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DATE: March 31, 2016 (Date of pronouncement)
DATE: April 22, 2016 (Date of publication)
AY: 2007-08
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CITATION:
Concept of mutuality in the light of Bangalore Club 350 ITR 509 (SC) explained

The contributions made by the members to the assessee cannot be a subject matter of tax merely because the part of its excess of income over expenditure is invested in mutual funds. It is also not the case of the Revenue that the dividend received from mutual funds have not been offered to tax by the assessee. The concept of Mutual concerns not being subject to tax is based on the principle of no man can profit out of itself. Therefore the test to be satisfied before an association can be classified as a Mutual concern are complete identity between the members i.e. contributors and the participants, the action of the mutual concern must be in furtherance of its objectives and there must be no scope of profiteering by the contributors from a fund. These tests have in fact been reiterated in Bangalore Club v/s. CIT 350 ITR 509 (SC)

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DATE: April 7, 2016 (Date of pronouncement)
DATE: April 22, 2016 (Date of publication)
AY: 2004-05
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CITATION:
S. 271(1)(c): Income-tax provisions are highly complicated and it is difficult for a layman to understand the same. Even seasoned tax professionals have difficulty in comprehending these provisions. Making a claim for deduction u/s S.80 IA which has numerous conditions is a complicated affair & cannot attract penalty

The provisions under the Income Tax Act are highly complicated and its different for a layman to understand the same. Even seasoned tax professionals have difficulty in comprehending these provisions. Making a claim for deduction under the provisions of S.80 IA of the Act which has numerous The provisions under the Income Tax Act are highly complicated and its different for a layman to understand the same. Even seasoned tax professionals have difficulty in comprehending these provisions. Making a claim for deduction under the provisions of S.80 IA of the Act which has numerous conditions attached, is a complicated affair. It is another matter that the assessing authorities have found that the claim is not admissible. Under these circumstances we hold that it cannot be said that this is a case of furnishing of inaccurate particulars of income

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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: November 4, 2015 (Date of pronouncement)
DATE: April 22, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 40(a)(ia), though inserted w.e.f. 01.04.2013, is retrospective in operation because it is curative and intended to remedy an unintended consequence. Accordingly, if the payee has paid the tax, the payer will not suffer a disallowance

The second proviso to s. 40(a)(ia) 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, and, therefore, the second proviso although inserted with effect from 1st April, 2013 is curative in nature and has retrospective effect

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DATE: April 5, 2016 (Date of pronouncement)
DATE: April 20, 2016 (Date of publication)
AY: 2007-08, 2009-10
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CITATION:
Fundamental principles of accrual of income under mercantile system of accounting explained in the context of waiver of income recoverable from person facing financial difficulties

Merely because assessee was following mercantile system of accounting, it could not be held that income had accrued to it. Earning of the income, whether actual or notional, has to be seen from the viewpoint of a prudent assessee. If in given facts and circumstances the assessee decides not to charge interest in order to safeguard the principal amount and ensure its recovery, it cannot be said that he has acted in a manner in which no reasonable person can act

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DATE: April 13, 2016 (Date of pronouncement)
DATE: April 19, 2016 (Date of publication)
AY: -
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CITATION:
S. 2(15)/ 11: If the predominant purpose is charitable, the earning of profit from an incidental activity like letting of property does not affect the charitable status. As the letting is a part of the educational activities, there is no obligation to maintain separate books u/s 11(4A). As per CBDT Circular No. 11 of 2008, the first proviso to s. 2(15) applies to the 'advancement of any other object of general public utility'

The revenue’s contention that the tribunal has overlooked the provisions of section 11(4A) is unfounded. We have noted above that the service charges received in respect of 6th and 7th floor were clearly on account of educational purpose. Letting out was incidental and not the principle activity of the assessee trust. Thus, in our opinion, section 11(4A) which require separate account to be maintained would not be attracted in view of our conclusion that the said amounts as received by the assessee for the assessment year have been received from educational activity which is the dominant activity of the assessee trust. In our opinion, if this be the case, separate books of accounts cannot be insisted upon as the said activity becomes part and parcel of the educational activities carried out by the assessee trust. In such a case, the benefit of exemption under section 11 (4A) cannot be denied. An interpretation as urged on behalf of the revenue would render nugatory the very spirit, rationale and the object of the exemption provisions making the same unworkable

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DATE: February 2, 2016 (Date of pronouncement)
DATE: April 19, 2016 (Date of publication)
AY: 1992-93, 1993-94
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CITATION:
S. 244A(1)(b) is a residual provision under which interest on refund of excess payment of self-assessment tax is payable to the assessee. Such interest is also payable on the principles of restitution and unjust enrichment. Engineers India 373 ITR 377 (Del) is not good law

In these circumstances the principle of restitution would be squarely attracted and the revenue is also statutorily bound to pay interest u/s.244A(1)(b) to the assessee. The apex court in South Eastern Coalfield –Vs- State of M. P. reported in 2003 (8) SCC 648 has categorically held that once the doctrine of restitution is attracted, the interest is often a normal relief given. Restitution sometimes refers to “disgorging of something which has been taken” and sometimes refers to “compensation for injury done”

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DATE: March 2, 2016 (Date of pronouncement)
DATE: April 18, 2016 (Date of publication)
AY: -
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CITATION:
Important law on concept of "ancestral property" under the Hindu Succession Act, 1956 and the formation of a HUF by the surviving members of the deceased explained

On a conjoint reading of Sections 4, 8 and 19 of the Act, after joint family property has been distributed in accordance with section 8 on principles of intestacy, the joint family property ceases to be joint family property in the hands of the various persons who have succeeded to it as they hold the property as tenants in common and not as joint tenants

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DATE: March 18, 2016 (Date of pronouncement)
DATE: April 18, 2016 (Date of publication)
AY: 2008-09
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CITATION:
In view of CBDT Circular No. 6/2016 dated 29.02.2016, if assessee has consistently shown shares as an “investment” and offered gains as capital gains, AO is not entitle to urge that the same constitutes “stock-in-trade” and assess gains as business profits on grounds that there were substantial and frequent transactions and motive was to earn profit and holding period of such shares was very short

Before us the moot question which is required to be decided is whether the income earned by the assessee on account of share is required to be treated as business income or required to be treated as short term capital gain. After the matter was heard on 11.02.2016, the CBDT came out with the Circular No. 6/2016 dated 29.02.2016 in the following manner. In view of the circular, we have clearly noticed that the issue raised in this appeal stands fully covered by the Circular issued by the CBDT. Since the assessee has treated the securities as investment and not as stock in trade in all the years, therefore, in view of the CBDT Circular, the revenue is not permitted to take a contrary view in the present year and claimed that the security is stock in trade and, therefore, the profit/gain caused to the assessee be treated as business income. In our view, there is no merit in the contention of the revenue and is deserves to be dismissed in view of the circular.

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DATE: March 1, 2016 (Date of pronouncement)
DATE: April 18, 2016 (Date of publication)
AY: 2007-08
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CITATION:
S. 80-IB(7): Amounts by way of rent and other misc items, though shown as "other income" in the books, constitutes "key revenue category" as per ICAI Guidelines and are "derived" from the business of the hotel

Thus it can be seen from the above that, rent received by the assessee of Rs.180,000/- from Heritage Shop which represents rental income from Curio Shop and of Rs.120,000/- for the space and amenities given to Kumarakom Water Transport Pvt. Ltd. will fall within the key revenue generation category of ‘Space Rentals’ and ‘Arcade revenue’ and ‘Housekeeping bill’ for a hotel industry. Revenue from staff mess of Rs.7,139/- will also fall within the key revenue generation category of ‘Food and Beverages’ for a hotel industry. Revenue from staff telephone of R.90,048/- will fall within the key revenue category of ‘Communication revenue (both telephone & internet)’ as per ICAI guidelines

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