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DATE: December 9, 2016 (Date of pronouncement)
DATE: December 23, 2016 (Date of publication)
AY: 2010-11
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S. 2(47)/ 54EC/54F: U/s 108 of the Companies Act read with CBDT Circular No. 704 dated 28.04.1995, a mere agreement for transfer of shares does not cause effective transfer of shares unless it is accompanied with delivery of share certificate and duly signed and stamped share transfer form. An agreement to transfer share merely gives an enforceable right to the parties

The word transfer of shares is an act of the parties, i.e. transferor and transferee by which title to share is transferred from one person to another for a consideration or otherwise. Share transfer is governed by section 108 of the Companies Act, 1956. As per section 108 of the Companies Act, 1956 registration of transfer of shares is possible only if a proper transfer deed in form no. 7B duly stamped and signed by or on behalf of the transferor and by or on behalf of the transferee and specifying the name, address and occupation, if any of the transferee and has been delivered to the company along with share certificates and endorsed by the Company by changing such details in the share holder register maintained under the Companies Act. In the case of shares of listed companies, effective transfer would take place when title to share is transferred from one person to another through demat account in recognized stock exchange. In the case of shares of unlisted companies, transfer would take place, only when valid share transfer form in form no. 7B is delivered to the company and endorsed by the Company. Therefore, for effective transfer of shares a mere agreement for transfer of shares is not sufficient, unless it is physically transfer shares by delivery of share certificate along with duly signed and stamped share transfer form

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DATE: December 16, 2016 (Date of pronouncement)
DATE: December 19, 2016 (Date of publication)
AY: -
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S. 10A/ 10B: Though s. 10A/ 10B were amended by FA 2000 w.e.f. 01.04.2001 to change "exemption" to "deduction", the "deduction" contemplated therein is qua the eligible undertaking of an assessee standing on its own and without reference to the other eligible or non-eligible units or undertakings of the assessee. The benefit of deduction is given by the Act to the individual undertaking and resultantly flows to the assessee. The deduction of the profits and gains of the business of an eligible undertaking has to be made independently and before giving effect to the provisions for set off and carry forward contained in s. 70, 72 and 74. The deductions u/s 10A/10B are prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income

If the specific provisions of the Act provide [first proviso to Sections 10A(1); 10A (1A) and 10A (4)] that the unit that is contemplated for grant of benefit of deduction is the eligible undertaking and that is also how the contemporaneous Circular of the department (No.794 dated 09.08.2000) understood the situation, it is only logical and natural that the stage of deduction of the profits and gains of the business of an eligible undertaking has to be made independently and, therefore, immediately after the stage of determination of its profits and gains. At that stage the aggregate of the incomes under other heads and the provisions for set off and carry forward contained in Sections 70, 72 and 74 of the Act would be premature for application. The deductions under Section 10A therefore would be prior to the commencement of the exercise to be undertaken under Chapter VI of the Act for arriving at the total income of the assessee from the gross total income. The somewhat discordant use of the expression “total income of the assessee” in Section 10A has already been dealt with earlier and in the overall scenario unfolded by the provisions of Section 10A the aforesaid discord can be reconciled by understanding the expression “total income of the assessee” in Section 10A as ‘total income of the undertaking’

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DATE: December 5, 2015 (Date of pronouncement)
DATE: November 1, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 10A/10B: After the change in scheme from “exemption” to “deduction” w.e.f. 01.04.2001, brought forward unabsorbed loss & depreciation of other 10B units and non-10B units are not liable for set off against the current year's profit of the 10B unit. The contrary law laid down in Himatasingike Seide 156 Taxman 151 (Kar), as approved by the Supreme Court, deals with the law pre 01.04.2001 when s. 10A/10B provided for an “exemption” and not a “deduction”

We find that the decision of the Karnataka High Court in Himatasingike Seide Ltd. (supra) which was undisturbed by the Apex Court was in respect of Assessment Year 1994-95. Thus it dealt with the provisions of Section 10B of the Act as existing prior to 1 April 2001 which was admittedly different from Section 10B as in force during Assessment Year 2009-10 involved in this appeal. Section 10B of the Act as existing prior to 1 April 2001 provided for an exemption in respect of profits and gains derived from export by 100% Export Oriented Undertakings and now it provides for deduction of profits and gains derived from a 100% Exported Oriented Units

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DATE: August 16, 2016 (Date of pronouncement)
DATE: September 9, 2016 (Date of publication)
AY: 1996-97
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CITATION:
S. 54F(4): Failure to deposit the amount of consideration not utilized towards the purchase of new flat in the specified bank account before the due date of filing return of Income u/s 139(1) is fatal to the claim for exemption. The fact that the entire amount has been paid to the developer/builder before the last date to file the ROI is irrelevant. Contrary view in K. Ramchandra Rao 277 CTR 0522 (Kar) is sub-silentio and is not good law

The sale of capital asset took place on 29th April, 1995 for a consideration of Rs.85.33 lakhs. The agreement for purchase of construction of flat for consideration of Rs.69.90 lakhs was entered into by the appellant on 16th July, 1996. An amount of Rs.35 lakhs were utilized by the Appellant in purchase of flat before the return of income was filed on 4th November, 1996 under Section 139 of the Act. However, the mandate under sub Section (4) of Section 54F of the Act is that the amount not utilized towards the purchase of the flat has to be deposited before the due date of filing return of Income under Section 139(1) of the Act in the specified bank account. In this case admittedly the entire amount of capital gains on sale of asset which is not utilized has not been deposited in a specified bank account before due date of filing of return under Section 139(1) of the Act. Therefore where the amounts of capital gains is utilized before filing of the return of income in purchase / construction of a residential house, then the benefit of exemption under Section 54F of the Act is available. Before us it is an undisputed position that except Rs.35 lakhs, the balance of the amounts subject to capital gains tax has not been utilized before date of furnishing of return of income i.e. 4th November, 1996 under Section 139 of the Act. Therefore, on plain interpretation of Section 54F of the Act, it appears that the impugned order of the Tribunal cannot be faulted

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DATE: September 2, 2016 (Date of pronouncement)
DATE: September 9, 2016 (Date of publication)
AY: 2003-04
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CITATION:
S. 80-IB: Fact that the AO allowed s. 80-IB deduction in the year of setting up does not disentitle him from examining the eligibility in subsequent years. As per the CBDT’s low tax effect circular, the tax effect has to be seen each year irrespective of the fact that a common issue arises over several years

An assessee must fulfill each of the conditions stipulated in Section 80-IB in each of the years in which the deduction thereunder is sought. The Assessing Officer would be entitled to ascertain in each of the assessment years whether or not the conditions of Section 80-IB remained fulfilled. In other words, even where an assessee is found to have fulfilled all the conditions of Section 80-IB in the initial assessment year and has on account thereof been granted the deduction thereunder, an Assessing Officer assessing the assessee’s income in subsequent years would be entitled to ascertain whether in that assessment year the conditions in Section 80-IB remained fulfilled or not. If not, he is bound to deny the deduction

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DATE: May 13, 2016 (Date of pronouncement)
DATE: May 16, 2016 (Date of publication)
AY: 2010-11
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S. 50C/ 54F: In allowing exemption u/s 54F, the deemed consideration u/s 50C has to be taken into consideration and it cannot be restricted to the consideration mentioned in the sale deed

The ultimate object and purpose of section 50C of the I.T. Act is to see that the undisclosed income of capital gains received by the assessee should be taxed and that the law should not encourage and permit the assessee to peg down the market value at their whims and fancy to avoid tax, but when the capital gain is assessed on notional basis, whatever amount is invested in the new residential house within the prescribed period under section 54 of the I.T. Act, the entire amount invested, should get benefit of deduction irrespective of the fact that the funds from other sources are utilised for new residential house

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DATE: April 15, 2016 (Date of pronouncement)
DATE: April 28, 2016 (Date of publication)
AY: 2007-08
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CITATION:
S. 54F: The demolition of a structure does not amount to a "transfer". It is not correct to contend that Vania Silk Mills 191 ITR 647 (SC) is overruled by Grace Collis 248 ITR 323 (SC). Lower authorities cannot refuse to apply binding High Court judgements on the basis that the High Court has not considered a Supreme Court judgement

The demolition of the structure would not constitute a transfer of the assets in terms of Section 54(3) of the Act in view of the decision of the Apex Court in the matter of Vania Silk Mills P. Ltd. v. CIT, reported in 191 ITR 647. In the above case, the Apex Court has held that when an asset is destroyed, there is no question of transfer taking place under the Act. The Apex court held that in terms of the Act that the words ‘Extinguishment of any right’ in Section 2(47) of the Act, does not include an extinguishment of right on account of destruction. It has to be an extinguishment of right on account of transfer. Thus, a destruction of assets when not on account of any transfer would not be hit by Section 54F(3) of the Act. Counsel for the revenue seeks to distinguish the decision of the Apex Court in the matter of Vania Silk Mills P. Ltd. (Supra) that the destruction in that case took place because of fire and hence it was involuntary. This distinction is of no consequence. In our view of the decision of the Apex Court in Vania Silk Mills (Supra) would squarely apply to the facts of the present case

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DATE: March 9, 2016 (Date of pronouncement)
DATE: March 12, 2016 (Date of publication)
AY: 2004-05
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S. 80-IB(4): Subsidies (such as transport subsidy, Interest subsidy and power subsidy) paid to the assessee with the object of reducing the cost of production constitutes "profits derived from the business of the industrial undertaking" and is eligible for deduction u/s 80-IB. Liberty India 317 ITR 218 (SC) is distinguishable on facts

In Liberty India v. Commissioner of Income Tax 317 ITR 218 (SC)/ 2009 (9) SCC 328, what this Court was concerned with was an export incentive, which is very far removed from reimbursement of an element of cost. A DEPB drawback scheme is not related to the business of an industrial undertaking for manufacturing or selling its products. DEPB entitlement arises only when the undertaking goes on to export the said product, that is after it manufactures or produces the same. Pithily put, if there is no export, there is no DEPB entitlement, and therefore its relation to manufacture of a product and/or sale within India is not proximate or direct but is one step removed. Also, the object behind DEPB entitlement, as has been held by this Court, is to neutralize the incidence of customs duty payment on the import content of the export product which is provided for by credit to customs duty against the export product. In such a scenario, it cannot be said that such duty exemption scheme is derived from profits and gains made by the industrial undertaking or business itself

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DATE: March 1, 2016 (Date of pronouncement)
DATE: March 10, 2016 (Date of publication)
AY: 2010-11
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CITATION:
S. 80-IA: As CBDT's Circular No.1/ 2016 dated 15.2.2016 is in line with Velayudhaswamy Spinning Mills 340 ITR 477 (Mad) the Dept should not agitate the controversy whether deduction u/s 80IA is allowable without setting off losses/unabsorbed depreciation which were set off in earlier years against other business income

On the basis of the decision in Velayudhaswamy Spinning Mills (340 ITR 477), the Central Board of Direct Taxes has issued Circular No.1/ 2016 dated 15.2.2016. The CBDT has clarified that an assessee who is eligible to claim deduction u/s 80IA has the option to choose the initial/first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen (or twenty) years, as prescribed under that Sub-Section. It is clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 801A for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfillment of conditions prescribed in the section. Hence, the term ‘initial assessment year’ would mean the first year opted for by the assessee for claiming deduction u/s 801A. However, the total number of years for claiming deduction should not transgress the prescribed slab of fifteen or twenty years, as the case may be and the period of claim should be availed in continuity

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DATE: February 18, 2016 (Date of pronouncement)
DATE: March 1, 2016 (Date of publication)
AY: -
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S. 80HHC: Sale proceeds of scrap cannot be included in total turnover

The issue in these appeals pertains to the question whether the proceeds generated from the sale of scrap would be included in the total turnover. In the recent decision of this Court in Commissioner of Income Tax Vs. Punjab Stainless Steel Industries & Ors. reported in [2014] 364 ITR 144 (SC) it has been held that sale proceeds generated from the sale of scrap would not be included in the total turnover for the purpose of deduction under Section 80HHC of the Income Tax Act, 1961

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