Direct Tax Annual Digest 2024: Part I
Pankaj Bajpai
7 Feb 2025 2:30 PM
ITAT Deletes Additions Against Unsuspecting Investor In A 'Penny Stock' To Make Quick ProfitThe Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the assessee was an unsuspecting investor who transacted in a 'penny stock' with a view to earning a quick profit, and since his involvement in any dubious transaction relating to price rigging or connection with exit providers...
ITAT Deletes Additions Against Unsuspecting Investor In A 'Penny Stock' To Make Quick Profit
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the assessee was an unsuspecting investor who transacted in a 'penny stock' with a view to earning a quick profit, and since his involvement in any dubious transaction relating to price rigging or connection with exit providers could not be shown, the transaction could not be treated as a 'pre-arranged' one even if there were no underlying fundamentals in or financial performance by the company whose shares were sold.
The bench of Narendra Kumar Choudhry (Judicial Member) and S. Rifaur Rahman (Accountant Member) has observed that even though all the characteristics of penny stock exist in the present case, the department has not brought on record any materials linking the assessee to any dubious transactions relating to entry, price rigging, or exit providers.
There Cannot Be Sale Without Purchase: ITAT Deletes Addition
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition made by the AO as there cannot be a sale without a purchase.
The bench of Saktijit Dey (Vice President) and Pradip Kumar Kedia (Accountant Member) has observed that the exclusion of purchases from the trading results is not permissible without corresponding exclusion of the sales in such trading activity for arriving at a fair and balanced view. The action of the AO patently offends the rudimentary principle of accounting.
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the information found in the pen drive or laptop of employees cannot be considered credible evidence unless it has been corroborated with any other evidence.
The bench of Pavan Kumar Gadale (Judicial Member) and B.R. Baskaran (Accountant Member) has rejected the capitation fee addition against the appellant/assessee made on the basis of cash, documents seized from its employees, and statements recorded during the search operation.
The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has held that the Indian Chamber of Commerce (ICC) is entitled to claim exemption in respect of its entire receipts.
The bench of Rajesh Kumar (Accountant Member) has observed that the ICC is not carrying on any activity of holding meetings, seminars, and conferences for business purposes but only to support its main object, and it charges its participants, members, and non-members the amount of the fee, which does not even cover the cost of holding such events.
ITAT Deletes Addition Of Unexplained Investment In Stock Valuation Difference
The Chennai Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition of unexplained investment in stock as a difference in the valuation of stock.
The bench of Mahavir Singh (Vice President) and Manjunatha. G. (Accountant Member) has observed that the assessee has declared additional income towards excess stock found during the course of the survey, and the assessee has explained the source for excess stock found during the course of the survey, i.e., that it was out of income earned from current year business or earlier years business, and surrendered the amount. The AO has not done anything to dispute the claim of the assessee that the source was not from business income.
Noticing that the draft assessment order was passed on Mar 4, 2022 and the assessee filed objection before the DRP on Apr 6, 2022 which was beyond the due date provided for filing objection, the Delhi ITAT held the assessment order to be time-barred being passed beyond Section 144C(4) of Income tax Act, 1961 time-limit.
The ITAT Coram comprising of Challa Nagendra Prasad (Judicial Member) and Dr. B.R.R. Kumar (Accountant Member), observed that “The draft of the Assessment Order, in this case, has been passed on 04 .03.202. The assessee file d objections before DRP on 06.04 .2022, i.e., after the due date of the time allowed for filing of the objections before the ld. DRP. The due date for passing of the final Assessment Order was 31.0 5.2022. Since the final Assessment Order has been passed on 27.12.2022 in divergence to due date prescribed u/s144C of the Income Tax Act, we hold that, the order passed by the Assessing Officer is barre d by limitation, and hence, treated as void”.
Emphasizing that the right to broadcast live events i.e., “Live Rights”, is not “copyright” and therefore any payment made thereto can't be said to be chargeable to tax as royalty under section 9(1)(vi) of the Income tax Act, 1961, the Delhi ITAT holds assessee as not in default for non-deduction of tax at source on foreign remittances made towards acquisition of right to broadcast 'live-events'.
The Member of ITAT comprising Saktijit Dey (Vice-President) and B.R.R. Kumar (Accountant Member) observed that “broadcasting “Live events” does not amount to a work in which copyright subsists, meaning thereby right to broadcast live events i.e., “Live Rights” is not “copyright” and therefore any payment made thereto can't be said to be chargeable to tax as royalty under section 9(1)(vi)”.
While setting aside the revision order passed on the ground that the AO did not conduct any enquiry or verification which should have been made with regards to income from auditorium hire charges, hoarding site & service charges and rent vis-a-vis Trust's objectives and consequential eligibility under Section 10(21), the Bench opined that it is important to show that the view taken by the AO is wholly unsustainable in law before embarking upon exercise of revisionary powers and that the revisionary powers cannot be exercised for directing a fuller inquiry to merely find out if the earlier view taken is erroneous particularly when a view was already taken after inquiry.
“If such course of action in the light of the Explanation 2 is permitted, then the by excise of revisionary powers the Revisional Commissioner can find fault with each and every assessment order without himself making any inquiry or verification and without establishing that assessment order is not sustainable in law”, added the ITAT.
Thus, the ITAT cautioned that such exercise would inevitably mean that every order of the lower authority would become susceptible to section 263 and that, will cause serious hardship to the tax payer concerned and this is not intended by the legislation by the insertion of the Explanation 2.
While opining that even if the taxpayer has left India for the purpose of business or profession, the same shall be considered for purpose of employment outside India under Explanation 1(a) to Section 6(1) of Income tax Act, 1961, the Mumbai ITAT held that assessee has rightly claimed to be a 'non-resident' as he stayed in India only for a period of 176 days during the year which entitles him to non-resident status as per Explanation 1(a) to Section 6(1).
Rejecting AO's argument that since the assessee went to Mauritius on an occupation permit to stay and work in Mauritius as an investor and not as an employee, Explanation 1(a) to Section 6(1) shall not be applicable to the assessee, the ITAT opined that even if it is accepted that the assessee went to Mauritius as an investor in Firstland Holdings Ltd., Mauritius in which he holds 100% shareholding, he still is entitled to claim the benefit of the extended period of 182 days under Explanation 1(a) to Section 6(1).
While setting aside the CIT(A)'s order enhancing assessee's income under Section 251(1)(a) of Income tax Act, 1961 by disallowing Employees Stock Option Plan (ESOP) expenses under Section 37(1), the Mumbai ITAT held that the CIT(A) has acted beyond his jurisdiction in enhancing assessee's income, since the AO during the course of assessment, has not taken into consideration the assessee's revised return and has not examined the taxability of ESOP expenses.
The Coram comprising of Kuldip Singh (Judicial Member) and Padmavathy S. (Accountant Member) observed that “the power to enhance is restricted to the subject matter of assessment or the source of income which have been considered expressly or by clear implications by the AO from the point of view of the taxability of the assessee”.
The Coram also added that “In cases where the AO has not dealt with the issue at and has not applied his mind on the taxability or non-taxability of a certain matter then the CIT(A) has no jurisdiction to enhance under section 251(1)”.
Finding that assessee has discharged the burden of proving identity, creditworthiness, and genuineness of the creditors to the loan transaction, the Kolkata ITAT deleted the addition made for alleged unexplained loan under Section 68 of Income Tax Act, 1961 based on the statement of third-party in a post-search assessment whose cross-examination was never allowed to assessee.
The Member of the ITAT comprising of Sanjay Garg (Judicial Member) and Rajesh Kumar (Accountant Member) observed that “The CIT(A) thereafter held that the sole basis of the Assessing Officer to make addition was on the basis of an earlier recorded statement of Shri Devesh Upadhyaya, which was neither recorded in the presence of the assessee nor the assessee was every confronted about the same. Even no incriminating material was found during the course of search action. Even all the creditors have duly confirmed the transactions and also established the source of the credits and the loan being also repaid in a short span of time. The CIT(A), therefore, has rightly held that the addition made by the Assessing Officer was not justified”.
S. 54F Exemption Not Available On Property Predominantly Being Used For Religious Purposes: ITAT
The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) has held that exemption under Section 54F of the Income Tax Act is not available on property predominantly being used for religious purposes.
The bench of R.K. Panda (Vice President) and Laliet Kumar (Judicial Member) has observed that the property is predominantly being used for religious purposes, namely mosques, orphanages, and staff quarters. Therefore, it does not fit within the definition of a residential house as contemplated under Section 54F of the Income Tax Act. However, there is a report stating that the 3rd floor of the property is being used for residential purposes and is being used for the residence of the assessee. The report suggesting the 3rd floor being residential is contrary to the statement of the assessee filed before the GHMC seeking regularization of the property, wherein it was submitted that the property was being used for a mosque, orphanage school, and residence for the staff. The statement shows that the assessee has not used the property for residential purposes within the time granted by the statute, and furthermore, there is no evidence to show that the assessee has invested in the construction of a residential house. Therefore, the assessee is not entitled to any relief under Section 54F.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the Singaporean Entity has not escaped the income on repatriating Rs.203.56 Cr. arising from redemption of non-convertible debentures (NCDs).
The bench of Astha Chandra (Judicial Member) and B. R. R. Kumar (Accountant Member) has observed that the Assessing Office has not examined the relevant records before them wherein the interest earned has been duly offered to tax.
While finding that the assessee has substantiated all evidences concerning transactions to establish the identity and creditworthiness of the lenders and proved the genuineness of the transactions, the Kolkata ITAT directed the Assessing Officer to delete the addition made under section 68 of the Income Tax Act, 1961.
The ITAT therefore allowed the appeal filed against the order passed by Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) u/s 143(3).
The Member of the ITAT comprising of Sanjay Garg (Judicial Member) and Rajesh Kumar (Accountant Member) observed that “where the assessee has filed all the evidences concerning transactions to establish the identity and creditworthiness of the lenders and to prove the genuineness of the transactions and the ld. Assessing Officer has not carried out any further verification, the addition cannot be made in the hands of the assessee. The AO must examine the issue in the cases of creditors and make the addition there and not in the hands of the assessee. The assessee has discharged its initial burden and the burden shifted on the Assessing Officer to enquire further into the matter by filing the evidences, which he failed to do.”
While relying on the previous order passed by the Co-ordinate Bench under Ravindra K. Reshamwala v/s DCIT in ITA No.2648/Mum/2022, the Mumbai ITAT directed Assessing Officer to allow the claim under Section 35-AC of the Income tax Act, 1961.
The Member of the ITAT comprising Sandeep Singh Karhail (Judicial Member) and B.R. Baskaran (Accountant Member) observed that “except for statement of trustee of the society, we find that there is no positive evidence on record to substantiate the same. There is nothing on record which would show that on the date of donation, the trust did not have valid registration or its registration stood withdrawn. It was only subsequently that the approval was withdrawn. This being so, the deduction could not be denied to the assessee since AO failed to conduct any inquiry before making disallowance and except for mere allegations, he did not brought on record any fact to establish that donation given by the assessee was subsequently returned back in cash”.
The Kolkata ITAT deleted the addition made under Section 68 of Income Tax, 1961 after finding that the assessee has established the onus placed upon him in respect of identity and creditworthiness of the share subscribers and also the genuineness of the transactions.
The Member of the ITAT comprising Sanjay Garg (Judicial Member) and Girish Agrawal (Accountant Member) observed that “the AO has not made out his case with cogent material on record that the appellant could come under the purview of section 68 of the Act with regard to share capital as reflected in the balance sheet when there is no finding with any cogent material evidence that the same was actually bogus in nature. It is accordingly observed that creditworthiness of the share subscribers to make investment in the share capital of the appellant company cannot be a disputed matter as per material facts on record”.
While setting aside the order disposing of assessee's objection for re-opening of assessment pursuant to the issue of notice u/s 148 of the Income tax Act, 1961 and the consequent reassessment order, the Madras High Court held that there is no scope for re-opening of the assessment, since the reasons cited for same was inspired from change of opinion of the Assessing officer.
A Single Judge Bench of Justice C. Saravanan observed that “there is no case made out for reopening the Assessment that was completed earlier. Reopening of the Assessment was inspired from a review and a change of opinion by the subsequent officer. Such practice has been deprecated and frowned upon by the Courts”
The Karnataka High Court has held that tax exemption cannot be denied to the government's helicopter pilot trainer merely for non-furnishing goods and service tax identification numbers (GSTIN) initially.
The bench of Justice B. M. Shyam Prasad has observed that the GSTIN of the recipient organization was not furnished initially, is able to be furnished later, and demonstrates that its services of imparting training to the helicopter pilots were totally sponsored and borne by the Central Government or the State Government.
The Delhi High Court has held that coconut oil sold by Amway as a hair oil cannot be classified as edible oil under the DVAT Act.
The bench of Justice Vibhu Bakhru and Justice Amit Mahajan, while ruling in favour of the department, observed that the coconut oil is sold by the appellant in small packs, is displayed in the category of hair care, the manner in which it is to be applied to hair, and the purpose for which it is purchased by the consumer leaves no manner of doubt that the coconut oil sold by the appellant is wrongly sought to be classified under Entry 25 of the Third Schedule of the DVAT Act.
The Delhi High Court has held that the Principal Commissioner Income Tax (PCIT) wrongly invoked jurisdiction under Section 263 of the Income Tax Act and fell in error by taking a U-turn in the fourth assessment year, thereby denying the benefit of Section 80IA of the Income Tax Act.
The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia has observed that no material was brought on record by the PCIT to show that merely by migration from Internet Protocol-Virtual Private Network (IP-VPN) to National Long Distance-International Long Distance (NLD-ILD) license, a new and different “undertaking” of the assessee within the meaning of Section 80IA(4)(ii) came into existence.
The Allahabad High Court has held that a minor typographical error in the e-way bill without any other material establishing an intention to evade tax will not attract a penalty under Section 129 of the Goods and Service Tax Act, 2017.
Placing reliance on the decision of Allahabad High Court in M/s. Varun Beverages Limited v. State of U.P. and 2 others, the judgment of Supreme Court in Assistant Commissioner (ST) and others v. M/s. Satyam Shivam Papers Pvt. Ltd. And another, Justice Shekhar B. Saraf held that “Upon perusal of the judgments, the principle that emerges is that the presence of mens rea for evasion of tax is a sine qua non for imposition of penalty. A typographical error in the e-way bill without any further material to substantiate the intention to evade tax should not and cannot lead to the imposition of penalty.”
The Jharkhand High Court has ruled that registration of mining equipment, including drill masters and dumpers is mandatory under the Motor Vehicles Act. However, the Court has further said that the issue of whether a vehicle is taxable or not will depend upon the test as to whether the vehicle is proposed to be used for transporting goods from one place to another.
The Calcutta High Court has quashed the ex parte order imposing excise duty on the incineration of lean gas used in the generation of electricity.
The bench of Justice Md. Nizamuddin has remanded the matter back to the adjudicating authority concerned to pass a fresh adjudication order by allowing the petitioner to file an objection against the adjudication order by treating it as show cause notice and to take all the points raised in this writ petition.
The Gujarat High Court has allowed the deduction under Section 80IA(4) of the Income Tax Act to the assessee engaged in developing infrastructure projects like roads, canals, etc.
The bench of Justice Bhargav D. Karia and Justice Niral R. Mehta has observed that the assessee has entered into a development of infrastructure facility agreement and not a work contract.
The Delhi High Court has held that investment in shares by a company in its Indian subsidiary is a “capital account transaction” which does not give rise to any income. Therefore, the same cannot be treated as income for taxation.
Placing reliance on the earlier decision of Delhi High Court in Nestle SA v. Assistant Commissioner of Income Tax, the bench comprising of Acting Chief Justice Manmohan and Justice Mini Pushkarna held “It is settled law that investment in shares in an Indian subsidiary cannot be treated as 'income' as the same is in the nature of “capital account transaction” not giving rise to any income.”
The Allahabad High Court has held that the writ court should not interfere in notice issued under Section 73 of the UP Goods and Service Tax Act, 2017 unless there is inherent lack of jurisdiction or complete absence of relevant material is alleged and established.
The Delhi High Court has held that an input tax credit (ITC) refund cannot be rejected merely on the grounds of the non-supply of authenticated documents.
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that the petitioner had uploaded documents; however, the system did not register the documents that were uploaded by the petitioner. The appellate authority records that the petitioner had not submitted any documents, which were submitted along with the reply.
The Rajasthan High Court has held that the department's action of denying the benefit of immunity on the ground that the penalty was initiated under Section 270A of the Income Tax Act for misreporting of income is not only erroneous but also arbitrary and bereft of any reason, as in the penalty notice, the respondents have failed to specify the limb, "under-reporting" or "misreporting" of income, under which the penalty proceedings had been initiated.
The bench of Justice Arun Bhansali and Justice Shubha Mehta has observed that the Deputy Commissioner violated the provisions of proviso to Section 270AA (4) by not providing any opportunity of hearing, the order passed was wholly laconic, it did not indicate as to under which part of Section 270A (9), the case of the petitioner was covered, and the revisional authority, without giving any cogent reasons, has in a wholly cursory manner indicated the case of the petitioner was within the ambit of Clauses (a) and (c) of Section 270A (9).
The Madras High Court has directed the verification of certificate of origin within 30 days and in case of failure of verification within time release the seized areca nut is subject to providing a bond for 100% of the value of goods but without insisting on a bank guarantee.
The bench of Justice Senthilkumar Ramamoorthy has observed that areca nuts have a limited shelf-life and the risk of contamination and deterioration of goods increases over time.
Employee Accepted Salary After TDS Deduction, Employer Responsible For Non-Deposit: Delhi High Court
The Delhi High Court has held that the employee accepted salary after TDS deduction and the employer is responsible for non-deposit of TDS.
The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia has observed that the petitioner/employee, having accepted the salary after the deduction of income tax at source, had no further control over it in the sense that thereafter it was the duty of his employer, acting as a tax collecting agent of the revenue, to pay the deducted tax amount to the Central Government in accordance with law.
The Delhi High Court has quashed the order cancelling GST registration with retrospective effect, bereft of reasons.
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that one of the consequences of cancelling a taxpayer's registration with retrospective effect is that the taxpayer's customers are denied the input tax credit availed in respect of the supplies made by the taxpayer during such a period.
On Thursday(January 4), the Supreme Court dismissed a Special Leave Petition filed by the State of Uttar Pradesh against the order of the Allahabad High Court quashing the demand of Rs. 235.52 Crores raised against Vivo Mobile India Private Limited raised by GST Authorities vide order under Section 74(9) of the Goods and Service Tax Act 2017.
In the peculiar facts of the case, the bench comprising of Justice B.V. Nagarathna and Justice Augustine George Masih refused to interfere with the order of the Allahabad High Court.
The Rajasthan High Court has held that once the deduction claim for education cess is withdrawn, the assessee is immune from the imposition of a penalty under Section 270A of the Income Tax Act.
The bench of Justice Vijay Bishnoi and Justice Munnuri Laxman has observed that neither in the assessment order nor in the subsequent show-cause notices, the Assessing Officer specify that the case of the petitioner-company is covered under which part of Section 270A(9). Even in the order, it is not specified which part of Section 270A(9) is attracted.
The Delhi High Court has directed the Customs Commissioner to release the remaining amount after realizing the redemption fine and penalty from the seized foreign currency.
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that ordinarily, the adjudicating officer needs to give the owner of the goods the option to pay a fine in lieu of confiscation, and if such a fine is not paid within a period of 120 days, such an option will become void. But the goods seized in the present case are nothing else but foreign currency.
The Allahabad High Court has held that the seizure of a vehicle transporting goods affects the civil rights of the transporter as the truck is a capital asset of the transporter. The Court held that the transporter ought to be afforded an opportunity of hearing before passing any penalty order against him.
While observing that the vehicle carrying the goods could be released under proviso-1 of Section 129 (6) of the UP Goods and Service Tax Act, 2017 on payment of Rs. 1 Lakh, the bench comprising of Justice Saumitra Dayal Singh and Justice Manjive Shukla held “Truck being the valuable property and a capital asset of the transporter which is utilised to generate revenue/ income, we perceive valuable civil right of the petitioner having being adversely affected exparte.”
While observing that transaction pertaining to loan between two concerns wherein the liability of borrower stood reduced in the books of accounts to an extent of payment made to clear the liability of assessee appears to be in accordance with law, the Madras High Court ruled that penalty under Section 271E of Income tax Act, 1961 cannot be levied on repayment of loan in absence of cash transaction.
The High Court made it clear that the question of dealing with cash transaction does not arise and therefore penalty under Section 271E cannot be levied.
A Single Judge Bench of Justice Krishnan Ramasamy observed that “with regard to the grant of loan by the petitioner to M/s. Shakti Sugar Ltd. and repayment of the same made by M/s. Shakti Sugar Ltd. to the aforesaid three entities based on the instructions of the petitioner and as regards the discharge of liabilities, suitable entries have been made both in the books of account of the petitioner as well as M/s. Shakti Sugar Ltd. and in a similar way, the same was reflected in the audited books of account. When such being the case, initiation of proceedings against the petitioner appears to have been made under wrong assumption that there was cash transaction”.
Finding that assessee's income from sub-letting/sub-licensing the space in question, has always been accepted by Respondent / Income Tax Department as, income from business, the Calcutta High Court held that assessee's income from sub-licensing/sub-letting is chargeable to tax as business income and not as income from house property.
The Division Bench comprising of Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj observed that “Since the object of the assesse company and its activity is the business of renting/licencing/sub-licencing shops etc. and it derived income mainly from the aforesaid business activity, therefore, the income from contribution/sub-licencing derived by the assessee is business income and not income from house property”.
While setting aside the Rajasthan High Court orders, the Supreme Court restored the assessee's appeals by condoning the delay in filing the paper-book before High Court and observed that the assessee is entitled to have his appeals heard on merits.
The Division Bench comprising of Justice P.S. Narasimha and Justice Aravind Kumar, observed that “As Appeal No. 817 of 2008 stood dismissed for noncompliance, the High Court was of the opinion that inconsistent orders cannot be passed and proceeded to dismiss even Appeal No. 816 of 2008 without examining the matter on merits. We are of the opinion that the Appellant is entitled to have his appeals heard on merits”.
The Kerala High Court has quashed the penalty under the Kerala Value Added Tax (KVAT) Act and held that re-sellers of machines have not wilfully classified machines under the wrong head and have adopted the same classification as the seller.
The bench of Justice Dinesh Kumar Singh has observed that penalty proceedings have to be initiated when there is a willful or contumacious act on the part of the assessee to evade payment of the correct tax. The petitioners had reason to adopt the classification as 'Digital Multifunctional Devices', as they being re-sellers could not have classified the machines to a different classification.
The Bombay High Court has held that even assuming that there was a defect in the notice, it had caused no prejudice to the assessee, and the assessee “clearly understood” what the purport and import of the notice were under Section 274 read with Section 271 of the Income-tax Act, 1961. The principles of natural justice cannot be read in abstract form.
The bench of Justice G. S. Kulkarni and Justice Jitendra Jain has observed that the assessee at no earlier point in time had raised a plea that, on account of a defect in the notice, the assessee was put to any prejudice.
The Court observed that a violation will not result in nullifying the orders passed by statutory authorities. If the case of the assessee is that the assessee was prejudiced and principles of natural justice were violated on account of not being able to submit an effective reply, it would be a different matter.
The Delhi High Court has held that taxpayers are not provided an opportunity to object to the retrospective cancellation of GST registration.
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has restored the GST registration of the petitioner to its original number.
The Delhi High Court has held that transactions concerning mutual funds were in the nature of investment and not motivated by trade.
The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia has observed that the intent has to be ascertained keeping in mind the magnitude and frequency of the transactions, the period for which shares are held, the purpose for which they are held, and how transactions are disclosed in the books of account. There is no presumption in law that the acquisition of shares by an assessee is necessarily for trade as opposed to investment.
Recently, the Supreme Court has held that definition of 'manufacture' under Section 2(e)(1) of the U.P. Trade Tax Act, 1948 does not include blending and packaging tea.
Distinguishing the judgment delivered by a three-judge bench of the Supreme Court in Chowgule & Co. Private Limited and Anr. vs. Union of India and Others, the bench comprising of Justice B.V. Nagarathna and Justice Ujjal Bhuyan held “However, in the instant case, mere mixing of different types of tea only for the purpose of marketing as tea and not a particular type of tea does not involve any process/manufacture within the meaning of the definition. Therefore, judgment and observations in Shiv Datt and Sons are squarely applicable to the present case.”
The Gujarat High Court has reiterated that the charge of the Secured Creditor will precede over the charge of an Unsecured Creditor. The above ruling came in a writ petition whereby the core issue raised was - 'Who will have the first charge over the property in question i.e. Secured Creditor or the State / Central Government (Crowns debt) on account of non-payment of dues of the Sales Tax department?'
The Supreme Court has held that the hiring of motor vehicles/cranes from a contractor is a service and would not attract Sales Tax or Value Added Tax (VAT) assuming the transaction to be sale of goods. The Court clarified that transfer of right to use the goods not only includes possession but also control over goods by the user. If the control over the goods remains with the contractor during the hire period, then it cannot be termed as sale of goods and only service tax can be levied.
The Allahabad High Court has held that once the registration of the assesee is cancelled, any notice for proceedings under the Central Goods and Service Tax Act, 2017 shall be served on the address of the assesee.
The Court observed that merely uploading notice on the web portal without any intimation to the assesee will vitiate any subsequent action as being bad in law.
Elaborating on the need for judicious application of the principle of audi alteram partem in legal and administrative proceedings, the bench comprising of Justice Shekhar B. Saraf held, “In the present case, when the petitioner had cancelled its registration in the year 2019, a proper notice was required to be issued to it under Section 74 of the Act at its address. However, the authorities simply uploaded the Section 74 show cause notice on the web portal inspite of knowing that the petitioner had already cancelled its registration prior to the date of issuance of the show cause notice. This action clearly prevented the petitioner from appearing in the hearing in the original proceeding under Section 74 of the Act that was accordingly passed ex parte.”
Industrial Units Can't Be Discriminated For Budgetary Support Based Turnover: Gauhati High Court
The Gauhati High Court recently held that the exclusion of industrial units who were eligible to avail benefits under the NEIIPP, on the classification that they did not pay Central Excise Duty either because their annual turnovers were below the threshold limit of 1.5 crores or that they had produced items which were already exempted, cannot be permitted to be a ground to deny the benefits of budgetary support scheme.
The single judge bench of Justice Soumitra Saikia observed: “Such classification cannot be held to be a reasonable classification as it fails to achieve the object for which the classification is made, namely providing financial support to those industries availing benefits under the NEIIPP. The said classification of the respondent authorities is therefore arbitrary and is hit by Article 14 of the Constitution of India and the same is, therefore, held to be bad in law.”
'No Reason To Interfere With The Levy Of Tax On The Sale Of 'Korai'': Patna High Court
In a recent ruling, the Patna High Court has upheld the imposition of tax on the sale of 'Korai,' a processed by-product used as cattle feed. The decision came in response to two appeals by M/s Raj Kumar Sao Kishori Lal Sao, a partnership engaged in the purchase, processing, and sale of food-grains, pulses, and related by-products.
The court's observation emphasized that there was no evidence to demonstrate that 'Korai' was sold as cattle feed. The processed nature of 'Korai' rendered it taxable as an unspecified residuary item at the rate of 8%, as it was not equivalent to Wheat Bran. The Appellate Authority had initially taxed it at 4%, a decision not challenged by the State.
The Mumbai ITAT recently reiterated that a notice can be issued u/s 148 of the Income Tax Act, 1961, even after the expiry of limitation period, if the sanction for same has been granted by the Principal Commissioner of Income Tax.
The Member of the ITAT comprising of Sandeep Singh Karhail (Judicial Member) and B.R. Baskaran (Accountant Member) observed that “the sanction granted under section 151 of the Act was found to be improper as the sanction was not granted by the appropriate authority under the provisions of the Act, which is not so in the present case since PCIT had the authority under section 151 to grant the sanction for issuance of notice under section 148 of the Act after the expiry of four years from the end of the relevant assessment year”.
While quashing the appeal filed by Revenue against the order passed u/s 250 by the National Faceless Appeal Centre, the Mumbai ITAT upheld the order passed by Commissioner of Income Tax (A) to delete the order of penalty issued under section 270A of the Income Tax Act, 1961.
The Member of the ITAT comprising Kavitha Rajagopal (Judicial Member) and Om Prakash Kant (Accountant Member) observed while relying on the judgment of the case CIT vs. Reliance Petro Products Pvt. Ltd that, “furnishing inaccurate claim of expenditure would not amount to giving inaccurate particulars of such income. The assessee has relied on various other decisions which have reiterated the proposition that the claim of higher depreciation would not amount to concealment of income.”
While clarifying that amount received for sale distribution or exhibition of cinematographic films would not fall under the domain of 'Royalty', the Mumbai ITAT deleted the demand/addition for non-deduction of TDS u/s 194J of the Income Tax Act, 1961.
The Member of the ITAT comprising of N. K. Choudhry (Judicial Member) and Prashant Maharishi (Accountant Member) observed that “Explanation-(2) to section 9(1)(vi) of the Act defines 'Royalty' and including certain consideration such as transfer of all or any rights (including the granting of a license) qua any copyright, literacy work or scientific work including film(s) or video tapes for using connection with Television or tapes for using in connection with Radio broadcasting by but carved out the exception by excluding 'the consideration for the sale, distribution or exhibition of cinematographic film(s)' which goes to show that consideration for the sale, distribution or exhibition of cinematographic film(s) has been excluded in the clause of 'Royalty'.”
On finding that payment and purchase made by the assessee is not disputed by AO, the Mumbai ITAT directed the AO to delete the addition on sundry creditors.
The Member of the ITAT comprising of Sandeep Singh Karhail (Judicial Member) and B.R. Baskaran (Accountant Member) observed that “Since in the present case the purchases made by the assessee and the payment made during the year have not been disputed by the AO in respect of the parties shown as sundry creditors, we are of the view that the addition in respect of the balance sundry creditors is not sustainable”.
The Chennai ITAT held that the orders passed by the DRP in violation of CBDT Circular No.19/2019 dated Aug 14, 2019, and without allotment of a valid computer-generated Document Identification Number (DIN) in the body of such order is invalid, non-est and shall be deemed to have never been issued.
The ITAT Coram comprising of Mahavir Singh (Vice President) and Manjunatha G (Accountant Member) observed that “there is no dispute with regard to fact that mandatory requirement of generating a computer-based DIN has not been allotted and is duly quoted in the body of the order issued by the AO/DRP. Subsequent generation of DIN either on the same day or next day and intimated to the assessee or other person by way of separate communication does not satisfy the conditions of para 3 & 4 of said circular. Therefore, we are of the considered view that any communication issued by the income-tax authority, in the present case, the AO/DRP without a valid computer-generated DIN and is duly quoted in the body of the order is invalid, non-est and shall be deemed to have never been issued”.
Emphasizing that although Section 32 of Income tax Act, 1961 was amended by the Finance Act, 2021 wherein it was stated that 'goodwill' is not an intangible asset eligible for depreciation was applicable prospectively with effect from AY 2021-22, the Mumbai ITAT held that claim of depreciation of goodwill acquired pursuant to slump sale under a Business transfer agreement is allowable under Section 32(1). Also Read - Foreign Nationals Coming To India Not Required To Declare Personal Gold Jewellery To Customs: Delhi High Court
The ITAT Member comprising of ABY T. Varkey (Judicial Member) and Amarjit Singh (Accountant Member), observed that “The goodwill in question is thus noted to be in the nature of acquired goodwill and the price paid by the appellant, irrespective of the fact that it was paid to related party, constituted the cost of acquisition in the hands of the appellant, in terms of Section 43(1) of the Act. The aforesaid material information, according to us, is sufficient to entertain the claim for depreciation on the goodwill acquired by the appellant”.
Observing that the assessee has only repatriated the amounts invested in the earlier years and hence, no taxability arises during the year, the Delhi ITAT held that there is no escapement of income in the hands of assessee i.e., a Singaporean entity on repatriating Rs.203.56 Cr. arising from redemption of NCDs where Assessee did not file the ITR.
The ITAT Coram comprising Dr. B.R.R. Kumar (Accountant Member) and Astha Chandra (Judicial Member) observed that “the assessee has only repatriated the amounts invested in the earlier years and hence, no taxability arises during the year. In the case of the assessee company, neither has any income accrued or arisen or is deemed to accrue or arise under that for the assessment year 2017-18 nor any claim has been under any DTAA”.
No Adjustment If Margin Falls Within Tolerance Range Of (+/-) 5% As Per Sec 92CA: Mumbai ITAT
Finding that the margins of assessee company fell within the tolerance limit of +/-5% for AY 2005-06, the Mumbai ITAT deleted the ALP adjustments proposed by the TPO in ITEs as well as IT segments.
The ITAT Bench comprising Amit Shukla (Judicial Member) and S. Rifaur Rahman (Accountant Member) observed that “TPO had adopted certain criteria for rejection of comparables which has been highlighted above. If those criteria itself are adopted on the comparables which has been chosen by the TPO and applying the filters adopted by him on the final set of comparables selected by him under ITES and IT segment, then as noted by the CIT (A) the arithmetic mean in ITES segment comes to 13.73% and in IT segment comes to 17.51%. In that case, in ITES segment margin shown by the assessee and margin which has been determined falls within the tolerance limit of +/- 5% as provided in proviso to Section 92CA which was applicable prior to 01/10/2009, then assessee's price of Rs. 30,29,93,009/-, which is well within the tolerance range”.
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that income tax addition cannot be made for discrepancies in maintaining KYC documentation, account opening forms, and violation of society bye-laws. The bench of Sandeep Singh Karhail (Judicial Member) and B.R. Baskaran (Accountant Member) has observed that for discrepancies in maintaining KYC documentation, account opening form, and violation of society bye-laws, action can be taken against the assessee under the relevant statute or by the concerned authority, such as RBI, however, the same cannot lead to an addition in the hands of the assessee under the Income Tax Act.
On finding that the Revenue has grossly erred by treating the element of interest on the alleged loan as bogus in nature, the Ahmedabad ITAT held that the loan amount cannot be made subject to addition under the provisions of section 68 of the Income tax Act, 1961, since loan was taken through banking channel and was repaid in the next year along with interest through banking channel and TDS was deducted on the interest.
The Member of the ITAT comprising Siddhartha Nautiyal (Judicial Member) and Waseem Ahmed (Accountant Member) observed that “once the assessee submits primary evidence with regard to identity and credit worthiness of creditor and the genuineness of the transaction the onus shifts on the AO to consider the material provided and make independent inquiry in order to find out genuineness of the evidence or bring material contrary to fact explained by the assessee. The AO cannot reject the primary evidence furnished by the assessee without appreciating the facts available on record or without bringing contrary material to form the belief that primary document or explanation furnished by the assessee is not satisfactory”.
Careless Attitude Of AO: Kolkata ITAT Deletes Addition Made Without Examining Nature Of Expenditure
On finding that expenses were incurred for the business purposes during the course of business, for which assessee has submitted all basic details which was not cross verified by the AO, the Kolkata ITAT deleted the addition made by AO.
The Member of the ITAT comprising Rajpal Yadav (Vice-President) and Girish Agrawal (Accountant Member) observed that “the inquiry at the end of the Assessing Officer is a flawed one. Apart from this observation, we find that he has nowhere examined how this expenditure was not necessary for the business. What are the products obtained by the assessee as a commission agent and how these were sold with the help of different parties across India. The assessee has not shown losses rather it has shown profit. Instead of approaching the controversy with that approach, Assessing Officer all of a sudden took help of jurisprudence which deals with unexplained share application money from paper companies. This shows the careless attitude at the end of the Assessing Officer while framing the assessment order”.
LTCG Not Eligible For Exemption U/s 10(38) If Claimed On Bogus Scrips: Ahmedabad ITAT
On finding the scrips as non-genuine and bogus, the Ahmedabad ITAT confirms the Assessing Officer's and CIT(A)'s decision for denying the LTCG exemption under Section 10(38) of the Income Tax Act, 1961.
The Member of the ITAT comprising Suchitra Kamble (Judicial Member) observed that “The assessee's claim for LTCG cannot be simply proved on the Demat statement but the very effect of the price purchased and price sold of the said scrip determined the same. In fact, the brokers' credibility was also doubted by the Assessing Officer and for which the assessee has not given any explanation before any of the Authorities. Thus, the Assessing Officer and the CIT(A) has rightly denied the LTCG exemption under Section 10(38) of the Act to the assessee.”
While following the order of Co-ordinate Bench, the Ahmedabad ITAT condoned the delay and restored the matter to the file of CIT(A) to allow exemption u/s 11 of the Income Tax Act, 1961 to the assessee as per the provisions of law.
The ITAT Coram comprising Waseem Ahmed (Accountant Member) observed that “non filing of Audit Report along with return of income is a procedural omission and cannot be an impediment in law in claiming the exemption, we allow this appeal condoning the delay in filing the Audit Report in Form No. 10B. However, we also upon condoning the delay, restore the matter to the file of the CIT(A) to pass order in regard to the exemption claimed by the assessee strictly in accordance with law.”
Reopening Initiated On Basis Of Wrong Reasons Renders Very Assessment As Invalid: Mumbai ITAT
On finding the reasoning behind the Assessment made by the Assessing Officer to be wrong, the Mumbai ITAT allowed the assessee's appeal against the order of Commissioner of Income Tax (Appeals) and National Faceless Appeal Centre.
The Member of the ITAT comprising Aby T Varkey (Judicial Member) and S. Rifaur Rahman (Accountant Member) observed that “the reason for reopening itself fails in this case, prima facie the assessment was reopened with the wrong reasoning that assessee has not filed its return of income by merely observing from IT Portal. It is fact on record that assessee has filed its return of income and Assessing Officer has accepted the same.”
On finding profits and gains derived from an industrial undertaking within the meaning of an expression under section 80-IB, the Mumbai ITAT directed the Assessing Officer to allow deduction u/s 80-IB of the Income Tax Act, 1961
The Member of the ITAT comprising of Kavitha Rajagopal (Judicial Member) and Prashant Maharishi (Accountant Member) observed that “the assessee is eligible for deduction u/s. 80IA/80IB of the Act on compensation received due to destruction of goods before sale had taken place. We find that on destruction of raw materials, the assessee was paid insurance claim, the cost of raw material is already considered as 'cost' while working out the profit of eligible undertaking and the claim tantamount to sale of raw materials. As regards to loss of goods at franchisee and the amount paid by such franchisee would also be sale of goods”.
While allowing the Assessee's appeal for registration u/s 12AB, the Indore ITAT held that mere charging a nominal amount for smooth functioning of educational institution and trust cannot called to be a part of commercial activity, and therefore, directed the CIT(E) to grant registration u/s 12AB of Income Tax Act, 1961.
The Bench comprising Vijay Pal Rao (Judicial Member) and B.M. Biyani (Accountant Member) observed that “the entire thrust of the CIT(E) is regarding services provided by the assessee against charges without even considering the fact whether the charges are nominal or reasonable mark up over cost that too is also applied for charitable purpose or achieving charitable objects of the assessee. Further the conclusion of CIT(E) that the commercial receipts for assessee are more than 20% of the total receipt is contrary to the fact that the assessee is not doing any trade or business but is providing the services for achievement of charitable objects and in that process nominal fee is charged which is also not more than 20% of the total receipts of the assessee as manifest from the details given in the forgoing part of this order”.
On finding that the AO has failed to refer the case to District Valuation Officer u/s 55A of Income Tax Act 1961, the Ahmedabad ITAT deleted the addition made by AO on account of on-money received by the assessee on the sale of duplex pent house.
The Bench comprising T.R. Senthil Kumar (Judicial Member) and Annapurna Gupta (Accountant Member) observed that “the AO has merely relied upon the report given by his Inspector and determined the fair market value of the flats and pent houses, which is against the provisions of the Act. The Inspector attached to the AO is not an expert to determine the fair value of the flats and Duplex Pent houses. Further when the AO summoned the various purchasers of the flats and recorded their statements u/s. 131, none of the purchasers having said to have paid on-money to the developer/assessee, except to having agreed the prices entered with the developer.”
On finding lack of opportunities provided to Assessee and in interest of substantial justice, the Chandigarh ITAT remanded the matter to the file of CIT(A) to examine the matter of exemption u/s 10(23C) of the Income tax Act, 1961 afresh.
The Bench comprising of Sanjay Garg (Judicial Member) and Vikram Singh Yadav (Accountant Member) observed that, “the additional evidence so submitted is critical and germane for deciding the matter under consideration and given that the assessment has been completed u/s 144, the assessee deserve to be allowed an opportunity to furnish the necessary explanation and documentation in support of its claim for exemption u/s 10(23C)(iiiad) of the Act.”
On finding that the AO has rightly estimated the gross profit after finding discrepancy in stock, the Rajkot ITAT confirmed the addition made u/s 69B of Income tax Act, 1961.
The Bench comprising Suchitra Kamble (Judicial Member) and Waseem Ahmed (Accountant Member) observed that, “The Assessing Officer has rightly estimated the gross profit by applying fair and reasonable ratio of gross profit at 8% instead of 6.25%. There is no need to interfere with the finding of the Assessing Officer as well as that of CIT(A).”
No Addition Is Permitted U/s 69 I-T Act Once Source Of Investment Stands Proved: Mumbai ITAT
On finding that none of requirements of section 69 regarding source of investment stands fulfilled, the Mumbai ITAT upheld the order of CIT(A) deleting the addition made by AO under said provision.
The Bench comprising C.V. Bhadang (President) and B.R. Baskaran (Accountant Member) observed that, “the said section envisages a situation where the assessee has (i) made an investment (ii) which is not recorded in the books of account or (iii) the assessee offers no explanation about the nature/source of the investment or (iv) the explanation offered is not found to be satisfactory. In our view, none of these requirements can be said to be satisfied in this case as the explanation offered is plausible and is clearly borne out of material on record.”
While setting aside the order passed by CIT(A) and emphasizing on the safe harbour limit, the Mumbai ITAT held that the assessee is entitled to the benefit of Section 50C of Income Tax Act, 1961.
The Bench comprising CV Bhadang (President) and BR Baskaran (Accountant Member) observed that, “the CBDT had acknowledged that there can be genuine cases, where there would be a variance between the “stamp duty value” and the “actual consideration received” in respect of similar properties depending upon variety of factors”. It can be seen that such variance indeed occurs on the basis of location, dimension, access and other facilities which a particular property may enjoy. It is necessary to note that the stamp duty value or the ready reckoner value is essentially an estimate. Section 50C(1) is an anti-avoidance provision to prevent evasion of tax by showing lesser consideration in the transactions. However, after acknowledging the fact of variance between the stamp duty value and the actual consideration, the proviso was initially introduced by Finance Act 2018 from A.Y. 2019-20, introducing the “safe harbour limit” of 5%”.
On not finding any substance in the conclusion of AO that the source of source of income is tainted, the Delhi ITAT confirms the deletion of addition made u/s 68 of Income Tax Act.
The Bench comprising Anubhav Sharma (Judicial Member) and Narendra Kumar Billaiya (Accountant Member) observed that, “merely because of some sort of control of Gupta family into companies transacting in the alleged penny stock cannot be basis to question the source of source in the hands of the assessee company without any direct evidence or circumstantial evidence giving a complete link of circumstances”.
The Kolkata ITAT confirmed the CIT(A)'s order upholding disallowance of claim of long-term capital gain exemption u/s 10(38) of Income tax Act, 1961 by stating that genuineness of the company is not dependent on the magnitude of profit.
The Member of the ITAT comprising Rajpal Yadav (Vice-President) and Girish Agrawal (Accountant Member) observed that “The assessee might have made investment when the shares of the company were already managed to a particular level and he sold his investment very early, but that small profit is earned by the assessee would not result into automatic genuineness of the transaction. It is an incorrect conception conceptualized by the assessee to segregate himself from the treatment of other such investors. It cannot be accepted as fact to distinguish the judgment of the Hon'ble Jurisdictional High Court, simply for the reason that magnitude of profit is on the lower side to the assessee.”
Relying on decisions of Supreme Court and High Court, the Pune ITAT directed the AO to allow the deduction u/s 80P(2)(a)(i) and 80P(2)(d) of Income Tax Act, 1961 in respect of interest income earned from co-operative bank/scheduled bank.
The Member of the ITAT comprising Inturi Rama Rao (Accountant Member) observed that, “the interest income earned by cooperative society on deposits made out of surplus funds with cooperative banks as well as schedule bank qualifies for deduction both under the provisions of section 80P(2)(a)(i) and section 80P(2)(d) of the Act, therefore, the reasoning given by the lower authorities on this issue cannot be accepted.”
The Rajkot ITAT held that Assessing Officer has not erred in computing separate capital gains tax in respect of sale of land (being Long Term Capital Gains) and sale of building / super structure (being Short Term Capital Gains), even if the assessee had made a consolidated sale of both land and building, as part of the same agreement.
The Member of the ITAT comprising Siddhartha Nautiyal (Judicial Member) and Waseem Ahmed (Accountant Member) observed that, “the Assessing Officer has not erred in facts and in law in computing separate capital gains tax in respect of sale of land (being Long Term Capital Gains) and sale of building / super structure (being Short Term Capital Gains), even if the assessee had made a consolidated sale of both land and building, as part of the same agreement.”
In a recent ruling, the Patna High Court slapped a fine of Rs 5,000 on a Goods and Services Tax ( GST ) officer for forcible and illegal recovery of the full tax amount from a man waiting to avail the statutory remedy of appeal before GST tribunal which has not been made functional in Bihar.
The court has directed the department to reimburse the entire collected tax within 2 weeks. The ruling was issued by a division bench led by Chief Justice K Vinod Chandran and Justice Rajiv Roy, granting relief to the National Insurance Company's Patna regional office.
Payment To Third Party Instead Of Selling Dealer, ITC Not Allowable: Calcutta High Court
The Calcutta High Court has held that the writ petitioner is not entitled to the benefit of input tax credit as he has not paid the amount to the selling dealer but to a third party.
The bench of Chief Justice T.S. Sivagnanam and Justice Supratim Bhattacharya has observed that the writ petitioner is precluded from adding words to a statute to state that he will be entitled to the benefit of the input tax credit, though he has not paid the amount to the selling dealer to a third party based on certain instructions.
he Bombay High Court has held that the AO has no jurisdiction to assess or reassess any income, which was the subject matter of an appeal.
The bench of Justice K.R. Shriram and Justice Neela Gokhale has observed that since the grant of benefit under Section 11 of the Income Tax Act, 1961, was the subject matter of appeal and has been held in favour of the assessee, the matter cannot be reopened.
While deciding the question as to whether reopening of a concluded assessment under Section 147 of the Income Tax Act (“Act”) was legally sustainable or not, the Supreme Court recently held that for the purposes of tax assessment, an assessee's obligation is limited to making a "full and true" disclosure of all "material" or primary facts, and thereafter, the burden shifts on the assessing officer. If a return is defective, it is upto the officer that he intimate the assessee in order that defects may be cured. But if the officer fails to do so, the return cannot be called defective.
"Ascertaining the defects and intimating the same to the assessee for rectification, are within the realm of discretion of the assessing officer. It is for him to exercise the discretion. The burden is on the assessing officer. If he does not exercise the discretion, the return of income cannot be construed as a defective return," the Bench of Justices BV Nagarathna and Ujjal Bhuyan said.
The Madras High Court has quashed the assessment order and held that the defect was not cured due to the availability of records in the custody of the central GST authority.
The bench of Justice Senthilkumar Ramamoorthy has observed that a composite order of assessment was issued with regard to four defects, and the documents on record disclose that the non-availability of records, on account of such documents being in the custody of the Central GST authority, undoubtedly impacted the petitioner's ability to respond to two defects.
The Madras High Court has held that an IGST refund claim may be made before the expiry of two years from the relevant date. The relevant date is required to be computed from the date of export of the goods concerned by any mode.
The bench of Justice Senthilkumar Ramamoorthy has observed that since the refund claim pertains to exports made between July 2017 and November 2017 and the refund application was filed on January 9, 2019, it is clear that the refund application was made within two years from the relevant date.
Section 5 Of Limitation Act Does Not Apply To Section 107 Of CGST Act: Allahabad High Court
The Allahabad High Court has held that Section 5 of the Limitation Act, 1963 does not apply to appeals filed under Section 107 of the Central Goods and Services Tax Act, 2017.
“The Central Goods and Services Act is a special statute and a self-contained code by itself. Section 107 of the Act has an inbuilt mechanism and has impliedly excluded the application of the Limitation Act. It is trite law that Section 5 of the Limitation Act, 1963 will apply only if it is extended to the special statute. Section 107 of the Act specifically provides for the limitation and in the absence of any clause condoning the delay by showing sufficient cause after the prescribed period, there is complete exclusion of Section 5 of the Limitation Act,” held Justice Shekhar B. Saraf.
The Lucknow Bench of the Allahabad High Court held that before passing of any adverse order, such as imposing tax or penalty, opportunity of hearing is mandatory under Section 75(4) of the Uttar Pradesh Goods and Service Tax Act, 2017.
Section 75(4) of the UPGST Act provides that an opportunity of hearing must be granted if requested in writing or where any adverse action is contemplated against such person.
UPGST | Burden To Prove Intention To Evade Tax Lies Solely On Department: Allahabad High Court
On Wednesday, the Allahabad High Court held that the burden to prove intention to evade tax lies solely on the Department. The Court held penalties in tax laws should not be imposed solely on insignificant technical errors which do not have any financial consequences.
The Court held that penalties should only be imposed where there is concrete evidence to show that an assesee is deliberately trying to defraud the system and not in cases of unintentional mistakes.
The Jharkhand High Court has held that the determination of the value of the excisable goods for the purpose of assessment falls within the exclusive jurisdiction of the Supreme Court of India under Section 35L of the Central Excise Act, 1944.
The bench of Justice Rongon Mukhopadhyay and Justice Deepak Roshan has observed that the appeals are not maintainable, and the same would lie before the Apex Court under Section 35L, as the jurisdiction of the High Court in such matters is specifically excluded under Section 35G and it falls within the exclusive jurisdiction of the Apex Court under Section 35L.
The Karnataka High Court has quashed the prosecution under Section 276C(1) of the Income Tax Act for wilful tax evasion.
The bench of Justice M. Nagaprasanna has observed that the assessees filed revised returns, waiving their claim for short-term capital loss and long-term capital gains, and also paid taxes, the moment the search was conducted and the assessment proceedings commenced.
The Himachal Pradesh High Court has held that departments of the state, including excise and revenue, will not have priority over the secured creditors' debt.
The bench of Justice Tarlok Singh Chauhan and Justice Satyen Vaidya has observed that the dues of the secured creditor, i.e., the appellant bank, will have priority over the dues of the Central Excise Department, as even after the insertion of Section 11E in the Central Excise Act, 1944, w.e.f. April 8, 2011, and the provisions contained in the SARFAESI Act, 2002, will have an overriding effect on the provisions of the Central Excise Act.
The Allahabad High Court has held that if the invoice accompanying the goods contains all the details of the vehicle then not filing of Part-B of the e-way bill is a technical error without any intention to evade tax. The court quashed the penalty order under Section 129(3) of the UP Goods and Service Tax Act, 2017.
The Delhi High Court has held that fees received by assessees for sub-licensing sports broadcasting rights attributable to 'live feed' is not taxable as royalty.
The bench of Justice Yashwant Varma and Justice Girish Kathpalia has observed that once the Court came to the conclusion that a live telecast would not fall within the ambit of the expression “work”, it would be wholly erroneous to hold that the income derived by the assessee in respect of “live feed” would fall within clause (v) of Explanation 2 to Section 9(1)(vi) of the Income Tax Act, 1961.
The Calcutta High Court has held that the assessee had repeatedly sought adjournments, which would show that the assessee attempted to drag the matter along, knowing well that the assessment would be time-barred.
The bench of Chief Justice T.S. Sivagnanam and Justice Supratim Bhattacharya have observed that the provision of Section 148A of the Act has been scrupulously followed by the assessing officer, and there is no error in the decision-making process of the court to interfere.
The Bombay High Court has held that a change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order contain references and/or discussions to disclose its satisfaction with respect to the query raised. The only requirement is that the assessing officer ought to have considered the objection now raised in the grounds for issuing notice under Section 148 of the Act during the original assessment proceedings.
The Allahabad High Court has held that mere technical errors under tax laws without any financial implications should not be grounds for imposition of penalties.
While dealing with the case of goods not accompanying e-way bill, Justice Shekhar B. Saraf held, “Mere technical errors, without having any potential financial implications, should not be the grounds for imposition of penalties. The underlying philosophy is to maintain a fair and just tax system, where penalties are proportionate to the gravity of the offense. In the realm of taxation, imposition of penalty serves as a critical measure to ensure compliance with tax laws and regulations.”
The Allahabad High Court has held that authorities cannot travel beyond the show cause notice to impose penalty on the assesee.
The bench comprising Justice Shekhar B. Saraf held, “At its core, a show cause notice represents the initial step in an administrative or legal process, wherein an individual or entity is formally apprised of allegations or discrepancies attributed to them. This notice serves as a mechanism to afford the recipient an opportunity to present their side of the story, provide clarifications, or rectify any perceived errors before any punitive action is taken.”
The Calcutta High Court has upheld the quashing of an order passed by the CIT speculating on the possibility of understatement in closing stock without a specific finding.
The bench of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyy has observed that the assessing officer has conducted a due inquiry and thereafter completed his scrutiny assessment. The tribunal also noted that the CIT, in his order under Section 263, has only observed that there is a possibility of understatement in the closing stock without a specific finding on the said aspect. Thus, the case on hand is not one such case where no inquiry was conducted by the assessing officer.
Goa Cess Act Is Not Subsumed By GST Laws: Bombay High Court
The Bombay High Court at Goa has held that the Goa Cess Act is not subsumed by the GST laws.
“The Goa Cess Act is intra vires Articles 14, 301, and 303 read with Article 304 of the Constitution of India. Also, it is legal and valid, being in no manner subsumed by the GST laws,” the bench of Justice G. S. Kulkarni and Justice Bharat P. Deshpande observed.
The Madras High Court, while remanding the matter, held that the refund claim has to be examined and determined based on documents pertaining to the availing of ITC as well as the export of products on a zero-rated basis.
The bench of Justice Senthilkumar Ramamoorthy has observed that the petitioner/assessee has made the refund claims on time and cannot be faulted for the delayed processing of claims by the department.
The Delhi High Court has held that as a customs broker, the petitioner cannot be held liable because exporters were not traceable after the issuance of 'Let Export Orders' and the export of the goods out of the country.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that once the Importer Exporter Code (IEC) particulars as mentioned are verified from the system as maintained by the Customs, there is no requirement statutorily placed upon the Custom House Agent (CHA) to undertake an independent exercise in order to verify the details as furnished by the exporter.
Electricity Qualifies As Input For Grant Of CENVAT Credit: Madras High Court
The Madras High Court has held that electricity qualifies as an input for the grant of CENVAT credit under the CENVAT Credit Rules, 2002 (CCR).
The Bench of Justice Anita Sumanth and Justice R. Vijayakumar have observed that the captive power plant has been set up at substantial cost by the appellant at one of the company locations. The electricity generated has been used as 'input' only within the appellant group of companies, though at different locations. The consumption is in pari materia with the power generation, and there is no inflated claim.
Sales Tax Subsidy/Incentive Is Capital Receipt: Delhi High Court
The Delhi High Court has held that the sales tax subsidy or incentive received by the assessee under the Dispersal of Industries Package of Incentives, 1993, was a capital receipt.
The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia has observed that the common thread running through various incentives provided under the scheme was the setting up of a new unit or large-scale investment in fixed capital. The fact that the eligibility certificate was to be issued by the agency implementing the scheme after the commencement of commercial production by the eligible unit appears to have been incorporated in the 1993 Scheme to ensure that the object and purpose of the 1993 Scheme, which was to industrialize underdeveloped and developing areas, were fulfilled.
The Calcutta High Court has held that when the goods are still in use, the question of passing the burden of customs duty does not arise, and the question of unjust enrichment will not be applicable.
The bench of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya has observed that the appellate authority took note of the certificate issued by the Chartered Accountant in which the Chartered Accountant again certified that all the goods brought under the cover of the three bills of entries are still in use by the Dredging Corporation of India. The Director (Operations and Technical) of the assessee certified that the vessel is in operation and has not been sold.
While holding that the draft assessment order suffers from non-application of mind, the Madras High Court sets aside the proceedings initiated in violation of procedure prescribed as per Section 144B(1)(vii) read with (xiv) and (xvi)(b) of the Income tax Act, 1961.
A Single Judge Bench of Justice Mohammed Shaffiq observed that “a duty is cast on the assessing authority in terms of Section 144B(1)(xiv) of the Act to take into account all relevant material and thereafter frame the draft assessment order. The respondent has erred in not complying with the above mandatory requirement inasmuch as the draft assessment order has been made without even examining / taking into account the objections / response of the petitioner made vide letter dated 22.09.2021. Thus, the draft assessment order suffers from non-application of mind to matters that are relevant and on record, thus stands vitiated”.
Discount Linked To Subsidy Alone Can Form Part Of “Transaction Value”: Madras High Court
The Madras High Court has held that a discount linked to the subsidy alone can form part of the “transaction value.”.
The bench of Justice C. Saravanan has observed that a discount by itself will not qualify as a subsidy. However, a discount offered by a distributor, a supplier, or the manufacturer to the buyer or recipient simplicitor cannot form part of the “transaction value” unless such a discount is offered on account of the subsidy for supplies by a third party.
Customs Act | Claimant Entitled To Interest On Delayed Return Of The 'Duty Drawback' : Supreme Court
The Supreme Court on Monday (February 5) observed that if there is a delay in refund of the 'duty drawback' to the claimant under the Customs Act, 1962, then the claimant would be entitled to interest in addition to the amount of drawback at the rate of interest which was fixed by the Central Government at the relevant point of time.
It was contended on behalf of the Directorate General of Foreign Trade (DGFT) that there was no provision for payment of interest on delayed refund of duty drawback.
Rejecting such contention, the Bench of Justices Abhay S. Oka and Ujjal Bhuyan while affirming the findings of the High Court, observed that the claimant would be entitled to receive the interest on the belated refund of the 'duty drawback' by the Director General of Foreign Trade (“DGFT”) under the Customs Act.
The Bombay High Court has held that HSBC Bank carrying on bona fide banking business in Mauritius is exempt from tax in India.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that interest arising in a contracting state (India) shall be exempt from tax in that state (in India) provided the income is derived and beneficially owned by any bank carrying on a bona fide banking business that is a resident of the other contracting state (Mauritius).
The Madras High Court has held that when a registered dealer claims any benefit under Section 19 of the TNVAT Act 2006, he has to strictly adhere to the conditions laid down in the said section.
The bench of Justice D. Krishnakumar and Justice R. Vijayakumar has observed that the petitioner has not produced the original tax invoice from a registered dealer, and therefore, he cannot complain that the authorities are attempting to reverse the input tax credit in his favor. In fact, the petitioner has affected the purchase five months after the cancellation of the registration of the selling dealer. Since the registration of the selling dealer had already been cancelled in April 2008, he would not have paid the tax. Therefore, the allegation of the petitioner that the notice issued by the respondent department for reversing the input tax credit would amount to double taxation is not legally sustainable.
The Bombay High Court has held that excise duty paid and included in the closing stock has to be claimed separately as a deduction; otherwise, the appellant would not be claiming the entire excise duty paid in the year of its payment.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that Section 43B, which came to be introduced from Assessment Year 1984–1985 onwards, provides that the excise duty would be deductible only on a payment basis in the year in which it is actually paid.
Pointing that the information which was furnished to the assessee though contained information pertaining to the three assessment years, the information called for in the notice dated Mar 31, 2023 pertained only to the assessment year 2016-17, the Calcutta High Court upheld the reassessment proceedings despite the fact that Section 148A(b) notice issued for AY 2016-17 was accompanied with annexure containing information for multiple AYs.
The Division Bench comprising Chief Justice T.S. Sivagnanam and Justice Supratim Bhattacharya observed that “The stipulation under Clause (d) has been complied with by the assessing officer who has taken a decision, on the basis of the material available on record including the reply/replies given by the assessee and found that the case of the assessee for the assessment year under question namely 2016-2017 is a fit case to issue notice under Section 148 of the Act and prior approval of the specified authority has also been obtained. Thus, the provision of the Section 148A of the Act has been scrupulously followed by the assessing officer and there is no error in the decision-making process of this court to interfere”
The Bombay High Court has held that the assessing officer cannot take recourse to reopen the assessment to remedy the error resulting from his oversight in the assessment proceeding.
The bench of Justice K. R. Shriram and Kamal Khata have observed that the assessment cannot be reopened by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts, as the Income Tax Officer had material facts before him when he made the original assessment.
The Jharkhand High Court has upheld the income tax addition as the assessees have failed to prove the identity, creditworthiness, or genuineness of the creditors, who have given cash loans.
The bench of Justice Rongon Mukhopadhyay and Justice Deepak Roshan has observed that usually the matter would have been remitted to the AO for mentioning the correct provision and proceeding in accordance with law, but in the instant matter, the source of income in the case of both the assessees has not been proved, inasmuch as both the assessees have failed to prove the identity, creditworthiness, or genuineness of the creditors, who have given cash loans as claimed by them, thus we are of the view that remitting the cases to the AO will be a futile exercise.
The Jharkhand High Court has held that the show cause notice should give the noticeee a reasonable opportunity to make objections against proposed charges indicated in the notice, and the person proceeded against must be told the charges against him so that he can make his defense and prove his innocence.
The bench of Justice Rongon Mukhopadhyay and Justice Deepak Roshan has observed that in the entire course of the proceeding, at no stage is the petitioner made aware of the provisions of law that have been contravened and/or under which the additions are sought to be made, which is in gross violation of the principles of natural justice, and the procedure adopted by the Department is not fair or proper.
The Telangana High Court has held that Goods and Service Tax (GST) is payable on the transfer of land development rights under a joint development agreement (JDA).
The bench of Justice P. Sam Koshy and Justice Laxmi Narayana Alishetty has dismissed the writ petition filed by the real estate developer assailing the imposition of GST on the transfer of land development rights (TDR) on JDA for residential projects.
The Bombay High Court has held that the service provided by an individual advocate, a partnership firm of advocates, by way of legal services is exempt from levy of service tax.
The bench of Justice G. S. Kulkarni and Justice Kishore C. Sant has observed that the taxable service in respect of services provided or to be provided by the individual advocate for a firm of advocates has been set out to be 'Nil'. The Notification No. 25/2012, dated June 20, 2012, also clearly provides that the service provided by an individual advocate, a partnership firm of advocates, by way of legal services, is exempt from the levy of service tax.
The Calcutta High Court has held that if the provisions of the old regime of Section 148 of the Income Tax Act, including Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), are read into or applied to the new regime applicable from 01.04.2021, it would also necessarily mean that a provision repealed by the Parliament without any savings and exception clause is applied by the department even after its life has come to an end, which is clearly not permissible in law.
The bench of Justice Md. Nizamuddin has relied on the decision of the Supreme Court in the case of Union of India vs. Ashis Aggarwal, in which the judgment of the Calcutta High Court was modified or substituted by directing that the notice under the old Section 148 of the Income Tax Act shall be deemed to have been issued under the new Section 148A(b), and all defenses that may be available to the assessee, including those under Section 149 of the Income Tax Act, and all rights and contentions that may be available to the assessee and department under the Finance Act, 2021, shall continue to be available.
The Allahabad High Court has held that the principle of res-judicata does not apply from one assessment year to another. However, the Court held that the Department cannot be allowed to change its stance for the same assesee for different assessment years, unless there is a marked change from one year to another.
Relying on the decision of the Supreme Court in Bharat Sanchar Nigam Ltd. v. Union of India, Justice Shekhar B. Saraf held that “One may of course keep in mind that in taxation matters, the principles of res-judicata do not apply squarely for one assessment year to the other. However, keeping in mind the doctrine of finality, unless there is a marked change from one assessment year to the other, the department cannot be allowed to take a different stand.“
The Supreme Court has refused to interfere with a 2017 Delhi High Court judgment which issued a set of guidelines to the Income Tax Department regarding the reopening of assessments.
A bench comprising Justice PS Narasimha and Justice Aravind Kumar dismissed a Special Leave Petition filed by the Income Tax Department in 2018 against the 2017 High Court verdict.
The Delhi High Court bench of Justice S. Muralidhar and Justice Prathiba M. Singh issued the guidelines to ensure that the Department did not repeat mistakes while reopening the assessment.
The Allahabad High Court has held that requirement of self-certified copy of order is not applicable to the appeals filed electronically under Section 107 of the Central Goods and Service Tax Act, 2017 read with Rule 108 of the Central Goods and Services Tax Rules, 2017.
Section 107 of the Central Goods and Services Tax Act, 2017 provides for remedy of appeal to any person aggrieved by any order passed under the Act. Rule 108 of the Central Goods and Services Tax Rules, 2017 provides that the appeal under Section 107 must be filed in FORM GST APL-01, along with the relevant documents, either electronically or otherwise as may be notified by the Commissioner.
Recently, while quashing penalty order passed under Section 129 of the Goods and Service Tax Act, 2017 against M/s Hawkins Cookers Limited, the Allahabad High Court cited the Arthashastra by Chanakya. “Governments should collect taxes like a honeybee collects honey from a flower without disturbing its petals.”
The Court held that in absence of any other discrepancy, incorrect address entered in four out of eight e-way bills is of the principal place of business of the petitioner, the same does not give rise to the presumption of intention to evade tax.
Justice Shekhar B. Saraf held that “mere technical error committed by the petitioner cannot result in imposition of such harsh penalty upon the petitioner.”
The Bombay High Court has held that the petitioner ought not to have been meted out such discriminatory treatment as denying clearance. The harsh and unreasonable conditions cannot be imposed, and more so when there is not an iota of material on the part of the department, as placed before the Court, indicating as to why a different yardstick would be required to be applied to the present consignments when earlier seven consignments were released at 16% to 28% bank guarantee.
The bench of Justice G. S. Kulkarni and Justice Firdosh P. Pooniwalla has directed the department to grant provisional release of the goods to the petitioners by accepting the bank guarantee from the petitioner of Rs. 3,49,000 in respect of the first bill of entry and the bank guarantee of Rs. 2,00,000 in respect of the second bill of entry. The necessary action in that regard must be taken within 10 days. In addition to the bank guarantees, the petitioner shall furnish a bond as per the conditions as incorporated in the letter of the Assistant Commissioner of Custom dated November 15, 2023, for the full value of the goods, which is Rs. 37,34416.
The Delhi High Court has held that the period spent in the disposal of the appeal before the CESTAT, i.e., between the filing and the final order being passed, shall not be counted towards the period stipulated under Section 28 (9) of the Customs Act.
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that the Tribunal has already heard the appeal of the petitioner and the order is reserved.
The Bombay High Court has held that the reopening of the assessment was purely on the basis of a change of opinion of the AO from that held earlier during the course of assessment proceedings. The change of opinion does not constitute justification for assuming that income chargeable to tax has escaped assessment.
The bench of Justice K. R. Shriram and Justice Dr. Neela Gokhale has observed that the AO in the assessment order has noted that the issue of investment in immovable property and capital gain/income on sale of property was considered under limited scrutiny assessment, and in view of the material on record, no addition on the issue is made. The information relied upon while issuing notice under Section 148A(b) relates to the flat, and an entirely contradictory view is taken in the order that the asset sold was a short-term capital asset and the gain arising on the transfer of the said flat is a short-term capital gain.
The Bombay High Court has held that if an assessee for commercial expediency and in the normal course of its business activities takes loan to invest in shares of its subsidiary, the interest paid on these advances utilised is allowable expenditure under Section 36(1)(iii) of the Income Tax Act.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that assessee had an aggregate shareholding of 64% in the subsidiary and, therefore, it cannot be contended that share application money made is not for business purpose.
Yoga And Meditation Charges Are Subjected To Tax Under Kerala Tax On Luxuries Act: Kerala High Court
The Kerala High Court has held that yoga and meditation charges are subjected to tax under the Kerala Tax on Luxuries Act.
The bench of Justice A. K. Jayasankaran Nambiar and Justice Kauser Edappagath has upheld the tribunal's ruling in which the tribunal differentiated between the incomes, allowing certain deductions for the cost of medicines and professional charges related to ayurvedic treatments while including yoga and meditation charges and miscellaneous income in the taxable turnover. The Tribunal's ruling was primarily based on the definitions and exclusions specified under Section 4(2)(e) of the Kerala Tax on Luxuries Act.
Mariya Paliwala 20 Feb 2024 1:45 PM Listen to this Article The Delhi High Court has held that the assessee, Mitsubishi Corporation, is not liable to deduct TDS under Section 195(1) of the Income Tax Act where the sum paid was not chargeable to tax in India.
The bench of Justice Rajiv Shakdher has observed that the assessee could have taken recourse to the DTAAs qua the reformulated question since the provisions contained therein were more beneficial. Therefore, the business connection test had no relevance once it was established that MC Metal (Thailand) and Metal One (Singapore) did not have a PE in India.
'Enemy Property' Not Exempt From Municipal Taxes As It Is Not Vested With Union Govt : Supreme Court
The Supreme Court held that the 'enemy property' vested in the possession of the Union Government-appointed 'custodian', as per the Enemy Property Act, 1968, cannot be considered a property of the Union Government to claim the exemption from the municipal taxes under Article 285 (1) of the Constitution of India.
“Union of India cannot assume ownership of the enemy properties once the said property is vested in the Custodian. This is because, there is no transfer of ownership from the owner of the enemy property to the Custodian and consequently, there is no ownership rights transferred to the Union of India. Therefore, the enemy properties which vest in the Custodian are not Union properties.”, observed Supreme Court Bench Comprising Justices B.V. Nagarathna and Ujjal Bhuyan.
The bench stated that the 'enemy property' is not entitled to claim the exemption availalbe for the properties of the Union Government from State taxes as per Article 285.
“As the enemy properties are not Union properties, clause (1) of Article 285 does not apply to enemy properties. Clause (2) of Article 285 is an exception to clause (1) and would apply only if the enemy properties are Union properties and not otherwise.”, the Judgment authored by Nagarathna J. noted while allowing the municipal corporation to levy taxes on the enemy property.
The Allahabad High Court has rejected the application of Section 5 of the Limitation Act in appeals filed under Section 107 of the Uttar Pradesh Goods and Service Tax Act, 2017.
The Court held that Tax laws are complete comprehensive codes which have strict procedural requirements to ensure revenue certainty and fiscal stability. Section 107 of the UPGST Act provides a period of three months from the date of order to file an appeal challenging the same. Section 107(4) empowers the appellate authority to exercise discretion in condoning delay of up to one month in filing the appeal. Section 5 of the Limitation Act is a general provision which enables Courts to condone delay if sufficient cause is shown.
The Court held that Section 107 prescribes a time frame for filing of appeal to ensure timely adjudication and to promote “the efficient administration of GST regime” whereas Section 5 of the Limitation Act provides for condonation of delay in exceptional circumstances where sufficient cause is shown.
The Delhi High Court has held that TDS prosecution can't be initiated against any office holder in a corporation without establishing an administrative connection.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar has observed that merely because a person holds an office in a corporate entity, it would not be sufficient to place him as a principal officer until and unless he is established to be connected with the management or administration of the company. The bench stated that the department assumed that any person who has been served a notice embodying an intent to treat that person as a principal officer would be sufficient for the purposes of Section 2(35) of the Income Tax Act. As per Section 2(35), the secretary, treasurer, manager, or agent thereof would be liable to be treated as the principal officer; however, he should be “connected with the management or administration of the company.”.
The Delhi High Court has held that a mere deduction of TDS by a donor on grants would not disentitle the assessee-NGO from exemption under Section 11 of the Income Tax Act.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav, while allowing the petition, set aside the assessment order and held that the receipt of Rs. 5.90 crore shall not be treated as income and allowed the claim of the assessee under Sections 11 and 12 of the Income Tax Act.
The Delhi High Court has held that subscription to legal databases cannot be construed as a transfer of copyright.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the subscription fees of the legal database LexisNex piad by an Indian subscriber neither comprise a transfer of copyright nor do they include a transfer of a right to apply technology and other related aspects, which are spoken of in Article 12(4)(b) of the DTAA.
The Lucknow bench of Allahabad High Court has quashed the order by the GST and Central Excise Superintendent for lack of jurisdiction.
The bench of Justice Alok Mathur has observed that according to the circular dated February 9, 2018 issued by the Government of India, Ministry of Finance, and Department of Revenue, the power of the Superintendent, Central Goods and Service Tax, and Central Excise is limited to the matter not exceeding Rs. 10,00,000, and in the present case, the amount involved is more than Rs. 16,00,000, and consequently, the order passed by it is without jurisdiction.
The Allahabad High Court has held that absence of tax invoices and/or e-way bill at the time of interception and their subsequent production does not absolve the assesee from the liability of penalty under the Goods and Service Tax Act.
“Production of these documents subsequent to the interception cannot absolve the petitioner from the liability of penalty as the very purpose of imposing penalty is to act as a deterrent to persons who intend to avoid paying taxes owed to the Government,” held Justice Shekhar B. Saraf.
The Bombay High Court has held that the respondent (assessee) ought to have deducted tax under Section 194I of the Income Tax Act, 1961, from the storage charges paid by the assessee.
The bench of Justice K. R. Shriram and Justice Sharmila U. Deshmukh has observed that the storage tanks in question do not qualify either as land or as buildings within the meaning of Section 194I. In terms of Section 194I, there has to be a lease, sub-lease, tenancy, or any other agreement involving land or any building, excluding factory buildings.
The Kerala High Court has held that Section 39 of the Kerala Value Added Tax Act, 2003, empowers the taxing authorities to recover the tax dues from the directors of the private company if the company fails to make payment of the tax. The bench of Justice Dinesh Kumar Singh has observed that when the taxing authorities could not recover the dues from the company, they issued notice for recovery of the said tax dues against the petitioners, who are the directors.
The Patna High Court has held that differentiation between government employees and other employees for leave encashment exemption is neither discriminatory nor violative of Article 14 of the Constitution of India.
The bench of Chief Justice K. Vinod Chandran and Justice Rajiv Roy has observed that the legislature must have the freedom to select and classify persons, properties, and income that it would tax and/or not tax. Thus, the differentiation made by the state between the employees of the central and state governments on the one hand and the other employees on the other in Section 10 (10 AA) of the Income Tax Act, 1961, is neither discriminatory nor violative of Article 14 of the Constitution of India.
'Cash' Excluded From Definition Of 'Goods', Can't Be Seized: Delhi High Court
The Delhi High Court has directed the respondent department to forfeit or remit the cash seized from the premises of the petitioner to the petitioner along with interest.
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that 'cash' is clearly excluded from the definition of the term 'goods' and would fall within the definition of'money' as defined in Section 2 (75) of the GST Act.
The bench stated that since cash is not a good, it could not have been seized under the provisions of the Act, as seizure is limited to the goods liable for confiscation.
The Gujarat High Court while partly allowing a special civil application has emphasized the importance of lender banks affording borrowers the opportunity to review audit reports and present their case before categorizing an account as fraudulent.
The court stressed the need for lenders to provide a copy of audit reports and allow a reasonable window for borrowers to submit representations. Furthermore, the court mandated that lenders must issue a reasoned order addressing any objections raised by the borrower.
The Madras High Court has held that Section 116A of the Tamil Nadu Urban Local Bodies Act, 1998, mandates that 15 days' time should be provided to the property tax assessee to respond to the notice before action is taken.
The bench of Justice Senthilkumar Ramamoorthy has directed the respondent department to de-seal the restaurant.
TDS Not Liable To Be Deducted On Business Support Services As Not Taxable As FTS: Bombay High Court
The Bombay High Court has held that business support services are not taxable as a fee for technical services (FTS), and no TDS is liable to be deducted.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that even if it is fees for technical or consultancy services, it can be only where fees are paid in consideration for making available technical knowledge, experience, etc. Thus, the view of the AAR that the petitioner, Shell International Petroleum Company Limited (SIPCL), works closely with and advises the employees of the petitioner and hence makes available the services is not correct.
The Bombay High Court has held that actual carrying on of agricultural operations is not a necessary condition for deciding that the parcels of land were agricultural lands.
The bench of Justice K. R. Shriram and Justice Dr. Neela Gokhale has quashed the order and remanded the matter for passing the fresh assessment order. The AO will only examine whether the evidence brought on record to establish the claim that the lands sold are in the nature of agricultural land is authentic. If the AO has to reject the evidence filed by the petitioner, he shall bring contrary material on record. For that, the AO has to conduct an inquiry to ascertain the authenticity of the certificates filed by the petitioner.
The Jammu & Kashmir and Ladakh High Court has held that leasehold interest in the land is an asset of the company and is capable of valuation. As such, it is to be included in the value of the assets of M/s. Jyoti Private Limited so as to determine the fair market value of shares held by the assessee as well as other shareholders.
The bench of Justice Tashi Rabstan and Justice Puneet Gupta, while upholding the ITAT's order, observed that the fair market value is defined under Section 2(22B) of the Act as the price that such an asset would ordinarily fetch on sale in the open market. Therefore, for the purposes of computation of capital gain, the fair market value has to be determined, not the value of shares; the valuation of shares is to be made under Rule 1D of the Wealth Tax Rules.
The Allahabad High Court has held that when the GPS tracking system showed slow movement of the truck due to mechanical issues in the engine, penalty under Section 129 of the Goods and Service Tax Act, 2017 could not have been imposed for not extending time-period in e-way bill.
The Court held that not extending time period in such case was a technical breach. At the time of interception of Petitioner's goods, the e-way bill had been expired for four days. Counsel for petitioner argued that due to overheating of the engine of the truck, the driver was driving slowly and intermittently stopping. Reliance was placed on the GPS of the truck to show that it was travelling on the original route.
S.5 Limitation Act Applies To Rectification Of Orders U/S 31 Of UP VAT Act: Allahabad High Court
The Allahabad High Court has held that Section 5 of the Limitation Act will apply to rectification of orders passed by officer, authority, Tribunal or the High Court under Section 31 of the Uttar Pradesh Value Added Tax Act, 2008.
Section 31 of the Uttar Pradesh Value Added Tax Act, 2008 provides that any officer, authority, Tribunal or the High Court may rectify any mistake apparent on the face of record in any of its order either on its own motion or on an application made by parties, within a period of three years from the date of the order which is sought to be rectified.
The Jharkhand High Court has held that the issuance of pre-SCN consultation is mandated under proviso to Section 28(1)(a) of the Customs Act, 1962, before issuing the show cause notice.
The bench of Justice Rongon Mukhopadhyay and Justice Deepak Roshan has observed that the mandatory pre-SCN consultation, as mandated under proviso to Section 28(1)(a) of the Customs Act, 1962, read with the Pre-Notice Consultation Regulation, 2018, was not complied with while issuing the impugned SCNs; hence, the subsequent Order-in-Original and the 1st Appellate Order were bad in law, being void ab initio and a nullity in the eyes of law.
The Delhi High Court has held that any pick-and-choose method of rejecting certain entries from the books of account while accepting others without an appropriate justification is arbitrary and may lead to an incomplete, unreasonable, and erroneous computation of the income of an assessee.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the ITAT has made a categorical finding that despite the fact that the AO was provided with the requisite bills, vouchers, and addresses of the transacting parties, it did not make any effort to confirm the veracity of the alleged bogus or inflated bills.
Revisional Jurisdiction Can't Be Invoked For Inadequacy Of Enquiry By AO: Delhi High Court
The Delhi High Court has held that the inadequacy of the inquiry by the AO with respect to certain claims would not in itself be a reason to invoke the powers enshrined in Section 263 of the Income Tax Act.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the claims were duly examined during the original assessment proceedings themselves, and neither there was any error nor was the same prejudicial to the interests of the department.
The Calcutta High Court has held that Adani Wilmar is eligible for sanction of incentives under the West Bengal State Support for Industries Scheme, 2008, post GST.
The bench of Justice Sabyasachi Bhattacharyya has directed the respondent department to disburse the balance amount of the claim of Rs. 4070 lakhs under the West Bengal State Support for Industries Scheme, 2008, in favor of the petitioners at the earliest, preferably within two months from the date, subject to the petitioners complying with the other formalities as contemplated in the Scheme.
The Delhi High Court has held that the expression “yes” could not be considered to be a valid approval under Section 151 of the Income Tax Act.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the satisfaction arrived at by the prescribed authority under Section 151 of the Income Tax Act must be clearly discernible from the expression used at the time of affixing its signature while according approval for reassessment under Section 148.
The approval cannot be granted in a mechanical manner, as it acts as a linkage between the facts considered and the conclusion reached. Merely appending the phrase “yes” does not appropriately align with the mandate of Section 151, as it fails to set out any degree of satisfaction, much less an unassailable satisfaction.
The Allahabad High Court has held that for goods in transit, vehicle number in bilty (consignment note) cannot be changed upon change of vehicle due to breakdown.
The Court quashed the penalty order on grounds that vehicle number was updated in Part-B of the e-way bill. Petitioner's goods were intercepted, and penalty was imposed under Section 129(3) of the Uttar Pradesh Goods and Services Tax Act, 2017 on grounds that the bilty and invoice accompanying the goods had the earlier vehicle's number.
Service Tax Not Liable To Be Paid On Ocean Freight/Sea Transportation Services: Bombay High Court
The Bombay High Court has held that service tax is not liable to be paid on ocean freight or sea transportation services.
The bench of Justice G. S. Kulkarni and Justice Firdosh P. Pooniwalla has relied on the decision of the Gujarat High Court in the case of SAL Steel Ltd. vs. Union of India, in which it was held that no tax is leviable under the Integrated Goods and Services Tax Act, 2007, on the ocean freight for the services provided by a person located in a non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India, and the levy and collection of tax on such ocean freight under the impugned notifications is not permissible in law.
The Madras High Court has directed the Assessing Officer to allow transitional credit of purchase tax paid under Section 140 of the TNGST Act, 2017, if the petitioner had paid “purchase tax” under Section 12(1) of the TNVAT Act.
The bench of Justice C. Saravanan has observed that the petitioner deserves a chance to defend the case as the impugned assessment order was passed during the period when the country was in semi-lockdown mode. If the VAT-TDS had indeed remained unutilized for discharging tax liability under the TNVAT Act, 2006, there should be a fresh adjustment of the amount out of the VAT-TDS towards the tax liability of the petitioner, and thereafter, ITC, which would have remained unutilized, ought to have been allowed to be transitioned under Section 140 of the Act or refunded to the petitioner under Section 54 of the TNGST Act, 2017 read with the TNVAT Act, 2006.
The Madras High Court has held that it is mandatory for the income tax department to follow the Digital Evidence Investigation Manual issued by the Central Board of Direct Taxes (CBDT) while conducting searches and seizing electronic evidence.
The bench of Justice Krishnan Ramasamy has observed that the electronic data has been collected in.txt files in violation of the provisions of the Digital Evidence Investigation Manual. Though the procedures have not been followed while collecting the electronic data in.txt files, the data collected by the respondents can be relied upon only if the said data are supported by the corroborative evidence.
Finding that the period of one month expired on July 31, 2022, whereas the assessment order came to be issued on Mar 25, 2023, the Madras High Court Held the assessment order issued beyond time-limit specified in Sec.144C(13) as unsustainable.
A Single Judge Bench of Justice Senthilkumar Ramamoorthy observed that “the directions of the DRP were forwarded to the assessing officer, i.e. National Faceless Assessment Centre, Delhi by uploading the same on 17.06.2022. Although learned senior standing counsel contends that the jurisdictional assessing officer received the directions only on 17.03.2023, for purposes of sub-section (13) of Section 144C, the date of receipt should be reckoned as the date of receipt by the National Faceless Assessment Centre on 17.06.2022”.
The Bombay High Court has held that exgratia bonuses paid to employees over and above the eligible bonus under the Payment of Bonus Act are allowable as business expenditures.
The bench of Justice K. R. Shriram and Justice Dr. Neela Gokhale has observed that the ITAT was not right in law in holding that the liability for salary and wages arising out of the Justice Palekar Award is not allowable as expenditure in the present year but only in the year in which the agreement between the management and the employees is entered into.
Assessment Order Passed Beyond Time Limit Prescribed U/s 153 Merits To Be Quashed: Delhi High Court
Finding that no valid demand stood raised against the Petitioner / assessee prior to Sep 30, 2021, the Delhi High Court directed the Respondents / Revenue to re-compute the refund payable to the petitioner along with statutory interest which shall run up to the date of remittance in accordance with law. The High Court therefore quashes the assessment order passed beyond time limit prescribed u/s.153 of the Income tax Act.
The Division Bench comprising of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav observed that “period prescribed under Section 153(3) of the Act would thus have to necessarily be computed from the date when the order of the ITAT was received by the respondents. Even if the benefits of TOLA were extended to the respondents, undisputedly, the order of assessment was liable to be framed lastly by 30 September 2021. The respondents have thus abjectly failed to pass an order in terms of the mandatory provisions comprised in Section 153 of the Act”.
ITAT Must Recall Its Order U/s 254 To Correct Manifest Error Apparent On Record: Delhi High Court
While condoning the delay of 86 days by Revenue in filing the appeal, the Delhi High Court dismisses Revenue's appeal filed against the Tribunal's order in miscellaneous application filed by assessee to review its earlier order u/s. 254(2) of the Income tax Act.
The Division Bench comprising Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav observed that “the ITAT had clearly rendered incompatible and inconsistent findings. In fact, we are constrained to observe that paras 12 and 21 were clearly contradictory. It was thus not only imperative but also expedient in the interest of justice for the ITAT to recall its order of 29 September 2020 and correct a manifest error apparent on the record”.
The Bombay High Court recently held that the interest paid on borrowed funds in respect of investment in shares of two companies was hit by Section 14A of the Act inasmuch as the dividend received on such shares did not form part of the total income
The Division Bench comprising Justice K.R. Shriram and Justice Dr. Neela Gokhale observed that “the fact remains that the dividend income from the two companies is not taxable and in that scenario the expenditure incurred on interest paid on funds borrowed in respect of investment in shares of two operating companies is hit by Section 14A of the Act inasmuch as the dividend received on such shares does not form part of the total income”.
The Bombay High Court in the Harshad Mehta Scam case, while upholding the ITAT's ruling, held that the Assessing Officer could not have assessed additions again since the CIT (A) had deleted the same in the first round of proceedings and the concerned matters have attained finality.
The bench of Justice K. R. Shriram and Justice Dr. Neela Gokhale has observed that various types of additions aggregating to the amount were made by the Assessing Officer in the original assessment proceedings, and in the appeal filed by the assessee, the CIT(A) deleted these additions. The Revenue did not prefer an appeal challenging the order of the CIT (A), and hence, the same has attained finality.
The Himachal Pradesh High Court has declared the levy of water cess by the state government on hydropower generation unconstitutional.
The bench of Justice Tarlok Singh Chauhan and Justice Satyen Vaidya has observed that even the Statement of Objects and Reasons as well as the preamble of the Himachal Pradesh Water Cess on Hydropower Generation Act, 2023, do not lend any guidance to the delegate. The preamble of the Act merely states that it is an act to levy water cess on hydropower generation in the State of Himachal Pradesh, and the Statement of Objects and Reasons merely states that the objective of the Act is revenue generation. Therefore, on account of having delegated power to fix rates of impugned levy to the Government of Himachal Pradesh without any legislative policy or guidance, the Act is unconstitutional.
The Calcutta High Court reiterated that the selection of the tested party is to further the object of the comparability analysis by making it less complex and requiring fewer adjustment.
The Division Bench comprising Justice T.S Sivagnanam and Justice Supratim Bhattacharya observed that “the tested party normally should be the least complex party to the controlled transaction and there is no bar for selection of tested party either local or foreign party and neither the Act nor the guidelines on transfer pricing provides so”.
The Delhi High Court allowed assessee's petition seeking refund of amounts which was deposited towards part payment of demand raised in pursuance of assessment order for AYs 2008-09 and 2009-10.
The Division Bench comprising Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav observed that “Since the remit ordered by the ITAT, admittedly, was rendered prior to 1 June 2016, it was incumbent upon the AO to have framed a final order of assessment on or before 31 March 2017. Having failed to do so, there would exist no justification for the respondent to retain the amounts which had been deposited by the petitioner”.
The Delhi High Court has quashed the order denying Nil or lower TDS certificates and held that the services provided by the assessee, Irish Company, to its Indian counterpart were not technical services.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that though the power to grant a TDS certificate was merely a preliminary examination of the issue of taxability and had no implication on the ultimate assessment that might be made, still due consideration should be accorded to the question of chargeability to tax while examining applications made under Section 197 of the Income Tax Act, 1961.
The Rajasthan High Court has held that the assessee is being run as a trust solely for educational purposes, thus seeking the exemption under Section 10(23C)(vi) of the Income Tax Act of 1961, and the generation of surplus from year to year cannot be a bar in seeking such an exemption under the provision of law.
The bench of Justice Pushpendra Singh Bhati and Justice Munnuri Laxman has observed that mere generation of surplus cannot be a basis for rejection of an application under Section 10(23C)(vi) on the ground that it amounts to an activity of the nature of profit-making. In fact, the third proviso to the said clause clearly provides that accumulation of income is permissible subject to the manner prescribed therein, provided such accumulation is to be applied “wholly and exclusively to the objects for which it is established.”
The Madras High Court has held that the Assessing Officer is not incompetent to invoke the jurisdiction under Section 154 of the Income Tax Act, 1961, if such officer had committed a glaring mistake of fact or law while passing the assessment order.
The bench of Justice C. Saravanan has observed that the meaning of the expression “error apparent on the face of record” is wider than the expression “mistake apparent from the record.”.
The Delhi High Court has held that the charges of clandestine removal and under valuation cannot be sustained merely on the basis of assumptions and presumptions. The absence of direct, credible evidence linking the respondents to the alleged offences necessitate the dismissal of the charges.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the physical verification of the stocks and the absence of discrepancies in the recorded quantity of the raw material as well as the lack of evidence regarding the purchase of significant quantities of raw materials and cash undermine the presumption of unaccounted manufacture.
The bench found that the recovery of documents from the premises unrelated to the respondents and reliance of such documents to establish clandestine operations are found to be procedurally flawed and legally untenable by the CESTAT.
Recently, the Supreme Court held that under the Customs Act, the Importer's Bill of Entry of subsequent imported goods can be discarded if the subsequent imported goods are undervalued to the previously imported identical or similar goods.
Affirming the findings of the Central Customs, Excise & Service Tax Appellate Tribunal (“CESTAT”), the Bench comprising Justices Abhay S. Oka and Pankaj Mithal observed that the transaction value in the bills of entry of the subsequent goods can be discarded if it is found that the importer has earlier brought/imported an identical goods or similar goods at a higher price from the same seller/exporter.
The Madras High Court has held that a tax recovery officer cannot declare a sale made by the assessee in favour of a third party void if he finds that the property of the assessee was transferred by the assessee to a third party with an intention to defraud the revenue.
The bench of Justice C. Saravanan has observed that the Income Tax Department will have to file a suit in terms of Rule 11 (6) of the 2nd Schedule of the Income Tax Act, 1961, though under Rule 11 (6) of the 2nd Schedule of the Income Tax Act, 1961, the party against whom an order of attachment is made has to institute a suit in a civil court to establish the right which he claims over the property in dispute, and subject to the result of such suit (if any), the order of the Tax Recovery Officer shall be conclusive.
The Allahabad High court has held that the Department must take consistent stands in identical fact situations for different tax periods as consistency is paramount in tax regime.
While observing that the facts of the tax periods under dispute were exactly identical to previous tax periods, Justice Shekhar B. Saraf held “While the principle of res judicata does not apply to taxation matters, it is incumbent upon authorities to take a consistent approach when dealing with similar factual and legal circumstances. The principle of consistency states that when faced with analogous factual and legal circumstances, the treatment should remain uniform. Taxpayers have a legitimate expectation that similar factual and legal circumstances will be met with uniform treatment, and any deviations from this principle undermine the credibility and legitimacy of the actions taken by tax authorities.”
The Allahabad High Court has clarified that 'capital goods' as defined under Section 2 of the Central Goods and Service Tax Act, 2017 are for long term use whereas 'inputs' are meant for day-to-day business operations and are not capitalized in the books of accounts.
“Capital goods are intended for long-term use and are typically subject to capitalization. However, inputs, are goods used in the day-to-day operations of the business and are not subject to capitalization,” held Justice Shekhar B. Saraf.
The Bombay High Court has held that the assessee cannot be said to furnish inaccurate particulars of income merely for variance in allowable deductions.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that the ITAT was of the view and rightly so that the assessee had made a bona fide claim under Section 36(1)(viii), as such deductions claimed are linked to the business profit. Only because there was variance in the deductions allowable due to a change in the determination of business profit can it be said that the assessee has furnished inaccurate particulars of income or concealed inaccurate particulars of income.
The Karnataka High Court has held that if income tax returns are available the same should be considered as best a piece of evidence and if variations are found in the income tax returns, considered for different assessment years, it would be appropriate to consider the average income of three assessment years to arrive at the annual stable income of the claimant seeking compensation under the Motor Vehicles Act.
A division bench of H.T.Narendra Prasad and Justice K V Arvind made the observation while partly allowing the appeal filed by Jayashree questioning the order of the trial court and sought enhancement of compensation granted.
The Allahabad High Court has held that the provision requiring the assesee to provide his “registered email address” to the income tax authorities under Section 144B of the Income Tax Act, 1961 is residuary in nature.
The Court held that if the assessing authority is unable to obtain the registered email address from the income tax returns or from the designated portal of assesee or website of Ministry of Corporate Affairs, then it is upon the assesee to provide the email address to the authority.
The Madras High Court recently highlighted that provision of Section 278E of the Income tax Act brings in a statutory presumption regarding the existence of a culpable mental state.
Accordingly, the High Court refused to interfere in the criminal proceedings and relegated the petitioner/ taxpayer to the trial, while stating that the onus is upon the petitioner to prove the contrary and that can be done only at the time of the trial.
The Supreme Court has held that Section 71 of the Customs Act, 1962 would be inapplicable to cases where imported goods were stocked outside the notified public bonded warehouse with the permission of the concerned officer.
A portion of the Appellant's factory premises was notified as a public bonded warehouse. The Appellant, with the permission of Superintendent of Customs and Central Excise (“Superintendent”), partially stocked 264 cases of the imported goods outside the bonded warehouse but within the factory premises.
The Himachal Pradesh High Court has held that credit availed on outward transportation services is eligible when the freight charges are included in the taxable value.
The bench of Chief Justice M.S. Ramachandra Rao and Justice Jyotsna Rewal Dua observed that the Tribunal was not justified in holding that the place of removal for the GTA services provided under the sale contract is the manufacturer's premises and not the place where the goods are sold. The Tribunal was not justified in holding that the GTA services in the present case are being received beyond the place of removal and therefore not covered within the definition of input service under Rule 2(1) of the CENVAT Credit Rules, 2004.
The Bombay High Court has held that categorising the body massager as an adult sex toy was purely the officer's imagination.
The bench of Justice G. S. Kulkarni and Justice Kishore C. Sant has upheld the CESTAT's ruling, in which it was held that the view taken by the Commissioner was purely the Commissioner's imagination to categorise the item not as a body massager but as an adult sex toy. The sale of body massagers within the national boundaries was not subjected to any prohibition. In discarding the submission of the revenue to that effect, it was observed that the adjudicating authority had appeared to have found a cause to pause for ascertainment of his authority to determine goods as 'obscene' solely in international transactions, while no such restrictions were placed on domestic transactions for such categories of goods.
The Delhi High Court has held that the judgement of Abhisar Buildwell passed by the Supreme Court cannot be construed to be an authority to override the mandate of Section 245-I of the Income Tax Act.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that in terms of the Supreme Court's judgment in the case of Abhisar Buildwell, the completed or unabated assessments can be re-opened by the AO in exercise of powers under Sections 147 and 148 of the Income Tax Act, subject to fulfillment of the conditions mentioned under the provisions.
The Madras High Court has recently ruled that Hostel services providing welling to girl students and working women will be exempt from the GST regime as they are residential dwelling units for the girl students and working women.
Justice Krishnan Ramasamy stressed the work “residential dwelling” referred to in Entry 12 of the Exemption Notification No. 12 of 2017 would include hostel facilities also. While noting that residential dwelling varies from person to person, the court added as far as hostellers were concerned, after their avocation, they stay, sleep, eat, wash etc in the hostel rooms alone thus making it their residential dwelling.
The Bombay High Court recently clarified that in a sale of a mortgaged asset, where the mortgage in favour of a secured creditor is registered prior in time with CERSAI, and the MVAT Authorities too have a charge, the proceeds of the enforcement of the mortgage would first go towards discharging the dues owed to the secured creditor. It is only the residue, if any, after discharging the dues of the mortgagee, that may flow to the MVAT Authorities, added the Court.
The High Court therefore held that once a secured creditor registers its security interest u/s 26-B of the SARFAESI Act notwithstanding any other law in force, the debts owed to the secured creditor shall be paid in priority over all other debts including taxes payable to the State Government.
A Division Bench of Justice Somasekhar Sundaresan and Justice B.P. Colabawalla observed that “The only effect of the interplay between Section 26-E of the SARFAESI Act and Section 37 of the MVAT Act would be that MVAT Authorities would not have priority in the recourse to the assets that are secured in favour of the secured creditor and registered in priority with CERSAI”.
The Bombay High Court has held that the action of the Maharashtra Government in levying stamp duty on delivery orders (DO) is within the legislative competence of the state.
The bench of Justice G.S. Patel and Justice Neela Gokhale has observed that the action of the State of Maharashtra in levying stamp duty on Delivery Orders (DO) as provided in Article 29 of Schedule I of the Maharashtra Stamp Act, 1958 (MSA) is well within the legislative competence of the State and does not intrude upon the legislative domain of the Parliament as reserved in Entries 41 and 83 of List I of Schedule VII of the Constitution of India and is not ultra vires Article 246(1), 286(1)(b) and 286(2) of the Constitution of India.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has held that the assessee, Abu Dhabi Investment Authority, is liable to benefit provided under Article 24 of the India-UAE Double Taxation Avoidance Agreement (DTAA), which provides that the government of one contracting state shall be exempt from tax in other contracting states in respect of any income derived by such income from those other contracting states.
The bench of Amit Shukla (Judicial Member) and Amarjit Singh (Accountant Member) has observed that the CIT(A) denied the benefit of Article 24, disbelieving that the assessee is in fact Abu Dhabi Investment Authority, as mentioned in Article 24(2)(b)(ii). The CIT(A) held that the assessee was a fraud entity based on the mobile number mentioned in ITR '9999999999' which turned out to be a fraud number on True Caller. The ITAT found the reasoning very flimsy and remarked that once all the other details have been provided and still there is doubt, then CIT(A) should have verified the PAN and the address provided in the return to see whether it is an Abu Dhabi government-owned company or not.
While holding the argument that an assessee is entitled to a stay on the recovery proceedings on payment of 20% of the demand during the pendency of appeal before the Tribunal, as too general, the New Delhi ITAT dismisses the stay application of Indian National Congress treating it as meritless.
At the same time, on the merits of the matter, the ITAT ruled that compliance with the conditions prescribed in Section 13A regarding furnishing of return by due date as per Section 139 is mandatory for a Political Party in order to be eligible for the claim of exemption u/s 13A of the Income tax Act.
While setting aside the order of CIT(A), the Mumbai ITAT directed the AO to delete the addition of annual letting out value (ALV) of the unsold flat u/s 22 of Income Tax Act, 1961.
The Bench comprising Pavan Kumar Gadale (Judicial Member) and Prashant Maharishi (Accountant Member) observed that “the annual value of unsold flats held as stock in trade has to considered as per the amendment in the finance Act 2017 under section 23(5) of the Act is applicable from A.Y 2018-19 and the present case is A.Y. 2012-13. Accordingly, we follow the judicial precedence and rely on the ratio of the legal decisions and the applicability of amendment Sec 23(5) of the act.”
Quoting the decision of cargo motors private limited versus deputy Commissioner of income tax (145 taxmann.com 641), the Mumbai ITAT reiterated that for purpose of making disallowance of expenses u/s 14A as per rule 8D, only those investments were to be considered which yielded exempt income during the year.
The Bench comprising Rahul Chaudhary (Judicial Member) and Prashant Maharishi (Accountant Member) observed that, “the assessee has more interest free funds available with it in the form of share capital and reserves and surplus then the amount of investment made which yielded tax free income during the year. Therefore, the presumption would be available in favour of the assessee that amount of investment made in such exempt income yielding investments are made of interest free funds available. Therefore, there could not have been any disallowance under rule 8D (2) (ii)of the income tax rules 1962 under section 14 A of the Act.”
While directing the AO to allow deduction u/s 80P(2)(a) or 80P(2)(d) of the Income-tax Act, 1961 of interest income earned by the assessee from the co-operative bank, the Mumbai ITAT clarified that co-operatives bank is also a co-operative society.
The Bench comprising Rahul Chaudhary (Judicial Member) and Prashant Maharishi (Accountant Member) observed that, “in respect of any income by way of interest or dividend derived by the co-operative society from its investment with any other co-operative society is also allowable as deduction fully under Section 80P(2)(d) of the Act, the facts are clear that assessee is a co-operative society and co-operative banks are also co-operative societies.”
On finding that entire proceeding was based on the covenants of the trust deed but not on the actual activities carried out by the appellant trust, the Pune ITAT set aside the order passed by CIT(E) cancelling the registration granted u/s 12AB(4) of the Income Tax Act, 1961.
The Bench comprising Partha Sarathi Chaudhury (Judicial Member) and Inturi Rama Rao (Accountant Member) observed that, “Mere fact that the trust deed contains a covenant that enables the settlor to utilize the premises for her use or family use, cannot empower the CIT to cancel the registration, as it does not lead to any conclusion that either the activities of the trust are not genuine or the activities are not being carried out in accordance with the objects of the trust. Similarly, the fact that huge investments are made in mutual funds, cannot also lead to the conclusion that the activities of the trust are not genuine.”
On finding sufficient evidence for establishing that expenditure was incurred for business expediency, the Delhi ITAT deleted the addition made by AO u/s 36(1)(iii) and u/s 37 of the Income Tax Act, 1961.
The Bench comprising Anubhav Sharma (Judicial Member) and Narendra Kumar Billaiya (Accountant Member) observed that, “no merit in the argument of the ld. DR that unless some revenue is shown from the project, the assessee cannot justify the loan and the interest expenditure was rightly disallowed. We are of the considered view that when business expediency in regard to the expenditure is established how far it fetches revenue in the relevant assessment year is not of much consideration unless there is specific evidence of wasteful or excessive expenditure, which is not the case here.”
On finding that voluntary disallowance of expense u/s 40(a)(ia) of the Income Tax Act is not a ground to treat the assessee as 'assessee in default' u/s 201(1), the Delhi ITAT deleted the addition of chargeable interest u/s 201(1A) as well as the treatment of 'assessee in default' u/s 201(1).
The Bench comprising Anubhav Sharma (Judicial Member) and M. Balaganesh (Accountant Member) observed that, “Merely because the assessee had voluntarily disallowed the expenses u/s 40(a)(ia) of the Act in the return, the same would not automatically enable the AO to treat it as “assessee in default” u/s 201(1) of the Act and consequentially levy interest u/s 201(1A) of the Act. In our considered opinion, the provisions of section 40(a)(ia) and section 201(1) / 201(1A) of the Act are mutually exclusive. In any case, there is no estoppel against the statute.”
The Kolkata ITAT recently ruled that service tax is not an amount paid or received for the services rendered by it, when the assessee is only collecting the service tax for passing it on to the Government account.
Referring to the decision of Delhi High Court in case of DCIT Vs. Mitchell Drilling International Pvt. Ltd, the Bench comprising Sonjoy Sarma (Judicial Member) and Girish Agrawal (Accountant Member) observed that, “for the purpose of computing the presumptive income of the assessee u/s. 44BB, service tax collected by the assessee on the amount paid to it for rendering the services is not to be included in the gross receipts in terms of section 44BB(2) read with section 44BB(1) of the Act. The High Court also held that service tax is not an amount paid or payable, or received or deemed to be received by the assessee for the services rendered by it, the assessee is only collecting the service tax for passing it on to the Government account.”
The Delhi ITAT ruled that management fee received by the non-resident taxpayer bank for extending ECB to an Indian entity is not taxable as fee for technical services (FTS) since it partakes the character of interest under Section 2(28A).
Thus, the ITAT held that such management fee would be exempt under Article 11(3)(b) of India-Germany DTAA.
The Division Bench comprising Saktijit Dey (Vice President) and Dr. B.R.R. Kumar (Accountant Member) observed that “even the management fee is of similar nature as commitment fee and documentation fee, as it is closely linked to the loan granted, hence cannot be distinguished from the documentation fee and commitment fee. Thus, in our view, management fee partakes the character of interest under section 2(28A) of the Act. Hence, would be exempt from taxation in India in terms of Article 11(3)(b) of the treaty”.
On finding that transfer pricing adjustment made in the Arm's Length Price to be erroneous, the Mumbai ITAT deleted the penalty u/s 271G of Income Tax Act, 1961 for non-furnishing of requisite information u/s 92D.
The Bench comprising Amit Shukla (Judicial Member) and S. Rifaur Rahman (Accountant Member) observed that, “levy of penalty under section 271G of the Act is neither fair nor reasonable and it is not justified in the present facts of the case viz., the nature of diamond trade, substantial compliance made by the assessee and the reasonable cause submitted before Transfer Pricing Officer and above all when there is no adjustment made in the Arm's Length Price, the levy of penalty under section 271G is hereby deleted.”
While considering the definition of 'member' under the Kerala Act, as per which loans given to nominal members would qualify for purpose of deduction u/s 80P(2)(a)(i) of the Income Tax Act, 1961, the Bangalore ITAT directed the AO to grant relief to the assessee by allowing the claim of deduction under said provision.
Relying on the decision of Supreme Court in the case of Mavilayi Service Cooperative Bank Ltd. v. CIT (2021) 123 taxmann.com 161 (SC), the Bench comprising Beena Pillai (Judicial Member) and Chandra Poojari (Accountant Member) observed that, “Section 80P(4) is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co-operative societies engaged in banking business, i.e. engaged in lending money to members of the public, which have a license in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench Judgement is wholly incorrect in its reading of Citizen Co-operative Society Limited (supra). Clearly, therefore, once Section 80P(4) is out of harm's way, all the Assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a)(i), notwithstanding that they may also be giving loans to their members which are not related to agriculture.”
On finding that failure on the part of assessee to comply with the pre-condition for obtaining the deduction cannot be condoned either by the statutory authorities or by the courts, the Bangalore ITAT ruled that the assessee is not eligible for deduction u/s. 80P of the Income Tax Act, 1961.
Relying on the decision of Kerala High Court in case of Nileshwar Rangekallu Chethu Vyavasaya Thozhilali Sahakarana Sangham v. CIT [2023] 152 taxmann.com 347 (Kerala), the Bench comprising George George K. (Vice President) and Laxmi Prasad Sahu (Accountant Member) observed that “even if the assessee makes his claim for deduction under section 80P in a return filed within time under sections 139(4), 142(1) or section 148, he will not be allowed the deduction, unless the return in question was filed within the due date prescribed under section 139(1). Thus, it is clear that the statutory scheme permits the allowance of a deduction under section 80P of the IT Act only if it is made in a return recognised as such under the IT Act, and after 1-4-2018, only if that return is one filed within the time prescribed under section 139(1) of the Act.”
Accepting the explanation given by the assessee that he had received cash on sale of property to be believable which was faithfully deposited in the bank account within a short period, the Delhi ITAT provided relief to the assessee against the order of assessment passed u/s 143(3) of the Income Tax Act, 1961.
The Bench of M. Balaganesh (Accountant Member) observed that, “the explanation given by the assessee that source for cash deposit for Rs. 29 lakhs in the bank account is made out of sale proceeds received in cash is to be believe as there is no other source of income available to the assessee. Accordingly, I hold that there is no cash for making any addition on account of unexplained credits in bank account in respect of cash deposit of Rs. 29 lakhs in the instant case.”
Pankaj Bajpai 8 Feb 2024 1:19 PM Listen to this Article The Mumbai ITAT upheld the CIT(A)'s order to delete the addition made u/s 68 of the Income Tax Act, 1961 finding no unexplained cash credit in the books of assessee.
The Bench of Pavan Kumar Gadale (Judicial Member) and Prashant Maharishi (Accountant Member) observed that, “It is not disputed that the assessee has not received any share application money in the financial year 2011-12 except allotment of shares. We find that the provisions of section 68 of the Act can be invoked or applicable, where the amount is found credited in the books of accounts of the asssessee in the F.Y.2011-12 and the assssessee fails to offer explanations or explanations are not satisfactory. The assessee has received the share application money along with the share premium in the financial year 2006-07 and not in F.Y.2011-12.”
On finding that without pointing out anything specific defect on wholesome basis, certain part of the expenses has been discarded on estimate basis, the New Delhi ITAT deleted the addition made by AO.
The Bench comprising Anubhav Sharma (Judicial Member) and Shamim Yahya (Accountant Member) observed that, “However, Tax Authorities were supposed to consider the nature of the business of the assessee being in distribution business of very competitive project like mobile phones through distributors in the States of Bihar, Jharkhand and Uttrakhand and on that account if certain expenditures, on day to day basis for running the distributorship and employees network were not in proper vouchers formats or signed, that alone cannot be a justification for disallowance on ad hoc basis to extent of 30%.”
In the interest of natural justice, the Mumbai ITAT restored the appeal of assessee back to the CIT with a direction to the assessee that as soon as the window is available for submission of details by the CIT(A), assessee must submit the detail within the prescribed time which is to be decided on merits of addition under section 56 (2) (x) (b) of the Income tax Act, 1961.
The Bench of Rahul Chaudhary (Judicial Member) and Prashant Maharishi (Accountant Member) observed that, “it is also the fact that the CIT(A) should have given a detailed reason on the ground of appeal raised by the assessee in terms of provisions of section 250(6). The CIT(A) without considering the merits of the case has merely upheld the action of the assessing officer. Therefore, the order of the CIT – A is not in accordance with the provisions of section 250 (6) of the act as in the ground of appeal there was a specific ground raised about the addition.”
The Ahmedabad ITAT held that the AO as well as the CIT(A) was not right in making the addition of cash deposits amounting to Rs. 49,80,000/- in bank account during the demonetization period by invoking section 69A of the Income tax Act, as the assessee has fully explained the cash deposits and thus the same cannot be treated as unexplained money.
The Bench of Suchitra Kamble (Judicial Member) observed that “the assessee has given all the details as to how the assessee has that much cash in hand during the demonetization period. This was never doubted by the Revenue. In fact, the bank statements clearly show including the details given of the students from which the fees and the money has been received”.
Noting that assessee has also furnished tabular chart along with supporting documents to demonstrate that TDS at appropriate rates has been deducted on such trade discount / commission given to it's agents, the Rajkot ITAT held that assessee cannot be held as in default for not deducting TDS.
The Division Bench of Waseem Ahmed (Accountant Member) & Siddhartha Nautiyal (Judicial Member) observed that “the assessee cannot be held to be an “assessee in default” for non-deduction of TDS, when assessee has already deducted taxes at source appropriate rates”.
On finding that AO has rejected the evidences furnished by the assessee relating to bank statement and confirmation of the creditors, without establishing any falsity in the same, the Delhi ITAT deleted the addition made by AO u/s 68 of the Income Tax Act, 1961.
The Bench of Challa Nagendra Prasad (Judicial Member) and B.R.R. Kumar (Accountant Member) observed that, “The AO has disregarded the creditworthiness of the lenders stating that they did not have sufficient sources or that their income is disproportionate to the loan advanced without making any verification in the case of the depositors. During the course of assessment proceedings and through additional evidence, the appellant has submitted the ITR reflecting the PAN and address details, relevant bank statement and confirmation of the creditors. Thus, the assessee can be said to have discharged the onus laid upon them.”
Only Obvious & Patent Mistake Can Be Subjected To Rectification Proceedings U/s 154: Bangalore ITAT
The Bangalore ITAT held that the CIT(A) is not justified in confirming the order of the AO passed u/s 154 of the Income Tax Act, on finding that the issue raised in the appeal is not a mistake apparent on record.
The Bench comprising of George George K (Vice President) and Chandra Poojari (Accountant Member) observed that, “the AO while issuing show cause notice for rectification had not mentioned that the assessee had violated the principles of mutuality by dealing with non-members. Therefore, the issue is highly debatable and by no stretch of imagination can be termed as a mistake apparent on the record. Only an obvious and patent mistake which can be established not by a long-drawn process of reasoning alone can be subjected to rectification proceedings u/s. 154”.
Referring to the decision of Apex Court in the case of Ghanashyam Mishra And Sons vs. Edelweiss Asset Reconstruction (2021) 126 taxmann.com 132 (SC), the Nagpur ITAT found that all the claims are not part of the Resolution Plan and hence dismissed the appeal filed against the orders of National Faceless Appeal Centre.
The Bench comprising S.S. Viswanethra Ravi (Judicial Member) and Inturi Rama Rao (Accountant Member) observed that, “once the proceedings have commenced by institution of application under section 7 or 9 or 10 of the Code, the continuance of the pending proceedings is prohibited and when once they reach the logical conclusion with due approval of the resolution plan by the Adjudicating Authority under sub section (1) of Section 31, the claims as provided in the resolution plan shall stand frozen and will be binding on the Corporate Debtor and its employees, members, creditors, including the Central Government, any State Government or any local authority, guarantors and other stakeholders.”
The Mumbai ITAT upheld the exemption of long-term capital gain granted to the Assessee, holding a valid Tax Residency Certificate (TRC), under Article 13 of India-Mauritius DTAA, on sale of equity shares of an Indian company, acquired prior to April 01, 2017.
The Division Bench comprising Prashant Maharishi (Accountant Member) and Sandeep Singh Karhail (Judicial Member) observed that “the assessment order passed by the learned Assessing Officer granting benefit of Article 13 to the assessee on shares acquired prior to 1st April 2017, is after making due enquires and further same is also made in accordance with the press release of Central Board of Direct Taxes, hence, cannot be considered to be erroneous insofar as it is prejudicial to the interest of the Revenue”.
While remanding the matter for fresh disposal of assessee's claim u/s 80IB of Income Tax Act, 1961 in the wake of new admissible evidence, the Mumbai ITAT directed the AO to consider the audit report u/s 44AB along with Form 3CB.
The Bench comprising Kuldip Singh (Judicial Member) and Gagan Goyal (Accountant Member) observed that, “Since the uploading of the audit report with form No.3CB and form No.10CCB could not be uploaded due to technical glitch as e-filing was newly introduced, the assessee cannot be punished for that, if he is otherwise eligible to get the benefit under section 80-IB.”
Reassessment Proceedings Initiated On Account Of Change Of Opinion Merits To Be Quashed: Mumbai ITAT
While confirming the CIT(A)'s order quashing the reassessment order, the Mumbai ITAT held that the reassessment proceedings were initiated on account of change of opinion formed on re-appraisal of the facts already on record and examined during the regular assessment proceedings.
The Division Bench comprising B.R. Baskaran (Accountant Member) and Rahul Chaudhary (Judicial Member) observed that “the CIT(A) had noted that specific queries were raised by the Assessing Officer in relation to Foreign Exchange Loss/(Gain) in response to which the Assessee had provided relevant financial statements, documents, details, and submissions. The CIT(A) had further noted that in the reasons recorded the Assessing Officer had drawn inference that income has escaped assessment based on facts already on record and not based on any new material which came in the possession of the Assessing Officer subsequent to the conclusion of the assessment proceedings. The CIT(A) had concluded that reassessment proceedings were initiated on re-appraisal and re-examination of the assessment records without bringing any tangible material to show that income has escaped assessment on account of failure on the part of the Assessee to furnish true and full facts”.
Profit Element Embedded In Unexplained Sales Can Only Be Treated As Undisclosed: Rajkot ITAT
While rejecting the estimation of profit at 12.5% deduced by AO on account of undisclosed sales, the Rajkot ITAT held that there has to be a reasonable basis for applying a particular net profit rate in each case.
The Bench of Annapurna Gupta (Accountant Member) & Madhumita Roy (Judicial Member) observed that “It is basic common sense that net profit to be applied is to be at justifiable rate depending upon nature of the business and other facts. It cannot be simply an adhoc rate”.
Finding that the Assessee Trust had applied for registration within the time allowed under the Income Tax Act, the Pune ITAT directed the CIT(E) to treat the application being filed within statutory time after verifying assessee's eligibility for deduction u/s 80IA(4) as per act.
The Bench comprising of Satbeer Singh Godara (Judicial Member) And Dipak P. Ripote (Accountant Member) observed that, “the words, 'within six months of commencement of its activities' has to be interpreted that it applies for those trusts/institutions which have not started charitable activities at the time of obtaining Provisional registration, and not for those trust/institutions which have already started charitable activities before obtaining Provisional Registration.”
Referring to CBDT Circular no. 10/2014, the Chennai ITAT emphasized that if an undertaking is transferred to another undertaking other than by way of amalgamation and demerger and in other cases, the transferee undertaking shall be eligible for deduction for remaining unexpired period u/s 80IA(4)(iii) of the Income Tax Act.
The Bench comprising of Manomohan Das (Judicial Member) and Manjunatha. G (Accountant Member) observed that, “proviso to section 80IA(12) of the Act applies only when there is a transfer of operation and maintenance of industrial park. In the facts of the appellant case, the entire undertaking which developed the industrial park has been transferred and not merely the operation and maintenance alone. Therefore, in our considered view, the reasons given by the Assessing Officer to allow deduction u/s. 80IA(4) of the Act only to operation and maintenance is not in accordance with law.”
Referring to the decision of Apex Court in the case of CIT vs. Reliance Petro Products Pvt Ltd, the Mumbai ITAT reiterated that for the purpose of levying penalty, the provisions of the Income tax Act to be strictly covered and that merely making an incorrect claim does not tantamount to furnishing of inaccurate particulars.
The Bench of S Rifaur Rahman (Accountant Member) & Kavitha Rajagopal (Judicial Member) observed that “even in the present case, the assessee was not queried about the provisions of lease equalization but had voluntarily by written submission stated to the AO that the disallowance of Rs.10,99,081/- was the difference between the actual amount and the disallowance made by the assessee which was claimed to be a bona fide error on the part of the assessee. The above action of the assessee evidences that the assessee has not malafidely made a lesser disallowance in the return of income filed by it”.
The Kolkata ITAT ruled that simply because a trust/charitable institution has not opted for getting benefits under the Income-tax Act, then such institution is not barred in future from applying from registration/approval under the relevant provisions.
The Bench of Sanjay Garg (Judicial Member) & Girish Agrawal (Accountant Member) found that the assessee for the first time started its activity after grant of provisional registration on Sep 15, 2022, on which date the trust received donation, and thereafter applied for final registration on Dec 30, 2022 which was well within the period of six months from the commencement of its charitable activity after the date of provisional registration.
On finding that the assessee society is not the owner of the funds but holding the same in fiduciary capacity, the New Delhi ITAT upheld the CIT(A)'s decision in deleting the addition made by AO of the funds received by assessee under “Swach Bharat Abhiyan”.
The Bench comprising of Challa Nagendra Prasad (Judicial Member) and B.R.R. Kumar (Accountant Member) referred to CIT(A)'s observation that, “the assessee has to return these funds to the agency/PSU/Department who have contributed to the funds. The letters from the Chairman DVC and minutes of meetings for implementing reconstruction and rehabilitation (R&R) efforts by PSUs shows clearly that the assessee merely holds these funds on behalf of these participating agencies and can spend these funds only as per the mandate provided to it. It was held that the assessee does not even spend these funds on its own but passed it to the designated state agency who will in turn spend these funds.”
Income Tax Not Payable On Services Rendered Abroad By Non-Resident Deputed By Indian Employer: ITAT
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the income tax is not payable on services rendered abroad by non-residents deputed by Indian employers.
The bench of Saktijit Dey (Vice President) and B. R. R. Kumar (Accountant Member) has observed that from the concurrent reading of Section 5 of the Income-tax Act, 1961, dealing with scope of total income, Section 15 dealing with computation of total income under the head salary and chargeability thereof, and Section 9 dealing with income arising or accruing in India with reference to the salaries and the services rendered in India, no taxability arises on the salary or allowances received by the assessee since the assessee is a non-resident and has rendered services outside India.
The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that stamp value as on the date of agreement of sale of the property, in the year 2010 (i.e., Rs. 1.4 Cr), has to be considered for the applicability of Section 56(2)(vii)(b) of the Income Tax Act.
The bench of Challa Nagendra Prasad (Judicial Member) and B. R. R. Kumar (Accountant Member) has deleted the addition of Rs. 40.45 lakhs made under Section 56(2)(vii)(b). The bench noted that the assessee entered into an agreement fixing the amount of consideration for the purchase of the immovable property in the year 2010, but the actual registration took place in 2013, and, further, the assessee paid a part of the consideration by check in the year 2010 before the date of the agreement.
Possession Of Transport Vehicles Is Sufficient Than Legal Ownership For S. 194C-TDS Exception: ITAT
The Jodhpur Bench of Income Tax Appellate Tribunal (ITAT) has held that the assessee, the legal owner, is not required to TDS under Section 194C, where a declaration under Section 194C(6) along with a PAN is obtained from the payees who are in possession of the vehicle, though they are not registered owners.
The bench of S. Seethalakshmi (Judicial Member) and Rathod Kamlesh Jayantbhai (Accountant Member) has observed that for the purpose of Section 44AE of the Income Tax Act, the term owner means anyone in possession of the goods carriage and not the registered owner. This assumes importance in defining the term “owns” in Section 194C(6) because the taxation of the assessee transporter is squarely covered under the provisions of Section 44AE. The bench, while relying on the various judicial precedents on the issue, and the apex court have decided the question of ownership based on the intention of the legislature, namely “to give benefit or to tax the assessee.”
The Allahabad High Court has recently quashed assessment order taxing Indian Made Foreign Liquor under the UP Entry of goods into Local Area Act 2007 on grounds that it is not provided in the schedule to the Act.
Provisional assessment order against the petitioner was passed on 19.04.2006 under Section 4-A (Realization Of Tax Through Manufacturer) of the Uttar Pradesh Entry of Goods into Local Area Tax Act, 2000 read with Rule 41(5) of the Uttar Pradesh Sales Tax Rule 2000. Final assessment order was passed on 30.03.2008 under the UP Entry of goods into Local Area Act 2007.
The Allahabad High Court has held that once the Appellate Authority has recorded a specific finding that quantification of stock was based on eye estimate and not in accordance with law, the confiscation order as well as the penalty order are liable to be set aside.
“When the Appellate Authority had come to the finding that the officers in the survey did not carry out the quantification of the stock in the correct manner, there was no reason for the Appellate Authority to uphold the confiscation and penalty,” held Justice Shekhar B. Saraf.
The Madras High Court has held that the Circular dated May 24, 2023, issued by the Central Board of Direct Taxes (CBDT) not extending time to file applications for regular registration of new provisionally registered trusts under Section 80G of the Income Tax Act is violative of the Constitution of India.
The bench of Chief Justice Sanjay V. Gangapurwala and Justice D. Bharatha Chakravarthy has observed that the petitioner trusts do not have any vested right to claim an extension of time. When the statute prescribes a time limit, the petitioner trusts are expected to apply within the said date to avail themselves of the benefits. The first respondent board issues circulars enlarging the time limit even beyond the prescribed limit to mitigate the rigors of the statute and the hardship faced by the assessees. The same is in exercise of its powers under Section 119(2)(b) of the Income Tax Act. No discrimination or differentiation was made between the existing trusts and the new trusts at the first instance when Circular No. 8 of 2022 was issued. When the impugned Circular No. 6 of 2023 was issued, the reason stated by the first respondent was to mitigate genuine hardship.
Placing reliance on the judgment of the Supreme Court in State of Karnataka vs. M/s Ecom Gill Coffee Trading Private Limited, the Allahabad High Court has held that input tax credit cannot be granted based solely on invoices and RTGS payment details.
While dealing with Section 70 of the Karnataka Value Added Tax Act, 2003 the Supreme Court in M/s Ecom Gill Coffee Trading Private Limited held that burden to prove that claim for input tax credit and the genuineness of the transaction lies solely on the assesee. The Court held that mere production of invoices and payments made by cheques is not enough to prove that the assesee is entitled to ITC.
“The dealer claiming ITC has to prove beyond doubt the actual transaction which can be proved by furnishing the name and address of the selling dealer, details of the vehicle which has delivered the goods, payment of freight charges, acknowledgement of taking delivery of goods, tax invoices and payment particulars etc. The aforesaid information would be in addition to tax invoices, particulars of payment etc,” held the Apex Court.
The Delhi High Court has quashed the initiation of assessment proceedings under Section 153C of the Income Tax Act, which was falling beyond the maximum 10-year block period.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has allowed the writ petitions placed in Lists I and II and pertaining to AYs' 2010-11, 2011-12, 2012-13, and 2013-14, all of which fall beyond the maximum 10-year block period.
The Kerala High Court has held that consideration received by trustees for such relinquishment of trusteeship cannot be treated as a capital receipt for the purposes of assessing it under the head of capital gains; the consideration will have to be treated as the individual income of the assessees and assessed accordingly under the appropriate head.
The bench of Justice A.K. Jayasankaran Nambiar has observed that a perusal of the trust deed in the instant cases does not indicate that any power was conferred on the trustees to relinquish their position as trustees en banc. A person who is appointed as trustee is not bound to accept the trust, but having once entered upon the trust, he cannot renounce the duties and liabilities except with the permission of the court, with the consent of the beneficiaries, or by the authority of the trust deed itself.
Delhi High Court Interpretes Rule 11UA For Determination FMV Of Shares U/S 56(2)(viib)
The Delhi High Court has held that it has interpreted Rule 11UA of the Income Tax Rules, 1962, for determining the fair market value (FMV) of shares under Section 56(2)(viib) of the Income Tax Act, 1961.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that Section 56(2)(viib) postulates that the FMV of shares shall be the value determined in accordance with the methods as may be prescribed or as may be substantiated by the company to the satisfaction of the AO, whichever is higher.
A perusal of Rule 11UA(2) would indicate that the assessee is enabled to determine the FMV of the unquoted equity shares either in accordance with the formula prescribed in clause (a) or on the basis of a report drawn by a merchant banker who may have determined the FMV as per the DCF Method.
The Kerala High Court has held that the land in question was used for agricultural purposes, which yielded agricultural income, which in turn was exempt from income tax under Section 10(1) of the Income Tax Act.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that there is no material produced by the appellant that would clearly suggest that the loan amount availed by it during the assessment year in question had been used for purchasing an asset, which it had used for the purposes of its business as a provider of asset management services.
The Calcutta High Court has held that payments by supervisors to individual labourers, each not exceeding Rs. 20,000, cannot be disallowed under Section 40A(3) of the Income Tax Act, 1961.
The bench of Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj has observed that the supervisors acted as agents of the assessee to disburse the amount to individual labourers, which in no case exceeded Rs. 20,000/- for any individual labour. Therefore, in view of the circumstances prescribed in the second proviso to Section 40A(3) read with Rule 6DD(l) of the Income Tax Rules, 1962, and the provisions of the Indian Contract Act, the payment of Rs. 1,21,49,190 cannot fall within the scope of Section 40A(3) of the Act, 1961.
The Delhi High Court has held that a reopening or abatement would be triggered only upon the discovery of material that is likely to “have a bearing on the determination of the total income” and would have to be examined bearing in mind the AYs' that are likely to be impacted.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that abatement of the six AYs' or the “relevant assessment year” under Section 153C would follow the formation of an opinion and satisfaction being reached that the material received is likely to impact the computation of income for a particular AY or AYs' that may form part of the block of ten AYs'. Abatement would be triggered by the formation of that opinion, rather than the other way around.
Supreme Court Expunges Gujarat HC's Adverse Observation Against GST Officials
The Supreme Court (on March 12) expunged the observations made by the Gujarat High Court in an interim order that statutory protection of the good faith clause under Section 157 of the Goods and Services Tax Act may not be available to the GST officers who conducted a search operation in the instant case.
A bench of Justices P.S. Narasimha and Aravind Kumar stated that the impugned observations made by the High Court were, in nature, “advance rulings” and expressed a tentative opinion. Reasoning this, the Court said that the High Court expressed such a view without even initiation of the legal proceedings.
The Delhi High Court has held that the Income Tax Settlement Commission (ITSC) is entrusted with the power to grant immunity from penalty and prosecution only in cases of full and true disclosure.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that once it is seen that the disclosure was not full and truthful, the ITSC loses its jurisdiction to entertain such an application as well as to provide any immunity to the applicant from prosecution and penalties.
Delhi High Court Grants Relief Of As Low As 5% IGST On Import Of Dialysis Machines By FMC India
The Delhi High Court has granted relief of as low as 5% Integrated Goods and Service Tax (IGST) on the import of dialysis machines by Fresenius Medical Care India Private Limited (FMC India).
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that dialysis machines covered under HSN Code 9018 and 9031 are liable to be taxed at 5%, essentially awarding a significant rebate of 7% on the import of dialysis machines.
The Delhi High Court has held that the rationale to deny input tax credit (ITC) to service providers who are not liable to pay tax on output services is obvious.
The bench of Justice Vibhu Bakhru and Justice Amit Mahajan has held that the service providers rendering services on which tax is payable on a reverse charge basis would constitute a class of their own, and a challenge to the same founded on Article 14 of the Constitution of India would necessarily fail.
It is well settled that Article 14 of the Constitution of India does not prohibit reasonable classification, which has a rational nexus to its object. Denying input tax credit to service tax providers, who are not liable to pay tax on output services, is founded on a rational basis, which has a clear nexus with the classification.
The Kerala High Court has held that the permission to effect over-the-counter sales of alcoholic liquor was a concession given to bar-attached hotel owners to permit them to carry on business and tide over the COVID lockdown period. The assessee cannot now contend that the tax on such transactions should not be levied on him because he did not originally have permission to effect such sales.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that the appellant, having opted to pay tax on a compound basis in lieu of the regular basis of assessment, cannot turn around and contend that the formula provided for payment of tax on a compound basis does not apply to him.
The Bombay High Court has quashed a reassessment order against a housewife when the alleged investment was made by her husband.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed, “We also have to notice that, surprisingly, the Principal Chief Commissioner of Income Tax has also accorded sanction for the issuance of this order instead of directing the AO to drop the proceedings against the petitioner.”
AO Is Not Clothed With Powers To Ascertain ALP Of Any International Transaction: Delhi High Court
The Delhi High Court has held that AO is not clothed with the powers to ascertain the Arm's Length Price (ALP) of any international transaction.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the AO is not clothed with the powers to ascertain the ALP of any international transaction that is selected based on the transfer pricing risk parameters. Furthermore, Section 92CA(4) of the Income Tax Act evidently mandates that the AO cannot deviate itself from the TPO order while computing the total income of the assessee.
The Allahabad High Court has held that intention to evade tax is essential condition for imposing penalty under Section 54(1)(2) of the Uttar Pradesh Value Added Tax Act, 2008.
Section 54(1) of the Uttar Pradesh Value Added Tax Act, 2008 provides for circumstances under which penalties can be imposed on an assesee. It is provided that where an assessing authority is satisfied that an assesee has committed any wrong mentioned therein, penalty can be imposed after giving due opportunity of hearing to such assesee.
The Delhi High Court has held that the National Faceless Assessment Centre (NFAC) cannot sustain invocation of penalty proceedings based on their own failure to lodge a claim under the Insolvency and Bankruptcy Code (IBC) within time.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that, as per Section 144B of the Income Tax Act, proceedings for assessment, reassessment, or re-computation are initiated in terms of the faceless procedure of assessment as prescribed therein. Any effort to assess, reassess, or re-compute could tend to lean towards a re-computation of liabilities that otherwise stand frozen by virtue of the resolution plan having been approved.
The Madras High Court held that the assessee cannot be absolved of responsibility as a registered person to monitor the GST portal.
The bench of Justice Senthilkumar Ramamoorthy has observed that an audit was conducted and that an audit report dated 15.09.2023 was issued. An intimation and show cause notice preceded the impugned order. It is noticeable that the tax proposal was confirmed because the petitioner did not submit a reply along with supporting documents. Therefore, by putting the petitioner on terms, the interest of justice demands that the petitioner be provided an opportunity.
The Bombay High Court has quashed the show cause notice (SCN) demanding GST on ocean freight on transportation of goods from outside India.
The bench of Justice G. S. Kulkarni and Justice Firdosh P. Pooniwalla has relied on the decision of the Supreme Court in the case of Mohit Minerals and observed that the verdict applies to both free on board (FOB) and sum of cost, insurance, and freight (CIF) contracts.
The Telangana High Court holds 'Handling of Cargo in Customs Areas Regulations, 2009' by way of which cost of living expenses were recoverable from the Customs Cargo Service Provider as ultra vires of the Customs Act, 1962. “In the absence of any special authorization to levy cost recovery charges, appellants have no authority to impose cost recovery charges by means of a Regulation. The inevitable conclusion is that the 2009 Regulations are ultra vires the Customs Act, 1962.”
The order was passed by a division bench comprising, Chief Justice Alok Aradhe and Justice Anil Kumar Jukanti in a Writ Appeal preferred by the Central Board of Excise and Customs against the order passed by a single judge bench, wherein section 5(b) of the Customs Regulations, 2009 was held ultra vires and consequently, it was held that Custom Officers placed at the Rajiv Gandhi International Airport, Hyderabad were not entitled to recover the cost of living expenses from the Custodian of Sea Ports and Air Cargo Complexes (M/s. GMR Hyderabad International Airport Limited, Rep. by its General Manager/ R1) of the RGIA, Hyderabad.
Malabar 'Parota' Is Akin To 'Bread', Exigible To 5% GST: Kerala High Court
The Kerala High Court has held that Malabar 'Parota' is akin to 'bread' and is exigible at the rate of 5% GST and not 18% GST.
The bench of Justice Dinesh Kumar Singh has observed that Malabar 'Parota' and Whole Wheat Malabar Parota are exigible at the rate of 5% GST and not 18% as held by the Advance Ruling Authority and Advance Ruling Appellate Authority.
The Rajasthan High Court has held that for holding an assessee guilty of the offence of filing delayed income tax returns, “mens rea“ is a necessary ingredient.
The bench of Justice Anoop Kumar Dhand has observed that in the absence of mens rea, an accused cannot be held guilty, and his conviction under Section 276 CC of the Income Tax Act cannot be sustained.
The Allahabad High Court has held that the jurisdiction of the Assessing Authority to decide the application for release of seized assets under Section 132B (1)(i) does not abate after a period of 120 days from the date on which the last of the authorizations for search under section 132 or for requisition under section 132-A was executed.
The Court held that the word “shall” in 2nd proviso to Section 132B (1)(i) is directory in nature as no stipulation is made for the automatic release of goods after the period of 120 days. It held that a levy of interest on the seized asset contemplated under Section 132B (4) does not make the “shall” in 2nd proviso to Section 132B (1)(i) mandatory in nature.
The Allahabad High Court has held that mandatory condition of pre-deposit prescribed under Section 35F of the Central Excise Act for filing appeals before the Customs Excise and Service Tax Appellate Tribunal cannot be waived under Article 226 of the Constitution of India.
Petitioner approached the High Court against the order passed by the Commissioner, Central Goods and Service Tax, Ghaziabad. Alternatively, petitioner prayed for waiver of mandatory pre-deposit under Section 35F of the Central Excise Act while being relegated to appellate jurisdiction under Section 86 of the Finance Act, 1994.
The Bombay High Court has held that the error on the part of the auditor cannot be rejected but should be accepted as a reasonable cause shown by the trust management.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that an assessee, a public charitable trust with almost over thirty years, which otherwise satisfies the condition for availing exemption, should not be denied the same merely on the bar of limitation, especially when the legislature has conferred wide discretionary powers to condone such delay on the authorities concerned.
The Bombay High Court has held that Tata Steel is entitled to treat the contribution of Rs. 212.52 crores to the Compensatory Afforestation Fund (CAF) as revenue expenditure.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has relied on the decision of the Bombay High Court (Goa Bench) in the case of The Commissioner of Income Tax v. Dr. Prafulla R. Hede, and another has accepted that a contribution to CAF will be revenue expenditure and not capital in nature.
The Delhi High Court has held that one of the consequences of cancelling a taxpayer's registration with retrospective effect is that the taxpayer's customers are denied the input tax credit availed in respect of the supplies made by the taxpayer.
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that simply because a taxpayer has not filed the returns for some period, it does not mean that the taxpayer's registration is required to be cancelled, with a retrospective date also covering the period when the returns were filed and the taxpayer was compliant.
Emery Cloth Is Cotton Coated Fabric And Liable To Be Exempted From Tax: Andhra Pradesh High Court
The Andhra Pradesh High Court has held that emery cloth is cotton coated fabric and liable to be exempted from tax.
The bench of Justice Ravi Nath Tilhari and Justice Harinath Nunepally has upheld the Tribunal's ruling in which it was held that the emery cloth is covered in Item-59.03 of the First Schedule to the Additional Duties of Excise (Goods of Special Importance) Act, 1957 and therefore is exempted under Fourth Schedule to the APGST Act, as the same is liable for additional duties of excise under the Additional Duties Act. It held that emery cloth is cotton coated fabric and therefore liable to be exempted from tax. Regarding the levy of tax on tarpaulins, the Appellate Tribunal held that tarpaulin which is waterproof with the base as cloth falls under cotton fabrics in item-5 of the Fourth Schedule to the APGST Act.
The Delhi High Court has upheld the disqualification as the CA Certificate did not match details on the Institute of Chartered Accountants of India (ICAI) portal as per the Unique Document Identification Number (UDIN).
The bench of Acting Chief Justice Manmohan and Justice Manmeet Pritam Singh Arora has observed that the discrepancy has arisen on account of the non-mention of the certified information by the petitioner's Chartered Accountant in the corresponding UDIN certificate in the field under the heading 'Figures/Particulars'. With respect to the UDIN certificate filled in by the Chartered Accountant on the ICAI website, the Chartered Accountant has left the field blank, and consequently, there is no certified information available in the UDIN certificate.
The Gujarat High Court has allowed the cenvat credit on welding electrodes, welding wire, etc. used for laying rail lines outside factories.
The bench of Justice Bhargav D. Karia and Justice Niral R. Mehta, while dismissing the appeal of the GST department, observed that CESTAT has correctly allowed the Cenvat credit on inputs, i.e., welding electrodes, wire FLR, filler wires, welding wires, wire rope, material used for railway lines, and capital goods, i.e., M.S. gratings and G.I. coated gratings.
The Punjab & Haryana High Court deleted the addition made by the AO u/s 41(1) of the Income tax Act on account of sale of copper wire, finding that the AO had made additions under the said provision simply on basis of presumption regarding the said sale, even after finding no stock in the premises.
A Division Bench of Justice Sanjeev Prakash Sharma and Justice Sudeepti Sharma observed that “A perusal of the assessement order and the explanation given by the assessee shows that the assessee explained each and every question put by the Assessing Officer. Further inspite of the fact that the Assessing Officer himself personally visited the factory premises along with the Inspector Sh. S.K.Gupta, and nothing was found to show that the assessee has tried to evade tax, the Assessing Officer on assumptions and presumptions made addition to the tune of Rs.2,15,150/- as profit”.
The Calcutta High Court has held that merely proving the identity of the investors does not discharge the onus on the assessee if the capacity or credit worthiness has not been established.
The bench of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya has observed that the assessee has not established the capacity of the investors to advance money for the purchase of the shares at a high premium. The credit worthiness of those investors' companies is questionable, and the explanation offered by the assessee, at any stretch of imagination, cannot be construed to be a satisfactory explanation of the nature of the source.
Relying on its earlier decision in A.S. Solanki Vs. State of U.P. and others, the Allahabad High Court has reiterated that tax dues cannot be collected from director of company under liquidation unless it has been provided in any statute.
The Allahabad High Court in A.S. Solanki had held that in a case where it was ascertained that the corporate veil had been used for malafide intent, the corporate personality shall be lifted so that the individuals responsible could be held liable. However, this doctrine could not be applied as a matter of course and be used to recover the dues of a company when they were unrecoverable, from the personal assets of the Directors.
The Allahabad High Court has held that computation of correct input tax credit can only be done till the passing of the regular assessment order by the Assessing Authority and not at a later stage.
The Court held that reverse input tax credit is neither a 'rate of tax' nor a 'turnover' which can be subjected to reassessment under Section 29 of the Uttar Pradesh Value Added Tax Act, 2008. Section 29 of the UPVAT Act empowers the Assessing Authority to initiate reassessment proceedings against an assesee if there is “reason to believe” that whole or part of the turnover has escaped assessment or has been assessed to tax at a lower rate than prescribed or if deductions and exemptions have been wrongly allowed.
AO Can't Proceed With Assessment In Absence Of Section 127 Transfer Order: Delhi High Court
The Delhi High Court has held that the Assessing Officer cannot proceed with assessment in the absence of a transfer order under Section 127 of the Income Tax Act.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that once the case of the assessee is centralized, then the transfer of the case of the assessee to another AO would not be permissible without a decentralization order or transfer order under Section 127 of the Income Tax Act, as contrary to such a position outside the underlying objective that the Act seeks to achieve by virtue of powers enshrined under Section 127.
The Supreme Court has held that labelling or re-labelling of containers amounts to 'manufacture' under the Central Excise Act for availing cenvat credit
The bench of Justices A. S. Oka and Ujjal Bhuyan was pronouncing its judgment on an appeal by the revenue under Section 35L(1)(b) of the Central Excise Act, 1944 against a 2015 order passed by the CESTAT, Mumbai.
By the impugned order, CESTAT has allowed the appeal filed by the respondent holding that as per Note 3 to Chapter 18 of the Central Excise Tariff Act, 1985 , the activity of labelling amounted to manufacture and hence, the respondent was eligible for availing the cenvat credit of the duty paid by its Jammu unit and was also eligible for rebate on the duty paid by it while exporting its goods.
The Calcutta High Court has held that the source of investments by those two companies is also the share capital and share premium raised by them while issuing their own shares to other closely held companies, and those companies had no noticeable business activities.
The bench of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya, while upholding the ITAT's order, noted that the effects of the documents were considered by the tribunal, and it was not satisfied with the genuineness of the transaction. More importantly, the assessee itself claimed that there was no noticeable business activity during the year. Thus, the tribunal ultimately concluded that the assessee has failed to establish the basic ingredients required to be established under Section 68.
Unexplained Expenditure Addition Merely Based On CBIC Instruction Not Sustainable: Delhi High Court
The Delhi High Court has deleted the addition for unexplained expenditure, which was based on the instruction issued by the Central Board of Indirect Taxes and Customs (CBIC).
“Merely proceeding on the basis that CBIC is an apex body and therefore, information provided by it cannot be doubted, without even identifying or meaningfully analyzing such information, is wholly insufficient to proceed to make an addition,” the bench of Justice Vibhu Bakhru and Justice Tara Vitasta Ganju observed.
Delhi High Court Quashes MOOWR Instructions Denying Benefit To Solar Power Generation Units
The Delhi High Court has held that the statutory scheme underlying the Manufacture and Other Operations in Warehouse Regulations, 2019 (MOOWR) cannot be construed as seeking to exclude solar power generation in terms of permissions granted under Section 65 of the Customs Act, 1962.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the activities undertaken by the writ petitioners are in aid of the objective of the country transitioning towards renewable energy sources so as to meet the targets of switching to a cleaner energy source. This is clearly an aspect that cannot possibly be doubted, even by the respondent department.
Merely Brandishing Newspaper Cuttings Doesn't Prove Sharing Commercial Expertise: Bombay High Court
The Bombay High Court has held that merely brandishing newspaper cuttings does not amount to proof of sharing commercial expertise with its French counterpart as mandated by Section 80-O of the Income Tax Act.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that Section 80-O was inserted in place of Section 85C, which was deleted by the Finance (No. 2) Act, 1967. While moving the bill relevant to the Finance Act No. 2 of 1967, the then Finance Minister highlighted the fact that fiscal encouragement needs to be given to Indian industries to encourage them to provide technical know-how and technical services to newly developing countries.
The employer's grant of interest-free loans or loans at a concessional rate will certainly qualify as a 'fringe benefit' and 'perquisite", the Court said.
A Division bench of the Supreme Court comprising of Justice Sanjiv Khanna and Justice Dipankar Datta while deciding a Civil Appeal in the case of All India Bank Officers' Confederation Vs The Regional Manager, Central Bank Of India & Others has held that Rule 3(7)(i) of the Income Tax Rules, 1962 is not violative of Article 14 of the Constitution of India and provision of interest free/concessional loan benefits provided by banks to bank employees shall be taxable as a perquisite under Section 17 of the Income Tax Act, 1961.
Capital Gain Tax Not Payable On Transfer Of Shares By Way Of Gift: Bombay High Court
The Bombay High Court has held that capital gain tax is not payable on the transfer of shares by way of gift.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that Section 45 of the Income Tax Act provides that any profits or gains arising from the transfer of a capital asset have to be considered by the assessee. Only when there is consideration received can the profit or gain be measured. A gift is commonly known as a voluntary transfer of property by one person to another without any consideration. A gift does not require consideration, and if there is consideration for the transaction, it is not a gift.
Reassessment Order Can't Merely Be Based On Tax Evasion Report Or An Audit Report: Orissa High Court
The Orissa High Court has held that reassessment orders cannot merely be based on a tax evasion report or an audit report.
The bench of Justice B.R. Sarangi and Justice G. Satapathy has observed that it is not enough if the Assessing Officer refers to the tax evasion report or an audit report; he has to independently apply his mind and record his satisfaction that there has been an escapement of tax. It is the mandatory minimum requirement of Section 43 of the OVAT Act.
The Bombay High Court has held that lender bank registration with the Central Registry of Securitisation and Security Interest of India (CERSAI) has first priority over Deputy Commissioner of Sales Tax (GST) (DCST) against proceeds of enforcement under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).
The bench of Justice B.P. Colabawalla and Justice Somasekhar Sundaresan observed that the Lender Bank had first priority in enforcement against the Walkeshwar Flat with effect from January 24, 2020, having been the first to register with CERSAI, which was done on January 2, 2020. The bench noted that Encore ARC, which conducted the auction on February 28, 2023, acquired the entitlement to priority from the lender bank along with the assignment of the loans to the borrowers with attendant security interests on March 21, 2020.
The Calcutta High Court has held that the adjudicating authority, without resorting to any action against the supplier, who is the selling dealer, ignored the tax invoices produced by the appellant as well as the certificates issued by the Chartered Accountants, which are erroneous and wholly without jurisdiction.
The bench of Chief Justice T.S. Sivagnanam and Justice Hiranmay Bhattacharyya has observed that even in the show-cause notice, the authority has admitted that "it is true that the recipient has made payment of the element of tax to the supplier against such transaction, but the payment of such tax has not been reciprocated to the exchequer." If the authority has admitted the fact that the recipient, who is the appellant, has made payment of the tax to the supplier against the transaction, If it is the case of the department that such tax has not been remitted to the state exchequer, the elementary principle to be adopted is to cause an inquiry with the supplier, and without doing so to penalize the appellant, it would be arbitrary, illegal, and without jurisdiction.
The Delhi High Court dismisses Revenue's appeal against ITAT's order in case of Dabur India Ltd., while reiterating that for purpose of deduction u/s 80IB & 80IC of the Income tax Act, the only essential requisite is that the eligible industrial undertakings should be carrying out manufacture or production of articles or things.
With respect to valuation of shares of Dabur Overseas Ltd, the Division Bench comprising Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav considered ITAT's conclusive findings of fact i.e. that TPO's approach of applying astronomical growth rate of 89% without giving any cogent reason and failure to alter corresponding outgoings/expenses for future years, was unreasonable, particularly when, in subsequent valuation report obtained from an independent valuer, the actual financials which were available during assessment proceedings were adopted.
The Jharkhand High Court has held that any unjust withholding of money or property from another party goes against the fundamental principles of justice, fairness, and good conscience. In this context, the unauthorized deductions made from the ongoing bills are unquestionably unlawful. Furthermore, the Court has imposed a substantial penalty of Rs 5 Lacs on the Managing Director of Jharkhand Bijli Vitran Nigam Limited (JBVNL) for engaging in unnecessary litigation and presenting frivolous defenses.
The Division Bench, comprising Acting Chief Justice Shree Chandrashekhar and Justice Navneet Kumar, emphasized, “Any unjust retention of money or property of another shall be against the fundamental principles of justice, equity and good conscience. The unauthorized deductions from the running bills of the petitioner-Firm are patently illegal. Such deductions caused loses to the petitioner-Firm which filed its Income Tax retuns but was deprived of Rs. 2,90,32,000/- and thereby suffered business or alteast interest losses. On the other hand, the JBVNL was unjustly enriched and need to restitute the petitioner-Firm. The refund of Rs. 2,90,32,000/- must therefore carry interest as a matter of course.”
While hearing a batch of petitions challenging penal provisions of GST Act, Customs Act, etc. as non-compatible with the CrPC and the Constitution, the Supreme Court on Thursday (May 2) expressed concerns about the ambiguity in Section 69 of the GST Act (dealing with power with arrest) and conveyed that it would interpret the law to "strengthen" liberty, if need be, but not allow citizens to be harassed.
The Bench of Justices Sanjiv Khanna, MM Sundresh and Bela M Trivedi asked Additional Solicitor General SV Raju (appearing for Revenue) to furnish data regarding the number of notices issued under the Central Goods and Services Tax Act, 2017 (in past 3 years) with respect to amounts exceeding Rs. 1 crore and Rs. 5 crores, as well as the number of arrests made during the time.
Life Of Provisional Attachment Order Is Only One Year: Delhi High Court
The Delhi High Court has held that the life of an order of provisional attachment is only one year.
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that the communication of attachment is dated August 14, 2019, and a period of one year has elapsed since the issuance of the communication. Consequently, the order dated August 14, 2019 has ceased to be effective and cannot be further implemented either by the department or the bank. The order dated August 14, 2019 ceases to have effect. Consequently, the bank henceforth cannot restrain the operation of the bank account of the petitioner based solely on the basis of an order.
The Bombay High Court has held that the sanctioning authority has to be the Principal Chief Commissioner of Income Tax (PCCIT) for issuing a reopening notice after the expiry of three years.
The bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that, as per the order and the notice, the authority that has accorded the sanction is the PCIT-27, Mumbai. The matter pertains to Assessment Year 2017-2018, and since the order as well as the notice were issued on July 20, 2022, both have been issued beyond a period of three years. Therefore, the sanctioning authority has to be the PCCIT, as provided under Section 151(ii) of the Income Tax Act. The proviso to Section 151 has been inserted only with effect from April 1, 2023, and, therefore, shall not be applicable to the matter at hand.
The Delhi High Court has held that, as per Section 75(5) of the GST Act, if sufficient cause is shown, the proper officer shall adjourn the hearing; however, not more than three adjournments may be granted.
The bench of Justice Sanjeev Sachdeva and Justice Ravinder Dudeja has observed that, in terms of Section 75(5) of the Act, three adjournments may be granted, but it is not mandatory for the proper officer to grant three adjournments. Adjournment is not a right. Said provisions empower the proper officer to grant up to three adjournments if sufficient cause is shown. It would be dependent on the facts of each case whether sufficient cause has been shown or not for the exercise of the discretion to adjourn.
Finding that the stock production and consumption records were maintained under the supervision of the Excise Authorities and there is no objection raised with regard to the said stock by the ITO, the Punjab & Haryana High Court held that the Assessing Officer could not have proceeded on a presumption alleging higher wastage shown by the assessee.
The High Court found that in the present case, the Assessing Officer has accepted the closing stock and further accepted the trading account to be correct and complete and without computing afresh, as per the proviso to Section 145(1) of the Income tax Act, the Assessing Officer has made addition to the account of wastage.
The Bombay High Court has held that the reasons for reopening clearly show that the assessing officer, except borrowing the information from the third report of the Justice M.B. Shah Commission, failed to record independently to his own satisfaction any reason so as to direct the reopening of the assessment.
The bench of Justice Bharat P. Deshpande and Justice Valmiki Menezes did not see any reason for independently forming opinions by the Assessing Officer, apart from what was borrowed from the Justice M.B. Shah Commission report. Thus, reasons that do not have any application to the mind or any independent material or reason to believe cannot be construed as legal reasons for re-opening the assessment.
The Allahabad High Court has held that the authorities are not estopped from taking action against wrongful claim of input tax credit merely because the firms with which transactions were alleged to have been done were registered at the time of the alleged transactions.
Observing that fraud vitiates even the most solemn proceedings, Justice Subhash Vidyarthi, held that “mere fact that the I.T.C. benefit had earlier been granted to the petitioner merely because the firms were registered, would not create any estoppel against the authority taking appropriate action for claiming refund of the benefit wrongly availed by the petitioner on the ground of receiving inward supplies from non-existent firms.”
The Sikkim High Court has held that when a procedure is prescribed, the petitioner, while seeking the grant of budgetary support, is required to follow that procedure and not work out a different procedure for the authorities to follow.
The bench of Justice Bhaskar Raj Pradhan has observed that when the petitioner was required by the authorities to modify their initial applications to a quarterly basis as required under the law, they had no choice but to reflect the balance of the ITC of CGST for the month of September 2017 as well.
Relying on its earlier decision in M/s Anandeshwar Traders v. State of U.P. and Others, the Allahabad High Court has held that the burden to prove double movement of goods based on same documents lies on the department.
The Allahabad High Court in M/s Anandeshwar Traders v. State of U.P. and Others held that the positive burden to prove that goods had been transported on an earlier occasion lies on the Assessing Authority. The Court had observed that since no inquiries were made from the assesee, toll plaza, purchasing dealer or any other source as to whether goods had been transported earlier, presumption could not have been drawn by the authorities merely based on the e-way bill.
No Change In Opening And Closing Stock Of NCDs; Bombay High Court Quashes Reassessment Notice
The Bombay High Court has quashed the reassessment notices as there was no change in the opening and closing stock of the non-convertible debts (NCDs).
The Bench of Justice K. R. Shriram and Justice Neela Gokhale has observed that the reopening of assessment by the notice was merely on the basis of a change of opinion of the AO. The change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.
The Delhi High Court refuses to interfere with the order of the AO passed u/s 127 where the case of the Taxpayer was centralized and transferred from Income-tax Officer (ITO), Delhi to Deputy Commissioner of Income-tax (DCIT), Central Circle, Haryana.
As per Section 127 of Income tax Act, the [Principal Director General or Director General] or [Principal Chief Commissioner or Chief Commissioner] or [Principal Commissioner or Commissioner] may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him.
The Bombay High Court recently quashed the search proceedings authorized by CBDT u/s 132(1) along with consequential notices and further actions on the ground that the material considered for authorizing the search is irrelevant and unrelated, and that “the reasons recorded, only indicates a mere pretence”.
Finding that the reasons forming part of the satisfaction note must satisfy the judicial conscience, the Division Bench comprising Justice K. R. Shriram and Justice Dr. Neela Gokhale observed that “the note also does not contain anything altogether regarding any reason to believe, on account of which, there is total non-compliance with the requirements as contemplated by Section 132(1) of the said Act which vitiates the search and seizure. It does not fulfil the jurisdictional pre-conditions specified in Section 132 of the Act”.
The Delhi High Court has held that the assessee can't be obstructed from availing of the benefits of the Direct Tax Vivad se Vishwas Act, 2020 (DTVSV Act) even where the time limit for an appeal has not expired.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the DTVSV Act aspires to finally free the tax arrears locked in litigation combat for ages and ultimately ensures timely collection of tax. In the present case, the dispute pertains to AY 2010–11. Much water has already flown through the gates, and a lot of time, resources, and energy have already been consumed in the ongoing litigation. Moreover, since the assessee aspires to avail himself of the benefits of the settlement scheme and the beneficial legislation in place to finally effectuate his aspirations.
The Allahabad High Court has held that plant and machinery sold after the closure of business are capital goods under Section 2(f) of the Uttar Pradesh Value Added Tax Act, 2008 and are excluded from levy of tax under the amended definition of 'business' under Section 2(e) of the Act.
The definition of 'business' under Section 2(e)(iv) of the Uttar Pradesh Value Added Tax Act, 2008 was amended in 2014 to include any transaction, even after the closure of business, if it relates to sale of goods acquired during the period in which business was carried out. Section 2(f) defines 'capital goods' as plant, machine, machinery, equipment, apparatus, tool, appliance or electrical installation used for manufacture or processing of any goods for sale by the dealer.
Right Of Appeal Relating To Value Of Service Maintainable Before Supreme Court: Meghalaya High Court
The Meghalaya High Court has held that the right of appeal relating to the value of service is maintainable before the Supreme Court.
The bench of Chief Justice S. Vaidyanathan and Justice W. Diengdoh has observed that there is an appellate remedy available to the appellant or to the aggrieved party in terms of Section 35G of the Central Excise Act, 1944; the issue pertaining to the value of service cannot be agitated before the High Court. The party has a right only before the Supreme Court in terms of Section 35L.
Crane Services To Transport Department Does Not Constitute Sale: Rajasthan High Court
The Rajasthan High Court, Jaipur Bench has held that crane services to the transport department does not constitute sale.
The bench of Justice Sameer Jain has observed that the crane services provided by the respondent-assessee do not constitute sale as provided under Section 2(35)(iv) of the Rajasthan Value Added Tax Act, 2003 and hence, the order of the Tax Board does not call for any interference.
The Calcutta High Court has held that if the share application money is neither a loan nor a deposit, then neither Section 269SS nor 269T of the Income Tax Act, 1961 shall apply. Consequently, no penalty, either under Section 271D or under Section 271E of the Income Tax Act, 1961, could be imposed.
The bench of Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj has observed that in cases of loans, it is ordinarily the duty of the debtor to seek the creditor and to repay the money according to the agreement. In other words, a loan grants temporary use of money or temporary accommodation under certain conditions. Thus, a loan is an act of advancing money by one person to another under an agreement by which the recipient of the money agrees to repay the amount on agreed terms.
The Orissa High Court has held that information related to the outcome of a tax evasion petition sought under the Right to Information Act cannot be provided.
The bench of Justice B.R. Sarangi and Justice G. Satapathy has observed that the claim of the petitioner with regard to the supply of information sought in the application filed under the Right to Information Act is not permissible in view of the provisions contained under clause (i) of Section 8(1) of the Right to Information Act.
The Allahabad High Court has held that once the acceptance of books of accounts by the Commissioner of Income Tax (Appeals) have not been objected to by the Assessing Authority before the Income Tax Appellate Tribunal, it is not open to the Assessing Officer to disturb the gross profit rate as declared by the assesee.
The bench comprising of Justice Saumitra Dayal Singh and Justice Donadi Ramesh held that “in absence of any other objection found in the books of accounts of the assessee as may have been pressed before the Tribunal, there survives no room to reject the books of accounts of the assessee. Consequently, there is no intrinsic evidence to enhance the gross profit rate. Once the books of accounts of an assessee are found accepted the Assessing Officer may have remained within the confines of his powers ad not disturbed the gross profit rate as that would remain in the nature of the result of the book entries and not an original entry by itself.”
The Gujarat High Court has upheld the imposition of a 12 percent tax on Mango Pulp since the inception of GST.
The court clarified that Circular No. 179/11/2022-GST dated August 3, 2022, and Notification No. 06/2022 dated July 13, 2022, simply reinforce that mango pulp falls under the 12 percent GST bracket, specifically after the inclusion of "Mangoes (other than mangoes, sliced, dried)" following guava.
The Allahabad High Court has held that the limitations prescribed under special statutes, such as Finance Act, 1994 will prevail over the limitations mentioned in the Limitation Act, 1963.
The Court held that statutes such as the Finance Act, 1994 or the Central Excise Act, 1944 were enabled to address specific areas of law and that they often contained detailed provisions regarding procedural aspects such as limitation.
The Gujarat High Court has ruled that the Notified Area Authority, Vapi, does not qualify as a local authority or governmental authority. As a result, the Solid Waste Management and recycling services provided to it are not eligible for exemption under Notification No. 12/2017-State Tax (Rate) dated 30th June 2017.
The division bench, comprising Justice Bhargav D. Karia and Justice Niral M. Mehta, held, “considering the conspectus of law laid down by the Hon'ble Apex Court in the case of New Okhla Industrial Development Authority (supra), the Notified Area Authority, Vapi cannot be considered as “local authority” or “Governmental Authority”. Therefore, the Notified Area Authority,Vapi is neither a “local authority” nor a “Governmental Authority” carrying out any activity in relation to any function entrusted to Panchayat under Article 243G of the Constitution or in relation to any function entrusted to Municipality under Article 243W of the Constitution.”
Additions U/s 69C Based Merely On CBIC Information Can't Be Sustained: Delhi High Court
The Delhi High Court sets aside the assessment order and remits the matter to AO on the ground that the additions of Rs.70.10 Cr. made under Section 69C as unexplained expenditure based merely on information received from Central Board of Indirect Taxes & Customs (CBIC) is unsustainable.
The Division Bench comprising Justice Vibhu Bakhru and Justice Tara Vitasta Ganju observed that if the AO intends to make any addition on account of unexplained expenditure, it can do so only after apprising himself as to the details of such expenditure and providing the assessee necessary opportunity to explain the same.
While remarking that the AO had no knowledge as to which import or purchase made by the Assessee was not disclosed by the Assessee, the Bench concurred with Assessee's submission that since it was not provided with the information based on which the addition was made, despite demanding the same, it was impossible for them to dispute the alleged additional purchases, except for stating that it had not imported goods of the value as disclosed in CBIC information.
The Calcutta High Court has held that the letter by the joint secretary cannot override the plain and unambiguous provisions of the Income Tax Act, 1961, and the Finance Act.
The bench of Justice Surya Prakash Kesarwani and Justice Rajarshi Bharadwaj has observed that the letter of the Joint Secretary merely informs that “the matter has been looked into and the board is of the opinion that the tax rate applicable in the case of ABN AMRO BANK would be the same as for an Indian company at the relevant tax rate applicable for the concerned assessment years." The letter is a D.O. letter. It is not a circular issued in exercise of power conferred under Section 119 of the Income Tax Act, 1961. Apart from that, the letter is in conflict with the plain and unambiguous provisions of the Act of 1961 and the Finance Act.
Additional Income Can't Be Treated As Concealed Income: Kerala High Court
The Kerala High Court has held that additional income cannot be treated as concealed income for the purposes of Section 271(1)(c) of the Income Tax Act.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that a satisfactory explanation has been offered by the assessee, well before the issuance of a notice to him under Section 148 of the Income Tax Act, and the admission of additional income made by the assessee has been accepted by the department that completed the assessment under Section 143 read with Section 147 of the Income Tax Act. On that basis, the explanation offered by the assessee with regard to the differential income has to be seen as accepted by the Revenue for the purposes of the explanation under Section 271 of the Income Tax Act.
The Delhi High Court has held that once the Transfer Pricing Officer (TPO) had proceeded to pass the order of October 17, 2017, all that the AO was obliged to do was pass an assessment order in accordance with the procedure prescribed in Section 92CA(4) of the Income Tax Act.
“The prescription of nine months would also be applicable to a fresh order that is liable to be made in accordance with Section 92CA of the Act. This is since Section 153 of the Act speaks not merely of assessments but also of orders that are liable to be framed under Section 92CA. The order which is spoken of in Section 92CA of the Act, as explained above, is the one which the TPO may come to make in accordance with sub-section (3) thereof. It is thus manifest that the assessment exercise was liable to be concluded within a period of nine months when computed from July 14, 2017,” the bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav observed.
The Kerala High Court has held that the stipulation under Clause 16 of the Income Computation and Disclosure Standards (ICDS) for the adoption of first-in, first-out (FIFO) or weighted average cost for valuation of the stock or inventory cannot be applied in the Assessment Year 2017-2018 for the valuation of the opening stock, as the opening and closing stock of the year are to be valued by applying the same methodology.
The bench of Justice Dinesh Kumar Singh has observed that the substitution of Section 145A with retrospective effect from April 1, 2017 by the Finance Act, 2018 is to give relief to those assessees who had adopted the FIFO to value their stock in the Assessment Year 2017-18 and to save their returns from being declared incorrect or invalid. This retrospective operation has the same purpose and objective. However, if an assessee did not apply the FIFO to value its opening and closing stock, as it was not mandatory, requiring such an assessee to apply the FIFO to value their stocks for the assessment year 2017–18 would result in an uncalled-for outcome.
The Kerala High Court has held that the expenditure that was incurred by the appellant/assessee by way of addition to buildings and electrical fittings on leasehold premises was in the nature of capital expenditure and not revenue expenditure.
The bench of Justice Dr. A.K. Jayasankaran Nambiar has observed that the assessing authority and the First Appellate Authority have clearly relied on the written submissions given by the assessee to find that the nature of the expenses incurred by the assessee was capital in nature. Neither in the grounds of appeal before the First Appellate Authority nor before the Tribunal was there any material produced by the assessee to show that the expenses incurred by them were revenue in nature. If the assessee had in fact a case that the expenditure incurred by it was revenue in nature, then it was for the assessee to produce materials that would clearly demonstrate that the expenditure was revenue in nature.
The Gauhati High Court has held that the long-term capital gains are exempt from income tax, and the non-disclosure while computing the long-term capital gains cannot result in causing prejudice to the department.
The bench of Justice Kaushik Goswami has observed that the Principal Commissioner of Income Tax has initiated the proceedings simply on the basis of the proposal of the subordinate authority and has not applied his mind after perusal of the records called for by him, and the very initiation of the proceeding is illegal, without jurisdiction, and not tenable in law.
'Transit Rent' Can't Be Considered As 'Revenue Receipt', Not Liable To Be Taxed: Bombay High Court
The Bombay High Court has held that 'Transit Rent' is not to be considered a revenue receipt and is not liable to be taxed. As a result, there will be no question of the deduction of TDS from the amount payable by the developer to the tenant.
The bench of Justice Rajesh S. Patil has observed that the ordinary meaning of rent would be an amount that the tenant or licensee pays to the landlord or licensee. In the present proceedings, the term used is “transit rent," which is commonly referred to as a hardship allowance, rehabilitation allowance, or displacement allowance, which is paid by the developer or landlord to the tenant who suffers hardship due to dispossession.
The Allahabad High Court has held that Over Dimensional Cargo cannot be penalized by the authorities for reaching its destination in less time than estimated by travelling at a higher speed when there is no intention to evade tax.
Clause 2.4 of the Circular issued by Commissioner, State Tax dated 17.01.2024 provides that Over Dimensional Cargo cannot be detained and penalty cannot be imposed only because the goods have reached the intended place earlier than the estimated time.
“The mere fact that the goods in question were transported at a faster speed does not constitute sufficient grounds for penalization, in light of the departmental circular explicitly excluding transit speed as a criterion for classification. The reliance on speculative assumptions and conjectural reasoning to justify the imposition of penalties is antithetical to the principles of fairness and equity that underpin the rule of law,” held Justice Shekhar B. Saraf.
The Allahabad High Court has held that the franchise agreement granted a non-exclusive licence rather than a transfer of the right to use goods and the transaction does not attract Value Added Tax under the Uttar Pradesh Value Added Tax Act (UPVAT Act).
The bench of Justice Shekhar B. Saraf has observed that the respondent-department had received royalty amount from various dealers under the franchise agreement and service tax has been duly paid by it on the same. If the payments have been subjected to service tax, they cannot be recharacterized as the sale of goods to levy VAT or sales tax.
The Delhi High Court has held that interest received by the Indian PE on deposits maintained with the Head Office/Overseas Branch is not taxable in India.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that the branch office would not partake in the character or attribute of a separate legal personality; the view as taken by the Tribunal is clearly rendered unexceptional. In any event, it would be the exception carved out in the Double Taxation Avoidance Agreement (DTAA) with respect to banking enterprises that would govern.
The Delhi High Court, while quashing the penalty, has held that both under-reporting and misreporting are viewed as separate and distinct misdemeanours.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that, as per Section 270A(1), a person would be liable to be considered to have under-reported their income if the contingencies spoken of in clauses (a) to (g) of Section 270A(2) were attracted. In terms of Section 270A(3), the under-reported income is liable to be computed in accordance with the prescribed stipulations.
The Kerala High Court has held that a claim for exemption in respect of transit sales must be justified by showing the sale as having occurred in transit.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V.M. has observed that the petitioner/assessee cannot establish the transit sales by showing the sale as having occurred in transit since the E1 Forms relied on by the assessee have been accounted for only in a subsequent year, which could only be after the transportation of the goods and not while the goods were in transit.
The Delhi High Court has held that exemption is allowable on donations made by one charitable trust to other charitable institutions for a temporary period.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that Section 11(3) of the Income Tax Act and the adverse consequences would have been attracted provided the incomes so accumulated were diverted for a purpose other than charitable or religious, or where they were not utilized for the purpose for which they were so accumulated or set apart during the period of five years contemplated under Section 11(2)(a). This was not a case where a permanent endowment was made or one where the donation stood imbued with some degree of permanency. It also cannot possibly be said that the money was lost or became unavailable to be applied.
Colourable Devices To Evade Tax Can't Be Tax Planning, Rules Telangana High Court
The Telangana High Court has held that tax planning may be legitimate, provided it is within the framework of the law. Colorable devices cannot be part of tax planning, and it is wrong to encourage or entertain the belief that it is honorable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges.
The bench of Justice P.Sam Koshy and Justice Laxmi Narayana Alishetty has relied on the decision of the Apex Court in the case of McDowell & Co. Ltd. v. CTO, in which it was held that the proper way to construe a taxing statute while considering a device to avoid tax is not to ask whether the provisions should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord its approval to it.
The Delhi High Court has held that the deduction under Section 37 of the Income Tax Act is allowable on unsettled claims as well as Incurred But Not Reported (IBNR), which would amount to contingent liabilities.
The bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that if the historical trend indicates that a large number of sophisticated goods were being manufactured in the past and if the facts established show that defects existed in some of the items manufactured and sold, then the provision made for warranty in respect of the army of such sophisticated goods would be entitled to deduction from the gross receipts under Section 37 of the 1961 Act. It would all depend on the data systematically maintained by the assessee.
The Kerala High Court has held that it is the prerogative of the government to fix the limit of income from the encashment of earned leave salary for the purposes of exemption from payment of income tax. Unless the government issues a notification fixing the limit of income for earned leave salary, an employee cannot claim exemption from payment of income tax on the encashment of earned leave for up to 300 days.
The bench of Justice Murali Purushothaman has observed that the last notification was issued on May 31, 2002, and the government did not thereafter issue a notification despite there having been three pay revisions. The latest notification is only in 2023, after which the upper limit has been fixed at Rs. 25 lakhs, taking the highest salary of the cabinet secretary, i.e., Rs. 2.5 lakhs per month.
While upholding ITAT's decision deleting disallowance of provisions for unsettled outstanding claims and 'Incurred But Not Reported' (IBNR) claims of health insurance company, the Delhi High Court held that provisions for unsettled outstanding and IBNR claims are not contingent liabilities, and hence allowable u/s 37 of Income tax Act.
The Division Bench comprising Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav observed that “it would be wholly incorrect to understand IBNR provisioning to be a contingent liability. We, in this regard, bear in consideration the precepts of reasonable estimation, the capability of a liability being quantified based upon historical trends and the known actuarial methods for estimation which are liable to be adopted in accordance with the IRDA Regulations”.
While quashing a show cause notice issued by the Department for initiation of penalty proceedings u/s 270A in a vague manner, the Delhi High Court held that categorical finding of 'mis-reporting/ under-reporting' is essential for levy of penalty u/s 270A.
The High Court also set aside an order dismissing immunity claimed by the assessee u/s 270AA and dropped the penalty proceedings u/s 270A due to AO's failure to allude to specific charge of misreporting or under-reporting in show cause notice.
While quashing the reassessment notice issued to the Assessee, pursuant to a search operation conducted against a third party, the Delhi High Court held the same to be barred by limitation under first proviso to Section 149(1) read with Section 153C & Section 153A of Income tax Act. The High Court rejected the AO's contention that Section 148 notice would not be beyond the limitation period as provided under the first proviso to Section 149 when computed from the date of actual search of the third party.
The Bombay High Court has upheld the order passed by the Income Tax Appellate Tribunal (ITAT) directing Vodafone India to deposit Rs. 230 crores for staying income tax demand.
The bench of Justice G. S. Kulkarni and Justice Somasekhar Sundaresan directed the petitioner, Vodafone India, to deposit an amount of Rs. 230 crore, being the lowest or minimum amount of 20% of the disputed tax demand, which, in our opinion, is clearly in consonance with the provisions of Section 254(2A) of the Income Tax Act.
The Kerala High Court has held that the statutory scheme for determining the taxable turnover of a works contract under the Kerala Value Added Tax Act (KVAT Act) does not suffer from any defect so as to render it unworkable to effectuate the charge to tax on a works contract.
The bench of Justice A.K. Jayasankaran Nambiar and Justice Syam Kumar V. M. has observed that it was incumbent upon the petitioner or assessee to declare the total turnover (contract receipts) pertaining solely to the works undertaken by them without including the component representing the value of the undivided share in the land. If the petitioner assessees choose not to do so, they have only themselves to blame for the predicament that they find themselves in.
ITC Wrongfully Availed But No Fraud/Misstatement Proven; Madras High Court Imposes Token Penalty
The Madras High Court has imposed a token penalty of Rs. 10,000 on the assessee instead of a higher penalty as the assessee wrongfully availed of the input tax credit (ITC), but the department could not prove fraud or misstatement on the part of the assessee.
The bench of Justice C. Saravanan has observed that the assessee reversed the ITC. Penalties under Section 74 deal with situations where credit is availed or utilized by reason of fraud or any wilful misstatement or suppression of facts that was not proved by the department.
The Gauhati High Court has held that it is not mandatory for the assessee to install all capital goods in the year of procurement itself so as to avail CENVAT credit.
The bench of Chief Justice Vijay Bishnoi and Justice Suman Shyam has observed that as long as the CENVAT credit is availed during the period of exemption available under the Notification dated July 8, 1999, the claim of the assessee would not stand extinguished merely because the CENVAT credit claim was not lodged nor availed during the financial years when the capital goods were procured.
Slump Sale Doesn't Amount To Sale Of Goods Within MVAT Act: Bombay High Court
The Bombay High Court has held that slump sale under the Business Transfer Agreement (BTA) would not amount to sale of goods within the purview of the Maharashtra Value Added Tax (MVAT) Act.
The bench of Justice G. S. Kulkarni and Justice Jitendra Jain has observed that it was completely a flawed approach on the part of the reviewing authority to tax part of the BTA considering it to be petitioner's sales/turnover of sales, for the financial year 2010-11 in respect of the amounts of the intangible assets as set out in schedule 3.3 of the BTA. Thus, in the context of the BTA, the reviewing authority could not have regarded the intangible items to be in any manner “sale of goods”, so as to fall within the petitioner's turnover of sales.
The Madras High Court has quashed the order imposing tax demands on post-sale discounts received by way of financial credit notes on the ground that receiving a discount is not tenable in law.
The bench of Justice Senthilkumar Ramamoorthy has observed that the assessing officer concluded that the taxable person is providing a service to the supplier while taking advantage of a discount by facilitating an increase in the volume of sales of such supplier. This conclusion is ex facie erroneous and contrary to the fundamental tenets of GST law.
Credit Available On Advance Tax Paid For Stock-Transferred: Kerala High Court
The Kerala High Court has held that the petitioner will be entitled to credit for the entire amount paid in terms of Circular No. 50/2006 for the goods in question, which were stock-transferred to its branch office in Pollachi.
The bench of Justice Gopinath P. has observed that a combined reading of the provisions of Circular No. 50/2006 and the definition of input tax in Section 2(xxiii) of the KVAT Act indicates that the tax paid in terms of Circular No. 50/2006 cannot assume the character of input tax.
The Bombay High Court has held that transportation of machinery from Jawaharlal Nehru Port Authority (JNPT) to the factory of the assessee does not constitute supply, and hence GST is not payable.
The bench of Justice K.R. Shriram and Justice Jitendra Jain has observed that the first limb of Section 129(1)(a), which provides for a penalty equal to one hundred percent of the tax payable, cannot be invoked in the present case. The State GST Authority in the impugned order has erroneously applied the rate of GST without first satisfying itself whether the transportation to one's own factory can at all fall within the charging section. The applicability of the rate of tax would get triggered only if a transaction falls within the meaning of the term “supply” as per Section 7 of the Maharashtra Goods and Service Tax Act (MGST Act).
Assessment Order Passed Against Dead Person Is Nullity: Karnataka High Court
The Karnataka High Court, while quashing the assessment order, held that the assessment order under Section 147 read with Section 144 of the Income Tax Act amounts to nullity.
The bench of Justice S. Sunil Dutt Yadav has observed that when the assessee dies during the pendency of the proceedings, proceedings are to be continued through the legal representatives of the deceased.
The Karnataka High Court has held that undervaluation cannot be a ground for seizure of goods in transit by the inspecting authority.
The bench of Justice Krishna S. Dixit and Justice Ramachandra D. Huddar upheld the single bench order in which the obligation to pay tax and penalty has been quashed coupled with a direction to release the vehicle.
The Gujarat High Court has allowed the deduction under Section 54 of the Income Tax Act on the cash transaction of the sale and purchase of residential property.
The bench of Justice Bhargav D. Karia and Justice Niral R. Mehta, while quashing the order of the Interim Board for Settlement Commission, denied the deduction of Rs. 2.4 crore with respect to the cash transaction of the sale and purchase of the residential property.
The Mumbai ITAT recently clarified that mere deposit of employee's contribution before due date of filing return of income as per Section 139 of Income tax Act, will not make it eligible for deduction.
Referring to the decision of Supreme Court in case of Checkmate Services Pvt Ltd. Vs. CIT (2022) 143 taxmann.com 178, the Bench of Prashant Maharishi (Accountant Member) and Narendra Kumar Choudhry (Judicial Member) reiterated that “such sum collected from employees if not deposited within the due dates prescribed under the respective Provident Fund and ESIC Act, is dis-allowable irrespective of the fact that the same were deposited before the due dates of filing of return of income”.
Irrespective of the delay occurred in filing fresh application for final approval u/s 80G(5) of Income tax Act, the Kolkata ITAT directed the CIT(E) to treat the application of assessee for final registration as 'filed within the time limit prescribed' and also pointed that the time consumed by the assessee in filing the revised application will not be taken into consideration.
The Bench comprising of Sonjoy Sarma (Judicial Member) and Girish Agrawal (Accountant Member) observed that, “all the facts were before CIT (exemption) when the assessee for the first time applied for the final approval u/s 80G of the act. Merely, because the assessee out of inadvertence had mentioned another clause, the same was not an illegality but rather the same was a rectifiable mistake.”
The Mumbai ITAT restored the matter back to the file of AO to consider the lower deduction of TDS certificates and give opportunity to the assessee to explain the case.
The Bench of Amit Shukla (Judicial Member) and Prashant Maharishi (Accountant Member) observed that “AO should have given opportunity to the assessee before carrying out rectification u/s. 154, so as to explain the various certificates which were issued by VIL to the assessee company for lower deduction of TDS”.
Finding that the AO without examining any of the documents, simply made the addition u/s 68 on account of failure of assessee to produce share subscribers, the Kolkata ITAT held that AO cannot take adverse inference without pointing out discrepancies or insufficiency in the evidences and without examining statement of the directors of the subscriber companies.
The Bench of Sanjay Garg (Judicial Member) and Girish Agrawal (Accountant Member) observed that “once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound to conduct an independent enquiry to verify the same”.
The Chennai ITAT has remanded the matter to the AO for reconsideration of disallowance u/s 80IA(4), after finding that the AO has not examined the agreement entered into by the assessee with various government and semi-government departments before invoking such disallowance.
The Bench of Manjunatha G (Accountant Member) and Manomohan Das (Judicial Member) observed that “The terms and conditions and the nature of work specified in the agreement can only decide whether the assessee is a developer of an infrastructure project or a simple work contractor who executes civil construction work for a developer”.
The New Delhi ITAT ruled that once AO has accepted the sales made in cash, then source of cash deposits ought to have been treated as explained, and no addition is permitted u/s 68 of the Income tax Act.
A Single Bench of Kul Bharat (Judicial Member) observed that “the AO has not commented on purchases. Undisputedly manufacturing and trading activity would be based on sale and purchase. If the purchases are treated as genuine and stock is also accepted then treating the sales as bogus is not logical”.
Emphasizing that the condition of filing the return of income within the due date is mandatory in nature for claiming deduction u/s 80IB(10) of the Income tax Act, the Ahmedabad ITAT confirmed the disallowance made by the AO under the said provision.
Referring to the decision of Apex Court in Wipro Ltd. vs. Pr. CIT (2022) 142 taxmann.com 562 (SC), the Bench of Suchitra Kamble (Judicial Member) and Waseem Ahmed (Accountant Member) reiterated that “for claiming the benefit u/s. 80IB(10) of the Income Tax Act, the twin conditions of furnishing a declaration before the Assessing Officer and that too before due date of filing original return of income u/s. 139(1) are to be satisfied and both are to be complied with”.
On finding that no addition is made based on the reasons to believe recorded by the AO for reopening the assessment, the New Delhi ITAT quashed the order passed by the AO u/s 147 of the Income tax Act, 1961
The Bench of the ITAT comprising of Anubhav Sharma (Judicial Member) and Shamim Yahya (Accountant Member) observed while referring to the decision of Jurisdictional High Court in the case of Commissioner of Income Tax vs. Monarch Educational Society [2016] 387 ITR 416 that, “If no addition is made on the basis of the reasons to believe recorded by the Assessing Officer for reopening the assessment under section 148 of the Act, resort cannot be had to Explanation 3 to section 147 of the Act to make an addition on any other issue not included in the reasons to believe for reopening the assessment.”
Finding that that the assessee is a Cooperative Society (and not a co-operative bank) which was engaged in providing short term credit facility to its members, the Chandigarh ITAT ruled that interest income has been earned on deposits placed with a co-operative society and duly eligible for deduction under section 80P(2)(d) of the Income tax Act.
Referring to the decision of Supreme Court in case of Mavilayi Service Co-operative Bank Limited 431 ITR 1 (SC), the Bench of Aakash Deep Jain (Vice President) and Vikram Singh Yadav (Accountant Member) observed that “Section 80P(2)(4) is relevant only where the assessee claiming the deduction under Section 80P of the Act is a cooperative bank and not where a co-operative society is claiming deduction on deposits placed with a co-operative bank”.
The Indore ITAT upheld the assessment framed u/s 144 r.w.s 147 of the Income tax Act as the assessee did not cooperate during the assessment proceedings.
The Bench of Vijay Pal Rao (Judicial Member) and B.M Biyani (Accountant Member) observed that “when the transaction is very much in the name of the assessee then the form of entity is irrelevant as the assessee has not disowned the ownership of the land in question and payment of the consideration through its directors”.
On finding that lower authorities had erred in computing the estimated gain on silver articles, the Chennai ITAT deleted the addition made by CIT(A) and levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961.
The Bench of the ITAT comprising V. Durga Rao (Judicial Member) and Manoj Kumar Aggarwal (Accountant Member) observed that, “the shortage of 693.85 grams in gold jewellery is well covered by the stated purchase of 1950 grams of gold jewellery by the assessee. This being the case, the estimation of gains on silver articles as computed by lower authorities could not be said to be perfect and accurate one. Considering this fact, it is not a fit case for imposition of penalty as done by CIT(A) in the impugned order.”
Abiding by the principle of judicial hierarchy and binding precedent, the Kolkata ITAT directed the AO to consider only the investments yielding tax exempt income for computation of disallowance under Rule 8D(2)(iii) of the Income Tax Rules 1962.
The Bench of the ITAT comprising of Sanjay Garg (Judicial Member) and Girish Agrawal (Accountant Member) observed while referring to the decision of Coordinate Bench of Guwahati in the case of ACIT vs. Williamson Financial Services Ltd. while deliberating upon the Explanation to section 14A that “the said Explanation being clarificatory is retrospectively applicable and that in view of the said Explanation, the disallowance u/s 14A will be attracted in respect of expenditure incurred for earning of tax exempt income irrespective of the fact that any tax exempt income has been yielded or not on such expenditure.”
While deleting the addition on account of unexplained investment, the New Delhi ITAT clarified that genuineness and veracity of the party cannot be doubted merely because the cold storage rent was received in cash, when the assessee is only a custodian of the goods received by it for storing in its storage.
The Bench of Challa Nagendra Prasad (Judicial Member) and Dr. BRR Kumar (Accountant Member) observed that “the material impounded in the course of survey on 01.11.2017 also contains copies of inward and outward ledger showing the moments of goods in and goods out belonging to the parties. Evidences also contain to gate passes for goods in and goods out which are all recorded in the names of the parties only. It is not in dispute that the income received from the parties in the form of cold storage charges is recorded as income by the assessee”.
The Mumbai ITAT clarified that interest rates on FCNR accounts maintained in foreign currency are different and dependent upon the currency in question. They are not dependent upon the PLR rate, which is applicable to loans in Indian rupee.
The ITAT therefore deleted the ALP adjustments qua Letter of Comfort and interest on delayed realization of sale proceeds from the AEs.
Referring to decision of Delhi High Court in the case of CIT-I vs. Cotton Naturals (I) (P) Ltd. [2015] 231 Taxmann 401 (Del), the Bench comprising Amit Shukla (Judicial Member) and Gagan Goyal (Accountant Member) observed that “The PLR rate, therefore, would not be applicable and should not be applied for determining the interest rate in the extant case. PLR rates are not applicable to loans to be re-paid in foreign currency. The interest rates vary and are thus dependent on the foreign currency in which the repayment is to be made. The same principle should apply”.
The Bangalore ITAT set aside the order passed by CIT(A) for providing relief u/s 80P(2)(a)(i) and 115BBE of Income Tax Act, 1961 and redirect the case back to the file of AO for reconsideration of the genuineness of the deposit during demonetization by the assessee.
At the same time, the ITAT also made it clear that in the event, the assessee does not co-operate with the revenue officer, the AO will be at liberty to dispose of the matter strictly in accordance with law.
The Bench of the ITAT comprising Madhumita Roy (Judicial Member) and Chandra Poojari (Accountant Member) observed that, “the PAN and KYC in respect of such members of the assessee's society was not furnished either before the AO or before the CIT(A) which could assist the authorities below to consider the genuineness of the income in its proper perspective.”
Pointing that applications are to be considered on merit for grant of registration, the Kolkata ITAT relegate the issue to the file of CIT(E) with a direction that application in Form No. 10AB should be construed as if filed under section 12A(1)(ac)(i) of Income Tax Act, 1961.
The Bench of the ITAT comprising Sanjay Garg (Judicial Member) and Girish Agrawal (Accountant Member) observed that, “basically application of the assessee ought to have been under section 12A, sub-clause (1)(ac)(i), where a regular registration for a period of five years ought to be granted. Automatically dismissal of the applications of assessees resulted on account of wrong mention of the clause in the application form. Had an opportunity would have been provided in the system, the assessees could have rectified this application and mentioned correct provision that these applications be treated under section 12A(1)(ac)(i).”
On finding that CIT(A) has failed to consider all submission of assessee and evidences placed on record, the New Delhi ITAT restored the matter back to file of AO for fresh adjudication regarding the TDS deduction u/s 194J or u/s 194C of the Income Tax Act, 1961 on the payments made towards maintenance of X-Ray machine and CVC machine.
The Bench of the ITAT comprising of G.S. Pannu (Vice President) and Challa Nagendra Prasad (Judicial Member) observed while referring to decision of Supreme Court in the case of Hindustan Coca Cola Beverage Pvt. Ltd. Vs. CIT 293 ITR 226 that, “if the payee has taken into consideration the amounts received by payer in their return of income and paid taxes on such amounts the assessee cannot be treated as an assessee in default u/s 201(1) of the Act. The CIT(A) appears to have not considered all these submissions of the assessee and the evidences placed before him.”
While holding that filing of audit report in Form 10CCB before the due date for filing of return of income u/s 139(1) of the Income Tax Act, 1961 is only directory and not mandatory for the year under consideration, the New Delhi ITAT directed the AO to allow deduction claimed u/s 80IA of the Income Tax Act, 1961.
The Bench of the ITAT comprising of G.S. Pannu (Vice President) and Challa Nagendra Prasad (Judicial Member) reiterated while referring the decision of Karnataka High Court in the case of CIT v. ACE Multitaxes Systems (P.) LTD. [2009] 317 ITR 207 (Kar.) that, “when a relief is sought for under Section 80IB of the Act, there is no obligation on the part of the assessee to file return accompanied by the audit report, thereby, holding that the same is not mandatory. Therefore, it is clear that before the assessment is completed if such report is filed, no fault could be found against the assessee.”
The Visakhapatnam ITAT directed the TPO to consider the impact of working capital adjustments of the assessee company and appropriate material differences with that of the comparable companies. The ITAT ruled on comparables selection, treatment of expenses as operating/non-operating, and notional interest on outstanding receivables in case of assessee company engaged in providing processing services in relation to manufacture of garments.
Emphasizing on the necessity of credit period, the Bangalore ITAT remitted the matter of ALP adjustment made towards notional interest on outstanding receivables in case of assessee company engaged in software development and IT enabled services.
Referring to the judgment of ITAT Delhi in ITA NO.1248/Del/2012, the Bench comprising Goerge Goerge K (Vice President) and Laxmi Prasad Sahu (Accountant Member) observed that “there has to be a proper inquiry by the TPO by analysing the statistics over a period of time to discern a pattern which would indicate that vis-a-vis the receivables for the supplies made to an AE, the arrangement reflects an international transaction intended to benefit the AE in some way”.
On finding that no addition is made based on the reasons to believe recorded by the AO for reopening the assessment, the New Delhi ITAT quashed the order passed by the AO u/s 147 of the Income tax Act, 1961
The Bench of the ITAT comprising of Anubhav Sharma (Judicial Member) and Shamim Yahya (Accountant Member) observed while referring to the decision of Jurisdictional High Court in the case of Commissioner of Income Tax vs. Monarch Educational Society [2016] 387 ITR 416 that, “If no addition is made on the basis of the reasons to believe recorded by the Assessing Officer for reopening the assessment under section 148 of the Act, resort cannot be had to Explanation 3 to section 147 of the Act to make an addition on any other issue not included in the reasons to believe for reopening the assessment.”
Emphasizing that the condition of filing the return of income within the due date is mandatory in nature for claiming deduction u/s 80IB(10) of the Income tax Act, the Ahmedabad ITAT confirmed the disallowance made by the AO under the said provision.
Referring to the decision of Apex Court in Wipro Ltd. vs. Pr. CIT (2022) 142 taxmann.com 562 (SC), the Bench of Suchitra Kamble (Judicial Member) and Waseem Ahmed (Accountant Member) reiterated that “for claiming the benefit u/s. 80IB(10) of the Income Tax Act, the twin conditions of furnishing a declaration before the Assessing Officer and that too before due date of filing original return of income u/s. 139(1) are to be satisfied and both are to be complied with”.
Finding that no defects were pointed out and the books of accounts have been accepted, the New Delhi ITAT ruled that the assessee having given the explanation which was plausible explanation which stands verified in inquiry by the Assessing Officer, the same cannot be rejected arbitrarily by indulging into surmises.
The Bench of Dr. B.R.R Kumar (Accountant Member) and Yogesh Kumar US (Judicial Member) observed that “when the difference in physical stock found during survey and as recorded in the books is duly reconciled by the assessee and supporting evidences have also been furnished before the Assessing Officer & CIT(A) in which no defect or discrepancy whatsoever has been pointed out by the Assessing Officer or CIT(A), no addition is called for”.
The Mumbai ITAT pointed out that the AO and the CIT(A) has applied the concept of human probabilities to hold the scrip as penny stock without bringing on record as to how the assessee is involved in any of the scrupulous activities or directly linked to one of the persons who has involved in manipulation/rigging of share prices, entry operator or exit provider. The ITAT therefore held that there is no material with the tax authorities to substantiate their findings that the impugned transaction in question is non-genuine.
On finding that no opportunity of hearing was provided to the assessee before rejecting its application for immunity from penalty, the Mumbai ITAT set-aside the whole issue back to the file of the AO to decide the issue of availability of immunity from imposition of penalty u/s 270AA of the Income Tax Act, 1961. The Mumbai ITAT also directed the assessee to provide the evidences of filing of form number 68, which could not be uploaded due to the error.
Mumbai ITAT Allows Depreciation On 'Right To Collect Toll Tax' On Infrastructure Facilities
While following the decision of the co-ordinate benches in assessee's own case, the Mumbai ITAT directed the AO to grant depreciation on the right to collect toll tax on infrastructure facilities considering same as intangible asset entitled to depreciation at the rate of 25%. The ITAT also directed the AO to re-compute the deduction allowable to the assessee u/s 80IA (4) of the Income Tax Act, 1961, by replacing the amount of amortised value of deduction with allowable depreciation.
On finding that the assessee trust is not into the business of publishing, printing, and subscription of the books as the same is not the main object of the assessee trust, the Mumbai ITAT upheld the decision of CIT(A) that the assessee's trust is eligible for exemption u/s. 11 of Income Tax Act, 1961.
The Bench of the ITAT comprising of Kavitha Rajagopal (Judicial Member) and B R Baskaran (Accountant Member) observed while relying on the decision of Supreme Court in the case of CIT vs. Sai Publication Fund [2002] 122 Taxman 437 (SC) that, “As per the proposition laid down by the Apex Court in the above said decision, the onus of proof lies on the Revenue to prove that the assessee was “carrying on business” in respect of the impugned receipt. Even in the case of the present assessee, the dominant purpose was to spread the message based on preaching's which the above decision has held to be not a business activity. It is also observed that in the said decision the term “business” and “carrying on business” has been widely interpreted. To hold the incidental or ancillary activity to be business, the Revenue is put to strict proof.”
The Mumbai ITAT deleted the addition made by AO u/s 69A of the Income Tax Act, 1961, on finding that retracted statement of the person representing the said firm, who otherwise neither named nor specified the role and also not connected the assessee specifically.
The Bench of the ITAT comprising of Narender Kumar Choudhry (Judicial Member) and Padmavathy S. (Accountant Member) observed that, “we have failed to understand that how the name as mentioned in the said diary, as 'NENSIBHI ELLA' can be attributed to the Assessee's name. Further, how the coded amount of Rs.32,500 can be construed as Rs.3,25,000,00/-. Further, how the Assessee is connected with the said narration of entries written in diary. Further, as per Assessee's claim, the mobile number noted in said diary is even otherwise do not belong to the Assessee and the Assessing Officer also failed to verify the owner of the said number to connect with the Assessee.”
On finding that CIT(A) was justified in adopting the valuation given by the DVO and has rightly considered the safe harbour rule of 5% as per third proviso to section 50C of the Income Tax Act, 1961, the Kolkata ITAT upheld the CIT(A)'s decision to delete the addition made under the head of “Capital gains”.
The Bench of the ITAT comprising of Sanjay Garg (Judicial Member) and Manish Borad (Accountant Member) reiterated while agreeing with the CIT(A)'s observation that, “once the safe harbour rule of 5% is held to be applicable in appellant's case, no addition could be made by invoking the provisions of section 50C. Consequently, assessee's computation in respect of capital, gains would be acceptable and consequently there will be no occasion to disturb the WDV in respect of buildings. This would also imply that depreciation worked out as per remaining WDV in the depreciation chart would be same as declared by the assessee. Hence, addition in respect of excess claim of depreciation is not sustainable.”
While allowing the appeal of assessee in respect of the fact that whether the PCIT had validly assumed his revision jurisdiction u/s 263 of the Income Tax Act, 1961, both in law and on facts, the New Delhi ITAT held that the PCIT erred in assumption of jurisdiction u/s 263 of the Income Tax Act, 1961.
The Bench of the ITAT comprising of Saktijit Dey (Vice President) and M. Balaganesh (Accountant Member) observed that, “Once, the reassessment order per se framed by the AO is not sustainable in the eyes of law, any revision order passed thereon u/s 263 seeking to revise such unsustainable order cannot be accepted in the eyes of law and consequential revision order also passed u/s 263 of the Act deserves to be quashed.”
While overturning the findings of CIT(A) that the assessee does not satisfy the condition laid down u/s 54 of the Income tax Act, 1961 for claiming deduction, the Mumbai ITAT directed the AO to re-compute the capital gains, if any, after allowing deduction u/s 54 as claimed by the assessee.
The Bench of the ITAT comprising of Rahul Chaudhary (Judicial Member) and Om Prakash Kant (Accountant Member) observed that, “the Revenue has not disputed that the facts that the occupation certificate in respect of the project Rustomjee Oriana in which flat was booked/purchased by the Appellant was received on 07/11/2015 and that the possession of the said Flat No. B-902 was granted to the Appellant on 15/03/2016. In view of the aforesaid, we overturn the findings returned by the CIT(A) that the Appellant does not satisfy the condition laid down in Section 54 of the Act for claiming deduction and hold that the Appellant is entitled to claim deduction under Section 54.”
While clarifying the difference between profession and business, the Delhi ITAT reiterated that compensation received under mutual agreement for non-renewal of contract cannot form basis of addition u/s 28(ii)(e) of the Income Tax Act, 1961
The Bench of the ITAT comprising of Yogesh Kumar U.S (Judicial Member) and N.K. Billaiya (Accountant Member) reiterated while considering the decision of Supreme Court in the case of G.K. Choksi & Co. 295 ITR 376 that, “Though the phrase has been used in certain sections as "business or profession", but nowhere has the phrase been used as the "business and profession. In fact, wherever the legislature intended that the benefit of a particular provision should be for both business or profession, it has used the words "business or profession" and wherever it intended to restrict the benefit to either business or profession, then the legislature has used the word either "business" or "profession", meaning thereby that it intended to extend the benefit to either "business" or "profession", i.e., the one would not include the other.”
On finding that AO has not computed capital gains by adopting the stamp duty value, the Mumbai ITAT restored the matter back to the file of the AO to follow the mandate of provision u/s 50(C)(2) of the Income Tax Act, 1961, and decide the issue afresh after giving the assessee an adequate opportunity of hearing.
The Bench of the ITAT comprising of Prashant Maharishi (Judicial Member) and Sandeep Singh Karhail (Accountant Member) observed that, “According to the provision under section 50(C)(2), if the Assessee objects before the AO that the values were adopted by the stamp value authorities exceeds the fair market value of the property, the AO is duty bound to refer the value to the valuation officer.”
Warranty Costs Are Not Part Of AMP Expenditure, Clarifies Bangalore ITAT
The Bangalore ITAT ruled on treatment of share-based compensation (SBC), depreciation & amortization as operating expense and inclusion of delivery charges & warranty expenses in AMP expenditure.
The Bench comprising George George K (Vice President) and Laxmi Prasad Sahu (Accountant Member) observed that “these expenditure cannot be regarded as having been incurred for the purpose of development of brand since these are post sales activities and part of sales expenditure. It is also not a case of lack of enquiry. Considering the entire facts, we hold that the delivery cost and warranty expenses are not part of AMP expenditure”.
While deciding on ALP adjustments qua export of goods to AEs and guarantee commission in case of a pharma company, engaged in manufacturing and marketing of formulations in India, the Mumbai ITAT accepted foreign AE as tested party.
The Bench comprising B.R Baskaran (Accountant Member) and Rahul Chaudhary (Judicial Member) observed that “so far the assessee herein is concerned and qua the transfer pricing provisions, what is required to be seen is whether the price realized on export of products to their AEs is at arms-length or not. Further, the fact the profitability of AEs is lower than the profitability of comparable companies, would also show that the assessee has not under invoiced the sales”.
The Mumbai ITAT ruled that as per Explanation to section 92B of the Income tax Act, the transaction of business restructuring shall be considered an international transaction, irrespective of the fact whether it has a bearing on the profit, income, losses, or assets of such enterprises.
The ITAT also upheld the disallowance of interest on Compulsory Convertible Debentures (CCDs) and treatment of cash payment by assessee to its parent company, pursuant to scheme of amalgamation, as deemed loan.
Finding that the assessment year 2008-09 is beyond the period of six assessment years and respectfully following the decision of the jurisdictional High Court and the coordinate bench, the New Delhi ITAT held that the assessment made u/s 153C of Income tax Act for the AY 2008-09 is barred by limitation.
The Bench of Challa Nagendra Prasad (Judicial Member) and Dr. BRR Kumar (Accountant Member) observed that “in the absence of mentioning the date of handing over of the materials the date of satisfaction note shall be reckoned as the date of handing over of the materials and consequently the time limit of calculating the six years has to be calculated from this date.”
Pointing that though there has been a delay in filing TDS returns, however, the TDS return has been filed much before 1.6.2015 and none of the cases involved a case of continuing default where the assessee has defaulted in furnishing the TDS statement even after 01.06.2015, the Chandigarh ITAT ruled that there is no basis for levy of fees u/s 234E of Income tax Act, 1961.
The Bench of Aakash Deep Jain (Vice President) and Vikram Singh Yadav (Accountant Member) observed that “even though the AO assume jurisdiction to levy fee u/s 234E with effect from 1.6.2015 and has the necessary jurisdiction to levy fee u/s 234E in the instant case while processing the TDS returns on 1/01/2017, at the same time, such jurisdiction has been held prospective in nature and the period prior to 1/6/2015 has to be excluded”.
On finding that the AO have not recorded valid satisfaction note in the case of the “other person”/assessee in the case as required by section 153C of the Income Tax Act, 1961, the Mumbai ITAT held that the AO lacked jurisdiction to frame assessment u/s 153C/143(3) and therefore assessment framed by AO are held to be without jurisdiction and therefore quashed.
The Bench of the ITAT comprising of Aby T. Varkey (Judicial Member) and S Rifuar Rahman (Accountant Member) observed that, “AO has simply stated that he has verified the records of the group of Milan Dalal/ Vinod Faria, after search action, and according to him, the case of the assessee falls u/s 153C of the Act. And therefore, he issued notice u/s 153C of the Act. This assertion of the AO in no way can be termed as valid satisfaction because the AO has not referred to any incriminating material belonging/pertaining/relating to the assessee which was seized/ unearthed from the premises of the searched person [i.e. Milan Dalal/Vinod Faria group], which was the essential jurisdictional fact, which is absent in the satisfaction note.”
On perusal of the audited balance sheet and profit and loss account, the Kolkata ITAT opined that if the assessee is given deduction of expenditure incurred during the year, which it is entitled to, then there will be a net loss against gross receipts during the year, which interalia included receipt of membership and donation from members.
The Bench of Dr. Manish Borad (Accountant Member) and Anikesh Banerjee (Judicial Member) observed that “even if an organisation, is not entitled to benefit u/s 11 of the Act but is certainly entitled to claim expenses incurred during the year against the gross receipts”.
Referring to the decision in case of Association of Indian Panel board Manufacturer v Deputy Commissioner of Income Tax [2023] 157 taxmann.com 550 (Gujarat), the Ahmedabad ITAT reiterated that filing of Form 10B along with the return of income is only a procedural requirement and cannot be treated as mandatory requirement for the purpose of claiming exemption u/s 11 & 12 of the Income tax Act and even if filed at a later stage the assessee is entitled to exemption claimed.
The Bench of Annapurna Gupta (Accountant Member) and T.R. Senthil Kumar (Judicial Member) observed that “since the failure to file Form No.10B was the only reason for the adjustment made to the return of income of the assessee subjecting its entire income to tax on the filing of the Form 10B to the CIT(A), the assessee ought to have been allowed its claim of exemption to its entire income”.
Finding that the assessee had arrangement with its AE for billing cost plus 15%, which has been duly billed during the year and entire depreciation cost plus 15% has been billed to the AE, the New Delhi ITAT allowed the depreciation claimed by assessee.
The Bench of Shamim Yahya (Accountant Member) and Challa Nagendra Prasad (Judicial Member) observed that “When the Revenue is accepting the revenue earned which is totally based upon depreciation plus 15% markup, there is no reason to deny the cost”.
On finding that addition which is not based on the reasons for reopening is un-sustainable, the Mumbai ITAT deleted the addition made by AO u/s 69C of the Income Tax Act, 1961.
The Bench of the ITAT comprising of Narender Kumar Choudhry (Judicial Member) and Padmavathy S. (Accountant Member) observed that, “the return of income was assessed under section 143(3) of the Act and the additions made by the Assessing Officer and affirmed by the Ld. Commissioner, in fact, are based on the different issue on which no reasons were recorded and therefore dents the proceedings under section 147 / 148 of the Act as well as the assessment order itself. Hence, we do not find any hesitation to quash the assessment order itself being void-ab-initio.”
On finding that assessee had made bona fide mistakes in the computation of its total income while filing its original return, which were later corrected by filing revised computation during assessment proceedings, the Mumbai ITAT deleted the penalty levied u/s 271(1)(c) of the Income Tax Act.
The Bench of the ITAT comprising of Sandeep Singh Karhail (Judicial Member) and Prashant Maharishi (Accountant Member) observed that, “the fact that the donation given was stated in the Tax Audit Report and the deduction under section 80G of the Act was also computed by the tax auditor, however even then the assessee failed to claim a deduction under section 80G of the Act supports the claim of the assessee that the mistakes were sheer inadvertent human error.”
The Kolkata ITAT reiterated that once the assessee has submitted the documents relating to identity, genuineness of the transaction, and credit-worthiness of the subscribers, then the AO is duty bound conduct to conduct an independent enquiry to verify the same.
The Bench of Sanjay Garg (Judicial Member) and Manish Borad (Accountant Member) observed that “the assessee has successfully explained the nature and source of alleged sum and even the source of source has been proved by providing details of the funds received from other sources through banking channel which has subsequently been used to make investment in the equity capital of the assessee company”.
The Chennai ITAT deleted the ALP adjustment made towards advertisement expenses (AMP expenses) for alleged brand enhancement for its AE by assessee manufacturing and selling cars in India as well as exporting them to its AEs and non-AEs abroad.
The Bench comprising Mahavir Singh (Vice President) and Manoj Kumar Aggarwal (Accountant Member) on identical issue, noted that the Coordinate bench in assessee's own cases for AYs 2012-13 and 2016-17 deleted the adjustment holding that there was no formal agreement or arrangement between assessee and its AEs for rendering of service w.r.t alleged brand promotion activity.
Segregation Of Contract Manufacturing Activity And Distribution Is Fair And Reasonable: Mumbai ITAT
The Mumbai ITAT rejected the assessee's own recharacterization as value added distributor (VAD) and upheld the CUP method to benchmark import of Active Pharmaceutical Ingredients (APIs).
The Bench comprising Vikas Awasthy (Judicial Member) and Gagan Goyal (Accountant Member) observed that “segregation of Contract Manufacturing activity and Distribution is fair and reasonable. Merely for the reason that the assessee committed error in TP study to merge the two distinct segments under one head would not mean that the error cannot be rectified, subsequently”.
The Kolkata ITAT recently decided on comparables selection and adoption of Cash PLI in case of entity engaged in production of continuously annealed, cold-rolled steel / coils and sheets for automotive sector.
The Bench comprising Dr. Manish Borad (Accountant Member) and Anikesh Banerjee (Judicial Member) observed that “The assessee stated that considering depreciation as a part of the total cost would not be appropriate for the purpose of benchmarking since the depreciation in the year under consideration was 16.92% of its revenue, vis-a-vis depreciation of 4.85% of seven comparable companies as taken by the TPO which in most cases as average depreciation as a percentage of revenue”.
The Delhi ITAT deleted the ALP adjustment made on account of interest on loan extended to AE by assessee, engaged in manufacturing of Seamless, ERW Pipes and Tubes, and trading of Pipes and Tube.
The Bench comprising Saktijit Dey (Vice President) and Dr. B.R.R. Kumar (Accountant Member) observed that “With regard to the guarantee in the agreement between Citibank, Singapore and JPSPL, it was submitted that JPSPL has obtained loan from Citibank, Singapore of around USD 2,90,00,000/-. No bank would provide such a huge amount of loan without taking any security in return, the security being any asset or any guarantee. In such circumstances, JPSPL has obtained loan backed by assessee's guarantee. The TPO has not brought on record any facts or material which depicts that the interest rate charged by bank is impacted by the securities offered by the borrower of the loan”.
Finding that the AO had received the approval from the office of CIT well before the last date for passing of the TP order, but went in slumber and held on to himself the approval from CIT for more than six months, the Mumbai ITAT ruled that the reference made by Assessing Officer to the TPO was clearly time barred and invalid. The ITAT therefore upheld the CIT's invoking revisional jurisdiction u/s 263 in case of assessee for AY 2018-19.
The Bench comprising Vikas Awasthy (Judicial Member) and Ms. Padmavathy S. (Accountant Member) observed that “The Assessing Officer completed the assessment giving a go bye to the mandatory provisions of section 92CA and CBDT Instruction No.3 of 2016. Such an assessment order definitely falls within the meaning of erroneous and prejudicial to the interest of Revenue as envisaged u/s. 263 of the Act”.
The Mumbai ITAT ruled that the date of the agreement by no stretch of imagination could be the date of sale of the shares by the assessee to the purchaser, for purpose of computation of capital gains.
The Bench of Prashant Maharishi (Accountant Member) and Kavitha Rajagopal (Judicial Member) observed that “As per the decision of Bharti Gupta Ramola v. CIT [2012] 20 taxmann.com 762 the date of transfer is 30.06.2006 for computing the holding period of assets from both the date, i.e., of acquisition and sale are not to be excluded”.
PCIT Cannot Enlarge Scope Of Limited Scrutiny By Invoking Sec 263: Chennai ITAT
Finding that the case of assessee was selected for limited scrutiny by the AO, the Chennai ITAT ruled that the PCIT cannot enlarge the scope of limited scrutiny u/s 263 of the Income tax Act.
The Bench of V. Durga Rao (Judicial Member) and Manjunatha, G. (Accountant Member) observed that “it is not a fit case to invoke the provisions of section 263 of the Act and pass revision order, where the case of the assessee was picked up for limited scrutiny”.
Referring to the decision of Bombay High Court in case of PCIT vs. Ram Builders (454 ITR 444), the Mumbai ITAT reiterated where assessee was involved in execution of civil works and it had shown purchases from twelve parties even if assessee failed to produce said parties for verification, then AO could not have treated entire purchases as non-genuine purchases but only profit element on such purchases.
The Bench of Amit Shukla (Judicial Member) and Amarjit Singh (Accountant Member) observed that “If the payments have been made though cheques and there is corresponding sales affected on the contract work carried out and TDS has been deducted, it cannot be said that the entire payment is to be disallowed”.