Digest of important case law – April 2012

No time to read through voluminous case reports?

S.2(IA) :Definition- Agricultural income- Cultivation of palm-Product fit for marketing is agricultural income and extraction of oil from fruit / kernel is an industrial activity and assessable as business income.(S. 28(i)).
The assessee is a plantation company which is engaged in cultivation of oil and processing and extraction of crude palm oil from fruit as well as from the kernel. The  Assessing Officer held that part of income earned by assessee from sale of palm oil as business income by applying rule 7 of the income –tax rules . In appeal the view of Assessing Officer was confirmed. On further appeal, the High Court held that the processing covered by item(ii) of section 2(IA)(b) is only so much of process which a cultivator ordinarily engages to make product for  marketing, therefore income that is attributable to agricultural operations  is the market value of palm fruit with pulp and kernel. Activity carried out by assessee in extraction of oil  from fruit /from kernel is an industrial activity and therefore income from such activity is assessable as its ‘profits and gains of business’ under section 28(i). Appeal was decided in favour of revenue.(A.Ys 1997-98 to 2006-07)

Oil Palm India Ltd  v. Asst CIT ( 2012) 206 Taxman 1 (Ker) (High Court)

S.2(24) : Definition – Income – incentive prize – not income
The Assessee subscribed to PPF which formed part of Small Savings Scheme encouraged by Government of Punjab. The Govt issued lucky coupon on every investment of Rs.5,000/-. The Assessee also received lucky coupon which won the prize of 1kg gold. The Assessing officer held that the price money won by assessee fell within the meaning of section 2(24)(ix) and made addition as income. On Appeal, the CIT(A) as well as the Tribunal deleted the addition. On appeal, the High Court, confirmed the view of the Tribunal and held that incentive price received by assessee on account of coupon given to the on the strength of small saving certificate would not fall within the definition of lottery and would not be included as income as per section 2(24)(ix). (A.Y. 1996 – 97).

CIT vs. Tilak Raj Kalra (2012) 206 Taxman 126 / 249 CTR 205(P&H)(High Court)

S. 2(47)(v) :Definition – Transfer –Possession-Capital gains-Conditions of execution of a written agreement and handing over possession have to be cumulatively satisfied.
The Twin conditions of execution of a written agreement and handing over possession have to be cumulatively satisfied in order to bring case within the ambit of Section 2(47)(v), read with Section 53A of the Transfer of Property Act, 1882. None of the conditions are satisfied in the said case i.e. neither the agreement to sale the land was signed nor the possession of the land had been delivered. Since the  transaction of the transfer has not taken in that year, thus nothing could be brought to tax. (A.Y. 2006-07)

Addl. CIT v. Delhi Apartment P. Ltd. (2012) 135 ITD 441 (Delhi)

S. 5 : Scope of total income-  Accrues or deemed to be accrued –Award- Interest and compensation awarded by Motor Accident Claim Tribunal to be taxed in the year in which award is final
The assessee received compensation and interest under the award passed by Motor Accident Claim Tribunal (MACT) and appeal filed by Insurance company was pending before the High Court. The Tribunal observed that such interest received would be chargeable to tax in the year when compensation and interest awarded by the MACT reaches finality. (A.Y. 2006-07)

Sharda Pareek (Smt.) v. Asst. CIT (2012) 50 SOT 439 (Jaipur)

S. 9 : Income deemed to accrue and arise in India Despite payment of arms length remuneration the agent, further profit could be attributable the PE in India. –DTAA- India Singapore  Art.7
Assessee was a company incorporated in Cayman Islands and conducts it s business operations from Singapore. Singapore tax authority had issued tax residency certificate to the tax payer confirming that its control and management was exercised from Singapore . During the relevant assessment year, the assessee was conducting its entire TV channel activities of Asia –Pacific Region from Singapore. The Assessing officer held that the assessee had appointed an Indian company as it agent in India and Indian company was entitled to 15% commission on a gross advertisement  revenue from India, the income of the assessee comprised only the advertisement time sold in by Indian company. Indian company collected the payments and remitted them to Singapore The Assessing Officer held that the assessee had an Agency PE in India. Assessing Officer further held that   even if the assessee paid  arm’s length remuneration to the agent, further profits could be attributed to the agency PE. The Assessing Officer accordingly attributed profits at 40, 30, 25, and 25% for relevant assessment years. In appeal CIT (A) up held the further attribution of profits but reduced the quantum. On appeal the tribunal held as under
(a) The assessee had not maintained separate accounts for the Indian operations, hence application of Rule 10(i)read with Rule 10(iii) was proper
(b) The tax computation filed by the assessee with the Singapore tax authority in respect of its global operations reflected losses . Hence , margin attributed by the Assessing Officer was on higher side.
(c) Transponder charges and programme charges cannot be said to be only Indian operations since the satellite footprint also covered.
(d) Circular no 742 of 1996 dated 2-5-2006 (1996) 219 ITR (st)49 provided for presumptive taxation 10 % of advertisement revenue of foreign telecasting companies as their income. Hence even though the said circular was withdrawn as there was no change in the business model of the tax payer,  attribution of 10% of the advertisement revenue earned by the tax payer from India was  reasonable. The Tribunal laid down the principle that despite payment of arm’s length remuneration to the agent further profit could be attributable the PE in India.(A.Y. 2002-03 to 2005-06)

MTV Asia LDC v. DDIT, ITA No. 3530/M/06, BCAJ Pg. 28, Vol. 43 B Part 6, March 2012(Mum)

S. 9 : Income deemed to accrue or arise in India – DTAA – Payment made for taking dredger(equipment ) on hire are not in the nature of royalty
The assessee entered into a contract with Singapore Dredger Company (EMPL) and took a dredger on hire and sub-contracted its work of dredging to EMPL.  The dredger was made available to assessee to deploy its dredging work at Vishakapatnam. The assessee made payment to EMPL. The Assessing Officer held the hire charges made to EMPL in the nature of royalty as it was for the use or right to use the dredger. On appeal to Tribunal it was held that the payment cannot be treated as royalty as assessee took the dredger only on hire and did not use the dredger on its own. Neither any right to use was given on and paid hire charges. Further, the said equipment was used by EMPL under supervision, control and employment of crew members for 24 hours. Thus, equipment cannot be construed as place of business of foreign company.(A Y 2005-06 and 2006-07 )

Dy. DIT v. Dharti Dredging & Infrastructure Ltd. (2012) 50 SOT 413 (Hyd)

S.9 : Income deemed to accrue or arise in India – DTAA – Services rendered for development of Balance Score Card, business management tool held to be Fees for Technical Services
The assessee is a foreign company located in Singapore providing services to various clients all over the world for development of Balance Score Card (BSC) project. The AO held that the receipts to be divided into two parts : charging one as royalty for sale of software and other as professional fees from rendering the said services. On appeal before Tribunal it was held that the software used by assessee cannot be considered independent, but part of services rendered by assessee to client. It was held that the fees for designing of BSC was Fees for Technical services as per provisions of Article 12 of India- Singapore DTAA as the assessee made available the knowledge for using BSC for their business purposes for meeting their long term targets and benefit ran into future. (A.Y. 2007-08)

Organisation Development Pte. Ltd. v. Dy. DIT (IT) (2012) 50 SOT 421 (Chennai)

S. 9 : Income deemed to accrue or arise in India – India – USA DTAA – term “attributable” equivalent to expression “effectively connected” – Interest on income tax refund chargeable to tax as per Article 11(2)
The assessee is a US company having its project office in India received interest on income tax. The Tribunal observed that expression “attributable” used in Article 11(5) of India US DTAA is equivalent to term “ effectively connected”. Thus, interest would be chargeable at the rate of 15% as per Article 11(2) of the India – USA DTAA and not  at the rate of 40% as per Article 11(5). (AY 2008-09)
Followed Special Bench decision of Clough Engineering Ltd. (2011) 130 ITD 137(SB) (Delhi)(Trib)

Bechtel International Inc. v. Asst. DIT (2012) 135 ITD 377 (Mum)

S. 9 : Income deemed to accrue or arise in India – DTAA – Income from marketing services and ‘Frequent Flier Program’ and ‘Starwood Preferred Guest’ services outside India, held not fees for technical services
The assessee is a company engaged in the business of providing hotel related services to various hotels across the world. Following the view laid in the decision of Sheraton International Inc. v. Dy. DIT (2006) 207 ITD 120(Delhi) and Dy. DIT v. Sheraton International Inc.(2009) 313 ITR 267 (Delhi), the Tribunal held income received from providing marketing services and ‘Frequent Flier Program’ and ‘Starwood Preferred Guest’ services outside India cannot be taxed as Fees for Technical Services. (A.Y. 2005-06, 2006-07)

Dy. DIT (IT) v. Sheraton International Inc. (2012) 135 ITD 373 (Delhi)

 

S.9 : Income deemed to accrue or arise in India – Offshore supply of equipment under the off-shore supply contract –
The applicant is a company incorporated under laws of China engaged in the business of supply of equipment for electric power project. The applicant entered into an agreement with an Indian company for supply of equipment for the power project, the said contract is an off-shore contract for off-shore supply of equipments. It was held that the Income Tax Authorities under the Act, have no jurisdiction to tax the payments made outside for the supplies taking place outside India. As per the terms of the contract the bill of lading, bill of entry and taking of transit insurance would be an off-shore sale and thus the amount receive from such offshore sale shall not be liable to tax in India.

SEPCO III Electric Power Construction Corporation, In re (2012) 342 ITR 313 (AAR)

Followed :Ishikawajima- Harima Heavy Industries Ltd. v. DIT (2008) 288 ITR 408 (SC) and LS Cable Ltd., In re (2011) 337 ITR 35 (AAR)

S.9 : Income deemed to accrue or arise in India –Deduction at source-Non-resident-Commission- Service rendered from abroad-Since the order was executed in India, right of  agent to receive commission arose in India hence the provision of withholding tax will apply .( S.5(2)(b),195)
The applicant is an Indian company engaged in the manufacturing and supply of Rice Par Boiling and Dryer Plants as per requirement of customers. It had received orders from two agents situated in Pakistan. The plant was shipped and commission was payable to agents on completion of export orders. The  question was raised whether the income of non –resident agent can be considered as deemed to accrue or arise in India  and whether tax deduction would be mandatory under section 195  on export commission paid to non-resident agent if so , at what rate. The Authority for Advance Ruling held that the fact that the agents have rendered services abroad in the form of soliciting the orders  and the commission is to be remitted to them abroad are wholly irrelevant for the purpose of  determining the situs of their income . Following the ruling in Rajive Malhotra ( 2006)284 ITR 564 (AAR) , it is to be held that income arising on account of  commission payable to the two agents is deemed to accrue and arise in India  and is taxable under the Act  in view of section 5(2)(b) read  with section 9(I)(i) . The provision of section 195 would apply and the rate of tax will be as provided under the Finance   Act for the relevant year.

SKF Boilers and Driers (P) Ltd ( 2012) 206 Taxman 19 / 248 CTR 121(AAR)

 

S. 9(1) : Income deemed to accrue or arise in India – Contract for procurement of off-shore supplies for project – As no income arises in India therefore not liable to tax in India
Applicant is a HongKong based company, engaged in the business of engineering, procurement and construction of petroleum, petro-chemical and power plant. With a view to execute project awarded by company P, it entered into a consortium with an Indian Company to develop a terminal for receipt and storage of liquefied natural gas at Kochi. On question as to whether income received/ receivable by applicant for off-supplies from P was liable to tax in India, it was held that though applicant had a business connection in India, but it had not carried any part of business relating to off shore supplies to India. Under the deeming provision of Section 9(1) read with Explanation 1(a), any business income accruing or arising to the applicant can be taxed in India only in respect of operation carried in India. It was held that the applicant was not the owner of supplies in India and as the right, title, payment in supplies passed to P which was importing these supplies from outside India. Thus, all that income from transaction had not arisen in India and therefore, not liable to tax in India.

CTCI Overseas Corporation Ltd., In re (2012) 342 ITR 217 (AAR)

S.9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical services- Make available- DTAA-India-UK- To “make available” technical knowledge, mere provision of service is not enough; the payer must be enabled to perform the service himself
The assessee, a UK based reinsurance broker, received commission from several Indian insurance companies for arranging reinsurance contracts. The AO & CIT (A) held that the commission was assessable to tax in India as “fees for technical services” u/s 9(1)(vii) & Article 13(4)(c) of the DTAA. However, the Tribunal (included in file), relying extensively on Raymond vs. DCIT(2003) 86 ITD 791 (Mum) & other judgements, held that “In order to fit the terminology “make available” in Article 13(4)(c), mere provision of technical services is not enough but the technical knowledge must remain with the payer, and he must be equipped to independently perform the technical function himself without the help of the service provider“. It was held that as the nature of services rendered by the assessee was not “technical or consultancy services which made available technical knowledge” etc to the payer, the commission was not assessable to tax. On appeal by the department, Held dismissing the appeal:
 The Tribunal conclusions are based on an assessment of the factual matrix. As there is no perversity in the findings, it does not give rise to a substantial question of law.(A.Y.2006-07)

DIT v. Guy Carpenter & Co Ltd (Delhi High Court) www.itatonline.org

S.9(1)(vii) : Income deemed to accrue or arise in India –Fees for technical services- Reimbursement of Salary to US company, held not fees for technical services as no technical know made available, hence, no liability to deduct  tax deducted  at source.
The assessee company had made payment abroad to a US based company under the head “remittance of manpower cost” claiming that the payment were reimbursement of salaries to persons deputed by US company. The Assessing Officer held such a payment to be Fees for Technical Services under Section 9(1) (vii) of the Act and thus, fastened with the consequences under Section 40(a)(i). On appeal to Tribunal it was observed that the agreement between the assessee and US company clearly shows that no technical know-how was made available to the assessee and since expatriates were employees of US company which deducted tax at source , assessee had no liability to deduct tax at source.  Therefore, as assessee made a bona-fide belief that the no part of payment made to US company had any element of income in it, the assessee was not in default. (A.Y. 2002-03 to 2006-07)

Asst. CIT v. CMS (India) Operations & Maintenance Co. P. Ltd. (2012) 135 ITD 386 (Chennai)

S.10(10D) : Exempt income- Key man insurance- Amount received by employee director on maturity of insurance policy is exempt.
Amount received by employee director on maturity of insurance policy , which was taken earlier by company and which was assigned to him by the company is not taxable in the hands of director.
CIT v.Rjan  Nanda (2012) 249 CTR 141/ 69 DTR 250 (Delhi) (High Court)
CIT v.Naresh Kumar Trehan (2012) 249 CTR 141/69 DTR 250 (Delhi) (High Court)

S.10(23C) (iiiad) : Exemption – Educational Institution – Assessing Officer is not justified in refusing exemption merely because surplus had arisen in the educational activity.
The assessee who was running two schools was not required to get approval from the prescribed authority as the total receipts did not exceed 1 crore. Further it was also observed that the Assessing Officer was not justified in refusing exemption under Section 10(23C)(iiiad) of the Act  and observing that the assessee was not existing for educational purposes merely because assessee earned surplus during the course of carrying on the education activity. (AY 2000-01 to 2006-07)

Gagan Education Society v. Addl. CIT (2012) 145 TTJ 230 (Agra)

S. 10(38) : Exempt income– Capital Gain – Delay in transferring shares into D-mat account from date of purchase of share – AO not justified in ignoring the relevant evidences and doubt the date of purchase – Exemption u/s 10(38)  was allowed
The assessee purchased the shares in the physical form and opened the Dmat account on a belated date. As the assessee provided all the relevant details such as address of registered office of the company, signature of authorized signatory along with signature of 2 directors, value of shares purchased in each company, date of issue of certificate, certificate number, registered folio etc, it was held that AO was not correct in doubting the genuineness of the transaction and declared date of purchase merely because there was substantial delay in transferring the shares in D-mat account. Thus, the exemption under Section 10(38) on long term capital gain on shares held to be allowed. (AY 2006-07)

ITO v Ajay Shantilal Lalwani (2012) 145 TTJ511 (Pune)   

S.10A : Exemption-Newly established undertakings- Free trade zone- Avoidance of tax- Transfer pricing- Deduction under section 10A, cannot be worked   on arm’s length price. (S.14A,92C 144C)
The Assessing Officer referred the matter to Transfer Pricing Officer to determine the arm’s length price in respect of finance  and accounting services to its associate enterprise. The Transfer Pricing Officer has accepted the method adopted by the assessee and no adjustments were made. However the Transfer Pricing Officer, passed the  a draft order under section 144C(1) restricting the claim under section 10A  by deducting the lease line charges incurred by the assessee  from export turnover on the ground that those expenses were incurred by delivery of software outside India and foreign travel expenses from export turn over for the reasons that they were incurred in providing technical services out side India. He also proposed disallowance of o.5% of the investment expenditure estimated to have been incurred for earning non-taxable income in accordance with of rule 8D , read with section 14A. The Assessing Officer reduced the quantum of deduction under section 10A. The Dispute Resolution Panel rejected all the objections of assessee and confirmed the order of Transfer Pricing Officer. On appeal the Tribunal held that section 10A deduction not to be worked out on basis of Transfer Pricing Officer. That all such adjustments made by the Assessing Officer to the export turn over of the assessee had also to be made in the total  turn over of the assessee. The disallowance under   rule 8D was held to be not justified . A reasonable disallowance can be made. The draft assessment order cannot  be  said to be bad in law . When adjustments made by the were deleted by the Tribunal that irregularity was automatically   cured . In such circumstances the assessment order need not be invalidated. Therefore the assessment is not time barred.(A.Y. 2007-08)
Visual Graphics Computing Services (India) P. Ltd  v. Asst.CIT (2012) 15 ITR 393 (Chennai)  

S.10A : Exempt income- Free trade zone-Set off of losses-Brought forward unabsorbed losses- Eligible and non- eligible unit-Deduction is allowable without set off of losses of non-eligible units.
The question arose whether the brought forward unabsorbed depreciation and losses of a unit which was not eligible for s. 10A deduction could be set-off against the current profit of a unit eligible for s. 10A deduction. The Tribunal, relying on Scientific Atlanta India Technology (P) Ltd v. ACIT(2010) 129 TTJ 273/2ITR 66 (Chennai )(SB) held that the a. 10A deduction had to be allowed before set-off of the losses of the non-eligible unit. On appeal by the department to the High Court, Held dismissing the appeal:

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(2003) 325 ITR 102 (Bom) followed) (A.Y. 2006 – 07)

CIT v. Black & Veatch Consulting Pvt. Ltd (Bom.) ( High Court)www.itatonline.org

S. 10A : Newly established undertakings- Free trade Zone- Export of Computer Software – No material to show that assessee indulged in arrangement with foreign buyers to inflate profits – AO not entitled to invoke provisions of Section 80I(9) and determine reasonable profits
The assessee was engaged in the business of manufacture of hardware and software and exported its products (both hardware and software), the assessee claimed exemption in respect of its two units. It was held that the AO was not entitled to presume existence of close connection or arrangement of the assessee with the foreign buyer for purpose of invoking Section 80I(9) and determine reasonable profits as there was no material to indicate that the course of business had been so arranged so as to inflate profits. (AY 1995-96, 1996-97 and 1998-99)

CIT v. H.B. Global Soft Ltd. (2012) 342 ITR 263 (Kar)(High Court)

S. 10A : Newly established undertakings- Free trade Zone- – Export oriented undertaking- Expenses disallowed –Expenses disallowed and added to profits of business is eligible deduction (S.80IA(10).
If any addition is made to the profits by way of disallowance of expenses, the amount added would form part of the profits of the business and the same has to be considered while working out deduction u/s. 10A.(A.Y.(2004-05).
Sanghvi Jewellery Mfg. Co. (P) Ltd v. ITO(2012) 68 DTR 177(Mum)

S.10A : Newly established undertakings- Free Trade Zone – Losses of S.10A eligible units allowed to be set-off against normal business income
Tribunal held that the losses of Section 10A eligible units are allowed to be set-off against the normal business income of the assessee while calculating the income as per normal provisions of the Act. (AY 2002 -03& 2003 – 04)
Patni Computer Systems Ltd. v. Dy. CIT (2012) 135 ITD 398 (Pune)

S.10B : Newly established hundred per cent export-oriented undertakings-– EOU- Set off of loss- Loss of eligible unit  can be set  off against the income arising from other units .(S.70, 80IA(5) ).
After substitution by Finance Act, 2000  w.e.f. 1st April ,2001, S. 10B is not a provision for exemption , but a provision which enables an assessee to claim a deduction, therefore a loss which is sustained by an eligible unit can be set off against the income arising from other units under the same head of profits and gains of business or profession.(A.Y. 2005-06)
CIT v. Galaxy Surfactants Ltd ( 2012) 343 ITR 108 (Bom) (High Court) / 249 CTR 38 / 64 DTR 42

S.11(1)(a) : Charitable or religious purposes- Charitable Trust – Assessee entitled to exemption even if the income is applied to acquire capital asset to be used for object of the Trust
The assessee entitled to exemption even if the expenditure has been incurred for acquiring capital asset to be used for object of the Trust. Application of income for charitable purpose not to be distinguished on the basis of application for revenue purposes and capital purposes. (AY 2000-01 to 2006-07)

Gagan Education Society v. Addl. CIT (2012) 145 TTJ (Agra) 230

S.12A : Trust or institution-Charitable purposes-Contributions-Registration of charitable institution –Refusal of registration was held to be not justified when the particular object was not acted upon. (S.2(15)
Assessee engaged in educational activities. One of the objects permitted assessee to export computed and other similar activities. The said object was never acted upon by the assessee. The Commissioner rejected the registration. On appeal to Tribunal the Tribunal held that  the CIT was not justified in rejecting registration application of the trust only on the ground that the Trust had the object of export of computer, which was not acted upon. The Tribunal referred the Circular No 11/2008 dated 19-12-2008.  

Baba Amarnath Educational Society v. CIT / ACE Educational & Charitable society v. CIT, (2012) 69 DTR 307 (Changigarh)

S.12AA : Trust or Institution-Registration-Charitable purposes-Registration-Constitutional validity-Amendment of section 12AA(3) is held to be valid.
The Commissioner issued the notice under section 12AA(3)  on 31 st July , 2007 for cancellation of the registration granted to the petitioner for the assessment year 1999-2000 on the ground that the petitioner is charging capitation fee and donations in respect of admissions and diverting them in respect of personal gain of trustees. The proceedings were initiated  and order was passed cancelling the registration. The said order was challenged before the Tribunal . The Tribunal allowed the appeal of assessee on the ground that the registration was granted under section 12A , which cannot be  invoked by section 12AA(3) , which were brought on the statute book w.e.f  1st October, 2004. The appeal against the order of Tribunal is admitted and pending for final disposal before the High Court. Section 12AA(3) has been amended by the Finance  Act of 2010  w.e.f. June 2010 giving the power to cancel the registration under section 12A. The Commissioner issued fresh show cause notice on 11 th Mach 2011 for cancellation of registration for reasons mentioned in his order dated 9th October , 2007.The assessee challenged the constitutional validity of provision  of sub section (3) of the section 12AA as amended by the Finance Act of 2010 w.e.f. 1st June 2010 to the extent they provide for revocation of a registration granted under  section 12A. The Court held that amendment of section 12AAA(3) by the Finance Act, 2010 is not arbitrary and it does not take away vested right nor does it create new obligation in respect of past actions and cannot be said to be retrospective in operation ; even if construed to be retrospective , it cannot be held to be violate of Article 14. Accordingly the petition was dismissed.(A.Y.1999-2000)

Sinhagad  Technical Education Society  v.CIT (2012) 343 ITR 23 / 249  CTR 45 (Bom) (High Court)

S.12AA : Trust or Institution-Registration-Charitable purposes– Assessee entitled to registration under Section 12AA of the Act, even if the assessee sells certain property 
The object of the business of the assessee was to planning and development of the city including preparation of master plan and zonal development plan which are in the nature of public utility. It was held that assessee would be entitled to registration under Section 12AA of the Act, even if the assessee sells certain property as the said activity is incidental to the object of the assessee.

Jodhpur Development Authority v. CIT (2012) 145 TTJ 221 (Jd)

S.14A : Business expenditure-Exempt income- Disallowance of expenditure without showing how assessee’s method is wrong is to be deleted-Rule 8D.
In AY 2008-09, the assessee claimed that it had not incurred any expenditure in earning dividend income and no disallowance u/s 14A could be made. However, the AO computed disallowance u/s14A & Rule 8D of Rs.12.81 lakhs. This was upheld by the CIT (A). On appeal to the Tribunal, Held:
S. 14A(2) empowers the AO to determine the amount of expenditure incurred in relation to tax-free income if, “having regard to the accounts of the assessee, he is not satisfied with the correctness of the claim of the assessee“. The satisfaction of the AO as to the incorrect claim made by the assessee is sine qua non for invoking the applicability of Rule 8D. The satisfaction can be reached only when the claim of the assessee is verified. If the assessee proves before the AO that it incurred a particular expenditure in respect of earning the exempt income and the AO is satisfied, then there is no requirement to proceed with the computation under Rule 8D. The AO wrongly proceeded on the premise that Rule 8D is automatic irrespective of the genuineness of the assessee’s claim in respect of expenses incurred in relation to exempt income. The correct sequence for making any disallowance u/s14A is to, firstly, examine the assessee’s claim of having incurred some expenditure or no expenditure in relation to exempt income. If the AO is satisfied with the same, then there is no need to compute disallowance as per Rule 8D. It is only when the AO is not satisfied with the correctness of the claim of the assessee in respect of such expenditure or no expenditure having been incurred in relation to exempt income, that the mandate of Rule 8D will operate.(A.Y.2008-09)

Auchtel Products Ltd v. ACIT ( Mum) www.itatonline.org

S.14A : Busiess expenditure-Exempt income-Burden is on Assessing Officer  to show expenditure is incurred to earn tax-free income.(Rule 8D )
The assessee earned dividend of Rs. 17 lakhs and LTCG of Rs. 12 crores. The assessee claimed that it had incurred no expense to earn the tax-free income and so no s. 14A disallowance was permissible. However, the AO disallowed Rs. 2 crores under Rule 8D towards interest and admin expenditure. The CIT (A) accepted that no interest was incurred and deleted that disallowance. He also reduced the admin expenditure disallowance. On appeal to the Tribunal, Held:
 (i) The contention of the Revenue that some expenditure, directly or indirectly, is always incurred for earning tax-free income cannot be accepted. The burden is on the AO to establish the nexus of the expenditure incurred with the earning of exempt income before making any disallowance u/s 14A (CIT v. Hero Cycles Ltd  ( 2010 )  323 ITR 518 (P&H), Jindal Photo followed)
 (ii) As regards interest, the AO has to show the nexus between the borrowed funds and the tax free investments. If that is not done, disallowance of interest is not permissible (K. Raheja Corporation (Bom) followed)
 (iii) As regards admin expenses, s. 14A disallowance cannot be made on an ad-hoc basis. It is the department’s responsibility to bring material on record to show that expenditure was incurred for earning the exempt income. If this is not done, disallowance is not permissible ( Wimco Seedlings followed v DCIT  ) (A.Y. 2006-07)

ACIT v. SIL Investment Ltd ( Delhi)www.itatonline.org

S. 14A : Business Expenditure – Disallowance-Exempt income-Investment which does not generate any income not forming part of total income  disallowance  is not  warranted
None of the investments made by the assessee has generated any dividend income which has been claimed as not forming part of total income. Thus, once there is no claim of income which does not form part of the total income under Act, there cannot be any disallowance in relation to an such investment. (AY 2006-07)

Siva Industries & Holdings Ltd. v. Asst. CIT (2012) 145 TTJ497 (Chennai) 

S.17(2) : Salaries-Perquisites-Tax paid by employer-Not includible as salary under Rule 3.
The tax paid by employer on behalf of employee is a perquisite under section 17(2) and therefore not includible in salary under Rule 3 of the income-tax Rule, 1962 for purpose of computing perquisite value of accommodation supplied by employer to employee. (A.Y.2006-2007)   

Tsoo Sakai v. CIT (2012) 49 SOT 154(Delhi)
S.17(3) : Salary-Profits in lieu of salary- Key man insurance policy- Surrender value cannot be taxed as profit in lieu of salary.( 2(24(xi), 56 )
The Assessing Officer treated the difference between the premium paid by the company and the surrender value paid by assesse as the benefit to be taxed in his hands under section 17. In appeal the Commissioner(Appeals) also confirmed the  addition made by the Assessing Officer. On further appeal the Tribunal held that amount in question cannot be treated as “Perquisite” under section 17(3).On appeal to the High Court , by revenue the Court referred the Circular no 762 dated 18th  Feb 1998  and held that on assignment of keyman insurance policy by company to its employee –director against receipt of surrender value from the director , difference between premium paid by company, to LIC and surrender value paid by director to company cannot be taxed as “profits in lieu of salary” in the hands of director. The  High Court held that neither section 17(3) nor section 56((2) (iv) will be attracted.     
CIT v.Rjan  Nanda (2012) 249 CTR 141/69 DTR 250 (Delhi) (High Court)
CIT v.Naresh Kumar Trehan (2012) 249 CTR 141/69 DTR 250 (Delhi) (High Court)

S. 28(i) : Business income- Trading receipt-Collection of contingency deposit-Collection contingency deposit by assessee against sales tax would form part of income. 
The Court followed the judgment in CIT v. Southern Explosive Co ( 2000) 242 ITR 107 (Mad) (High Court) and held that  Collection of ‘contingency deposit’ by the assessee against the payment of sales tax would form part of income.(A.Y.1996-97 &1997-98)
CIT v. Sundaram Finance Ltd. (2012) 67 DTR 117 (Mad)(High Court)
S.28(i) : Business income- Business loss-Speculation- Shares-Loss on sale of share purchased on behalf of client, subsequently disowned is not covered by provisions of section 73, loss is held to be allowable as business loss.(S.73)
Losses incurred by assessee (sub-broker of shares) on account of sale of shares which were purchased on behalf of the client and subsequently disowned by respective client must be allowed as business losses and not be covered under provisions of Explanation to Section 73 of the Act. Explanation 73 is attracted only when a part of the business of the assessee company consists of purchase and sale of shares of other companies. Transaction in shares undertaken by share broker as its own under compulsion after certain clients disowned part of such transactions, did not constitute business of the assessee in share dealing. (A.Y. 2001-02)

ITO v. Rajvi Securities (P.) Ltd. (2012) 50 SOT 592 (Ahd)

S.31 : Business or Revenue Expenditure – Current Repairs or Revenue Expenditure – Accounting Practice – Nature of Expenditure(S, 37)
Each machine in a textile mill is an independent entity. Replacement of old machinery with new machinery is not current repairs but capital expenditure. Replacement of such an old machine with a new one bring into existence a new asset giving enduring benefit which is capital in expenditure.
Accounting practices may not be the best guide in determining the nature of expenditure but are indicative of nature of transaction and intention of the assessee. (A.Y. 1995 – 96)

CIT v. Sri Mangayarkarsi Mills Pvt. Ltd. (2011) 11 SCC 656(SC)

S.32 : Depreciation-Computer system- Cost below 5000-100 % depreciation-Difference between “Finance Lease” & “Operational Lease”, matter set aside  Tribunal to decide a fresh. 
 The assessee bought 1614 items of computer systems for Rs.40 lacs from HCL Hewlett Packard Ltd and leased back to the same company. The assessee claimed 100% depreciation on the ground that the cost of each itemwas less than Rs.5,000. The AO & CIT (A) held that the lease was not a bona fide transaction and that the transaction was a finance transaction. It was held that the assessee had advanced Rs.40 lacs to HCL Hewlett Packard Ltd and agreed to receive back this amount along with the interest over six years. However, the Tribunal upheld the claim on the ground that the conditions of a valid lease were satisfied. On appeal by the department to the High Court, Held:

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.

CIT v. The Instalment Supply Ltd (Delhi)(High Court)www.itatonline.org.

S. 32 : Depreciation –Wind mill-Additional depreciation- Device of Wind Mill and foundation, civil works, electrical installation, development expenses, heldto be wind mill and entitled to additional  depreciation on entire device and cannot be bifurcated as several parts.
Depreciation was claimed on device of windmill and additional depreciation was claimed on foundation, civil works, electrical installation, development expenses and other machinery. It was held by the Tribunal that the depreciation is allowable on renewable energy which includes windmill also. Where depreciation is claimed on entire device which is capable of generating energy using wind energy, and cannot be bifurcated, in to several parts, the depreciation is held to be allowable on entire device. (A.Y. 2007 -08)
ACIT(OSD) v. Parry Engineering & Electronics P. Ltd. ITA No. 3317 / Ahm/ 2012 ,Ahmedabad Tribunal Order dated 02/3/2012(2012) Vol 35 Feb P. 557  (Ahd)(Trib)

S.32 : Depreciation-Books-Capital expenditure- Expenditure incurred on books by the tutorial institutions is held to be capital expenditure and eligible for depreciation.(S.37(1))
 The expenditure incurred by the tutorial institutions on books and preparing students for professional entrance examination is capital expenditure, entitled to depreciation under Section 32(1) irrespective of whether the tutorials are ‘profession’ or ‘business’ (A.Y. 2006-07)

Brilliant Study Centre v. Asst. CIT (2012) 135 ITD 351 (Cochin)

S.36(1)(iii) : Interest on borrowed capital-Subsidiary- Equity capital-Whether interest paid is allowable or not, requires reconsideration.
The Tribunal held that as the assessee, being a holding company had a deep interest in its subsidiary, and hence if the holding company advanced borrowed money to a subsidiary and the same is used by the subsidiary for some business purposes, the assessee would be entitled to deduction of interest on its borrowed loans. On appeal by the department, Held  by the Supreme Court:
Issue notice on the applications for condonation of delay as also on the special leave petitions. In our view, S.A. Builders Ltd. v. CIT, needs reconsideration.

ACIT v. Tulip Star Hotels Ltd (SC).www.itatonline.org.

S.37(1) : Business expenditure-Unaccounted expenditure-Setoff-Block assessment-Unaccounted expenditure to be set-off against unaccounted income despite Expl. to s. 37(1) & proviso to s. 69C. Govt. criticized for apathy towards black money.(S.69C,158BC)
 Pursuant to a search u/s 132, an assessments u/s 158BC was made and various additions were made. One of the issues was whether if the AO makes an addition of unaccounted income on the basis of seized records, he is required to give a deduction for the unexplained expenditure shown in the same records. Held by the Court:

(i) The assessee was engaged in unaccounted business and the seized accounts showed unaccounted receipts and unaccounted expenditure. There is no justification for doubting the entries found in the seized records pertaining to expenditure while accepting the income found recorded therein. When the Department relies on the seized records for estimating undisclosed income, there is no reason why the expenditure stated therein should be disbelieved merely because there is no written agreement and that payments were not made through cheques or demand drafts. This would be unrealistic and not justified. The statute authorizes assessment of “undisclosed income” which has to be arrived at after allowing expenditure incurred by the assessee whether it be accounted in the regular books or not. The Explanation to s. 37(1) does not apply because the unaccounted business is not an “illegal business”. Section 69C is concerned, in the first place the proviso introduced with effect from 01/04/1999 does not apply to the block assessment for the period covered herein and secondly we do not think excess expenditure over accounted expenditure in business is covered by Section 69C itself.

(ii) 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. (A.Y. 1988-89 to 1997-98)

CIT v. P. D. Abrahm (Ker)(High Court)www.itatonline.org

S.37(1) : Business expenditure- Keyman insurance policy-Premium paid on key man insurance policy is allowable as deduction.
The premium paid for keyman insurance policy is allowable as deduction .The nature of expenditure is to be seen at the time it is incurred. Department could not sit on the armchair of the assesse and decide as to whether it was appropriate on business expediency for the assesse to incur such an expenditure or not. The argument of the department that it is a colourable device   is rejected by the High Court. (A.Ys 1994-95 to 2000-2001)
CIT v .Escorts Heart  Institute  &  Research Centre Ltd (2012) 249 CTR 141/69 DTR 250 (Delhi) (High Court)

S.37(1) : Business expenditure-C&F handling charges-No evidence of rendering service- Cryptic order-Tribunal’s order not dealing with finding of “sham” transaction is “perverse”, allowing of expenditure held to be not justified.
The AO disallowed payments made by the assessee to M/s Blue Chip & Co towards “C&F handling charges” on the ground that the transactions were a “sham” and intended to provide interest-free funds to Vijay Mallya& his wife Samira Mallya. This was confirmed by the CIT (A) though the Tribunal allowed the claim on the ground that a similar issue had been allowed in the earlier years. On appeal by the department, Held reversing the Tribunal:

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.

CIT v. Punjab Breweries Ltd (P&H)( High Court) www.itatonline.org

S. 37(1) : Business Expenditure – Travel allowance – Disallowance to be calculated with respect to each journey undertaken.(Rule 6D )
Intrinsic evidence available in the Rule 6D demonstrates that the disallowance which is available qua an employee or such other person ought to be calculated in respect of each of such journey undertaken. (AY 1989-90)

CIT v. SRF Ltd. (2012) 342 ITR 106(Delhi) (High Court)

S.37(1) : Business expenditure- Royalty-Sister concern-Held to be allowable as no substantial question of law. (S.260A)
The assessee had made payments to sister concern for the use of trade mark  which was held to be genuine and accordance with business exigencies . The Tribunal has followed its own decision for the earlier years , which has been accepted by revenue. The High Court up held the order as no substantial question of law  would arise.(A.Y.2005-06)
CIT v.Galaxy Surfactants Ltd ( 2012) 343 ITR 108 (Bom) (High Court) / 249 CTR 38 / 64 DTR 42

S.37(1) : Business expenditure –Fringe benefit tax –Expenses- Expenditure which are subjected to FBT is allowable as business expenditure.
The Tribunal referred to the CBDT Circular No.8/2005, dated 29-8-2005 and opined that once fringe benefit tax is levied on expenses incurred, it follows that the same are treated as fringe benefits provided by the assessee as employer to its employees and the same have to be appropriately allowed as expenses incurred wholly and exclusively incurred by the assessee for the purpose of its business.(A.Y.2006-07)

Hansraj Mathuradas v. ITO, ITA No. 2397/M/10, dt. 16-9-11, BCAJ Pg. 25, Vol. 43 B Part 5, February 2012(Mum)

S.37(1) : Business expenditure –Licence fee-Capital or revenue-Licence fee paid held to be revenue expenditure as benefit of  fees paid endures only till end of the relevant year and not extend to the subsequent financial year.(S.35ABB).
The assessee is engaged in the business of digital communication services for data, fax, etc. The assessee made payment for obtaining licence for providing telecommunication services through for a period of 10 years. The licence fee was payable on yearly basis. The benefit of licence fee paid during the year endures only till end of the relevant year and does not extend to the subsequent financial year. Thus, it was held that the license fee was not in the nature of capital expenditure falling under Section 35 ABB but revenue expenditure as per Section 37(1). (AY 2002-2003 to 2004-05)

BhartiAirtel Ltd. v. Asst. CIT (2012) 145 TTJ 161 (Mum)

S.37(1) : Business Expenditure – Performance guarantee –Contractual obligation-Compensation paid for default of assessee as performance guarantee is held to be  allowable expenditure.
Where during the continuity of business if in a particular contract the assessee had to compensate for his own default by offering performance guarantee which was a contractual obligation and that the said business continued later on, then a disallowance for a particular  contract could not be considered separately. Same be allowed as business expenditure. (A.Y. 2006 – 07)

Neo Structo Construction Ltd. v. Addl. CIT,  ITA No. 3026/ Ahd/ 2009 order dated 24/2/2012(2012) Vol 35 Feb P.555 (Ahd)

S. 37(1) : Business Expenditure – Royalty- Trade mark-Payment of royalty for use of trademark as well as technical information, in relation to manufacture, use and sale of product  is held to be revenue expenditure.
The assessee made payment of royalty on net sales for use of trademark and technical information in relation to manufacture, use and sale of product and not in relation to setting up of plant. The assessee did not acquire the ownership over the trademark or technical information as there was no provision for transfer of the same. The Tribunal held that the said expenditure to be treated as revenue expenditure. (A.Y. 2003-04 , 2004 – 05 and 2006 – 07)

Mafatlal Denim Ltd v. Dy. CIT (2012) 135 ITD 483(Mum)

S. 37(1) : Business expenditure- Foreign income-tax-Foreign income-tax is deductible as business expenditure , bar in s. 40(a)(ii) does not apply to foreign taxes.(S. 40(a))(ii).
 The assessee paid Rs.42.57 lakhs in Belgium as income-tax and claimed that as deduction u/s 37(1). The AO rejected the claim by relying on s, 40(a)(ii) which provides that any sum paid on account of tax levied on profits or gains of business shall not be allowable as a deduction, though the CIT (A) allowed the claim on the ground that the bar in s. 40(a)(ii) did not apply to foreign taxes. On appeal by the department, Held dismissing the appeal:

The term “tax” is defined in s. 2(43) to mean income-tax chargeable under the provisions of this Act. S. 37(1) allows a deduction of all taxes and rates. Taxes levied in foreign countries whether on profits or gains or otherwise are deductible u/s 37(1) not hit by s. 40(a)(ii). It is also not application of income. The same view has been taken by ITAT Mumbai in South East Asia Shipping Co&Tata Sons Ltd and the department’s Reference Applications u/s 256(1) & 256(2) were rejected and the issue has reached finality.(A.Y. 2002-03,2003-04 and 2004-05)

DCIT v. Mastek Limited ( Ahd) www.itatonline.org

S.40(b)(v) : Amounts not deductible-Partnership deed-Remuneration- Partnership deed need not quantify partner’s remuneration, hence disallowance cannot be made  
 The assessee’s partnership deed provided that the partners would be paid remuneration / salary “according to the standards and norms fixed by the relevant provisions of the Income Tax Act, 1961”. The AO disallowed the claim for deduction of the salary paid to the partners u/s 40(b)(v) on the ground that as the deed did not quantify the amount of remuneration. This was reversed by the CIT (A) and Tribunal. On appeal by the department, Held dismissing the appeal:

The Tribunal finding that “The quantification of the remuneration was apparent from clause 8 of the partnership deed which provided that the remuneration would be payable as per norms fixed by the Income-tax Act. The requirement in law is that remuneration should have been authorized and the amount of remuneration shall not exceed the amount specified in s. 40(b)(v) which uses the word ‘authorised‘ and not the word ‘quantify‘”. It is a finding of fact which cannot be interfered with by this Court

CIT v. The Asian Marketing (Raj)(High Court).www.itatonline.org.

S.40(a)(ia) : Amounts not deductible-Deduction at source-Contractor-Professional and technical fees-Payment made before due date of filing of return-Tax deducted was paid before due date of filing of return hence the disallowance cannot be made -Special Bench decision  cannot be followed in view of High Court Judgment.
 In AY 2005-06, the assessee made payments to contractors & for professionals & technical services. Though TDS was deducted, it was paid after the end of the FY but before filing the ROI. The assessee pleaded that s. 40(a)(ia), as amended by the FA 2010 w.e.f. 1.4.2010 to provide that no disallowance should be made if the TDS was paid before the due date of filing the ROI should be held to be retrospective. However, the AO & CIT (A), rejected the claim by relying on Bharati Shipyard Ltdv.Dy. CIT( 2011)132 ITD 53 (Mum) (SB). On appeal to the Tribunal, Held allowing the appeal:

The issue involved has now been decided by the Calcutta High Court in CIT vs. Virgin Creators against the Revenue. However, it is noteworthy that the Special Bench of ITAT Mumbai in the case of Bharati Shipyard Ltdv.Dy.CIT(2011)132 ITD 53 (Mum) has taken a view that the amendment is prospective in nature and would apply accordingly. Respectfully following the decision of the Calcutta High Court in the case of Virgin Creators the order of the CIT(A) is not sustainable and the assessee’s appeal is allowed(A.Y. 2005-06)

Alpha Projects Society P. Ltd v. DCIT (Ahd).www.itatonline.org

S.40(a)(ia) : Amounts not deductible-Deduction at source-Rent- Service charges of furniture and fixtures is in the nature of rent hence disallowance is justified.
Payment made for using the part of the fixture of rented property was in nature of rent and the assessee was required to deduct the tax under section 194-I. The disallowance was justified under section 40(a)(ia) for not deducting the tax. (A.Y. 2007-08)

The Karnavati Co-op. Bank Ltd. v. Dy. CIT (2012) 144 TTJ 769 (Ahd.)

S.40(a)(ia) : Amounts not deductible-–Deduction at source-Interest paid as per court order there is no obligation to deduct tax at source hence no disallowance can be made . (S.194A).
The Assessing officer disallowed of interest, for failure to deduct tax at source payment of disputed amount with interest as per the court order.
The Tribunal held that the amount was paid in accordance with the decision of the High Court. The interest payable under the decree of the court was a judgement debt, therefore, he was not obliged to deduct tax at source.(A.Y. 2005-06)

Akber Abdul Ali v. ACIT, ITA No. 5538/M/08, BCAJ Pg. 25, Vol. 43 B Part 6, March 2012(Mum)

S.40(a)(ia) : Amounts not deductible- Deduction at source- Contract- Tax deducted is paid before due date of filing of return no disallowance can be made under section 40(a)(ia).(S.194C).
The assessee made payments to contractors from April 2007 to February 2008. However, the TDS thereon was deducted (belated) in March 2008 and paid before the due date for filing the ROI. The AO disallowed the payments u/s 40(a)(ia) though the CIT (A), relying on BapusahebNanasahebDhumal, allowed the claim on the ground that as the TDS was (belatedly) deducted in March 2008, it could be paid before the due date for filing the ROI. On appeal by the department, Held dismissing the appeal:
 (i) Though u/s 194C, tax had to be deducted at the time of payment or credit, the assessee deducted TDS only in March. While the assessee has to face consequences for its failure to deduct TDS in time, no disallowance u/s 40(a)(ia) can be made because clause (A) of the proviso to s. 40(a)(ia) provides that if the tax is deducted during the last month of previous year and paid on or before the due date of filing the ROI, no disallowance shall be made (Bapusaheb Nanasaheb Dhumal v ACIT (2010)40 SOT 361 (Mum) followed);
(ii) S. 40(a)(ia) was amended by the FA 2010 w.e.f. 1.4.2010 to provide that no disallowance shall be made if the TDS (for whichever month) is paid before the due date of filing the ROI. While in Bharti Shipyard Ltd v DCIT (2011) 132 ITD 53 (Mum) (SB), it was held that the amendment is not retrospective, a contrary view has been taken by the Calcutta High Court in CIT v. Virgin Creations. Considering the precedent in the judicial hierarchy, the judgement of the non-jurisdictional High Court prevails over a judgement of the Special Bench (Kanel Oil & Export (2009)121 ITD 596 (Ahd) (TM) followed) (AY 2008-09)

ACIT v.  M.K. Gurumurthy (Bang)(Trib.)www.itatonline.org

S. 40(a)(ia) : Amounts not deductible-Deduction at source-  Business Expenditure – Payment for supply of labour – Can be assumed that there was a contract for supply of labour between the assessee and CDLB –  provisions of Section 194C was clearly attracted
Payment made to CDLB towards stevedoring expenses being in the nature of the payment for supply of labour, it can be assumed that there was a contract for supply of labour between the assessee and CDLB and, therefore provisions of Section 194C was clearly attracted even though the labour hired by assessee through CDLB is considered to be in assessee’s employment. Matter remanded to the file of CIT(A) as CIT(A) did not deal with the said provisions. (AY 2006 -07)

Dy. CIT v. Kamal Mukherjee & Co. (Shipping) P. Ltd. (2012) 145 TTJ 374 / 69 DTR 75 (Kol) (Trib.)

S.40A(2) : Business Expenditure –Interest- Interest paid by assessee is not in excess of fair market value and wholly and exclusively for the purpose of business, disallowance was  deleted.
As there was no material with the Assessing Officer to show that the payment of interest made to sister concern was in excess of fair market value and interest paid was wholly and exclusively for the purpose of business. Hence, disallowance was deleted. (AY 2002-2003 to 2004-05)

BhartiAirtel Ltd. v. Asst. CIT (2012) 145 TTJ 161 (Mum)(Trib.)

S. 43B : Deductions on actual payment-Business expenditure-– Interest on delayed payment of interest – Demand of tax not payable within specified within includes payment of interest – Hence, allowed
In light of provisions of Section 17A(2) of Himachal Pradesh General Sales Tax Act, 1968 it was held that when there is a demand of tax and that is not paid within the period, then interest is automatically payable. The Tribunal failed to consider the provision of Himachal Pradesh General Sales Tax Act, 1968 and merely based its conclusion on the term “any sum payable”. Therefore the Hon’ble High Court allowed the claim of deduction by the assessee. (AY 1989 -90)

Shankar Trading Co. P. Ltd. v. CIT (2012) 342 ITR 81 (Delhi) (High Court)

S. 44BBA : Air craft-Non-residents- Computation- Non Resident – Income from ground handling and technical services rendered to other airlines at Indian airport not taxable in India under Section 44BBA.
Following the decision of Lufthansa German Airlines v. Dy. CIT (2004) 90 ITD 310 (Delhi) it is observed that where assessee is engaged in the airline business, the income from ground handling and technical services rendered to other airlines at Indian airport would not be taxable in India under Section 44BBA and same would be considered as profits from operation of aircraft in international traffic as per provisions of Article 8 of the DTAA. (A.Y. 2006-07 )

Dy. DIT v. KLM Royal Dutch Airlines(2012) 50 SOT 578 (Delhi)(Trib.)

S.45 : Capital gains- Investment in shares-Whether the profit on sale of shares is assessable as business income or capital gains Tribunal must examine the issue holistically as per the test laid down by High Court and Circular of CBDT.
The assessee offered gains from sale and purchase of securities as “capital gains”. The AO assessed it as business profits on the ground that in the earlier years, it was offered as such. The CIT (A) & Tribunal accepted the assessee’s plea on the ground that the securities were shown as “investments” in the accounts and in the earlier years, the STCG was offered as business profits as there was no difference in the tax rate. On appeal by the department, Held reversing the Tribunal:
 There was a dispute whether in the earlier years, the gains were offered as business profits or as capital gains and the Tribunal had not given a clear finding. The Tribunal ought to examine the issue holistically keeping in mind the parameters/tests laid down in CIT v. Rewashanker A. Kothari( 2006) 283 ITR 338 (Guj) and CBDT’s Circular No.4/2007 dated 15th June 2007 on when income from transactions in securities should be treated as “business profits” and when as “capital gains”:
 (a) Whether the initial acquisition of the subject-matter of transaction was with the intention of dealing in the item or with a view to finding an investment?;
 (b) Why and how and for what purpose the sale was effected subsequently?;
 (c) How the assessee dealt with the subject-matter of transaction during the time the asset was with the assessee. Has it been treated as stock-in-trade or as an investment in the balance sheet?
 (d) How the assessee returned the income from such activities and how the department dealt with the same in the preceding and succeeding assessments?;
 (e) Whether the deed of partnership or memorandum of association, if the assessee is a firm or a company, authorises such an activity?
 (f) Most importantly, what is the volume, frequency, continuity and regularity of transactions of purchase and sale of the goods concerned.

CIT v. Sahara India Housing Corporation Ltd (Delhi) ( High Court)www.itatonline.org

S.45 : Capital gains- Investment –Shares- Business profits-Quantum of shares cannot be the sole test to decide whether  assessee is an investor or trader , on the facts the profits on sale of shares held be as capital  gains and not as business income.(S.28 (i)).
The assessee offered LTCG of Rs. 2.59 crores and STCG of Rs. 5.53 crores on sale of shares. The AO held that the LTCG & STCG were assessable as business profits on the ground that (a) the dividend was meager, (b) the assessee had undertaken risk by dealing in shares, (c) the holding period of most of the securities was very short, (d) the ratio of sales to purchases is was 1.77, (d) the sale and purchase transactions were frequent and (e) the scale of the activity of sale and purchase of securities was substantial. The CIT (A) upheld the taxability of STCG as business profits though the Tribunal deleted that as well. On appeal by the department, Held dismissing the appeal:
To determine whether an assessee is an investor in shares or a dealer in shares, a pragmatic and common sense approach has to be adopted always keeping in mind commercial considerations. The tests have been laid down in Instruction No.4/2007 dated 15.6.2007&CIT vs. Rewashanker A. Kothari (2006)283 ITR 338 (Guj). On facts, the Tribunal was right that the STCG was not assessable as business profits because (a) the assessee was a salaried employee, (b) He maintained two separate portfolios for investment and trading, (c) the shares were held for periods ranging from 2.4 months to 11 months, (d) though the quantum or total number shares was substantial, the transactions in question were only seven in number and the period of holding was not insignificant and small. While the quantum or total number may not be determinative but in a given case keeping in view period of holding may indicate intention to make investment, (e) substantial dividend income had been received, (f) the element of uncertainty and risk is always there in securities and this factor cannot be a determinative factor to decide whether the assessee is trading in shares or is an investor. Some investors do take risk, (g) The ratio of sales and purchase will always be in favour of sales when the shares are sold and (h) in the earlier assessment years, transactions in the investment portfolio were accepted by the AO.

CIT v. Vinay Mittal (Delhi) ( High Court)www.itatonline.org.

S.45 : Capital gains-No cost of acquisition-Ancestor land-Compensation received from municipal corporation is not taxable.
The assessee received Inami land from his ancestors for service of ‘Dargah’. Subsequently the municipal corporation acquired the said land and paid compensation to assessee. Assessing Officer was of the view that income arising from aforesaid transaction was liable to tax under section 45. In the present case since land was acquired by assessee’s ancestors free of cost for maintenance and services of Dargah, any element of cost in acquisition of aforesaid land was in conceivable. The ITAT therefore held that the transaction in question was outside the purview of section 45.(A.Y.2005-2006)

ITO v. Pashu Mohammed Zainuddin (2012) 50 SOT 45(URO)(Pune)(Trib.)
S. 45 : Capital Gains –Agricultural land – Land purchased for agricultural purpose, held for long period and shown as asset in balance sheet is Liable to capital gain tax on sale and not as business income. (S. 28(i))
The assessee is a company engaged in the business of purchase and sale of land. Where the assessee purchased the land which was used for agricultural land, showed it as asset in the balance sheet and held it for a long period. It was held by the Tribunal on the sale of such land be taxable as Capital Gain and not as Profit from Business and Profession. (A.Y. 2006-07) 

Addl. CIT v. Delhi Apartment P. Ltd. (2012) 135 ITD 441 (Delhi)(Trib.)

S.45 : Capital gains- Investment in Shares-Though the assesse borrowed the money , gains on shares assessable as STCG & not business profits.(S.28(i).
The assessee earned gains from shares of which Rs. 7.61 crores was out of delivery-based transactions and offered as STCG while Rs. 4.26 crores was out of futures & options and offered as business profits. The AO & CIT (A) assessed the STCG as business profits on the ground that (a) there was no LTCG, (b) there was no dividends, (c) there were hundreds of transactions during the year, (d) the assesee had borrowed interest-bearing funds for purchase of shares & (e) the average holding period was 41 days. On appeal by the assessee, Held allowing the appeal:
In the books, the delivery based transactions were accounted as investment and a distinction from the non-delivery transactions is maintained. The transactions were with a limited number of companies (8) and the average number of transactions    in one month were 8. The CBDT Circular permits the assessee to deal in the shares of one    scrip and treat some as trading and some as a capital investment. The fact that the assessee borrowed funds for investing in shares cannot constitute a factor as in none of the case laws or CBDT circular it has been held that borrowings will not be allowed in investment transactions. Investment in capital assets can also be carried out by use of borrowed funds. There is no bar notified by the law, judicial pronouncement or CBDT Circular.(A.Y. 2006-07)

Narendra Gehlaut v. JCIT (Delhi)(Trib.)www.itatonline.org

S. 45 : Capital gains-Dutch Citizen – Sale of tenancy rights in property –Sale of shares of a company holding ownership rights in immovable property is taxable as per  Article 13 of India-Netherlands DTAA.
Mrs. Punnika, Dutch resident holds ¼ interest in the tenancy rights and 596 shares in Parikh Agencies Pvt. Ltd., a dormant company holding ownership rights in immovable property in Mumbai. The applicant desired to know her tax liability under the Indian Tax Laws and under the laws of Netherlands in respect of the release of tenancy rights and on sale of the said shares. The questions involved for ruling are
1.Is the amount received for the release and relinquishment of tenancy rights, a real estate transaction liable to be taxed under the head capital gain and further, is it to be taxed in India or in the Netherlands?
2.Is it correct that the capital gain tax on sale of shares is to be paid in the Netherlands only and that, the TDS already made on the sale of shares is to be refunded to her by India?
It was held that
Ans. 1 The amount received for the release and relinquishment of tenancy rights is liable to be taxed under Article 13.1 of the DTAA in India.

Ans. 2 The capital gains on sale of shares is taxable in India under Article 13.4 of the DTAA. The TDS already paid on the sale of shares is to be allowed credit against any tax demanded by the Revenue, upon its proper verification.

Punnika Parikh(Mrs) AAR No. 1092 dt. 22 March 2012(AAR)(Unreported)

S.47(iv) : Capital gains- Transaction not regarded as transfer- Buy-back of shares- Indian subsidiary company – Indian subsidiary held not to be 100% owned as some shares held through nominees, section 46A being specific provision it was held that capital gains chargeable to tax in India(S. 45, 46A,115JB)
Applicant, a company in Germany holds 43,83,994 shares in the capital of a public limited company in India. Balance 6 shares are held by group companies as nominee of German company to maintain minimum number of shareholder to 7 as required by the Companies Act, 1956. The Indian company has proposed to buy back shares from the applicant. Applicant has approached Authority for ruling on following questions

1. Whether, in the facts and circumstances of the case, would the transfer of shares in the course of the proposed buy-back of shares, be exempt from tax in India in the hands of the applicant, in view of the provisions of section 47(iv)?
2. Without prejudice to Question 1, whether the applicant would be liable to tax under the provisions of section 115JB of the Act, in the absence of any business presence or permanent establishment, (PE) in India?
3. Where the gains arising to the applicant in the course of buy-back of shares by UVW India, is not taxable in India under the Act, whether UVW Germany is entitled to receive the amount on buy-back of shares without any deduction of tax at source?

AAR held that the exemption under section 47(iv) is available only where the parent company itself holds, or its nominees separately hold 100% shares of the shares of the subsidiary. Also the AAR observed that a nominee shareholder has the same rights in the company as any other shareholder and hence the shareholding by the nominees is not to be equated with the shareholding by the Applicant. The AAR held that section 46A has to prevail over section 45. The AAR referred to the speech of the Finance Minister and concluded that the intent behind the section was to clarify that income earned on buy back of shares would be deemed to be capital gains and not dividend income. On that basis AAR ruled the capital gains to be taxable in India. Without further discussion it was held that section 115JB has no application and the income being chargeable to tax, the applicant cannot receive any amount without deduction of tax at source.

RST (2012) 249 CTR 113 / 69 DTR 1(AAR)

S. 49 : Capital Gains – Previous owner -Cost of acquisition- Property acquired on partition of HUF, year of acquisition of property by HUF to be taken as year of Indexation.
The assessee sold the house property, which she acquired on partition of HUF. Since the property was not acquired by assessee at her own but was acquired under the mode specified in Section 49(1), the index cost of acquisition is to be computed with reference to the year in which HUF had acquired the property and not the year in which the property came to the assessee on partition. (A.Y. 2008-09)

Shakuntala Somani(Smt) v. ITO (2012) 50 SOT 629 (Indore)(Trib.)

S.50 : Capital Gains-Depreciable assets-Block of assets-On sale of office premises which was included in block of assets no depreciation was claimed hence assessable as long term capital gains.
The assessee earned long-term capital gain on transfer of an office premises. It was apparent from the records that the assessee had included the said property in block of assets but no depreciation was ever claimed or allowed on it. In the present case both the conditions mentioned in section 50 were fulfilled and hence the gain declared by the assessee was accepted as such, since no infirmity was pointed out by A.O. in the calculation thereon by assessee, hence provisions of section 50 cannot be applicable.(A.Y.2006-2007)

Divine Construction Company v. Asst. CIT.(2012) 49 SOT 6 (URO(Mum)(Trib.)

S.50C : Capital gains- Full value of consideration- Stamp valuation-Registration- When registration does not take place provisions cannot  be applied.
Where the registration does not take place by paying stamp duty, provisions of section 50C cannot be invoked. (A.Y.2004-05)

Ran Mal Bhansali v. ACIT (2012) 143 TTJ 65 (UO)(Jd.)(Trib.)

S.50C : Capital Gains – Full value of consideration-Stamp valuation- Purchaser-Income from undisclosed source- Deeming fiction created under Section 50C cannot with reference to full value of consideration cannot be extended to provision of Section 69 in case of purchaser.(S.69)
Section 50C incorporates special provision for determining full value of consideration in case where such full value of consideration declared to be received or accruing as a result of transfer of immovable property is less than value assessed or adopted by Stamp Valuation authority. It was held that the provisions of Section 50C apply only to the seller of the property and not the purchaser and thus, no addition can be made as unaccounted investment with reference to stamp duty value. (A.Y. 2006-07)

ITO v. Inderjit Kaur(Mrs) (2012) 50 SOT 377 (Chandigarh)(Trib.)

S. 54EA : Capital Gain –Investment in specified securities-Exemption-
–  Additional Compensation from date of receipt held allowable
Claim of exemption u/s 54EA for investment made around 5 years after the date of transfer instead of within 6 (six) months. Transfer took place in 1992 but  compensation received in June 1997. Amount was invested in UTI Monthly Income Scheme on July 5, 1997, and July 15, 1997. Claim of allowability of exemption under Section 54EA in A.Y. 1998 – 99, with respect to additional compensation from the date of receipt was held to be allowable. (AY 1998-99)

CIT v. J. Palemar Krishna (2012) 342 ITR 366 (Kar) (High Court)

S. 54EC : Capital gains- Investment in bonds- Exemption-Within six months- If investment within 6 months of transfer is impossible, then relief available if investment made within 6 months of receipt of consideration
 The assessee entered into a development agreement on 12.7.2005 in which the consideration was fixed at Rs 2.50 crores. A correction deed was entered into on 2.7.2007 in which the sale consideration was increased to Rs. 4.90 crores. The assessee invested Rs. 50 lakhs in s. 54EC bonds on 3.8.2007 and 27.10.2007. The AO held that the date of transfer was 12.7.2005 and as the s. 54EC investments had been made beyond a period of 6 months from the date of transfer, the exemption was not available. The assessee claimed that as it was impossible for him to invest within 6 months from the date of transfer, the period of 6 months had to be reckoned from the date of receipt of consideration. Held by the Tribunal:
 Though s. 54EC requires the investment to be made within 6 months of the date of transfer, a technical interpretation cannot be adopted but it has to be interpreted having regard to the purpose and spirit of the section. In Circular No 791 dated 2.6.2000 the CBDT held in the context of capital gains arising u/s 45(2), that though the transfer arises in the year of conversion of a capital asset into stock-in-trade, the period of 6 months for investment u/s 54E has to be reckoned from the date of sale of the stock-in-trade. The CBDT appreciated the impossibility of the assessee being able to invest the amount in specified assets within six months from the date of transfer. This interpretation of the CBDT supports the assessee’s claim that where the consideration is received much after the date of transfer and it is not possible to invest the same within 6 months of the date of transfer, the period of 6 months must be reckoned from the date of receipt of consideration.

Mahesh Nemichandra Ganeshwade v. ITO ( Pune)(Trib.)www.itatonline.org

S.54F : Capital Gains-Investment in residential house-Purchase of land-Invested in purchase of land construction not completed , entitled to exemption.
The assessee had invested full sale consideration received on sale of original asset in purchase of plot of land and started construction of a new house, though not completed. In view thereof the assessee was entitled to the exemption under section 54F of the Act, in as much as the thrust of the said section is on investment of net consideration received on sale of original asset and started construction of a new residential house, though the new house is not completed the assessee had complied with provisions of section 54F and hence as entitled to benefit of exemption claimed by assessee.(A.Y.2007-2008)

RajneetSandhu(Smt) v. DY.CIT(2012) 49 SOT 7(Chandigarh) (Trib.)
S.54F : Capital Gains –Investment in residential house- Exemption – Assessee unable to construct residential house within prescribed period, exemption to be granted under special circumstances where intention of the statute is satisfied
During the relevant assessment year, the assessee sold the capital asset and earned long term capital gain. Subsequently, assessee invested entire sale consideration in purchasing a land for construction of a residential house. However, assessee was prevented from constructing the house on the said land for the prescribed period of 3 years due to Order of status quo by Civil Court as a result of injunction petition filed by the owner of the land. The Tribunal observed that the conduct of assessee unequivocally demonstrates that assessee had  proceeded to construct a residential house, based on which he had claimed exemption, thus under certain special facts and circumstances the assessee would be entitled to exemption under Section 54F of the Act as the intention of the statute was fully satisfied by the assessee. (A.Y. 2007-08)

V.A. Tharabai(Smt.)v. Dy.CIT ( 2012) 50 SOT 537 (Chennai)

S.55(2)(ab) : Capital Gains –Cost of improvement-Cost of acquisition-
 Computation – Acquisition of shares on corporation and demutualization in lieu of BSE membership – Protective Assessment made on event of sale of shares deleted
The assessee company was engaged in the business of stock broking and stock trading. The assessee acquired shares of BSE consequent to corporation and demutualization of BSE as a company. The Revenue made protective assessment on the premise that in the event of sale of shares so acquired, the assessee would take benefit of section 55(2)(ab) of the Act and would claim cost of acquisition at the price at which the assessee originally paid by for acquiring stock exchange membership card ignoring the depreciation availed of for period from acquisition of stock exchange membership card till exchange of shares for BSE card. On appeal before the Tribunal, it was held that protective assessment so made was erroneous as while computing capital gains on transfer the assessee had calculated its cost of acquisition on the basis of written down value and Re. 1 which it had paid per share at the time of issue of shares by the BSE. (A.Y. 2006-07)

Asst. CIT v. Omniscient Securities Pvt. Ltd. (2012) 15 ITR 82 (Mum) ( Trib.)

S.56 : Income from other sources-Parking rent- Signage rent – terrace rent – licence fee –Assessable as income from other sources and not under the head income from house property.
The assesse company is engaged in the business of real estate development . It had declared a sum under the head income from house property . The Assessing Officer took the view that the amount received on account of signage rent, parking rent, terrace rent and license fees was to be taxed under the head ‘profits and gains of business. In appeal Commissioner (Appeals) held that the same is assessable as income from other sources. On appeal the Tribunal confirmed the view of the Commissioner  (Appeal) and held that  signage rent, terrace rent and license fee is taxable as Income from other sources u/s. 56 and not as income from house property u/s. 22(A.Y.2006-07).

JMD Realtors (P) Ltd. v. DCIT (2012) 135 ITD 337 (Delhi)(Trib.)

S. 56 : Income from other sources –Rental income-Discontinued business-Assessee not started his discontinued business and nothing is available on record  hence rental income charged as income from other sources
Where the assessee has not started his discontinued business and nothing is available on record wherefrom it can be inferred that assessee has ever intended to start its business the rental income was rightly considered by the AO as an income from other sources; however, whatever expenses are necessary to be incurred to earn the income are allowable expenditure u/s 57(iii). (A.Y. 2006 – 07)

ITO v. PujyaSujatha Agro Farms (P) Ltd. (2012) 145 TTJ 489 (Visakha) (Trib.)

S.68 : Cash credits- Share application money-Affidavit-Information furnished by Investigation wing showed that the parties who subscribed to share application money were entry providers and summons issued to parties  were not responded, affidavits were file after two years , addition held to be justified.
In the course of assessment proceedings the Assessing Officer  issued summons to parties who have subscribed shares, which could not be served, accordingly the addition was made under section 68. On appeal the assessee filed affidavit of directors , the Assessing  Officer was directed to examine the directors . After examination the Assessing Officer has forwarded the remand report. On merit the Commissioner (Appeals) deleted the addition , which was confirmed in appeal by the Tribunal. On appeal to the High Court by revenue , the Court held that , the affidavits filed by assessee two years later from entry providers to effect transaction as genuine has no evidentiary value , information from investigation wing and the summons issued to parties has come back hence there is no duty on Assessing Officer to prove that monies emanated from coffers of assessee, hence the addition under section 68 was justified , hence the appeal of revenue was allowed. (A.Y. 2000-01)

CIT v. Nova Promoters and Finlease (P) Ltd(2012) 342 ITR 169 / 206 Taxman 207(Delhi) (High Court)

S.68 : Cash Credits-Burden of proof-Identity-Evidence cannot be disregard without bringing any evidence contrary .
Once the assessee produces adequate evidence which prima facie discharge the burden of proving identity, creditworthiness of the shareholders and genuineness of transaction, in facts of such a case if the Revenue authorities want to discard these evidences as ‘created evidences’ the Revenue should make through probe so as to nail the assessee under section 68 of the Act.(A.Y.  2004-05 & 2006-07  )

CIT v. Kamdhenu Steel & Alloys Ltd. (2012) 68 DTR 38 (Delhi)(High Court)
S.68 : Cash Credits-Share application money-Identity-Identity proved and filed confirmation with PAN, addition cannot be made.
Four companies had invested in equity shares of assessee Company. All the above four companies had issued confirmation letters regarding purchase of shares from assessee and they also quoted their PAN. The assessee had also submitted resolution of board of director of each Company regarding investment in purchase of equity share of assessee and copy of their bank account’s indicating availability of funds for purchase of shares. In view of the above facts, no addition could be made under section 68 of the Act as assessee had proved identity of four companies, genuiness and creditworthiness of companies.  (A.Y.2006-2007)

Asst.CITv.HitkarniPrakashan limited (2012) 49 SOT 28(Jabalpur) (Trib.)
S.68 : Cash Credits –Balance sheet-Unclaimed liability- Old unclaimed liability in balance sheet for more than one year, no credit made in the books of accounts, held no addition to be made.
The provisions of Section 68 of the Act, held to be inapplicable in case where there are unclaimed liabilities lying in the Balance Sheet of the assessee for more than one year and no credit for the same have been made in the books of accounts. (A.Y.2007-08)

Dy. CIT v. Eastern Medikit Ltd. (2012) 135 ITD 461 (Delhi)(Trib.)
S.69 : Unexplained investments- unexplained investment in plot-Merely on the basis of draft agreement additions cannot be made.
Alleged amount of Rs.1.85 crores cannot be said to have been paid by the assessee merely on the basis of the draft agreement and the papers found at the time of survey; when it was established that said deal was finally closed as per revised agreement and there was no evidence to show payment of Rs.1.85 crores by assessee or his family members.(A.Y.2007-08)

Dy. CIT v. RajatAgarwal    (2012) 68 DTR 58(Jp) (Trib.)

S. 69A : Unexplained money-Confessional statement- Shifting stand- Addition  cannot be made merely on the basis of shifting stand and confessionary statement made by assessee , low tax morality of assessee not a basis of making addition
Where addition under Section 69A was sustained merely on the shifting stand and confessionary statement furnished by the Director- cum- DGM (finance) of the assessee and not on the evidence on record, it was held by the Tribunal that low tax morality displayed by the assessee cannot be the basis of addition. (A.Y.2007-08)

Dy. CIT v. Eastern Medikit Ltd. (2012) 135 ITD 461 (Delhi)(Trib.)

S.80G : Deduction-Donation- Charitable purpose-Recognition of institution etc. u/s. 80G(5)
Where a charitable institution is established for both charitable and religious purposes the expenditure on such religious activities (including salary to preachers engaged to spread the teachings of Lord Jesus Christ) exceeding 5 per cent of the total income, it is hit by sub-s (5)(ii) of S. 80G r/w/ subs. (5B) and CIT has rightly refused the registration u/s. 80G.(A.Y.2010-2011)

Church of Christ Social Service Society v. CIT (2012) 67 DTR330/144 TTJ 785 (Visakkhapatanam )(Trib.)

S. 80HHC : Deduction-Export business-Unabsorbed business loss- Depreciation-As there was no profit after set-off of unabsorbed business losses and depreciation of earlier year claim of section 80HHC is  rejected.
While determining the business profit for the purpose of Section 80HHC of the Act unabsorbed business losses and depreciation of the earlier years to be set-off. Where after set-off of business losses and unabsorbed depreciation there are no eligible profits, claim of deduction under Section 80HHC to be rejected.(A.Y. 2003-04 , 2004 – 05, 2006 – 07)

Mafatlal Denim Ltd v. Dy. CIT (2012) 135 ITD 483(Mum)(Trib.)
S. 80HHC : Deduction-Export business-Export oriented undertaking-Turnover-Eligible units-  Both units section 10B eligible units as well as non-eligible units, profit claimed as deduction u/s 10B cannot be included for deduction u/s 80HHC.
Where an exporter has both Section 10B eligible units as well as non-eligible units, turnover of 100% export oriented undertaking, whose profits have been claimed as deduction under Section 10B, cannot be included in total turnover for purpose of computing deduction under Section 80HHC. (A.Y. 2003-04)

Crew  B.O.S. Products Ltd v. Asst. CIT (2012) 135 ITD 542 (Delhi)(Trib.)

S. 80 HHE : Deduction-Export of computer software-Computer software-Turnover- Turnover of foreign branches has been reduced by revenue from export turnover, excludible from figure of ‘Turnover’ for purpose of computing deduction under section 80HHE
Where turnover of foreign branches has been reduced by revenue from export turnover, same is excludible from figure of ‘Turnover’ for purpose of computing deduction under Section 80HHE  (AY 2002 -03& 2003 – 04)

Patni Computer Systems Ltd. v. Dy. CIT (2012) 135 ITD 398 (Pune)(Trib.)

S.80IA : Deduction-Industrial undertakings-Infrastructure development-Industrial Undertaking Electricity-Annual loading cost- Profits in case of electricity collected by Electricity Board at lower rate to be determined on the basis of annual loading cost
The Electricity Board purchased power produced by assessee who was manufacturer of Yarn and had installed windmill for the purpose. Where electricity generated by assessee was collected by Electricity Board at lower rate and released to assessee whenever required, it was held that profits of the eligible undertaking were to be determined on the basis of the annual loading cost of electricity purchased by assessee from  Electricity Board. (A.Y. 2007-08)

Excel Cotspin (India) P. Ltd. v. Dy. CIT (2012) 15 ITR  57 (Chennai)(Trib.)

S. 80IB(4) : Deduction –  Industrial undertakings-Other than Infrastructure development-assessee not applied for factory licence before 31 March 2004 – Necessary condition of deduction not fulfilled

To qualify for deduction under Section 80IB(4) of the Act, one of the essential requirement is that the industrial undertaking should have begun to manufacture or produce articles or things on or before March 31, 2004. It was held that where the assessee had not even applied for a factory licence before 31 March 2004, the necessary condition under Section 80IB was not fulfilled. However, where application for licence was already made before 31 March 2004, but licence was obtained shortly thereafter, such lapse must be viewed as purely technical. The grant of licence would not relate back to the original date of application. (AY 2005-06)

CIT v. Jolly Polymers (2012) 342 ITR 87 (Guj.) (High Court)

S.80IB : Deduction–Profits and gains from industrial undertakings-Form- Reassessment-Deduction has to be allowed though the form no 10CCB was filed in the course of reassessment proceedings.( Form No.10CCB )
By filing Form No.10CCB in the course of reassessment proceedings (which form was not filed with the return of income, nor was it filed in the course of assessment proceedings, the assessee is not making any fresh claim for deduction u/s. 80IB but merely furnishing the documents to substantiate its claim made during the course of assessment and even reassessment proceedings and hence deduction to be allowed. (A.Y. 2003-04)

DCIT v. Tide Water Oil Co.(I) Ltd, ITA No. 20151/Kol/10 dated 20-1-2012.BCAJ Pg. 27, Vol. 43 B Part 5, February 2012(Kol) (Trib.)

S. 90 : Double taxation relief-Avoidance of tax-Permanent establishment- Arms length principle there was no attribution of profit-India  France DTAA – Article 5(5)
A French company (FCO) is engaged in the business of operation of ships in international traffic. FCO carried on operations in India through agents who handled the work at most of Indian ports. The agents are responsible for all clearance from the Governments. The Assessing Officer held that FCO had PE in India hence 10 % of the gross receipts from India to agency PE. The FCO contended that it did not have a PE in India under DTAA , hence its business profits could not be taxed in India .In any case , due to arm’s length principal , there was no attribution of profit. The Tribunal held that under India France DTAA as long as it is shown that the transactions between the agent and the principal are made under  arm’s length conditions, the agent would be treated as that of independent status even if he deals exclusively for one principal.
The `profit neutrality’ theory on account of arms length remuneration to a dependent agent PE (DAPE) may not always hold good as the dependent agent (DA) may not be compensated for entrepreneurial risk that may arise to the principal.

Delmas France v. ADIT, ITA No.9001/M/10, dt. 11-1-12, BCAJ Pg. 31  Vol. 43 B Part 5, February 2012.(Mum) (Trib.)

S.90 : Doubletaxation relief-Interest-Income tax refund- DTAA-India- Netherland-Interest on income tax refund is held to be chargeable to tax as Income from Interest as per the provisions of DTAA. (Art. 11)
 The assessee, a company declared income tax refund as income from interest under Article 11 of DTAA between India – Netherland and offered it to tax @ 10%. The Assessing Officer denying the claim of the assessee held that the interest on income tax refund was liable to be considered as business profit under Article 7 of the said DTAA and thus chargeable to tax @ 41%. On appeal to Tribunal it was held that there was no difference in the language used in Article 11 of the Indo-Germany DTAA and Article 11(2) of India – Australia DTAA .Thus, following the decision of Hapag Lloyd Container Linie GmbH v. DIT(IT) (2011) 9 Taxmann.com 126 (Mum) it was held that interest on income tax is liable to be taxed as income from interest and not business profit (A.Y. 2004-05)

International Global Networks BV v. DDIT(IT) (2012) 50 SOT 433(Mum)(Trib.)

S.90 : Double taxation relief- Foreign PE profits –Permanent establishment-Under Article 7 of the DTAA, foreign PE profits may be taxed in India.
The assessee, an Indian PSU company, earned Rs. 10.68 crores from foreign projects in Oman etc. The assessee claimed that it had a “permanent establishment” (PE) in those countries and that in accordance with the DTAA, only the source country was entitled to tax the profits and India was not authorized to tax the foreign PE profits. HELD by the Tribunal rejecting the plea:
 Article 7 of the DTAA provides that the profits of an enterprise of a Contracting State shall be taxable only in that state of residence unless the enterprise carries on business in other contracting state through a PE situated therein. If the enterprise carries on business as aforesaid, the profits of the enterprise “may be taxed” in the other Contracting State but only so much of them as is attributable directly or indirectly to the PE. While the first part gives exclusive taxation right to the State of residency, the second part gives taxation right to the state of residency as well as to the State where the PE is situated. The phrase “may be taxed” shows that the State of source has the non-exclusive right to tax while the State of residence continues to have the inherent right to tax. This interpretation is supported by the OECD Commentary on the Model Convention. P.V.A.L. Kulandagan Chettiar (2004)267 ITR 654 (SC) turned on different facts and does not lay down the proposition that the profits of a foreign PE cannot be taxed in the State of residence of the assessee.(A.Y.2000-01,2005-06 )

Telecommunications Consultants India Ltd v. ACIT (Delhi)(Trib.)www.itatonline.org

S. 90 : Double taxation relief-Avoidance of tax-Gains arising  from the transfer of shares  is liable to tax in India.- DTAA–India   Article 14(5)-
French residents transferred shares of a French company to another French resident. The only business/asset of the French company was shares comprising 80% equity shares in an Indian company. Since the transfer resulted in transfer of underlying assets and control of Indian company, on purposive interpretation, gains arising from the transfer were liable to tax in India.

Merieux Alliance and GroupeInds. Marcel Dassault, In re, AAR Nos. 846 and 847 of 09, Dt 28-11-11, BCAJ Pg. 37, Vol. 43 B Part 4, January 2012(AAR)

S.92C : Avoidsnce of tax- Transfer pricing-Power-TPO- TPO cannot examine the necessity of, or rewrite, the transaction.
The assessee entered into an agreement pursuant to which it paid brand fee/ royalty to an associated enterprise. The TPO disallowed the payment on the ground that as the assessee was regularly incurring huge losses, the know-how/ brand had not benefited the assessee and so the payment was not justified. This was reversed by the CIT (A) & Tribunal on the ground that as the payment was genuine, the TPO could not question commercial expediency. On appeal by the department, Held dismissing the appeal:

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 Investments Ltd v.CIT (1951)20 ITR 1 (SC), Walchand& Co Pvt Ltd (1967)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

CIT v. EKL Applicances Ltd (Delhi) ( High Court)www.itatonline.org

S.92C : Avoidance of tax- Arms’ length price-International transaction-Transfer pricing- Computation of ALP – Depreciation –  Assessee provides for depreciation on more real time basis and not as per Income Tax Rules – no adjustment called for in the quantum of depreciationfor the purpose of determining the Arm’s Length Price.
The assessee has followed a scientific system of providing for depreciation on a more real time basis. The assessee is not providing technical depreciation influenced by Income Tax Rules. The assessee provides for more or less actual depreciation. This actual depreciation is more relevant in working out the operating profit of the assessee. Thus, no adjustment is called for in the quantum of depreciation provided by the assessee in its operating account so as to work out its operating profit for the purpose of determining the Arm’s Length Price. (A.Y. 2007-08)

Lason India (P.) Ltd. v. Asst. CIT ( 2012) 50 SOT 583 (Chennai)(Trib.)

S. 92C : Avoidance of tax- Arms’ length price-International transaction-Transfer pricing- TPO rejected the filters adopted by the assessee and adopted untenable filters for arriving at the comparables ,Tribunal set aside the matter back to Assessing Officer.
Where TPO rejected the filters adopted by the assessee and adopted untenable filters for arriving at the comparables. The assessee in his detailed submissions before the TPO as well as the Tribunal, brought out various factors that would justify adopting of comparables by the assessee. On appeal, the Tribunal following the decision of Genesis Integrating System India P. Ltd. (Bangalore) set- aside the matter back to the file of AO directing the TPO to allow assessee to cross examine the comparables whose replies were sought to be used against the assessee if the assessee so desires. (A.Y. 2006-07)

Genesis Microchip (I) (P.) Ltd. v. Dy. CIT (2012) 135 ITD 533 (Bang)(Trib.)

S.92C : Avoidance of tax- Arms’ length price-International transaction-Transfer pricing- Extension of credit to the AE beyond a stipulated credit period – Held not to be construed as International Transaction
The extension of credit to the AE beyond a stipulated credit period cannot be  construed as an ‘international transaction’ for the purpose of section 92B(1) so as to require adjustment for ascertaining the ALP. Therefore, the consequential addition is untenable and liable to be deleted. (AY 2002 -03& 2003 – 04)

Patni Computer Systems Ltd. v. Dy. CIT (2012) 135 ITD 398 (Pune)(Trib.)

S.92C : Avoidance of tax- Arms’ length price-International transaction-Transfer pricing-TPO has no power to question business purpose of transaction, rule 10B(1)(a), does not authorize disallowance of any expenditure on the ground that it was not necessary.(S.37)
 The assessee made payment of Rs. 31.34 crores to its associated enterprise for “Second Line Support” services. The TPO & DRP held that the assessee had not benefited from the expenditure and that it was not “necessary to be incurred” and that its ALP was Nil. On appeal by the assessee Held:
 There is no force in the Revenue’s claim that the assessee was not required to make any payment to its AE for resolving warranty claims. The assessee has the right to enter into an arrangement according to which its business interests are protected. It is the prerogative of the assessee to decide the business expediency. Rule 10B(1)(a) does not authorize disallowance of any expendtture on the ground that it was not necessary or prudent for the assessee to have incurred the same or that in view of the expenditure was unremunerative or that in view of the continued losses suffered by the assessee in his business, he could have fared better had he not incurred such expenditure. However, the reasonableness of an expenditure has not been excluded from determination and the TPO has to determine the ALP of the transaction (CIT vs. EKL Appliances Ltd&Dresser Rand followed).(A.Y.2007-08 )

Ericsson India Pvt. Ltd v. DCIT ( Delhi)(Trib.)www.itatonline.org

S.92C : Avoidance of tax- Arms’ length price-International transaction-Transfer pricing- Computation of ALP – Loan is granted to foreign subsidiary in foreign currency – International LIBOR rate apply and not the domestic prime lending rate – No addition to be made where assessee charging interest at a rate higher than the LIBOR rate
In case of grant of loan by the assessee to its foreign subsidiary in foreign currency out of its own funds, for determining ALP, it is the international LIBOR rate that would apply and not the domestic prime lending rate, and assessee charging interest at a rate higher than the LIBOR rate, no addition can be made on this account.(A.Y.2006-07)

Siva Industries & Holdings Ltd. v. Asst. CIT (2012) 145 TTJ497 (Chennai)  (Trib.)

S.115J : Company- Book – Profit –  Deduction – Bonus and Donation amounts – Assessee not entitled to deduction when profit and loss account of the assessee disclosed the net profit in accordance with Part II and Part III of Schedule VI of the Companies Act
The AO while completing the assessment under Section 115J of the Act, disallowed the bonus and donation amounts on the ground that they did not relate to AY 1989-90. The High Court held that when the profit and loss account of the assessee disclosed the net profit in accordance with Part II and Part III of Schedule VI of the Companies Act, the assessee was not entitled to have deduction of the amounts debited in profit and loss appropriation account in the computation of net profit. (AY 1989-90)

CIT v. Swamiji Mills Ltd. (2012) 342 ITR 250 (Mad) (High Court) 

S.115JA : Company- Book Profit – deduction of withdrawal from the revaluation reserve account – creation of the revaluation reserve account referable to the balance sheet assets portion and not by way of appropriation to the profit and loss account – hence no deduction allowed
The assessee while computing the book profit for the assessment year 1989-90, reduced withdrawal from the revaluation reserve account. The High Court deciding in the favour of the department held that since the creation of the revaluation reserve account was referable to the balance sheet assets portion and not by way of appropriation to the profit and loss account, the question of claiming deduction does not arise.  Therefore assessee was not entitled to deduction in respect of withdrawal from the reserve account in terms of Section 115JA. (AY 1989-90)

CIT v. W.S. Industries (India) Ltd. (2012) 342 ITR 231 (Mad) (High Court)

S.115VJ : Tonnage tax scheme – Treatment of common costs – Reasonable basis -vis-à-vis proportionate basis-Matter set aside.
Assessee as also the authorities below have proceeded to use the expression `reasonable basis’ as interchangeable with `proportionate basis’.  This approach is fallacious in as much as proportionate basis is not essentially a reasonable basis in all the situations, particularly in the context of passive income like rent and interest.  Further, the allocation of the depreciation cost has to be also on the basis of usage of the asset in respect of which depreciation is claimed.  Thus, allocation of all the common costs on proportionate basis is neither reasonable nor meets the prescription of the statute. The matter was set aside to Assessing Officer for adjudication de novo. (A.Y. 2005-06)

Surendra Overseas Ltd v. Dy. CIT (2012) 68 DTR34(Kol.) (Trib.)     

S.127 : Income –tax authorities- Power to transfer cases-Question whether the  section 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 assessee challenged the order on the ground that as no reasons were given in the s. 127(2) order (though given in the affidavit-in-reply), the s. 127(2) order had to be struck down as per Ajanta Industries and others v. CBDT (1976)102 ITR 281 (SC). The department relied on Arti Ship Breaking vs. DIT(2000)) 244 ITR 333 (Guj) where it was held that Ajanta Industries was no longer good law and reasons were not required to be stated in the order. Held by the Court:

In Ajantha Industries and others   vs. CBDT(1976) 102 ITR 281 (SC), it was held that the requirement of recording reasons u/s 127(1) is mandatory and non-communication thereof is not saved by showing that the reasons exist in the file. However, in Arti Ship Breaking v.CIT (2000)244 ITR 333 (Guj) this law was not followed on the basis that in two subsequent decisions it was held non-communication of reasons recorded by the authority would not vitiate the proceedings. This view of the division bench does not appear to be correct because the said later two decisions related to irregularities in course of disciplinary proceedings which had nothing to do with s. 127 conferring power of transfer. Accordingly, it cannot be said that Ajantha Industries has lost its force in view of those two subsequent decisions. Accordingly, the matter has to be referred to a larger bench to consider the following question:

“Whether the decision of the three-judge-bench of the Supreme Court in the case of Ajantha Industries reported in [1976] 102 ITR 281 so far as it lays down the law that the requirement of recording reasons under section 127(1) of the Income tax Act is a mandatory direction under the law and non-communication thereof is not saved by showing that the reasons exist in the file although not communicated to the assessee is still a good law in view of the subsequent decisions of the Supreme Court in the cases of Managing Director, ECIL v. B. Karunakar, AIR 1994 SC 1074, and State Bank of Patiala v. S. K. Sharma, AIR 1996 SC 1669 as held by a Division Bench of this court in the case of Arti Ship Breaking vs. Director of Income Tax (Investigation) and others reported in (2000) 244 ITR 333.”

MillenniunHouseware v. CIT (Guj)( High Court)www.itatonline.org.

S.139(4) : Assessment –Return- Notice- Notice under section 142(1) cannot be issued after filing of Return after time-limit for issuance of notice under section 143(2) has expired
The Assessing Officer not to issue notice under Section 142(1) for the purpose of making an assessment after filing of return after time limit of the issuance of notice under Section 143(2) has expired.

Madan Singh Kangarot  v. ITO (2012) 145 TTJ (Jp) 262(Trib.)

S.143(2) : Assessment – Jurisdiction- Search and seizure-Notice-Block assessment- Non issue of notice assessment held to be bad in law, deeming provision did not have the effect.(S.158BC,292BB)
Where notice under section 143 (2) of the Act is not issued to the assessee, the assessing authority does not have jurisdiction to proceed further and frame block assessment proceedings.  The Hon’ble Court further held that provisions of section 292 BB of the Act did not have any effect on the judgment of Apex Court in the case of,CITv.Hotel Blue Moon 321 ITR 362 where in the court held that the very foundation of the jurisdiction of the assessing officer is on issuance of notice under section 143 (2) of the Act. On facts there was finding that no notice was issued under section 143 (2) hence the block assessment held to be bad in law. The court also held that non consideration of section 292BB , which is rule of evidence ,and deeming provision to validate the notice in certain circumstances did not have any effect , when the notice was not served.

Manish Prakash Gupta v. CIT (2012) 68 DTR 112 / 249 CTR 57(All)( High)(Court)
S.144 : Aseesment- Books of acconts- Audited-Books of accounts audited can not be rejected without pointing out specifc defects.
The assessing officer cannot reject the books of accounts maintained by the assessee without pointing out specific mistake in the books of accounts which are audited by the chartered accountant.

Asstt. CIT v. RoopchandTharani (2012) 66 DTR104 (Chattisgarh)(High Court)
S.144C : Assessment- Reference to dispute resolution panel- Draft Order mistakenly termed as Final Order by AO – Corrigendum issued by Assessing Officer rectifying the mistake not prejudicial to the interest of assessee
The Draft Assessment order passed by Assessing Officer was mistakenly termed as Final Order and demand notice was issued along with the order. The AO issued a corrigendum and withdrew the demand notice. It was held by the Tribunal that corrigendum issued by AO was not prejudicial to assessee. A statutory authority has inherent power to issue corrigendum and once the corrigendum is issued, that mistake is undone and first communication of the AO assumes character of the draft order. (A.Y. 2007-08)

Lason India (P.) Ltd. v. Asst. CIT (2012) 50 SOT 583 (Chennai)(Trib.)

S.145 : Assessment- Method of Accounting – Business Expenditure  – Deduction of unutilized Modvat credit – No accounting procedure involved in determining deduction – Matter remanded back to AO giving opportunity to assessee to prove payment of excise duty on inputs
The assessee claimed deduction of unutilized Modvat credit as reflected in the books of accounts from the value of its stock. The AO rejected the books of accounts of the assessee. It was held that the AO was not justified in rejecting the method of accounting as it was not accounting procedure which was involved in the claim made by the assessee but a specific deduction claimed in respect of available Modvat credit. The matter thus remanded back to the AO to give opportunity to assessee to make good its claim towards the value of excise duty paid by the assessee to its vendors and seek reduction in value proportionately. (AY 1995-96, 1996 – 97, 1997 -98 and 1998 – 99)

CIT v. H.P. Global Soft Ltd. (2012) 342 ITR 263 (Kar.) (High Court)

S.145 : Assessment-Method of accounting-Accrual of income-Retention money- Retention money received pursuant to furnishing of bank guarantee is not taxable until successful completion of the contract and expiration of the guarantee.(S.5)
As per the contract 5 % of the amount was to be held as retention money When the retention money reached 2% of the contaractprice , the tax payer could ask for release of 1% of retention money by furnishing bank guarantee. The Tax payer received the retention money by furnishing the bank guarantee. The Assessing Officer held that the same is taxable .In appeal  CIT (A) held that since the tax payer  did not have an absolute right over the payments they were not taxable. On  appeal to the Tribunal , the Tribunal held that  as long as performance guarantee remains and enforceable without notice to the tax payer ,the retention money received cannot be recognised as income until successful completion of contract and expiration of the guarantee.(A.Y.2004-05)

ADIT v. Ballast NadamDregin, ITA no. 999/M/08, BCAJ Pg. 26, Vol. 43 B Part 6, March 2012(Mum)(Trib)

 

S.147 : Reassessment-Limitation-Reopening of  reasons need not be supplied within limitation period, reopening cannot be held to be invalid. (S.148,149 )
 For AY 2004-05, the AO issued a notice u/s 148 on 15.3.2011. The recorded reasons were supplied to the assessee on 30.8.2011 (after the expiry of the limitation period of 6 years). The assessee, relying on Haryana Acrylic Manufacturing Co  v. CIT(2009) 308 ITR 38 (Delhi), challenged the reopening inter alia on the ground that as the recorded reasons were supplied after the expiry of the limitation period, the reassessment proceedings were invalid. Held dismissing the petition:

There is no requirement in s. 147, 148 or 149 that the reasons recorded should also accompany the notice issued u/s 148. The requirement in s. 149(1) is only that the notice u/s 148 shall be issued. There is no requirement that it should also be served on the assessee before the period of limitation. There is also no requirement in s. 148(2) that the reasons recorded shall be served along with the notice of reopening the assessment. The only mandatory requirement is that before issuing the notice to reopen the assessment the AO shall record his reasons for doing so. After GKN Driveshafts(India) Ltd v.ITO (2003)259 ITR 19 (SC) the AO is duty bound to supply the recorded reasons to the assessee after the assessee files the return in response to the s. 148 notice. Haryana Acrylic turned on the peculiar facts of that case, where two sets of reasons had been recorded by the AO. As the second set of reasons alleging non-disclosure of material facts surfaced for the first time in the affidavit filed by the Revenue before the High Court after the expiry of 6 years, it was held that the reassessment proceedings were invalid. As this is not the fact situation here, the assessee’s plea cannot be accepted

A. G. Holdings Pvt. Ltd v. ITO (Delhi) (High Court) www.itatonline.org.

S.147 : Reassessment-Disclosure in notes on account-Change of opinion- Question  whether there is “change of opinion” if AO does not specifically apply his mind referred to Full Bench.
 In the Notes to accounts, the assessee had disclosed that it had received Rs.173 lakhs for transfer of exclusive distribution rights of AC and water coolers and that it was credited to capital reserve and not treated as income. The AO passed a s. 143(3) assessment order in which he did not deal with the issue. Subsequently, as the revenue audit raised an objection, the AO, within 4 years from the end of the AY, reopened the assessment on the ground that the said amount was chargeable as “Capital gains”. The Tribunal, following CIT v Kelvinator of India Ltd (2010) 256 ITR 1 (FB) (affirmed in CIT v Kelvinator of India Ltd  (2010 ) 320 ITR 561 (SC)), struck down the reopening on the ground that it was based on the notes on accounts that was already on record, there was no “fresh material” and so it was a case of “lapse of the AO” and a “change of opinion“. On appeal by the department, Held:

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 of India Ltd (2010) 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:

(i) What is meant by the term “change of opinion?

(ii) Whether assessment proceedings can be validly reopened u/s 147, even within four year, if an assessee has furnished full and true particulars at the time of original assessment with reference to income alleged to have escaped assessment and whether and when in such cases reopening is valid or invalid on the ground of change of opinion?

(iii) Whether the bar or prohibition under the principle “change of opinion” will apply even when the AO has not asked any question or query with respect to an entry/note, but there is evidence and material to show that the AO had raised queries and questions on other aspects?

(iv) Whether and in what circumstances s. 114 (e) of the Evidence Act can be applied and it can be held that it is a case of change of opinion?”

CIT v. Usha International Ltd (Delhi) (High Court)www.itatonline.org.

S.147 : Assessment-Reassessment –Change of opinion-Beyond four years-Reassessment held to be not valid in the absence of any new or additional information.
Where the assessee had made full and true disclosure and also there was a note by the auditor in his audit report, reopening of assessment beyond the period of four years was held to be not valid notwithstanding the fact that for subsequent assessment year a similar addition had be   made by the assessing officer. Assessment cannot be reopened on the basis of a mere change of opinion.  There should be some tangible material with the assessing officer to come to the conclusion that there is an escapement of income. A mere change of opinion on the part of the assessing officer in the course of assessment for a subsequent year cannot justify the reopening of an assessment.(A.Y.2006-07)

NYK Line (India) Ltd. v. Dy. CIT (2012) 68 DTR 90 (Bom)(High Court)

S.147 : Assessment-Reassessment –Housing project-Amendment of law-Beyond four  years-Reassessment held to be not valid.
The Assessing officer issued the notice for reopening Notice issued after the expiry of four years from the end of the relevant assessment year merely on the basis of a prospective amendment without placing any evidence on record to demonstrate that the assessee had concealed any material facts was held to be invalid.(A.Y.2004-05)

Kalpataru Sthapatya (P) Ltd. (2012) 68 DTR 221 (Guj)(High Court).

S.147 : Assessment-Reassessment –Beyond four years- Notice –Reassessment merely on the basis of investigation wing held to be not valid.
Notice issued after the expiry of four years from the end of the relevant assessment year by the assessing officer merely acting mechanically on the information supplied by the Investigation wing about the accommodation entries provided by the assessee to certain entities without applying his own mind was led to be not justified.(A.Y.2004-05, 2006-07)

CIT v. Kamdhenu Steel & Alloys Ltd. (2012) 68 DTR 38/ 248 CTR 33 (Delhi)(High Court)

S.147 : Reassessment –Beyond four years-Reopening held to be valid on the basis of disclosure made in subsequent year.
Assessment can be reopened even after the expiry of four years from the end of the relevant assessment year on the basis of the disclosure made in subsequent year which were not disclosed in the relevant assessment year.( A.Y.2004-05)

Siemens Information Systems Ltd. v. Asstt.CIT & Ors. (2012) 68 DTR 77 (Bom)(High Court)

147 : Reassessment – Reason to believe – subsequent supreme court decision.- Reopening held to be valid.
After the decision of the Supreme Court in Orissa State Warehousing Corpn vs. CIT (1999) 153 CTR (SC) 177: (1999) 237 ITR 589 (SC), it was incumbent on AO to examine whether the claim allowed by him under s. 10(29) during the original assessment proceedings was in conformity with the same Theory of reassessment based on change of opinion is not applicable to assessee’s case as the AO was implementing the law of the land as declared by the Supreme Court. Reopening was therefore valid and sustainable.(A,Y .1995-96 &1997-98 )

Asst. CIT v. Ventral Warehousing Corp.(2012) 67 DTR356  (Delhi)

S.147 : Change of opinion-Reopening of assessment on mere change of opinion on set of facts available at the time of completion of original assessment is held to be not valid
No reassessment to be initiated in the case where AO after due application of mind has decided a particular issue in a particular manner in the original assessment unless there are any fresh material coming to his notice after passing assessment order. Thus, change of opinion by the AO on same facts of which were there at the time of completing the original assessment action of AO was held to impermissible. (A.Y. 2004-05)

International Global Networks BV v. DDIT(IT) (2012) 50 SOT 433(Mum) (Trib.)

S. 147 :  Non –filing of ROI – In absence of any tangible material to show that the income had exceeded the maximum amount not chargeable to tax – Reassessment not justified
In the absence of any tangible material to show that the assessee’s income in the AY 1999-2000 and 2000-01 had exceeded the maximum amount which is not chargeable to tax, AO was not justified in initiating reassessment proceeding u/s 147 merely for the reason that the assessee has not filed its return for the said AYs; there was no relevant or tangible material on the basis of which the AO could have formed requisite belief that income had escaped assessment. (A.Y.  1999-2000,2000-01)

Cebon India Ltd. v. Asst. CIT (2012) 145 TTJ475 (Delhi) (Trib.)

S.148 : Reassessment – Notice – No reassessment as assessee made full disclosure and the AO considered and examined the claim at the time of original assessment
Where at the time of original assessment, the assessee furnished full and true information germane to the facts of the case and the claim of the assessee as regards the deduction of Section 80IA was specifically considered and examined by the AO, the AO could not reopen the assessment. It was held that the assessee had not failed or did not omit to disclose material facts.

RRB Consultants and Engineers P. Ltd. v Dy. CIT (2012) 342 ITR 127 (Delhi)(High Court)

S. 154 : Assessment- Rectification of Mistakes – deduction from the profit not enumerated in clause (i) to (ix) covered by the Explanation to Section 115JA(2) – Mistake apparent on record
The assessment was completed based on the profit taken from Profit and Loss appropriation account prepared in terms of Part II and III of Schedule IV of the Companies Act. The claim of the assessee of deduction from the profit not enumerated in clause (i) to (ix) covered by the Explanation to Section 115JA(2) was held to be a mistake apparent on record. The order of Tribunal reversing the original Order and passing a revised assessment under Section 154 upheld by the High Court. (A.Y. 1997 – 98)

Sree Bhagawathy Textiles Ltd. v. Asst. CIT (2012) 342 ITR 244 (Ker)(High Court)  

 

S.163 : Representative assessees- Agent of a non-resident – Business Connection – Mere relation between the parties which facilitates or assists the carrying on of the business held as business connection [S.9(i) ]
The assessee held to be an agent of non-resident company under Section 163 of the Income Tax Act, 1961 on the principle that mere relation between the business of non-resident and the activity in India which facilitates or assists the carrying on of the business would also result in a business connection within the meaning of Section 163(1)(b) and Section 9(1)(i) of the Act. As also the non-resident was in receipt of income from the assessee as per section 163(1)(c) of the Act. (A.Y. 1998-99)

ADIT v. Jet Airways (India) P. Ltd. (2012) 50 SOT 543 (Mum)(Trib.)

S.174 : Assessment of persons leaving India-Assessment- Prima facie satisfaction- Notice under section 174(4) is mandatory, notice under section 143(2) is not sufficient.(S.143(2), 175).
From the petitioner an amount of Rs 1,74,000 was seized by Police on night patrol duty. The seized amount was deposited in Court and after setting apart an amount of 33 percent towards income tax due the balance amount was released. The petitioner received the notice under section 142(1) as no return were filed .The assessee filed the return declaring  the total income of Rs 36000.In the course of assessment proceedings the explanation was given for the sources of the cash . The Assessing Officer disbelieved the  explanation  and assessed the the entire cash recovered as  unaccounted  cash recovered. The revision petition filed by the assessee under section 264 was also dismissed by Commissioner. The Assessee filed the writ petition. The Court held that before invoking the powers under section 174 and 175  there has to be prima facie satisfaction of the facts and circumstances and a specific notice has to be issued under section 174(4) . The court also held that the issue of notice under section 142(1) is not sufficient. Accordingly the assessment orders were set aside.(A.Y. 2003-04,2004-05)

Abdul VahabP.v. Asst CIT ( 2012) 249 CTR 102 (Ker) (High Court)

S.194C : Deduction  at source –Works contract- Payment for making diaries and catalogues is held not a works contract as no material supplied by the assessee.
Payment made to two parties for preparing diaries, catalogues and folders as per requirements of the assessee. It was held that as no material was supplied by the assessee, the same does not constitute work contract. Therefore, assessee not obliged to deduct tax at source. (A.Y.2007-08)

Dy. CIT v. Eastern Medikit Ltd. (2012) 135 ITD 461 (Delhi)(Trib.)

S. 194C : Deduction at source ––Contract-Other party- Other party not privy to the contract between the assessee and the principal, hence no TDS is  to be deducted for payment made to other party .
The provisions of Section 194C apply only when condition of “carrying out any work in pursuance of a contract” is fulfilled. In the instant case as per the agreement, the risk and responsibility of the carrying out contract work is on assessee and other party does not have privity to contract between the assessee and the principal. Therefore the payment made by assessee to the other party does not fall within the purview of Section 194C of the Act. (A.Y. 2007-08)  

Bhail Bulk Carriers v. ITO (2012) 50 SOT 622 (Mum)(Trib.)

S.194J : Deduction at Source –Technical fees-Leaseline charges held not to be fees for technical services.
Following decision of Angel Broking Ltd. (2010) 3 ITR (Trib) 294 (Mum) it was held that the leaseline charges are not in the nature of fees for technical services as per Section 194J of the Act. (A.Y. 2006-07)

Asst. CIT v. Omniscient Securities Pvt. Ltd. (2012) 15 ITR 82 (Mum) (Trib.)

S.194H : Deduction of tax at source-Discount-Principal-Agency-Amount retained by collection centers is not commission hence provisions of section 194H cannot be applied.
 Amount of discount retained by the collection centres is not `commission’ paid by the assessee to the collection centres and consequently section 194H does not apply to such amounts. Since assessee has not paid any amounts to the collection centres, provisions of sec. 194H could, not have been met.Existence of principal – agency relationship is a sine qua non for invoking section 194H.  (A.Y. 2006-07)

SRL Ranbaxy Ltd v. Addl. CIT, ITA No. 434/Del/11 dt 16-12-11, BCAJ Pg. 28, Vol. 43 B Part 5, February 2012(Delhi) (Trib.)

S.195 : Deduction at source-Non-resident- Fees for technical services- “make available” technical knowledge, mere provision of service is not enough; the payer must be enabled to perform the service himself, hence the assesse is not liable to deduct tax at source.- DTAA- India-Nether land –Art 12( S. 201 ) 
 The assessee, engaged in prospecting and mining for diamonds entered into an agreement with a Netherlands company for conducting air borne survey and providing high resolution geophysical data. The AO held that the consideration was chargeable to tax as “fees for technical services” under Article 12 of the India-Netherlands DTAA and held the assessee liable u/s 195 & 201 for failure to deduct TDS. This was reversed by the CIT (A) & Tribunal on the ground that though the Dutch company had performed services using technical knowledge and expertise, such technical experience etc had not been “made available” to the assessee. On appeal by the department to the High Court, Held dismissing the appeal:

Article 12(5) of the DTAA defines “fees for technical services” to mean payments in consideration for the rendering of any technical or consultancy services “which make available technical knowledge, experience, etc or consist of the development and transfer of a technical plan or technical design. To be said to “make available”, the service should be aimed at and result in transmitting technical knowledge etc so that the payer of the service could derive an enduring benefit and utilize the knowledge or know-how on his own in future without the aid of the service provider. In other words, to fit into terminology “making available”, the technical knowledge, skills” etc must remain with the person receiving the service even after the particular contract comes to an end. It is not enough that the services offered are the product of intense technological effort and a lot of technical knowledge and experience of the service provider has gone into it. The technical knowledge or skills of the provider should be imparted to and absorbed by the receiver so that the receiver can deploy similar technology or techniques in the future without depending upon the provider. On facts, while the Dutch company performed the surveys using substantial technical skills, it has not made available the technical expertise in respect of such collection or processing of data to the assessees, which the assessee can apply independently and without assistance and undertake such survey independently. Consequently, the consideration is not assessable as “fees for technical services” (AAR Rulings in Perfetti Van Melle Holding, Shell India&Areva T&D distinguished)( A.Y. 2004-05)

CIT v. De Beers India Minerals Pvt Ltd (Karn)( High Court)www.itatonline.org. 

S.195 : Dedcution at source—Non-resident-Interest-Income on sale of CCDs – CCDs in the nature of debt until converted  therefore  income recharacterised as interest income hence  benefit under India-Mauritius DTAA is held not applicable and liable to deduct tax treating the same as interest.(S.45, 90, Art 11 )
Z, the applicant and an Indian Company V (hereinafter referred as "V") invested in equity shares and CCDs of Company S (hereinafter referred as "S"), wholly owned subsidiary of V.Under the investment agreement executed between S, V and Z, the CCDs were mandatorily convertible into equity shares upon the expiry of 72 months from the investment date; additionally, prior to the mandatory conversion date, Z had a put option to sell specific number of equity shares and CCDs to V and V had the call option to purchase the said shares and CCDs from Z. V exercised the call option and purchased the CCDs from Z. The tax officer however rejected the application and asked V to deposit the withholding tax on this transaction. Z subsequently approached the AAR for a ruling on the issue.

AAR held that CCD was in the nature of a debt instrument and the obligation to repay the principal and an interest component were embedded in the concept of debt. The AAR further concluded that ‘interest’ denotes any type of income that become payable on a debenture. On review of the investment agreement the AAR concluded that S had no power to exercise any management control over its business and that for all practical purposes V and S were a single entity.Additionally, V was required to share with Z, its financial statement, debt servicing status etc.

In light of such provisions, the AAR observed that on a close reading of the investment agreements, it was apparent that the commitment to repay the debt was on V, the parent of S and not S and therefore, the purchase of CCDs by V from Z should be considered repayment of the debt such that income arising to Z should be treated as interest income.

Z, In re (2012) 69DTR 329(AAR)

S.195 : Deduction at Source – Non- resident (India – Netherland DTAA) – Make Available – recipient of services must be conveyed the right to continue the practice put into effect and adopted
The term “Make Available” means that the recipient of the services should be in a position to derive an enduring benefit and be in a position to utilize the knowledge or know-how in future on his own. Where the expertise in running the industry run by the group is provided to Indian entity in group to be applied in running business, the employees of Indian entity get equipped to carry on that business model or service model on their own without reference to service provider when service agreement comes to an end. This would not be termed as make available as the recipient must also be conveyed specially the right to continue the practice put into effect and adopted under agreement on its expiry. 

Perfetti Van Melle Holdings B.V. (2012) 342 ITR 200 (AAR)

S. 195 : Deduction at Source – Non- resident (India – Netherland DTAA) – services giving knowledge and experience in the nature of assistance to team of Indian company – Taxable in India
The applicant is Netherland company, engaged in the manufacture and sale of sugar confessionary and gum. The services giving knowledge and experience of the confectionary industry to an Indian company were technical in nature . The agreement clearly shows that the services were in the nature of assistance to team of Indian company. The recipient of the services was bound to apply specified services to optimize the profit to give maximum royalty based on turnover. Therefore, the services under the service agreement when read with the trademark and technology and know-how licence agreement, fell within the purview of article 12(5) of the DTAA. Therefore the payment was taxable as per DTAA and Income Company is liable to withhold taxes under Section 195 of the Act.

Perfetti Van Melle Holding B.V., In re (2012) 342 ITR 200 (AAR)

220 : Collection and recovery- Interest-Assessment set  aside-Interest is payable by assessee from the date of fresh assessment order .
The original assessment  has been set aside  by the CIT(A),,but on further appeal ,the Tribunal set aside the order of CIT(A) and issue was restored back to the Assessing Officer. In the fresh assessment , the Assessing Officer repeated the addition raising the same demand but interest under section 220(2) was levied from the date of demand notice issued as per the original assessment order. In an appeal before the Tribunal the assessee contended that in view of Board Circular dated no 334 dated 3-4-1982 , the interest could be charged only from the date when the demand became due as per the fresh assessment order and not from the date of original assessment order. The Tribunal accepted the contention and held that interest payable is to be computed from the date of fresh assessment order. Accordingly the appeal of assessee was allowed.A.Y.1996-97)

NaradInvt. And Tdg P. Ltd v. DCIT, ITA No.3360/Mum/10, dt 19-10-11 BCAJ Pg. 35, Vol. 43 B Part 4, January 2012(Mum)(Trib.)

S.220 : Collection and recovery- Appeal to Commissioner (Appeals)- Stay- Direction was given for expeditious disposal of appeal and stay of demand till disposal of appeal.
For the assessment years 2003-04, 2004-05 , 2005 -06 the Assessing Officer accepted the contention of the assessee that it was an agent of the Government of India for the Navi Mumbai  project. However  for the assessment year 2006-07 the Assessing Officer has changed the stand and held  that it is liable to be assessed in respect of all the projects including Navi Mumbai project and raised the demand on assessee.  The assessee filed an appeal before  the Commissioner (Appeals) which was pending. The application for recovery of stay was rejected . The assessee filed a writ petition  before the High Court .High Court stayed the recovery proceedings and directed the Commissioner (Appeals) to for expeditiously disposal of appeal. (A.Y. 2006-07)
CITY and Industrial Development Corporation of Maharashtra Ltd v. Asst CIT (2012) 343 ITR 102 (Bom) (High Court)

 

S.237 : Refunds-Refund of Income-tax and   Wealth tax- General principles-Article 265 of the   Constitution of India.
The Income-tax  Act and wealth tax Acts provide for levy  assessment ,recovery , refund , appeals and all incidental /ancillary matters . For an assessee to claim refund , he must satisfy the statutory requirements and article 265 of the Constitution of India is not violated  if an assessee does not claim refund in accordance with the provisions of the Act  or when the “wrong” assessment  or any other  “wrong”  order  becomes . An assessment order or an order or an order quantifying the income or tax able wealth can be rectified or modified in the proceedings as contemplated by the enactment . The assessment order or the order quantifying the income or taxable wealth cannot be challenged on the merits while the authorities examine the question of refund . The authorities can not go beyond the assessment order or the order qualifying net wealth /income. The  Court held that the refund provisions should be interpreted in a reasonable and practical manner and when warranted liberally in favour of the assessee.. If there is substantial compliance with the provisions for refund , it may not be denied because it is not strictly in the form or prescribed manner. Accordingly the Court  allowed the petition for granting refund. For the Assessment year 1999-2000 the assessee had filed the return and had deposited self assessment tax and return filed by the assessee was accepted . The Court observed the the assessee has the right to file a revision under section 25 of the wealth tax Act , however ,the period for filing for the revision had expired and the assessee did not take steps to invoke the power hence the assessee is not entitled to refund.(A.Ys 1994-95 and 1999-200)
 Indglonal Investment and Finance Ltd and another v.ITO (2012) 343 ITR 44 (Delhi)(High Court)
Taksal Theatres Private Ltd  v. Asst CIT (2012) 343  ITR 44 (Delhi) (High Court) 

S.245R : Advance rulings-Application-Return filed-Admissibility of the application to the Authority after filing return of income is held as barred hence the application rejected.
Application was made by the applicant to reconsider the view in the case of SEPCO III Electric Power Corporation that upon filing the return of income, it cannot consider the question where return has been filed.

It was stated by the authority that the fixing of the date of notice under section 143(2) / 142(1) of the Act by the income-tax authority as the starting point, would result in vagaries and to the use of different yardsticks to different applicants. A jurisdiction cannot depend on such vagaries. It is, therefore, necessary to have a fixed common point or event for determining the existence or absence of jurisdiction. Applying that test it is held that the definite point should be the date of filing of the return juxtaposed with the filing of the application before this Authority. Thus the application is rejected.

Also it may be noted that in the instant case the applicant has approached the authority more than four years after the transaction giving rise to the application was entered into and even assessments for two years were already completed.

Red Hat India Private Limited – A.A.R. No. 1050 dt. 3 February 2012(AAR)(Unreported)

S. 246A : Appeal –Commissioner (Appeals)- Additional ground –Capital gain- Benefit of proviso to section claimed  was first time before Commissioner(Appeals) held justified in allowing the claim.
In the return of income filed by the assessee the assessee has shown the long term capital gains taxable at 20%., which was accepted by the Assessing Officer. The assessee has not filed revised return. The assessee filed  an appeal before the Commissioner (Appeal) and contended that by mistake the capital gain was offered at 20%. As per proviso the long term capital gain is assessable for the relevant year was at 10%. The assessee also filed an application under Rule 46A(1)(c )/(d ) of the IT Rules.  The Commissioner (Appeals) has admitted the claim and allowed the appeal. Revenue has filed an appeal before the  Tribunal  . The Tribunal allowed the appeal following the Goetze (India) Ltd v.CIT (2006) 284 ITR 323 (SC). On an appeal to the High Court by assessee the Court held that the Assessee is entitled to raise the legal issue before the first Appellate  Authority , which possessed co terminus power similar to Assessing Officer. The High Court set aside the order of Tribunal and restored the order of Commissioner (Appeals).(A.Y .2001-02)

Raja Rani Gulati(Smt) v. CIT (2012) 249 CTR 51 (All) (High Court)

S.251 : Appeal- Commissioner (Appeals) –power-New source of income- Remand-Assessing Officer cannot travel  beyond the specific issue contained in remand order.(S. 115J)
The assessing officer is not empowered to travel beyond the specific issues contained in the order of remand passed by the Commissioner of Income tax (Appeals) (A.Y.1988-89)

Dy. CIT v. Surat Electricity Co. Ltd. (2012) 67 DTR 181 (Guj)(High Court)

S.251 : Appeal –Commissioner (Appeals)- Power- Change of status- In appeal the Commissioner (Appeals) has no power to modify the status of assessee from AOP to BOI.
The Assessing Officer issued the notice under section 148 to assesse in the  status of AOP  comprising of three persons. The assessment order passed in pursuance of notice under section 148 was challenged before Commissioner (Appeals). The Commissioner (Appeals) changed the status from AOP to  BOI  consisting of two persons. The Order of Commissioner (Appeals) was up held by the Tribunal. On appeal by the assessee to High Court the court held that if the status of the assessee to be modified , the only option available to the Assessing  Officer is to assess the income in the appropriate status ,if permitted by law, by issuing a notice to the assessee in that particular status . Commissioner (Appeals) was not justified in modifying the status from AOP to BOI. The question was answered in favour of assessee.( A.Y. 1972-73).

Gutta Anajaneyulu& Co v.CIT (2012) 249 CTR 106(AP)(High Court)

S.254 : Appellate Tribunal-Orders- Power-Non servicing of notice-Dept’s appeal dismissed owing to ‘apathy’ in serving notice of hearing
 Notice of hearing of the department’s appeal could not be served on the assessee through post at the address given in Form 36. The DR was accordingly directed to directly effect service of the notice of hearing on the assessee. On the date of hearing, the DR was unable to say whether service was effected or not. Held by the Tribunal dismissing the appeal:

The department has shown total apathy in the matter of service of notices of hearing. The opportunity of hearing to the other side is essential before adjudicating appeal for which service of notice is condition precedent. It is the established practice and procedure that in case notices of hearing cannot be served on the assessee in revenue’s appeals, such notices are got served through Income-tax authorities. This practice is based on considerations of expediency and equity and is fully in conformity with the judicial powers and jurisdiction of the Tribunal and does not run contrary to any provisions of the Statute. It is within the incidental or implied powers of the Tribunal as enunciated in ITO v. M.K. Mohammed Kunhi (  1969)71 ITR 815 (SC) & CIT v .Paras Laminates Pvt Ltd (1990)186 ITR 722 (SC). Accordingly, the Tribunal was within its powers to direct, and it was obligatory on the part of the I.T. authority, to effect service of notice of hearing on the assessee since the service could not be effected by post at the address given by the revenue in the memorandum of appeal since the department, as an executive organization, is well equipped with the requisite staff strength of Notice Server, Income-tax Inspector etc. for serving various statutory notices on the tax payer. Since the revenue has shown apathy with regard for serving the notices of hearing on the assessee and has also not made any request to get the notice served by alternate way i.e., by way of publication etc as laid down in rule 20 of CPC, there is no alternative but to dismiss the appeal (Dy. CIT v. Aditya Organisers (P) Ltd (2004)91 ITD 342 (Ahd) followed)

ITO v. Rachana Constructions (Pune)(Trib.).www.itatonline.org.

S.254(1) : Appellate Tribunal-Orders- Duty- Reasoned order-Block assessment-Tribunal has to deal with factual findings of Assessing Officer and  give reasons for its conclusion, order of  Tribunal set aside.
 Pursuant to a search u/s 132, the AO passed a block assessment order u/s 158BC. The Tribunal allowed the assessee’s appeal on the ground that (i) the search warrant did not mention the assessee’s name and (ii) the assessment was not based on material found during the search. The department filed an appeal claiming that (a) the search warrant &panchnama did refer to the assessee’s name and (b) the detailed assessment order exposing the assessee’s modus operandi had not been dealt by the Tribunal. Held by the High Court allowing the appeal:
The Tribunal recorded a wrong factual finding that the search warrant did not include the assessee’s name. The Tribunal has not specifically referred to and dealt with the findings of the AO. which are detailed, specific & with reference to several factual aspects, documents, etc. The Tribunal is required to deal with the factual findings recorded by the AO and give its factual conclusions. The factual conclusion should be based upon reasons and should be outcome of analysis and discussion. The Tribunal being the final fact finding authority cannot merely record its conclusions without discussing the factual matrix, evidence and material. Merely stating that the papers etc. do not pertain to the assessee and the contents of the document cannot be utilized, is the conclusion or the final inference which is not sufficient in the light of what has been held by the AO in the block assessment order. The fact that the assessee filed a detailed written synopsis does not mean that the order of the Tribunal meets the legal requirement. The law mandates that the Tribunal should give reasons which are discernible and apparent from the order. What weighed with the Tribunal cannot be assumed in the absence of discussion.

CIT v. Promain Ltd (Delhi) ( High Court)www.itatonline.org

S.254(1) : Appellate Tribunal-Orders–Sufficient cause- Adjournment- Despite “Last Chance” appeal should be adjourned if there is sufficient cause.
 The department’s appeal was adjourned at the assessee’s request to 9.02.2010 and it was made clear that it would be the “last opportunity”. The assessee’s counsel filed an application for adjournment on 8.02.2010 on the ground that he was going to Mumbai for some urgent work. On 9.2.2010, no one appeared for the assessee and so the Tribunal rejected the adjournment application and allowed the department’s appeal. On appeal by the assessee to the High Court Held:
 Ordinarily, it is not incumbent on the Tribunal to adjourn the case when a last opportunity had already been granted to the assessee. However, there may be number of circumstances where adjournment becomes necessary in the interest of justice. If Counsel for assessee had to go for some urgent work to Mumbai and an application for adjournment was moved in advance, then in the interest of justice, a short adjournment should have been granted. If number of opportunities had already been afforded to the Counsel for assessee, then adjournment could have been granted, on payment of cost. The Tribunal has not assigned any reason as to whether reason mentioned in the application for adjournment, constituted sufficient cause for adjournment or not. Even if a last opportunity is granted and case is fixed for hearing and sufficient cause is shown on the date fixed for hearing, then the case can be adjourned and it should be adjourned, in the interest of justice. Accordingly, the Tribunal committed an illegality in rejecting the application for adjournment and in deciding the appeal exparte. Appeal remitted to the Tribunal for decision on merits on payment of costs of Rs.21,000 by the assessee.

Mehru Electrical & Engg. (P) Ltd v. CIT (Raj)(High Court)www.itatonline.org

S.254(1) : Appellate Tribunal-Orders- Tax effect below 2 lakhs  – In view of CBDT instruction appeal filed by revenue dismissed.
Where tax effect is less than Rs. 2 lakhs , In view of instructions No. 5 of 2008 dated 15/5/2008,appeal filed by the revenue liable to be dismissed. (A.Y. 2000-01 to 2002-03)

Asst. CIT v. SagarSaha (2012) 135 ITD 512 (Kol)(Trib.)

S.254(1) : Appellate Tribunal-Orders- Recovery-Stay- Deduction at Source – Wheeling and Transmission charges – As assessee voluntarily opined that tax was required to be deducted and obtained certificate u/s 197(1) – No stay of Demand
By deducting tax at source from  the A.Y. 2009-10, assessee had voluntarily held the opinion that tax was required to be deducted at source on wheeling and transmission charges; further payee also obtained certificate u/s 197(1) for deduction of tax at lower rate; Assessee has not established the prima facie case in favour stay of demand hence stay application was rejected. (AY 2007-08)

Maharashtra State Electricity Distribution Co. Ltd. v. Asst. CIT (2012) 145 TTJ 383 (Mum)(Trib.)

S.254(2) : Appellate Tribunal- Mistake apparent from the record- Ex parte order-Non-  appearance of chartered Accountant before the Tribunal  due wrong mentioning of date is a  reasonable cause, recalling of order is justified. 
Assessee,s chartered accountant has filed an affidavit stating that he did not appear at the time of hearing as he had wrongly recorded the date of hearing in his dairy and also furnished a photocopy of the diary showing the wrong noting ,the Tribunal held that it has to be accepted that there was sufficient cause for his non – appearance on the date of hearing .As the Tribunal having effectively decided the matter against the assesee by setting aside the order of the CIT (A) , and restoring the matter back to the Assessing Officer , referring the Rule 23 of the ITAT Rules , the ex-parte order of Tribunal is recalled.(A.Y.2006-07)
Five Star Health Care (P) Ltd v.ITO ( 2012) 145  TTJ 537 (TM ) (Delhi) (Trib.)

S.254(2) : Appellate Tribunal-Orders-Rectification of mistake apparent from the record- Application to recall the matter – Hearing conducted in open, transparent manner, giving opportunity to assessee to present argument, hence application rejected on the basis that order under section 254(2) does not have existence de-hors the order under Section 254(1).
The assessee filed the instant application under Section 254(2) seeking recall of Tribunal’s order contending that impugned order was clearly an incorrect order, passed in violation of rule of law and procedure and inconsistent with maxim Audi AlteramPartem. The Tribunal rejected the application on the basis that it conducted hearing in open and in transparent manner. An order under Section 254(2) does not have existence de-hors the order under Section 254(1), so that it (re-calls) is impermissible under Section 254(2). The court goes on to note the power to recall available under Rule 24 of the rules, observing that under the circumstances as stipulated there in.  (A.Y. 2007 – 08)

Karun Dutt Singh v. Asst. CIT (2012 ) 135 ITD 514 (Cochin)(Trib.)

S. 254 (2) : Appellate Tribunal-Orders-Rectification of mistake apparent from the record-Transfer pricing- Company whose financial statement were falsified, directed to be removed from comparable cases in computation of ALP – only after arriving at the arithmetical means of two ALP, the adjustment of 5% can be done.  
On miscellaneous application, one of the companies whose financial statement was publicly known to be falsified directed to be removed from comparable cases in computation of ALP but pleas as regards exclusion of certain other companies risk adjustment rejected; only after arriving at the arithmetical means of two ALP, the adjustment of 5% can be done. Matter restored to the file of Assessing Officer (AY 2003-04)

SAP Labs India (P) Ltd. v. Asst CIT (2012) 145 TTJ521 (Bang) (Trib.)

S.260A : Appeal -High Court-Duty of High Court- Reasoned order-Opportunity of hearing- It is the duty of High Court to pass a reasoned order .
In an appeal filed by the department against the order of Tribunal , the High Court set aside the order of Tribunal , without hearing the assessee. The Apex court held that the assessee must be heard and it is the duty of the High Court to pass the reasoned order.  Accordingly   the order of High Court was set aside to decide de novo.

Rajesh Mahajanv.CIT (2012) 249 CTR 28 (SC)

S.260A : Appeal -High court-Order of special bench-Non filing of appeal-.  Not assailing the order of Special Bench for earlier years in appeal  can be challenged in subsequent year on question of law. (S. 143, 261)
Even though the order of the Special Bench of the Tribunal relating to earlier assessment years was not assailed in appeal by the Department itself, it does not take away the right of the Revenue to question the correctness of the assessment order on the same issue in the relevant assessment year, particularly when a question of law is involved which goes to the very root of the matter.

Catholic Syrian Bank Ltd. v. CIT (2012) 68 DTR1/ 248CTR 1206 Taxman 182/ (2012) 3 SCC 784(SC)

S.260A : Appeal-High Court-Finding of fact- Question of law-Perverse-“a fortiori”.
The court held that , even where a reference of a question of law is made to the High Court in its advisory jurisdiction , and not the appellate jurisdiction , where normally the findings of fact recorded by the Tribunal are binding on the High Court , the finding are not binding on the High Court , if they are perverse or if the findings are such that no person acting judicially and properly instructed as the relevant law could have come to the determination under appeal. The position in an appeal under section 260A of the Income-tax Act ,1961 is “a fortiori”.(A.Y. 2000-01)

CIT v. Nova Promoters and Finlease (P) Ltd(2012) 342 ITR 169 / 206 Taxman 207(Delhi) (High Court)

S.263 : Commissioner- Revision of orders prejudicial to revenue- Deduction-Allocation of expenses-Assessing Officer  has not applied his mind hence revision is held to be justified. Other issues where the  Assessing Officer has applied his mind , revision held to be not justified.
Assessee is engaged in growing of tea leaves and manufacturing of tea filed its return of income and claimed deduction under section 80I, 80IA and 80HH. The Assessing Officer restricted the claim under section 143(3).Commissioner revised the order on the ground that the Assessing Officer should have allocated expenditure on scientific research while computing profits derived from industrial undertaking to which deduction pertained and also agency commissioner and interest paid were also to be allocated while computing the deduction. On appeal to the Tribunal , the Tribunal quashed the order of Commissioner on the ground that the  during the course of assessment proceedings the Assessing Officer has asked specific query and same was replied . The Court held that though the specific query was raised  and the reply was filed , the Assessing Officer has not applied his mind  and failure to do so the revision order was held to be justified.
As regards  agency commission and  interest the court held that the revision was not justified because the agency commission has already been factored in while computing the profits of the eligible units.  Similarly  , interest it was not depended upon borrowed funds and there was sufficient accruals in the eligible units. As regards whether cess on green leaves is part of expenditure incurred in business of growing and manufacturing of tea and it is allowable as business expenditure, therefore while computing composite income derived from sale of tea grown and manufactured by assessee entire cess would be claimed against taxable income.  Hence revision of order is not justified.( A.Y 1998-99)

CIT v. Hindustan Lever Ltd ( 2012) 206 Taxman 75 (Bom) (High Court)  

S.263 : Commissioner-Revision of orders prejudicial to revenue-Appeal –Fresh assessment- No appeal is  preferred by assessee against revision order hence  no ground relating to revision order could be taken in appeal against fresh assessment
Where assessee did not prefer any appeal against a revision order of Commissioner, no ground relating to revision order could be taken in appeal against fresh assessment order passed giving effect to revision order. (A.Y. 2003-04)

Crew B.O.S. Products Ltd v. Asst. CIT (2012) 135 ITD 542 (Delhi)(Trib.)

S.263 : Commissioner- Revision of orders prejudicial to revenue-Application of mind-Assessing officer applies his mind, examines accounts, makes enquiry hence Commissioner cannot revise the order.
The provisions of the Section 263 does not visualize a case of substitution of the judgment of CIT for that of ITO where ITO in exercise of its quasi-judicial powers while making an assessment examines the accounts, makes enquiry, applies his mind to the facts and circumstances of the case and determines the income by either accepting or making changes in accounts. Such order of ITO cannot be called as erroneous. (A.Y. 2003-04)

AntalaSankaykumarRavjibhai v. CIT (2012) 135 ITD 506 (Rajkot)(Trib.)

S.263: Commissioner- Revision of orders prejudicial to revenue-Application of mind-Twin condition of ‘erroneous order’ and ‘prejudice caused to revenue’ must be satisfied, Assessing Officer has applied mind hence the order not erroneous and cannot be revised.
It is trite that an order can be revised only and only if twin conditions of ‘erroneous in the order’ and ‘prejudice caused to revenue’ co-exits. Where the AO examined the issue from all angles it was held that order could not be held to be erroneous on account of non- application of mind. Therefore, the assessment order could not be revised as one of the twin preconditions to revise the order was absent.(A.Y. 2006-07)  

S. Murugan v. ITO (2012) 135 ITD 527 (Chennai)(Trib.)

S.271(1)(c) : Penalty-Concealment-Company-Book profit-There cannot be concealment if book profit is assessed under section 115JB.
 For AY 2001-02, the assessee filed a ROI declaring loss of Rs.43.47 crores under the normal provisions of the Act and book profits of Rs.3.86 crores u/s 115JB. The AO assessed a loss at Rs.36.95 crores as per normal provisions and book profits at Rs.4.01 crores. As there was a reduction in the loss under the normal provisions owing to various additions and disallowances, the A.O. levied penalty u/s 271(1)(c) in accordance with Explanation 4 & CIT v. Gold Coin health Food P. Ltd (2008)304 ITR 308 (SC). Before the High Court, the assessee argued that even if there was a concealment u/s 271(1)(c) with respect to the normal assessment, the same was not relevant because the assessee’s income was assessed u/s 115JB. The High Court accepted the plea and held that as the s. 115JB “book profits” were by a legal fiction deemed to be the “total income”, the furnishing of wrong particulars had no effect on “the amount of tax sought to be evaded” as defined in Explanation 4 to s. 271(1)(c). On appeal by the department to the Supreme Court, Held:
Delay condoned. The special leave petition is dismissed

CIT v. Nalwa Sons Investment Ltd (SC)www.itatonline.org.

S. 271(1)( c) : Penalty – Concealment of Income –  No penalty to be levied where assessee could show and explain that the interpretation propounded was plausible and had merit, though it was not accepted in quantum appeal
The assessee made a payment to Registrar of Companies which it claimed as revenue expense which was disallowed. Also there was disallowance of payment on which tax deducted at source paid to the government after the end of the previous year. It was held that cancellation of penalty under Section 271(1)(c ) was justified where the plea and the interpretation propounded by the assessee was rejected in the quantum proceedings but the assessee could in the penalty proceedings show and explain that the interpretation propounded was plausible and had merit, though it was not accepted. (AY 2001-02)

CIT v. AT & T Communication Service India P. Ltd. (2012) 342 ITR 257 (Delhi) (High Court)  
Editorial, referred : Nestle India Ltd. (2005) 275 ITR 1 (Delhi)(High Court) and Oracle Software India Ltd. (2007) 293 ITR 353 (Delhi)(High Court)

S. 271(1)( c) : Penalty – Concealment- Disallowance-Penalty for concealment  cannot be levied  merely on the basis of  disallowance u/s 40(a)(ia) where assessee furnished relevant evidence.
Assessee having furnished all relevant material facts and the audit report in the statutory form along with its return and also filed an explanation which could not be said to be not bona fide, it cannot be said to be guilty of concealment of income or furnishing of inaccurate particulars thereof, merely because certain expenses have been disallowed u/s 40(a)(ia) and therefore, no case for imposition of penalty u/s 271(1)( c) is made out.(A.Y.2005-06)

Asst. CIT v. Medversity Online Ltd. (2012) 145 TTJ  398 69 DTR 326 (Hyd)(Trib.)  

S.271AAA : Penalty –Search and seizure-Limitation for payment of tax-As there is no outer time limit is fixed by statute  for payment of tax along with interest, penalty cannot be levied on the ground that tax was not paid before filing of return.
The provisions of Section 271AAA of the Act do not set a time limit for payment of taxes along with interest. Thus where entire tax and interest was duly paid by assessee within time limit for payment of notice of demand under Section 156 and before the penalty proceedings were concluded, the assessee could not be denied immunity under Section 271AAA(2)  only on the ground that the said amounts were not paid before filing of income tax return or before concluding the assessment . (A.Y. 2008-09)

Dy. CIT v. Pioneer Marbles & Interiors (P.) Ltd. (2012) 50 SOT 571 (Kol)(Trib.)

S.271 B : Penalty –Accounts audited- Delay in filing audit report – Mere availability of the audit report before Assessing Authority even before completing assessment, not a reason to substantiate the delay in filing levy of penalty held to be justified.
The assessee in the instant case failed to furnish audit report along with the necessary enclosures as per provisions of Section 44AB of the Act. The AO accordingly levied penalty as per Section 271B of the Act. On appeal to Tribunal it was held that mere availability of the audit report and other enclosures before Assessing Authority even before completing assessment, by itself is not a reason to substantiate the delay in filing audit report and enclosures. Thus, penalty under Section 271B must be levied.(A.Y. 2006-07)

Paragon Industries v. ITO (2012) 50 SOT 558 (Chennai )(Trib.)

Allied Laws

Right of information-Members of CESTAT- Corruption charges-Tribunal Member’s Corruption Charges Information can be disclosed under RTI.

Certain complaints qua corruption were made against Ms. Jyoti Balasundaram, Member/CESTAT. After examining this complaint, the President of CESTAT made certain adverse entries in the ACR of the said Member. On the basis of the said ACR, the Department of Revenue, Ministry of Finance, opened a file with the subject “follow up action on the integrity in the ACR for the year 2000-01 in respect of Ms. Jyoti Balasundaram, Member (Tech), CESTAT.” Ultimately, this file was closed without taking any proper action. The appellant filed a RTI application seeking inspection of the file & copies of the Note Sheets and correspondence. This was rejected by the CIC on the ground that the issue relating to integrity was a part of the ACR & ACR grades could not be disclosed to third-parties except under exceptional circumstances. The Single Judge held that the information sought was “third party information” and so the authorities had to consider whether the third party’s “privacy” defence could be overruled in the public interest or not. On second appeal, Held:

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)

R. K. Jain v. UOI (Delhi)(High Court)www.itatonline.org

Transfer of Property Act, 1882, Ss. 5, 53A & 54 – Indian Stamp Act, 1899, S. 27 – Registration Act, 1908, S. 17 – Transfer of Property – Immovable Property
Immovable property can be legally and lawfully transferred or conveyed only by a registered deed of conveyance. General power of attorney / sales agreements / will transfers do not convey title and do not amount to transfer, nor can they be recognised as valid modes of transfer of immoveable property. They cannot be  recognised as deeds of title except to the limited extent of section 53A of the Transfer of Property Act.

These observations are not intended to in any way affect the validity of sale agreements and power of attorney executed in genuine transactions. A person may enter into a development agreement with a land developer or builder for developing the land either by forming plots or by constructing apartment buildings and in that behalf execute an agreement of sale and grant a power of attorney empowering the developer to execute agreements of sale or conveyances in regard to individual plots of land or undivided shares in the land relating to apartments in favour of prospective purchasers.
Suraj Lamp and Industries Pvt. Ltd. v. State of Haryana &Anr.(2012) 340 ITR 1 (SC)

Referencer

Reports-
Report of the Standing Committee Finance on the Direct taxes Code Bill, 2010 (2012) 342 ITR (ST) 417

Circular no 1 of 2012 dated 9th April 2012 –Issue of TDS certificate in form no.16A.( 2012) 343 ITR 32 (st)
Income –tax (Appellate Tribunal)Amendment Rules , 2012 ( 2012) 343 ITR 34(st)

 

Articles-

DTC-Standing committee’s report –An appraisal – By S. Rajaratnam ( 2012) 343 ITR (Journal) 1

S.4: Sales tax subsidy-Supreme court transfer on Maharashtra Government Sales tax subsidy-by Gopal Nathani( 2012) 342 ITR (Journal) 73.

Finance Bill 2012-Budget 2012: Validity of Retrospective Amendment, by T. N. Pandey (2012) 342 ITR (Journal) 81.

Land –Mark cases-by S. Rajaratnam( 2012) 342 ITR(Journal) 97

No TDS in respect of reimbursement of expenses-by S.K  Tyagi (2012) 342 ITR (Journal) 41.

Supreme Court revisits on concepts of tax planning and tax avoidance in Vodafone’s decision by T.N.Pandey( 2012) 226 Taxman 121(Mag)

Amendments to slash Vodafone Raising Critical Issues-by Minu Agarwal (2012) 248 CTR (Articles) 23s

General Anti –Avoidance Rules –The Real Challenge  by Sangeeta Jain ( 2012) 248 CTR (Articles) 37

Introduction of General Anti –Avoidance Rule provisions in the Indian Tax law  byTejalMehata& Anil Kadam ( 2012) 248 CTR( Articles) 33

Alternative Minimum tax on non-corporate Tax payers  by R. Santhanam (2012) 248 CTR (Articles) 17

Provisions in the Finance Bill, 2012 for   widening the tax base by M. S. Prasad ( 2012) 248 CTR (Articles) 26

Special Courts for Prosecution in Direct tax case by R. Santhanam( 2012) 248 CTR (Articles) 49

Finance Bill, 2012 : Widening the tax base  by T.C.A Ramanujam ( 2012) 248 CTR (Articles) 53

Finance Bill ,2012 : Budget  the Senior Citizens by T.C.A.S angeetha ( 2012) 248 CTR (Articles) 57

Finance Bill ,2012- Measures to prevent generation and Circulation of  unaccounted money by .M.S. Prasad ( 2012) 248 CTR(Articles) 60.

Budget 2012: Taxing the Un taxed  by Sameer  Goia& Rahul  Varshney ( 2012) 248 CTR (Articles) 69

Finance Bill , 2012 – Taxing contributions towards  share capital /Premium  as Company’s Income is Unjust and Un fair  by T.N.Pandey ( 2012) 248 CTR (Articles) 73
Finance Bill , 2012 –Rationalisation of International Taxation provisions by M. S. Prasad  ( 2012) 249 CTR (Articles) 1

Finance  Bill -2012- Retrospective Amendments in the Finance Bill , 2012  by R.Raghunath ( 2012) 249 CTR (Articles) 12.

Finance Bill 2012- Camouflaged Amnesties for getting Undisclosed Funds by T.N.Pandey( 2012) 249 CTR (Articles) 18

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