Month: June 2014

Archive for June, 2014


Smita Conductors Ltd vs. DCIT (ITAT Mumbai)

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DATE: June 27, 2014 (Date of publication)
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S. 50/ 112: Though gains on depreciable assets held for more than 3 years have to be treated as STCG u/s 50, the gains have to be taxed at the rate applicable to a LTCG

The assessee’s stand that s. 50C does not apply to depreciable assets is not acceptable in view of United Marine Academy 130 ITD 113(Mum) (SB). As regards the rate of tax, s. 50, which deems the capital gains as short-term capital gain is only for the purposes of sections 48 and 49 which relate to computation of capital gain. The deeming provisions have to be restricted only to computation of capital gain and for the purpose of other provisions of the Act the capital gain has to be treated as long-term capital gain. Consequently, though for the purpose of computation of capital gain, the flat has to be treated as short-term capital gain u/s 50, for the purpose of applicability of tax rate it has to be treated as long-term capital gain if held for more than three years (ratio of Ace Builders 281 ITR 410(Bom) & Manali Investments 139 TTJ 411(Mum) followed)

Posted in All Judgements, Tribunal

RW Promotions Pvt. Ltd vs. ACIT (ITAT Mumbai)

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DATE: (Date of pronouncement)
DATE: June 27, 2014 (Date of publication)
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S. 254(2): Pendency of an appeal filed in the High Court u/s 260A bars the hearing of a MA filed u/s 254(2) even if the appeal is not admitted

The assessee has moved an instant Miscellaneous Application (MA) against the order of the !TAT. At the time of hearing, the AR for the assessee-appellant informed that the assessee has filed an appeal u/s 260A before the Hon’ble Bombay High Court, but is yet to be admitted. Since the appeal has been filed before the Hon’ble Bombay High Court, the judicial propriety does not allow the assessee to seek efficacious remedy simultaneously before two authorities and in particular where the issue is seized by a higher judicial forum, even if pending admission. On this ground, the instant MA is rejected

Posted in All Judgements, Tribunal

Allahabad Bank vs. ITO (ITAT Agra)

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DATE: (Date of pronouncement)
DATE: June 24, 2014 (Date of publication)
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S. 201/ 201(iA): The payer is not liable for TDS default if the Dept does not show that the tax could not be recovered from the recipient

(i) A short deduction of tax at source, by itself does not result in a legally sustainable demand u/s 201(1) and u/s 201(1A). As held in Hindustan Coca Cola Beverages vs. CIT 293 ITR 226, taxes cannot be recovered once again from the assessee in a situation in which the recipient of income has paid due taxes on income embedded in the payments from which tax withholding requirements were not fully or partly, complied with. In Jagran Prakashan vs. DCIT 21 TM.com 489 (All) it was held that the deductor cannot be treated an assessee in default till it is found that assessee has also failed to pay such tax directly. Thus, to declare a deductor, who failed to deduct the tax at source as an assessee in default, condition precedent is that the recipient has also failed to pay tax directly;

Posted in All Judgements, Tribunal

DIT (E) vs. Ahmedabad Management Association (Gujarat High Court)

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DATE: (Date of pronouncement)
DATE: June 23, 2014 (Date of publication)
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Proviso to s. 2(15) which denies exemption to a charitable institution carrying on commercial activities does not apply to institutions carrying out relief to the poor, education or medical relief but applies only to those carrying out “advancement of any other object of general public utility”

(iii) On the issue of the Proviso to s. 2(15), the same has been explained in Circular No.11/2008 dated 19/12/2008. From the said Circular it appears that the newly inserted proviso to s. 2(15) of the Act will apply to entities whose purpose is advancement of any other object of general public utility i.e. fourth limb of definition of ‘charitable purpose’ contained in s. 2(15) and hence such entities will not be eligible for exemption u/s 11 or u/s 10(23C) of the Act if they carry on commercial activities. The Proviso will not apply in respect of the first three limbs of s. 2(15) i.e. relief to the poor; education or medical relief. Thus, where the purpose of a trust or institution is relief of the poor; education or medical relief, it will constitute ‘charitable purpose’ even if it incidentally involves the carrying on of the commercial activities.

Posted in All Judgements, High Court

Sunil Kumar Agarwal vs. CIT (Calcutta High Court)

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DATE: (Date of pronouncement)
DATE: June 23, 2014 (Date of publication)
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S. 50C: If the stamp duty valuation is higher than the consideration received, the AO must refer the valuation to the DVO even if there is no request by the assessee

No inference can be made that the assessee has accepted the price fixed by the District Sub Registrar for stamp duty purposes as the fair market value of the property because the assessee has nothing to do in the matter. Stamp duty is payable by the purchaser & it is for the purchaser to either accept it or dispute it. The assessee could not, on the basis of the price fixed by the Sub-Registrar, have claimed anything more than the agreed consideration of a sum of Rs.10 lakhs which, according to the assessee, was the highest prevailing market price. It would follow automatically that his case was that the fair market value of the property could not be Rs.35 lakhs as assessed by the District Sub Registrar. In a case of this nature the AO should, in fairness, have given an option to the assessee to have the valuation made by the Departmental Valuation Officer (DVO) contemplated u/s 50C. As a matter of course, in all such cases the AO should give an option to the assessee to have the valuation made by the DVO. The valuation by the DVO is required to avoid miscarriage of justice. The legislature did not intend that the capital gain should be fixed merely on the basis of the valuation to be made by the District Sub Registrar for the purpose of stamp duty. The legislature has taken care to provide adequate machinery to give a fair treatment to the citizen/taxpayer. There is no reason why the machinery provided by the legislature should not be used and the benefit thereof should be refused. Even in a case where no such prayer, the AO, discharging a quasi judicial function, has the bounden duty to act fairly and to give a fair treatment by giving him an option to follow the course provided by law.

Posted in All Judgements, High Court

Nortel Networks India International Inc vs. DDIT (ITAT Delhi)

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DATE: (Date of pronouncement)
DATE: June 19, 2014 (Date of publication)
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Circumstances leading to formation of PE and estimation of profit attributable therto under Rule 10 explained. Even foreign assessees are liable for interest u/s 234B

(i) The contract entered between the assessee and Reliance Infocom is a turnkey contract, indivisible contract for supply, installation, testing, commissioning etc. Nortel India has undertaken the responsibility for negotiating and securing the contracts. The contract for installation and commissioning was also undertaken by Nortel India. These arrangements show that assessee is getting its work executed through Nortel India. The assessee is merely a shadow company of Nortel Group and for all practical purposes, all the facilities and services available to the Nortel Group of Companies are equally available to the assessee. The hardware supplied through it is installed by Nortel India. The contracts were pre-negotiated by Nortel India. Thus, Nortel India is a fixed place of the business and dependent agent PE of the assessee. The Liaison Office of Nortel Canada is rendering all kinds of services to all the group companies including the assessee. The LO building pertaining to Nortel Canada constitutes fixed place PE of the assessee. The assesee’s contention that sales were completed overseas and installation was done under a separate contract is not acceptable. The compensation which has been represented as a sale consideration for the equipment represents the payment for works contract where entire installation and customisation has been carried out in India

Posted in All Judgements, Tribunal

Sanjay Aggarwal vs. DCIT (ITAT Delhi)

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DATE: June 19, 2014 (Date of publication)
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S. 153A: Addition in a search assessment for a AY which is not pending can be made only if incriminating material is found during search

(i) The language of s. 153A has been structured in such a way so as not to permit the making of addition for the assessment year of which the assessment is not pending as on the date of search, without there being any incriminating material found during the course of search. It is manifest that a duty is cast on the AO to determine the ‘total income’ of the assessee for such six assessment years. ‘Total income’ refers to the sum total of income in respect of which a person is assessable and covers not only the income emanating from declared sources or any material placed before the AO but from all sources including the undeclared ones. However, the second proviso to s. 153A(1) eclipses the afore discussed determination of ‘total income’ by mandating that while pending assessments relating to any assessment year falling within the period of six years shall abate and that completed assessments shall remain intact. The effect of the second proviso in the entire setting of section is that the assessment for any assessment year which is not pending as on the date of search cannot include an item of income for which no incriminating material was found

Posted in All Judgements, Tribunal

Kerala Vision Ltd vs. ACIT (ITAT Cochin)

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DATE: (Date of pronouncement)
DATE: June 18, 2014 (Date of publication)
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S. 40(a)(ia): If an amount is made taxable by a retrospective amendment, the payer cannot be held liable to deduct TDS on a payment made earlier and to suffer disallowance u/s 40(a)(ia)

In view of the retrospective insertion of Explanation 6 by the Finance Act, 2012, the payment made by the assessee as “Pay Channel Charges” constitutes “royalty” as defined in clause (i) of Explanation 2 to s. 9(1) of the Act. However, as the decision of the assessee not to deduct TDS was supported by Asia Sat, the assessee cannot be held to be liable to deduct tax at source by relying on the subsequent amendments made in the Act with retrospective effect (Channel Guide 139 ITD 49 (Mum), Sonata Information Technology & Infotech Enterprises followed)

Posted in All Judgements, Tribunal

CIT vs. J. L. Morrison (India) Ltd (Calcutta High Court)

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DATE: (Date of pronouncement)
DATE: June 18, 2014 (Date of publication)
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S. 263: The CIT can revise an assessment only if he can show unmistakably that the order of the AO is unsustainable. Fact that the AO has passed a non-speaking order does not mean that he has not applied his mind

(i) If the AO has taken a possible view, it cannot be said that the view taken by him is erroneous nor the order of the AO in that case can be set aside in revision. It has to be shown unmistakably that the order of the AO is unsustainable. Anything short of that would not clothe the CIT with jurisdiction to exercise power u/s 263 of the Act

Posted in All Judgements, High Court

ITO vs. Growel Energy Co. Ltd (ITAT Mumbai)

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DATE: (Date of pronouncement)
DATE: June 17, 2014 (Date of publication)
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ITAT issues strictures against AO & CIT & fines them for filing a frivolous appeal

The ITO, the Appellant, as well as the CIT, who has authorised the AO to prefer an appeal, did not apply their mind in the correct perspective and in a very lacklustre and routine manner filed the appeal which, in turn, resulted in wastage of time of the court … At this juncture it may be noticed that the power is vested in the CIT and not with the AO because the Legislature, in its wisdom, thought that a superior/ senior officer can take a more balanced decision so as to avoid filing frivolous appeals in routine manner. However, even the CIT has not given his reasons as to why he has authorised the AO to file an appeal on this issue…. we are of the firm view that the AO has raised a soulless ground which deserves to be dismissed in limine. We could have saved a lot of time had the CIT not given his authorisation on such frivolous issues. On the contrary, it is incumbent upon the Commissioner, as a supervisory authority, to admonish the AO for making an addition without basic understanding of legal position…. this is a peculiar case where even the CIT (Admin) who is supposed to supervise the proper functioning of the AO, under his charge, has allowed him to file appeals without properly examining the assessment order and the order of the CIT(A), which results in unnecessary expenditure to the assessee when appeal is filed by the Revenue and the assessee had to undergo the trauma of engaging counsel and paying substantial fees to defend the case when the Revenue has no case at all … Therefore we award a token cost of Rs. 5,000 upon the CIT who has given the authorisation and cost of Rs. 10,000 upon the AO who has filed this appeal… The said payment should be made to the assessee within one month from the date of receipt of this order. Registry is also directed to mark a copy to the Chairman, CBDT so that in future the Income Tax Commissioners, who are responsible for filing appeal before the Tribunal, would take proper care to scrutinise the issues before authorising the AO to file appeals before the Tribunal

Posted in All Judgements, Tribunal
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