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DATE: August 12, 2015 (Date of pronouncement)
DATE: August 13, 2015 (Date of publication)
AY: 2010-11
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CITATION:
S. 144: If books are rejected and Gross Profit rate is estimated, separate disallowance of expenses cannot be made

When such an estimate is made it is in substitution of the income that is to be computed under s. 29. In other words, all the deductions which are referred to under s. 29 are deemed to have been taken into account while making such an estimate. This will also that the embargo placed in s. 40 also taken into account

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DATE: August 11, 2015 (Date of pronouncement)
DATE: August 12, 2015 (Date of publication)
AY: 1991-92
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CITATION:
S. 54G does not require that the machinery etc has to be acquired in the same AY in which the transfer takes place. It is sufficient if the capital gain is “utilized” towards purchase of P&M by giving advances to suppliers. Section 24 of the General Clauses Act applies also to ‘omissions’ along with `repeals’ and saves rights given by subordinate legislation

The aforesaid construction by the High Court of Section 54G would render nugatory a vital part of the said Section so far as the assessee is concerned. Under sub-section (1), the assessee is given a period of three years after the date on which the transfer takes place to purchase new machinery or plant and acquire building or land or construct building for the purpose of his business in the said area. If the High Court is right, the assessee has to purchase and/or acquire machinery, plant, land and building within the same assessment year in which the transfer takes place. Further, the High Court has missed the key words “not utilized” in sub-section (2) which would show that it is enough that the capital gain made by the assessee should only be “utilized” by him in the assessment year in question for all or any of the purposes aforesaid, that is towards purchase and acquisition of plant and machinery, and land and building. Advances paid for the purpose of purchase and/or acquisition of the aforesaid assets would certainly amount to utilization by the assessee of the capital gains made by him for the purpose of purchasing and/or acquiring the aforesaid assets

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DATE: August 13, 2015 (Date of pronouncement)
DATE: August 12, 2015 (Date of publication)
AY: -
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S. 253: Severe strictures passed regarding the conduct of the Vice President and President of the ITAT and the CBDT for seeking to constitute Special Bench for non-judicial reasons and on grounds of "political sensitivity"

This is the most distressing part. The president forwarded the letter of the Board to the Vice president for his comments. This was purely an internal movement of the file. It was not that the matter was judicially assigned to the Vice president and notified on his board. There was no indication for any litigant to know that the file was now before the Vice president. In spite of this position, the Special counsel who was to be engaged by the Revenue met the Vice president and explained him the need for a special bench. How the Special counsel knew that the file of the matter was before the Vice president, is a mystery. This was a private meeting and the Petitioner was not informed. The matter was seized before the regular bench and the revenue was a contesting party. The Petitioner was completely unaware that any such private meeting had taken place between the counsel and the Vice president. Permitting a party to the litigation to meet privately in absence of other side in respect of an ongoing litigation and then base an opinion on such meeting ,was most improper on the part of the Vice president. The Vice president did not even find it improper and he has proceeded to place the said private meeting on record as if nothing was wrong about the same. Not only holding such private meetings is opposed to judicial conduct, but not knowing that it is an improper judicial conduct, makes the matters worse

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DATE: August 5, 2015 (Date of pronouncement)
DATE: August 12, 2015 (Date of publication)
AY: 2004-05
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S. 36(1)(vii)/ 36(2): The principal part of the Inter-corporate Debt (ICD) can be claimed as a bad debt if the interest thereon has been offered to tax in some year

The debt comprises not only the brokerage which was offered to tax but also principal value of shares which was not received. Therefore, even if a part of debt is offered to tax, Section 36(2)(i) of the Act, stands satisfied. The test under the first part of Section 36(2)(i) of the Act is that where the debt or a part thereof has been taken into account for computing the profits for earlier Assessment Year, it would satisfy a claim to deduction under Section 36(1)(vii) read with Section 36(2)(i) of the Act

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DATE: August 7, 2015 (Date of pronouncement)
DATE: August 12, 2015 (Date of publication)
AY: 2009-10
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S. 41(1)/ 68: Old unclaimed liabilites which are not written back by the assessee can neither be assessed as "cash credits" u/s 68 nor assessed u/s 41(1) as "remission or cessation of liability"

On the applicability of section 68, we are of the view that those provisions will not apply as the balances shown in the creditors account do not arise out of any transaction during the previous year relevant to AY 2009-10. The provisions of sec. 68 are clear inasmuch as they refer to “sum found credited in the books of account of an assessee maintained for any previous year”. Since the credit entries in question do not relate to previous year relevant to AY 2009-10, the same cannot be brought to tax u/s. 68 of the Act. The proper course in such cases for the Revenue would be to find out the year in which the credits in question were credited in the books of account and thereafter make an enquiry in that year and make an addition in that year, if other conditions for applicability of section 68 are satisfied

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DATE: April 17, 2015 (Date of pronouncement)
DATE: August 10, 2015 (Date of publication)
AY: 2007-08
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S. 43B: Service-tax billed to customer but not collected from him cannot be disallowed u/s 43B on ground of non-payment to treasury

Section 43B does not contemplate liability to pay the service tax before actual receipt of the funds in the account of the assesee. Liability to pay service tax into the treasury will arise only upon the assessee receiving the funds and not otherwise

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DATE: August 7, 2015 (Date of pronouncement)
DATE: August 10, 2015 (Date of publication)
AY: 2009-10
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S. 40(a)(ia)/ 194A/ 197A(1A): If payer obtains declarations in Form 15G/ 15H, tax is not deductible at source. Failure to furnish such declarations to CIT may attract penalty u/s 272A(2)(f). However, disallowance u/s 40(a)(ia) cannot be made

The assessee has received such Forms as prescribed from those persons to whom interest was paid/being paid and accordingly no deduction of tax was to be made in such cases. The default for non-furnishing of the declarations to the Commissioner of Income-tax as prescribed may result in invoking penalty provisions under section 272A(2)(f), for which separate provision/procedure was prescribed under the Act. However, once Form 15G/ Form 15H was received by the person responsible for deducting tax, there is no liability to deduct tax. Once there is no liability to deduct tax, it cannot be considered that tax is deductible at source under Chapter XVII-B as prescribed under section 40(a)(ia)

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DATE: August 6, 2015 (Date of pronouncement)
DATE: August 10, 2015 (Date of publication)
AY: 2003-04
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S. 147: The revenue audit cannot perform functions of judicial supervision and a reopening based on the interpretation of the audit cannot be sustained. However, a reopening based on communication of the law or factual inaccuracy by the audit is valid

The logic in not sustaining the initiation of reassessment on the basis of interpretation of law by the audit party is that the internal auditor cannot be allowed to perform functions of judicial supervision over the Income-tax authorities by suggesting to the Assessing Officer about how a provision should be interpreted and whether the interpretation so given by the AO to a particular provision of the Act is right or wrong

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DATE: August 7, 2015 (Date of pronouncement)
DATE: August 10, 2015 (Date of publication)
AY: 2006-07
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CITATION:
(i) DR can only support the AO's order and cannot set up an altogether new case before the ITAT, (ii) Loss on sale of shares, even if a speculation loss, can be set-off against the gains on sale of shares

Even if the loss claimed by the assessee relating to share transactions as well as loss resulting on valuation of closing stock is treated as speculation loss, the same is entitled to be set-off against the profit on sale of shares in view of DLF Commercial Developers Ltd. 261 CTR (Del) 127

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DATE: August 4, 2015 (Date of pronouncement)
DATE: August 6, 2015 (Date of publication)
AY: -
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S. 194-I: In deciding whether a payment is for "use of land", the substance of the transaction has to be seen. If the payment is for a variety of services and the use of land is minor, the payment cannot be treated as "rent"

When the airlines pay for these charges, treating such charges as charges for ‘use of land’ would be adopting a totally naïve and simplistic approach which is far away from the reality. We have to keep in mind the substance behind such charges. When matter is looked into from this angle, keeping in view the full and larger picture in mind, it becomes very clear that the charges are not for use of land per se and, therefore, it cannot be treated as ‘rent’ within the meaning of Section 194-I of the Act

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