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Month: August 2018

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DATE: August 20, 2018 (Date of pronouncement)
DATE: August 23, 2018 (Date of publication)
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S. 80-IC: An assessee who avails of deduction for a period of 5 years @ 100% of profits and gains is entitled to deduction on 'substantial expansion' for remaining 5 Assessment Years @ 25% (or 30% where the assessee is a company) and not @ 100% (Mahabir Industries v. PCIT 256 TM 201 (SC) distinguished)

As pointed out above, once the assessees had started claiming deduction under Section 80-IC and the initial Assessment Year has commenced within the aforesaid period of 10 years, there cannot be another initial Assessment Year thereby allowing 100% deduction for the next 5 years also when sub-section (3), in no uncertain terms, provides for deduction @ 25% only for the next 5 years. It may be asserted again that the assessees accept the legal position that they cannot claim deduction of more than 10 years in all under Section 80-IC

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DATE: August 10, 2018 (Date of pronouncement)
DATE: August 23, 2018 (Date of publication)
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Income-tax dues, being in the nature of Crown debts, do not take precedence even over secured creditors, who are private persons. Given s. 238 of the Insolvency and Bankruptcy Code, 2016, the Code will override anything inconsistent contained in any other enactment, including the Income-tax Act

Given Section 238 of the Insolvency and Bankruptcy Code, 2016, it is obvious that the Code will override anything inconsistent contained in any other enactment, including the Income-Tax Act. We may also refer in this Connection to Dena Bank vs. Bhikhabhai Prabhudas Parekh and Co. & Ors. (2000) 5 SCC 694 and its progeny, making it clear that income-tax dues, being in the nature of Crown debts, do not take precedence even over secured creditors, who are private persons

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DATE: July 31, 2018 (Date of pronouncement)
DATE: August 23, 2018 (Date of publication)
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S. 40(a)(ii): Education cess is not part of tax. Accordingly, the same is allowable as a deduction and disallowance u/s 40(a)(ii) cannot be made. CBDT Circular referred

That on a plain reading of the above provision of section 40(a) (ii), it is evident that a sum paid of any rate or tax is expressly disallowed by this sub-clause in two cases : (i) where the rate is levied on the profit or gains of any business or profession, and (ii) where the rate or tax is assessed at a proportion of or otherwise on the basis of any such profits or gains. It is evident that nowhere in the said section it has been mentioned that education cess is not allowable. Education cess is neither levied on the profits or gains of any business or profession nor assessed at a proportion of, or otherwise on the basis of, any such profits or gains.

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DATE: August 10, 2018 (Date of pronouncement)
DATE: August 23, 2018 (Date of publication)
AY: 2012-13
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CITATION:
S. 23(1)(c) vacancy allowance: The words 'property is let' does not mean 'property actually let out'. If property is held with an intention to let out in the relevant year coupled with efforts made for letting it out, it could be said that such a property is a let out property and the same would fall within the purview of s. 23 (1)(c) and be eligible for vacancy allowance. A reasonable approach should be taken on the assesse's attempts to let out and infallible proof should not be demanded

Therefore, it is not at all relevant as to whether the property was let out in past or not. These words do not talk of actual let out also but talk about the intention to let out. If the property is held by the owner for letting out and efforts are made to let it out, that property is covered by clause (c) and this requirement has to be satisfied in each year that the property was being held to let out but remained vacant for whole or part of the year. Above discussion shows that meaning and interpretation of the words ‘property is let’ cannot be ‘property actually let out’. Thus, if a property is held with an intention to let out in the relevant year coupled with efforts made for letting it out, it could be said that such a property is a let out property and the same would fall within the purview of clause (c) of section 23(1)

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DATE: July 23, 2018 (Date of pronouncement)
DATE: August 21, 2018 (Date of publication)
AY: 2005-06
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CITATION:
S. 147/50C: The assessment cannot be reopened (within 4 years) on the ground that the AO lost sight of a statutory provision like 50C. This amounts to a review. A.L.A. Firm 55 TM 497 (SC) distinguished on the basis that the reopening in that case was because the AO was unaware of a binding High Court judgement. Here it is not the case of the Revenue that the AO was not aware of s. 50C at the time of passing the S. 143(3) assessment order

The basis of reopening the assessment in A.L.A. Firm (Supra) was the decision in the case of G.R.Ramachari & Co. (Supra) coming to the knowledge of the Assessing Officer subsequent to the completion of assessment proceedings. In this case it is not the case of the Revenue that the Assessing Officer was not aware of Section 50C of the Act at the time of passing the Assessement Order dated 26.12.2007 under Section 143 of the Act. In this case the trigger to reopen assessment proceedings as recorded in the reasons is nonfurnishing of copy of the sale deed by the Respondent. This has been found factually to be incorrect. Therefore, once the sale deed was before Assessing Officer and enquiries were made during the assessment proceedings regarding the quantum of capital gains, it must follow that the Assessing Officer had while passing the order dated 26.12.2007 under Section 143(3) of the Act had taken view on facts and in law as in force at the relevant time. Thus, this is a case of change of opinion

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DATE: August 6, 2018 (Date of pronouncement)
DATE: August 21, 2018 (Date of publication)
AY: 2012-13
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CITATION:
S. 68: If no cash is involved in the transaction of allotment of shares and it is a case of book adjustment, provisions of s. 68 treating it as unexplained cash credit are not attracted. Even if it were to be assumed that the subscribers to the increased share capital are not genuine, the amount of share capital would in no circumstances be regard as undisclosed income of the company

Counsel argued, and rightly, that when there was no cash involved in the transaction of allotment of shares, provisions of Section 68 of the said Act treating it as unexplained cash credit are not attracted

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DATE: October 13, 2016 (Date of pronouncement)
DATE: August 17, 2018 (Date of publication)
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S. 14A Rule 8D: The expression “does not form part of the total income” in s. 14A envisages that there should be an actual receipt of the income, which is not includible in the total income. If no exempt income is received or receivable during the relevant previous year, no disallowance u/s 14A can be made

The expression “does not form part of the total income” in Section 14A of the Income Tax Act, 1961 envisages that there should be an actual receipt of the income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. The Income Tax Appellate Tribunal held that the provisions of Section 14A of the Income Tax Act, 1961 would not apply to the facts of this case as no exempt income was received or receivable during the relevant previous year

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DATE: May 1, 2018 (Date of pronouncement)
DATE: August 17, 2018 (Date of publication)
AY: 1984-85
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CITATION:
S. 37(1)/145(2): Entire law on accrual of liability under mercantile system of accounting explained in the context of Accounting Standard 4 (AS-4) (contingencies and events occurring after the balance sheet date) issued by the ICAI and s. 211 of the Companies Act, 1956, after referring to all important judgements of the Supreme Court and High Courts

While the judgment in Challapalli Sugars Ltd is that of a two Judge bench of the Supreme Court, the judgment in Tutirorin Alkali Chemicals and Fertilizers Ltd is that of a three Judge bench of the Supreme Court. As the judgment in Challapalli Sugars Ltd was noticed by the Supreme Court, in its subsequent judgment in Tutirorin Alkali Chemicals and Fertilizers Ltd, the law declared in Challapalli Sugars Ltd, as explained in the subsequent judgment of the Supreme Court in Tutirorin Alkali Chemicals and Fertilizers Ltd, is binding on this Court. The law declared in Challapalli Sugars Ltd, as explained in Tutirorin Alkali Chemicals and Fertilizers Ltd, is that, in the absence of a provision in the Income-tax Act indicating the contrary, the rules of accountancy or the Accounting Standards framed by the Institute of Chartered Accountants of India can be adopted.

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DATE: June 21, 2018 (Date of pronouncement)
DATE: August 17, 2018 (Date of publication)
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CITATION:
S. 37(1): Law on whether payment of a one-time fee to continue the business of mining constitutes capital expenditure or revenue expenditure explained with reference to R.B.Seth Moolchand Sugachand v CIT 86 ITR 647 (SC) and Bikaner Gypsums 187 ITR 39 (SC)

The distinction between the judgment in R.B. Seth Moolchand Sugachand and the judgment in Bikanker Gypsums Ltd is that in Bikaner Gypsums Ltd there was a pre-existing right and the expenditure was incurred not to assert a new right but to exercise a pre-existing right. In the present case, it is the same as in Bikaner Gypsums Ltd. since the mining licence was previously issued in favour of the assessee and the payment of the NPV did not extend the area of the assessee’s mining operations, it merely removed an impediment in the carrying on of the operations in terms of the original licence

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DATE: August 3, 2018 (Date of pronouncement)
DATE: August 15, 2018 (Date of publication)
AY: 2009-10
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CITATION:
S. 32(2): There is no conflict between CIT vs. Hindustan Unilever Ltd 394 ITR 73 (Bom) & Miltons/ Confidence Petroleum because while the former is at the stage of final hearing, the latter is at the stage of admission. Accordingly, the request for reference to a Larger Bench is not acceptable. Merely filing of an SLP would not make the order of this Court bad in law or give a license to the Revenue to proceed on the basis that the order is stayed and/or in abeyance

Therefore, no reason has been shown to us at the final hearing, why the decision is Hindustan Unilever Ltd. (supra) is not to be followed. Merely filing of an SLP from the order of Hindustan Unilever Ltd. (supra) would not make the order of this Court bad in law or give a license to the Revenue to proceed on the basis that the order is stayed and/or in abeyance. The Revenue is entitled to challenge the view taken by us following our decision in Hindustan Unilever (supra) by challenging this decision in the Apex Court. However, in the present facts, at this stage, there can be no question of our not following the order in Hindustan Unilever

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