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DATE: November 29, 2018 (Date of pronouncement)
DATE: December 7, 2018 (Date of publication)
AY: 2014-15
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CITATION:
S. 2(47) Transfer: The reduction of share capital of a company by way of reducing the face value of each share from Rs. 1,000 to Rs. 500 amounts to "extinguishment of rights" and is a "transfer" u/s 2(47) of the Act. The assessee is eligible to claim a capital loss therefrom (Kartikeya V. Sarabhai vs. CIT 228 ITR 163 (SC) & other judgements followed)

Sec. 2(47) which is an inclusive definition, inter alia, provides that relinquishment of an asset or extinguishment of any right there in amounts to a transfer of a capital asset. While, it is no doubt true that the appellant continues to remain a shareholder of the company even with the reduction of a share capital but it is not possible to accept the contention that there has been no extinguishment of any part of his right as a shareholder qua the company. It is not necessary that for a capital gain to arise that there must be a sale of a capital asset. Sale is only one of the modes of transfer envisaged by s. 2(47) of the Act. Relinquishment of the asset or the extinguishment of any right in it, which may not amount to sale, can also be considered as a transfer and any profit or gain which arises from the transfer of a capital asset is liable to be taxed under s. 45 of the Act

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DATE: February 9, 2018 (Date of pronouncement)
DATE: March 3, 2018 (Date of publication)
AY: 2008-09
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S. 68 Bogus Share Capital: Share premium received can be assessed as undisclosed income if (a) directors are allotted shares at par while others are allotted at premium, (b) the high premium is not justified by a valuation report, (c) the high premium is not supported by the financials, (d) based on financials the value of shares is less and no genuine investor would invest at the premium, (e) there are discrepancies & abnormal features which show transaction as "made up" to camouflage real purpose

The argument of the assessee that the provisions of Sec.56(1)(viib) of the Act does not apply to the case on hand for the year under consideration as it has been introduced by Finance Act, 2012 w.e.f. 1.4.2013 is a misplaced one. From a reading of the order of assessment, it is clear that the Assessing Officer has invoked the provisions of Sec. 68 of the Act. This leads us to the question of whether the provisions of Sec. 68 of the Act can be invoked for the nature of transactions involved in the case, where sums of money are credited in the name of share premium. This question has been addressed by the Hon’ble Calcutta High Court in the case of Pragati Financial Management Pvt. Ltd. Vs. CIT in C.A. 887 & 998 of 2016 and others dt.7.3.2017. In its order (supra) on the issue of whether enquiry under Section 68 of the Act can be carried out for examining the genuineness of the share premium transaction, the Hon’ble High Court held that Sec. 68 of the Act can be invoked to conduct enquiry on the genuineness of share premium transactions

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DATE: April 21, 2017 (Date of pronouncement)
DATE: April 21, 2017 (Date of publication)
AY: 2010-11
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CITATION:
Transfer Pricing: An international transaction can be clubbed / aggregated with other international transactions if such transactions are closely connected with each other. The onus is on the assessee to establish the justification for clubbing the transactions. If the TPO has not applied TNMM at the entity level and has bench marked the royalty payment on standalone basis and not subjected the cost of production or other transactions to bench marking, the contention that when TNMM is applied at the entity level, there was no necessity of separate bench marking in respect of royalty transactions cannot be accepted

The only issue that arises for consideration before us is whether the TPO was justified in making the ALP adjustment in respect of royalty payment made to M/s. Falco Limited in the given facts of the present case. The royalty payment is made to M/s. Falco Limited for manufacturing electronic components by using technology, expertise and knowhow of Falco and marketing and selling components under the brand name of Falco in India as well as abroad by the assessee company. In consideration of same, royalty at the rate of 8% of sales was made by the appellant to M/s. Falco Limited. No doubt the law is settled to the extent that an international transaction can be clubbed / aggregated with other international transactions provided such transactions are closely connected with each other. In the cases cited by the ld. counsel for the appellant, this proposition of law was reiterated. But in the present case, the TPO had not applied TNMM at entity level. The TP study report submitted by the assessee company had been rejected by the TPO. This action of the TPO is confirmed by the Hon’ble DRP. But the TPO proceeded to bench mark the transaction of the royalty payment on stand alone basis. In the process, the cost of production or other transactions are not subjected to bench marking by the TPO. Therefore the contention of the ld. counsel that when the TNMM was applied at the entity level, there was no necessity of separate bench marking in respect of royalty transactions cannot be accepted

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DATE: February 9, 2016 (Date of pronouncement)
DATE: March 30, 2016 (Date of publication)
AY: 2011-12
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CITATION:
S. 115JA/115JB: Capital receipts (such as subsidy & carbon credits), which have no income element, have to be excluded from book profits even if credited to the P&L A/c

The genesis of Sec 115J, thereafter section 115JA and now section 115JB was to ensure that the assessee, while making profit from operations, should not enjoy tax free status due to various deductions available under the Income Tax Act. There was never any intention of the legislature to tax what is not income at all. In a recent decision, the Hon’ble Apex Court in the case of Indo Rama Synthetics (I) Ltd -vs- CIT (2011) 330 ITR 363 (SC) has held that the object of MAT provisions is to bring out the real profit of the companies. The thrust is to find out the real working results of the company. Inclusion of receipt in the computation of MAT would defeat two fundamental principles, it would levy tax on receipt which is not in the nature of income at all and secondly it would not result in arriving at real working results of the company. The real working result can be arrived at only after excluding this receipt which has been credited to P&L a/c and not otherwise

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DATE: January 23, 2015 (Date of pronouncement)
DATE: July 8, 2015 (Date of publication)
AY: 2009-10
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S. 14A & Rule 8D: (i) Investments in subsidiaries & joint ventures are for strategic purposes and not for earning dividend and so the expenditure cannot be disallowed, (ii) If the AO does not deal with the assessee's submissions and merely says "not acceptable" it means he has not recorded proper satisfaction

Investment in subsidiary companies and joint venture companies are long term investment and no decision is required in making the investment or disinvestment on regular basis because these investments are strategic in nature and no direct or indirect expenditure is incurred for maintaining the portfolio on these investments or for holding the same. The department has not disputed that the purpose of investment is not for earning the dividend income but having control and business purpose and consideration

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DATE: June 23, 2015 (Date of pronouncement)
DATE: July 8, 2015 (Date of publication)
AY: 2009-10
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CITATION:
S. 2(47)(v): Even if possession is handed over to the developer, there is no "transfer" if the developer has only paid an interest-free advance to the assessee to meet expenses

The provisions of section 2(47)(v) of the Act can only be invoked where absolute possession of capital asset was given to the buyer against certain consideration, but in the instant case no consideration was ever fixed for handing over the possession to the developer and whatever amount was received it was received as interest free advance to meet the expenses to be incurred in discharging certain responsibilities agreed upon in this agreement. Therefore, from any angle there is no transfer of asset as per provisions of section 2(47) of the Act and capital gain would only be chargeable in the years in which stock-in-trade would be sold

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DATE: June 17, 2015 (Date of pronouncement)
DATE: June 19, 2015 (Date of publication)
AY: 2010-11
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CITATION:
S. 11, 68, 115BBC: Law on taxing of "anonymous donations" received by a charitable trust explained

To be excluded from the definition of expression “anonymous donation” the person receiving the voluntary contributions referred to in section 2(24) (iia) is required to maintain a record of identity indicating the name and address of the contributor and such other particulars as may be prescribed. Since no other particulars have been prescribed under the provisions the person receiving the donation is under obligation to maintain the identity of donors indicating the name and address only

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DATE: March 13, 2015 (Date of pronouncement)
DATE: March 23, 2015 (Date of publication)
AY: 2003-04
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CITATION:
S. 147/ 151: Sanction of CIT instead of JCIT renders reopening void. The error cannot be saved u/s 292BB

Since the approval was not obtained from the competent authority, notice issued under section 148 of the Act is void ab-initio and the assessment framed consequent thereto is not a valid assessment. The error is fatal and cannot be saved under section 292BB

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DATE: January 16, 2015 (Date of pronouncement)
DATE: January 19, 2015 (Date of publication)
AY: 2012-13
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CITATION:
S. 271FA: As DIT is of the same rank as the CIT(A), an appeal against the DIT's order can only be filed before the ITAT even though s. 253(1) does not refer to s. 271FA

Though there is no specific reference of the order passed under section 271FA of the Act by the Director of Income-tax in section 253(1) of the Act for the purpose of filing an appeal against the said order, but an analogy drawn from the reading of section 253(1) of the Act is that the order passed by the Commissioners of Income-tax or an Officer who is equal in rank can only be challenged before the Tribunal, which is higher in rank

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DATE: November 5, 2014 (Date of pronouncement)
DATE: November 11, 2014 (Date of publication)
AY: 2008-09
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CITATION:
S. 50C vs. s. 11: If a charitable institution invests the entire sale consideration in other capital asset, s. 50C should not be invoked

The only issue in the appeal is, therefore, whether while taking the Value of Sale of capital Asset being immoveable property in case of an institution registered u/s 12A whether the provisions of section 11(1A) will prevail or deeming provisions …

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