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COURT:
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DATE: July 17, 2019 (Date of pronouncement)
DATE: August 3, 2019 (Date of publication)
AY: 2011-12
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CITATION:
S. 56(2)(vii): The stand of the Dept that in the case of an individual, a "HUF" is not a "relative" and that while a gift by the individual to the HUF is exempt, a gift from the HUF to its member is taxable u/s 56(2)(vii) is not correct. S. 56 (2) (vii) provides that the members of the 'HUF' are to be taken as "relatives". The converse is not provided because on first principles, amounts received by a member from the 'HUF' cannot be said to be income of the member exigible to taxation. Terming by the PCIT of decisions of the Tribunal as "incorrect" tantamounts to judicial indiscipline and will lead to chaos

As per the provisions of section 56 (2) (vi i) of the Act , though the members of the ‘HUF’ are to be taken relatives of the ‘HUF’ for the purpose of the said sect ion, however, the converse is not true that is to say that ‘HUF’ is not a relative of the individual member as per meaning of relative given in the case if individual under explanation to sect ion 56(2)(vi i) of the Act

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DATE: March 15, 2019 (Date of pronouncement)
DATE: July 13, 2019 (Date of publication)
AY: 2008-09
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CITATION:
S. 254(2) MA: If an appeal against the order of the ITAT has been filed in the High Court and the same has been admitted by the High Court, a Miscellaneous Application u/s 254(2) seeking rectification and recall of the order is not maintainable. The MA is maintainable only if the appeal is pending and has not been admitted (RW Promotions 376 ITR 126 (Bom) distinguished, Muni Seva Ashram 38 TM.com 110 (Guj) followed)

Considering the totality of the facts involved in the present case and in view of the decisions cited hereinabove, we are of the view that in the present case since the appeal against the order of the Tribunal has already been admitted and a substantial question of law has been framed by the Hon’ble High Court, the Tribunal cannot proceed with the Miscellaneous Application u/s 254(2) of the Act

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DATE: May 29, 2019 (Date of pronouncement)
DATE: July 6, 2019 (Date of publication)
AY: 2012-13
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CITATION:
Capital vs. Revenue Receipt: Damages received for breach of development agreement are capital in nature & not chargeable to tax. The only right that accrues to the assessee who complains of breach is right to file a suit for recovery of damages from the defaulting party. A breach of contract does not give rise to any debt. A right to recover damages is not assignable because it is not a chose-in-action. Such a mere 'right to sue' is neither a capital asset u/s 2(14) nor is it capable of being transferred & is therefore not chargeable under u/s 45 of the Act (All imp judgements referred)

Despite the definition of the expression capital asset in the widest possible terms in section 2(14), a right to a capital asset must fall within the expression ‘property of any kind’ and must not fall within the exceptions. Section 6 of the Transfer of Property Act which uses the expression ‘property of any kind’ in the context of transferability makes an exception in the case of mere right to sue. The decisions there under make it abundantly clear that the right to sue for damages is not an actionable claim. It cannot be assigned and its transfer is opposed to public policy. As such it will not be quite correct to say that such a right constituted capital asset which in turn has to be an interest in ‘property of any kind.’

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COURT:
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DATE: November 28, 2018 (Date of pronouncement)
DATE: July 6, 2019 (Date of publication)
AY: 2010-11
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CITATION:
S. 292BB: If the assessee objects to the AO's jurisdiction but his AR later conveys no-objection, it means that the assessee has withdrawn his objection. Submission that the AR had no authority to convey no-objection and cannot bind the assessee is not acceptable. Once the assessee empowers his AR to appear before authorities, all of the AR's concessions are binding on the assessee (Himalayan Coop Group Hsg Soc 2015 7 SCC 373 distinguished)

We are confronted with a situation in which the assessee did raise objection before the AO during the course of assessment proceedings itself that the notice was not properly served upon him. However, the AR of the assessee appearing before the AO, gave his ‘no objection’ for furthering the assessment proceedings. When the second limb of the ld. AR not objecting to the continuation of assessment proceedings despite service of notice on the assessee’s manager is considered in conjunction with the first limb of the assessee initially objecting to the service of notice, the inference which follows is that the assessee did raise objection initially but withdrew the same before the AO

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DATE: April 23, 2019 (Date of pronouncement)
DATE: July 6, 2019 (Date of publication)
AY: 2009-10
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CITATION:
S. 254(1)/(2): The fact that the judges indicate a decision during the hearing or even dictate a judgement in open court gives no right to the litigant. Judges can change or alter their decision at any time until the judgement is signed & sealed. A MA on the ground that the ITAT Members stated a particular decision during the hearing but did the opposite in the order is not maintainable

The question arises as to whether the Bench while hearing the appeal has given any decision. May be the assessee got the impression in good faith. Even if the impression went to the assessee then also the same does not have any effect on the order of the Court as it is well settled law that a judge can recall the order and change his mind in extreme case where the though draft copy signed and dictated in the open, as held in the case of Kaushalbhai Ratanbhai Rohit & Ors. vs. State of Gujrat, [SLP (Criminal) 453/2014)], by the Apex Court

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DATE: July 1, 2019 (Date of pronouncement)
DATE: July 3, 2019 (Date of publication)
AY: 2009-10
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CITATION:
S. 143(2) Notice/ Rule 127: There is a difference between "issue" of notice and "service" of notice. Service of notice is a pre-condition for assuming jurisdiction to frame the assessment. Under Rule 127, service at the PAN address is valid even if it is different from the address in the Return. If a notice is issued but is returned unserved by the postal authorities and thereafter no effort is made to serve another notice before the deadline, it shall be deemed to be a case of "non-service" and the assessment order will have to be quashed

Section 27 provides that service by post shall be deemed to be effected by properly addressing, pre-paying and posting by registered post. It means that when a letter containing the document is properly addressed, pre-paid and posted by a registered post, it will be considered as a valid service. It is not the end of the provision. There is a specific mention of the words `unless the contrary is proved’. It means that the presumption of valid service on properly addressing, pre-paying and positing by registered post is not irrebuttable. It can be rebutted if the contrary is proved. Extantly, we are dealing with a situation in which the contrary has been proved inasmuch as the Department has itself accepted that the notice sent by the registered post was returned by the postal authorities. Under such circumstances, there can be no presumption of valid service of notice in terms of the above provisions

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DATE: May 27, 2019 (Date of pronouncement)
DATE: June 27, 2019 (Date of publication)
AY: 2015-16
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CITATION:
S. 56(2)(viib): The assessee has the option under Rule 11UA(2) to determine the FMV by either the ‘DCF Method’ or the 'NAV Method'. The AO has no jurisdiction to tinker with the valuation and to substitute his own value or to reject the valuation. He also cannot question the commercial wisdom of the assessee and its investors. The ‘DCF Method’ is based on projections. The AO cannot fault the valuation on the basis that the real figures don't support the projections. Also, the fact that independent investors have invested in the start-up proves that the FMV as determined by the assessee is proper

There is another very important angle to view such cases, is that, here the shares have not been subscribed by any sister concern or closely related person, but by an outside investors like, Anand Mahindra, Rakesh Jhunjhunwala, and Radhakishan Damania, who are one of the top investors and businessman of the country and if they have seen certain potential and accepted this valuation, then how AO or Ld. CIT(A) can question their wisdom. It is only when they have seen future potentials that they have invested around Rs.91 crore in the current year and also huge sums in the subsequent years as informed by the ld. counsel. The investors like these persons will not make any investment merely to give dole or carry out any charity to a startup company, albeit their decision is guided by business and commercial prudence to evaluate a start-up company like assessee, what they can achieve in future

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DATE: April 25, 2019 (Date of pronouncement)
DATE: June 27, 2019 (Date of publication)
AY: 2003-04
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CITATION:
S. 92C/ Rule 10B: If the TPO is not satisfied with the assessee's method of benchmarking royalty payments, he should independently benchmark the ALP by adopting any one of the prescribed methods. He cannot determine The ALP at nil on an ad-hoc basis. TNMM is the most appropriate method for determining the ALP of royalty and not the CUP method. If an authority like the RBI or Commerce Ministry has approved the rate of royalty, it carries persuasive value that the rate is at ALP

The Transfer Pricing Officer has not proceeded to benchmark the payment of royalty by applying any of the prescribed methods provided under the statute. Without assigning any reason, the Transfer Pricing Officer has determined the arm’s length price of the royalty payment at nil. Prima-facie, it appears, the determination of arm’s length price of royalty payment at nil by the Transfer Pricing Officer is completely on ad-hoc basis without following the due process of law as provided under the statute

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DATE: June 12, 2019 (Date of pronouncement)
DATE: June 22, 2019 (Date of publication)
AY: 2015-16
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CITATION:
S. 68 Bogus Capital Gains from Penny Stocks: The allegation that the Co is a penny stock co whose share price has been artificially rigged by promoters/brokers/operators to create non-genuine LTCG is not sufficient. The AO has failed to bring on record any evidence to prove that the transactions carried out by the assessee were not genuine or that the documents were not authentic. No specific enquiry or investigation was conducted in the case of the assessee and/or his broker either by the INV Wing or by the AO during the course of assessment proceedings. The penny stock was also not subject to any action from SEBI (Udit Kalra 176 DTR 249 (Del) distinguished, Fair Invest Ltd 357 ITR 146 (Del) followed)

These facts clearly demonstrate that the assessee is a habitual investor and being a qualified professional [Chartered Accountant], is well aware of market trends of shares in the stock market. The entire assessment has been framed by the Assessing Officer without conducting any enquiry from the relevant parties or independent source or evidence but has merely relied upon the statements recorded by the INV Wing as well as information received from the INV Wing. It is apparent from the assessment order that the Assessing Officer has not conducted any independent and separate enquiry in this case of the assessee. Even the statement recorded by the INV Wing has not been got confirmed or corroborated by the person during the assessment proceedings

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COURT:
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DATE: June 14, 2019 (Date of pronouncement)
DATE: June 20, 2019 (Date of publication)
AY: 2009-10
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CITATION:
S. 56(2)(vii)(c): The assessee's purchase of shares of NDTV Ltd at Rs 4 per share from RRPR Holdings Pvt Ltd when the market price of the share was Rs 140 is a benefit taxable u/s 56 (2)( vii). The argument that as it is a transaction between closely related parties, there is no motive of tax evasion & s. 56 (2) does not apply is not acceptable. The assessee has failed to explain by credible evidence any reason of buying shares of the company at Rs. 4 per share when the quoted price was Rs. 140 & so the assessee cannot say that there was no motive of tax evasion. Even otherwise, s. 56 (2) deems such differences/receipts as income

Where an individual or after 1 st day of October 2009, receives any property other than immovable property for a consideration, which is less than the aggregate fair market value of the property by an amount exceeding INR 50,000/- , the aggregate of fair market value of such property as exceeds such consideration is chargeable to tax under the head income from other sources. The impugned asset that has been transferred in this transaction in shares, which is covered under the definition of property as per clause (d) of the second proviso to the above section. Further fair market value of such transaction is also required to be determined under section 11 UA of the income tax rules according to which the fair market value in respect of a court in shares are the quoted price on the recognized stock exchange. Therefore the impugned transaction satisfied all the ingredients of the provisions of section 56 (2) (vii) of the act

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