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DATE: April 15, 2016 (Date of pronouncement)
DATE: April 22, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 40(a)(ia)/ 192: Employees deputed pursuant to a secondment agreement are not "employees" of the assessee and so the amounts paid by way of reimbursement of their salary is not subject to TDS in the assessee's hands

The employees are not the employees of assessee Mahanagar Gas Ltd but employees of British Gas and they are working with assessee only in view of secondment agreement. As per joint venture agreement GAIL and British Gas have agreed to second, therefore, employees to the joint venture company i.e. Mahanagar Gas Ltd. on secondment basis and under secondment agreement certain employees have been seconded to the assessee. Since the employers were seconded for limited time of 2 to 3 years, the remuneration payable to these seconded employees were being paid by British Gas or GAIL recoverable from assessee on cost to cost basis. The nature of secondment agreement make clear the duties of second employees, their liabilities towards assessee and reimbursement of actual cost of remuneration, benefits and disbursement by assessee to the joint venture partners. These are reimbursements. Also the employee’s remuneration was allowable to tax in India then there would be tax deduction obligation on the employer who was responsible for making payment to the employees

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DATE: October 7, 2015 (Date of pronouncement)
DATE: November 17, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 50C should not be invoked if difference between stamp value and declared consideration is nominal, S. 14A/ Rule 8D does not apply to share application money, Pure foreign exchange hedging transactions cannot be treated as speculative transactions

Though section 50C of the Act does not speak of any such variation in terms of percentage between value adopted for the purpose of stamp duty and the registration and the actual consideration received on transfer, keeping in view of the decision of the Hon’ble ITAT, Hyderabad Bench and keeping in view of the fact that the difference between the valuation for the stamp duty and the actual consideration received by the assessee is less than 2% we are of the view that addition sustained by CIT(A) should be deleted

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DATE: October 14, 2015 (Date of pronouncement)
DATE: October 20, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 14A Rule 8D does not apply to shares held as stock-in-trade. AO cannot apply Rule 8D to make a disallowance without showing how the assessee's disallowance is wrong

The AO has not examined the accounts of the assessee and there is no satisfaction recorded by the AO about the correctness of the claim of the assessee and without the same he invoked Rule 8D of the Rules. While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. From the facts of the present case it is noticed that the AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½% of the total value

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DATE: June 30, 2015 (Date of pronouncement)
DATE: July 1, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 271AAA: Law on what is “undisclosed income” and levy of penalty on the basis of a “dumb” document and surrender by the assessee explained

A charge can be levied on the basis of document only when the document is a speaking one. The document should speak either out of itself or in the company of other material found on investigation and/or in the search. The document should be clear and unambiguous in respect of all the four components of the charge of tax. If it is not so, the document is only a dumb document. No charge can be levied on the basis of a dumb document. A document found during the course of a search must be a speaking one and without any second interpretation, must reflect all the details about the transaction of the assessee in the relevant assessment year

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DATE: March 4, 2015 (Date of pronouncement)
DATE: June 19, 2015 (Date of publication)
AY: 2007-08
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CITATION:
S. 40(a)(ia) second proviso is curative and retrospective. Legitimate business expenditure cannot be disallowed if the payee has paid tax thereon

The second proviso to section 40(a)(ia) of the Act inserted by the Finance Act, 2012 is curative in nature intended to supply an obvious omission, take care of an unintended consequence and make the section workable. Section 40(a)(ia) without the second proviso resulted in the unintended consequence of disallowance of legitimate business expenditure even in a case where the payee in receipt of the income had paid tax. It has for long been the legal position that if the payee has paid tax on his income, no recovery of any tax can be made from the person who had failed to deduct the income tax at source from such amount

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DATE: May 22, 2015 (Date of pronouncement)
DATE: May 27, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 40(a)(ia) second proviso was inserted by FA 2012 to rectify the unintended consequence of disallowance in the hands of the payer even if the payee has paid tax. It is curative and retrospective in operation. Assessee's claim of having obtained declarations u/s 197A from the payees should not be disbelieved without evidence. Assessee is not expected to go into the correctness of the declarations filed by the payees

The second proviso to section 40(a)(ia) of the Act inserted by the Finance Act, 2012 is curative in nature and intended to supply an obvious omission, take care of an unintended consequence and make the section workable. Section 40(a)(ia) without the second proviso resulted in the unintended consequence of disallowance of legitimate business expenditure even in a case where the payee in receipt of the income had paid tax. It has for long been the legal position that if the payee has paid tax on his income, no recovery of any tax can be made from the person who had failed to deduct the income tax at source from such amount

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DATE: May 13, 2015 (Date of pronouncement)
DATE: May 26, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 14A Rule 8D(2)(iii): Even strategic investment in group concerns for purposes of control & not for earning dividend attracts disallowance. Plea that no expenditure is incurred to earn dividend is not acceptable because earning dividend is not an automatic process.

The term ‘expenditure’ as per section 14A would include the expenditures that are related to investments made i.e. expenditures on administration, capital expenses, travelling expenses, operating expenses etc. It is difficult to accept that the assessee company was making investments decisions to the tune of Rs.6,31,637 lakhs of public money without incurring a single penny out of its pocket. Such decisions are highly strategic in nature and are required to be made by highly qualified and experienced professionals. The same would also require market research and analysis. The assessee company by acquiring controlling interest in the subsidiary companies would also be required to attend board meetings and make policy decisions with regard to the aforesaid huge amount of investments made. By no stretch of imagination, it can be assumed that such activities were done without incurring any expenditure

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DATE: May 13, 2015 (Date of pronouncement)
DATE: May 26, 2015 (Date of publication)
AY: 2008-09
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CITATION:
S. 194-I applies only to amounts paid for “use” of the land and not for amounts paid to “acquire” the rights. Distinction between “lease premium” and “rent” explained

The purport of section 194 I of the Act is not to bring in its purview payments of any or every kind. Only those payments which are in the nature of “use” of land come within the ambit of section 194 I of the Act. The word “use” is therefore of prime importance for transactions where the consideration paid for the property would be termed as “rent”. The term “use “according to us has to be interpreted keeping in mind the relationship between the landlord and the tenant. The same cannot be extended to bring within its purview exploitation of any kind with reference to the property by changing its identity for its own benefit and thereafter selling it for profit

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DATE: January 29, 2015 (Date of pronouncement)
DATE: February 2, 2015 (Date of publication)
AY: 2007-08
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CITATION:
S. 9(1)(vii): Reimbursement of expenditure under cost-sharing agreement does not constitute "income" and there is no obligation to deduct TDS u/s 195

A perusal of the decision of the Supreme Court in Tejaji Farasram Kharawalla Limited (1967) 67 ITR 95 (SC) clearly shows that Supreme Court has categorically held that the reimbursement of the actual expenses would not be taxable in the hands of the person receiving the reimbursements

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DATE: December 2, 2014 (Date of pronouncement)
DATE: December 4, 2014 (Date of publication)
AY: 2008-09 & 2009-10
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S. 2(15)/ 11: Entire law on what is "charitable purpose" and scope of Proviso inserted by Finance (No.2) Act 2009 w.r.e.f. 01.04.2009 explained

(i) The purpose for which the assessee association, i.e. The Indian Chamber of Commerce, was established is a charitable purpose within the meaning of S. 2(15) of the Act. The assessee is carrying out the said activities which are incidental …

Indian Chamber of Commerce vs. ITO (ITAT Kolkata) Read More »