Category: All Judgements

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DATE: August 22, 2012 (Date of publication)
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In Indian Oil Panipat 315 ITR 255 (Del) it was held that if the interest received was “inextricably linked” with the setting up of the plant, it could not be treated as income from other sources. This reasoning is in line with Bokaro Steel Ltd, Karnataka Power Corp 247 ITR 268 (SC) & Bongaigaon Refinery 251 ITR 329(SC). Though the proviso to s. 36(1)(iii) enacts that any amount of the interest paid towards (“in respect of”) capital borrowed for acquisition of an asset or for extension of existing business regardless of its capitalization in the books or otherwise, “for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use” would not qualify as deduction, in all these cases, when the interest was received by the assessee towards interest paid for fixed deposits when the borrowed funds could not be immediately put to use for the purpose for which they were taken, the Courts held that if the receipt is “inextricably linked” to the setting up of the project, it would be capital receipt not liable to tax but ultimately be used to reduce the cost of the project. By the same logic, in the present case too, the funds invested by the assessee and the interest earned were inextricably linked with the setting up of the power plant and, therefore, the interest earned on fixed deposit of amounts borrowed cannot be treated as a revenue receipt

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DATE: August 21, 2012 (Date of publication)
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It is a settled proposition of law that the Tribunal u/s 254(1) has no power to take back the benefit conferred by the AO or enhance the assessment. Once the matter has been restored by the Tribunal, the income cannot be enhanced from what was determined at the time of original assessment proceedings, which was the subject matter of dispute before the Tribunal. This proposition of law has been upheld by the Supreme Court in Hukumchand Mills Ltd 62 ITR 232 (SC) and reiterated in Mcorp Global 309 ITR 434 (SC). Therefore, the enhancement of assessment by making 100% disallowance in respect of free food allowance cannot be sustained and the same is restricted to 50%, as was made by the AO in the original round of proceedings

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DATE: (Date of pronouncement)
DATE: August 17, 2012 (Date of publication)
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Upon a return of income being filed, the matter is “pending, in the sense that the AO has the right to take such steps, including issuance of notice. The rationale for the bar in the Proviso to s. 245R(2) is that if the applicant wishes to plan its affairs and transactions in advance, it is free to do but once it proceeds to file a return, the AAR’s jurisdiction to entertain the application for advance ruling is taken away, because the AO would then be seized of the matter, and would possess a multitude of statutory powers to examine and rule on the return. The fact that in the past the AAR followed a different practice in the past is irrelevant because there is no estoppel against a statute

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DATE: (Date of pronouncement)
DATE: August 17, 2012 (Date of publication)
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The department’s contention that the assessee ought to have invested in the period that the s. 54EC bonds were available (1.7.2006 to 3.8.2006) after the transfer is not well founded. The assessee was entitled to wait till the last date (21.9.2006) to invest in the bonds. As of that date, the bonds were not available. The fact that they were available in an earlier period after the transfer makes no difference because the assessee right to buy the bonds upto the last date cannot be prejudiced. Lex not cogit impossibila (law does not compel a man to do that which he cannot possibly perform) and impossibilum nulla oblignto est (law does not expect a party to do the impossible) are well known maxims in law and would squarely apply to the present case

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DATE: (Date of pronouncement)
DATE: August 17, 2012 (Date of publication)
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S. 268A was inserted by the Finance Act 2008 w.r.e.f. 1.4.1999 to reduce litigation in small cases and regulate the right of Revenue to file or not to file appeal. Instruction no.3/2011 dated 9.2.2011 has been issued by the CBDT pursuant to this power. Though clause 11 provides that the instruction would apply to appeals filed on or after 9.2.2011 and appeals filed that date would be governed by the instructions operative at the time the appeal was filed, in a number of cases, it has been interpreted to mean that the monetary limits specified in the Instruction would apply to pending appeals as well (Vijaya V. Kavekar (Bom) followed (included in file)

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DATE: (Date of pronouncement)
DATE: August 15, 2012 (Date of publication)
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The theory of precedents does not have strict application to the AAR. It is bound only by the decisions of the Supreme Court. The decisions of High Courts have only persuasive value. The AAR is not subordinate to any High Court for even Article 227 of the Constitution to apply and there are grave doubts whether the jurisdiction under Article 226 will be attracted to the AAR. While the AAR should be slow in disagreeing with propositions of law laid down in earlier rulings, it should not be deterred from taking a contrary view if it is convinced that the earlier view is not correct

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DATE: (Date of pronouncement)
DATE: August 15, 2012 (Date of publication)
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U/s 82 of the Companies Act, shares in a company is moveable property transferable in the manner provided by its Articles of Association. The applicant has not shown the gift was authorized by its Articles. It is difficult to imagine the Articles of Association of a company providing for gifting away of the assets in the form of shares in another company by what is attempted to be described as oral gift. A “gift” by one company to another company of shares in a public company appears to be strange, unless it be one which has been set up for some purpose. The revenue’s contention that the purpose of the gift is to avoid tax and s. 56(2)(viia) is not far-fetched. Also, s. 47(i) & (iii) appear to apply to gifts by individuals and HUFs and not by companies. The Authority has the right & the duty to consider the reality of the transaction and genuineness of the transaction, in addition to its validity. When such transactions are entered into involving substantial assets the applicant has to prove to the hilt the factum, genuineness and validity of the transaction, the right to enter into the transaction and the bona fides of the transaction. To postulate that a corporation can give away its assets free to another even orally can only be aiding dubious attempts at avoidance of tax payable under the Act. The AO is in a batter position to make a proper enquiry into the question of the genuineness and validity of the transaction. Hence, a ruling is declined

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DATE: (Date of pronouncement)
DATE: August 14, 2012 (Date of publication)
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S. 143(1) assessment cannot be reopened u/s 147 in absence of “new material” The assessee filed a ROI in which it claimed deduction for non-compete fees and depreciation on leased premises which was accepted by the AO vide Intimation u/s …

Telco Dadajee Dhackjee Ltd vs. DCIT (ITAT Mumbai Third Member) Read More »

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DATE: (Date of pronouncement)
DATE: August 13, 2012 (Date of publication)
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When s. 10A(9) was omitted in AY 2004-05, the Finance Minister said in the budget speech that the provision was “illogical” and had to be removed. Given the object & purpose of the omission, it can be held that the omission has retrospective effect and applies to change in the ownership in AY 2003–04. Further, sub–section (9) was omitted without any saving clause and it is not a case of repeal. If a provision in a statute is unconditionally omitted without any saving clause in favour of the pending proceedings, all actions must stop where such an omission is found. As s. 10A(9) has been omitted, it is as if the sub-section never existed in the statute (G.E. Thermo Matrix (ITAT B’lore followed)

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DATE: (Date of pronouncement)
DATE: August 10, 2012 (Date of publication)
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S. 74(1), as substituted w.e.f. 01.04.2003, uses the present tense and refers to the long-term capital loss of the current year. It applies to the long-term capital loss of AY 2003-04 onwards and not to the long-term capital loss relating to the period prior to AY 2003-04. The set-off of long-term capital loss relating to a period prior to AY 2003-04 is governed by s. 74(1) as it stood in that AY