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DATE: October 22, 2019 (Date of pronouncement)
DATE: November 2, 2019 (Date of publication)
AY: -
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Settlement Application: For purposes of making an application for settlement, a case i.e. an assessment would be pending till such time as the assessment order is served upon the assessee. The assessee is entitled to proceed on the basis that till the service of the assessment order, the case continues to be pending with the AO. Therefore, it was open to him to invoke the provisions of Chapter XIXA of the Act (CIT Vs. ITSC 58 TM 264 & Yashovardhan Birla 73 TM 5 followed, V.R.A. Cotton Mills 33 TM 675 & Shlibhadra Developers 2016 (10) TMI 778 distinguished)

For purposes of making an application for settlement, a case i.e. An assessment would be pending till such time as the assessment order is served upon the assessee. The declaration of law by this Court is binding on all authorities within the State including the Commission. The petitioner was entitled to proceed on the basis that till the service of the assessment order, the case continues to be pending with the Assessing Officer. Therefore, it was open to him to invoke the provisions of Chapter XIXA of the Act on 30th March, 2016 as till that date the assessment order was not served upon him

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DATE: January 18, 2018 (Date of pronouncement)
DATE: January 25, 2018 (Date of publication)
AY: 2008-09
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Bogus capital gains from Penny stocks: The fact that the appreciation in the value of the shares is high does not justify the transactions being treated as fictitious and the capital gains being assessed as undisclosed income if (a) the shares are traded on the Stock Exchange, (b) the payments and receipts are routed through the bank, (c) there is no evidence to indicate it is a closely held company and (d) the trading on the Stock Exchange was manipulated in any manner

The assessee purchased shares of a company during the assessment year 2006-2007 at Rs 11/- and sold the same in the assessment year 2008-2009 at Rs 400/- per share. The Assessing Officer added the appreciation to the assessees’ income on the suspicion that these were fictitious transactions and that the appreciation actually represented the assessees’ income from undisclosed sources. The Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner

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DATE: January 24, 2017 (Date of pronouncement)
DATE: January 27, 2017 (Date of publication)
AY: 2006-07
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S. 45/48: The AO is not bound to accept the consideration stated in the sale deed. In a case where property is sold between arm’s length parties at a gross undervaluation, the onus is on the assessee to explain and if there is no explanation, the AO is entitled to draw an inference. The presumption against the value being understated (not undervalued) is greater where parties are connected or related. However, if the AO does not allege that the assessee received more consideration than is stated in the sale deed, he cannot made an addition to the stated consideration (George Henderson 66 ITR 622 (SC) & Gillanders Arbuthnot 87 ITR 407 (SC) explained)

The judgments in CIT v. George Henderson & Co. Ltd. (1967)66 ITR 622, Commissioner of Income Tax, Calcutta v. Gillanders Arbuthnot & Co. (1973) 87 ITR 407 undoubtedly hold that the expression “full value of the consideration” cannot be construed as the market value but as the price bargained for by the parties to the sale. It is necessary for the Assessing Officer to ascertain as to what was the price bargained for by the parties to the sale. The judgment, however, does not support the further submission of the assessee that the price stated in the sale-deed must irrespective of anything also be considered to be the sale price for the purpose of computing the capital gain. In our view this absolute proposition is not well founded. The Assessing Officer must determine whether the price stated in the agreement for sale is in fact the price bargained for by the parties thereto. In other words, the full value of the consideration is neither the market value nor necessarily the price stated in the document for sale but the price actually arrived at between the parties to the transaction. If therefore it is found that the price actually arrived upon between the parties is not the price reflected in the document, it is the price bargained for by the parties to sale that must be considered for determining the capital gain under section 48. The Supreme Court did not hold that inferences cannot be drawn by the Assessing Officer from the facts established. In fact in paragraph-5 the Supreme Court observed that there was no inferential finding that the shares were sold at the market price of ` 620/- per share. This read with the operative part of the order in paragraph-6 remanding the matter to record a finding as to the actual price received makes it clear that the finding can be based on inferences as well. In paragraph-6 the assessee is given an opportunity to explain the unusual nature of the transaction. It cannot be suggested that even if there was no explanation by the assessee, the Assessing Officer was bound not to draw an adverse inference

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DATE: December 23, 2016 (Date of pronouncement)
DATE: January 5, 2017 (Date of publication)
AY: 2010-11
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S. 10(23C)(vi)/ (via)/ 80G: The law laid down in Visvesvaraya Technological University vs. ACIT 384 ITR 37 (SC) is that the generation of surplus is not fatal to the grant of exemption u/s 10(23C)(vi)(via)/ 80G if such surplus is utilized for charitable purposes. The fact that the hospital charges of the assessee, as compared to other commercial establishments, are very nominal, throws further light on its charitable character

In view of the findings of the Apex Court in paragraphs 8 and 9 of its judgment in Visvesvaraya’s case (supra), as reproduced earlier, we unhesitantly conclude that even if substantial surplus is generated, but the same is found to have been ploughed back for building infrastructure/assets, which in turn are used for educational/charitable purposes, the institution would not lose its charitable character. In the case before us, it has not been disputed that the assessee is registered under Section 12A and that it has been held entitled to the grant of exemption under Section 10 (23C)(vi) of the Act as per orders of this Court passed in C.W.P. No. 6031 of 2009, upheld by the Apex Court in Civil Appeal No. 9606 of 2013. It has further come on record that the assessee was granted exemption under Section 80G of the Act from the year 1997 till the passing of the impugned order. Further, the finding of the Tribunal, that the assessee has never mis-utilized its funds, has not been assailed before us. The generated surplus having been ploughed back for expansion purposes also remains undisputed by the Revenue as no challenge to the same has been made. In fact, the utilization of surplus for large scale expansion at the behest of the assessee was also acknowledged by the Commissioner. The Tribunal had further detailed in its order the receipts, expenditure, capital expenditure, income/surplus of receipts over expenditure, income applied for the charitable purposes and percentage of the income applied in a tabulated form, which clearly depicted utilization of surplus by the assessee for only charitable purposes

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DATE: December 23, 2016 (Date of pronouncement)
DATE: December 29, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 2(15)/11: Impact of the amendment to the definition of "charitable purpose" in s. 2(15) by insertion of a proviso by the Finance Act, 2008 and whether it supersedes the verdicts in Loka Shikshana Trust 101 ITR 234 (SC), Surat Art Silk Cloth Mfrs. Association 121 ITR 1 (SC) etc explained

If the legislature intended the latter part of the proviso to apply to the word “advancement” as well and not merely to the words “object of general public utility”, it would have worded the amendment entirely differently. The proviso would have expressly been made applicable to the advancement as well as to the object of general public utility. That the legislature did not do so is an indication that it accepted the interpretation of the Supreme Court of Section 2(15) as it originally stood and retained the effect of the section in that regard in the 2009 amendment. The ratio of the judgment in Surat Art Silk’s case (supra), in this regard, therefore, remains the same

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DATE: December 9, 2016 (Date of pronouncement)
DATE: December 19, 2016 (Date of publication)
AY: 2012-13
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S. 194C vs. 194J: Law on whether payments for construction, erection & commissioning etc of plants involving inputs from technical personnel constitutes "payments for technical services" and attracts TDS obligations u/s 194J in the light of Bharti Cellular 330 ITR 239 (SC) explained

The contention of the revenue that in accordance with the judgement of the Supreme Court in Commissioner of Income Tax Vs Bharti Cellular Ltd., (2011) 330 ITR 239 (SC), the matter ought to be remanded to the Assessing Officer to examine technical experts on this issue is not well founded. Firstly, the department never made an application for examining an expert. Secondly, it is not the department’s case that there was any material other than the contracts which required consideration. Apart from raising this contention, no such case was made out even before us at the hearing of this appeal. The case before us merely requires a construction of the contract. The extent of human intervention that was relied upon by the department is based on the provisions of the contract itself

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DATE: November 30, 2016 (Date of pronouncement)
DATE: December 12, 2016 (Date of publication)
AY: 2004-05
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S. 271(1)(c) penalty cannot be levied in a case where the assessee has relied on legal opinion of a professional and there is no tax impact i.e. the loss disallowed in year one is allowed set-off in a later year

The Tribunal noted that the respondent had claimed the set off of its business income of Rs. 1.85 crores against the brought forward business losses of the earlier years on the basis of a legal opinion received from a leading firm of Chartered Accountants. The Tribunal found nothing clandestine in the manner in which the opinion was sought. In any event, even our attention was not invited to anything which suggests any malafides either in the obtaining of the opinion or otherwise. Further, the loss was allowed to be carried forward in the assessment year, namely, assessment year 2002-2003

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DATE: September 29, 2016 (Date of pronouncement)
DATE: October 8, 2016 (Date of publication)
AY: 2010-11
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S. 37(1): While expenditure for purchase of a capital asset is capital expenditure, guarantee commission to acquire the asset on installment terms is revenue expenditure

Expenditure incurred for the purchase of the machinery was undoutedly capital expenditure; for it brought in an asset of enduring advantage. But the guarantee commission stands on a different footing. By itself, it does not bring into existence any asset of an enduring nature; nor did it bring in any other advantage of an enduring benefit. The acquisition of the machinery on installment terms was only a business exigency

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DATE: September 2, 2016 (Date of pronouncement)
DATE: September 9, 2016 (Date of publication)
AY: 2003-04
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S. 80-IB: Fact that the AO allowed s. 80-IB deduction in the year of setting up does not disentitle him from examining the eligibility in subsequent years. As per the CBDT’s low tax effect circular, the tax effect has to be seen each year irrespective of the fact that a common issue arises over several years

An assessee must fulfill each of the conditions stipulated in Section 80-IB in each of the years in which the deduction thereunder is sought. The Assessing Officer would be entitled to ascertain in each of the assessment years whether or not the conditions of Section 80-IB remained fulfilled. In other words, even where an assessee is found to have fulfilled all the conditions of Section 80-IB in the initial assessment year and has on account thereof been granted the deduction thereunder, an Assessing Officer assessing the assessee’s income in subsequent years would be entitled to ascertain whether in that assessment year the conditions in Section 80-IB remained fulfilled or not. If not, he is bound to deny the deduction

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DATE: January 12, 2016 (Date of pronouncement)
DATE: February 28, 2016 (Date of publication)
AY: 2009-10
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S. 14A/ Rule 8D: The disallowance of expenditure cannot exceed the amount of tax-free dividend

The income from dividend had been shown at Rs. 1,11,564/- whereas disallowance under Section 14A read with Rule 8D of the Rules worked out by the Assessing Officer came to Rs. 4,09,675/-. Thus, the Assessing Officer disallowed the entire tax exempt income which is not permissible as per settled position of law. The window for disallowance is indicated in section 14A, and is only to the extent of disallowing expenditure “incurred by the assessee in relation to the tax exempt income”. The disallowance under section 14A read with Rule 8D as worked out by the Assessing officer is not in accordance with law and as such working is not sustainable

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