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DATE: November 22, 2019 (Date of pronouncement)
DATE: November 30, 2019 (Date of publication)
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CITATION:
Appeal u/s 246A reg denial of liability to pay buy-back tax u/s 115QA: The expression “denies his liability to be assessed” in s. 246A takes within its fold every case where the assessee denies his liability to be assessed under the Act. It is not confined to the liability to be assessed u/s 143(3) but applies also to the liability to pay tax u/s 115QA. If there is adequate appellate remedy, a Writ Petition under Article 226 cannot be entertained (Kanpur Coal Syndicate 53 ITR 225 (SC) & Chhabil Dass Agarwal 357 ITR 357 (SC) followed)

If the submission of the appellant is accepted and the concerned expression as stated hereinabove in Section 246(1)(a) or in Section 246A(1)(a) is to be considered as relatable to the liability of an assessee to be assessed under Section 143(3) as contended, there would be no appellate remedy in case of any determination under Section 115QA. The issues may arise not just confined to the question whether the company is liable at all but may also relate to other facets including the extent of liability and also with regard to computation. If the submission is accepted, every time the dispute will be required to be taken up in proceedings such as a petition under Article 226 of the Constitution, which normally would not be entertained in case of any disputed questions of fact or concerning factual aspects of the matter. The assessee may thus, not only lose a remedy of having the matter considered on factual facets of the matter but would also stand deprived of regular channels of challenges available to it under the hierarchy of fora available under the Act

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DATE: November 11, 2019 (Date of pronouncement)
DATE: November 30, 2019 (Date of publication)
AY: -
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CITATION:
Levy of penalty u/s 271(1)(c) is not valid if (i) there is no record of satisfaction by the AO that there was any concealment of income or that any inaccurate particulars were furnished by the assessee or (ii) If the notice is issued in the printed form and the inapplicable portions are not struck off (Samson Perinchery 392 ITR 4 (Bom) & New Era Sova Mine [2019 SCC OnLine Bom 1032] followed, Mak Data 358 ITR 593 (SC) distinguished).

The notice which is issued to the assessee must indicate whether the Assessing Officer is satisfied that the case of the assessee involves concealment of particulars of income or furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in the printed form, then, the necessary portions which are not applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded

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DATE: November 15, 2019 (Date of pronouncement)
DATE: November 30, 2019 (Date of publication)
AY: 2018-19
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CITATION:
Static vs. Ambulatory interpretation of DTAAs: Entire law on whether the retrospective amendments to the definition of "royalty" in s. 9(1)(vi) of the Act can have bearing on the interpretation of the same term in the DTAAs explained with reference to the doctrine of "treaty override" and the Vienna Convention (Siemens AG 310 ITR 320 (Bom) explained)

That is a classic case of a subtle unilateral treaty override. While, in India, the expression ‘treaty override’ is often loosely used for the situations where the provisions of tax treaty prevails over any inconsistent provisions of domestic law, this approach seems to be at variance with the international practices wherein connotations of ‘treaty override’ refer to a situation in which domestic legislation of a treaty partner jurisdiction overrules the provisions of a single treaty or all treaties hitherto having had effect in that jurisdiction. That will be the end result of a domestic law amendment of an undefined treaty term, in departure from the current position, and import such amended meaning of that term, under article 3(2), in the treaty situations as well. Such an approach, on the first principles, is unsound inasmuch as it is well settled in law that the treaty partners ought to observe their treaties, including their tax treaties, in good faith. Article 26 of Vienna Convention on Law of Treaties provides that, “Pacta sunt servanda: Every treaty in force is binding on the parties to it and must be performed by them in good faith”. What it implies is that whatever be the provisions of the treaties, these provisions are to be given effect in good faith. Therefore, no matter how desirable or expedient it may be from the perspective of the tax administration, when a tax jurisdiction is allowed to amend the settled position with respect to a treaty provision, by an amendment in the domestic law and admittedly to nullify the judicial rulings, it cannot be treated as performance of treaties in good faith. That is, in effect, a unilateral treaty over-ride which is contrary to the scheme of Article 26 of Vienna Convention on Law of Treaties

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DATE: November 27, 2019 (Date of pronouncement)
DATE: November 30, 2019 (Date of publication)
AY: 2007-08
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CITATION:
Law on taxation under DTAAs of "transparent entities" & "representative assesseess" explained: When an assessee is a representative assessee of a tax transparent entity, it is the status of beneficiaries or constituents of tax transparent entities which is relevant for the purpose of determining treaty protection (Linklaters LLP 9 ITR (Trib) 217 (Mum) followed)

The principle emerging out of this analysis of legal position is that when an assessee is a representative assessee of a tax transparent entity, it is the status of beneficiaries or constituents of tax transparent entities which is relevant for the purpose of determining treaty protection. Viewed thus, this is beyond doubt that the income in question has actually accrued to the taxable entities on the Netherlands, which, according to the approach adopted by the Assessing Officer, is sine qua non for tax treaty protection. It would thus appear that the treaty protection has indeed been wrongly declined to the assessee

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DATE: October 24, 2019 (Date of pronouncement)
DATE: November 28, 2019 (Date of publication)
AY: 2006-07, 2007-08, 2008-09
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CITATION:
S. 92 Transfer Pricing: Even if an assessee is eligible for tax exemption at the rate of hundred percent under section 10A/10B of the Act, then also the arm’s length price on international transactions deserve to be determined under section 92C of the Act (all imp judgements referred)

The provisions of chapter X are not impeding with the manner of the computation of exemption under section 10A of the Act, but it is to work out the true ALP qua the sale price of the impugned international transaction. Therefore we disregard the contentions of the ld. AR for the assessee that no reference to the TPO can be made for determining the ALP

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DATE: November 7, 2019 (Date of pronouncement)
DATE: November 16, 2019 (Date of publication)
AY: -
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CITATION:
Condonation of delay of 1754 days: If the stand of the Applicant in the Affidavit that he had no knowledge about the passing of the order is not expressly refuted by the Respondent, the question of disbelieving the stand of the Applicant cannot arise. For this reason, indulgence should be shown to the Applicant by condoning the delay

Unless that fact was to be refuted, the question of disbelieving the stand taken by the appellant(s) on affidavit, cannot arise and for which reason, the High Court should have shown indulgence to the appellant(s) by condoning the delay in filing the concerned appeal(s). This aspect has been glossed over by the High Court

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DATE: October 22, 2019 (Date of pronouncement)
DATE: November 16, 2019 (Date of publication)
AY: 2006-07
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CITATION:
Condonation of delay of 571 days: Mistake of counsel may be taken into account in condoning delay. Claim that the delay was caused by Counsel not communicating the order has to be accepted unless it is shown that blame put on counsel is with malafide intentions in order to cover up mistake/lapse on the part of the assessee. As per human conduct and probabilities, a professional counsel cannot be expected to admit his lapses as it may affect his reputation. Also, if the appeal is adjudicated on merits, refusing to condone the delay is an error (All imp judgements referred)

When an assessee authorizes a counsel to appear on his behalf, such authorization is given by placing faith on the legal expertise of the Counsel and also with the hope that the counsel shall take care of the interest of the assessee. Hence, when there is a lapse on the part of the legal counsel, in my view, the assessee should not be found fault with, unless it is shown that the blame put on the counsel with malafide intentions in order to cover up the mistake/lapse on the part of the assessee.

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DATE: October 31, 2019 (Date of pronouncement)
DATE: November 9, 2019 (Date of publication)
AY: 2012-13 to 2017-18
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CITATION:
S. 68/ 69C: Bogus share capital + Bogus purchases: Photocopies of blank share transfer forms, blank signed receipts etc necessary for transfer of shares found with assessee are not admissible as evidence u/s 61 of Evidence Act and not incriminating in nature. On merits, all investors are assessed & have filed confirmations with trail of funds. AO did not make further inquiry into the documentary evidences or verify the trail of source of funds. As regards bogus purchases, the AO cannot blow hot & cold by disallowing the purchases from a party as bogus while treating sales to same party as genuine

Assessee produced sufficient documentary evidences before the A.O. to prove that money routed from the assessee itself which came back to the assessee in the form of share capital/premium, therefore, assessee proved identity of the Investors, their creditworthiness and genuineness of the transaction in the matter and as such have been able to prove ingredients of Section 68 of the I.T. Act. The A.O. however did not make any further enquiry on the documentary evidences filed by the assessee. The A.O. did not verify the trail of the source of funds received by assessee through various entities as explained above. The A.O. thus, failed to conduct scrutiny of the documents at assessment stage and merely suspected the transaction between the Investor Companies and the assessee company despite the fact that in the deviation report the A.O. expressed doubts in making addition into the matter. It may also be noted here that no cash have been reported to have been deposited in the accounts of the assessee, the Investor Companies and other related parties

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DATE: October 16, 2019 (Date of pronouncement)
DATE: November 9, 2019 (Date of publication)
AY: 2015-16
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CITATION:
S. 56(2)(viia) cannot apply to a foreign company as Rule 11U(b)(ii) (prior to 01.04.2019) which defines "balance sheet‟ was not applicable to a foreign company. If the computation provisions cannot apply, the charging section cannot apply. The amendment to Rule 11U with effect from 1.4.19 is prospective in nature (B. C. Srinivasa Shetty 128 ITR 294 (SC), Palai Central Bank Ltd (1985) 1 SCC 45 followed)

We hold that since the shares of a foreign company were acquired by the assessee company in the instant case, the ld AO ought to have relied on the balance sheet as audited by the auditor appointed under the Indian Companies Act. In the instant case, the ld AO had relied on the balance sheet of KNP Industries Pte Ltd, Singapore, which is prepared in accordance with Singapore Companies Act, which fact is not in dispute before us. Admittedly, the case of the assessee falls squarely on clause (ii) of the definition of “Balance Sheet‟ as defined in Rule 11U of the Rules supra. Hence it is mandatory to draw a balance sheet as on the valuation date i.e. 10.2.2015 /11.2.2015 (being the date of purchase of shares by the assessee company) and that the said balance sheet should have been audited by an auditor appointed under section 224 of the Companies Act, 1956. Hence it could be safely concluded that the ld AO had applied the valuation method on a different date which is not in accordance with law and that since the computation mechanism provided in Rule 11UA of the Rules is not applicable to the facts of the instant case, the provisions of section 56(2)(viia) of the Act also could not be invoked

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DATE: October 3, 2019 (Date of pronouncement)
DATE: November 2, 2019 (Date of publication)
AY: -
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CITATION:
Doctrine of mutuality: A club registered as a 'company' u/s 25 of Companies Act is not like other companies as it has no shareholders, no dividends declared, and no distribution of profits takes place. Such clubs cannot be treated as separate in law from their members. The ratio decidendi in Bacha F. Guzdar 27 ITR 1 does not apply to such clubs. When a club supplies goods to its members, there is no "sale" and sales-tax cannot be levied (Bangalore Club 350 ITR 509 (SC), Venkatesh Premises Coop Soc 402 ITR 670 (SC) & other imp judgements referred)

if persons carry on a certain activity in such a way that there is a commonality between contributors of funds and participators in the activity, a complete identity between the two is then established. This identity is not snapped because the surplus that arises from the common fund is not distributed among the members – it is enough that there is a 44 right of disposal over the surplus, and in exercise of that right they may agree that on winding up, the surplus will be transferred to a club or association with similar activities. Most importantly, the surplus that is made does not come back to the members of the club as shareholders of a company in the form of dividends upon their shares. Since the members perform the activities of the club for themselves, the fact that they incorporate a legal entity to do it for them makes no difference.

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