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DATE: June 28, 2016 (Date of pronouncement)
DATE: July 6, 2016 (Date of publication)
AY: -
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CITATION:
Severe strictures passed at the attitude of the Government in creating “hurdles and obstacles in the smooth working and functioning of all the tribunals and courts” and the fact that the “State has yet to adopt a culture of respect and regard for the judiciary”. Directions given that issue of allotment of residential quarters to Tribunal Members should not be kept a “closely guarded secret” but made public

It is these dismal state of affairs which compel us to observe as above. We are still apprehensive for this State has yet to adopt a culture of respect and regard for the judiciary. The judiciary is an important organ of the State. The State has a wider connotation and included in it are the legislature, executive and the judiciary. The executive wing of the State Government continues to show disrespect and disregard to the judiciary in matters which are of above routine nature. We have seen precious time being wasted on the judicial side on such trivial issues. There are ways and means by which the General Administration Department and the Finance Department of the State create hurdles and obstacles in the smooth working and functioning of all the tribunals and courts set up by the State.

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DATE: June 8, 2016 (Date of pronouncement)
DATE: June 28, 2016 (Date of publication)
AY: 2008-09
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CITATION:
S. 148 notice issued to, and reassessment order passed on, a non-existing entity is without jurisdiction. A writ petition can be entertained despite the presence of alternate remedy

The impugned notice has been issued in respect of a non existing entity as M/s. Addler Security Systems Pvt. Ltd., which stands dissolved, having been struck off the Rolls of the Registrar of Companies much before its issue. Consequently, the assessment has been framed also in respect of the non-existing entity. This defect in issuing a reopening notice to a non-existing company and framing an assessment consequent thereto is a issue which goes to the root of the jurisdiction of the Assessing Officer to assess the non-existing company

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DATE: June 6, 2016 (Date of pronouncement)
DATE: June 16, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 2(15)/12AA(3): The DIT has no jurisdiction to cancel registration of a charitable institution on the ground that it is carrying on commercial activities which are in breach of the amended definition of "charitable purpose" in s. 2(15). Registration can be cancelled only if the activities of the trust are not genuine or are not being carried out in accordance with its objects. This is clarified by Circular No.21 of 2016

The submission made on behalf of the Revenue that the Circular No.21 of 2016 would have only prospective effect in respect of Assessment made subsequent to the amendment under Section 2(15) of the Act w.e.f. 1st April, 2016 is also not sustainable. The amendment in Section 2(15) of the Act brought about by Finance Act, 2016 w.e.f. 1st April, 2016, is essentially that where earlier the receipts in excess of Rs.25 lakhs on commercial activities would exclude it from the definition of ‘charitable purpose’ is now substituted by receipts from commercial activities in excess 20% of the total receipts of the institution. In the above view, Circular No.21 of 2016 directs the Officer of the Revenue not to cancel Registration only because the receipts on account of business are in excess of the limits in the proviso to Section 2(15) of the Act would also apply in the present case. The impugned order has held that cancellation of a Registration under Section 12AA(3) of the Act, can only take place in case where the activities of trust or institution are not genuine and/or not carried on in accordance with its objects

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DATE: September 7, 2011 (Date of pronouncement)
DATE: June 13, 2016 (Date of publication)
AY: 2001-02
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CITATION:
S. 10(38)/ 69: Fact that a small amount invested in "penny" stocks gave rise to huge capital gains in a short period does not mean that the transaction is "bogus" if the documentation and evidences cannot be faulted

The explanations of the assessee seems to have been rejected by the assessing authority more on the ground of presumption than on factual ground. The presumption is so compelling that comparatively a small amount of investment made by the assessee during the previous year period relevant to the assessment years 1999- 2000 and 2000-01 have grown into a very sizable amount ultimately yielding a fabulous sum of Rs. 1,41,08,484 which was used by the assessee for the purchase of the flat at Colaba. The sequence of the events and ultimate realization of money is quite amazing. That itself is a provocation for the Assessing Officer to jump into a conclusion that the transactions were bogus. But, whatever it may be, an assessment has to be completed on the basis of records and materials available before the assessing authority. Personal knowledge and excitement on events, should not lead the Assessing Officer to a state of affairs where salient evidences are over-looked. In the present case, howsoever unbelievable it might be, every transaction of the assessee has been accounted, documented and supported. Even the evidences collected from the concerned parties have been ultimately turned in favour of the assessee. Therefore, it is, very difficult to brush aside the contentions of the assessee that he had purchased shares and he had sold shares and ultimately he had purchased a flat utilizing the sale proceeds of those shares

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DATE: June 2, 2016 (Date of pronouncement)
DATE: June 4, 2016 (Date of publication)
AY: -
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CITATION:
Law on whether "installation or construction activity" constitutes a PE under Article 5 and whether "mobilisation/ demobilisation charges" can be treated as "royalty" u/s 9 (1) (vi) & Article 12 (3) (b) of the DTAA and whether "installation charges" could be treated as "Fees for Technical Services" under Explanation 2 below s. 9 (1) (vii) read with Article 12 (4) (a) of the India-Singapore DTAA explained

Therefore, on two counts the finding of the AAR on FTS cannot be sustained. The first being that the installation services are not incidental to the mobilisation/demobilisation service. The contract was in fact for installation, erection of equipment. Mobilisation/demobilisation constituted an integral part of the contract. Secondly, the AAR has proceeded on a factual misconception that the dominion and control of the equipment was with IOCL. It was erroneously concluded that the payment for such mobilisation/demobilisation constitutes royalty. In that view of the matter, the consideration for installation cannot not be characterized as FTS and brought within the ambit of Article 12.4(a) of the DTAA. The resultant position is that no part of the income earned by the Petitioner from the contract with IOCL can be taxed in India

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DATE: June 2, 2016 (Date of pronouncement)
DATE: June 4, 2016 (Date of publication)
AY: -
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CITATION:
Compensation awarded by the Motor Accident Claims Tribunal, and interest accruing thereon, is to ameliorate the sufferings of the victims and does not have the character of "income". If there is a conflict between a social welfare legislation and a taxation legislation, the social welfare legislation will prevail since it subserves larger public interest. CBDT Circular dated 14.10.2011 is not good law

While going through the said provisions of law, one comes to the inescapable conclusion that the mandate of the said provisions does not apply to the accident claim cases and the compensation awarded under the Motor Vehicles Act cannot be said to be taxable income. The compensation is awarded in lieu of death of a person or bodily injury suffered in a vehicular accident, which is damage and not income. The Circular, dated 14.10.2011, issued by the Income Tax Authorities, whereby deduction of income Tax has been ordered on the award amount and interest accrued on the deposits made under the orders of the Court in Motor Accident Claims Cases, is quashed

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DATE: April 28, 2016 (Date of pronouncement)
DATE: June 4, 2016 (Date of publication)
AY: 1993-94, 1994-95
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CITATION:
Entire law on concept of "revenue receipt", "capital receipt" and "casual income" explained in the context of taxability of compensation received for cancellation of a sale deed of immovable property. If the AO claims that the receipt is a capital gain, he cannot change his stand to contend that it is a revenue receipt

The sum of Rs.20 lakhs received by the Assessees was in the context of the cancellation of the sale certificate and the sale deed executed in their favour in relation to an immovable property and neither Assessee was dealing in immovable property as part of his business. While it could if at all be said to be in the nature of a capital receipt, what is relevant for the present case is that the Revenue has been unable to make out a case for treating the said receipt as of a casual and non-recurring nature that could be brought to tax under Section 10(3) read with Section 56 of the Act. Following the decision in Cadell Weaving Mill (supra), there can be no manner of doubt that what is in the nature of capital receipt, cannot be sought to be brought to tax by resorting to Section 10(3) read with Section 56 of the Act

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DATE: March 28, 2016 (Date of pronouncement)
DATE: May 30, 2016 (Date of publication)
AY: -
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Reluctance of AOs to comply with binding Court judgements leads to negative reactions amongst business entities doing business in India and hurts National pride and image. Hereafter non-compliance with orders would visit officials with individual penalties, including forfeiture of salaries

No officer is acting independently and following judgments of this Court, but waiting for the superiors to give them a nod. Even the superiors are reluctant given the status of the assessee and the quantum of the demand or the refund claim. We are sure that some day we would be required to step in and order action against such officers who refuse to comply with the Court judgments and which are binding on them as they fear drastic consequences or unless their superiors have given them the green signal. If there is such reluctance, then, we do not find any enthusiasm much less encouragement for business entities to do business in India or with Indian business entitles. Such negative reactions / responses hurt eventually the National pride and image. It is time that the officers inculcate in them a habit of following and implementing judicial orders which bind them and unmindful of the response of their superiors. That would generate the right support from all, including those who come forward to pay taxes and sometimes voluntarily. Hereafter if such orders are not withdrawn despite binding Division Bench judgments of this Court that would visit the officials with individual penalties, including forfeiture of their salaries until they take a corrective action

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DATE: May 13, 2016 (Date of pronouncement)
DATE: May 26, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 263: Even if the AO has conducted an inquiry into the taxability of share capital receipts u/s 68, the CIT is entitled to revise u/s 263 if the AO has not applied his mind to important aspects. Law in Lovely Exports 299 ITR 268, Sophia Finance 205 ITR 98 etc does not apply as they are prior to the Money Laundering Act 2002. Qs whether receipt towards share capital is taxable pre s. 56(2)(viib) & whether proviso to s. 68 is retrospective are left open

Whether receipt of share capital was a taxable event prior to 1st April, 2013 before introduction of Clause (VII b) to the Sub-section 2 of Section 56 of the Income Tax Act; whether the concept of arms length pricing in a domestic transaction before introduction of Section 92A and 92BA of the Income Tax Act was there at the relevant point of time are not questions which arise for determination in this case. The assessee with an authorised share capital of Rs.1.36 crores raised nearly a sum of Rs.32 crores on account of premium and chose not to go in for increase of authorised share capital merely to avoid payment of statutory fees is an important pointer necessitating investigation. Money allegedly received on account of share application can be roped in under Section 68 of the Income Tax Act if the source of the receipt is not satisfactorily established by the assessee. Reference in this regard may be made to the judgement in the case of Sumati Dayal –Vs- CIT (supra) wherein Their Lordships held that any sum “found credited in the books of the assessee for any previous year, the same may be charged to income tax….”. We are unable to accept the submission that any further investigation is futile because the money was received on capital account. The Special Bench in the case of Sophia Finance Ltd. (supra) opined that “the use of the words “any sum found credited in the books” in Section 68 indicates that the said section is very widely worded and an Income-tax Officer is not precluded from making an enquiry as to the true nature and source thereof even if the same is credited as receipt of share application money. Mere fact that the payment was received by cheque or that the applicants were companies, borne on the file of Registrar of Companies were held to be neutral facts and did not prove that the transaction was genuine as was held in the case of CIT –Vs- Nova Promoters and Finlease (P) Ltd. (supra). Similar views were expressed by this Court in the case of CIT –Vs- Precision Finance Pvt. Ltd. (supra). We need not decide in this case as to whether the proviso to Section 68 of the Income Tax Act is retrospective in nature. To that extent the question is kept open. We may however point out that the Special Bench of Delhi High Court in the case of Sophia Finance Ltd. (supra) held that “the ITO may even be justified in trying to ascertain the source of depositor”. Therefore, the submission that the source of source is not a relevant enquiry does not appear to be correct. We find no substance in the submission that the exercise of power under Section 263 by the Commissioner was an act of reactivating stale issues. In the case of Gabriel India Ltd. (supra) the CIT was unable to point out any error in the explanation furnished by the assessee. Whereas in the present case we have tabulated the evidence which was before the assessing officer which should have provoked him to make further investigation. The assessing officer did not attach any importance to that aspect of the matter as discussed above by us

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DATE: May 18, 2016 (Date of pronouncement)
DATE: May 21, 2016 (Date of publication)
AY: 1999-2000
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CITATION:
S. 143(1)/ 147: Entire law on the reopening of s. 143(1) assessments in the light of Zuari Estate Development 373 ITR 661 (SC) explained

Whereas in a case where the initial assessment order is under Section 143 (3), and it is sought to be reopened within four years from the expiry of the relevant assessment year, the AO has to base his ‘reasons to believe’ that income has escaped assessment on some fresh tangible material that provides the nexus or link to the formation of such belief. In a case where the initial return is processed under Section 143 (1) of the Act and intimation is sent to the Assessee, the reopening of such assessment no doubt requires the AO to form reasons to believe that income has escaped assessment, but such reasons do not require any fresh tangible material

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