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DATE: August 12, 2016 (Date of pronouncement)
DATE: September 2, 2016 (Date of publication)
AY: 2007-08
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Compensation for breach of promise to provide land to the assessee is not compensation for loss of profits but is for injury caused to the profit making apparatus. Such compensation is a capital receipt not chargeable to tax

The injury was caused to the profit making apparatus as the land which was profit making apparatus for the assessee was not supplied by JMA Buildcom (P) Ltd. as per the agreement entered into between the assessee and associates, and JMA Buildcom (P) Ltd. Appreciating the same, compensation was awarded in the arbitration proceedings initiated against JMA Buildcom.(P) Ltd. In other words, the basis of award remained the lost profit due to non-supply of the land i.e. profit making apparatus and not on loss of profit. We thus find that the only inference can be drawn is that the compensation received by way of reward due to non-supply of land by JMA Buildcom (P) Ltd. under the agreement was capital receipt

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DATE: July 19, 2016 (Date of pronouncement)
DATE: August 30, 2016 (Date of publication)
AY: 2005-06
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Condonation of delay: An appeal wrongly filed before the AO and not CIT(A) is an unintentional lapse of the assessee. The AO ought to have returned the appeal to enable the assessee to take corrective steps. The likelihood of error is inherent in human nature The power of condonation is in view of human fallibility and must be exercised in cases of bona fide lapses

Human interaction is influenced by human nature. Inherent in human nature is the likelihood of error. Therefore, the adage “to err is human”. Thus, the power to condone delay while applying the law of limitation. This power of condonation is only in view of human fallibility. The laws of nature are not subject to human error, thus beyond human correction. In fact, the Apex Court in State of Madhya Pradesh Vs. Pradip Kumar 2000(7) SCC 372 has observed to the effect that although the law assists the vigilant, an unintentional lapse on the part of the litigant would not normally close the doors of adjudication so as to be permanently closed, as it is human to err

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DATE: August 11, 2016 (Date of pronouncement)
DATE: August 30, 2016 (Date of publication)
AY: -
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S. 14A Rule 8D: The AO must examine the accounts closely and determine if at all any expenditure could be ascribed to the tax exempt dividend/interest earned by the assessee. If the tax exempted income was earned without the interference of any employee the question of attributing any expenditure cannot arise at all

Sub-rule (1) categorically and significantly states that the Assessing Officer having regard to the account of the assessee and on not being satisfied with the correctness of the claim of expenditure made by the assessee or claim that no expenditure was incurred in relation to income which does not form part of the total income under the Act, can go on to determine the disallowance under subrule (2) to Rule 8D of the Rules. Sub-rule (2) will not come into operation until and unless the specific precondition in sub-rule (1) is satisfied. Thus, section 14A (2) of the Act and rule 8D (1) in unison and affirmatively record that the computation or disallowance made by the assessee or claim that no expenditure was incurred to earn exempt income must be examined with reference to the accounts, and only and when the explanation/claim of the assessee is not satisfactory, computation under subrule (2) to rule 8D of the Rules is to be made

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DATE: August 16, 2016 (Date of pronouncement)
DATE: August 30, 2016 (Date of publication)
AY: 2007-08, 2008-09
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S. 145A(a)(ii) applies only to goods and not services. Service-tax billed on rendering of services is not includible as trading receipts. No disallowance u/s 43B can be made for the unpaid service-tax liability which is not claimed as a deduction

It is very clear from the reading of Section 145A(a)(ii) of the Act that it only covers cases where the amount of tax, duty, cess or fee is actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation

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DATE: August 19, 2016 (Date of pronouncement)
DATE: August 30, 2016 (Date of publication)
AY: 1988-89
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S. 256(1): Failure to serve reference as provided by Rule 658 of the Bombay High Court Rules upon the Respondent means that the applicant is not interested in pursuing the reference and the same has to be returned unanswered

In terms of Rule 658 of the Bombay High Court (Original Side) Rules, the party at whose instance a Reference has been made to this Court is required to take all such steps as are necessary to have a notice issued and served upon the opposite party within two months from the receipt of notice of the Reference from the High Court. In view of the fact that the applicant assessee has no evidence of having served the Reference upon the Respondent Revenue, we are not inclined to examine the questions of law as raised for our opinion at the instance of the applicant assessee

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DATE: August 22, 2016 (Date of pronouncement)
DATE: August 26, 2016 (Date of publication)
AY: -
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S. 275: Penalty proceedings for contravention of Sections 269SS & 269T are not related to the assessment proceeding but are independent of it. Therefore, the completion of appellate proceedings arising out of the assessment proceedings has no relevance. Consequently, the limitation prescribed by s. 275(1)(a) does not apply. The limitation period prescribed in s. 275(1)(c) applies to such penalty proceedings

penalty proceedings for default in not having transactions through the bank as required under Sections 269SS and 269T are not related to the assessment proceeding but are independent of it, therefore, the completion of appellate proceedings arising out of the assessment proceedings or the other proceedings during which the penalty proceedings under Sections 271D and 271E may have been initiated has no relevance for sustaining or not sustaining the penalty proceedings. It was held that clause (a) of sub-section (1) of Section 275 was not attracted to such proceedings

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DATE: August 22, 2016 (Date of pronouncement)
DATE: August 26, 2016 (Date of publication)
AY: -
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S. 68: When the facts show that the loan applications of 37 alleged trade creditors were processed and handled by the assessee and that the loan amounts were not reflected in the returns of the alleged creditors, the High Court erred in remanding the matter to the AO on the ground that the AO ought to given notice to the alleged trade creditors

Both the Assessing Officer and the C.I.T. had recorded findings of fact adverse to the Assessee which has been upheld by the learned single judge of the High Court. The Division Bench of the High Court in the Writ Appeal thought it appropriate to reverse the said findings on the ground that the 37 persons who had advanced the loan to the Assessee ought to have been given notice. The jurisdiction of the Division Bench in a Writ Appeal is primarily one of adjudication of questions 6 of law. Findings of fact recorded concurrently by the authorities under the Act and also in the first round of the writ proceedings by the learned single judge are not to be lightly disturbed

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DATE: August 11, 2016 (Date of pronouncement)
DATE: August 20, 2016 (Date of publication)
AY: 2009-10
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S. 37(1): Foreign exchange loss is not a "notional" or "speculation" loss and is allowable as a deduction. CBDT's Instruction No. 3 of 2010 which deals with foreign exchange derivative transactions (forward contracts) is not applicable to cases of losses in dealings with foreign exchange

The loss was not on account of derivatives but are in fact losses and gains in foreign exchange relating to the purchase and sales transactions i.e. creditors and debtors outstanding as on 31st March, 2010. Therefore, Instruction No.3 of 2010 issued by the CBDT would have no application to the facts of the present case. In fact, the issue arising herein would be covered by the principles laid down by the Apex Court in Woodward Governor India (P) Ltd. (supra). Accordingly, as the impugned order of Tribunal followed by the decision of the Apex Court in Woodward Governor India (P) Ltd. (supra) which governs the issue, the question as proposed does not give rise to any substantial question of law

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DATE: August 11, 2016 (Date of pronouncement)
DATE: August 17, 2016 (Date of publication)
AY: -
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S. 28: Income from letting of property on rent by an assessee engaged in the business of letting is assessable as "business profits" u/s 28 and not as "Income from house property" u/s 22

The issue involved in these appeals is no more res integra as this Court has decided in the case of Chennai Properties and Investments Ltd. v. Commissioner of Income Tax [2015] 373 ITR 673 (SC) that if an assessee is having his house property and by way of business he is giving the property on rent and if he is receiving rent from the said property as his business income, the said income, even if in the nature of rent, should be treated as “Business Income” because the assessee is having a business of renting his property and the rent which he receives is in the nature of his business income

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DATE: May 31, 2016 (Date of pronouncement)
DATE: August 17, 2016 (Date of publication)
AY: 2004-05
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S. 14A is applicable even where the motive of the assessee in acquiring the shares is to obtain controlling interest in a company and not to earn dividends

The question arose whether s. 14A applies to a case where the motive of the assessee is to acquire controlling interest in a company and not to earn dividends. The Tribunal followed the judgement of the Special Bench in ITO v. Daga Capital Management Pvt. Ltd (2009) 312 ITR (AT) 1 and held that section 14A is applicable even where the motive in acquiring the shares was to obtain controlling interest in the companies. The Tribunal upheld in principle the applicability of section 14A but remanded the matter to the Assessing Officer to ascertain from the facts of the case as to how much interest bearing borrowings was utilized to acquire shares in the companies

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