The question about applicability of Instruction No.3 of 2011 has been considered in several judgements including Smt. Vijaya V. Kavekar (Bom) and Ranka & Ranka (Kar) and the view is that Instruction No.3 of 2011 dated 9.2.2011 would also apply to pending appeals. We are in agreement with this view and so tax appeals filed by the department which are below the tax effect of Rs.10 lakhs are not maintainable

In Mittal Court Premises Co-op Society 320 ITR 414 (Bom) it was held in the context of non-occupancy charges that the principle of mutuality would apply to a co-op society. The same principle applies to the TDR premium paid by a member to the Society of which he is a member as consideration for being permitted to make an additional utilization of FSI on the plot allotted by the Society. There is a complete mutuality between the Society and its members and the TDR premium is not chargeable to tax

Prior to the Finance Act No.2 of 1996 unabsorbed depreciation could be carry forward indefinitely. The Finance Act No.2 of 1996 restricted the period of carry forward & set-off of unabsorbed depreciation to 8 years from AY1997-98. Circular No.762 dated 18.2.1998 clarified that the brought forward depreciation for the earlier years would be added to the depreciation for AY 1997-98 and the period of 8 years would begin from AY 1997-98 onwards. S. 32 (2) was amended by Finance Act, 2001 w.e.f. AY 2002-03 to restore the position as it was prevailing prior to the Finance Act No. 2 of 1996 and the period of 8 years was done away with. In Circular No.14 of 2001, the CBDT clarified that the removal of the 8 year time period was “with a view to enable the industry to conserve sufficient funds to replace plant and machinery“. The effect of the amendment is that the unabsorbed depreciation available to an assessee on 1.4.2002 (AY 2002-03) has to be dealt with in accordance with the s. 32(2) as amended by the Finance Act, 2001 and not by s. 32(2) as it stood before the said amendment. Had the intention of the Legislature been to allow unabsorbed depreciation allowance worked out in AY 1997-98 only for eight subsequent assessment years even after the amendment of s. 32(2) by Finance Act, 2001 it would have incorporated a provision to that effect. However, it does not contain any such provision and so a purposive and harmonious interpretation has to be taken. Therefore, the unabsorbed depreciation pertaining to AY 1997-98 can be carried forward for set-off indefinitely

The assessee’s argument that as the Full Bench judgement in Kelivinator 256 ITR 1 (Del) (FB) was approved by the Supreme Court 320 ITR 561, the observations made by the Full Bench must be regarded as the ratio of the Supreme Court is not correct because the question before the Supreme Court was whether the concept of “change of opinion” stands obliterated with effect from 1.4.1989 or not. The Supreme Court did not hold that the tangible material must be that which did not form part of the original record of the assessment proceedings. The ratio of the decision of the Supreme Court is what the judgement lays down and not what the decisions of the High Court under challenge held. Further, it is doubtful whether even the Full Bench in Kelvinator meant to convey that a certain claim which has not been examined by the AO in the original assessment, cannot be a subject matter of reopening on the basis of material already on record. Now, the Delhi High Court has itself referred the matter for reconsideration to another Full Bench in Usha International

Even in a case where only a s. 143(1) Intimation is passed, the power to reopen can be exercised only where there is “reason to believe that income has escaped assessment” and not merely to “scrutinize” the return or “verify” the expenditure. Further, even in case of reopening of an assessment which was previously accepted u/s 143(1) without scrutiny, the AO would have power to reopen the assessment, provided he had some tangible material on the basis of which he could form a reason to believe that income chargeable to tax had escaped assessment. Such reason to believe need not necessarily be a firm final decision of the AO. This safeguard is necessary to prevent arbitrary exercise of powers u/s 147 to circumvent the scrutiny proceedings which could not be framed in view of notice u/s 143(2) having become time barred. On facts, in respect of two issues, the AO reopened the assessment to verify the claims. For mere verification of the claim, power of reopening of assessment cannot be exercised. The AO in the guise of power to reopen an assessment cannot seek to undertake a fishing or roving inquiry and seek to verify the claims as if it were a scrutiny assessment

There is no distinction in principle between a slot charter and a voyage charter of a part of a ship. They are both in a sense charterers of a space in a ship. The phrase “operation of ships” in Article 9 must be understood in the context of the phrase “the business of operation of ships” in s. 44B. As income from slot hire agreements falls within s. 44B it must be held to be within the ambit of Article 9(1). Article 9 does not require the ship to be owned by an the assessee. It merely requires the income to be “from the operation of ships in international traffic”. A charter is certainly contemplated by Article 9 and an enterprise that controls the management/operation of the ship would be included in Article 9 even if it does not own the ship (KLM Royal Dutch Airlines 178 Taxman 291 (Del) followed)

In Indian Oil Panipat 315 ITR 255 (Del) it was held that if the interest received was “inextricably linked” with the setting up of the plant, it could not be treated as income from other sources. This reasoning is in line with Bokaro Steel Ltd, Karnataka Power Corp 247 ITR 268 (SC) & Bongaigaon Refinery 251 ITR 329(SC). Though the proviso to s. 36(1)(iii) enacts that any amount of the interest paid towards (“in respect of”) capital borrowed for acquisition of an asset or for extension of existing business regardless of its capitalization in the books or otherwise, “for any period beginning from the date on which the capital was borrowed for acquisition of the asset till the date on which such asset was first put to use” would not qualify as deduction, in all these cases, when the interest was received by the assessee towards interest paid for fixed deposits when the borrowed funds could not be immediately put to use for the purpose for which they were taken, the Courts held that if the receipt is “inextricably linked” to the setting up of the project, it would be capital receipt not liable to tax but ultimately be used to reduce the cost of the project. By the same logic, in the present case too, the funds invested by the assessee and the interest earned were inextricably linked with the setting up of the power plant and, therefore, the interest earned on fixed deposit of amounts borrowed cannot be treated as a revenue receipt

Upon a return of income being filed, the matter is “pending“, in the sense that the AO has the right to take such steps, including issuance of notice. The rationale for the bar in the Proviso to s. 245R(2) is that if the applicant wishes to plan its affairs and transactions in advance, it is free to do but once it proceeds to file a return, the AAR’s jurisdiction to entertain the application for advance ruling is taken away, because the AO would then be seized of the matter, and would possess a multitude of statutory powers to examine and rule on the return. The fact that in the past the AAR followed a different practice in the past is irrelevant because there is no estoppel against a statute

The department’s contention that the assessee ought to have invested in the period that the s. 54EC bonds were available (1.7.2006 to 3.8.2006) after the transfer is not well founded. The assessee was entitled to wait till the last date (21.9.2006) to invest in the bonds. As of that date, the bonds were not available. The fact that they were available in an earlier period after the transfer makes no difference because the assessee right to buy the bonds upto the last date cannot be prejudiced. Lex not cogit impossibila (law does not compel a man to do that which he cannot possibly perform) and impossibilum nulla oblignto est (law does not expect a party to do the impossible) are well known maxims in law and would squarely apply to the present case

S. 268A was inserted by the Finance Act 2008 w.r.e.f. 1.4.1999 to reduce litigation in small cases and regulate the right of Revenue to file or not to file appeal. Instruction no.3/2011 dated 9.2.2011 has been issued by the CBDT pursuant to this power. Though clause 11 provides that the instruction would apply to appeals filed on or after 9.2.2011 and appeals filed that date would be governed by the instructions operative at the time the appeal was filed, in a number of cases, it has been interpreted to mean that the monetary limits specified in the Instruction would apply to pending appeals as well (Vijaya V. Kavekar (Bom) followed (included in file)