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DATE: October 9, 2017 (Date of pronouncement)
DATE: October 14, 2017 (Date of publication)
AY: 1997-98 to 2000-01
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CITATION:
S. 80-IA contains substantive and procedural provisions for computation of special deduction. Any device adopted to reduce or inflate the profits of eligible business has to be rejected. The claim for 100% deduction, without taking into consideration depreciation, is anathema to the scheme u/s 80-IA of the Act which is linked to profits. If the contention of the assessees is accepted, it would allow them to inflate the profits linked incentives provided u/s 80-IA of the Act which cannot be permitted

It may be stated at the cost of the repetition that judgment in Mahendra Mills was rendered while construing the provisions of Section 32 of the Act, as it existed at the relevant time, whereas we are concerned with the provisions of Chapter VI-A of the Act. Marked distinction between the two Chapters, as already held by this Court in the judgments noted above, is that not only Section 80-IA is a code by itself, it contains the provision for special deduction which is linked to profits. In contrast, Chapter IV of the Act, which allows depreciation under Section 32 of the Act is linked to investment. This Court has also made it clear that Section 80-IA of the Act not only contains substantive but procedural provisions for computation of special deduction. Thus, any device adopted to reduce or inflate the profits of eligible business has to be rejected. The assessees/appellants want 100% deduction, without taking into consideration depreciation which they want to utilise in the subsequent years. This would be anathema to the scheme under Section 80-IA of the Act which is linked to profits and if the contention of the assessees is accepted, it would allow them to inflate the profits linked incentives provided under Section 80-IA of the Act which cannot be permitted

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DATE: October 9, 2017 (Date of pronouncement)
DATE: October 14, 2017 (Date of publication)
AY: 2010-11
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CITATION:
S. 254(2) Limitation period: The amendment to s. 254(2) w.e.f. 01.06.2016 to curtail the period available to file rectification applications from four years to six months cannot apply to appellate orders passed prior to that date because that would take away a vested right

The reason for the said principle is not far to seek. Though periods of limitation, being procedural law, are to be applied retrospectively, yet if a shorter period of limitation is provided by a later amendment to a statute, such period would render the vested right of action contained in the statute nugatory as such right of action would now become time barred under the amended provision

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DATE: October 3, 2017 (Date of pronouncement)
DATE: October 7, 2017 (Date of publication)
AY: -
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CITATION:
S. 153A search assessment: Supreme Court stays operation of the judgement of the Delhi High Court in Dayawanti Gupta vs. CIT 390 ITR 496 (Del). The High Court dealt with the issue whether an assessment u/s 153A can be made even if no incriminating material has been found during s. 132 search proceedings

In Dayawanti Gupta vs. CIT 390 ITR 496 (Del), the assessee argued before the Delhi High Court that since no incriminating material was found during or pursuant to the search, additions, made on the basis of block assessment, were unsustainable inasmuch as they revisited finally settled assessments. It was submitted that for completing a block assessment, founded on search proceedings and notice under Section 153A, the assessing officer has to base the order on fresh materials found during the search, in the form of books of accounts, articles seized, or other similar materials. In this case, the revenue could not substantiate its plea that the assesses had concealed their income, because nothing suspect which could result in an addition to the income assessed during the previous years was in fact seized or taken into custody. Therefore, the four assessments for the block period in question had to be set aside

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DATE: October 4, 2017 (Date of pronouncement)
DATE: October 6, 2017 (Date of publication)
AY: -
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CITATION:
S. 2(47)/ 45: Entire law on whether a joint development agreement entered into by an owner of land with a developer constitutes a "transfer" u/s 2(47) and whether the same gives rise to capital gains chargeable to tax u/s 45 and 48 of the Income-tax Act explained in the context of the provisions of the Transfer of Property Act, Registration Act and real income theory

If an agreement, like the JDA in the present case, is not registered, then it shall have no effect in law for the purposes of Section 53A. In short, there is no agreement in the eyes of law which can be enforced under Section 53A of the Transfer of Property Act. This being the case, we are of the view that the High Court was right in stating that in order to qualify as a “transfer” of a capital asset under Section 2(47)(v) of the Act, there must be a “contract” which can be enforced in law under Section 53A of the Transfer of Property Act. A reading of Section 17(1A) and Section 49 of the Registration Act shows that in the eyes of law, there is no contract which can be taken cognizance of, for the purpose specified in Section 53A. The ITAT was not correct in referring to the expression “of the nature referred to in Section 53A” in Section 2(47)(v) in order to arrive at the opposite conclusion. This expression was used by the legislature ever since sub-section (v) was inserted by the Finance Act of 1987 w.e.f. 01.04.1988. All that is meant by this expression is to refer to the ingredients of applicability of Section 53A to the contracts mentioned therein. It is only where the contract contains all the six features mentioned in Shrimant Shamrao Suryavanshi (supra), that the Section applies, and this is what is meant by the expression “of the nature referred to in Section 53A”. This expression cannot be stretched to refer to an amendment that was made years later in 2001, so as to then say that though registration of a contract is required by the Amendment Act of 2001, yet the aforesaid expression “of the nature referred to in Section 53A” would somehow refer only to the nature of contract mentioned in Section 53A, which would then in turn not require registration. As has been stated above, there is no contract in the eye of law in force under Section 53A after 2001 unless the said contract is registered. This being the case, and it being clear that the said JDA was never registered, since the JDA has no efficacy in the eye of law, obviously no “transfer” can be said to have taken place under the aforesaid document

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DATE: September 19, 2017 (Date of pronouncement)
DATE: October 6, 2017 (Date of publication)
AY: -
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CITATION:
Strictures by ITAT against ICAI deprecated: It is very unfortunate that the Tribunal, out of sheer desperation and frustration and agitated by the fact that the Revenue is not opposing the request for condonation of delay blamed the assessee's Chartered Accountant and the ICAI on how they should conduct themselves. The Tribunal completely misdirected itself by taking irrelevant factors into account. Delay of 2984 days in filing the appeal caused by wrong advice of a professional is capable of condonation. However, even if the assessee has acted bona fide, he can be held liable for payment of costs to balance rights and equities

Thus, we find that the Tribunal, out of sheer desperation and frustration and agitated by the fact that the Revenue is not opposing the request for condonation of delay, turned its attention towards the assessee’s Chartered Accountant. It is unfortunate that thereafter paragraphs after paragraphs are devoted to how a Chartered Accountant ought to conduct himself and while advising litigants in tax matters. How a Chartered Accountant, as a professional, should be aware that legal proceedings should be filed in time and if there are adverse orders, how proper advice should be given. It is very unfortunate that the Tribunal has, apart from seeking to advice professionals, blamed not only individual Chartered Accountants but equally the Institute of Chartered Accountants of India. It is unfortunate that Courts of law or Tribunals, which are the last fact finding authorities in this case, adopted this course

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DATE: September 26, 2017 (Date of pronouncement)
DATE: October 4, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 140A/ 221(1): Law explained on whether an assessee who defaults on paying self assessment tax u/s 140A while filing the return of income is liable for penalty u/s 221(1) if he files a revised return of income and pays the tax thereon at the time of filing the revised return of income

As a plain reading of the above statutory provisions would show, the lapse, referred to in section 140A(1), is the failure “to pay such (admitted) tax together with interest payable under any provision of this Act for any delay in furnishing the return or any default or delay in payment of advance tax, before furnishing the return” and the lapses punishable under section 221(1) are the lapses in respect of “default in making a payment of tax”. The default triggering the penal liability under section 221(1) is the default in making payment of tax, and that the default in payment is tax is with reference to the filing of the income tax return. Viewed thus, default is committed at the point of time when a return of income is filed without making payment of the admitted tax liability. Clearly, therefore, the assessee committed a default in not paying the admitted tax liability when it filed the original income tax return, without payment of admitted tax liability, on 30th September 2008. To this extent, there is no dispute or ambiguity at all.The question then arises as to what is the impact of filing a revised income tax return

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DATE: September 13, 2017 (Date of pronouncement)
DATE: October 4, 2017 (Date of publication)
AY: -
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CITATION:
A Chartered Accountant who is accused of offering a bribe to an Income-tax Officer for performing an official act can be tried under sections 7 and 13 (1)(d) of the Prevention of Corruption Act and s. 120-B of the IPC. The fact that the CA is not a “public servant” is irrelevant

The third fold of argument that the accused No.2 is not a public servant and is beyond the contemplation of the statute. The words occurring at Section 8 of the Act “Whoever accepts or obtains, or agrees to accept, or attempts to obtain, from any person, for himself or for any other person, any gratification…………” covers the persons other than the public servants contemplated by definition clause (c) of section 2 of the Act and that does not require much elaboration. Regarding the contention that section 7 of the P.C.Act cannot be invoked against accused No.1 is not within the competency of the petitioner to urge before this court. Even otherwise the charge sheet material contains voice recording of the accused Nos.1 and 2 and the complainant and also there is material that this petitioner made demand for bribe on behalf of the 1st accused

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DATE: September 19, 2017 (Date of pronouncement)
DATE: October 3, 2017 (Date of publication)
AY: 2008-09
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CITATION:
S. 14A/ Rule 8D: The AO is not entitled to make any disallowance under Rule 8D if he does not specifically record that he is not satisfied with the correctness of the assessee's claim. The fact that the CIT(A) and ITAT were not satisfied with the assessee's disallowance and enhanced it does not mean that Rule 8D becomes applicable and the disallowance should be computed as per the prescribed formula

The Assessing Officer did not specifically record that he is not satisfied with the correctness of the claim of the assessee in respect of the expenditure in relation to the income which does not form part of the total income under the Act. However, he felt obliged and going by the presence of Rule 8D that once Section 14A is attracted, the disallowance is to be made as per Rule 8D only which has been prescribed by the Legislature. The Assessing Officer has not adverted to the plain language of subsection (2) of Section 14A

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DATE: September 18, 2017 (Date of pronouncement)
DATE: October 3, 2017 (Date of publication)
AY: 2009-10
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CITATION:
Transfer Pricing: Steps to be undertaken in identification of comparable transactions/entities while fixing the ALP and the margin explained. Though the TNMM method allows broad flexibility tolerance in the selection of comparables, broad functionality is not sufficient to find the comparable entity. There must be similarity with the controlled transaction

In so far as identifying comparable transactions/entities is concerned, the same would not differ irrespective of the transfer pricing method adopted. In other words, the comparable transactions/entities must be selected on the basis of similarity with the controlled transaction entity. Comparability of controlled and uncontrolled transactions has to be judged, inter alia, with reference to comparability factors as indicated under rule 10B(2) of the Income Tax Rules, 1962. Comparability analysis by the transactional net margin method may be less sensitive to certain dissimilarities between the tested party and the comparables. However, that cannot be the consideration for diluting the standards of selecting comparable transactions/entities. A higher product and functional similarity would strengthen the efficacy of the method in ascertaining a reliable arm’s length price. Therefore, as far as possible, the comparables must be selected keeping in view the comparability factors as specified. Wide deviations in profit level indicator must trigger further investigations/analysis

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DATE: September 25, 2017 (Date of pronouncement)
DATE: October 3, 2017 (Date of publication)
AY: 2007-08
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CITATION:
Transfer Pricing: A giant risk taking company like Infosys Technologies with huge significant intangibles and having huge assets leading to the exorbitant turnover is not comparable with a captive unit which is subject to minimum/ limited risk. The fact that the functional profile of Infosys is similar to that of the assessee is irrelevant

When we examine the profile of the assessee company vis-à-vis Infosys Technologies Limited in the light of the judgment in CIT vs. Agnity India Technologies Pvt. Ltd. (supra), there is no comparability for benchmarking the international transactions for the reasons inter alia that Infosys Technologies Limited is a giant risk taking company whereas, on the other hand, the assessee is a captive unit of its parent company and prone to minimum/ limited risk; that the Infosys Technologies Limited is having huge significant intangibles and having huge assets leading to the exorbitant turnover; that it is not in dispute that functional profile of assessee company and CIT vs. Agnity India Technologies Pvt. Ltd. is similar

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