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THE CHAMBER OF TAX CONSULTANTS

3, Rewa Chambers, Ground Floor, 31, New Marine Lines, Mumbai - 400 020

Tel.: 2200 1787 / 2209 0423 Fax: 2200 2455 E-mail: citcindia@vsnl.net

Visit us at: Website: http://www.ctconline.org

Study Group Meeting held on – 28th June, 2013

- CA Dinesh R. Shah

Recent case laws for 28/6/2013

The Recent Direct Case laws.

28/6/2013. A. Section 1 to 14A.

(1) Agricultural Land: Capital Gains.

CIT V/s. Smt. Rani Taradevi

(2013) 214 Taxman 321

Se.2(14) of I.T Act 1961 Capital Assets (Agricultural Land)

A.Y. 2004-05. whether where acquired land was situated between developed

Sector of Panchkala on one side and on other side it was only one Kilometers

away from District Head Quarter it was to be regarded as Capital asset within

meaning of Se.2(14) and the amount of compensation received by assessee an

acquisition of said land was liable to tax held ‘YES’,.

(2) Section 14A an d Rule 8D (11A No 7851-M/2011 dt.13.3.2013).

J.K. Investors (Bombay) Ltd V/s ACIT (OSD) Circle 2 (2) Act 14A read with rule

8D can not be invoked without showing, pointing out that assessee’s claim is

wrong.

(3) Gift to HUF by MR IAV on 23-4-2004 to his nephew (i.e. Son of his elders

brothers HUF.

Harshadrai D Vaidya HUF V/s ITO Mehsana.

ITA C. Bench Ahmedabad. ITA No 1527/ Ahd/2010 A.Y.2005-06.

Date of order. 26/4/2013.

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We therefore hold that since the assessee HUF has undisputedly received a gift

of Rs.7 lacs from a relative. Who is an uncle of the Karta of this HUF i.e. as per

Explanation to Sub- clause (iv) brother or Sister of either of the parents of the

Individual “ hence fall within the Category of the “Relative prescribed in the Act.

Therefore not chargeable to tax in the hands of the assessee. Thus the grounds

raised are hereby allowed.

(4) Exemption u/s 10A. Conversion of proprietorship firm into the partnership.

CIT V/s. Bullet International (2013) 85 DTR (All H.C) 357 (72)

A.Y. 2004-05. Exemption u/s 10A allowability: Conversion of proprietorship

concern into partnership will not entail disallowance of exemption u/s 10A. As per

CBDT Circular No 7 of 2003 dt. 5-9-2003 benefit u/s 10A is attached to

undertaking and not to owner thereof Further sub Section (9) and (9A) of Se.10A

have been omitted by the Finance Act 2003 w.e.f. 1/4/2004.

(5) Disallowance under Se.14A Shares held in Stock-in-trade.

Dy CIT V/s. Gulshan Investment Co. Ltd.

(2013) 86 DTR (Kol) Tribunal 262.

Se.14A is applicable whether the shares are held as Stock-in-trade or as

Investment, where shares are held as Stock-in-trade rule 8D (2) (ii) and (iii) has

no application but rule 8D (2) (1) is applicable and the disallowance under Se.14A

read with rule 8D is restricted to the expenditure directly relatable to earning of

dividend Income.

(B) Income from House Property.

(6) Section 22:- Notional Income in respect of Property:-

Bhawanji Kuverji Haria V/s. ACIT (ITAT Mumbai)

Reported in Bombay Chartered Accountant Journal June 2013 Page (308) (2013)

Notional Income in respect of property belonging to the assessee; but used by the

firm in which the assessee is a partner is not chargeable to tax under the head

Income from House Property. The Tribunal deleted the Addition made by the A.O.

(7) ITO V./s Bajaj Bhavan Owners Premises C.S.L ITAT Mumbai B. Bench,.

(Reported in BCAJ June 2013 Page 308- 2013.

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Rental Receipts for letting out of terrace for erecting of antenna are chargeable to

tax under the head “Income from house property subject to deductions u/s 24.

(8) Deemed Ownership property given on Leave and Licence Basis.

CIT V/s. Pelican Investments (P) Ltd.

(2013) 353 ITR 16 Bombay (H.C)

Effect of Insertion of Section 27 (iiib) w.e.f. 1/4/1988 and Se. 269 UA (f) w.e.f.

1/10/1986. Agreement for Licence of shopping arcade for Eleven years in

No.1987. Second Agreement for similar Licence for the year in January 1999

Duration of two agreements could not be combined- License could not be owner of

shopping Arcade .I.T Act 1961 Se.27(iiib) Section 269 UA (f)

(C ) Income From Business

9 Profits and Gains of business or Profession. Se.28 to 44DB.

Disallowance ui/s 40 A(2) Directors Remuneration.

Hive Communication (P) Ltd. V/s. CIT (2013) 353 ITR 200 Delhi H.C.

Disallowance on ground that Payment to one director.

Excessive and unreasonable compared with payments to other directors- Job

profile of directors different. No disallowance could be made I.T Act 1961 Se 40A

(2).

10. Rejection of books of Accounts.

CIT V/s Superior Crafts (2013) 353 ITR 101 (Delhi H.C)

Failure to maintain Stock Register- Not a ground for rejection of accounts.

Special Auditor not recommending rejection of account- Rejection of account not

justified I.T Act 1961 Se.145.

11. Waiver of Loan for purpose of relocation of Business u/s 41 (1).

CIT V/s. Software Computers (P) Ltd. (2013) 354 ITR 16 (Bombay H.C).

The amount was advanced as a loan to the assessee was for the purpose of

relocating its office premises the loan taken was utilized for the that purpose.

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Hence the loan was taken for acquisition of Capital asset and not for the purpose

of trading activity. It was a Capital receipt.

12. Business Expenditure disallowance Excess or unreasonable Payment.

Se.40 (a) (2) (b) (1) CIT V/s. Shivkumar (2013) 354 ITR 19 (Delhi H.C)

Whether a particular Expenditure or Interaction Loan was excessive and

unreasonable- question of fact- Concurrent finding that no disallowance can be

made on ground of Excess or unreasonable payment finding of facts.

13. Excess Payment of Interest against the prescribe law/ Rate- Muthoot Finance

Corpt. V/s. CIT

(2013) 87 DTR (kerala H.C) 212 (98)

Interest on deposits in excess of the rate of prescribed under Kerala Money

Lenders Act. Interest on deposits in excess of the rate prescribed under Kerala

Money lender Act is not entitled to deduction in view of Explanation to Se.37 (1)

of I.T Act 1961.

14. Disallowance u/s 40 (a) (ia)

CIT V/s. Sikandarkhan N. Tanvar & Others.

(2013) 87 DTR 137 Gujarat H.C (issue 96)

Amount paid vis-à-vis payable u/s 40 (a) (ia) Covers not only the amounts which

are payable as on 31st March of Particular year but also which were payable at

any time during the year.

15. Se.40 (a) (ia) Amount not deductible Special Bench Verdict in Merilyn Shipping is

not good law.

CIT V/s. Crescent Export Syndicate GA 190 2013 ITAT 20 of 2013 dt.

28/03/2013. Calcutta High Court) Source ITAT Online.org.)

16. Se.43B deduction on actual Payment employees Contribution. Employee’s

contribution. ITO V/s LKP Securities ITA No 638/Mum/2012/ dt. 17/5/2013. a.Y.

2008-09 ITAT (Mumbai)

Se. 2 (24( (X) 36 (1) (va) 37 (1).Se.43B covers only the sums payable by way of

contribution by the assessee as an employer i.e. the employers contribution to

the PF & ESI funds. It does not cover the employees contribution. While the

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employers contribution is allowable u/s 37 (1). The employee’s contribution

collected by the employers is deemed to be his Income u/s 2 (24) (X) and is

allowable as a deduction u/s 36 (1) (va) only if it is paid to the relevant fund by the

due date as prescribed in the relevant legislation. Even if one assumes that

S. 43B (b) applies to Se.36 (1) (va) payments a deduction would not be

admissible because the Se.36 (1) (va) payments are not otherwise allowable. If

they are paid beyond the due date. Thus deductible of employees contribution

has to be seen only with reference to S.36 (1) (va)

17. Se.43B Certain deduction to be allowed on actual payment- P.F Payments.

Asst. CIT V/s UPS Jetair Express (P) Ltd (2013) Taxmann.com 108.

Where assessee made payment to P.F Employees State Insurance Corp. before

closure of financial year or within due date for filing return as provided same

could not be disallowed by invoking provisions of Se.43B.

18. In case of CIT V/s. M/s. Kichhu Sugar Company Ltd.

Appeal No 50 of 2009 High Court of Uttarakhand at Nainital.

Date of order. 20/5/2013.

The Due date referred to in Section 36 (1) (va) of the Act must be read in

conjunction with Section 43B (b) of the Act and reading fo the same would make

it amply clear that the due date as mentioned in Se.36(1) (va), is the due date as

mentioned in Se.43B(b) i.e. Payment/ Contribution made to the P.F Authority any

time before the return for the year in which the liability to pay accrued along with

evidence to establish payment thereof. The A.O proceeded on the basis that

“due date” as mentioned in Section 36 (1)(va) of the Act, is the due date fixed by

the P.F authority. Whereas in the matter of calling out the meaning of the word,

“due date” as mentioned in the said section. The A.O was required to take note

of Section 43B(b) of the Act and not taking note of the provisions contained

therein committed gross error, which having been rectified by the Appellate.

Authority and confirmed by the Tribunal there is no Scope of Interference.

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19. Speculative Transactions.

Aakash Chand Jain V/s. Dy. CIT

(2013) 142 ITD 441 (issue No 5) Jaipur Bench.

Where assessee carried out Jobbing transactions in regular course of his

business, as a member of MCX Loss suffered in said transactions would fall

under Sub-Section (c ) of Section 43 (5). Which is eligible for set off against

business Income of the relevant year.

20. Commission Payment.

Fashion Suiting (P) Ltd. V/s Joint CIT

(2013) 86 DTR (Jaipur Tribunal)

CIT (A) having categorically accepted that assessee has paid Commission to

various agents in respect of Sales made by them at various depots located in

various cities and that the confirmation of all these agents have filed with their

PAN the disallowance of commission payments made by the A.O for want of

relevant details of the recipients can not be sustained (various cases discussed)

21. Disallowance: Section 43B.

Euro RSCG Advertising (P) ltd. V/s. Ass.CIT

85 DTR Mumbai Tribunal 272.

Amount of Service tax : Disallowed by A.O on the ground that liability has not

crystallized during the year, as there was no formal written order,. Not justified.

For claim u/s 43B:- The Year of payment is relevant.

22. Firm disallowance u/s 40 (b) salary to partner:- Book Profit Suresh A. Shroff &

Co,. V/s. Joint CIT.

(2013) 85 DTR (Mumbai) Tribunal 446 (75 issue)

Book profit for the purposes of Se.40 (b) (v) Explanation 3 means the net profit

as shown in Profit and Loss A/c. Including Income from Other sources and not

only the Profit computed under the heads profits and gains of business on

profession.

23. Section 40A (3) read with Section 145

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ITO V/s. Nardev Kumar Gupta.

(2013) 142 ITD 303 Jaipur Bench of ITAT.

Business disallowance- Cash payment exceeding prescribed limit (Application of

provision) A.Y. 2009-10. Whether when Incomes is assessed by estimating profit

after rejection of books of account under Section 145 (3) then no disallowance

can be made separately under Section 40A (3) Held YES.

24. Se.43(5). Speculative transaction Hedging loss. Not a “Speculative Loss”

The assessee, an Exporter, entered into forward contract with Banks to hedge

against any loss arising out of fluctuation in foreign currency:- Treated as

business Loss.

CIT V/s. Friends and Friends Shipping (P) Ltd.

Tax Appeal No 251 of 2010 Gujarat H.C itatonline.org)

25. Se. 37 (1) Business Expenditure. Illegal payments end use of payment.

CIT V/s. Rajarani Exports (P) Ltd. ITYAT No 49 of 2013 (Calcutta H.C)

[Source ITAT ion line.Org]

The assessee Exported tea to Iraq under the oil for Food programme. It paid

Commission to a Jordian company. This Company was front company for the

Iraqi Regime. Meant to receive illegal kickback and did not render any services.

It was held that the purpose is for bonafide business purposes the fact that they

end up being used as illegal kickbacks will not attract explanation to Section 37

(1).

(26) Business setting up and commencement of Business.

(2013) 87 DTR (Delhi HC) 249

When the assessee was in a position to apply for the tender borrowed money for

interest albeit from its holding company and deposited the same with NGEF Ltd.

on the same day, it shows that the assessee’s business had been set-up and it

was ready to commence business; assessee was therefore entitled to carry

forward loss after setting off interest received against interest paid.

26. Section 32 (1) (II) Income tax Rule 1962. Appendix I Part A item 111(3) (viii) (c )

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Dy CIT V/s. UAL Industries Ltd.

(2013) 87 DTR (Kol) T.M) (Tribunal) 247

Fly ash handling System Installed by the assessee is eligible to be treated as

“AIR Pollution Control Equipment’ for the purpose of granting depreciation at 100

percent.

28. Capital or Revenue Expenditure.

Dy CIT V/s. Mclcod Russel India Ltd.

(2013) 24 ITR (Tribunal) 262 (Kolkata)

Expenditure on upgrading computer hardware and Software are Revenue

Expenditure.

29. Business Expenditure: Bad Debts.

CIT V/s. Small Industries Development Bank of India.

(2013) 85 DTR (Bombay H.C) 436 (issue No 75)

Bad debts written of by the assessee being monies lent in the ordinary course of

its business, same are allowable as deduction under Se. 36 (1) (Vii) subject to

satisfaction of Se. 36 (2) (1) even though such debts had arisen from assessee’s

business activities in the years in which it was not taxable by virtue of operation of

Se.50 of SIDBI Act 1989. .

30. Miltons Pruivate Ltd V/s. CIT 6.

ITA No 3019 / Mum/2012 A.Y. 2007– 08. B. Bench. Date of order 22/5/2013

following the Gujarat High Court decision in general Motors India (P) Ltd. u/s Dy

CIT.

Para 7:-

We have carefully considered the rival submissions and pursued the record, In

the light of the decision of Hon’able Gujarat High court [Which in turn was

followed by the ITAT Mumbai Bench]. We are of the considered opinion that the

assessee is entitled to set off of unabsorbed depreciation pertaining to A.Y. 1995-

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96 onwards. (i.e. It will be deemed to be depreciation of the current year and can

be set off against business Income- and Income from other Sources of Income

and/ or can be allowed to be carried forward.

(D) Capital Gains.

31. Long Term Capital or Short term Capital Gain

Asst.CIT V/s. V. Ram Mohan (2013) 24 ITR (Tribunal) 50 (Chennai Tribunal.)

Agreement for Development of property- Assessee is entitled to 42.50 percent

of built up area- Income from sale of land to Extent of 57.50 percent shares arises

in financial year in which agreement executed. Gains from Sale of land to be

assessed as long term Capital Gains and profit from Super Structure to be

assessed as Short term Capital gains.

32. Transfer under Section 2 (47) (v) of I.T Act 1961 read with Se.53A of transfer of

Property Act.

Mrs. Durdana Khatoon V/s. Asst.CIT.

(2013) 24 ITR (Tribunal) 55 Hyderabad.

Capital Gain- Transfer- Year in which transfer takes place. Law Applicable-

Insertion of clauses (v) and (vi) in section 2 (47) w.e.f 1/4/1988. PART

Performance:- Agreement with Developer and handing over possession for

construction- Transfer complete Capital Gains- Assessable- com0pletion of

transfer of Property under ‘general law not required to attract Se.2(47) (v) &

Se.45.

33. Section 50C and Section 47 of I.T Act 1961

Dy CIT V/s. S. Venkat Reddy (2013) 57 SOT 117 Hydrabad ITAT.

Stamp value on the date of agreement to be reckoned for computing Capital

gains if registration is delayed bonafidely.

34. Section 50C:-

Asst.CIT V/s. MIL Industries Ltd.

(2014) 142 ITD 428 Chennai Tribunal.

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Assessee sold a part of land of its factory property for a consideration of Rs.2,.22

Crores Stamp duty valuation. Rs.3.95.

A.O referred matter to DVO his valuation was Rs.3.54 Crores (but same was not

available while finalizing the Assessment order. The A.O took Stamp duty

valuation Rs.3.95 Crores. The Tribunal held however considering fact that there

were difference in valuation made by assessee’s banker (who value the property

1.21 Crores] Stamp duty valuation authority and D.V.O. Consideration was to be

fixed at Rs.2.50 Crores Held ‘YES’.

35. Capital Gains Chargeable as Business Income V/s. Capital Gains.

A.Y. 2007-08. Se.45 & Section 28 (1) of I.T Act 1961.

CIT V/s. Arvind Jain (2013) 214 Taxman 260

Assessee engaged in Sale and purchase of shares maintained two separate

portfolios as Investment Portfolios and a trading Port folio during relevant A.Y.

assessee declared certain Income arising from sale of shares under Capital

gains. A.O treated as business Income. The Tribunal set aside order holding

that short term Capital Gains and long term Capital Gains were out of Investment

A/c and were not related to trading Account of assessee the Tribunal order was

confirmed. Circular No 4/2007 dated 15/6/2007 relied upon.

36. Section 50C read Se.2(47)

Bagri Impex (P) Ltd V/s Asst. CIT.

(2013) 214 Taxman 305 Calcutta H.C.

Registration in subsequent year (A.Y. 2006-07) whether transfer of land or

building or both shall be deemed to have taken place only after stamp duty has

been assessed by stamp duty valuation authority Held YES. Whether where

deed of conveyance got registered in year subsequent to year in which

consideration was received applying Se.50C valued assessed by Stamp

Valuation authority in such subsequent year should be taken as fall value

consideration Held YES.

37. Section 45 (4) read with Se. 2 (47)

ITO V/s Fine Developers (2013) 55 SOT 122 (Mumbai)

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Income of firm/ Partner- a.Y. 2008-09. Assessee firm was engaged in business

of builders and Developers. It admitted a new partner A.O found that assessee

owned a plot of land 50 percent of which was transferred in favour of new

partner- He thus opinion that assessee firm was liable to Section 45 (4) (the land

was held as stock-in-trade) there was not extinguishment of right as envisaged by

section 2 (47) in case of assessee- firm Held YES.

38. Capital Gain Chargeable as distribution of assets of firm on dissolution).

Bharat Ginning and pressing Factory V/s. ITO

(2013) 32 TAXMANN.COM 332 Ahmedabad Tribunal.

Where there was a family settlement an d there was a retirement as well as

induction of new partner and assets of Partnership transferred to retiring partner

same would amount to transfer of capital assets in nature of Capital gain

chargeable to tax u/s 45 (4) A.Y. 1999-2000.

39. Capital Gains Long Term Capital Gains:- Genuiness of Share transactions:-

CIT V/s. Arunkumar Agarwal HUF

(2014) 85 DTR (Jharkhand H.C) 219 (issue No 68)

Assessee having purchased shares prior to the steep rise in their value as also

prior to enquiry by SEBI finding the transaction of some of the brokers suspicious.

A.O was justified in denying benefit of long term Capital Gain holding the

transactions as bogus only on the basis of SEBI’s opinion without any further

enquiry.

40. Addln CIT V/s. Delhi Apartments (P) Ltd.

Income Accrual of Income. No transfer of possession during the previous year

(A.Y. 2006-07) but only receipt of advance:-

(2013) ITR Tribunal 217 Delhi.

Capital gains transfer of Asset: Date of transfer No agreement signed or

possession delivered in relevant year (A.Y. 2006-07) gain can not be taxed in

A.Y. 2006-07.

41. Surrender of tenancy right: Se. 2 (47) 45 & 56

Vinod V. Chhapia V/s ITO 21 (2) (3) 56 SOT Page 465

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Capital Gains transfer (Surrender of tenancy rights) A.Y. 2006-07.

New tenant made payment to old tenant as well as assessee (the land lord). The

assessee claimed said amount to be capital receipt and claimed exemption u/s

54EC by investigating it in NABARD Bonds. Whether consent given by assessee

landlord for transfer of tenancy right would results in transfer of any capital asset

held No. Whether amount received was taxable as Income from other source and

not as capital gain. Held ‘YES’.

42. Capital Gains Exemption Under Section 54F.

Time limit for deposit under the Scheme:-

CIT V/s. Jagtar Singh Chawla.

(2013) 87 DTR (P& H) 217. (issue No 99)

Exemption under Section 54F. Time limit for deposit under the Scheme-vis-avis

purchase of new house. Assessee has proved the payment of substantial

amount of sale consideration for purchase of a residential property on or before

31st March 2008, that is within extended period of limitation of filing of return-

only a sum of Rs.24 lacs was paid out of total sale consideration of Rs. two

Crores on 23rd April 2008, though possession was delivered to the assessee on

execution of the power of attorney on 30th March 2008. Since the assessee has

acquired a residential house before the end of the next financial year in which

sale has taken place therefore, the assessee is not liable to pay any capital gain.

43 Capital Asset- Agricultural land.

Syed Nawab Hussain V/s. Asst. CIT

(2013) 24 ITR (Tribunal) 180 Hydrabad.

Land in question was clearly situated within 8 K.M. from local limits of Hydrabad

Municipal Corp. which was notified area- Land can not be treated as agricultural

land I.T Act 1961 Se.2 (24) (iii) (a).

44. Agreement to relinquish rights acquired by M.O.U is Capital Assets liable to

Capital Gain.

SSPDL Ltd. V/s. Dy CIT

(2013) 24 ITR (Tribunal) 290 Hydrabad.

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Property Includes dominum or right to ownership.

Assessee entering into Memorandum of understanding for purchase of land-

Intention of assessee to construct building for setting up corporate office.

Agreement to relinquish rights acquired by agreement Right over Capital asset

being part and parcel of business undertaking of assesse- Not stock in trade-

Transfer includes relinquishment of right in Capital asset- Income accruing to

assessee out of relinquishment of right chargeable as capital gains not business

Income I.T Act Se.2 (14), (47) 28,45,48.

(E) Additions Under Section 68.69.69A. 69B. 69C.

45. Cash Credit trade advances against sale received.

Crystal Networks (P) Ltd. V/s. CIT

(2013) 353 ITR 171 (Calcutta H.C)

Finding by CIT (A) that advances were genuine Tribunal setting aside decision

without proper reason- Tribunal’s finding g perverse- Addition of advances could

not be made under Section 68 I.T Act 1961.

Effect of decision of (SC) in Udhavdas Kewalram V/s CIT

(1967) 66 ITR 462 (SC) followed.

46. Undisclosed Investment (Bogus Purchases) A.Y. 2005-06

ITO V/s. Navjivan Synthetics.

(2013) 142 ITD 96 Ahmedabad Tribunal.

Assessee had claimed to have made cash purchases from a party. However

cash (Sales) on account of said purchases were not reflected in account of said

party (the seller) but assessee had shown all purchase bills and delivery challans

and weighting slip. Whether merely said party did not produce all sales bills any

addition on account of Bogus purchases should not have been made in

assessee’s hand held ‘YES’.

47. Income from undisclosed Source.

Bhairavnath Agro Fin (P) ltd. V./s. CIT

(2013) 85 DTR Rajsthan 403 (74)

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assessee having failed to produce acceptable evidence as to agricultural-

Income and to prove from reliable evidence as to deposits in bank and

Investment in shares were sustainable.

48. Bogus Purchases.

M/s. Jitendra Harshad Kumar Textiles (P) Ltd. V/s. ITO WARD 4 (2) (3)

ITA No 77/Mum/2011- A.Y. 2007-08 dated 21-11-2-12.

When purchases are physically effected, the assessee has not received money

back, supported by delivery Note. Transport Receipt. The affidavit from the

Supplier supplying goods the purchases price paid by Cross order Cheques.

The Supplier retracted the statement. In such Circumstances the additions were

made on assumption and is to be deleted completely.

(F) Business Deduction/ Chapter VIA deductions.

49 Housing Project: Special deduction.

Income tax Officer V/s Keval Construction.

(2013) 354 ITR 13 Gujarat H.C

Ownership of a property not a mandatory condition, transportation charges

disallowed on ground tax not deducted at source- disallowance would not

disqualify deduction i.e. Even if a certain Expenditure which was incurred by the

assessee for the purpose of a developing housing project was not allowable by

virtue of Se.40 (a) (ia) since the assessee had not deducted the tax at source as

required under law, it could not be denied that such disallowance would

ultimately go to increase the assessee’s profit from the business of developing

housing profit whatever be the ultimate profit of the assessee as computed even

after making disallowance u/s 40 (a) (ia) would qualify for deduction as provided

under the law.

50 Housing Project : Special deduction.

CIT V/s Raghvendra Constructions (2013) 354 ITR 194 (Karnataka H.C)

Specification of area of Residential unit- Meaning of built up area- Inner

measurement of residential unit at floor level to be taken into consideration.

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Common areas like balconies even if share with one other person to be

excluded.

51. Housing Project.

Manan Corp. V/s Asst. CIT (2013) 214 Taxman 373.

Housing Projects A.Y. 2006-07. Whether amendment in provisions of Sectuion

801B (10) (d) having been made effective from 1st April 2005 is prospective in

nature for the purpose of deduction u/s 801B (10) CBDT Instruction No 4 of 2009

dt.30/6/2009.

52. Deduction under Se. 801B (10):- A.Y. 2003-04 & A.Y. 2004-05.

CIT V/s. Arun Excello Foundations (P) Ltd.

(2013) 86 DTR (Madras) 99 Se.801B (10)

Prior to amendment by the finance (No2) Act 2004 housing Project Contemplated

u/s 801B (10) refers construction of any building’ and can not be restricted to and

as referable to a housing project covering residential units only deduction u/s

801B (10) is allowable on a pro rata basis where both commercial and residential

houses have been built; requirement as regard Cl(i) would arise wherein, in a

given, where there is a residential unit, the same has to satisfy the maximum

built up area. Specified under Sub Cl (i) of Section 801B (10).

53. Housing Projects:- Special deductions Se.801B (10) and Se.40 (a) (ia) of I.T Act

1961.

Dy CIT V/s. Rameshbhai V. Prajapati

(2013) 23 ITR (Tribunal) 516 Ahmedabad.

Expenditure disallowed under Se. 40 (a) (ia) not to be included in profits eligible

for special deduction.

Disallowance u/s 40 (a) (ia) is due to the deeming fiction. Created by the penal

Se.40 (a) (ia) of the Act. The effect thereof can not be imported into a beneficial

provision such as Se.801B (10) of the Act while computing deducting u/s 801B

(10) of the Act. ( In short on such amount benefit of 801B (10) not available.

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54. Section 801B (10)

Ramsukh Properties V/s Dy. CIT (2013) 84 DTR 383 (Pune Tribunal)

Assessee is entitled to deduction in respect of completed flats if the entire project

could not be completed due to reasons beyond his control.

(G) Assessment Appeal

55. CIT V/s. Global Ventedge (P) Ltd.

(2013) 354 ITR 21 Delhi H.C

Fin ding of tribunal procedure Tribunal concurring with view of CIT (A) Tribunal

need not repeat reasoning of CIT (A)

56. Revision Condition precedent: Se. 263 of I.T Act 1961

Spectra Shares and Scrips (P)Ltd V/s CIT

(2013) 354 ITR 35 ((AP High Court)

Commissioner:- Powers of assessee an Investment company carrying on

business in shares for purposes of deriving dividend Income. A.O accepting

assessee as Investment company being with explanation and data submitted by

it and taxing Income under head ‘Capital Gains’ order of A.O not containing

reasons for accepting assessee an Investment company. Revision on ground

A.O did not make an elaborate discussion not justified.

57. Advance tax Interest Payable by assessee.

Sankhala Polymers (P) Ltd. V/s ITO (2013) 352 ITR 452 (Karnataka)

Company book Profits Law applicable. Effect of retrospective amendment to

section 115JB by Finance Act 2002. Impracticability of giving effect to amended

provisions for A.Y. 2002-03. Levy of Interest not justified Levy of Interest for

subsequent assessment years justified I.T Act 1961.

58. Special Audit u/s 142 (2A) is justified.

U.P State Industrial Development Corp. Ltd V/s. Chief CIT

(2013) 353 ITR 176 (Allahbad H.C)

Proceeding under Section 142 (2A) of the I.T Act 1961 are not strictly judicial

proceedings. The Satisfaction regarding complexity of the accounts is not

required to be arrived at by discussing the accounts in meticulous details.

17

Where the approving authority has considered the account books along with the

Auditors’ ’ Report and finds that there was a malafide intentions to avoid

verification of the books of Account and that there were various comments by the

auditors regarding gross neglect and misappropriation of the funds and order

under Se.142 (2A) would be justified.

59. Re-assessment Notice after four years:-

FAG Bearings India Ltd V/s Dy. CIT

(2013) 353 ITR 405 Gujarat H.C.

Failure to disclose material facts necessary for assessment claim for deduction

considered in Scrutiny assessment. No failure to disclose material facts

Advertisement that notice had been issued at behest of audit party not denied

Notice not valid. Se.1961 Se.148.

60. Revision under Section 263 of I.T Act 1961.

Bhartia Industries V/s CIT (2013) 353 ITR 486 (Cal) HC.

Revision Circulars Powers of Commissioner. Assessment order following judicial

decisions that expenditure on voluntary retirement scheme is deductible.

Circulars that such expenditure was not deductible revision to disallow

expenditure not valid.

61. Assessment Special Audit u/s 142 (2A) of I.T Act 1961.

(2013) 214 Taxman 130 Delhi Development authority V/s. Union of India.

Se. 142 (2A) of I.T Act 1961. Inquiry before assessment. Special Audit A.Y.

2003-04 to A.Y. 2009-10. the high Court held that it was apparent that A.O did

not call for examine or consider books of Account or even sample accounts

where before passing an order u/s 142 (2A). A.O should have examined books

of Account or relevant accounting entries himself before forming an opinion Held

YES.

Whether since inconsistencies Vague views and non application of mind was

apparent from reasons recorded impuged direction quashed.

62 Reassessment – Notice- Validity.

Bipinkumar P. Khandheria V/s Dy. CIT

18

(2013) 354 ITR 268 (Gujarat H,.C)

Notice on ground return filed before wrong Assessing Officer (i.e. prior to Search

the Regular assessing Officer]/ was non EST (invalid) transfer of case after

search not intimated to assessee- Return to erstwhile. Assessing Officer

accepted and tax paid- Revenue could not hold returns to be non est-notice. (for

reassessment) Invalid. I.T Act 1961 Se.148.

63. The Best Judgement Assessment.

Bhairvnath Agrofin (Pvt) Ltd V/s CIT

(2014) 354 ITR 276 (Rajsthan H.C)

Failure to avail of opportunities and failure to give reply to notice under section

142 (1).

Additional Evidence filed not genuine- Agricultural Income- Evaluation of

evidence on basis of human probability and surrounding circumstances- deposit

of cash in bank account- assessee not discharging onus- best judgement

assessment justified. I T Act 1961 Se.144.

64. Cash Credits:- Section 68 of I.T Act 1961.

Mod Creations (P) Ltd V/s. Income tax Officer.

(2013) 354 ITR 282 (Delhi H.C)

Presumption that represent Income of assessee- Rebuttable Initial burden is on

assessee burden shifts as soon as assessee establishes authenticity of

transactions. Assessee need not prove either genuiness of transactions

executed between creditors and sub-creditors or credit worthiness of sub-

creditors. Assessee discharging initial onus. Revenue to prove that credit were

circular route adopted by assessee to plough back its own undisclosed Income

into accounts.

65. Appeal to High court. Competency of Appeal.

CIT V/s. Ranka and Ranka (2013) 352 ITR 121 Karnataka (issue No 2)

Effect of Section 268A- Monetary limits- Instruction No 3 of 2011 raising

monetary limits- Scope of National Litigation Policy 2011. Instruction No 3 of

19

2011 applicable to pending proceedings CBDT Instruction No 3 of 2011 dated

February 3,2011.

66. Court on its own Motion V/s CIT

(2013) 352 ITR 273 Delhi H.C.

Return of Income- Intimation- deduction of tax at source. Credit for Refunds0

adjustment of refund- Central processing Center- Hardships faced by assessee

owing to faulty processing of returns and uploading of details of tax deducted at

source. High Court- directions given to Department and CBDT- I.T Act 961. SS

143 (1) 154, 201, 203, 244A, 245.

67. Best Judgement Assessment:-

CIT V/s. Bake food Products (P) ltd.

(2013) (A,.P. High court) Page 429 (75)

Assessee having filed a defective return and failed to rectify the defects which

were pointed out by the A.O latter was bound to treat the return as invalid and to

take further proceedings on the footing that the assessee has failed to furnish the

return, assessing authority could not have proceeded to make ex-parte

assessment under Se.144 without a serving a notice under Section 139 (2) or

under Se.148 of I.T Act 1961.

(H) Search and Seizure.

68. Refund of Excess amount Seized:-

G.L. Jain V/s. CIT (2013) 352 ITR 339 (Delhi)

Refund of Excess amount seized: Interest on refund period for which interest

payable. Refund as a result of appellate order, Interest payable from date of

original assessment order. Adjustment of tax liability of brother of assessee not

justified. Assessee entitled to Inteest for amount Seized. I.T Act 1961. 132 B (3)

69. Search and Seizure Block Assessment : Undisclosed Income.

Bhanu Vijay Singh M. Vaghela (Decd) V/s ITO

(2013) 353 ITR 146 (Gujarat H.C)

Simultaneous Search in premises of assessee and third person. Amount

mentioned in paper discovered having signatures of assessee and third person-

20

third person admitting that amount represented repayment of loan by him to

assessee. Addition of amount to Income of assessee justified.

70. Search and Seizure. Assessment in Search cases.

Asst. CIT V/s. Pratibha Industries Ltd.

(2013) 23 ITR Page 766 (Mumbai) Part (6)

Assessment in Search cases. A.O bound to issue Notice Jurisdiction to issue

notice not affected by fact that no incriminating material found. Abatement of

pending proceedings . Assessment which have become final addition restricted

to in criminating material found in search. Where no incriminating material found

and no proceeding pending, assessment to be at Income originally assessed I.T

Act 1961 Se.153A.

71. 153A Returns V/s Regular return filed under Section 139

Dy CIT V/s Purti Sakhar Karkhana

(2013) 23 ITR Tribunal 667 (5)

Search and Seizure special procedure for assessment complete code penalty.

Concealment of Income or furnishing inaccurate particulars of Income. To be

determined with reference to be determined with reference to return filed in

response to section 153A not to return filed under Section 139.

No material recovered during Search. Showing Concealment of Income. Nil

return filed in response to notice under Section 153 A. Showing reduced Capital

work in progress Returns accepted and no demand created penalty not leaviable

I.T Act 1961 Se. 153A, 271 (1) ( c ).

Interpretation of taxing Statutes Deeming fiction- to be construed strictly. .

(I) Others. T.D.S Provisions.

72. Collection and Recovery of tax: other modes of recovery society of Franciscan

(Hospitaller) Sisters V/s. Dy. Director of Income tax (Exemption) (Bombay High

Court decisions)

Where applications for stay of demand- itself were yet to be heard action under

section 226 (3) attaching bank account for realization of demand virtually keeping

21

no funds to carry on trusts day to day welfare activities was arbitrary and high

handed.

Reported in The Chartered Accountant Journal month June 2013 Page No

(1840)

73. Applicability of TDS Provision In case of Individual and/ or HUF.

Harshadbhai N. Bagadia V/s. Asst. CIT

(2013) 86 DTR (Gujarat H.C) 89 (78)

In the financial year immediately preceding the financial year in which the

payment was made the assessee’s sale did not exceeds the limits provided in

Section 44AB and therefore there was no need for audit and consequent TDS

under Se.194C. A.O’s reason to believe that the Income chargeable to tax has

escaped assessment is without any foundation and lack validity.

74. Disallowance royalty/ TDS.

Sonic Biochem Extractions (P) Ltd. V/s ITO

Purchase of Software with hardware of computer claim for depreciation- No

purchase of copy right- does not involve. Commercial exploitation thereof No

intangible asset involved purchase of asset and claim to depreciation- not

covered under section 40 (a) (ia) for disallow I.T Act Se.9(1) (vi) Explanation 2

Section 40 (a) (ia).

75. A.Y. 2005-06

BMS Projects (P) Ltd. V/s. Dy. CIT

(2013)85 DTR (Ahd) Tribunal 393 (73)

Payment to sub contractors disallowed on the ground that though TDS was

deducted it was belately deposited, not justified. TDS in respect of the said

payments had actually been paid on 24th may 2005 i.e. before due date of filling

return i.e. before 31st October 2005) and same is allowable.

76 Income tax Officer V/s MGB Transport.

(2013) 23 ITR Tribunal 391 Kolkata ITAT (3)

22

Payments liable to tax deduction at source- Provisions applicable only on

amounts remaining payable at the end of financial year and not on amounts paid.

(paid during the year)

77 TDS Provisions: Disallowance u/s 194C (?)

Aristocon Engineers Co-op. Society Ltd. V/s Dy. CIT.

(2013) 24 ITR ( Tribunal) 42 (Kolkata)

Business Expenditure:- Disallowance Payments to Labour contractors Failure to

establish liability to disallowance under Section 30 (a) (ia)- Direction to Assessing

Officer and CIT (A) to delete disallowance I.T Act 1961. Se. 40 (a) (ia),.

78 CIT V/s. Silver Oak Laboratories (P) Ltd. Supreme Court. Un reported.

The assessee a manufacturer of Pharmaceutical products entered into

agreements with various manufactures who manufactured the said items

according to the specifications provided by the assessee.

The A.O held that the transaction between the assessee and the manufacture

and the manufacturer was in the nature of a works contract and fell within the

purview of Se.194C and that the assessee ought to have deducted TDS thereon.

The Tribunal held that the transaction was one of stale simplicitor and was not in

the nature of a work contract and that the assessee was not liable to deduct TDS

u/s 194C.

The Department’s appeal to the high court was dismissed by following Reebok

India 306 ITR 124 Del. On appeal by the department to the Supreme Court held

dismissing the SLP.

(It is clarified that the definition of the word “work” will not include manufacturing

or supplying a product according to the requirement or specification of a customer

by using material from a person other than such customer.

(J) Penalties.

79. Surrender of Income during Survey under Se,.133A.

No Returns of Income filed under Section 139 (1) but time under Section 139 (4)

was not expired.

Vasavi Shelters V/s ITO (2013) 141 ITD 590 Bangalore Tribunal.

23

The return of Income filed under Section 1488 (but within time available under

Section 139 (4),. The returned Income were accepted. Penalty u/s 271 (1) ( cO)

was dropped- deleted whether unless it is found that there is actually a

concealment or non disclosure of particulars of Income in return filed by the

assessee penalty can not be imposed Held YES.

Explanation 3 to Section 271 (1) ( c) is not applicable.

80. Penalty under Section 271 (1) ( c) of I.T Act 1961

CIT V/s Splendor Construction.

(20130 352 ITR 588 Delhi H.C (5)

Property held as Stock-in trade- Conversion of Stock-in-trade into Investment just

before sale of property to pay lower tax furnishing inaccurate particulars of

Income tax Levy of penalty justified.

81. Penalty Excess claim of depreciation.

CIT V/s. Somany Evergree Knits Ltd.

(2013) 352 ITR 592. Bombay H.C.

Wrong claim to loss as revenue. Expenditure- Mistake rectified during

assessment proceeding since time to file revised return expired. No dispute that

mistake bonafide- No penalty.

82 Penalty Audit:- Failure to get account in time.

CIT V/s U.P Rajya Sahkari Evam Bhoomi Vikas Bank Ltd.

(2014) 353 ITR 152 (All)

Books of Account delivered to auditors in time-

Delay on part of auditors Penalty could not be imposed u/s 271B of I.T Act 1961.

83. Concealment Penalty.

No penalty u/s 271 (1) (c ) for not offering Capital gain on Section 50C. Stamp

duty value.

CIT V/s. Madan Theatres Ltd. (Calcutta H.C) GA No 684 of 2013 ITAT No 62 of

2013 dated 14/5/2013 Source itatonlin.org].

84. Penalty u/s 271 (1) ( c): Assessment under Section 115JB.

24

Asst.CIT V./s SRE Infrastructure Finance Ltd.

(2015) 85 DTR Delhi Tribunal 361 (issue No 72)

Tribunal having restored the issue relating to disallowance and the high court

having admitted for adjudication the issue, raised in quantum appeals relating to

the additions made in terms of the provisions of Section 115JB /. Penalty u/s

271(1) ( c) in respect of disallowances additions can not be sustained if tax paid

on the Income assessed u/s 115JB.

85. Bogus Purchases: & Penalty u./s 271 (1) ( c).

CIT V/s. Mahavir Mirror Industries (P) Ltd.

(2014) 363 ITR 553 (Madras H.C)

Purchases shown in Accounts Bogus. Assessment on basis of estimate.

Assessee not proving genuiness of purchases levy of penalty valid.

86. Penalty u./s 271 (1) ( c)

Bennett Colleman and Co. Ltd. V/s. Asst. CIT

(2013) 24 ITR (Tribunal) 102 Mumbai

No Contrary material to prove that claiming not bonafide or bogus. No

concealment of Income. Penalty cannot be levied.

87. Penalty under Section 271AAA

Asst. CIT V/s. A.N. Annamalaisamy (HUF)

(2013) 87 DTR (Chennai Tribunal) 202

Assessee having offered the whole of undisclosed Income admitted by him at the

time of search in the revised return filed by him before the completion of

assessment and paid the tax thereon along with interest and explained that the

undisclosed Jewellery was acquired over a period of time. Penalty under

Section. 271 AAA was not leviable.

88. Penalty- Loan in Cash Exceeding specified limit.

CIT V/s. Sivkumar (2013) 354 ITR 9 (Madras H.C)

25

Firm- Partner- Loan to Partner by firm- Firm and Partner are not two different

entities finding that transaction was genuine- Penalty could not be imposed u/s

269SS & 271D of I.T Act 1961.

89 CapitalGains.

Asst. CIT V/s. G. Ramahrahmam.

(2013) 57 SOT 130 (Chennai) (2)

Se.48 read with Section 24 of the Incoem tax Act 1961.

Capital Gains. Computations of (deductions) A.Y. 2007-08. whether deduction

under Se.24(b) and computation of Capital gains under Section 48 are altogether

different provisions and none of them excludes operation of other Held YES.

Whether, therefore, an assessee can include Interest paid on housing loan for

computation under Section48. Even though said amount has already been

deduction under Section 24 (b) while computing Income from “House Property

Held ”YES”.

90. Search an d Seizure: Assessment under Section 153A.

Jail Steel (India) V/s. Assistant CIT. Rajsthan High Court.

(2013) 88 DTR Rajsthan 1 (106)

Scope of Section 153A vis-a vis new claim for deduction or allowance- In the

assessment under Se. 53A, it is not open to the assessee to seek deduction or

claim relief not claimed by it in the original assessment which already stand

completed before the date of initiation of the search or making requisition.

91. Commission vis-a vis payment to banks for providing credit Card facility.

Tata Tele Services Ltd V/s Dy. CIT (2013) 87 DTR (Bangalore A) 346.

Payments banks on account of utilization of credit card facilities would be in the

nature of bank charge and not in the nature of commission within the meanings of

194H.

92. TDS Provision.

Sub brokerage paid on Government Securities business to sub agent. Whether

Section 194H applicable (?)

26

ITO V/s. Mittal Investment & Co. ITA No 1951/Delhi/2012. Order dated

27/3/2013. Delhi Tribunal.

Reported in The Chambers Journal Volume 1 No 9 June 2013 issue Page No

108-109.

TDS Provision Se.194H of the I.T Act 1961. commission and brokerage etc.

Payment of Commission/ sub-brokerage made by assessee who is an agent of

Post office Scheme, PPF, R.B.I Bonds, Mutual Fund etc to the person whose

Services were taken for earning commission in relation to Securities falls outside

purview of provisions of Section 194H A.Y. 2008-09.