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DATE: February 28, 2020 (Date of pronouncement)
DATE: March 7, 2020 (Date of publication)
AY: 2007-08
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CITATION:
S. 92A(2): The law in Diageo India Pvt Ltd 47 SOT 252 that the definition of "Associated Enterprises" in section 92A(1)(a) & (b) is the basic rule which is unaffected by the specific instances referred to in s. 92A(2) is not good law in view of the amendment by the FA 2002 and CBDT Circular No. 8 dated 27.08.2008. The correct law as held in Veer Gems 95 taxmann.16 (Guj) is that S. 92A(2) restricts the scope of S. 92A(1) and it is only when the criterion specified in sub section (2) is satisfied, two enterprises can be treated as associated enterprises. Judgements of non jurisdictional High Courts are binding on the Tribunal

Section 92A(2) governs the operation of Section 92A(1) by controlling the definition of participation in management or capital or control by one of the enterprise in the other enterprise. If a form of participation in management, capital or control is not recognized by Section 92A(2), even if it ends up in de facto or even de jure participation in management, capital or control by one of the enterprise in the other enterprise, it does not result in the related enterprises being treated as ‘associated enterprises’. Section 92A(1) and (2), in that sense, are required to be read together, even though Section 92A(2) does provide several deeming fictions which prima facie stretch the basic rule in Section 92A(1) quite considerably on the basis of, what appears to be, manner of participation in “control” of the other enterprise. What is thus clear that as long as the provisions of one of the clauses in Section 92A(2) are not satisfied, even if an enterprise has a de facto participation capital, management or control over the other enterprises, the two enterprises cannot be said to be associated enterprises

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DATE: February 14, 2020 (Date of pronouncement)
DATE: February 24, 2020 (Date of publication)
AY: 2008-09
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CITATION:
S. 68 Bogus Cash Credits: The expression “any previous year” does not mean all previous years but the previous year in relation to the assessment year concerned. If the cash credits are credited in the FY 2006-07, it cannot be brought to tax in a later AY.

The crucial phrase in Section 68 of the IT Act, which provides that the sum so credited in the books and which is not sufficiently explained, may be charged to the income tax as income of the assessee of “that previous year” also lends support to the contentions of Dr. Daniel

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DATE: January 8, 2020 (Date of pronouncement)
DATE: February 24, 2020 (Date of publication)
AY: -
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S. 11/ 12AA: The only requirement for granting registration is that the objects of the society should be charitable in nature and activities are genuine (i) A trust may be of a public charitable nature even if the control of the trust property is not vested in the public but is retained by the settlors, (ii) Registration u/s 12A cannot be declined on the ground that the Trust Deed does not contain "dissolution clause". This is totally irrelevant & beyond the scope of enquiry contemplated u/s 12A. of the Act, (iii) Registration cannot be refused for non furnishing of registration with the Registrar of Societies. Registration with the Registrar of Societies is not a precondition for granting registration u/s 12A.

In the instant case, the Ld. CIT(E) denied the registration by observing that the head of the society is restricted to be from Shree Dhar Vansh and no other member of the Sabha will have any right to raise any objection. In my opinion that cannot also be a ground to refuse the registration when the object of the assessee society are charitable in nature. On a similar issue the Hon’ble Kolkata High Court in the case of Smt. Ganesh Devi Rami Devi Charity Trust Vs. CIT reported at 71 ITR 696 held as under: ” (i) a trust may be of a public charitable nature even if the control of the trust property was not vested in the public but was retained by the settlers

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DATE: February 13, 2020 (Date of pronouncement)
DATE: February 22, 2020 (Date of publication)
AY: 2012-13
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S. 147 Reopening for Bogus Share Capital u/s 68: The parent co does not have sufficient funds to invest such huge amounts in Indian subsidiaries. The funds are routed through a web of entities spread across various jurisdictions, mostly in tax havens. The investments so made, are required to be investigated and the credit worthiness of the investing company is in jeopardy, in view of the information received from the investigation wing. This exercise can be undertaken during the re-reassessment proceedings to finally determine if the amounts represent undisclosed income of the assessee which is required to be taxed in its hands. At the stage of re-opening, only a reason to believe should exist with regard to escapement of income. Definite conclusion would be drawn after raising queries upon the assessee in the light of s. 68 of the Act (All imp verdicts referred)

Whilst it is the settled position in law that the sanctioning authority is required to apply his mind and the grant of approval must not be made in a mechanical manner, however, as noted by the Division Bench of the Calcutta High Court in Prem Chand Shaw (Jaiswal) v Assistant Commissioner, Circle-38, Kolkata [2016] 67 taxmann.com 339 (Calcutta), the mere fact that the sanctioning authority did not record his satisfaction in so many words would not render invalid the sanction granted under section 151(2) when the reasons on the basis on the basis of which sanction was sought could not be assailed and even an appellate authority is not required to give reasons when it agrees with the finding unless statute or rules so requires

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DATE: January 31, 2020 (Date of pronouncement)
DATE: February 22, 2020 (Date of publication)
AY: 1999-00
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S. 254(2): The Writ Petition to challenge the ITAT's order dismissing the MA does not appear to be bonafide. In the garb of the MA, the Petitioner sought review of the final order passed by the Tribunal and for rehearing of the appeal which is not permissible in law. Costs of Rs. 10,000 imposed on the Petitioner

In the instant case, what we notice is that not only was there no mistake apparent from the record but in the garb of the Misc. Application, petitioner had sought for review of the final order passed by the Tribunal and for rehearing of the appeal which is not permissible in law. In our view, Writ Petition does not appear to be bonafide

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DATE: February 6, 2020 (Date of pronouncement)
DATE: February 22, 2020 (Date of publication)
AY: 2011-12
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S. 2(47)/45: A reduction of capital results in an "extinguishment of rights" in the shares and constitutes a "transfer‟. The fact that the percentage of shareholding remains unchanged even after the reduction is irrelevant. The loss arising from the cancellation of shares is entitled to indexation and is allowable as a long-term capital loss (Bennett Coleman 133 ITD 1 (Mum)(SB) distinguished, all imp verdicts referred)

The ld DR vehemently argued that the percentage of shareholding remains the same because reduction of shares had happened for all shareholders. We find that the ld DR relied on para 24 of the judgement of Special Bench of Mumbai Tribunal in 133 ITD 1 supra to support his proposition. In this regard, we hold that the percentage of shareholding has got no bearing for chargeability of capital gains under the Act. We further find that the provisions of section 55(2)(v) of the Act were applied in the Mumbai Special Bench decision also in para 28 thereon. We find that in the case before us, the provisions of section 55(2)(v) of the Act will have no application at all and if the assessee is not given the benefit, it will never get it and none of the clauses of section 55(2)(v) of the Act would be applicable to the assessee in the instant case. Hence reliance placed on para 28 of the judgement of Special Bench of Mumbai Tribunal does not advance the case of the revenue

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DATE: February 4, 2020 (Date of pronouncement)
DATE: February 19, 2020 (Date of publication)
AY: 2017-18
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CITATION:
S. 143(3): While E-Assessment without human interaction is laudable, such proceedings can lead to erroneous assessment if officers are not able to understand the transactions and accounts of an assessee without a personal hearing. Assessment proceeding under the changed scenario would require proper determination of facts by proper exchange and flow of correspondence between the assessee and the AO. The AO should at least call for an explanation in writing before proceeding to conclude that the amount collected by the assessee was unusual. Also, since the assessment proceedings no longer involve human interaction and is based on records alone, the assessment proceeding should have commenced much earlier so that before passing assessment order, the AO could have come to a definite conclusion on facts after fully understanding the nature of business of the assessee.

The Government of India has introduced E-Governance for conduct of assessment proceedings electronically. It is a laudable steps taken by the Income Tax Department to pave way for an objective assessment without human interaction. At the same time, such proceedings can lead to erroneous assessment if officers are not able to understand the transactions and statement of accounts of an assessee without a personal hearing. The respondent should have to be therefore at least called for an explanation in writing before proceeding to conclude that the amount collected by the petitioner was unusual

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DATE: February 7, 2020 (Date of pronouncement)
DATE: February 15, 2020 (Date of publication)
AY: 2000-01
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CITATION:
U/s 43B(a), deduction is allowed on “any sum payable by the assessee by way of tax, duty, cess or fee.” The scheme of s. 43B is to allow deduction when the sum is actually paid. (i) The credit of Excise Duty earned under MODVAT scheme is not sum payable by the assessee by way of tax, duty, cess. It is merely the incident of Excise Duty that has shifted from the manufacturer to the purchaser and not the liability to the same. Consequently, the unutilised credit under MODVAT scheme does not qualify for deduction u/s 43B. (ii) The sales tax paid by the appellant was debited to a separate account titled ‘Sales Tax recoverable account’ and is liable for disallowance u/s 43B.

Deductions under Section 43B is allowable only when sum is actually paid by the assessee. In the present case, the Excise Duty leviable on appellant on manufacture of vehicles was already adjusted in the concerned assessment year from the credit of Excise Duty under the MODVAT scheme. The unutilised credit in the MODVAT scheme cannot be treated as sum actually paid by the appellant. The assessee when pays the cost of raw materials where the duty is embedded, it does not ipso facto mean that assessee is the one who is liable to pay Excise Duty on such raw material/inputs. It is merely the incident of Excise Duty that has shifted from the manufacturer to the purchaser and not the liability to the same

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DATE: February 10, 2020 (Date of pronouncement)
DATE: February 15, 2020 (Date of publication)
AY: 2010-11
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CITATION:
S. 68 Bogus Purchases: Though the assessee has not proved the genuineness of the purchases and sales, yet if the AO has accepted the sales, the entire purchases cannot be disallowed. Only the profit element embedded in purchases would be subjected to tax and not the entire amount (Bholanath Polyfab 355 ITR 290 (Guj) followed, Kaveri Rice Mills 157 Taxman 376 (All) & La Medica 250 ITR 575 (Del) referred)

Having found that the purchases corresponded to sales which were reflected in the returns of the assessee in sales tax proceedings and in addition, were also recorded in the books of accounts with payments made through account payee cheques, the purchases were accepted by the two appellate authorities and following judicial dictum decided to add the profit percentage on such purchases to the income of the assessee. While the CIT (A) had assessed profit at 2% which was added to the income of the assessee, Tribunal made further addition of 3% profit, thereby protecting the interest of the Revenue

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DATE: June 11, 2019 (Date of pronouncement)
DATE: February 15, 2020 (Date of publication)
AY: 2014-15
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CITATION:
Transfer Pricing: (i) If the "arms length‟ principle is satisfied qua the relevant transaction between the assessee and its Indian subsidiary, no further profits can be attributed to the assessee in India even if it was to be held that the latter had a PE in India (ii) If the subsidiary has subsequently entered into an "APA‟ with the CBDT & the FAR analysis and overall functions remain unchanged, the "APA‟ would have a bearing on the ALP of the earlier years

The Indian subsidiary of the assessee had for A.Y. 2015-16 to A.Y 2019-20 entered into an “APA‟ with the CBDT. As is discernible from the “APA‟, the functions of the subsidiary company inter alia included “marketing and sale of various software solutions” of the assessee company. As per the “APA‟ the operating profit margin up to its revenue of Rs. 50 crore was to be taken at 7% of its “Operating revenue‟. Admittedly, the FAR analysis and overall functions of the subsidiary company had remained the same during the period covered by the “APA‟ and that for the year under consideration i.e A.Y 2014-15. Though, the APA in the case of the assessee had been entered into for the period spread over A.Y. 2015- 16 to A.Y 2019-20, however, as held by the ITAT, Mumbai in the case of 3i India Pvt. Ltd. Vs. DCIT (ITA No. 581/Mum/2015, dated 16.09.2016), a subsequent “APA‟ would also have a bearing on the earlier years

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