Source: http://aiftponline.org/journal/2016/may-2016/direct-tax-high-courts/
Timestamp: 2019-04-24 03:17:38+00:00

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Assessee institution engaged in imparting higher and specialized education in field of communication including advertising and its related subjects. Training given to individual as well as to persons sent by companies to meet needs of Indian industry and commerce. Held, such activity does not amount to services in relation to trade, commerce and industry it amounts to imparting education, it will still be held that the institution exist solely for educational purpose.
Assessee was a journalist by profession and was appointed as the foreign correspondent in India of a German news magazine. German publisher paid a lump sum amount upon termination as sign off compensation for association of past 23 years and loss of work space. Assessing Officer treated the compensation received to be revenue in nature and chargeable to tax under Income- tax Act, 1961.
policies.’ In the name of compliance with Section 145(1), it cannot be open to anyone to force adoption of accounting policies which result in a distorted view of the affairs of the business. Therefore, even under the mercantile method of accounting, and, on peculiar facts of instant case, the assessee was justified in following the policy of not recognising these interest revenues till the point of time when the uncertainty to realise the revenues vanished. The Tribunal further referred to the fact that the various resolutions which decision rendered by the Tribunal in the impugned order is a decision on facts and nothing has been shown to us which would warrant interference by this Court on account of any finding being perverse or arbitrary.
Assessee was a State Government undertaking engaged in financing industrial units. It had made investment in securities on which it earned tax-free dividend income. The AO observed that though 75 per cent of investments were made through funds given by State Government, 25 per cent of investments were made out of mixed pool of funds and, therefore, 25 per cent of interest expenditure was taken as indirect expenditure liable for disallowance under section 14A, r.w. rule 8D. As amount of disallowance exceeded amount of exempt income itself, AO adopted a sum of 5 per cent of indirect expenditure together with 0.5 per cent of average investments under rule 8D(2)(iii) as disallowance under section 14A, read with rule 8D.
On appeal, the CIT(A) deleted the additions made by the AO on the ground that the AO failed to establish direct nexus between borrowed funds and tax-free investments. The Tribunal affirmed the order of the CIT(A).
Assessee, an individual, was an employee of company &apos;G&apos;. He was discharged from service under the relevant Service Rules after giving three months&apos; pay. Further, the assessee was also paid certain amount as ex-gratia compensation on premature cessation of his services. The assessee treated the said ex-gratia payment as a capital receipt and consequently did not offer it to tax. The AO took a view that compensation so received was to be taxed u/s. 17(3) as &apos;profits in lieu of salary&apos;. The Tribunal confirmed the order passed by AO.
At the time of retirement, the assessee received various retirement benefits from the company. Further, the assessee was also paid certain amount as compensation which was claimed as non-compete fees, not chargeable to taxable. However, the AO re-characterised the nature of payment to be “profits in lieu of salary’ as the assessee failed to provide explanation the manner in which the compensation was computed and negotiated with the company. The CIT(A) and Tribunal upheld the order of the AO.
The assessee was having rental income and claimed deduction of interest from the said income under section 24(1)(vi). The Assessing Officer disallowed the said deduction as the assessee had not purchased/constructed any building from the funds on which the interest was paid. On appeal, the Commissioner (Appeals) upheld the disallowance. On Second Appeal, the Tribunal allowed deduction under section 24(1)(vi) to assessee by recording finding that said loan liability was undertaken by assessee for acquiring its mortgaged property.
Assessee was engaged in the business of FM radio broadcasting and was granted permission for operating FM Radio Broadcasting channels. In its return of income, Assessee claimed additional depreciation under section 32(1)(iia) of the Act, on new plant and machinery acquired for production of radio programmes. Assessing Officer did not concur with the Assessee and did not consider production of radio programmes as production of article or thing. On appeal the Tribunal held that Assessee was eligible for claiming additional depreciation under section 32(1)(iia) of the Act. Aggrieved by the Tribunal judgement, Revenue preferred an appeal before the High Court.
"˜thing’ which is tangible and which can be transmitted and even sold by making copies. High Court placed reliance on Gramophone Co. India Ltd v. Collector of Customs (1 SCC 549)(SC) and Collector of Central Excise v. Rajasthan State Chemical Works (4 SCC 473)(SC). Thus it was held that Assessee had acquired and installed plant and machinery for manufacture of ‘article or thing’ and it is entitled to claim additional depreciation under section 32(1)(iia) of the Act.
The assessee had taken on lease a plot of land from the Calcutta Port Trust. It had encroached some of land belonging to the trust, for which the trust asked the assessee to pay damages before proposal of the assessee for grant of a long-term lease in respect of the encroached land. The assessee made the said payment and claimed it as revenue expenditure u/s. 37(1).
The AO treated the impugned payment as capital in nature on the ground that it was expended to obtain a long-term lease. He also held that the encroachment amounted to an infraction of law. The CIT(A) and Tribunal concurred with the view of the AO.
Rs. 65,00,000/- The Assessing Officer treated the same as short term capital gain as the asset had been brought for the first time in its books of account and added it to the income of the assessee.
Before the CIT(A) the assessee contended that the provisions of section 28(iv) of the Act were not applicable as neither the Act of bringing an asset into the books nor revaluation thereof would amount to benefit or perquisite because the asset was already owned by the assessee, though not reflected in its books. The fact that the asset had been brought into its books did not amount to obtaining any benefit by the assessee. It was further contended that no capital gains had occurred when it had converted the firm into a joint stock company as in view of the provisions of Chapter IV of the Companies Act, the act of declaring a firm as a company did not amount to transfer. It was contended that if the property is transferred from an individual to himself, then no profit or gain accrues to such person.
The CIT(A) held that a transfer of assets by a partnership firm to a company comprising only of shareholders who were earlier partners of the firm attracts liability under section 45 of the Act and directed the Assessing Officer to compute the capital gains as per the provisions of section 48 read with section 55 of the Act. The Tribunal held that capital gains can be brought to assessment only, if the full value of the consideration is received by or accrues to the transferor. The consideration in the instant case is stated to be allotment of shares though the shares were issued by the company not to the firm but to its partners. Even if it was considered that the shares somehow represented the consideration, the firm would not be liable to tax.
The assessee, erstwhile registered firm, was engaged in the business of training and trading of software. It consisted of only two partners, who were holding equal stakes in the firm. Subsequently, the assessee firm revalued its assets and the partnership business was converted into the business of Private Limited Company as a going concern and all the assets of the firm got vested as assets of the Private Limited Company, in which, the same partners were interested.
the assessee was liable to pay tax on &apos;capital gains&apos;.
The Commissioner (Appeals) allowed the appeal holding that when a partnership firm was transformed into a private limited company, there was no transfer of capital assets as contemplated under section 45(4).
The Tribunal again held that the transfer of assets of a partnership firm, without dissolution, to a private limited company fell within the expression &apos;otherwise&apos; as contemplated under section 45(4) and, therefore, the assessee was liable to pay tax.
The assessee claimed benefit of section 54F, however, he did not entirely source the amount invested in his new asset from capital gain receipts and therefore AO made an addition to the income of the assessee. The CIT(A) upheld the addition made by the AO. The Tribunal reversed order of the CIT(A) holding that section 54F did not put any restriction whether the investment was made out of loan amount or from the sale consideration and, therefore, for availing the benefit of section 54F amount invested in the new asset need not be entirely sourced from capital gain.
Rs. 38 lakh. During assessment proceedings of Assessee, authorised representative of Tom Investments Limited attended the proceedings to substantiate the genuineness of loan transaction and Tom Investment Limited intimated that the amount lent to Assessee was had in turn borrowed from M/s Tuq Credits Limited. The Tom Investments Limited was unable to furnish the information to prove genuineness and credibility of Tuq Credits Limited. Therefore the Assessing Officer concluded that Tuq Credits Limited is not a genuine party and the entire chain of lending and borrowing was bogus. Hence the loan received was treated as unexplained income and entire interest expenditure was disallowed to the Assessee.
"˜initial assessment year’ would mean the first year opted for by the assessee for claiming deduction u/s. 80-IA. However, the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty years, as the case may be and the period of claim should be availed in continuity.
High Court held that transactions with parties other than the International Transactions with associated enterprise or in respect of specified domestic transactions are not within the ambit of Chapter X of the Act. Similar view was taken in Tara Jewels Exports Pvt Ltd. ((2016) 381 ITR 404 (Bom)(HC) and Keihin Panalfa Ltd. (2016) 381 ITR 407 (Delhi)(HC).
Rs. 260 crores which is more than 23 times the turnover of the Assessee. This company cannot be regarded to be in equal size to the Assessee. We, accordingly, direct the AO to exclude this company out of the comparables.
Assessee’s turnover. We, therefore, do not find any illegality or infirmity in the order of CIT(A) in excluding this company out of the comparables.
Rs. 11 crores. Therefore, on the basis of the turnover filter itself this company cannot be regarded to be comparable to the Assessee.
(b) The said findings of the Tribunal in respect of the said three companies are on the basis of appreciation of evidence on record. We find no infirmity in the said findings of the Tribunal on that count. In fact, the Tribunal has endorsed the views of the CIT Appeals whilst coming to such conclusions. The concurrent findings of facts arrived at by the Authorities below, cannot be reappreciated by this Court in the present Appeal as held by the Apex Court in the Judgment reported in 2011(1) SCC 673 in the case of Vijay Kumar Talwar v. CIT.
The assessee-company was engaged in the business of manufacturing and trading of soft contact lenses and eye care solutions. In transfer pricing proceedings, the TPO noted that the assessee had entered into an agreement with its AE, B&L USA, for distribution of the product manufactured by its group companies, in terms of which the assessee was required to promote the B&L brand and to develop marketing intangibles for B&L products in India by incurring expenditure on AMP. The TPO opined that the AMP expenses did not benefit the assessee as it had incurred a loss in assessment year 2006-07. The TPO noted that the Assessee did not receive any reimbursement from its AE for the AMP expenses. The TPO concluded that the Assessee had developed marketing intangibles for its AE and was in the process of making the intangible even more valuable by incurring huge AMP expenses, bearing risks and using both its tangible assets and skilled, trained manpower. TPO, applied 10 per cent markup on AMP expenses and made addition to assessee&apos;s ALP. The adjustment was confirmed by the DRP.
On 25-3-2014, certain cash was seized by the competent authority. Application was filed by the assessee on 17-4-2014 for release of such cash. Despite repeated reminders, the authority failed to dispose of such application and it was disposed of, denying such release, only on 20-7-2015 i.e. after the expiry of more than 1 year. High Court held that if an application is made under first proviso to section 132B(1)(i) then the same should be disposed of within the time limit given in the second proviso which is 120 days from the date on which of the last of the authorisations for the search was executed. Second proviso though speaks of releasing the assets as referred to in first proviso within the time limit prescribed, still the question of not releasing the asset would arise only upon the decision on the application is taken by the AO. If no decision is taken within the time limit, then the releasing of assets becomes imminent. Further, it was held that such time limit cannot be said to be directory in nature.
– namely as alleged beneficiary rather than holder or beneficiary of the account in HSBC, Geneva.
However, on enquiry by the Revenue from HSBC, Geneva, it was learnt that a modified Consent Waiver Form would not enable the bank to give copies of the bank statement of A/c. No. 5091404580 since the Waiver would have to be provided without modifications.
apply for and obtain the requisite information.
assessee’s objection to the reasons recorded by a speaking order. It is only if the Assessing Officer rejects the objection that he can proceed with the assessment proceedings of the reopened assessments.
Officer’s reasons. The TPO’s reasons on merits much after the issue of the reopening notice does not have any bearing on serving the reasons recorded upon the party whose assessment is being sought to be reopened.
One more peculiar fact to note is that in the affidavit dated 10th July, 2015 filed by one Prabhakar Ranjan on behalf of the Revenue it is stated that the Assessing Officer was under a bona fide impression that the TPO would pass an order in favour of the assessee. In fact, if that be so, we are unable to understand how the Assessing Officer could have any reason to believe that income chargeable to tax has escaped assessment. Be that as it may, this petition was adjourned from time-to-time to enable the Revenue to file the necessary affidavits explaining their contention.
The Apex Court in ACIT v. Rajesh Jhaveri Stock Brokers P. Ltd. 291 ITR 500, had an occasion to deal with identical facts, namely reopening Notices issued under Section 148 of the Act where assessment is completed earlier by Intimation under Section 143(1) of the Act. In the above case, the Apex Court held that a Notice for reopening an assessment under Section 148 of the Act could only be justified if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. This decision of the Supreme Court in Rajesh Jhaveri Stock Brokers P. Ltd. (supra) has not been disturbed by the Apex Court in Zuari Estate Development and Investment Co. Ltd. (supra). In fact, the Supreme Court in Zuari Estate Development and Investment Co. Ltd. (supra) makes a specific reference to its decision in Rajesh Jhaveri Stock Brokers P. Ltd. (supra) to hold that where the assessment has been completed by Intimation under Section 143(1) of the Act, there can be no question of change of opinion.
The Apex Court in Zuari Estate Development and Investment Co. Ltd. (supra) has not dealt with the issue whether before invoking Section 148 of the Act, the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment, where the original assessment has been completed by Intimation under Section 143(1) of the Act. The Revenue is trying to infer that because the Apex Court in Zuari Estate Development and Investment Co. Ltd. (supra) has set aside the order of this Court and restored the issue to be decided on merits by the Tribunal, it must be inferred that the Apex Court had come to the conclusion that reason to believe was not necessary for issuing reassessment Notices where the regular assessment was completed under Section 143(1) of the Act. As rightly pointed out by Mr. Pardiwalla, it can equally be inferred that the Apex Court in the above case had come to the conclusion that there is reason to believe that income had escaped assessment and consequently restored the issue to the Tribunal to decide the reassessment proceedings on merits.
– Circle 39(1) was the Assessing Officer of the Assessee and had the jurisdiction over this case. However on 14th March, 2014 the ITO Ward 39(2) issued a notice to the assessee under section 148 of the Act. The notice of reopening was issued by ITO Ward 39(2) who was not the Assessing Officer of the assessee and this single fact in itself vitiates the reopening of the assessment. Realising the mistake the Assessing Officer (who had the jurisdiction over the Assessee) issued a notice dated 23rd June, 2014 under section 148 of the Act but it was beyond the deadline of 31st March, 2014 under section 149(1)(b) of the Act.
One of the main points urged in the present petition is that the reopening of the assessment sought to be made under Section 148 of the Act is bad in law since the notice had been issued and the reasons for reopening had been recorded by the ITO Ward 39(20, who was not the Assessing Officer as far as petitioner is concerned.
The High Court held that it was only the Assessing Officer who has issued the original assessment order dated 13th April, 2009 for AY 2007-08 under Section 143(3) of the was empowered to exercise powers under Section 147/148 to reopen the assessment. This was because he alone would be in a position to form reasons to believe that some income of that particular AY had escaped assessment. Further provisions of section 151 of the Act required prior approval of CIT if he feels that the assessment order is prejudicial to the interest of Revenue. However in any event ITO who has not passed the original order cannot reopen the assessment.
assessee’s appeal, after concluding that no incriminating documents were found during the course of search, on the basis of which additions had been made by the AO. This finding was upheld by the Tribunal.
– Profits of Non-residents, then section 172 is referable to section 44B. Both provisions open with a non-obstante clause and whereas section 44B enacts special provisions for computing profits and gains of shipping business in case of non-residents section 172 dealing with shipping business of non-residents is enacted for the purpose of levy and recovery of tax in the case of any ship belonging to or chartered by a non-resident operated from India. These sections and particularly section 172 devise a scheme for levy and recovery of tax. The sub-sections of section 44B denote as to how the amounts paid to or payable would include demurrage charges or handling charges or any other amount of similar nature. The sub-sections of section 172 read together and harmoniously would reveal as to how the tax should be levied, computed, assessed and recovered. Therefore, there is no warrant in applying the provisions in Chapter XVII for collection and recovery of the tax and its deduction at source vide section 195.
To our mind, the Division Bench judgment in Commissioner of Income-tax v. Orient (Goa) Pvt. Ltd. seen in this light does not, with greatest respect, take into account the scheme and setting as understood above. There need not be apprehension because there is no escape from the levy and recovery of tax. The tax has to be levied and collected. The ship cannot leave the port or if allowed to leave any port in India, it must either pay or make arrangement to pay the tax. Hence, the apprehension of avoidance or evasion both are taken care of by the legislature. That is how advisedly the legislature cast the obligation to deduct tax at source on the person responsible to make payment to a non-resident in shipping business.
The Assessee had made sales of scrap, however no tax was collected at source on sale of scrap by the Assessee. Therefore the Assessing Officer held that as a consequence of non-compliance of provisions of section 206C of the Act, the Assessee was liable to pay tax and interest under section 206C(7) of the Act.
"˜waste and scrap’ and thereby not liable for tax collection at source. Aggrieved the Revenue filed an appeal before the High Court.
We find this conduct on the part of the Assessing Officer to accept a stay application and not immediately give acknowledgement of its receipt is unacceptable. The least that is expected of a civil servant is to be fair and civil. In the absence of the above, his conduct is not one becoming of an Officer belonging to the prestigious Indian Revenue Service. The least that is expected of an Officer is that when a person files an application / letter, which is accepted by him, an acknowledgement should be forthwith given to the party filing the application or letter. In case he refuses to accept the letter he should endorse on the letter / application the reason why it is not being accepted with a line or two for the refusal to accept. In case he does accept it and give an acknowledgment he can deal with the applications/ letters as is appropriate in accordance with law. We believe that what has happened in this case is an aberration. However, the Chief Commissioner of Income Tax would ensure that his Officers do not behave in such an high handed and unfair manner, not expected of civil servants.
A best judgment assessment was passed under section 144 of the Act by Assessing Officer, disallowing deductions under section 10A of the Act. On appeal, CIT(A) set aside the assessment order after considering the documents furnished and the evidence placed on record by the Assessee. Aggrieved the Revenue appealed against the CIT(A) order before the Tribunal.
revenue’s appeal and held that there is no requirement in law that the CIT(A) should invariably consult or confront the Assessing Officer every time additional evidence is obtained by CIT(A) on its own motion. Also in cases wherein the additional evidence is in nature of clinching evidence, leaving no further room for any doubt or controversy, in such case no useful purpose would be served in performing the ritual or forwarding the evidence to the Assessing Officer and in obtaining his report.
Revenue preferred appeal before the High Court against the impugned order. High Court noted that the Tribunal had failed to note that Rule 46A(3) requires the Assessing Officer to be given an opportunity to examine the documents produced by the assessee for the first time before the CIT(A). This mandate of Rule 46A(3) could not have been dispend with, as it is a statutorily prescribed rule of natural justice. High Court held that Rule 46A(3), cannot be whittled down or brushed aside as performing a ritual. While sub-rule (4) confers power on the First Appellate Authority to cause production of documents, justice and fair play would require the Assessing Officer to be given the opportunity to examine such documents and put forth his objections. Accordingly, the High Court held that the document which the Assessee intends to place before the Appellate Authority, cannot be entertained by CIT(A) except on fulfilment of the following conditions:- (1) recording reasons in writing for receiving such evidence; and (2) giving the assessing authority an opportunity to examine the documents.
Pursuant to a search and seizure action, the AO invoked the provisions of S. 153A of the Act and completed the assessment by bringing to tax share application money as unexplained u/s. 68 of the Act.
The CIT(A) held that addition u/s. 68 was beyond the scope of S. 153A, however, upheld the addition on merits. The Tribunal though allowed the revenue to assail the finding of the CIT(A) on scope of Sec. 153A, reversed the assessment order.
Against the order of the Commissioner (Appeals), the revenue filed an appeal before the Tribunal in the prescribed form. The Tribunal by order dated 6th November, 2007 dismissed the appeal on the ground that the revenue had not obtained approval of the Committee on Disputes (COD) to prosecute a dispute with the assessee, a public sector company, which was required in view of the decision of the Supreme Court in the case of ONGC v. CCE  6 SCC 437. Thereafter, the Supreme Court in the case of Electronics Corpn. of India Ltd. v. Union of India  332 ITR 58 held that the approval of COD was no longer required to prosecute a dispute amongst the departments of the Government and Public Sector undertakings inter se. Consequently, in the year 2012 the revenue filed a Miscellaneous application ("˜MA’) before the Tribunal for recall of the order dated 6 November 2007.
The Tribunal dismissed the MA on the ground that the said Application was filed beyond the period of limitation provided in s. 254(2).
On appeal to HC, the Revenue contended that the appeal was dismissed by Tribunal under Rule 12 of the ITAT Rules, 1963 i.e. memorandum of appeal was rejected for want of Committee on Disputes ("˜COD’) approval. Further, the period of limitation as envisaged u/s. 254(2) only applies to order passed u/s. 254(1).
assessee’s own case and are accepted by Revenue by not filing an appeal to HC; or which already been concluded by Supreme Court against the Revenue.
The Assessee Company had claimed a deduction on account of lease rental paid for motor car taken on finance lease and the same was allowed in the assessment. The Commissioner being of the view that the lease rentals were required to be treated as capital expenditure, thus directed the Assessing Officer to examine the same.
Tribunal was of the view that the Assessing Officer (while passing the order under section 143(3) of the Act) had requisite details and evidences and on being satisfied of such details and evidences, he had allowed the claim to the assessee. Therefore the assessment order passed by the Assessing Officer was not erroneous and prejudicial to the revenue. Aggrieved by the order, the revenue preferred an appeal before the High Court.
The High Court followed the earlier year orders, wherein DRP had ruled in the favour of the Assessee and had allowed deductions on account of lease rental payment. High Court also noted that the Commissioner had simply directed the Assessing Officer to examine the matter without recording as to why the order passed by the Assessing Officer was prejudicial to the interest of the revenue and erroneous.
The Tribunal had remanded matter to the AO after issuing certain directions. However, the AO passed the order without complying with the directions of the Tribunal. Thereafter, the CIT exercised revisional powers u/s. 263 in setting aside the assessment order and remanded it to AO.
The assessee filed its return of income claiming deduction of certain expenditure which resulted in business loss. The Assessing Officer disallowed the expenditure as the business had not commenced and added the same to the income of the assessee. The AO disallowed the carry forward loss as claimed in the return of income as it was filed beyond the due date. The AO also passed a penalty order under section 271(1)(c) on ground that assessee had deliberately furnished inaccurate particulars of income relating to carry forward loss.
The CIT(A) as well as the Tribunal set aside the penalty order holding that even when assessee declared net loss in its e-return, it was automatically reflected as carry forward loss. It was also found that return of income filed for the subsequent assessment year prior to the order of the subject assessment year also indicated that the assessee had not claimed any set off or loss carried forward from the earlier assessment years.

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