Source: http://aiftponline.org/category/journal/2015/october/
Timestamp: 2019-04-23 14:55:32+00:00

Document:
A	In a writ petition before the Madras HC, the court was concerned in respect of reversal of input tax credit on the ground that the selling dealer has not filed monthly returns. The reversal was done u/s 19. The question was whether the Order of the Assessing Officer reversing ITC was in violation of principles of natural justice. The liability had to be fastened on the selling dealer and not on the writ-dealer which had shown proof of payment of tax on purchases made from the selling dealer. In the circumstances, High Court held in the affirmative and the matter was remitted back to the AO for fresh consideration.
B.	In this case too, the Madras HC was concerned of the reversal of input tax credit u/s 19 and the ground was that the Registration Certificate of the selling dealers were cancelled with retrospective effect could not be a ground to deny the benefit of input tax credit to the petitioner and others.
Under Notification No. FD-71 CSL 2015 dated 1-8-2015, the Karnataka Govt. exempted with immediate effect, the tax payable by a dealer under the KVAT Act, 2003 on the sale of the goods viz. (1) Solar PV Panels and (2) Solar Inverters.
3.	Whether the Authority is Bound to take into Consideration of Belated Production of Statutory Declaration Forms ?
4.	Appeal to The Appellate Authority barred by limitation – Whether delay can be condoned ?
The Karnataka High Court was concerned with the legal provision that u/s. 62(3) of the KVAT Act, 2003 where the Act expressly provided for filing of an appeal within 30 days and empowered the Appellate Authority to condone the delay up to 180 days and the appeal was filed beyond 210 days was indeed beyond the period prescribed for filing of the appeal. Further, section 5 of the Limitation Act, which provided for condonation of delay was not attracted in view of the specific provision under the Act. Hence, the writ petition was dismissed.
In a resort hotel amount collected by way of entry ticket charges to access park and beach, video / camera permit charges from non-residents at the hotel, was a “luxury” as defined u/s 2(ee) ? The HC held that it would fall within the term “luxury” provided in a hotel as defined in section 2(f). It was therefore liable to luxury tax at the appropriate rate under the Kerala Tax Luxuries Act, 1976.
circular of the Commissioner, could not have any application to the case of the petitioner. Resultantly, the writ petition against the demand notice failed and dismissed.
*	In this case, it is seen from the judgment that the Apex Court’s judgment in Commissioner of ST, U.P. v. Indra Industries (2001) 122 STC 100 (SC).
In this case, dealer allowed discount subsequent to the sale through ‘credit notes’. Exact quantification of discount was not worked out at the time of sale, as a result dealer paid tax in excess to the extent of discount amount. The assessing authority duly verified the payment of discount and finalised the assessment for the year 1999-2000. However, Addl. Commissioner u/s 21(2) of the U.P. Trade Tax Act, 1948 directed reassessment and recovery of the tax refunded on the discount amount. The petitioner challenged this action by filing writ petition in the HC. While deciding the writ petition, the HC came to the conclusion that there was no application of mind and non-recording of reasons in the Order of reassessment made by the Dy. Commissioner. As a result, the writ petition was allowed setting aside the demand of ` 29,04,735 as a result of reassessment order.
Here in this case, the question was appropriation of payments made during pendency of provision assessment. Entire demand set-aside in provisional assessment, but upheld in the revision proceedings. Meantime, “Amnesty Scheme” was declared by the Govt. and the tax liability settled under the scheme. In the circumstances, writ was filed praying that amounts of pre-deposit be adjusted towards “Principal Tax Liability” under the Amnesty Scheme and liability to be adjusted accordingly. High Court held it was not proper that pre-deposits to be appropriated first as per section 55C of the Act. In the circumstances, the petitioner filed S.L.P. in the SC. The HC held that S.L.P. is not a continuation of revisional proceedings u/s. 55C of the Act and the appellant-assessee would have no right and it cannot be considered in the scope of writ petition. Accordingly, the writ petition was rejected.
In the case of the applicant, settlement of arrears found to be incorrect, which was prejudicial to the interest of revenue. Hence, Dy. Commr. invoked suo motu powers of revision and he corrected the amnesty order. This was challenged in the revision petition. The HC held that the authority to correct an order passed by any officer subordinate to the Dy. Commr. except Appellate Authority, was well within the power of Dy. Commr. to interfere and prevent prejudice being caused to the revenue, as per section 23(B) and 35 of the Kerala GST Act, 1963. Accordingly, the revision petition was rejected.
In this case, the dealer was denied input tax credit as the selling dealer did not deposit the tax collected by him. Therefore, the question in appeal before the HC was whether purchasing dealer was again liable to pay the tax? The HC held in the negative on the ground that the sale was complete by transfer of goods on the payment of the price of goods. The movement of goods in case of transfer of goods which was taxable under the VAT Act was not essential but the sale invoice and the tax payment as well as passing of consideration could constitute the sale of such goods. The claim of ITC on the purchases could not be denied on the ground that the selling dealers did not deposit the tax charged from the purchasing dealer unless fraud, collusion and connivance with the Registered dealers selling the goods was established. The rules did not provide that there must be some movement of goods or if there was no movement of goods, then, input tax credit was not admissible. So long as VAT invoice shall contain the particulars of goods sold as per Rule 54(4), ITC could not be denied and, thus, the appeal was decided in favour of the appellant.
In AIFTP Journal Vol. 18 Part 6 at Sl. No. 10 in the case citation, namely, Saral Wirecraft Pvt. Ltd., please read STJ Vol. 54 Part V P 634 instead of P 652 (Guj.) inadvertently mentioned.
We have a godown in Navi Mumbai Municipal Corporation area wherein we store goods which are thereafter dispatched to JNPT for the purpose of using the same in our operations in the Territorial Waters or in the Exclusive Economic Zone. We do some processing on such goods but the goods remain the same even after the processing. The goods remain in such godown for two to three days. We were of the view that CESS or LBT is not payable on such transactions and therefore we did not obtain registration under the respective enactments though such storage is for last several years. Now, the Corporation officials are insisting for registration.Kindly inform us the correct legal position.
Our views are expressed qua the provisions of Local Body Tax (LBT) but the same apply mutatis mutandis to the provisions of Cess.
“Local Body Tax” means a tax on the entry of goods into the limits of the City, for consumption, use or sale therein, levied in accordance with the provisions of Chapter XIB, but does not include cess as defined in clause (6A) and Octroi as defined in clause (42).
(aaa) Local Body Tax on the entry of the goods into the limits of the City for consumption, use or sale therein, in lieu of octroi or cess, if so directed by the State Government by Notification in the Official Gazzettee.
Section 152P of the MMC Act states that the Corporations to which the provisions of clause (aaa) of sub-section (2) of section 127 apply, may, for the purposes of that Act, levy and collect Local Body Tax on the entry of goods specified by the State Government by Notification in the Official Gazzette, into the limits of the City, for use or consumption or sale therein, at the rates specified on the Notification.
The Government has accordingly issued Notification.
In view of the above legal provisions, LBT can be levied when goods are brought into the LBT area for consumption, use or sale – mere physical entry of the goods into the LBT area would not attract the levy of LBT. Mere physical entry of goods into the LBT limits would not attract levy of LBT unless goods are brought in for use or consumption or sale. Use and consumption would involve conversion of the commodity into a different commercial commodity by subjecting it to some processing. The entry must be for the purpose of consumption, use or sale within the local area. Further, the word “therein” is significant and indicates unambiguously that the consumption, use or sale must take place in the local area and not outside.
The taxable event is the entry of goods into a local area for use ‘therein’. The fundamental ingredient of the taxable event is that the goods will ‘repose’ in the local area for ‘an indefinite period’ and ‘finally and permanently rest within the municipal limits’ and amount to ‘a mixing up of the goods with the mass of property in the local area’.
Words are not to be viewed in isolation and their meaning ascertained only according to dictionaries. The word must be viewed in the light of its setting in the sentence in Entry 52, List II.
We have considered the sentences in Entry 52, List II and in sections 127 and 152P. It seems to us clear beyond doubt that the legislature has been invested with the power to tax entry of goods into a local area for consumption, use or sale therein. The purpose of allowing the State Legislature to impose LBT is to allow taxation of goods that enter into a local area for either consumption, use or sale within the local area. The purpose is not to allow taxation of entry of any goods which enter temporarily into and then exit the local area. If the consumption and sale have to take place within the local area, the ‘use’ must equally take place within the local area.
Blacks Law Dictionary, 8th Edition, gives the meaning of the word “use” as follows:- “The application or employment of something; esp., a long-continued possession and employment of a thing for the purpose for which it is adapted, as distinguished from a possession and employment that is merely temporary or occasional the neighbours complained to the city about the owner’s use of the building as a dance club.” The word “use” thus means the employment of a thing for the purpose for which it is made or adapted.
The Supreme Court in Acqueous Victuals Pvt. Ltd. vs. State of U.P. And ors. [(1998) 5 SCC 474] where the Supreme Court considered the earlier decision on the subject and observed that the word “consumption” is added to the word “use” and in either case the entry within the municipal limits must be with a view to their retention.
The court further observed that, “15. In view of the aforesaid decision, it becomes obvious that the word “retention” is held to be a synonym with the word “repose”, meaning thereby the article concerned must finally rest within the municipal limits. In the light of the aforesaid judgment of the Constitution Bench of this Court, therefore, it is obvious that before a municipality can impose octroi duty on any commodity, it has to be shown that the commodity concerned was brought within the municipal limits for consumption, that is, for being totally used up so that it ceases to exist within the municipal limits themselves or it was to be used for an indefinite period within the municipal limits so that it ultimately rests within the municipal limits and does not go out subsequently, or the commodity concerned must be shown to have been brought within the municipal limits for the purpose of sale within the said limits.
We are therefore of the view that that considering the facts informed by you, you are not liable to pay LBT in Navi Mumbai Municipal Corporation area. However, you have not informed the nature of processing. Please ensure that the processing done by you does not convert the original goods into different commercial commodity.
1.	As per the amended provisions of LBT law, what is the basis to determine turnover during the year, whether it will be on the basis of the turnover for each Municipal Corporation or total turnover of all Municipal Corporations in Maharashtra State?
Rs. 50 Crores. Considering the above amendments, whether LBT liability is now to be discharged only for those 4 Municipal Corporations?
3.	As per the aforesaid Notification, the amendment is effective from 1st April, 2015. In such case the LBT paid by my client in the remaining 19 Municipal Corporations can be claimed as Refund for the period from April 2015 to July 2015?
1.	Section 127(aaa) of the Maharashtra Municipal Corporations Act (MMC Act) read with Section 152P of that Act authorises the Corporation to impose Local Body Tax on the entry of the goods into the limits of the city for consumption, use or sale therein if so directed by the State Government by Notification in the Official Gazette.
2.	Section 152T of the said MMC Act authorises the Government of Maharashtra to prescribe the Rules for the purposes of the Act. Accordingly, the Government of Maharashtra has notified the Rules vide Notification number LBT-0209/CR-65/09/UD-34 dated 25-3-2010. Rule 3 of the said Rules prescribes the limits of turnover for registration and Rule 17 provides for cancellation of the registration certificate granted under Rule 3 in the circumstances prescribed under the said Rule 17.
Rs. 5,000/- then that dealer is liable for registration under that Corporation, of course if the further conditions of that Rule 3(1)(a) are also complied with. The other category of dealers, who are other than importers. For them clause (b) has been prescribed under Rule 3(1). This clause speaks about the turnover of purchase or sales other than import and has accordingly prescribed the limits.
4.	Now the question is, whether the term “turnover of purchases” or “turnover of sales” mentioned in these clauses (a) & (b) apply to those particular Corporations or whether they apply to the entire State. These terms have not been defined under the Rules but have been defined under the main MMC Act. The term ‘Corporation’ has also been defined under clause (10) of section 2 of the MMC Act and means the Municipal Corporation constituted or deemed to have been constituted in larger area known as a City.
5.	The ‘turnover of purchases’ and ‘turnover of sales’ have been defined under clauses (70A) and (70B), respectively, of that Section 2 of the MMC Act and mean the aggregate amount of purchase price paid or payable in respect of purchase of goods and sale price received or receivable in respect of sale of goods.
Rs. 5,500/- and turnover of all the purchases are more than Rs. 1,50,000/- in Navi Mumbai Municipal Corporation Area shall become liable in all Municipal Corporation Areas in the State of Maharashtra even if he does not have any transaction in any other corporation area. It is illogical.
Rs. 50 Crores in the previous financial year. In our view, you are liable to pay LBT only in those four Municipal Corporations and not in other 19 Municipal Corporations.
8.	However, the view expressed by us is not free from doubt. It is especially so, because the Government of Maharashtra is in great financial crises due to the possible postponement of the GST. The speeches made by the Minister on the floor of House at the time of introduction of Bill qua LBT are not admissible for the construction of the statute. The bureaucracy may in future interpret the same to mean the aggregate turnover in the State of Maharashtra. Therefore, we advise you to immediately apply to the Commissioner of all respective Municipal Corporations under Rule 31 of the LBT rules for determination of the correct position in law. The said Rule 31authorises the Commissioner to statutorily determine, on application, whether Local Body Tax is payable qua particular transaction.
Rs. 50 Crores in the previous year) should be deemed to have been cancelled with effect from 1-8-2015. Therefore, in our view your liability to pay LBT continued till 31st July, 2015.
STOP PRESS : The Government of Maharashtra has accepted this legal position and has now issued.
Rs. 1,05,000/- as survival bonus after every three years from LIC during the span of 15 years and thereafter the sum assured with Bonus on maturity.
1.	Is there any specific provision under the Income-tax Act by which this amount is taxed under the head “Income from other sources”?
2.	Is it possible to show the income under head Capital Gain?
3.	Is there any provision to claim the investment made in the policy as cost against the survival benefits?
4.	If yes then how the same is to be claimed i.e. can one claim the cost by dividing it against the survival benefit receivable after every three years and then pay tax on entire amount received on maturity.
5.	If the investment made is not allowed to be deducted from the survival amount receivable, will it not be unconstitutional as this will amount to taxing gross receipt and not income.
From the facts, it is clear that Mr. X has taken money back insurance policy called as New Bima Bachat Policy. As per the terms of the said policy, it is a single premium payment policy, where sum assured will be paid back to the policy holder in the form of survival benefit periodically. First survival benefit will be given to the policy holder on completion of three years of the policy and thereafter completing every three years. At the end of the term, policyholder on maturity will receive a sum assured minus survival benefits paid plus bonus. If he dies within the term of policy, death benefit will be paid to his nominee i.e. sum assured plus bonus.
Rs. 5,59,843/-. However, as stated he has not claimed any deduction under section 80C.
Rs. 1,05,000/-. i.e. Rs. 5,25,000/-).
So, the survival benefits received would be nothing but return of capital as it is money back policy, hence, the same is not liable to tax when it is received. But on maturity bonus amount would be taxable in the hands of Mr. X under section 56 of the Act as it cannot be taxed under any other head.
In view of the above, the queries raised in serial nos. 2 to 4 do not require any elaboration.
Further, there is nothing unconstitutional, as survival benefit is nothing but return of investment and on maturity bonus would be taxable as the same is not exempt under section 10(10D) of the Act.
As regards TDS deducted on each payment of survival benefit can be claimed as a refund.
A firm having three partners and doing construction work.
In the said firm, there are tippers and JCB machines standing in balance sheet for business purpose.
Out of three partners, one partner wants tipper and another partner wants JCB machinery for his individual business purpose.
Can it be transferred by debiting their capital account and crediting machinery account during the continuation of partnership business without attracting capital gains tax.
What will be position, if the said transaction is effected on dissolution of firm?
Further, if the firm is decided to be dissolved on April 1, 2016 and the said transaction is made then as to whether the entry is to be passed on March 31, 2016 or April 1, 2016 and in that circumstances as to which date will be treated for taxation purpose i.e. March 31, 2016 or April 01, 2016 and in which year liability to pay income tax, if any, will arise?
However, if partners withdraw at the time of dissolution of firm then as per section 45(4) of the Act, the liability in the hands of firm would arise on the basis of fair market value of the assets withdrawn on the ground that it amounts to distribution.
The dictionary meaning of the expression “distribution” is “to give each a share, to give several persons”. The expression ‘distribution’ connotes something actual and not notional. It can be physical, it can also be constructive. One may distribute amounts between different shareholders either by crediting the amount due to each one of them in their respective accounts due to him.
[see Punjab Distilling Industries Ltd. v. CIT (57 ITR) (SC)].
Thus the year in which transfer takes place would create liability for taxation.
Gift given by Nana or Nani (i.e. mother side of assessee) is taxable or not? Whether Nana / Nani is covered under the definition of ‘Relative’? Whether lineal ascendant / descendant is also covered by mother side of assessee?
(D)	Brother or sister of either of the parents of the individuals.
The term “lineal descendants” include all descendants and is not restricted to male descendants. [see Jagnnath vs. Kunja Behari (AIR 1929 PC 162)]. So lineal ascendant would include an ascent or in direct line of ascent of a child which includes Nana / Nani (i.e. parents of mother).
Rs. 2,38,609/- received from sale of a flat as long term capital gain was rejected treating it as short term capital gains. This was confirmed by the Commissioner (Appeals). The Tribunal held that as a specific flat was allotted to the assessee, on November 30, 1988,the allotment letter or payment of the first installment did not entitle the assessee to claim that the gains were long term capital gains.
Under the provisions of Income Tax Act 1961, when an assessment is made and demand is raised against the assessee, the assessee usually prefers first appeal before the CIT(A) and files application for stay of the demand in dispute before the AO within thirty days from the date of receipt of the assessment order.
But under the Indirect Tax Laws, the assessee being aggrieved with the order of assessment prefers Appeal before the First Appellate Authority along with an application for stay of the demand in dispute. The latter seems to be very much reasonable. Because, the authority, who would dispose of the first appeal would certainly apply his mind while disposing of the stay application filed before him.
Since the year 1961 the Income Tax Law came in to existence, it was never thought of that the AO who had passed the order of assessment would never act in a fair manner to grant stay on the demand in dispute. It is also not expected in common paralance that the AO, who has raised demand would grant stay on the demand to the assessee. Because if the AO will grant stay of the demand in dispute, he will mean that he is challenging his own order.
Section 220(6) of the Act provides that where an assessee has presented an appeal under section 246 or section 246A the Assessing Officer may, in his discretion and subject to such conditions as he may think fit to impose in the circumstances of the case, treat the assessee as not being in default in respect of the amount in dispute in the appeal, even though the time for payment has expired, as long as such appeal remains un-disposed.
(a)	ITO v. M.K. Mohammed Kunhi (1969) 71-ITR-815(SC).
(b)	V. N. Purushothaman v. Agricultural ITO (1984) 149-ITR-120 (Kerala).
(c)	Prem Prakash Tripathi v. CIT (1994) 208-ITR-461 (All.).
(d)	Debashis Moulik v. CIT (1998) 231-ITR-737 (Cal.).
(f)	Jagdish N.Hinduja v. CIT (2011) 59-DTR-333 (Karn.).
Although the legal position is very much clear but the CIT(A) is quite reluctant to exercise this power. On the other hand, they are not exercising this power at all. Such is the attitude on the part of CIT(A) to stay the demand during the pendency of an appeal. But the Parliament of India has not considered this aspect till this date and amended the law to that effect.
Against the stay order of the AO the assessee has to approach the Joint/Additional Commissioner and against the order of JCIT/Addl. CIT’s order, the CIT. These are all administrative orders. Being aggrieved with the stay order of the CIT the assessee may prefer Writ Application before the Hon’ble High Court.
In a number of cases where high pitch assessment is done by the AO and stay application is not considered by him, the assessee suffers a lot due to coercive measures taken by AO for realisation of the demand in dispute by way of attachment of bank accounts for recovery of the demand.
Further, it is generally understood that instructions of CBDT are binding on the AO. CBDT’s clarification on Instructions on Stay of Demand issued vide Letter [F. No. 404/10/2009-ITCC], dated 1-12-2009 is discussed below for better appreciation of the facts.
Many queries have been received by the Board regarding the applicability of Instruction number 95 dated 21-8-1969 vis-à-vis Instruction number 1914 dated 2-12-1993. Many assessees are taking the plea that Instruction No. 1914 does not supersede Instruction No. 95 dated 21-8-1969.
The above observations were circulated to the field officers by the Board as Instruction number 95 dated- 21-8-1969.
(i)	Clarification to Instruction number 95 was issued on 14-9-1970 stating that it relates to disputed demands only.
(ii)	Instruction number 635 was issued on 12-11-1973 stating that stay should be granted only in those cases where demands are attributable to substantial points of dispute.
(iii)	Clarification to Instruction number 95 dated 13-7-1976 held that the Instruction becomes operative only in cases where there are no lapses on the part of the assessee.
(iv)	Instruction number 1067 dated 21-6-1977 held that the ITO can pass the necessary orders u/s. 220 (6) in all cases except cases under section 144A or 144B where the approval of IAC is required.
(v)	Instruction number 1158 dated 27th March. 1978 held that in suitable cases the assessee may be allowed to furnish security.
(vi)	Instruction number 1282 dated 4th October 1979 held that requests should be made to CIT(A) and ITAT for early disposal of appeals and constant watch should be kept on progress of appeals.
(vii)	Instruction number 1362 was issued on 15-10-1980 in supersession of all the earlier Instructions. It was an Instruction covering the issue in detail and in para 4 of the same there was a clear reference to the proposition laid down in Instruction number 95 which is as follows:- In exercising this discretion, the Income-tax Officer should take into account factors such as: whether the points in dispute relate to facts; whether they arise from different interpretations of law; whether the additions have been made as a result of detailed investigation; whether the additions are based on materials gathered through enquiry/survey/search and seizure operations; whether the disputed addition to income has been assessed elsewhere by way of protective assessment and the tax thereon has been paid by such person etc. The magnitude of addition to income returned cannot be the sole determinant in this regard. Each disputed addition will need to be considered to arrive at the quantum of tax that may need to be stayed.
3. It is clear that the substance of the assurance as laid down in Instruction number 95 dated 21-8-1969 was submerged in the Instruction number 1362 dated 15-10-1980 which was issued in supersession of all earlier Instructions on the subject. Instruction No. 1914 dated 2-12-1993 was issued subsequently in super-session of all the earlier Instructions on the subject and the said Instruction also covers unreasonably high pitched assessment order and genuine hardship cases.
4. It is therefore clarified that there is no separate existence of the Instruction No. 95 dated 21-8-1969. Instruction No. 95 and all subsequent Instructions on the issue ceased to exist from the date Instruction No. 1362 came into operation. In turn Instruction No. 1362 and all subsequent Instructions on the issue also ceased to exist the day Instruction No. 1914 came into operation i.e. 2-12-1993.The Instruction No. 1914 holds the field currently and a copy of Instruction No. 1914 is enclosed for reference.
Similarly, Instructions for Recovery of Outstanding Tax Demands have been issued by CBDT vide No. 1914 F. No. 404/72/93 ITCC dated 2-12-1993.
1.	The Board has felt the need for a comprehensive instruction on the subject of recovery of tax demand in order to streamline recovery procedures. This instruction is accordingly being issued in supersession of all earlier instructions on the subject and reiterates the existing Circulars on the subject.
(d)	Demand stayed in accordance with paras B & C below.
ii.	Where demand in respect of which a recovery certificate has been issued or a statement has been drawn, the primary responsibility for the collection of tax shall rest with the TRO.
iii.	It would be the responsibility of the supervisory authorities to ensure that the Assessing Officers and the TROs take all such measures as are necessary to collect the demand. It must be understood that mere issue of a show cause notice with no follow-up is not to be regarded as adequate effort to recover taxes.
i.	Stay petitions filed with the Assessing Officers must be disposed of within two weeks of the filing of petition by the tax- payer. The assessee must be intimated of the decision without delay.
ii.	Where stay petitions are made to the authorities higher than the Assessing Officer (DC/CIT/CC), it is the responsibility of the higher authorities to dispose of the petitions without any delay, and in any event within two weeks of the receipt of the petition. Such a decision should be communicated to the assessee and the Assessing Officer immediately.
iii.	The decision in the matter of stay of demand should normally be taken by Assessing Officer/ TRO and his immediate superior. A higher superior authority should interfere with the decision of the AO/TRO only in exceptional circumstances; e.g., where the assessment order appears to be unreasonably high-pitched or where genuine hardship is likely to be caused to the assessee. The higher authorities should discourage the assessee from filing review petitions before them as a matter of routine or in a frivolous manner to gain time for withholding payment of taxes.
i.	A demand will be stayed only if there are valid reasons for doing so. Mere filing an appeal against the assessment order will not be a sufficient reason to stay the recovery of demand. A few illustrative situations where stay could be granted are: It is clarified that in these situations also, stay may be granted only in respect of the amount attributable to such disputed points. Further, where it is subsequently found that the assessee has not co-operated in the early disposal of appeal or where a subsequent pronouncement by a higher appellate authority or court alters the above situation, the stay order may be reviewed and modified. The above illustrations are, of course, not exhaustive.
c.	Require an undertaking from the assessee that he will co-operate in the early disposal of appeal failing which the stay order will be cancelled.
e.	Reserve a right to adjust refunds arising, if any, against the demand.
iii.	Payment by installments may be liberally allowed so as to collect the entire demand within a reasonable period not exceeding 18 months.
iv.	Since the phrase “stay of demand” does not occur in section 220(6) of the Income-tax Act, the Assessing Officer should always use in any order passed under section 220(6) [or under section 220(3) or section 220(7)], the expression that occurs in the section viz., that he agrees to treat the assessee as not being default in respect of the amount specified, subject to such conditions as he deems fit to impose.
v.	While considering an application under section 220(6), the Assessing Officer should consider all relevant factors having a bearing on the demand raised and communicate his decision in the form of a speaking order.
i.	Even where recovery of demand has been stayed, the Assessing Officer will continue to review the situation to ensure that the conditions imposed are fulfilled by the assessee failing which the stay order would need to be withdrawn.
ii.	Where the assessee seeks stay of demand from the Tribunal, it should be strongly opposed. If the assessee presses his application, the CIT should direct the departmental representative to request that the appeal be posted within a month so that Tribunal’s order on the appeal can be known within two months.
iii.	Appeal effects will have to be given within 2 weeks from the receipt of the appellate order. Similarly, rectification application should be decided within 2 weeks of the receipt thereof. Instances where there is undue delay in giving effect to appellate orders, or in deciding rectification applications, should be dealt with very strictly by the CCITs/CITs.
3.	The Board desires that appropriate action is taken in the matter of recovery in accordance with the above procedure. The Assessing Officer or the TRO, as the case may be, and his immediate Superior Officer shall be held responsible for ensuring compliance with these instructions.
4.	This procedure would apply mutatis mutandis to demands created under other Direct Taxes enactments also.
It is thus understood from the above judgment that the CIT has no jurisdiction under the statute to grant stay on the demand in dispute. It is the AO, who has got only power as per provisions of section 220(6) of the Act to grant stay of the demand. It is not out of place to mention here that referring the judgment of the Hon’ble Kerala High Court some of the CIT(s) are not taking up stay application for hearing or rejecting the same being not maintainable before them.
It is thus pointed out here that merely writing an article in a souvenir or journal would not solve the purpose. Further, an assessee’s representation to the Government of India may not help in bring an amendment to the present law, which is beinging followed for years together. It is only All India Federation of Tax Practitioners, which may represent the FINMIN/CBDT to make an amendment in the Income Tax Law incorporating a clear provision so as grant of stay by the CIT(A) is concerned and modify the earlier instructions with a new one. It is not known whether the Direct Tax Code would come in to force and the same shall contain provisions as discussed above. However, the above aspect needs attention and every effort should be made to bring the above little change in the statute.
Chennai Properties and Investment Ltd. v. Commissioner of Income Tax, (2015) 373 ITR 673 (SC) and also High Court of Calcutta in the case of Shyam Burlap Co. Ltd. v. Commissioner of Income Tax in ITA No. 163/2005 decided on 4-9-2015 have held that income in case of companies where Memorandum of Association provides for carrying on the business of letting out is in the nature of business income and chargeable accordingly and not under the head “Income from house property”. An attempt is being made in this Article to analyze the effect on above decisions on the controversy in regard to the matter.
United Commercial Bank Ltd. v. Commissioner of Income Tax (1957) 32 ITR 688, wherein the Hon’ble Supreme Court had taken a view after exhaustive review of the authorities that under the Scheme of Income-tax Act, 1922, the heads of income, Profit and Gains enumerated in difference clauses of section are mutually exclusive. Each specific head covering items of income arising from a particular source. Accordingly, notwithstanding that the market was constructed pursuant to object of the company, rental income received from the shops held to be assessable under the head “Income from other sources” and not as business income.
Karanpura Development Co. Ltd. v. Commissioner of Income Tax (1961) 44 ITR 362 (SC). The facts before the Supreme Court have been that income had been received pursuant to leasing of coal mining rights. The assessee company was formed with the object, inter alia, of acquiring and disposing of the underground coal mining rights in certain coal fields and it had restricted its activities to acquiring coal mining leases over large areas, developing them as coal fields and then sub-leasing them to collieries and other companies. The assessee had shown the income as business income. The Hon’ble Supreme Court observing that the object and the manner of its activities and the nature of its dealings with its properties have to be considered and accordingly had held the income to be in the nature of business income for the purpose of above case and not as income from house property.
Sultan Brothers (P) Ltd. v. Commissioner of Income Tax, (1964) 51 ITR 353 (S.C.). In the facts of above case, the Appellant had let out building fully equipped and furnished for a term of six years for running a hotel and for other ancillary purpose. The Hon’ble Supreme Court observed that whether a particular letting is business has to be decided in the circumstances of each case. Further, it was observed that “each case has to be looked at from a businessman’s point of view to find out whether the letting was the doing of a business or the exploitation of his property by an owner”. It was also observed that merely an entry in the object clause showing a particular object would not be determinative factor to arrive at an conclusion whether the income is to be treated as income from business and such a question would depend upon the circumstances of each case viz. whether the particular business is letting or not. Accordingly, in the facts of above case the Hon’ble Supreme Court held the income to be in the nature of business income.
In the case of S.G. Mercantile Corporation P. Ltd. v. Commissioner of Income (1972) 83 ITR 700 (SC) again the Hon’ble Supreme Court considered the issue in the circumstances where the assessee company was having its object of developing the market and had let out shops, stalls and ground spaces. The assessee company had taken the market place on lease and thereafter sub-leases were made. In this circumstances the question for consideration was whether the income was chargeable under the head “Business income” or under the head “Income from other sources”. The Hon’ble Supreme Court held that income in the facts of the case was assessable as business income and not under the head “Income from other sources”.
Shambhu Investment P. Ltd. v. Commissioner of Income Tax (2003) 263 ITR 143 (SC). In the facts of above case the assessee company was owning a immovable property. It had occupied a portion of the property. Rest of the property was let out to be used as table space by the occupants with furniture and fixtures and lights and air conditioners. The assessee also provided services like watch and ward staff, electricity, water and other common amenities. The monthly rent was being charged was inclusive of above facilities. The Calcutta High Court held that income from property was assessable in the hands of assessee as income from house property.
(2001) 249 ITR 7 (Cal.). On appeal to the Supreme Court, the Hon’ble Supreme Court dismissed the appeal holding that there was no reason to interfere with the conclusion arrived at by the High Court.
In regard to the issue, as mentioned above, there have been large numbers of decisions of different Courts including of Hon’ble Supreme Court in regard to the matter. Reference of above decisions has been made herein only with a view to indicate that there has been consistently an issue in regard to the matter and the Hon’ble Supreme Court and High Courts have taken view considering facts and circumstances of each of the case and if we strictly go through the facts of each case and the holding of Hon’ble Court, it is very difficult to make out what has been the consistent line of thinking and why decision in a particular case has been taken in one way or another.
The Hon’ble Supreme Court has considered the issue recently in the case of Chennai Properties and Investment Ltd. (supra). In the facts of this case the assessee company was having its main object in the Memorandum of Association to acquire the properties in the city of Madras (now Chennai) and to let out those properties. The rental income from such properties was shown as income from business in the return of income filed by the assessee. The Department considered the same as income chargeable under the head “Income from house property”. The Commissioner of Income Tax (Appeals) allowed the appeal of the assessee holding it to be income from business. The Income Tax Appellate Tribunal also affirmed the order of Commissioner of Income Tax (Appeals). In appeal filed by the Department before the High Court of Chennai the Hon’ble High Court held that income was chargeable under the head “Income from house property”. The Madras High Court basically rested its decision on the judgment of Hon’ble Supreme Court in the case of East India Housing Land Development Trust Ltd. (supra). Against the decision of High Court the assessee filed appeal before the Hon’ble Supreme Court. The Hon’ble Supreme Court analyzed decisions of Supreme Court in the cases of East India Housing and Land Development Trust Ltd. and also in the case of Sultan Brothers (P) Ltd. (supra) and Karanpura Development Co. Ltd. (supra). In the facts of the case the Hon’ble Supreme Court also observed that the entire income of the assessee was through letting out of two properties, namely, “Chennai house” and “Firhavin Estate” and there was no other income of the assessee. Further, the Hon’ble Supreme Court observed that main object of the company was to acquire and hold properties and to let out those properties. After taking specific note of the decision of Constitutional Bench of Hon’ble Supreme Court in the case of Sultan Brothers (P) Ltd. (supra) in which case it was observed by the Hon’ble Court that each case has to be looked at from businessman’s point of view, held that in the facts of the case income was chargeable as business income.
The issue had also recently come up for consideration before the High Court of Calcutta in the case of Burlap Co. Ltd. v. Commissioner of Income Tax (supra) decided on 4-9-2015. In the facts of above case the assessee company was in earlier years has been showing the income under the head “Income from house property” and same was being accepted as such by the Department. During the year under consideration the assessee company paid compensation to two of its tenants for vacating the property and intention of the company was to earn higher rental income by letting the property to new tenants. In these circumstances the assessee company claimed that its rental income was in the nature of business income and compensation paid by it was also deductible as business expenditure. The Department in these circumstances had taken a view that since the assessee company itself has been showing the income in earlier years as income from house property, it could not change its stand in this year and cannot claim the income as business income. The Commissioner allowed the claim of the assessee company after examining the Memorandum of Association and noting the fact that 85% of its income was by way of rent. The Tribunal, however, held that income was chargeable under the head “Income from house property”. Accordingly, the assessee filed appeal before the Calcutta High Court. Before the Calcutta High Court amongst other decisions, decision of Hon’ble Supreme Court in the case of Chennai Properties and Investment Ltd. (supra) has also been cited by counsel on behalf of the assessee. There is, however, no specific discussion in the Judgement in regard to aforesaid decision of the Supreme Court. The Hon’ble High Court, however, proceed in the matter taking cognizance of the object clause in the Memorandum permitting the assessee to carry on business in letting out of properties. Further, it has been noted that 85% of income of the appellant was by way of deriving rent and lease rentals. Accordingly, it has been held by High Court that income from rent constituted the business income of the assessee.
It can be said in the conclusion that broadly there has been thinking of the Courts that since property is held as a owner and rental income is being received as a result of ownership of the property the same is chargeable under the head “Income from house property”, notwithstanding it may be stock-in-trade of the business or the rental income is received as part of its business activities. Whereas the Courts from time to time have also been taking the view that income from properties is in the nature of business income. In the case of Chennai Properties and Investment Ltd. (supra) and thereafter Calcutta High Court in the case of Shyam Burlap Co. Ltd. has held that where rental income is being received as a result of carrying on the business of letting out, income would be in the nature of business income notwithstanding that there is separate head of income in the Income-tax Act, namely, income from house property. It is, therefore, submitted that the rental income where it is in the nature of business income keeping in view the activities of an assessee, should be considered as business income and not as income from house property. Similarly in case of developers no income should be assessed on the basis of notional annual value on the ground of ownership as the flats etc. are held by the builders/developers as stock-in-trade and not for the purpose of letting out and same are held only for the reason that they have not been able to sell the same. A distinction should be drawn whether the property is held as business asset or an investment. The basis and the criteria adopted in determining the nature of income earned in respect of shareholding, whether capital gain or business income, should equally be applicable for determining the nature of rental income for the purpose of taxability.
United Commercial Bank Ltd. v. Commissioner of Income Tax (`957) 32 ITR 688 (SC) and Western State Trading Co. Pvt. Ltd. v. Commissioner of Income Tax (1971) 80 ITR 21 (SC) and the dividend income has been allowed to be set off against brought forward loss arising in share deals. To the same effect have been number of other cases also.
With great pride, I must say that the above Conference organised by All India Federation of Tax Practitioners (AIFTP), (North Zone), and Income Tax Bar Association, Varanasi, at Hotel Clarks, Varanasi, on 10th and 11th October, 2015, for in-depth deliberations on tax laws was a unique success in as much as, it was inaugurated by the Chief Guest Hon’ble Justice Mr. R. K. Agarwal, Judge, Supreme Court of India and the Guest of Honour Hon’ble Mr. K. V. Chaudhary, Central Vigilance Commissioner, Government of India. Hon’ble Chief Guest at the inaugural address stressed the importance of taxes as the nation is governed/administered and developed on taxes only. At the same time, he stated that the structure and implementation of taxes is quite complex apart from its high incidence, and requires to be simplified for the benefit of the taxpayer, as was emphasised by great author and thinker ‘Chanakya’ in his ‘Arthashastra’, which advice is valid even today and we must follow it. Guest of Honour Mr. K. V. Chaudhary, Central Vigilance Commissioner, Government of India, informed the distinguished gathering, that huge unquantified black money is going out of the country in respect of which Government of India has no accounts. Therefore, according to him, it is necessary to make the law to arrest such outflow of huge money out of the economy of the country. In this respect, he made categorical statement that the citizens of this country who have stacked black money in various other countries must be proceeded with as per law, and monitored strictly by financial cyber crime agency of the nation.
The Conference Chairman Mr. Bharat Ji Agarwal, Sr. Advocate and Past President of the AIFTP also addressed the distinguished gathering on the importance of such conferences wherein continued study of tax laws and updating the knowledge takes place, which is of vital importance for the Bar, Bench as well as the Administration, who also takes part in such ‘Manthan’ and enrich themselves of the current developments that takes place in the field of direct and indirect taxes, which affects the fabric of the society as a whole.
In recognition of Mr. Bharat Ji Agarwal’s contribution in the development of direct and indirect tax laws of the country as well as shouldering the responsibilities as Chairman/President of the various Bar Associations, the Conference awarded him the citation of ‘Lifetime Achievement Award’ which was presented to him by Mr. P. C. Joshi, Advocate and Past President of the AIFTP.
Thereafter, technical sessions of direct and indirect taxes took place in which eminent faculties / authorities on the subjects deliberated extensively on the assigned subjects.
The unique feature of the Conference was panel discussion, appropriately titled, ‘Mann Ki Baat’ with the Senior officials of the IT, ST, VAT, Company Law, Depts. and the Industries Leaders, who exchanged freely and frankly their difficulties in resolving the grievances of the Trade and Industry, in mutual interests. This session of ‘Mann Ki Baat’ proved quite fruitful and at the end of the session, everybody participating in the session wore a very smiling face and reiterating that in future such sessions should be held regularly to resolve the difficulties of both i.e., the administration and taxpayers.
As usual the last session was of ‘Brain Trust’ in which Trustees answered queries received from the delegates to their satisfaction.
All in all, after undergoing hectic sessions of the Conference, the delegates visited the Temple of “Lord Kashi Vishwanath” for prayers and offered Ganga Pooja and Aarti, and then the delegates departed the venue of the Conference with great satisfaction.
Last but not the least, the leaders of AIFTP (NZ) and Income Tax Bar Association, Varanasi, deserves great appreciation for their hard work put in organising the above Conference.
A system of GST compliance rating could result in blacklisting of defaulting dealers. However, it is the buyer who will be denied input tax credit.
There is no centralised registration for Central GST and integrated GST.
Exporters will no longer be able to obtain non-duty paid inputs and will have to claim input credit / rebate at a later stage.
A partial refund will not be made upfront and automatically when a claim is filed; the entire refund will be made after due processing at one go, within the set time period.
Considering the above red-tape practices adopted at the initial stage of promoting GST, it is highly impossible to go for it. So, the trade and industry together with tax practitioners in general should be on alert whether they should advocate the GST still knowing that it will cause great hardships of no end to them.
The CBDT is always late when it comes to resolving the dues of income tax payers. The recent CBDT Notification No. 78/2015 dated 12-10-2015 is a testimony of its working. U/s 80DDB r/w amended Rule 11DD dated 12-10-2015, it had relaxed the condition of obtaining the certificate for claim of expenditure u/s. 80DDB in respect of specified ailments from a specialist doctors working in a Government hospital. Under the amended rule, it will not be mandatory to obtain a certificate from a specialist doctor working in a Govt. hospital but a certificate from a specialist treating the patient will suffice for the purpose of claiming deduction u/s. 80DDB r/w. Rule 11DD.
I-T GETS KUDOS FOR FASTER REFUND!
The Government has speeded up for tax refunds with some taxpayers getting them within a week of filing returns. But it appears that those who got it may be blessed by the Govt. Those who received reacted “Historic! I-T refund in less than a month of filing!” Jai Ho! tweeted Bhaskar Bhattacharya. Others such as Chartered Accountant Kamlesh Vikamsey and Krish tweeted accordingly (TOI dated. 24-8-2015). But we common persons will not receive refunds so fast. Thus, it appears that CPC is following pick and choose method for releasing refunds, one wonders! May we therefore appeal to CBDT to look into the matter?
One of the objects of the All India Federation of Tax Practitioners (the “Federation”) being “to strive and work for independence of Honourable Courts”, we at AIFTP welcome the Supreme Court judgment. The senior members of the Tax Bar were always of the opinion that the present system of the appointment of judges should be continued albeit with increased transparency.
The Tax Bar has witnessed how the Executive in the past has tried to interfere with the justice delivery system of the Income-tax Appellate Tribunal. It is only due to a Public Interest Litigation filed by the ITAT Bar Association, Mumbai, and with the strong support of the then President of the ITAT, Honourable Shri T. V. Rajagopala Rao, could the independence of the ITAT be saved by the higher Judiciary. It may be noted that the then Law Secretary was held guilty of contempt for interfering with the judicial functioning of the ITAT. [ITAT v. V. K. Agarwal (1999) 235 ITR 175(SC), Ajay Gandhi v. B. Singh (2004) 265 ITR 451 (SC)]. This scenario of developments must be kept in mind while welcoming the above Apex Court judgment.
One can only imagine if the Apex Court would not have interfered, then what could have been the fate of the Mother Tribunal of our country and the taxpayers. One would also appreciate that the then Honourable Prime Minster of India, Shri Atal Bihari Vajapyee, on 16-1-2004, on the occasion of the release of commemorative postage stamp in memory of late Shri N. A. Palkhivala at Mumbai, had stoutly deprecated the Emergency thus: “In those dark days, the battle for democracy was fought by many people in many different ways. Many of us in politics under the leadership of Jaiprakash Narayan fought it in prisons. But I have no doubt that one of the finest battles was fought in the Court rooms and that fighter was Nani Palkhivala”.
Judges could deliver verdicts such as that in Kesavanand Bharti’s case [AIR 1973 SC 1461] only because of their fierce independence. One would also appreciate that in taxation matters, the Government is always a party. If any High Court Judge decides a high-stake matter in favour of the assessee, the Government may brand him as a pro-assessee Judge thereby jeopardising his chances of being elevated to the Apex Court, if the NJAC was to continue. We are of the firm opinion that the Honourable Apex Court has rightly done its lawful duty by striking down the Act as unconstitutional. Having said that, we are also of the opinion that there is a lot of scope for improvement in the current process of selection of judges and we at AIFTP level shall contribute our mite in the process.
(i)	After looking at the performance of advocates in courts and after enquiring into their credentials, advocates may be selected by the collegium, and thereafter, he or she may be requested to forward an application in appropriate form.
(ii)	Applications maybe invited by the Registry of High Courts from advocates who are eligible to be appointed as Judges.
(iii)	Selection of Judges from the lower courts / judicial authorities such as the Income-tax Appellate Tribunal, CESTAT as well as Sales Tax Tribunals across the country may be considered.
(iv)	Importantly, contribution to the development of the profession made by the lawyer may be given additional weightage in the selection process.
4.	After scrutinising the applications, the names of shortlisted candidates may be circulated in the full court of the respective High Court or at least amongst its senior Judges and thereafter, the names of approved candidates be forwarded to the Supreme Court collegium.
5.	In the era of specialisation, persons who are well conversant with certain specialised areas of law such as taxation, PIL, RTI, IPR etc. deserve to be appointed. In the Income–tax Appellate Tribunal, for instance, certain Judicial Members deserve to be appointed as High Court Judges. As per the transfer procedure, a professional appearing before the Income-tax Appellate Tribunal is not posted as a Member in the same State where he was practicing. Therefore, the collegium of the High Court concerned may not have the mechanism to judge the credentials of the prospective candidates from the Income–tax Appellate Tribunal. Thus, the collegium of the High Court may, in consultation with the Income-Tax Appellate Tribunal, devise an appropriate internal mechanism for obtaining feedback about the proposed candidates. This will help attract deserving candidates of the Income–tax Appellate Tribunal to the High Court.

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