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DATE: June 16, 2016 (Date of pronouncement)
DATE: September 8, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 37(1): Expenditure incurred by a director in engaging lawyers to defend himself against cases filed for violation of the law by the Company of which he is a director is not personal expenditure but is allowable as business expenditure

Mr. Nimesh Kampani has been mentioned as one of the accused among several others, for non-payment of these fixed deposits by Nagarjuna Finance Limited. The Andhra Pradesh Government had since filed suit against directors of Nagarjuna Finance Limited including Mr. Kampani. To defend himself, Mr. Kampani has appointed various advocates to represent his case before various courts viz, District Court, High Court of Andhra Pradesh, Supreme Court of India. As the expenditure is incurred to protect his business interest the same is required to be allowed u/s. 37(1) of the Act. Accordingly we direct the A.O. to allow legal expenses of Rs.40,72,750/-

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DATE: May 27, 2016 (Date of pronouncement)
DATE: June 16, 2016 (Date of publication)
AY: 2005-06
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CITATION:
S. 68: Long-term capital gains arising from transfer of penny stocks cannot be treated as bogus merely because SEBI has initiating an inquiry with regard to the Company & the broker if the shares are purchased from the exchange, payment is by cheque and delivery of shares is taken & given

Assessee has made investment in shares which was purchased on the floor of stock exchange and not from M/s Basant Periwal and Co. Against purchases payment has been made by account payee cheque, delivery of shares were taken, contract of sale was also complete as per the Contract Act, therefore, the assessee is not concerned with any way of the broker. Nowhere the AO has alleged that the transaction by the assessee with these particular broker or share was bogus, merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, insofar as assessee is not concerned with the activity of the broker and have no control over the same

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DATE: April 15, 2016 (Date of pronouncement)
DATE: April 22, 2016 (Date of publication)
AY: 2009-10
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CITATION:
S. 40(a)(ia)/ 192: Employees deputed pursuant to a secondment agreement are not "employees" of the assessee and so the amounts paid by way of reimbursement of their salary is not subject to TDS in the assessee's hands

The employees are not the employees of assessee Mahanagar Gas Ltd but employees of British Gas and they are working with assessee only in view of secondment agreement. As per joint venture agreement GAIL and British Gas have agreed to second, therefore, employees to the joint venture company i.e. Mahanagar Gas Ltd. on secondment basis and under secondment agreement certain employees have been seconded to the assessee. Since the employers were seconded for limited time of 2 to 3 years, the remuneration payable to these seconded employees were being paid by British Gas or GAIL recoverable from assessee on cost to cost basis. The nature of secondment agreement make clear the duties of second employees, their liabilities towards assessee and reimbursement of actual cost of remuneration, benefits and disbursement by assessee to the joint venture partners. These are reimbursements. Also the employee’s remuneration was allowable to tax in India then there would be tax deduction obligation on the employer who was responsible for making payment to the employees

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DATE: February 19, 2016 (Date of pronouncement)
DATE: April 13, 2016 (Date of publication)
AY: 2010-11 & 2011-12
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CITATION:
S. 263: As issue of whether TDS should bee u/s 194C or 194H is subject to two views, revision is not possible

In the original assessment proceedings, the AO had analysed the payment in detail and then concluded that the provisions of sec. 194C are applicable. Also, not two but three views were possible viz. (i) TDS u/s 194H which was discussed by the AO in original order; (ii) TDS u/s 194C which was upheld by AO; and (iii) sec. 194A now sought to be taken by CIT. Since three views were possible, revision was not permissible. Furthermore, even on merits, it was held that view of the CIT was not correct because there was no money borrowed or debt incurred, and hence, payment made to NCL was not “income by way of interest”

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DATE: March 30, 2016 (Date of pronouncement)
DATE: April 10, 2016 (Date of publication)
AY: 2007-08
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CITATION:
S. 68: Share application money received from an associate concern cannot be assessed as cash credits if assessee has discharged its initial onus to prove the identity, creditworthiness and genuineness of the transaction

CIT(A) dealt with issue all the objections raised by the AO and after considering the documents placed on record, recorded a categorical finding to the effect that amount payable and receivable by the assessee was squared off which was in accordance with the provisions of Companies Act. Further finding was recorded to the effect that these companies were assessed with I.T. Department for several years. The identity and genuineness of the transaction was duly accepted. The detailed finding recorded by CIT(A) are as per material on record

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DATE: October 30, 2015 (Date of pronouncement)
DATE: April 5, 2016 (Date of publication)
AY: 2002-03
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CITATION:
Income does not accrue if the debtor is in a precarious financial position and recovery is doubtful

Income did not accrue in the hands of the assessee owing to the precarious financial condition of the debtor notwithstanding that: (a) Services were rendered and the income was recorded in the books of account of the assessee during the relevant year & (b) bad debts were claimed in subsequent years when the dispute was settled

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DATE: December 23, 2015 (Date of pronouncement)
DATE: February 6, 2016 (Date of publication)
AY: 2010-11
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CITATION:
S. 37(1): While receiving of gifts by doctors is prohibited by MCI Guidelines, the giving of such gifts by Pharma companies is not prohibited by any law. CBDT Circular dated 01.08.2012 is prospective

Receiving of gifts by doctors was prohibited by MCI guidelines, giving of the same by manufacturer is not prohibited under any law for the time being in force. Giving small gifts bearing company logo to doctors does not tantamount to giving gifts to doctors but it is regarded as advertising expenses. As regards sponsoring doctors for conferences and extending hospitality, pharmaceuticals companies have been sponsoring practicing doctors to attend prestigious conferences so that they gather contemporary knowledge about management of certain illness/disease and learn about newer therapies. We found that the disallowance was made by the AO by relying on the CBDT Circular dated 01.08.2012 onwards. However, the Circular was not applicable because it was introduced w.e.f.01.08.2012. i.e. assessment year 2013-2014, whereas the relevant assessment year under consideration is 2010-2011 and 2011-2012

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DATE: February 18, 2015 (Date of pronouncement)
DATE: November 23, 2015 (Date of publication)
AY: 2008-09
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CITATION:
The object of introduction of Securities Transaction Tax (STT) was to end litigation on the issue of whether profit earned from delivery based sale of shares is capital gains or business profit. Merely because the assessee liquidates its investment within a short span of time, which had given better overall earning to the assessee, would not lead to the conclusion that the assessee had no intention to keep on the funds as investor in equity shares, but was actually intended to trade in shares

The idea behind introduction of security transaction tax is to end the litigation on the issue, whether the profit earned from delivery based sale of shares is capital gains for business profit. Thus, w.e.f. 01.10.2004; on the share transactions subjected to STT; concessional tax rate of 10% (which has been increased to 15% from AY 2009-10) are applicable in respect of STCG whereas no tax is chargeable in respect of LTCG. It is also noted that the CBDT vide its Circular no.4/2007, dated 15.06.2007 has also recognized possibility of two portfolios, i.e. one ‘Investment portfolio’ comprising of securities which are to be treated as capital assets and the other ‘Trading portfolio’ comprising of stock in trade which are to be treated as trading assets. In view of these facts, profit arose on shares in respect of delivery based transaction are liable to be taxed as capital gain and not as business income.

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DATE: June 19, 2015 (Date of pronouncement)
DATE: July 21, 2015 (Date of publication)
AY: 2011-12
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CITATION:
Bogus purchases: Manner of computing profits in the case of bogus purchases by an assessee who is not a dealer in the goods but has consumed the goods in his business explained

As per our considered view, since the purchases so made were not sold by the assessee, the AO was not justified in estimating 15% profit on such bogus purchases. However, such bogus purchases/expenses were going to reduce the assessee’s profits by the equal amount of such expenses and not only by 15% as taken by the AO. It was not a case where purchases so made were actually sold by the assessee. Where assessee is found to have sold the goods out of the bogus purchases, under those circumstances it is reasonable to estimate profit out of such sales so as to make appropriate addition. However, in the instant case the assessee was engaged in the business of hotel wherein the expenditure alleged to be incurred on plumbing, electrical items, furniture, printing and stationary etc appears to have reduced directly the profit earned by assessee

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DATE: July 8, 2015 (Date of pronouncement)
DATE: July 20, 2015 (Date of publication)
AY: 2009-10
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CITATION:
Transfer Pricing: Important principles on benchmarking transactions of advances/ credit period tp AEs reiterated

Since sale price of the product or service was always influenced by the credit period allowed by the seller, the transaction of sale to the AE and credit period allowed in realization of sale proceeds are closely linked and the price determined for such sale is after consideration of the credit period provided by the seller. Further, it was also held that for the purpose of determining the ALP of sale transaction, the transaction of excess credit period provided by the seller to the AE is required to be aggregated with the sale transaction by the seller to the AE and cannot be benchmarked separately

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