Month: August 2012

Archive for August, 2012


Vodafone Essar Gujarat Ltd vs. Dept of Income-tax (Gujarat High Court)

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DATE: August 31, 2012 (Date of publication)
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The Scheme cannot be said to have no purpose or object and that it is a mere device/subterfuge with the sole intention to evade taxes. While it is true that the Scheme may result into tax avoidance, it cannot be said that the only object of the Scheme is tax avoidance. In Vodafone International Holdings B.V 341 ITR 1 (SC) it was held that the Revenue cannot start with the question as to whether the impugned transaction is a tax deferment/saving device but that it should apply the “look at” test to ascertain its true legal nature. The corporate business purpose of a transaction is evidence of the fact that the impugned transaction is not undertaken as a colourable or artificial device. The stronger the evidence of a device, the stronger the corporate business purpose must exist to overcome the evidence of a device. Tax planning may be legitimate provided it is within the framework of law though a “colourable device” cannot be a part of tax planning. It cannot be said that all tax planning is illegal/illegitimate/impermissible. A similar scheme of arrangement involving demerger of passive infrastructure assets of the Company has been sanctioned by the Delhi High Court

Posted in All Judgements, High Court

CIT vs. Sureshchandra Durgaprasad Khatod (HUF) (Gujarat High Court)

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DATE: (Date of pronouncement)
DATE: August 30, 2012 (Date of publication)
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The question about applicability of Instruction No.3 of 2011 has been considered in several judgements including Smt. Vijaya V. Kavekar (Bom) and Ranka & Ranka (Kar) and the view is that Instruction No.3 of 2011 dated 9.2.2011 would also apply to pending appeals. We are in agreement with this view and so tax appeals filed by the department which are below the tax effect of Rs.10 lakhs are not maintainable

Posted in All Judgements, High Court

CIT vs. Jai Hind CHS Ltd (Bombay High Court)

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DATE: August 30, 2012 (Date of publication)
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In Mittal Court Premises Co-op Society 320 ITR 414 (Bom) it was held in the context of non-occupancy charges that the principle of mutuality would apply to a co-op society. The same principle applies to the TDR premium paid by a member to the Society of which he is a member as consideration for being permitted to make an additional utilization of FSI on the plot allotted by the Society. There is a complete mutuality between the Society and its members and the TDR premium is not chargeable to tax

Posted in All Judgements, High Court

CIT vs. Gujarat Flouro Chemicals (Supreme Court)

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DATE: (Date of pronouncement)
DATE: August 28, 2012 (Date of publication)
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We have serious doubts about the correctness of the judgement in Sandvik Asia. In our view, the judgement in Modi Industries Ltd correctly holds that advance Tax or TDS loses its identity as soon as it is adjusted against the liability created by the assessment order and becomes tax paid pursuant to the assessment order. If Advance Tax or TDS loses its identity and becomes tax paid on the passing of the Assessment Order, then, is the assessee not entitled to interest under the relevant provisions of the Act? We say no more. With respect, we are of the view that Sandvik Asia [supra] has not been correctly decided. In the circumstances, we direct the Registry to place this matter before
Hon’ble the Chief Justice on the administrative side for appropriate orders

Posted in All Judgements, Supreme Court

ACIT vs. ICICI Securities Primary Dealership Ltd (Supreme Court)

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DATE: August 28, 2012 (Date of publication)
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The assessee had disclosed full details in the Return of Income in the matter of its dealing in stocks and shares. According to the assessee, the loss incurred was a business loss, whereas, according to the Revenue, the loss incurred was a speculative loss. Rejection of the objections of the assessee to the re-opening of the assessment by the Assessing Officer vide his Order dated 23rd June, 2006, is clearly a change of opinion. In the circumstances, we are of the view that the order re-opening the assessment was not maintainable

Posted in All Judgements, Supreme Court

General Motors India Pvt. Ltd vs. DCIT (Gujarat High Court)

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DATE: (Date of pronouncement)
DATE: August 27, 2012 (Date of publication)
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Prior to the Finance Act No.2 of 1996 unabsorbed depreciation could be carry forward indefinitely. The Finance Act No.2 of 1996 restricted the period of carry forward & set-off of unabsorbed depreciation to 8 years from AY1997-98. Circular No.762 dated 18.2.1998 clarified that the brought forward depreciation for the earlier years would be added to the depreciation for AY 1997-98 and the period of 8 years would begin from AY 1997-98 onwards. S. 32 (2) was amended by Finance Act, 2001 w.e.f. AY 2002-03 to restore the position as it was prevailing prior to the Finance Act No. 2 of 1996 and the period of 8 years was done away with. In Circular No.14 of 2001, the CBDT clarified that the removal of the 8 year time period was “with a view to enable the industry to conserve sufficient funds to replace plant and machinery“. The effect of the amendment is that the unabsorbed depreciation available to an assessee on 1.4.2002 (AY 2002-03) has to be dealt with in accordance with the s. 32(2) as amended by the Finance Act, 2001 and not by s. 32(2) as it stood before the said amendment. Had the intention of the Legislature been to allow unabsorbed depreciation allowance worked out in AY 1997-98 only for eight subsequent assessment years even after the amendment of s. 32(2) by Finance Act, 2001 it would have incorporated a provision to that effect. However, it does not contain any such provision and so a purposive and harmonious interpretation has to be taken. Therefore, the unabsorbed depreciation pertaining to AY 1997-98 can be carried forward for set-off indefinitely

Posted in All Judgements, High Court

CIT vs. Smifs Securities Ltd (Supreme Court)

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DATE: (Date of pronouncement)
DATE: August 24, 2012 (Date of publication)
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Explanation 3 to s. 32 states that the expression “asset” shall mean an intangible asset, being know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature. The words “any other business or commercial rights of similar nature” in clause (b) of Explanation 3 indicates that goodwill would fall under the expression “any other business or commercial right of a similar nature. The principle of ejusdem generis would strictly apply while interpreting the said expression which finds place in Explanation 3(b). Consequently, “Goodwill” is an asset under Explanation 3(b) to s. 32(1) & eligible for depreciation. Though the AO held that the assessee had not “paid” anything for the goodwill, this cannot be accepted because (a) the CIT (A) & Tribunal (correctly) held that that the difference between the cost of an asset and the amount paid in the process of amalgamation constituted “goodwill” and (b) this aspect was not challenged by the department before the High Court

Posted in All Judgements, Supreme Court

Gujarat Power Corporation Ltd vs. ACIT (Gujarat High Court)

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DATE: August 24, 2012 (Date of publication)
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The assessee’s argument that as the Full Bench judgement in Kelivinator 256 ITR 1 (Del) (FB) was approved by the Supreme Court 320 ITR 561, the observations made by the Full Bench must be regarded as the ratio of the Supreme Court is not correct because the question before the Supreme Court was whether the concept of “change of opinion” stands obliterated with effect from 1.4.1989 or not. The Supreme Court did not hold that the tangible material must be that which did not form part of the original record of the assessment proceedings. The ratio of the decision of the Supreme Court is what the judgement lays down and not what the decisions of the High Court under challenge held. Further, it is doubtful whether even the Full Bench in Kelvinator meant to convey that a certain claim which has not been examined by the AO in the original assessment, cannot be a subject matter of reopening on the basis of material already on record. Now, the Delhi High Court has itself referred the matter for reconsideration to another Full Bench in Usha International

Posted in All Judgements, High Court

Inductotherm (India) Pvt. Ltd vs. DCIT (Gujarat High Court)

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DATE: (Date of pronouncement)
DATE: August 23, 2012 (Date of publication)
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Even in a case where only a s. 143(1) Intimation is passed, the power to reopen can be exercised only where there is “reason to believe that income has escaped assessment” and not merely to “scrutinize” the return or “verify” the expenditure. Further, even in case of reopening of an assessment which was previously accepted u/s 143(1) without scrutiny, the AO would have power to reopen the assessment, provided he had some tangible material on the basis of which he could form a reason to believe that income chargeable to tax had escaped assessment. Such reason to believe need not necessarily be a firm final decision of the AO. This safeguard is necessary to prevent arbitrary exercise of powers u/s 147 to circumvent the scrutiny proceedings which could not be framed in view of notice u/s 143(2) having become time barred. On facts, in respect of two issues, the AO reopened the assessment to verify the claims. For mere verification of the claim, power of reopening of assessment cannot be exercised. The AO in the guise of power to reopen an assessment cannot seek to undertake a fishing or roving inquiry and seek to verify the claims as if it were a scrutiny assessment

Posted in All Judgements, High Court

DIT vs. Balaji Shipping UK Ltd (Bombay High Court)

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DATE: (Date of pronouncement)
DATE: August 23, 2012 (Date of publication)
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There is no distinction in principle between a slot charter and a voyage charter of a part of a ship. They are both in a sense charterers of a space in a ship. The phrase “operation of ships” in Article 9 must be understood in the context of the phrase “the business of operation of ships” in s. 44B. As income from slot hire agreements falls within s. 44B it must be held to be within the ambit of Article 9(1). Article 9 does not require the ship to be owned by an the assessee. It merely requires the income to be “from the operation of ships in international traffic”. A charter is certainly contemplated by Article 9 and an enterprise that controls the management/operation of the ship would be included in Article 9 even if it does not own the ship (KLM Royal Dutch Airlines 178 Taxman 291 (Del) followed)

Posted in All Judgements, High Court