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DATE: August 9, 2019 (Date of pronouncement)
DATE: August 17, 2019 (Date of publication)
AY: 2014-15
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CITATION:
S. 50C + S. 10(38) Bogus Penny Stocks Capital Gains: (i) Though the 3rd Proviso to s. 50C, which provides a safe harbour of 5%, applies w.e.f. 01.04.2019, it must be interpreted to apply since the insertion of s. 50C (01.04.2003) because it is curative and removes an incongruity and avoids undue hardship to assesseess (ii) LTCG from penny stocks cannot be treated as bogus if the documentation is in order and no fault is found by the AO

The insertion of third proviso (noted above) to Section 50C of the Act is declaratory and curative in nature. That is, the third provisoto Section 50C of the Act relates to computation of value of property as explained by us above, hence it is not a substantive amendment, it is only a procedural amendment therefore the Coordinate Benches of the ITAT used to ignore the variation up to 10%, therefore, the said amendment should be retrospective.Quite clearly therefore, even when the statute does not specifically state so, such amendments, in the light of the detailed discussions above, can only be treated as retrospective and effective from the date related statutory provisions was introduced. Viewed thus, the third proviso to Section50C should be treated as curative in nature and with retrospective effect from 1st April 2003, i.e. the date effective from which Section 50C was introduced.

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DATE: September 7, 2018 (Date of pronouncement)
DATE: September 13, 2018 (Date of publication)
AY: 2012-13
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CITATION:
S. 2(47)/ 54: Though an unregistered agreement to sell does not entitle the parties to seek part performance u/s. 53A of the Transfer of Property Act, 1882, it can be a basis for a suit for specific performance in view of s. 49 of the Registration Act. Consequently, even an unregistered agreement creates a right in favour of the buyer and constitutes a "transfer" of the old property u/s 2(47) for purposes of determining whether the purchase of the new property is within one year of the date of "transfer" of the old property

Thus, a right in respect of the capital asset (old residential property in question) has been transferred by the assessee in favour of the vendee/transferee on 16.09.2011 and, therefore, since purchase of the new property on 04.10.2010 which fact has been disputed by the AO/Ld. CIT(A) the purchase of the property is well within one year from the date of transfer as per sec. 2(47) of the Act, therefore, we allow the appeal of the assesse

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DATE: June 20, 2018 (Date of pronouncement)
DATE: June 23, 2018 (Date of publication)
AY: 2011-12
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CITATION:
S. 139(5): There is no bar / restriction that an assessee cannot file a revised return of income after issuance of notice u/s 143(2). A revised return of income can be filed even in course of the assessment proceedings provided the time limit prescribed u/s 139(5) is available. The Departmental Authorities are not expected to deny assessee’s legitimate claim by raising technical objection

There is no bar / restriction in the provisions of section 139(5) of the Act that the assessee cannot file a revised return of income after issuance of notice under section 143(2) of the Act. It is trite law, the assessee can file a revised return of income even in course of the assessment proceedings, provided, the time limit prescribed under section 139(5) of the Act is available. That being the case, the revised return of income filed by the assessee under section 139(5) of the Act cannot be held as invalid

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DATE: June 14, 2018 (Date of pronouncement)
DATE: June 15, 2018 (Date of publication)
AY: 2012-13
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CITATION:
S. 68 Bogus share premium: Addition cannot be made on the ground that the directors of the share subscribers did not turn up before the AO. The assessee can be required to prove only such facts which are in his knowledge. Creditworthiness of the subscriber cannot be disputed by the AO of the assessee but by the AO of the subscriber. If the assessee has discharged its onus to prove identity, creditworthiness & genuineness of the share applicants, the onus shifts to AO to disprove the documents furnished by assessee. In absence of any investigation, much less gathering of evidence by the AO, an addition cannot be sustained merely based on inferences drawn by circumstance (all judgements considered)

To sum up section 68 of the Act provides that if any sum found credited in the year in respect of which the assessee fails to explain the nature and source shall be assessed as its undisclosed income. In the facts of the present case, both the nature & source of the share application received was fully explained by the assessee. The assessee had discharged its onus to prove the identity, creditworthiness and genuineness of the share applicants. The PAN details, bank account statements, audited financial statements and Income Tax acknowledgments were placed on AO’s record. Accordingly all the three conditions as required u/s. 68 of the Act i.e. the identity, creditworthiness and genuineness of the transaction was placed before the AO and the onus shifted to AO to disprove the materials placed before him. Without doing so, the addition made by the AO is based on conjectures and surmises cannot be justified

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DATE: December 1, 2017 (Date of pronouncement)
DATE: January 20, 2018 (Date of publication)
AY: 2010-11
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CITATION:
S. 271(1)(c) Penalty: Conflict in law laid down by Bombay, Patna & Karnataka High Courts in Kaushalya 216 ITR 660 (Bom), Maharaj Garage (Bom), Samson Perinchery (Bom), Mithila Motors 149 ITR 751 (Pat) & Manjunatha Cotton & Ginning 359 ITR 565 (Kar) on whether the issuance of a s. 274 notice is merely an administrative device for informing the assessee about the proposal to levy penalty and mere mistake in the language used or mere non-striking of the inaccurate portion invalidates the notice or not explained. Impact of the conflicting law of the High Courts on Benches of the Tribunal in jurisdictional and non-jurisdictional States also explained

The line of reasoning of the Hon’ble Bombay High Court and the Hon’ble Patna High Court is that issuance of notice is an administrative device for informing the assessee about the proposal to levy penalty in order to enable him to explain as to why it should not be done. Mere mistake in the language used or mere non-striking of the inaccurate portion cannot by itself invalidate the notice. The Tribunal Benches at Mumbai and Patna being subordinate to the Hon’ble Bombay High Court and Patna High Court are bound to follow the aforesaid view. The Tribunal Benches at Bangalore have to follow the decision of the Hon’ble Karnataka High Court. As far as benches of Tribunal in other jurisdictions are concerned, there are two views on the issue, one in favour of the Assessee rendered by the Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning (supra) and other of the Hon’ble Bombay High Court in the case of Smt. Kaushalya. It is settled legal position that where two views are available on an issue, the view favourable to the Assessee has to be followed

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DATE: February 8, 2017 (Date of pronouncement)
DATE: February 20, 2017 (Date of publication)
AY: 2010-11
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CITATION:
Entire law on Permanent Establishment, Force of Attraction principle, taxability of software embedded in hardware as royalty, make available of technical services etc explained (all important judgements referred)

Some provide for taxing profits/income from all transactions whether they are attributable to PE or not or whether they are of the same kind of transactions carried on by the PE or not, which is referred to as “Full Force of Attraction” principle. As to which principle is applicable in a given case depends on the clauses of the convention between two countries. Article 7(1) of the DTAA between India and Netherlands provides for taxing profits of the enterprise in the other state only to the extent they are attributable to the PE in the other state, adopting “No Force of Attraction” principle

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DATE: January 4, 2017 (Date of pronouncement)
DATE: January 14, 2017 (Date of publication)
AY: 2012-13
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CITATION:
S. 9(1)(vii)/ Article 12: There is a difference between a 'contract of work' and a ‘contract of service’. In a 'contract of work', the activity is predominantly physical while in a 'contract of service', the dominant feature of the activity is intellectual. Fees paid with respect to a ‘contract of work’ does not constitute "fees for technical services" and consequently the assessee is not liable to deduct TDS u/s 195

There is a difference between ‘Contract of work and ‘Contract of service’. The two words convey different ideas. In the ‘Contract of work’ the activity is predominantly physical; it is tangible. In the activity referred as ‘Contract of service’, the dominant feature of the activity is intellectual, or at least, mental. Certainly, ‘Contract of work’ also involves intellectual exercise to some extent. Even a gardener has to bestow sufficient care in doing his job; so is the case with a mason, carpenter or a builder. But the physical (tangible) aspect is more dominant than the intellectual aspect. In contrast, in the case of rendering any kind of ‘service’, intellectual aspect plays the dominant role. In the case under consideration, the scope of work mentioned in the agreement clearly explains that it is ‘contract of work’ to dismantle the machinery, therefore, it is not a ‘contract of service’ hence payment by the assessee is not for technical services, therefore, the assessee company is not liable to deduct TDS

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