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DATE: November 16, 2018 (Date of pronouncement)
DATE: December 3, 2018 (Date of publication)
AY: 2011-12
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CITATION:
S. 47(xiiib) r.w.s 47A(4): The conversion of a company into a LLP constitutes a "transfer". If the conditions of s. 47(xiiib) are not satisfied, the transaction is chargeable to 'capital gains‘ u/s 45 (Texspin Engg 263 ITR 345 (Bom) distinguished). If the assets and liabilities of the company are vested in the LLP at 'book values‘ (cost), there is in fact no capital gain. The argument that u/s 58(4) of the LLP Act, the LLP is entitled to carry forward the accumulated losses & unabsorbed depreciation of the company, notwithstanding non-compliance with s. 47(xiiib) is not acceptable

We find from a perusal of the ‘memorandum‘ explaining the purpose and intent behind the enactment of sub-section (xiiiib) to Sec. 47, that prior to its insertion, the ‘transfer‘ of assets on conversion of a company into a LLP attracted levy of “capital gains” tax. The legislature in all its wisdom had vide the Finance Act, 2010 made Sec. 47(xiiib) available on the statute, with the purpose that the transfer of assets on conversion of a company into a LLP in accordance with the Limited Liability Partnership Act, 2008, subject to fulfilment of the conditions contemplated therein, shall not be regarded as a ‘transfer‘ for the purposes of Sec. 45 of the Act. In so far, the reliance placed by the ld. A.R on the judgment of the Hon‘ble High Court of Bombay in the case of CIT Vs. Texspin Engg. & Mfg. Works (2003) 263 ITR 345 (Bom) is concerned, the same in our considered view is distinguishable on facts.

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DATE: November 16, 2018 (Date of pronouncement)
DATE: November 24, 2018 (Date of publication)
AY: 2012-13
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CITATION:
S. 68 Bogus share premium: If the overwhelming evidence in the form of audited accounts, ROC Form 2 & ROC Form 20B shows the 'nature' of receipt to be share premium, it has to be taken to be so. If the Department wants to contend that what is apparent is not real, the onus is on it to prove that it was the assessee's own money which was routed through a third party. S. 68 does not (before & after the 2012 amendment) envisage the valuation of share premium. Consequently, the AO has no jurisdiction to determine whether the share premium is reasonable or not (Pratik Syntex (P.) Ltd. vs. ITO 94 taxmann.com 12 (Mum) distinguished)

Even amendment to section 68 brought by Finance Act, 2012 does not refer to valuation. The insertion of the proviso to section 68 of the Act by Finance Act, 2012 casts an additional onus on the closely held companies to prove source in the shareholders subscribing to the shares of companies. During the course of the hearing, the Ld Counsel explained that the explanatory memorandum to the Finance Bill 2012 makes it clear that the additional onus is only with respect to source of funds in the hands of the shareholders before the transaction can be accepted as a genuine one. Even the amended section does not envisage the valuation of share premium. This is further evident from a parallel amendment in section 56(2) of the Act which brings in its ambit so much of the share premium as charged by a company, not being a company in which the public are substantially interested, as it exceeds the fair market value of the shares. If one accepts the Ld CIT-DR’s contentions that section 68 of the Act can he applied where the transaction is proved to be that of a share allotment that here the valuation for charging premium is not justified, it will make the provisions of section 56(2)(viib) of the Act redundant and nugatory. This cannot be the intention of the Legislature especially when the amendments in the two sections are brought in at the same time

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DATE: August 30, 2018 (Date of pronouncement)
DATE: September 7, 2018 (Date of publication)
AY: 2011-12
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CITATION:
S. 272A(1)(c) Penalty: The argument that penalty u/s 272A(1)(c) can be levied only for non-compliance of s. 131(1) and not s. 131(IA) is not correct because s. 131(1A) has to be read with s. 131(1). On facts, the penalty is justified because the conduct of the assessee is not bona fide. There is deliberate and complete defiance to the summons issued u/s 131(1A)

So far as the arguments of the ld. counsel for the assessee that there was a reasonable cause on the part of the assessee in not submitting the details as called for by the ADIT (Investigation) is concerned, we find from the record that there was a deliberate defiance on the part of the assessee for non- submission of the same under the pretext that some of the details are available in the records of the Income Tax Department or some of the details are available in the Website of the Ministry of Corporate Affairs

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DATE: November 18, 2016 (Date of pronouncement)
DATE: November 26, 2016 (Date of publication)
AY: -
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CITATION:
Taxability of software license fees as royalty: Non-consideration of the verdict of the Tribunal in Solid Works Corporation (51 SOT 34) and misreading of the Delhi High Court's verdict in Ericsson AB constitutes a mistake apparent from the record u/s 254(2) and the orders have to be recalled

In the instant appeals, the Tribunal admittedly did not consider the decision rendered by co-ordinate bench in the case of Solid Works Corporation (supra), even though it was relied upon by the assessees herein. The assessees have contended that the non-consideration of the decision of co-ordinate bench, when it was specifically relied upon by the assessee would result in a mistake apparent from record and would warrant recall of the order. In support of this contention, the assessees have placed their reliance on the decision rendered by Hon’ble Supreme Court in the case of Honda Siel Power Products Ltd (supra), wherein the Hon’ble Apex Court has held that the Tribunal was justified in exercising its power u/s 254(2) when it was pointed out to the Tribunal that the judgement of co-ordinate bench was placed before the Tribunal when the original order came to be passed but it had committed a mistake in not considering the material which was already on record

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DATE: September 23, 2015 (Date of pronouncement)
DATE: October 8, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 14A/ Rule 8D: (i) Presumption laid down in HDFC Bank 366 ITR 505 (Bom) and Reliance Utilities 313 ITR 340 (Bom) that investments in tax-free securities must be deemed to have come out of own funds and (ii) Law laid down in India Advantage (Bom) that s. 14A and Rule 8D does not apply to securities held as stock-in-trade cannot be applied as both propositions are contrary to Godrej & Boyce 328 ITR 81 (Bom)

In our view, it was incumbent on the parties to have brought its’ decision in the case of Godrej & Boyce to the notice of the Hon’ble Court in HDFC Bank Ltd.. We are conscious that we are deciding an appeal in the case of the same assessee. So, however, we are deciding a purely legal issue, i.e., whether, in view of the statutory presumption cast by section 14A, a non obstante provision, a presumption on facts could obtain, or that the assessee shall have to establish the same with reference to its accounts, in terms of section 14A(2) r/w s. 14A(3), leading to a satisfaction or otherwise of the assessing authority, arrived at objectively, only to find the earlier decision in Godrej & Boyce (supra) as having addressed the said issue. Further, that the facts in Reliance Utilities and Power Ltd., which was even otherwise in respect of allowance of expenditure u/s.36(1)(iii) – a provision which does not mandate any apportionment per se, stood established, with in fact the said decision having been considered in Godrej & Boyce. As such, there being no estoppel against law, we consider ourselves as legally justified in following the said decision by the Hon’ble jurisdictional High Court, address as it does, in our opinion, the issue at hand, and is thus squarely applicable, even as found in Dhanuka & Sons (supra), D. H. Securities (P) Ltd. (supra); and Damani Estates & Finance (P.) Ltd. (supra). These also constitute the binding reasons for not following the decision by the tribunal in Dy. CIT (OSD) vs. Shri Durga Capital Ltd. (in ITA No. 7405/Mum/2011 dated 03.08.2015/copy on record), also relied upon before us, in-as-much as we find no statement of law ascribed to India Advantage Securities Ltd. (supra); the Hon’ble Court therein holding the appeal before it to not raise any substantial question of law. Further, there is, no reference to the binding decision by the Hon’ble jurisdictional High Court in Godrej & Boyce (supra), or by the tribunal in D. H. Securities (P) Ltd. (supra) as well as Damani Estates & Finance (P.) Ltd. (supra), explaining the said decision, as well as its bearing on the decision by the larger bench of the tribunal in Daga Capital Management Pvt. Ltd. (infra), in Shri Dura Capital Ltd

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DATE: August 7, 2015 (Date of pronouncement)
DATE: August 13, 2015 (Date of publication)
AY: 1997-98, 1998-99, 1999-00
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CITATION:
S. 271(1)(c): Claim that interest income is eligible for s. 10B exemption, though upheld by the ITAT for an earlier year, is so implausible that it attracts penalty for concealment/ furnishing inaccurate particulars of income

We, in view of the foregoing, find no merit in the assessee’s case. It, to our mind, has not adduced any explanation, much less substantiated it, except for a bald assertion (i.e., of the said interest income as being a part of the assessee’s business income). The reliance on the decisions by the hon’ble jurisdictional high court, which we have found to be in fact supportive of the Revenue’s case, with the law in the matter being, in fact, well settled, is only a false plea or a ruse. Reliance on the decision by the tribunal for a subsequent year (AY 2000-01) is, under the circumstances, again, completely misplaced. A plausible explanation towards its’ claim/s saves penalty u/s. 271(1)(c), in view of, again, the settled law in the matter which though is completely missing in the present case

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DATE: May 25, 2015 (Date of pronouncement)
DATE: May 27, 2015 (Date of publication)
AY: 2007-08 to 2010-11
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CITATION:
ITAT laments non-representation/ inept-representation of matters before it by the Revenue. Suggests guidelines to remedy the state of affairs

it is noticed that some of the DRs had never had exposure to the functions of the Tribunal except the formal court observation as part of their training programme, which sometimes result in not supporting the stand of the Revenue effectively and in turn may affect a genuine case of the Revenue for want of proper prosecution. We would take this opportunity to suggest that any official, on being assigned the duty of DR, should be made to sit in the court room for observation at least for 15 days so that their services can be used effectively at a later stage.

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