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DATE: February 28, 2019 (Date of pronouncement)
DATE: February 26, 2019 (Date of publication)
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CITATION:
S. 92C Transfer Pricing: The TPO cannot re-characterize a transaction of subscription to redeemable preferential shares as being equivalent to interest free loans advanced by the assessee to the AE & charge notional interest thereon. The TPO cannot disregard the apparent transaction and substitute the same without any material or exceptional circumstances pointing out that the assessee had tried to conceal the real transaction or that the transaction in question was sham. The TPO cannot question the commercial expediency of the assessee entered into such transaction

The facts on record would suggest that the assessee had entered into a transaction of purchase and sale of shares of an AE. Nothing is brought on record by the Revenue to suggest that the transaction was sham. In absence of any material on record, the TPO could not have treated such transaction as a loan and charged interest thereon on notional basis

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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: February 1, 2019 (Date of pronouncement)
DATE: February 16, 2019 (Date of publication)
AY: 2011-12
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CITATION:
S. 147 Reopening: If the assessee delays filing objections to the reasons and leaves the AO with little time to dispose of the objections and pass the assessment order before it gets time barred, it destroys the formula provided in Asian Paints 296 ITR 90 (Bom) that the AO should not pass the assessment order for 4 weeks. A writ petition to challenge the reopening will not be entertained

Asian Paints Ltd. Vs. Dy. Comm. Of Income Tax & Ors. reported in 296 ITR 90 Bom has provided that if the Assessing Officer does not accept the objections of the assessee, he shall not proceed further in the matter within a period of four weeks from the date of receipt of said order of objections. The petitioner by its conduct destroyed this formula provided by the Court in the case of Asian Paints (supra), making it impossible for the assessing officer to wait for four weeks after disposal of objections without running the risk of allowing the assessment to be time barred

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DATE: November 19, 2019 (Date of pronouncement)
DATE: February 9, 2019 (Date of publication)
AY: 2008-09
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CITATION:
Capital Gains vs. Business Profits: As per CBDT Circular No. 6 of 2016 dated 29.2.2016 gains on shares held for more than 12 months are treated as long-term capital gains and not as business profits. The fact that the amount invested in shares were out of borrowed funds and there were frequent and voluminous transactions is irrelevant

our attention is drawn to Circular No. 6 of 2016 dated 29.2.2016 issued by the Central Board of Direct Taxes (CBDT). This circular issued with regard to the issue of taxability of surplus on sale of shares and securities, – whether as capital gain or business income in case of long term holdings of shares and securities i.e in excess of 12 months. It has clarified therein that with a view to reduce litigation and uncertainty in the matter of taxibility, as long term capital gains or business income – the assess has an option to treat the income from sale of listed shares and securities as income arising under the head ‘Long Term Capital Gains’, them the same shall be accepted by the assessing officer

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DATE: January 22, 2019 (Date of pronouncement)
DATE: January 28, 2019 (Date of publication)
AY: 2009-10
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CITATION:
S. 45 Capital Gains: The allottee gets title to property on issue of allotment letter. The payment of installments is only a follow­-up action. Taking delivery of possession is only a formality. Accordingly, the date of allotment is the date on which the purchaser of a residential unit can be stated to have acquired the property (CBDT Circulars applied)

It was noted that such allotment is final unless it is cancelled or the allottee withdraw from the scheme and such allotment would be cancelled only under exceptional circumstances. It was noted that the allottee gets title to the property on the issue of allotment letter and the payment of installments was only a follow­up action and taking the delivery of possession is only a formality

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DATE: January 17, 2019 (Date of pronouncement)
DATE: January 28, 2019 (Date of publication)
AY: 2011-12
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S. 147: Even in a case where return is accepted without scrutiny, the AO cannot proceed mechanically and on erroneous information supplied to him by investigation wing. If AO acts merely upon information submitted by investigation wing and on total lack of application of mind, the reopening is invalid

Even in a case where the return filed by the assessee is accepted without scrutiny, as per the settled law, the Assessing Officer can issue a notice of reopening of assessment provided he has reason to believe that income chargeable to tax has escaped assessment. The Assessing Officer cannot proceed mechanically and also on erroneous information that may have been supplied to him. In fact, we note that in the present case the Assessing Officer had issued a notice to a wrong person

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DATE: January 17, 2019 (Date of pronouncement)
DATE: January 19, 2019 (Date of publication)
AY: 2011-12
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CITATION:
S. 147 Reopening of Bogus Sales/ Purchases: If the AO disallowed 2.5% of alleged bogus purchases during the regular assessment, he cannot reopen on the ground that as per N. K. Proteins Ltd 2017-TIOL-23-SC-IT the entire amount should have been disallowed as this amounts to change of opinion

In other words, during the previous reassessment proceedings, the Assessing Officer examined the alleged bogus sales of the assessee, taxed 2.25% thereof as assessee’s additional income and passed the order of assessment accordingly. The Assessing Officer now believes that taxing 2.25% of the sales, was an error and instead the entire amount should have been added to the assessee’s income. This would be a mere change of opinion

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DATE: (Date of pronouncement)
DATE: January 19, 2019 (Date of publication)
AY: 2011-12
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CITATION:
S. 147 Reopening of S. 143(1) Intimations: The mere fact that the return is processed u/s 143(1) does not give the AO a carte blanche to issue a reopening notice. The basic condition precedent of 'reason to believe' applies even to s. 143(1) intimations. If the assessee claims the facts recorded in the reasons are not correct, the order on objection must deal with them. Otherwise an adverse inference can be drawn against the Revenue

Even in cases where the return of income has been accepted by processing under Section 143(1) of the Act, reopening of an assessment can only be done when the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. The mere fact that the return has been processed under Section 143(1) of the Act, does not give the Assessing Officer a carte blanc to issue a reopening notice

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DATE: January 3, 2019 (Date of pronouncement)
DATE: January 19, 2019 (Date of publication)
AY: 2011-12
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CITATION:
S. 254(2): The law in CIT vs. Ramesh Electrical Co 203 ITR 497 (Bom) that failure to deal with an argument does not constitute a 'mistake apparent from the record' does not apply to a case where a fundamental submission is omitted to be considered by the ITAT. The omission is apparent from the record and should be rectified by the ITAT

The Tribunal ignored the fact that the above observation of this Court in Ramesh Electrical (supra) was on the basis that for a rectification application to be maintainable, the mistake should be apparent from the record. In this case, the mistake / error in not dealing with the fundamental submission in appeal is apparent from the record, as the submission that the distribution fee was not royalty was recorded and yet not dealt with in the order

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DATE: January 7, 2019 (Date of pronouncement)
DATE: January 17, 2019 (Date of publication)
AY: -
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CITATION:
S. 40(a)(ia): The second proviso to s. 40(a)(ia) is beneficial to the assessee and is declaratory and curative in nature. Accordingly, it must be given retrospective effect

Various Courts, however, have seen this proviso as beneficial to the assessee and curative in nature. The leading judgment on this point was of the Division Bench of Delhi Court in the case of CIT Vs. Ansal Land Mark Township P Ltd [2015] 377 ITR 635 (Delhi). The Court held that Section 40(a)(ia) is not a penalty and insertion of second proviso is declaratory and curative in nature and would have retrospective effect form 1.4.2005 i.e the date from the main proviso 40(a)(ia) itself was inserted

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