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DATE: February 11, 2016 (Date of pronouncement)
DATE: February 15, 2016 (Date of publication)
AY: 2008-09
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Argument that transfer pricing adjustment cannot be made if the assessee's income is deductible u/s 10A/ 10B is not acceptable. Contrary view in TCS cannot be followed as it is obiter dicta & contrary to law laid down in Aztech Software 107 ITD 141 (SB)

No exception has been carved out by the statute for non-determination of the ALP of an international transaction of an assessee who is eligible for the benefit of deduction section 10A/10B or any other section of Chapter- VIA of the Act. Section 92(1) clearly provides that any income arising from an international transaction is required to be computed having regard to its arm’s length price. There is no provision exempting the computation of total income arising from an international transaction having regard to its ALP, in the case of an assessee entitled to deduction u/s 10A or 10B or any other relevant provision. Section 92C dealing with computation of ALP clearly provides that the ALP in relation to an international transaction shall be determined by one of the methods given in this provision. This section also does not immune an international transaction from the computation of its ALP when income is otherwise eligible for deduction. On the contrary, we find that sub-section (4) of section 92C plainly stipulates that where an ALP is determined, the AO may compute the total income of the assessee having regard to the ALP so determined. This shows that the total income of an assessee entering into an international transaction, is required to be necessarily computed having regard to its ALP without any exception

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DATE: August 28, 2015 (Date of pronouncement)
DATE: February 15, 2016 (Date of publication)
AY: 2005-06
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S. 54EC: The period of "6 months" available for making investment means 6 calendar months & not 180 days. Payment by cheque dates back to date of presentation & not date of encashment

For purposes of section 54EC, as held by the Special Bench of Ahmedabad bench in the case of Alkaben B. Patel (2014) 148 ITD 31 (Ahd) and M/s. Crucible Trading Co. Pvt. Ltd. in ITA No.5994/Mum/2013 dated 25.02.2015 “6 months” have been interpreted and it is held that the same would mean 6 calendar months and not 180 days. As held by the Supreme Court in CIT vs. Ogale Glass Works Ltd. (1954) 25 ITR 529 (SC), in the case of cheques not having been dishonored but having been encashed, the payment related back to the date of the receipt of the cheques and in law the dates of payments were the dates of the delivery of the cheques

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DATE: December 10, 2015 (Date of pronouncement)
DATE: January 29, 2016 (Date of publication)
AY: -
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Controversy on whether s. 80-1A(9) mandates that the amount of profits allowed as deduction u/s 80-1A(1) has to be reduced from the profits of the business of the undertaking while computing deduction under any another provisions under heading C in Chapter VI-A of the Income-tax Act, 1961 referred to larger Bench

While Hon’ble Mr. Justice Anil R. Dave took the view that the judgement of the Delhi High Court in Great Eastern Exports v. Commissioner of Income-Tax2 [2011] 332 ITR 14 (Delhi) lays down the correct position in law and allowed the appeals of the Revenue, Hon’ble Mr. Justice Dipak Misra dissented and held that the law laid down by the Bombay High Court had in Associated Capsules Private Limited v. Deputy Commissioner of Income Tax and another [2011] 332 ITR 42 (Bom) lays down the correct position in law and dismissed the appeals of the Revenue. In view of difference of opinion, the matters have been referred to a larger Bench

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DATE: December 18, 2015 (Date of pronouncement)
DATE: December 26, 2015 (Date of publication)
AY: 2007-08
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S. 10A: Even undisclosed income surrendered by assessee is eligible for s. 10A exemption if dept does not show that the assessee has any other source

The decision of the Hon’ble Madras High Court in the case of CIT Vs S. Khader Khan Son (2008) 300 ITR 157 is of no help to the assessee because the assessee agreed during the course of survey for the addition only when discrepancies in the loose papers were found. The assessee surrendered Rs.11 lakhs to cover up the irregularities of the business and short coming found during the course of survey. The said surrender was related to the regular business of the assessee and it is not brought on record that the assessee earned the said income from any other source. Therefore, the deduction u/s 10A of the Act was allowable to the assessee being 100% Export Oriented Unit established in SEZ on this income also. In view of the above we uphold the addition made by the AO and sustained by the CIT(A), however, the AO is directed to allow the deduction u/s 10A of the Act

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DATE: October 8, 2015 (Date of pronouncement)
DATE: October 27, 2015 (Date of publication)
AY: 2005-06
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S. 10A/ 10B: After AY 2001-02 when s. 10A/ 10B became “deduction” provisions instead of “exemption” provisions, the deduction has to be computed before adjusting brought forward unabsorbed losses /depreciation

The deduction under s. 10A has to be given effect to at the stage of computing the profits and gains of business. This is anterior to the application of the provisions of s.72 which deals with the carry forward and set off of business losses. A distinction has been made by the Legislature while incorporating the provisions of Chapter VIA Section 80A(1) stipulates that in computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of the Chapter, the deductions specified in ss.80C to 80U. S.80B(5) defines for the purpose of Chapter VI-A “gross total income” to mean the total income computed in accordance with the provisions of the Act, before making any deduction under the Chapter

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DATE: July 13, 2015 (Date of pronouncement)
DATE: October 20, 2015 (Date of publication)
AY: 2009-10
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S. 54F is a beneficial provision & must be interpreted liberally. It does not require that the construction of the new residential house has to be completed, and the house be habitable, within 3 years of the transfer of the old asset. It is sufficient if the funds are invested in the new house property within the time limit

The essence of s. 54F is to ensure that assessee who received capital gains would invest same by constructing a residential house and once it is established that consideration so received on transfer of his Long Term capital asset has invested in constructing a residential house, it would satisfy the ingredients of Section 54F If the assessee is able to establish that he had invested the entire net consideration within the stipulated period, it would meet the requirement of Section 54F and as such, assessee would be entitled to get the benefit of Section 54F of the Act

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DATE: September 2, 2015 (Date of pronouncement)
DATE: September 14, 2015 (Date of publication)
AY: 2008-09, 2009-10
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S. 10A/ 10B: If Tribunal upholds Revenue's plea that assessee is not entitled to S. 10B, it must consider the assessee's alternate plea for s. 10A deduction even if such alternate plea has not been raised before the lower authorities

A respondent in an appeal, if he has not filed a cross-appeal, is deemed to be satisfied with the decision. He is, therefore, entitled to support the judgment of the first officer on any ground but he is not entitled to raise a ground which will work adversely to the appellant. In fact such a ground may be a totally new ground, if it is purely one of law, and does not necessitate the recording of any evidence, even though the nature of the objection may be such that it is not only a defence to the appeal itself but goes further and may affect the validity of the entire proceedings. But the entertainment of such a ground would be subject to the restriction that even if it is accepted, it should be given effect to only for the purpose of sustaining the order in appeal and dismissing the appeal and cannot be made use of, to disturb or to set aside, the order in favour of the appellant

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DATE: September 10, 2015 (Date of pronouncement)
DATE: September 12, 2015 (Date of publication)
AY: 2009-10, 2011-12
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Even post insertion of proviso to s. 2 (15) but before 01.04.2016, s. 11 benefit cannot be denied to business activities carried by the trust in the course of actual carrying out of such advancement of any other object of general public utility. Trusts are entitled to carry out activities in the nature of trade, commerce or business etc as long as these activities are carried out in the course of actual carrying out of advancement of any other object of general public utility. On facts, activity of auctioning commercial plots for maximum revenue cannot be regarded as a profit-making exercise

This substitution of proviso to Section 2(15) may be viewed as representing a paradigm shift in the scope of the exclusion clause. The paradigm shift is this. So far as the scope of earlier provisos is concerned, the CBDT itself has, dealing with an assessee pursing “the advancement of any object of general pubic utility”, observed that “If such assessee is engaged in any activity in the nature of trade, commerce or business or renders any service in connection to trade, commerce or business, it would not be entitled to claim that its object is for charitable purposes” because “In such a case, the object of ‘general public utility’ will only be a mask or a device to hide the true purpose which is trade, commerce, or business or rendering of any service in relation to trade, commerce or business.” The advancement of any objects of general public utility and engagement in trade, commerce and business etc. were thus seen as mutually exclusive in the sense that either the assessee was pursuing the objects of general public utility or pursuing trade, commerce or business etc. in the garb of pursing the objects of general public utility

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DATE: September 4, 2015 (Date of pronouncement)
DATE: September 11, 2015 (Date of publication)
AY: -
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S. 54EC: If REC Bonds are not available during the prescribed period, time for investment has to be extended. Fact that NHAI Bonds were available is irrelevant. Amount paid to sisters as per family arrangement for permitting transfer of property is decutible u/s 49(1)

The bonds were admittedly not available during the said period. The fact that the Bonds issued by the National Highway Authority of India were available and hence the assessee ought to have invested in those bonds within the stipulated period of six months is not acceptable. Section 54EC gives assessee an option to invest either in bonds of National Highway Authority of India or then in bonds of Rural Electrification Corporation Limited. The said provision does not stipulate that the investment has to be in any bond whichever is available. Both bonds carry different benefits and hence deliberately the Parliament has given option to the assessee to invest in any one out of two as per his choice. In a given case, the assessee may choose to invest in both. However, discretion is conferred upon the assessee, who is the best judge of his own needs and interests. He cannot be forced to invest in the bond whichever is available because period of six months is about to expire. This option or discretion given by the Parliament to the assessee needs to be honoured here. If said option was available when period of six months was to expire and could have been expressed by the assessee when said period was about to expire, the situation would have been otherwise

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DATE: August 19, 2015 (Date of pronouncement)
DATE: August 27, 2015 (Date of publication)
AY: 2010-11
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S. 54: Giving advance to builder constitutes "purchase" of new house even if construction is not completed and title to the property has not passed to the assessee within the prescribed period

The word ‘purchase’ used in Section 54 of the Act should be interpreted pragmatically. The intention behind Section 54 was to give relief to a person who had transferred his residential house and had purchased another residential house within two years of transfer or had purchased a residential house one year before transfer. It was only the excess amount not used for making purchase or construction of the property within the stipulated period, which was taxable as long term capital gain while on the amount spent, relief should be granted. Principle of purposive interpretation should be applied to subserve the object and more particularly when one was concerned with exemption from payment of tax

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