In admitting the appeal filed under section 260A against the judgement of the 5 Member Special Bench of the Tribunal in Aztec Software vs. ACIT 294 ITR (AT) 32 / 107 ITD 41, the High Court has granted stay of “the operation and all further proceedings” of the said judgement until further orders.
Held, affirming the majority view of the Special Bench in DCIT vs. Oman International Bank 100 ITD 285 that:
(i) Though the Circulars issued by the CBDT are not binding on the court as held in CCE vs. Ratan Melting & Wire Industries 231 ELT 22 (S.C.), it is binding on the authorities and while it is for the Court to read the section in its proper context, while so reading the Court will bear in mind the circular issued by the CBDT. Circulars are sometimes issued to obviate difficulties in the operation of the provisions and these are aspects which Courts do bear in mind while considering the Circulars. Accordingly, Circulars have to be taken into account.
(ii) The decision of an assessee to treat a debt as a bad debt in his books has to be a business or commercial decision and not whimsical or fanciful and must be based on material that the debt is not recoverable. The decision must be bona fide;
(iii) Post amendment of s. 36 (1)(vii) & 36 (2), the burden is not on the assessee to show the debt is “bad”. In order to disallow, the AO must show that the decision of the assessee was not bona fide.
Where the question arose whether in respect of an appeal admitted u/s 260A, the High Court has power to grant stay of recovery of outstanding demand, HELD:
(i) S. 260A provides that the provisions of the Code of Civil Procedure relating to appeals to the High Court shall apply;
(ii) Rules 5 (1) and 5 (3) of Order 41 of the Code of Civil Procedure authorize the Court to grant stay provided it is satisfied:
(a) that substantial loss may result to the party applying for stay of execution unless the order is made;
(b) that the application has been made without unreasonable delay; and
(c) that security has been given by the applicant for the due performance of such decree or order as may ultimately be binding upon him.
(iii) On facts, as these conditions were satisfied, the assessee was entitled to stay subject to conditions.
Where the question arose whether the Explanation to s. 73 (which deems the loss from trading in shares by a company to be speculation loss) can be confined only to cases where there is manipulation and whether the loss arising on valuation of closing stock of shares is also covered, HELD:
(i) Though the Circular of the CBDT supports the interpretation that the object of the Expl. to s. 73 is to curb manipulation of group companies’ shares, the scope of the Expl. extends to all companies carrying on business in shares;
(ii) Though the Expl. refers to purchase and sale of shares and not to losses suffered on account of valuation, it applies to valuation losses as well as there is no difference between trading losses and valuation losses.
Where the assessee made a VDIS declaration in which diamonds were disclosed and he later claimed that the moneys received by him were the sale proceeds of the said diamonds which could not be taxed but the AO held that the sale was fictitious as the second purchaser to whom the diamonds were stated to have been sold by the first purchaser was not traceable, HELD
In view of the fact that the diamonds formed a part of the declaration which was accepted by the department and the consideration was received from the purchaser by cheque and recorded in the books of accounts, the assessee had proved the possession of the diamonds at the time of declaration and the sale thereof could not be disbelieved merely because there was doubt about the second sale.
We are clearly of the opinion that in the present case, the conduct of the D.R.I. officers is not only high handed but it is in gross abuse of the powers vested in them under the Customs Act. It is apparent that the D.R.I. officers in utter disregard to the order passed by the Commissioner of Customs (A), Mumbai have forced the petitioners to pay the amount by threat and coercion which is not permissible in law. Thus, the conduct of the D.R.I. officers in the present case in collecting the amount from the petitioners towards the alleged differential duty is wholly arbitrary, illegal and contrary to law. Having terrorised the petitioners with the threat of arrest, it is not open to the D.R.I. officers to contend that the amount has been paid by the petitioners voluntarily. We strongly condemn the high handed action of the D.R.I. officers in totally flouting the norms laid down under the Customs Act in relation to reassessment proceedings and purporting to collect the amount even before reassessment. We hope that such incidents do not occur in the future
Though it is the settled position under the common law that the term “owner” means a person who has valid title legally conveyed to him after complying with the requirements of law such as Transfer of Property Act, Registration Act, etc, a different view has to be taken in the context of S. 22 of the Act having regard to the ground realities and the object of the Act, namely, “to tax the income”. Accordingly, the term “owner” means a person who is entitled to receive income from the property in his own right.” There is no requirement that there has to be a registered Deed of conveyance for a person to be treated as an owner for purposes of S. 22.
S. 149, which imposes the limitation period, requires the notice to be “issued” but not “served” within the limitation period. Once a notice is issued within the period of limitation, jurisdiction becomes vested in the AO to proceed to reassess. Service is not a condition precedent to conferment of jurisdiction but it is a condition precedent to the making of the order of assessment;
Where an assessee has his own funds as well as borrowed funds, a presumption can be made that the advances for non-business purposes have been made out of the own funds and that the borrowed funds have not been used for this purpose. Accordingly, the disallowance of the interest on the borrowed funds is not justified.
Where an assessment is made u/s 115JA of the Act, an assessee is not liable to pay interest for non-payment/shortfall of advance tax u/ss 234B and 234C of the Act. CIT v. Kwality Biscuits Ltd 284 ITR 434 (SC) followed;