We are constrained to observe about the effort made by us to persuade the Central Government to take steps to prevent generation and circulation of black money. Through a detailed interim order we appraised the Government that unless prohibition is introduced against cash dealings particularly in property sales in film industry and the like against at least for payments over a certain limit in cash, black money generation and circulation cannot be controlled because the disincentives on cash dealings contained under the various provisions of the Income Tax Act have failed to achieve the objective. Further, by prohibiting use of cash in major transactions terror and mafia funding and corruption could be arrested to a large extent. Above all, the worst enemy of our economy that is, circulation of high denomination counterfeit currencies (presently estimated at 7000 crores) could be prevented to a large extent. Unfortunately, the response of the Central Finance Ministry is not at all encouraging in as much as Government wants status quo to continue to the detriment of the economic interest of the country and the people as a whole. Our limitations while exercising appellate jurisdiction u/s 260A inhibit us from initiating any proceedings or issuing direction against the Central Government. However, we express our anguish on the attitude of the Central Government to have created this vicious situation and allow the same to continue

The Tribunal held that the “make available” condition was not satisfied inasmuch as no technical knowledge etc, was made available by the assessee to the Indian insurance companies operating in India. The Tribunal conclusions are based on an assessment of the factual matrix of the case at hand and are factual in nature. As there is no perversity in the findings, it does not give rise to a substantial question of law

The question whether an agreement is a finance agreement or an operating lease cannot be decided by merely looking at the title of the agreement or the nomenclature given to the said agreement. The terms and conditions mentioned in the agreement may be relevant but the surrounding circumstances & type and nature of the asset have also to be considered. There is a difference between a finance agreement and an operational lease. A finance lease is one where the lessee uses the asset for substantially the whole of its useful life and the lease payments are calculated to cover the full cost together with interest charges. It is thus a disguised way of purchasing the asset with the help of a loan. An operating lease is any other type of lease where the asset is not wholly amortised during the non-cancellable period, if any, of the lease and where the lessor does not rely for his profit on the rentals in the non-cancellable period. This distinction has been explained in Asea Brown Boveri Ltd vs. IFCI (2004) 12 SCC 570, Association of Leasing and Financial Service Companies vs. UOI (2011) 2 SCC 352 & Sundaram Finance Ltd vs. Kerala AIR 1966 SC 1178. As the Tribunal has not considered the issue from the right perspective, matter remanded

S. 10A is a deduction provision and not an exemption provision. S. 10A has to be given effect to at the stage of computing the profits and gains of business. This is anterior to the application of the provisions of s. 72 which deals with the carry forward and set off of business losses. A distinction has been made by the Legislature while incorporating the provisions of Chapter VI-A. S. 80A(1) stipulates that in computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of the Chapter, the deductions specified in s. 80C to 80U. S. 80B(5) defines for the purposes of Chapter VI-A “gross total income” to mean the total income computed in accordance with the provisions of the Act, before making any deduction under the Chapter. What the Revenue in essence seeks to attain is to telescope the provisions of Chapter VI-A in the context of the deduction which is allowable u/s 10A, which would not be permissible unless a specific statutory provision to that effect were to be made. In the absence thereof, such an approach cannot be accepted. Accordingly, the decision of the Tribunal is affirmed since it is plain and evident that the deduction u/s 10A has to be given at the stage when the profits and gains of business are computed in the first instance (Hindustan Unilever Ltd vs. DCIT 325 ITR 102 (Bom) followed)

Q whether the s. 127(2) transfer order is invalid for want of reasons referred to Full Bench The CIT, Valsad, passed an order u/s 127(2) centralizing the assessee’s case from Vapi to Surat “to facilitate coordinated and effective investigation”. The …

Millenniun Houseware vs. CIT (Gujarat High Court) Read More »

A case where the AO specifically examines an issue and applies his mind poses no difficulty because even if the order is silent, it is a case of “change of opinion”. However, in a case where the AO does not notice or examine a particular aspect in the assessment order and does not raise any written question or query, can it be said that the doctrine of “mere change of opinion” is applicable. There can be different aspects in which this question may arise including cases where the claim may be a repetition and allowed in earlier years. To what extent the presumption u/s 114 (e) of the Evidence Act applicable is the issue. The question is whether the presumption is rebuttable and when the presumption is rebutted. Further, whether the said presumption only applies to procedural aspects or even to substantive assertions relevant to the assessment. Though in Kelvinator 256 ITR 1, the Full Bench held that s. 114 (e) of the Evidence Act would apply and the AO would be deemed to have applied his mind, s. 114 was not specifically referred to by the Supreme Court nor did it specifically approve or disapprove the observations of the Full Bench. Accordingly, the matter should be examined by a larger Bench and the issues requiring consideration are

It is not in public interest to accept such a claim when there is no evidence of rendering any service by Blue Chip & Co to the assessee. The sole object of diverting funds to Blue Chip & Co was to facilitate passing of funds as interest free loan to Vijay Mallya and Samira Mallya. The agreement between the assesee and Blue Chip was found to be a “sham transaction” by the AO & CIT (A). The Tribunal committed grave error by recording the order as if it is a consent order though the DR had categorically defended the AO & CIT (A)’s order. Also, the earlier orders of the Tribunal had been challenged before the High Court. Therefore the findings of the Tribunal are wholly erroneous, cryptic, perverse, laconic and perfunctory

U/s 8(1)(j) of the RTI Act, information which relates to personal information the disclosure of which has no relationship to any public activity or interest, or which would cause unwarranted invasion of the privacy of the individual cannot be disclosed unless the authority is satisfied that the larger public interest justifies the disclosure of such information. U/s 11 (1), where the CPIO etc intends to disclose the information which relates to or has been supplied by a third party and has been treated as confidential by that third party, the CPIO is required to give written notice to the third party and invite him to make submissions why the information should not be disclosed. This mandatory procedure has to be followed and the Single Judge rightly directed the CIC to determine whether disclosure of the Tribunal Member’s ACR was in the larger public interest (Arvind Kejriwal vs. CPIO AIR 2010 Delhi 216 followed; Centre for Earth Sciences Studies Vs. Anson Sebastian, 2010 (2) KLT 233 not followed)

The “transfer pricing guidelines” laid down by the OECD make it clear that barring exceptional cases, the tax administration cannot disregard the actual transaction or substitute other transactions for them and the examination of a controlled transaction should ordinarily be based on the transaction as it has been actually undertaken and structured by the associated enterprises. The guidelines discourage re-structuring of legitimate business transactions except where (i) the economic substance of a transaction differs from its form and (ii) the form and substance of the transaction are the same but arrangements made in relation to the transaction, viewed in their totality, differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner. The OECD guidelines should be taken as a valid input in judging the action of the TPO because, in a different form, they have been recognized in India’s tax jurisprudence. It is well settled that the revenue cannot dictate to the assessee as to how he should conduct his business and it is not for them to tell the assessee as to what expenditure the assessee can incur (Eastern Investment Ltd 20 ITR 1 (SC), Walchand & Co 65 ITR 381 (SC) followed). Even Rule 10B(1)(a) does not authorise disallowance of expenditure on the ground that it was not necessary or prudent for the assessee to have incurred the same