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DATE: June 24, 2020 (Date of pronouncement)
DATE: June 29, 2020 (Date of publication)
AY: 2013-2014
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CITATION:
S. 2(22)(e) is a deeming provision & should be construed strictly. The section uses the expression "by way of advances or loans" which shows that all payments received from the sister company cannot be treated as deemed dividend but only payments which bear the characteristics of loans and advances. Under the law, all loans and advances are debts, but all debts are not loans and advances. The term 'loans and advances' is not defined & has to be understood in the commercial sense. Advances given for purely temporary financial accommodation for business purposes does not attract the deeming fiction (All imp judgements referred)

After hearing both the parties and perusing the relevant records, it reveals that they are in the form of current and inter banking accounts and contain both types of entries i.e. giving and taking the amount and appear to be a current account and cannot be considered as loans and advances as contemplated u/s 2(22)(e) of the IT Act

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DATE: June 17, 2020 (Date of pronouncement)
DATE: June 27, 2020 (Date of publication)
AY: 2011-12, 2012-13
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CITATION:
S. 254(2A): ITAT President to consider whether a Special Bench should be constituted to decide two very significant aspects relating to the powers of the ITAT to grant unconditional stay of demand after the amendment in first proviso to s. 254(2A) by the Finance Act 2020, namely, (i) The legal impact, if any, of the amendment on the powers of the Tribunal u/s 254(1) to grant stay; and, (ii) if the amendment is held to have any impact on the powers of the Tribunal u/s 254(1),- (a) whether the amendment is directory in nature or is mandatory in nature; (b) whether the said amendment affects the cases in which appeals were filed prior to the date on which the amendment came into force; (c) whether, with respect to the manner in which, and nature of which, security is to be offered by the assessee, under first proviso to s. 254(2A), what are broad considerations and in what reasonable manner, such a discretion must essentially be exercised, while granting the stay,by the Tribunal.

We are of the considered view that these issues are of vital importance to all the stakeholders all over the country, and in our considered understanding, on such important pan India issues of far reaching consequence, it is desirable to have the benefit of arguments from stakeholders in different part of the country. We are also mindful of the fact, as learned Departmental Representative so thoughtfully suggests, the issues coming up for consideration in these stay applications involve larger questions on which well considered call is required to be taken by the bench. Considering all these factors, we deem it fit and proper to refer the instant Stay Applications to the Hon’ble President of Income Tax Appellate Tribunal for consideration of constitution of a larger bench and to frame the questions for the consideration by such a larger bench, under section 255(3) of the Income Tax Act, 1961

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DATE: March 5, 2020 (Date of pronouncement)
DATE: June 26, 2020 (Date of publication)
AY: 1984-85
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CITATION:
S. 28(iv): The Dept's argument that the waiver of a loan constitutes an operational subsidy which is taxable is not correct. There is a fundamental difference between “loan” and “subsidy” & the two concepts cannot be equated. While “loan” is a borrowing of money required to be repaid back with interest; “subsidy” is not required to be repaid back being a grant. Such grant is given as part of a public policy by the state in furtherance of public interest. Therefore, even if a “loan” is written off or waived, which can be for various reasons, it cannot partake the character of a “subsidy”. The waiver of a loan cannot be brought to tax u/s 28(iv) of the Act

Conceptually, “loan” and “subsidy” are two different concepts. As per the Concise Oxford English Dictionary, Indian Edition, the term “loan” has been explained as a thing that is borrowed, especially a sum of money that is expected to be paid back with interest; the action of lending. Black’s Law Dictionary, Eight Edition, describes “loan” as an act of lending; a grant of something for temporary use; a thing lent for the borrower’s temporary use, especially a sum of money lent at interest; to lend, especially money. In Supreme Court on Words and Phrases, it is stated that “loan” necessarily supposes a return of the money loaned; in order to be a loan, the advance must be recoverable; “loan” is an advance in cash which includes any transaction which in substance amounts to such advance

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DATE: February 11, 2020 (Date of pronouncement)
DATE: June 23, 2020 (Date of publication)
AY: 2001-02, 2003-04
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CITATION:
S. 36(1)(vii)/ 36(2): Write-off of inter corporate deposits and advances given for purchase of vehicles or plant and machinery is allowable as a bad debt. There is no requirement under the Act that the bad debt has to accrue out of income under the same head i.e 'income from business or profession' to be eligible for deduction. All that is required is that the debt in question must be written off by the assessee in its books of accounts as irrecoverable

It is a settled position in law that after 1.4.1989, it is not necessary for the assessee to establish or prove that the debt has in fact become irrecoverable but it would be sufficient if the bad debt is written off as irrecoverable in the accounts of the assessee. This is because, as held by this Court, decision to treat a debt as a bad debt is a commercial or business decision of the assessee. Recording of a debt as a bad debt in his books of accounts by the assessee prima facie establishes that it is a bad debt. If the Assessing Officer disputes that the onus would be on him to prove otherwise

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DATE: June 12, 2020 (Date of pronouncement)
DATE: June 22, 2020 (Date of publication)
AY: 1992-93, 1993-94, 1994-95, 1995-96
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CITATION:
S. 45/ 147: Capital gains are chargeable to tax when individual flats are sold and not when the land is transferred to the co-operative society formed by the flat purchasers. The flat purchasers, by purchasing the flats, had certainly acquired a right or interest in the proportionate share of the land but its realisation is deferred till formation of the co-operative society by the owners of the flats and eventual transfer of the entire property to the co-operative society

According to the Assessing Officer, assessee had erred in offering to tax ‘capital gains’ in the year when the individual flats were sold whereas such ‘capital gains’ could be assessed to tax only when the land is trasferred to the co-operative society formed by the flat purchasers. If the assessee had offered to tax as ‘capital gains’ in the assessment years under consideration which should have been offered to tax in the subsequent years, it is beyond comprehension as to how a belief can be formed that income chargeable to tax for the assessment year under consideration had escaped assessment. That apart, the flat purchasers by purchasing the flats had certainly acquired a right or interest in the proportionate share of the land but its realisation is deferred till formation of the co-operative society by the owners of the flats and eventual transfer of the entire property to the co-operative society

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DATE: June 18, 2020 (Date of pronouncement)
DATE: June 20, 2020 (Date of publication)
AY: 2006-07
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CITATION:
S. 54F: In determining whether the assessee owns more than one residential property, the usage of the property has to be considered. If an apartment is sanctioned for residential purposes but is in fact being used for commercial purposes as a serviced apartment, it has to be treated as commercial property. Alternatively, several independent residential units in the same building have to be treated as one residential unit and there is no impediment to allowance of exemption u/s 54F(1)

The usage of the property has to be considered for determining whether the property in question is a residential property or a commercial property. It is not in dispute that the aforesaid two apartments are being put to commercial use and therefore, the aforesaid apartments cannot be treated as residential apartments. The contention of the revenue that the apartments cannot be taxed on the basis of the usage does not deserve acceptance in view of decisions of Kerala, Delhi, Allahabad, Calcutta and Hyderabad High Courts with which we respectfully concur. 11. Alternatively, we hold that assessee even otherwise is entitled to the benefit of exemption under Section 54F(1) of the Act as the assessee owns two apartments of 500 square feet in same building and 17 therefore, it has to be treated as one residential unit. The aforesaid fact cannot be permitted to act as impediment to allowance of exemption under Section 54F(1) of the Act

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DATE: June 18, 2020 (Date of pronouncement)
DATE: June 20, 2020 (Date of publication)
AY: 2014-15
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CITATION:
S. 40(a)(ia): The amendment to s. 40(a)(ia) by the Finance (No.2) Act, 2015 w.e.f. 01.04.2015, which restricts the disallowance for failure to deduct TDS to 30% of the expenditure instead of 100%, is curative in nature and should be applied retrospectively

We find that Finance (No.2) Act has made amendment to section 40(a)(ia) of the Act w.e.f. 01.04.2015. Various benches of the Tribunals including the Delhi Benches of the Tribunal, have held the amendment made by Finance (No 2) Act to be curative in nature. We further finds the coordinate bench of the Tribunal in the case of R.H. International Vs. ITO (supra) has held that disallowance u/s. 40(a)(ia) of the Act be restricted to 30% of the expenses paid as against 100% because amended provision is curative in nature and the provisions should be applied retrospectively

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DATE: June 12, 2020 (Date of pronouncement)
DATE: June 16, 2020 (Date of publication)
AY: 2015-16
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S. 143(3)/ 292BB: Under CBDT Instruction No.5/2016, a case earmarked for 'Limited Scrutiny' cannot be taken for 'Complete Scrutiny' unless the AO forms a "reasonable view" that there is a possibility of under assessment of income. The objective of the instruction is to (i) prevent fishing and roving enquiries; (ii) ensure maximum objectivity; and (iii) enforce checks and balances upon the powers of the AO. On facts, there is not an iota of cogent material shown by the AO for the conversion from limited scrutiny to complete scrutiny. The PCIT has also accorded approval in a mechanical manner. S. 292BB does not save the infirmity. The assessment order has to be quashed as a nullity

The department, which is State, can be permitted to selectively apply the standards set by themselves for their own conduct. If this type of deviation is permitted, the consequences will be that floodgate of corruption will be opened which it is not desirable to encourage. When the department has set down a standard for itself, the department is bound by that standard and cannot act with discrimination

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DATE: June 12, 2020 (Date of pronouncement)
DATE: June 13, 2020 (Date of publication)
AY: 2003-04
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CITATION:
S. 260A/ 271(1)(c): (i) An appeal u/s 260-A can be entertained by the High Court on the issue of jurisdiction even if the same was not raised before the Tribunal (ii) the question relating to non-striking off of the inapplicable portion in the s. 271(1)(c) show-cause notice goes to the root of the lis & is a jurisdictional issue (iii) it would be too technical and pedantic to take the view that because in the printed notice the inapplicable portion was not struck off, the order of penalty should be set aside even though in the assessment order it was clearly mentioned that penalty proceedings u/s 271(1)(c) had been initiated separately for furnishing inaccurate particulars of income, (iv) Penalty cannot be imposed for alleged breach of one limb of s. 271(1)(c) of the Act while proceedings were initiated for breach of the other limb of s. 271(1)(c). This vitiates the order of penalty, (v) Threat of penalty cannot become a gag and / or haunt an assessee for making a claim which may be erroneous or wrong (All judgements referred)

Concealment of particulars of income was not the charge against the appellant, the charge being furnishing inaccurate particulars of income. As discussed above, it is trite that penalty cannot be imposed for alleged breach of one limb of Section 271(1)(c) of the Act while penalty proceedings were initiated for breach of the other limb of Section 271(1)(c). This has certainly vitiated the order of penalty.

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DATE: June 12, 2020 (Date of pronouncement)
DATE: June 13, 2020 (Date of publication)
AY: 2003-04
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CITATION:
S. 68 Bogus Cash Credits: In the case of an assessee engaged in providing 'accommodation entries', the entire deposits cannot be assessed as unexplained cash credits. Only the commission (0.15%) earned in providing the accommodation entries can be assessed as income (PCIT vs. NRA Iron and Steel (2019) 103 Taxmann.com 48 (SC) distinguished)

In so far the decision of the Supreme Court in NRA Iron and Steel Pvt. Ltd. (supra) is concerned, the same is not attracted in the present case in as much as facts of the present case are clearly distinguishable. Unlike the present case, the assessee in NRA Iron and Steel Pvt. Ltd. (supra) claimed the cash credits as its income. However, it was found that the creditors had meagre or nil income which did not justify investment of such huge sums of money in the assessee. The field enquiry conducted by the Assessing Officer revealed that in several cases the investor companies were non-existent. Thus, it was held that the assessee had failed to discharge the onus which lay on it to establish the identity of the investor companies and the credit worthiness of the investor companies. In such circumstances, the entire transaction was found to be bogus. But as already discussed in the preceding paragraphs, assessee never claimed the cash credits as its income. It admitted its business was to provide accommodation entries. In return for the cash credits it used to issue cheques to the customers / beneficiaries for slightly lesser amounts, the balance being its commission. Moreover, the cash credits had been accounted for in the respective assessment of the beneficiaries.

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