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DATE: April 6, 2021 (Date of pronouncement)
DATE: April 24, 2021 (Date of publication)
AY: AY 2019-20
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CITATION:
S. 245 Adjustment of Refund: The Dept has not complied with the requirements of s. 245 of the Act. It is difficult to appreciate the stand of the Dept that the order passed by the high court would not cover/operate over the matters and orders passed by the ITAT, Union of India being not a party to the matter. Such a justification from and the approach of, the authorities is difficult to be approved of which is not in fitness of stature, especially of the state department, which is supposed to act like a model litigant (All imp judgements on s. 245 referred)

Although the respondents purport to contend that proper procedure had been followed, record does not bear that there had been any communication made to the petitioner as to its submissions being not acceptable before or at the time of making the adjustment. Decisions in the cases of “A. N. Shaikh”, “Hindustan Unilever Ltd.,” and “Milestone Real Estate Fund” (supra) relied on, on behalf of the petitioner have not been met with by the respondents nor it is the case of the respondents that any other course could be adopted for adjustment of refund. There is stark absence of material showing compliance of requirements viz: application of mind to contentions on behalf of the petitioner, reasoned order and its communication to the assessee. The facts and circumstances lend lot of substance to submissions advanced on behalf of the petitioner that there is absence of compliance of requirements under section 245 of the Act, coupled with observations of high court in the decisions relied upon on behalf of the petitioners

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DATE: April 9, 2021 (Date of pronouncement)
DATE: April 24, 2021 (Date of publication)
AY: 2012-13
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CITATION:
Article 226/ s. 147: (i) A Writ Petition can be filed in the Bombay High Court against an order passed in Delhi if the assessee is based in Mumbai. The litigant has the right to go to ‘a Court’ where part of cause of action arises. (ii) A s. 148 notice & s. 147 reassessment order passed against an amalgamated (non-existing) company is without jurisdiction. The defect cannot be treated as procedural defect. Mere participation of the assessee in the assessment proceedings is of no effect as there is no estoppel against law. Such a defect cannot be cured by invoking section 292B (All imp judgements referred)

The consequence of approved scheme of amalgamation was that amalgamating company had ceased to exist and on its ceasing to exist, it cannot be regarded as a person against whom assessment proceeding can be initiated. In said case before notice under Section 143(2) of the Act was issued on 26.9.2013, the scheme of amalgamation had been approved by the high court with effect from 1.4.2012. It has been observed that assessment order passed for the assessment year 2012-13 in the name of non-existing entity is a substantive illegality and would not be procedural violation of Section 292 (b) of the Act. The Supreme Court in its aforesaid decision, has quoted an extract from its decision in Saraswati Industrial Syndicate Ltd. Vs. CIT8. The Supreme Court has also referred to decision of Delhi high court in the case of CIT Vs. Spice Enfotainment Ltd.9and observed that in its decision Delhi high court had held that assessment order passed against non-existing company would be void. Such defect cannot be treated as procedural defect and mere participation of appellant would be of no effect as there is no estoppel against law. Such a defect cannot be cured by invoking provisions under section 292B

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DATE: June 18, 2019 (Date of pronouncement)
DATE: June 24, 2019 (Date of publication)
AY: -
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CITATION:
S. 40A(9): The provision is not meant to hit genuine expenditure by an employer for the welfare and the benefit of the employees. Even contributions to unapproved and unrecognized funds have to be allowed as a deduction if they are genuine in nature

The very purpose of insertion of sub-section (9) of section 40A thus was to restrict the claim of expenditure by the employers towards contribution to funds, trust, association of persons etc. which was wholly discretionary and did not impose any restriction or condition for expanding such funds which had possibility of misdirecting or misuse of such funds after the employer claimed benefit of deduction thereof. In plain terms, this provision was not meant to hit genuine expenditure by an employer for the welfare and the benefit of the employees

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DATE: June 11, 2019 (Date of pronouncement)
DATE: June 20, 2019 (Date of publication)
AY: -
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CITATION:
S. 32(1)(ii) Depreciation on Intangible asset: Rights acquired under a non-compete agreement gives enduring benefit & protects the assessee's business against competition. The expression "or any other business or commercial rights of similar nature" used in Explanation 3 to sub-section 32(1)(ii) is wide enough to include non-compete rights (Ferromatice Milacron India 99 TM.com 154 (Guj) followed)

The legislature thus did not intend to provide for depreciation only in respect of the specified intangible assets but also to other categories of intangible assets which may not be possible to exhaustively enumerate. It was concluded that the assessee who had acquired commercial rights to sell products under the trade name and through the network created by the seller for sale in India were entitled to deprecation

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DATE: April 16, 2019 (Date of pronouncement)
DATE: April 30, 2019 (Date of publication)
AY: 2005-06
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CITATION:
S. 115JB (pre amendment by Finance Act, 2012) is not applicable to a banking company (also insurance & electricity cos) . The mechanism provided for computing book profit in terms of S. 115JB(2) is wholly unworkable for a banking company. When the machinery provision fails, the charging section also fails. The anomaly was removed by the Finance Act, 2012. However, the amendments are neither declaratory nor clarificatory but make substantive and significant legislative changes which are applicable prospectively (Kerala State Electricity Board 329 ITR 91 (Ker) followed)

These amendments in section 115JB are neither declaratory nor classificatory but make substantive and significant legislative changes which are admittedly applied prospectively. The memorandum explaining the provision of the Finance Bill, 2012 while explaining the amendments under Section 115JB of the Act notes that in case of certain companies such as insurance, banking and electricity companies, they are allowed to prepare the profit and loss account in accordance with the sections specified in their regulatory Acts. To align the Income Tax Act with the Companies Act, 1956 it was decided to amend Section 115JB to provide that the companies which are not required under Section 211 of the Companies Act, to prepare profit and loss account in accordance with Schedule VI of the Companies Act, profit and loss account prepared in accordance with the provisions of their regulatory Act shall be taken as basis for computing book profit under Section 115 JB of the Act.

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DATE: February 20, 2019 (Date of pronouncement)
DATE: February 26, 2019 (Date of publication)
AY: 2010-11
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CITATION:
S. 92C: Taxability under Transfer Pricing provisions of shares purchased at value in excess of FMV: As the transaction of purchase of equity shares is a capital transaction and does not give rise to any income, the transfer pricing provisions do not apply. Chapter X is a machinery provision. It can only be invoked to bring to tax any income arising from an international transaction. It is necessary for the revenue to show that income does arise from the international transaction. S. 2(24)(xvi) & 56(2)(viib) are prospective

There is no dispute before us that the transaction of purchase of shares by the respondent of its subsidiary company i.e. A.E. at a price much higher than its fair market value would be international transaction as defined in Section 92(B) of the Act. The only issue before us as considered by the impugned order of the Tribunal is whether Chapter X of the Act would at all be applicable in case of any investment made on capital account. This on the premise that the transaction of purchase of equity share capital would not give rise to any income. We note that similar issue was before this Court in Vodafone 268 ITR 1 and this court inter alia observed that Chapter X of the Act is machinery provision to arrive at the arm’s length price of transaction between associated enterprises

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DATE: June 15, 2018 (Date of pronouncement)
DATE: October 10, 2018 (Date of publication)
AY: 2013-14
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CITATION:
S. 147: The computation of income is the basic document for making the s. 143(3) assessment. If there is a disclosure in the computation, it leads to the prima facie necessary inference that there is application of mind by the AO. The fact that the AO did not raise specific queries & is silent in the assessment order does not mean there is no application of mind (Techspan 404 ITR 10(SC) followed, other contra judgements distinguished)

There was also no reason in the present facts for the Assessing Officer to ask any queries in respect of this claim of the petitioner, as the basic document viz. computation of income at note 21 (Assessment Year 2013-14) and note 22 (Assessment Year 2014-15) thereof explained the basis of the claim being made to the satisfaction of the Assessing Officer. Thus, it must necessarily be inferred that the Assessing Officer has applied his mind at the time of passing an assessment order to this particular claim made in the basic document viz. computation of the income by not disallowing it in proceedings under Section 143(3) of the Act as he was satisfied with the basis of the claim as indicated in that very document. Therefore, where he accepts the claim made, the occasion to ask questions on it will not arise nor does it have to be indicated in the order passed in the regular assessment proceedings. Thus, issuing the impugned notices on the above ground would, prima-facie, amount to a change of opinion

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DATE: July 23, 2018 (Date of pronouncement)
DATE: August 21, 2018 (Date of publication)
AY: 2005-06
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CITATION:
S. 147/50C: The assessment cannot be reopened (within 4 years) on the ground that the AO lost sight of a statutory provision like 50C. This amounts to a review. A.L.A. Firm 55 TM 497 (SC) distinguished on the basis that the reopening in that case was because the AO was unaware of a binding High Court judgement. Here it is not the case of the Revenue that the AO was not aware of s. 50C at the time of passing the S. 143(3) assessment order

The basis of reopening the assessment in A.L.A. Firm (Supra) was the decision in the case of G.R.Ramachari & Co. (Supra) coming to the knowledge of the Assessing Officer subsequent to the completion of assessment proceedings. In this case it is not the case of the Revenue that the Assessing Officer was not aware of Section 50C of the Act at the time of passing the Assessement Order dated 26.12.2007 under Section 143 of the Act. In this case the trigger to reopen assessment proceedings as recorded in the reasons is nonfurnishing of copy of the sale deed by the Respondent. This has been found factually to be incorrect. Therefore, once the sale deed was before Assessing Officer and enquiries were made during the assessment proceedings regarding the quantum of capital gains, it must follow that the Assessing Officer had while passing the order dated 26.12.2007 under Section 143(3) of the Act had taken view on facts and in law as in force at the relevant time. Thus, this is a case of change of opinion

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DATE: March 7, 2018 (Date of pronouncement)
DATE: March 13, 2018 (Date of publication)
AY: 2006-07, 2007-08, 2009-09
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CITATION:
Transfer Pricing: The Comparable Uncontrolled Price (CUP) method is not the Most Appropriate Method for determining the Arm's Length Price (ALP) in respect of the transactions of (sales of goods and sales commission) with Associated Enterprises (AEs) if there are geographical differences, volume differences, timing differences, risk differences and functional differences. If it is not shown that the selection of TNMM as the Most Appropriate Method is perverse, the same cannot be challenged

The TPO has while stating that FAR analysis has to be carried out, does not indicate that it was carried out. On the contrary, we find that the Tribunal in the impugned order has done the necessary FAR analysis. This is so as it has compared the risk and functional differences involved in finished goods being sold to AEs as against those sold to third parties as we have enumerated above to come to the conclusion that the prices at which the finished goods sold to the third parties are not comparables to the prices at which the goods sold to the AEs inter alia on the FAR analysis. We note that the finished goods are customized goods and the geographical differences, volume differences, timing differences, risk differences and functional differences, came to a conclusion that the CUP method would not be the MAM to determine the ALP

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DATE: June 14, 2017 (Date of pronouncement)
DATE: December 29, 2017 (Date of publication)
AY: 2009-10
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CITATION:
S. 80-IA(5): Only losses of the years beginning from the initial assessment year are to be brought forward for set-off against profits of the eligible unit. Losses of earlier years which are already set off against income cannot be brought forward notionally for set-off. The fiction in s. 80-IA(5) is created only for a limited purpose and cannot be extended

The eligible business were the only source of income, during the previous year relevant to the initial assessment year and every subsequent assessment years. When the assessee exercises the option, the only losses of the years beginning from initial assessment year alone are to be brought forward and no losses of earlier years which were already set off against the income of the assessee. Looking forward to a period of ten years from the initial assessment is contemplated. It does not allow the Revenue to look backward and find out if there is any loss of earlier years and bring forward notionally even though the same were set off against other income of the assessee and the set off against the current income of the eligible business. Once the set off is taken place in earlier year against the other income of the assessee, the Revenue cannot rework the set off amount and bring it notionally. A fiction created in subsection does not contemplates to bring set off amount notionally. The fiction is created only for the limited purpose and the same cannot be extended beyond the purpose for which it is created

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