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DATE: February 6, 2018 (Date of pronouncement)
DATE: February 12, 2018 (Date of publication)
AY: 2006-07
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CITATION:
S. 271(1)(c) Penalty: The law in Nayan Builders 368 ITR 722 (Bom) does not mean as a matter of rule that in case where the High Court admits an appeal relating to quantum proceedings ipso facto i.e. without anything more, the penalty order gets vitiated. The question of entertaining an appeal from an order imposing / deleting penalty would have to be decided on a case to case basis. There can be no universal rule to the effect that no penalty can be levied if quantum appeal is admitted on a substantial question of law

Each appeal in respect of the order deleting / imposing a penalty by the Tribunal would have to be considered in relation to the facts arising therein and also in the quantum proceedings. It cannot be said as a matter of rule that in case where this Court admits an appeal relating to quantum proceedings ipso facto i.e. without anything more, the penalty order get vitiated. Thus, the question of entertaining an appeal from an order imposing / deleting penalty would have to be decided on a case to case basis. There can be no universal rule to the effect that no penalty, if quantum appeal is admitted on a substantial question of law

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DATE: February 10, 2015 (Date of pronouncement)
DATE: January 5, 2018 (Date of publication)
AY: 2007-08
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S. 14A/ 115JB: Amount disallowed u/s 14A of the Act cannot be added to arrive at book profit for purposes of section 115JB of the Act

The impugned order of the Tribunal followed its decision in M/s. Essar Teleholdings Ltd. v/s. DCIT in ITA No. 3850/Mum/2010 to held that an amount disallowed under Section 14A of the Act cannot be added to arrive at book profit for purposes of Section 115JB of the Act. The Revenue’s Appeal against the order of the Tribunal in M/s. Essar Teleholdings (supra) was dismissed by this Court in Income Tax Appeal No.438 of 2012 rendered on 7th August, 2014. In view of the above, question (b) does not raise any substantial question of law

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DATE: December 22, 2017 (Date of pronouncement)
DATE: December 29, 2017 (Date of publication)
AY: 2014-15
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S. 147/ 292B: Sanction for issuing a reopening notice cannot be mechanical but has to be on due application of mind. Sanction accorded despite mention of non-existent section in the notice is prima facie evidence of non application of mind on the part of the sanctioning authority. S. 292B cannot cure such defect

There can be no dispute with regard to the application of Section 292B of the Act to sustain a notice from being declared invalid merely on the ground of mistake in the notice. However, the issue here is not with regard to the mistake / error committed by the Assessing Officer while taking a sanction from the Joint Commissioner of Income Tax but whether there was due application of mind by the Joint Commissioner of Income Tax while giving the necessary sanction for issuing the impugned notice. It is a settled principle of law that sanction granted by the higher Authority for issuing of a reopening notice has to be on due application of mind. It cannot be mechanical approval without examining the proposal sent by the Assessing Officer. Prima facie, it appears to us that if the Joint Commissioner of Income Tax would have applied his mind to the application made by the Assessing Officer, then the very first thing which would arise is the basis of the notice, as the provision of law on which it is based is no longer in the statute

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DATE: December 16, 2016 (Date of pronouncement)
DATE: August 9, 2017 (Date of publication)
AY: 2008-09
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CITATION:
Transfer Pricing: A party is not barred in law from withdrawing from its list of comparables a company found to have been included on account of mistake of fact. The Transfer Pricing Mechanism requires comparability analysis to be done between like companies and controlled and uncontrolled transactions by carrying out of FAR analysis. The assessee's submission in arriving at the ALP is not final. It is for the TPO to examine and find out the companies listed as comparables which are in fact comparable

We find that the impugned order of the Tribunal holding that a party is not barred in law from withdrawing from its list of comparables, a company, if the same is found to have been included on account of mistake as on facts, it is not comparable. The Transfer Pricing Mechanism requires comparability analysis to be done between like companies and controlled and uncontrolled transactions. This comparison has to be done between like companies and requires carrying out of FAR analysis to find the same. Moreover, the Assessee’s submission in arriving at the ALP is not final. It is for the TPO to examine and find out the companies listed as comparables which are, in fact comparable

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DATE: August 1, 2017 (Date of pronouncement)
DATE: August 9, 2017 (Date of publication)
AY: 1998-99, 1999-00, 2000-01, 2001-02
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Interest on interim compensation received pending final disposal by the High Court is income if there is no direction given by the Court. The source of funds to earn income cannot determine the taxability of the income. The fact that the assessee may have to return the compensation and interest on the principle of restitution as provided under S. 144 of the Civil Procedure Code is not relevant because restitution is not a certainty. Paragon Construction 274 ITR 413 (Del) distinguished

The source of funds to earn income cannot determine the taxability of the income earned on the capital amount which has been invested. This in the absence of any statutory mandate otherwise. The income earned would be chargeable to tax irrespective of the source of the funds from which the income has been earned. In the mercantile system of accounting, income accrues when the right to receive the same arises, even though the actual receipt could be at a later date. In the present case it is an accepted position that the right to receive the interest from the fixed deposits already accrued to the assessee. In such circumstances, the interest on the fixed deposit would be chargeable to tax, as sought to be done by the Assessing Officer under the head income from other sources

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DATE: October 3, 2016 (Date of pronouncement)
DATE: July 20, 2017 (Date of publication)
AY: 2003-04
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CITATION:
S. 147: If the AO does not follow the law laid down in GKN Driveshafts 259 ITR 19, the reopening proceedings have to be quashed. There is no reason to restore the issue to the AO to pass a further/fresh order because it would give a licence to the AO to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the AO for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the assessee by reviving stale/ old matters

Once the impugned order finds the Assessment Order is without jurisdiction as the law laid down by the Apex Court in GKN Driveshafts (India) Ltd., v/s. ITO 259 ITR 19 has not been followed, then there is no reason to restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale/ old matters

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DATE: June 29, 2017 (Date of pronouncement)
DATE: July 6, 2017 (Date of publication)
AY: -
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CITATION:
S. 158BFA(1): If the delay in filing the return is completely attributable to the revenue for non-furnishing of copies of the documents and not giving inspection of the documents seized within a reasonable time after making the demand, the interest has to waived. Though s. 158BFA(1) does not (pre 2002) confer the power to waive interest, it has to be read in on equitable construction because the subject cannot be made to pay for the negligence of the Officers of the State (J. H. Gotla 4 SCC 343 followed)

This now takes us to the final issue viz. is it open under the provisions of Section 158-BFA(1) of the Act to the Assessing Officer to waive interest imposable thereunder even in the absence of any discretion provided to waive interest under Section 158-BFA(1) of the Act. There can be no dispute that bare reading of the section does not provide for any discretion to waive and/or reduce the interest imposable on account of the late filing of the return of income. It is a settled position in law that a fiscal statute has to be strictly interpreted, particularly when there is no ambiguity in the statute. The normal rule of interpreting a fiscal statute is the literal rule of interpretation. However, when the Parliament makes a law, it proceeds on the basis that the Executive i.e. the State will act fairly and not cause unjustified burden upon the subject. The provisions of Section 158BFA(1) of the Act proceeds on the above premise and it was expected of the State to grant copies of the documents seized and/or inspection of the record as expeditiously as possible, so as to enable the appellant to file his return of income. This particularly so, as to delay in filing of return, leads to levy of interest. This not having been done, as was expected under the Statute, the subject cannot be made to pay for the negligence of the Officers of the State. Therefore, in a case like this where strict construction may result in injustice, an equitable construction may be preferred

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DATE: June 12, 2017 (Date of pronouncement)
DATE: June 21, 2017 (Date of publication)
AY: 1995-96
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Capital Gains: While a family arrangement/settlement does not amount to a "transfer" u/s 2(47) as it only recognizes "pre-existing rights" between the parties, the same applies only to members of the families and not to transfers made by corporate entities. The corporate veil can never be lifted at the instance of the company itself because that would amount to its denying its own corporate existence. The fact that the Company is wholly owned by the members of the family is irrelevant

There is no dispute before us that a family arrangement/settlement would not amount to a transfer. So far as the members of Mohota family are concerned, who are parties to the family settlement, any transfer inter se between them on account of family settlement would not result in a transfer so as to attract the provisions of the Capital gain tax under the Act. However, in the present case, we are not concerned with the members of Mohota family who were parties to the family settlement, but with transfer of share done by the Company incorporated under the Companies Act having separate/independent corporate existence, perpetual succession and common seal. This Company is independent and distinct from it’s members

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DATE: April 18, 2017 (Date of pronouncement)
DATE: April 21, 2017 (Date of publication)
AY: 2008-09
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CITATION:
An additional ground (relating to claim u/s 80-IA) cannot be permitted to be raised if the necessary evidence that the assessee is entitled to the claim is not on record. The fact that claim has been allowed by the AO in a subsequent year and that there is no reason why the claim should not be allowed in the present year is irrelevant. Also, the assessee must satisfy the appellate authority that the ground now raised was bona fide and the same could not have been raised earlier for good reasons

We note that it is an undisputed position before us that for the subject assessment year, the appellant assessee had not claimed benefit of Section 80IA of the Act in respect of its Jetty / Port either before the Assessing Officer or before the CIT(A). A claim for benefit under Section 80IA of the Act can only be made if the infrastructure facility such as Jetty / Port is, among other things, being run on the basis of an agreement for either developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility. The sine qua non provided in SubSection (7) of Section 80IA of the Act is the furnishing along with its Return of Income, a report of audited accounts in Form 10CCB as required under Rule 18BBB(3) of the Act. The Form 10CCB which is required to be filed along with Return of Income has various details to be filled in, including the initial assessment year from which the deduction is being claimed, the nature of the activity carried out with regard to the infrastructure facility, namely, whether it is for developing or developing and operating or for developing, operating and maintaining the new infrastructure facility. It is only on examination of those details as submitted by the auditor in Form 10CCB that the claim of deduction can be considered. It is undisputed that for the subject assessment year, no Form 10CCB has been filed by the appellant assessee. Therefore, there is no evidence on record for subject assessment year to allow the claim. The submission of Mr.Agrawal for the appellant that primary evidence in the form of jetty is on record is not acceptable. Mere ownership or existence of jetty is not evidence of eligibility to the benefit of Section 80IA of the Act, which is admittedly conditional upon satisfaction of certain requirements as provided therein

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DATE: March 20, 2017 (Date of pronouncement)
DATE: April 7, 2017 (Date of publication)
AY: 2008-09
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CITATION:
Bogus share capital/ premium: The proviso to s. 68 (which creates an obligation on the issuing Co to explain the source of share capital & premium) has been introduced by the Finance Act 2012 with effect from 01.04.2013 and does not have retrospective effect. Prior thereto, as per Lovely Exports 317 ITR 218 (SC), if the AO regards the share premium as bogus, he has to assess the shareholders but cannot assess the same as the issuing company's unexplained cash credit

The proviso to Section 68 of the Act has been introduced by the Finance Act 2012 with effect from 1st April, 2013. Thus it would be effective only from the Assessment Year 2013-14 onwards and not for the subject Assessment Year. In fact, before the Tribunal, it was not even the case of the Revenue that Section 68 of the Act as in force during the subject years has to be read/understood as though the proviso added subsequently effective only from 1st April, 2013 was its normal meaning. The Parliament did not introduce to proviso to Section 68 of the Act with retrospective effect nor does the proviso so introduced states that it was introduced “for removal of doubts” or that it is “declaratory”. Therefore it is not open to give it retrospective effect, by proceeding on the basis that the addition of the proviso to Section 68 of the Act is immaterial and does not change the interpretation of Section 68 of the Act both before and after the adding of the proviso

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