The issue of whether the lessor is entitled to claim depreciation in the case of a “sale and lease back” transaction as well as in a “finance lease” have been laid to rest by the judgements in ICDS 350 ITR 527 (SC), Kotak Mahindra Finance 317 ITR 236 (Bom) and Cosmo Films 338 ITR 266 (Del) where it was held that the lessor is eligible to claim depreciation. The judgements of the Special Bench in MidEast Portfolio Management 87 ITD 537 (Mum) (SB) and IndusInd Bank 135 ITD 165 (Mum) (SB) are impliedly overruled.
The penalty was levied by the department in a mechanical manner. The assessee would have filed the hard-copy of the quarterly statements but this is not accepted by the department. The computer has to generate a number for acknowledging receipt of such statements. The number is not generated till the computer tallies the PAN and the information available on AS-26. The late filing is caused by an administrative glitch. The delay occurs because the assessee-deductors are dependent on information of TDS and its deposit from the sub treasury of the Government and the filing of the e-return through the designated service provider of the Income-tax Department. The assessee-deductors have no technical competency to file the return by themselves without external aid. They are also not competent to do so by themselves as per rule 37B and “Filing of Return of Tax deducted at source” scheme 2003, which requires the submission of quarterly statement through NSDL or other approved agencies which are third parties and not under the control of the assessees. Penalty u/s 272(A)(2) cannot be levied in a routine manner. The late filing of TDS return cannot be said to be intentional or willful. It is only a technical or venial breach
On merits, the argument that the Explanation below s. 80-IA (13) provides for a levy of tax which was hitherto unknown is not acceptable. It cannot be said that the Legislature in introducing the explanation materially changed the exemption which existed till such explanation was introduced. The explanation was introduced for the “removal of doubts” and is declaratory in nature. By the Explanation, the Legislature has distinguished between cases of developing/ operating etc from a works contract. It cannot be disputed that there is an intrinsic difference between developing an infrastructure facility and executing a works contract. The Explanation merely aims to clarify that deduction u/s 80IA(4) is not available in case of execution of works contract. Such an interpretation is possible even on the basis of the existing provisions of s. 80IA (4) (Radhe Developers 341 ITR 403 (Guj) referred)
The action of attaching the assessee’s bank account u/s 226(3) during the pendency of a stay application and without giving it notice was arbitrary and high handed. The whole object of serving a notice on the assessee is to enable the assessee to have some recourse. While in a given case, it may not be feasible to serve a prior notice on the assessee if there is an apprehension that the monies would be spirited away, this was not a case of that type. In a situation such as the present where appeals filed by the assessee are pending before the CIT (A) and the assessee had sought an opportunity of being heard and filed applications for stay, there was no justification whatsoever to proceed hastily with the enforcement of the recovery of the demand without disposing of the application for stay
The argument that s. 194C does not apply in the absence of a written contractual agreement is not acceptable. Even a verbal contract is sufficient. As regards the judgement of the Special Bench in Merilyn Shipping 136 ITD 23 (SB) where the view was taken that s. 40(a)(ia) can apply only to the amounts remaining payable as at the end of the year and not to the amounts paid during the year, though the Andhra Pradesh High Court has granted “interim suspension” of the said judgement, the said stay/ suspension applies only to the parties to that proceeding and does not destroy the binding effect of the judgement of the Special Bench. There is a difference between “stay of operation” of an order and “quashing of an order”. While, in the case of a “quashing”, the order of the lower court ceases to exist, in the case of a “stay”, the order of the lower court continues to operate and have binding effect. Accordingly, the judgement of the Special Bench in Merilyn Shipping still holds ground and the TDS provisions will apply, for purposes of invocation of s. 40(a)(ia), only on the amounts remaining payable at the end of the year and not on the amounts paid (Shree Chamund Mopeds Ltd. vs. Church of South India Trust Association AIR 1992 SC 1439, 1444 & Pijush Kanti Chowdhury vs. State of West Bengal 2007 (3) CHN 178 followed)
The order of the Karnataka High Court in CIT vs. IBM India Pvt. Ltd cannot be read to mean that consideration of whether an assessee has made out a strong prima facie case for stay of enforcement of a demand is irrelevant. Nor is the law to the effect that absent a case of financial hardship, no stay on the recovery of a demand can be granted even though a strong prima facie case is made out. In considering whether a stay of demand should be granted, the Court is duty bound to consider not merely the issue of financial hardship if any, but also whether a strong prima facie raising a serious triable issue has been raised which would warrant a dispensation of deposit. That is a settled position in the jurisprudence of our revenue legislation. In CEAT Limited v. UOI 2010 (250) ELT 200 (Bom) it was held that “If the party has made out a strong prima facie case, that by itself would be a strong ground in the matter of exercise of discretion as calling on the party to deposit the amount which prima facie is not liable to deposit or which demand has no legs to stand upon, by itself would result in undue hardship of the party is called upon to deposit the amount.” Where a strong prima facie case has been made out, calling upon the assessee to deposit would itself occasion undue hardship. Where the issue has raised a strong prima face case which requires serious consideration as in the present case, a requirement of pre-deposit would itself be a matter of hardship. Also the manner in which the Revenue has sought to brush aside a binding decision of the Court in the case of the assessee on the issue of a stay on enforcement for the previous year has to be serious disapproved. The rule of law has an abiding value in our legal regime. No public authority, including the Revenue, can ignore the principle of precedent. Certainty in tax administration is of cardinal importance and its absence undermines public confidence
The CBDT has accepted that incorrect and wrong demands have been uploaded on the CPC arrears portal. In his letter dated 21.08.2012, the CIT, CPC, has expressed his concern and anguish on account of uploading of incorrect and wrong data in the CPU and the problem faced by them and by the assesses. The CBDT has issued Circular No. 4 of 2012 in which the burden is put on the assessee to approach the AOs to get their records updated and corrected by filing s. 154 applications. While this may be the easiest option available, it should not be a ground for the AO not to suo motu correct his records and upload correct data. Each assessee has a right and can demand that correct and true data relating to the past demands should be uploaded. Asking the assessee to file s. 154 applications entails substantial expenses and defeats the main purpose behind computerisation. Also, the AO’s do not adhere to the time limit prescribed for disposal of the s. 154 applications. To ensure transparency (and accountability), a register must be maintained with details and particulars of each application made u/s 154, the date on which it was made, date of disposal and its fate. The s. 154 application has to be disposed of by a speaking order and communicated to the assessee. There must be full compliance of the said requirements
The Circular is purported to be issued in terms of the judgement in Krishna Sales (73) ELT 519 (SC). Though in Krishna Sales it was held that mere filing of an appeal does not operate as stay or suspension of the order appealed against, the Board has overlooked the fact that the assessee is not seeking stay only on account of filing of an appeal, but for the reason that the assessee has sought dispensing with the pre-deposit of duty and penalty and has a right to demand decision on such application, a right which is created by the Statute. Therefore, the very basis of the Circular is untenable, misconceived, wholly illegal and arbitrary. Therefore, the condition of recovery, if no stay is granted within 30 days, is illegal, arbitrary, unjustified and consequently set aside (Larsen & Tuobro (Bom) referred)
The assessee took a business decision not to honour its commitment of fulfilling the export entitlement in view of loss being suffered by it. The genuineness of the claim of expenditure being for business purpose is not disputed. The assessee has not contravened any provision of law and the forfeiture of the bank guarantee is compensatory in nature and does not attract the Explanation to s. 37(1)
Though s. 14A applies to shares held as stock-in-trade, Rule 8D (2)(ii) & (iii) cannot apply if the shares are held as stock-in-trade because one of the variables on the basis of which disallowance under rules 8D(2)(ii) & (iii) is to be computed is the value of “investments, income from which does not or shall not form part of total income”. If there are no such “investments”, the rule cannot have any application. When no amount can be computed under the formula given in rule 8 D(ii) and (iii), no disallowance can be made under rule 8D (2)(ii) & (iii) either. As held in B. C. Srinivas Shetty 128 ITR 294 (SC), when the computation provisions fail, the charging provisions cannot be applied, and by the same logic, when the computation provisions under rule 8 D (2) (ii) and (iii) fail, disallowance there under cannot be made either as the said provision is rendered unworkable. However, this does not exclude the application of rule 8 D(2)(i) which refers to the “amount of expenditure directly relating to income which does not form part of total income”. Accordingly, in a case where shares are held as stock-in-trade and not as investments, the disallowance even under rule 8 D is restricted to the expenditure directly relatable to earning of exempt income. The result is that the scope of disallowance under Rule 8D is narrower than that of s. 14A.