A combined reading of s. 201(1A) and s. 40(a)(ia) shows that while a case of short-deduction of TDS is covered by s. 201(1A), it is not covered by s. 40(a)(ia). There is an obvious omission to include short deduction / lesser deduction in s. 40(a)(ia). Therefore, in case of short /lesser deduction of tax, the entire expenditure whose genuineness was not doubted by the assessing officer, cannot be disallowed (S.K. Tekriwal (Cal HC) & Chandabhoy and Jassobhoy 49 SOT 448 (Mum) followed)

An amount paid for investment in share capital of subsidiaries outside India is not in the nature of an “international transaction” as defined in s. 92-B. Transfer pricing provisions are not applicable to transactions where there is no income (Circular No. 14, dated 22/11/2011, Dana Corporation 321 ITR 178 (AAR) & Amiantit International 322 ITR 678 (AAR) referred)

S. 40(a)(i) does not impose an absolute disallowance for failure to deduct TDS. It provides that the deduction shall be allowed in the year of deduction of the TDS. As the assessee had in fact deducted TDS in the immediately succeeding year, it had substantially complied with the provision. Also, as the fact that TDS was not deducted was stated in the tax audit report which was filed with the return, it could not be said that the assessee has not disclosed the correct particulars of income

The CBDT’s instructions for assumption of jurisdiction for selection of cases of corporate assesses for scrutiny and assessment are issued u/s 119 and are binding on the AO and have to be followed by him in letter and spirit. The burden lies on the authority assuming jurisdiction to show and establish that such instructions have duly been complied and satisfied in letter and spirit. On facts, as there was no disallowance of Rs. 5 lacs or more in the earlier years and as no identical issue had arisen in the present year, the notice issued u/s 143(2) was not in terms of the CBDT’s Scrutiny Guidelines and consequently the assumption of jurisdiction was illegal and the entire assessment proceedings were invalid (Nayana P. Dedhia 270 ITR 572 (AP) followed)

Under the policy of the Central Government and the SEBI (FII) Regulations, 1995 a FII can only “invest” in securities and cannot do “business” in securities. S. 115AD also provides that all income arising to a FII from securities, whether from their retention or from their transfer, is taxable as a capital gain. This is also the view expressed in Press Note F. No. 5(13)SE/91-FIV dated 24.03.1994 issued by the Ministry of Finance. If the Revenue is permitted to make a distinction between the securities held by a FII by classifying them as a capital asset or as stock in trade, s. 115AD will become otiose. The result is that all income arising to a FII, including from dealings in derivatives has to be assessed as capital gains. The contrary view of the AAR in Royal Bank of Canada cannot be followed (LG Asian Plus Ltd 46 SOT 159 followed)

The affidavit produced by the AR is not a valid affidavit because there is no verification appended on it and there is no mention as to which of the paras are true to the knowledge of the deponent and which of the paras of the affidavit are true to his belief. The affidavit is also not a duly sworn affidavit as required under Rule 10 of the ITAT Rules 1963 because it has not been properly endorsed by the notary regarding the oath of affirmation before him by the executant of the affidavit. The notary has put his signatures under his name seal but there is no mention whether the oath was administered to the signatory or if done so, when and where it was administered. Even words “Sworn before me” are missing. If the affidavit does not certify or endorse the fact that oath has been administered, it remains a waste paper. On merits, the case is one of gross negligence and inaction on the part of the assessee and the AR. The explanation that the AR’s assistant kept the papers in his drawer and failed to take necessary action is vague and evasive and not sufficient cause for condonation. There is also no general principle saving the party from all mistakes of its counsel. There is also total inaction and gross negligence on the part of the assessee for not inquiring the status of the appeal from the AR. Though courts adopt liberal view while condoning delay on the principle that technicalities should not prevail over the cause of justice, litigants should not take the courts for granted

S. 43B covers only the sums payable by way of contribution by the assessee as an employer, i.e., the employer’s contribution to the PF and ESI funds. It does not cover the employees contribution. While the employer’s contribution is allowable u/s 37(1), the employees’ contribution collected by the employer is deemed to be his income u/s 2(24)(x) and is allowable as a deduction u/s 36(1)(va) only if it is paid to the relevant fund by the due date as prescribed in the relevant legislation. Even if one assumes that s. 43B(b) applies to s. 36(1)(va) payments, a deduction would not be admissible because the s. 36(1)(va) payments are not ‘otherwise allowable’ if they are paid beyond the “due date”. The decisions in Vinay Cement 213 CTR (SC) 268 & Alom Extrusions 319 ITR 306 (SC) are not an authority on the point that employees’ contributions are also covered by s. 43B. Though in AIMIL 321 ITR 508 (Del) it was held that employees’ contribution to EPF and ESI funds are covered by s. 43B, it cannot be followed because (i) the Court moved on the premise that employees’ contribution is subject to clause (b) of s. 43B and did not notice the condition in s. 36(1)(va), (ii) the decision by the tribunal, which was approved by the High Court in AIMIL was rendered without considering the decision of the Special Bench in ITC Ltd & (iii) it is inconsistent with Godaveri (Mannar) Sahakari 298 ITR 149 (Bom). Accordingly, AIMIL cannot be followed and the deductibility of employees’ contribution has to be seen only with reference to s. 36(1)(va) (together with grace period) (Bengal Chemicals & Pharmaceuticals (included in file) & ITC Ltd 112 ITD 57 (Kol)(SB) followed)

The AO has not brought on record anything which proves that there is any expenditure incurred towards earning of dividend income. The AO has not examined the accounts of the assessee and there is no satisfaction recorded by the AO about the correctness of the claim of the assessee and without the same he invoked Rule 8D. While rejecting the claim of the assessee with regard to expenditure or no expenditure, as the case may be, in relation to exempted income, the AO has to indicate cogent reasons for the same. The AO has not considered the claim of the assessee and straight away embarked upon computing disallowance under Rule 8D of the Rules on presuming the average value of investment at ½% of the total value. This is not permissible (J. K. Investors (Bombay) followed)