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India Today Online Pvt. Ltd vs. ITO (ITAT Delhi)

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DATE: March 15, 2019 (Date of pronouncement)
DATE: April 29, 2019 (Date of publication)
AY: 2013-14, 2014-15
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CITATION:
S. 56(2)(viib)/ Rule 11UA: Law on how to determine the "FMV" (Fair Market Value) of shares issued by a closely held company explained. The fact that the company is loss-making does not mean that shares cannot be allotted at premium. The DCF method is a recognised method though it is not an exact science & can never be done with arithmetic precision. The fact that future projections of various factors made by applying hindsight view cannot be matched with actual performance does not mean that the DCF method is not correct

Rule 11UA will apply only if option is exercised in sub-clause (i), but if the assessee has been able to substantiate the fair market value in terms of sub-clause (ii), then valuation done by the assessee cannot be rejected simply on the ground that it does not stand the test of method provided in 11U and 11UA. Here the assessee has been able to show that the aggregate consideration received and the shares which were issued does not exceed FMV and has demonstrated the value as contemplated in Explanation (a) and therefore, the working of the assessee as per Explanation (a) sub clause (ii) has to be accepted. Section 56(2)(viib) provides for fair market value to be opted whichever is higher either under sub-clause (i) or sub-clause (ii). Since the working of FMV so substantiated by assessee company as per sub-clause (ii) is higher than value prescribed u/s 11UA, then same should be adopted for the purpose of valuation of the shares of the assessee company

The Chamber of Tax Consultants vs. CBDT (Bombay High Court) (Final Order)

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DATE: April 11, 2019 (Date of pronouncement)
DATE: April 23, 2019 (Date of publication)
AY: -
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CITATION:
S. 250: The CBDT is empowered to lay down broad guidelines for disposal of appeals by CsIT(A). However, it cannot offer 'incentives' to CsIT(A) for making enhancement and levying penalty. Such policy transgresses the exercise of quasi-judicial powers & is wholly impermissible and invalid u/s 119. The 'Incentives' have the propensity to influence the CsIT(A) and they will be tempted to pass an order in a particular manner so as to achieve a greater target of disposal

All these contingencies necessarily point to circumstances where the order passed by the Commissioner (Appeals) is in favour of the revenue. For example this policy refers to the enhancement made by the Commissioner or a case where the Commissioner has levied penalty under section 271(1) of the Act. This necessarily refers to enlargement of the assessee’s liability before the Commissioner as compared to what may have been determined by the Assessing Officer. In our opinion, such policy is wholly impermissible and invalid. Any directives by the CBDT which gives additional incentive for an order that the Commissioner (Appeals) may pass having regard to its implication, necessarily transgresses in the Commissioner’s exercise of discretionary quasi judicial powers.

PCIT vs. Mohommad Haji Adam (Bombay High Court)

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DATE: February 11, 2019 (Date of pronouncement)
DATE: April 23, 2019 (Date of publication)
AY: -
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CITATION:
S. 68/69 Bogus Purchases: Even if the purchases are bogus, the entire purchase amount cannot be added. As the department had not disputed the assessee's sales & there was no discrepancy between the purchases and the sales, the purchases cannot be rejected without disturbing the sales in case of a trader. The addition has to be restricted to the extent of the G.P. rate on purchases at the same rate of other genuine purchases (N.K .Industries 292 CTR 354 (Guj), N. K. Proteins 250 TM 22 (SC) distinguished)

In the present case, as noted above, the assessee was a trader of fabrics. The A.O. found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee’s additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee’s sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trader. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases

DIT (IT) vs. Schlumberger Asia Services Ltd (Uttarakhand High Court) (Full Bench)

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DATE: April 12, 2019 (Date of pronouncement)
DATE: April 23, 2019 (Date of publication)
AY: 2004-05
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CITATION:
S. 44BB: Amount reimbursed to the assessee (service provider) by ONGC (service recipient), representing service tax paid earlier by the assessee to the Government of India, would not form part of the aggregate amount referred to in clauses (a) and (b) of sub-section(2) of Section 44BB of the Act (Mitchell Drilling International 380 ITR 130 (Del), CBDT Circular No. 4/2008 dt 28.04.2008 & Circular No. 1/2014 dt 13.01.2014 followed)

Except to state that the said judgment needs re-consideration, no justifiable cause has been shown as to why this Court should take a view different from that of the Delhi High Court, in Mitchell Drilling International Pvt. Ltd.48, more so when the Division Bench of the Delhi High Court has taken a view similar to that of a Division Bench of this Court in M/s Schlumberger Asia Services Ltd.2. As the revenue has not been able to show just cause for this Court to take a different view, we see no reason to differ with the Division Bench judgment of the Delhi High Court that reimbursement of service tax is not an amount paid to the assessee on account of providing services and facilities in connection with the prospecting for, or extraction or production of, mineral oils in India.

PCIT vs. A. A. Estate Pvt. Ltd (Supreme Court)

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DATE: April 16, 2019 (Date of pronouncement)
DATE: April 20, 2019 (Date of publication)
AY: 2008-09
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CITATION:
S. 260A: There is a distinction between questions proposed by the appellant for admission of the appeal (u/s 260­A(2)(c)) and the questions framed by the Court (u/s 260­A(3)). The High Court has to formulate substantial question of law and only thereafter hear the appeal on merits. If the High Court is of the view that the appeal does not involve any substantial question of law, it should record a categorical finding to that effect & dismiss the appeal in limine. However, it cannot, without admitting the appeal and framing any question of law, issue notice to the respondent, hear both parties on the questions urged by the appellant and dismiss it. This is not in conformity with the mandatory procedure prescribed in s. 260­A

It was, however, not done and instead the High Court without admitting the appeal and framing any question of law issued notice of appeal to the respondent­ assessee, heard both the parties on the questions urged by the appellant and dismissed it. In our view, the respondent had a right to argue “at the time of hearing” of the appeal that the questions framed were not involved in the appeal and this the respondent could urge by taking recourse to sub­ section (5) of Section 260­A of the Act. But this stage in this case did not arise because as mentioned above, the High Court neither admitted the appeal nor framed any question as required under sub­section (3) of Section 260­A of the Act. The expression “such question” referred to in sub­ section (5) of Section 260­A of the Act means the questions which are framed by the High Court under sub­section (3) of Section 260­A at the time of admission of the appeal and not the one proposed in Section 260­A (2) (c) of the Act by the appellant

Rajbhushan Omprakash Dixit vs. DCIT (Bombay High Court)

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DATE: April 5, 2019 (Date of pronouncement)
DATE: April 20, 2019 (Date of publication)
AY: 2011-12
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CITATION:
S. 147/ 148: The fact that the assessee did not disclose the material is not relevant if the AO was otherwise aware of it. If the AO had the information during the assessment proceeding, irrespective of the source, but chooses not to utilize it, he cannot allege that the assessee failed to disclose truly and fully all material facts & reopen the assessment (Scope of Explanation 1 to S. 147 explained)

As per this Explanation thus, production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the first proviso to Section 147. Here is not a case where the Assessee is seeking to rely on a disclosure which the Revenue can seek to bring within the fold of the said Explanation. Here is a case where the Department already had collected certain documents and materials which were before the Assessing Officer at the time of framing assessment. If the Assessing Officer did not, for some reason, advert to such material or did not utilize the same, he surely cannot allege that the Assessee failed to disclose truly and fully all material facts.

Rupa Shyamsundar Dhumatkar vs. ACIT (Bombay High Court)

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DATE: April 5, 2019 (Date of pronouncement)
DATE: April 20, 2019 (Date of publication)
AY: 2007-08
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CITATION:
S. 148 Reopening: As per settled law, notice for reopening of assessment against a dead person is invalid. The fact that the AO was not informed of the death before issue of notice is irrelevant. Consequently, the s. 148 notice is set aside and order of assessment stands annulled (Alamelu Veerappan 257 TM 72 (Mad) followed)

There are several judgments of different High Courts holding that the notice or reopening of assessment is invalid in law. It is not necessary to refer to all the judgments on the point. Suffice it to say, as per the settled law, notice for reopening of assessment against a dead person is invalid

P. Leelavathi vs. V. Shankarnarayana Rao (Supreme Court)

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DATE: April 9, 2019 (Date of pronouncement)
DATE: April 13, 2019 (Date of publication)
AY: -
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CITATION:
Benami Transactions: In considering whether a particular transaction is benami, six circumstances can be taken as a guide: (1) source from which purchase money came; (2) nature and possession of property, after purchase; (3) motive, if any, for giving transaction a benami colour; (4) position of parties and relationship, if any, between claimant and alleged benamidar; (5) custody of title deeds after sale & (6) conduct of parties in dealing with the property after sale. Mere fact that financial assistance was given is not a determinative factor (All imp judgements referred)

It is well­ settled that the burden of proving that a particular sale is benami and the apparent purchaser is not the real owner, always rests on the person asserting it to be so. This burden has to be strictly discharged by adducing legal evidence of a definite character which would either directly prove the fact of benami or establish circumstances unerringly and reasonably raising an inference of that fact. The essence of a benami is the intention of the party or parties concerned; and not unoften, such intention is shrouded in a thick veil which cannot be easily pierced through. But such difficulties do not relieve the person asserting the transaction to be benami of any part of the serious onus that rests on him; nor justify the acceptance of mere conjectures or surmises, as a substitute for proof

Jagdish C. Dhabalia vs. ITO (Bombay High Court)

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DATE: March 12, 2019 (Date of pronouncement)
DATE: April 13, 2019 (Date of publication)
AY: 2008-09
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CITATION:
S. 50C Capital Gains: The assessee cannot avoid the impact of s. 50C by claiming that his s. 54EC investment is large enough to cover the deemed consideration based on stamp duty valuation. Such interpretation renders s. 50C redundant

The deeming fiction under section 50C of the Act, must be given its full effect and the Court should not allow to boggle the mind while giving full effect to such fiction. We are not opposing the proposition canvassed by the Counsel of the Assessee that deeming fiction must be applied in relation to the situation for which it is created. However, while giving full effect to the deeming fiction contained under section 50C of the Act for the purpose of computation of the capital gain under section 48, for which section 50C is specifically enacted, the automatic fallout thereof would be that the computation of the assessee’s capital gain and consequently the computation of exemption under section 54EC, shall have to be worked out on the basis of substituted deemed sale consideration of transfer of capital asset in terms of section 50C of the Act

D. J. Malpani vs. CCE (Supreme Court) (Larger Bench)

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DATE: April 9, 2019 (Date of pronouncement)
DATE: April 10, 2019 (Date of publication)
AY: -
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CITATION:
If an amount (Dharmada, Charity) is paid at the time of the sale transaction for a purpose other than the price of the goods, it cannot form part of the transaction value. Such payment is not for the transaction of sale and cannot be treated as consideration for the goods. The fact that the payment is compulsory upon purchase does not mean that it is involuntary because the purchaser purchases the goods out of his own volition (All imp judgements referred)

When an amount is paid as Dharmada along with the sale price of goods, such payment is not made in consideration of the transfer of goods. Such payment is meant for charity and is received and held in trust by the seller. If such amounts are meant to be credited to charity and do not form part of the income of the assessee they cannot be included in the transaction value or assessable value of the goods

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