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DATE: May 29, 2019 (Date of pronouncement)
DATE: July 6, 2019 (Date of publication)
AY: 2012-13
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Capital vs. Revenue Receipt: Damages received for breach of development agreement are capital in nature & not chargeable to tax. The only right that accrues to the assessee who complains of breach is right to file a suit for recovery of damages from the defaulting party. A breach of contract does not give rise to any debt. A right to recover damages is not assignable because it is not a chose-in-action. Such a mere 'right to sue' is neither a capital asset u/s 2(14) nor is it capable of being transferred & is therefore not chargeable under u/s 45 of the Act (All imp judgements referred)

Despite the definition of the expression capital asset in the widest possible terms in section 2(14), a right to a capital asset must fall within the expression ‘property of any kind’ and must not fall within the exceptions. Section 6 of the Transfer of Property Act which uses the expression ‘property of any kind’ in the context of transferability makes an exception in the case of mere right to sue. The decisions there under make it abundantly clear that the right to sue for damages is not an actionable claim. It cannot be assigned and its transfer is opposed to public policy. As such it will not be quite correct to say that such a right constituted capital asset which in turn has to be an interest in ‘property of any kind.’

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DATE: March 8, 2019 (Date of pronouncement)
DATE: March 16, 2019 (Date of publication)
AY: 2011-12
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S. 50C Capital Gains: The adoption of stamp valuation as the sale consideration is not justified in absence of any evidence that the sale consideration was more than the value shown in the agreement. The AO has not brought on record that the property under sale was not was under various encumbrances and the assessee was having the absolute marketable title of the said property (All judgements considered)

The value adopted for the purpose of payment of stamp duty is not disputed by the assessee. The assessing officer has not brought on record that the property under sale was not was under various encumbrances and the assessee was having the absolute marketable title of the said property. No material is brought on record by assessing officer that the assessee has received much more consideration than shown in the MOI. The assessing officer treated the stamp valuation rate as the value of consideration, despite the facts that the assessee throughout the proceedings contended that the assessee was neither having possessing of the impugned piece of land nor having marketable title. The assessee offered the said piece of land on the basis ‘as is where is’. These vital facts were ignored by the lower authorities

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DATE: September 26, 2018 (Date of pronouncement)
DATE: January 29, 2019 (Date of publication)
AY: 2009-10
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S. 147 Reopening for taxing Bogus share capital: Even in a s. 143(1) intimation, the AO is not entitled to reopen on the ground that the assessee has received "huge share premium" which was not "examined" by the AO. The AO cannot reopen in the absence of tangible material that shows income has escaped assessment

The assessment was processed under section 143(1). The assessment was reopened on 29.03.2014 without four year from the end of relevant Assessment Year. We have noted that the Assessing Officer nowhere mentioned in the reasons recorded that any tangible material either from assessment record or from other source has come in the notice of Assessing Officer for his reason to believe that any income has escape assessment. Therefore, the basic requirement of reopening of the assessee i.e. reason to believe was not fulfilled at the time of recording the reasons of reopening

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DATE: December 7, 2018 (Date of pronouncement)
DATE: December 15, 2018 (Date of publication)
AY: 2010-11
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S. 56(2)(vii) is a counter evasion mechanism to prevent money laundering of unaccounted income & does not apply to bona fide business transaction done out of business exigency. The difference between alleged fair market value of share and the subscribed value of shares cannot be assessed as income u/s 56(2)(vii)(c) (CBDT Circulars & case laws referred)

Section 56(2)(vii) does not apply to bonafide business transaction. As explained hereinabove, shares were issued by the company to comply with a covenant in the loan agreement with State Bank of India which required the promoters to increase the total net worth of the company to Rs. 150 crores by 31 March, 2010. Therefore, the shares were issued by the company for a bonafide reason and as a matter of business exigency. Circular No.1/2011 dated 6 April, 2011 issued by the CBDT explaining the provision of section 56(2)(vii) specifically states that the section was inserted as a counter evasion mechanism to prevent money laundering of unaccounted income. In paragraph 13.4 thereof where it is stated that “the intention was not to tax transactions carried out in the normal course of business or trade, the profit of which are taxable under the specific head of income”

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DATE: November 16, 2018 (Date of pronouncement)
DATE: November 21, 2018 (Date of publication)
AY: 2006-07, 2007-08
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S. 68 Black Money in HSBC Bank Account (i) Non-residents are not required to disclose their foreign bank accounts and assets to Indian income-tax authorities (ii) The assessee cannot be asked to prove the negative that the credits found in HSBC Bank is not sourced out of income derived from India (iii) the Govt / legislature never intended to tax foreign accounts of non residents (iv) mere holding of an account outside India does not have led to the conclusion that the amount is tax evaded

It is very clear from the clarifications issued by the Government itself that the legislature does not wish to take any action in respect of non residents holding foreign bank accounts. Further, even in the excel utility of return of income in the income-tax department website, the moment a person fills his residential status as non resident, the excel utility prevents filling of columns pertaining to foreign assets. Even, the Hon’ble Finance Minister has clarified that all accounts in foreign bank may not be illegal as they may belong to NRI. Thus, even the government has acknowledged the fact that an NRI foreign bank account is not illegal

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DATE: June 29, 2018 (Date of pronouncement)
DATE: July 5, 2018 (Date of publication)
AY: 2014-15
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CITATION:
S. 56(2)(viia) is a counter evasion mechanism to prevent laundering of unaccounted income under the garb of gifts. The primary condition for invoking S. 56(2)(viia) is that the asset gifted should become a “capital asset” and property in the hands of recipient. If the assessee-company has purchased shares under a buyback scheme and the said shares are extinguished by writing down the share capital, the shares do not become capital asset of the assessee-company and hence s. 56(2)(viia) cannot be invoked in the hands of the assessee company

The provisions of sec. 56(2)(viia) should be applicable only in cases where the receipt of shares become property in the hands of recipient and the shares shall become property of the recipient only if it is “shares of any other company”. In the instant case, the assessee herein has purchased its own shares under buyback scheme and the same has been extinguished by reducing the capital and hence the tests of “becoming property” and also “shares of any other company” fail in this case. Accordingly we are of the view that the tax authorities are not justified in invoking the provisions of sec. 56(2)(viia) for buyback of own shares

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DATE: May 16, 2018 (Date of pronouncement)
DATE: July 3, 2018 (Date of publication)
AY: 2007-08
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S. 2(42C)/ 50B: A transaction by which an undertaking is transferred in consideration of the allottment of shares is an "exchange" and not a "sale". The fact that the agreement refers to the parties as "seller" and "purchaser" is irrelevant. S. 2(42C)/ 50B apply only to "sale" and not to "exchange". Entire law on "estoppel" explained. As there is no estoppel against a statute, an assessee is entitled to raise the claim regarding non-taxability at any stage of the proceedings

In the present case the consideration was not money but equity shares and debentures and hence the transaction was not a “Sale” but an “Exchange” and consequently, the provisions of Section 50B of the I.T. Act, are not attracted. In the case of CIT vs. Bharat Bijlee Ltd. (365 ITR 258) where an undertaking was transferred under a Scheme of Arrangement to a company which allotted preference shares and bonds as consideration to the Transferor company. Following the decision of the Hon’ble Supreme Court in Motor & General Stores (P) Ltd. (66 ITR 692), the jurisdictional High Court held that the provisions of section 50B were inapplicable to the transaction

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DATE: May 25, 2018 (Date of pronouncement)
DATE: June 21, 2018 (Date of publication)
AY: 2012-13
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CITATION:
'On Money': The fact that the assessee has sold flats at an undervaluation does not mean that he has understated the consideration and earned undisclosed 'on money'. The mere presumption that excess price could have been charged is not a ground for coming to the conclusion that the assessee did charge a higher price. The burden of proving such understatement or concealment is on the Revenue (All important judgements considered)

The case law relied by Assessing Officer in ITO Vs Diamond Investment and Properties ITA No. 5537/M/2009 is not applicable on the facts of the present case. In case of Diamond Investment and Properties (supra), the flats were sold to the related parties was much lower than the price charged from the other parties. However, there is no allegation of related parties’ transaction in the present case. The coordinate bench of Tribunal Neelkamal Realtor & Erectors India (P0 Ltd (2013) 38 taxmann.com 195 held that when the assessee offered an explanation for charging lower price in respect of some of flats sold by it and Assessing Officer without controverting such explanation made addition to income of assessee by applying rate of another flat sold by it, Assessing Officer was not justified in his action. Similar view was taken by another bench of Tribunal in ACIT Vs Rustom Soil Sethna

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DATE: February 23, 2018 (Date of pronouncement)
DATE: April 14, 2018 (Date of publication)
AY: 2006-07
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CITATION:
S. 133A: An admission of estimated income made during survey has no evidentiary value and is not binding on the assessee. The income has to be assessed as per the return of income and books of account. Hiralal Maganlal 97 TTJ Mum 377 distinguished. CBDT Circular No. 286/2/2003 (Inv.) II dated 10.03.2003 referred

The Hon’ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. vs State of Kerala & Anr., 91 ITR 18 (SC) recognised the trite law that it was open to the assessee who made the admission to show that it was incorrect. As per the Hon’ble Supreme Court, it was imperative that in such a situation assessee ought to be given a proper opportunity to show the correct state of facts. In fact, in the case before the Hon’ble Supreme Court, assessee was attempting to show that the entries made by it in the account books did not disclose the correct state of facts. The Hon’ble Supreme Court recognised the right of the assessee to do so on the premise that it was open to the assessee who made the admission to show that the same was incorrect. In other words, as per the Hon’ble Supreme Court, the admission made on an anterior date, which was not based on correct state of facts, was not conclusive to hold the issue against the assessee

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DATE: March 9, 2018 (Date of pronouncement)
DATE: March 29, 2018 (Date of publication)
AY: 2006-07
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CITATION:
Entire law on what constitutes a "Sham transaction"/ "Colourable device" explained. The sale of shares in a pvt ltd co by the assessee to a relative (son) in order to book losses so as to set-off the capital gains from on sale of property cannot be rejected as a sham transaction / colourable device if the transaction is within the four corners of law and valid

The transactions being genuine, merely because the assessee has claimed set-off of capital loss against the capital gain earned during the same period, cannot be said to be a colourable device or method adopted by assessee to avoid the tax. The shares were transferred by executing share transfer Form and after paying the requisite Stamp duty. The company NTPL also passed a Board Resolution for transfer of those shares. The consideration of share was effected to through banking channel. The fair market value arrived by assessee, as furnished before Commissioner (Appeals). In our view the transactions of sale of share were genuine and transacted at a proper valuation. The lower authority has not disputed the genuinity of transaction. The transactions carried by assessee are valid in law, cannot be treated as non-est merely on the basis of some economic detriment or it may be prejudicial to the interest of revenue

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