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DATE: February 14, 2020 (Date of pronouncement)
DATE: March 14, 2020 (Date of publication)
AY: 2015-16
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CITATION:
S. 10(38) Bogus capital gains from penny stocks: As the detailed explanation of the assessee does not sufficiently discharge the onus on proving the source of impugned deposits, the impugned addition should be restricted to 30% only with a rider that same shall not be treated as a precedent in any other assessment year

It emerges that from a perusal of these case files that although the assessee has produced her documentary evidence before the lower authorities about the impugned sums to be in the nature of income derived from the sales of shares, the fact remains that her detailed explanation tendered in the course of assessment till date does not sufficiently discharg her onus on proving the source of impugned deposits

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DATE: March 5, 2020 (Date of pronouncement)
DATE: March 7, 2020 (Date of publication)
AY: 2008-09
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CITATION:
S. 153C: Compliance with the requirements of s. 153C is mandatory. (i) If the AO of the searched person is different from the AO of the other person, the AO of the searched person is required to transmit the satisfaction note & seized documents to the AO of the other person. He is also required to make a note in the file of the searched person that he has done so. However, the same is for administrative convenience and the failure by the AO of the searched person to make a note in the file of the searched person, will not vitiate the proceedings u/s 153C. (ii) If the AO of the searched person and the other person is the same, it is sufficient for the AO to note in the satisfaction note that the documents seized from the searched person belonged to the other person. Once the note says so, the requirement of s. 153C is fulfilled. In such case, there can be one satisfaction note prepared by the AO, as he himself is the AO of the searched person and also the AO of the other person. However, he must be conscious and satisfied that the documents seized/recovered from the searched person belonged to the other person. In such a situation, the satisfaction note would be qua the other person. The requirement of transmitting the documents so seized from the searched person would not be there as he himself will be the AO of the searched person and the other person and therefore there is no question of transmitting such seized documents to himself

This Court had an occasion to consider the scheme of Section 153C of the Act and the conditions precedent to be fulfilled/complied with before issuing notice under Section 153C of the Act in the case of Calcutta Knitwears (2014) 6 SCC 444 as well as by the Delhi High Court in the case of Pepsi Food Pvt. Ltd (367) ITR 112 (Delhi). As held, before issuing notice under Section 153C of the Act, the Assessing Officer of the searched person must be “satisfied” that, inter alia, any document seized or requisitioned “belongs to” a person other than the searched person. That thereafter, after recording such satisfaction by the Assessing Officer of the searched person, he may transmit the records/documents/things/papers etc. to the Assessing Officer having jurisdiction over such other person. After receipt of the aforesaid satisfaction and upon examination of such other documents relating to such other person, the jurisdictional Assessing Officer may proceed 7 to issue a notice for the purpose of completion of the assessment under Section 158BD of the Act and the other provisions of Chapter XIV-B shall apply.

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DATE: February 19, 2020 (Date of pronouncement)
DATE: March 7, 2020 (Date of publication)
AY: -
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CITATION:
S. 12AA: Registration can be applied for by a newly registered trust. There is no stipulation that the trust should have already been in existence and should have undertaken any activities before making the application for registration. The term ‘activities’ in s. 12AA includes ‘proposed activities’. The CIT must consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. However, he cannot refuse registration on the ground that no activities are carried out

Since section 12AA pertains to the registration of the Trust and not to assess of what a trust has actually done, we are of the view that the term ‘activities’ in the provision includes ‘proposed activities’. That is to say, a Commissioner is bound to consider whether the objects of the Trust are genuinely charitable in nature and whether the activities which the Trust proposed to carry on are genuine in the sense that they are in line with the objects of the Trust. In contrast, the position would be different where the Commissioner proposes to cancel the registration of a Trust under sub-section (3) of section 12AA of the Act. There the Commissioner would be bound to record the finding that an activity or activities actually carried on by the Trust are not genuine being not in accordance with the objects of the Trust. Similarly, the situation would be different where the trust has before applying for registration found to have undertaken activities contrary to the objects of the Trust.

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DATE: March 5, 2020 (Date of pronouncement)
DATE: March 7, 2020 (Date of publication)
AY: 2002-03
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CITATION:
S. 80-IA(4): As per s. 575 of the Companies Act, the conversion of a partnership firm into a company under Part IX causes a statutory vesting of all assets of the firm into the company without the need for a conveyance. The business of the firm is carried on by the company and the latter is eligible for the benefits of s. 80-IA.

It is manifest that all properties, movable and immovable (including actionable claims) belonging to or vested in a company at the date of its registration would vest in the company as incorporated under the Act. In other words, the property acquired by a promoter can be claimed by the company after its incorporation without any need for conveyance on account of statutory vesting. On such statutory vesting, all the properties of the firm, in law, vest in the company and the firm is succeeded by the company. The firm ceases to exist and assumes the status of a company after its registration as a company. A priori, it must follow that the business is carried on by the enterprise owned by a company registered in India and the agreement entered into between the erstwhile partnership firm and the State Government, by legal implication, assumes the character of an agreement between the company registered in India and the State Government for (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating a new infrastructure facility.

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DATE: January 14, 2020 (Date of pronouncement)
DATE: March 7, 2020 (Date of publication)
AY: 2014-15
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CITATION:
S. 90(3): The law laid down in PVAL Kulandagan Chettiar 267 ITR 654 (SC) that once an income of an Indian assessee is taxable in the treaty partner source jurisdiction under a treaty provision, the same cannot be included in its total income taxable in India as well i.e. the residence jurisdiction, is no longer good law in view of s. 90(3) inserted w.e.f. 01.04.2004 read with Notification no. 91 of 2008 dated 28.08.2008. The substitution of s. 90 w.e.f. 01.10.2009 does not affect the validity of the said Notification. The mere amendment or substitution of a section does not affect the validity of notifications, circulars and instructions issued therein (all imp judgements referred).

The effect of Hon’ble Supreme Court’s judgment in PVAL Kulandagan Chettiar 267 ITR 654 (SC) thus was clearly overruled by the legislative developments. It was specifically legislated that the mere fact of taxability in the treaty partner jurisdiction will not take it out of the ambit of taxable income of an assessee in India and that “such income shall be included in his total income chargeable to tax in India in accordance with the provisions of the Income-tax Act, 1961 (43 of 1961), and relief shall be granted in accordance with the method for elimination or avoidance of double taxation provided in such agreement”.

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DATE: February 28, 2020 (Date of pronouncement)
DATE: March 7, 2020 (Date of publication)
AY: 2007-08
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S. 92A(2): The law in Diageo India Pvt Ltd 47 SOT 252 that the definition of "Associated Enterprises" in section 92A(1)(a) & (b) is the basic rule which is unaffected by the specific instances referred to in s. 92A(2) is not good law in view of the amendment by the FA 2002 and CBDT Circular No. 8 dated 27.08.2008. The correct law as held in Veer Gems 95 taxmann.16 (Guj) is that S. 92A(2) restricts the scope of S. 92A(1) and it is only when the criterion specified in sub section (2) is satisfied, two enterprises can be treated as associated enterprises. Judgements of non jurisdictional High Courts are binding on the Tribunal

Section 92A(2) governs the operation of Section 92A(1) by controlling the definition of participation in management or capital or control by one of the enterprise in the other enterprise. If a form of participation in management, capital or control is not recognized by Section 92A(2), even if it ends up in de facto or even de jure participation in management, capital or control by one of the enterprise in the other enterprise, it does not result in the related enterprises being treated as ‘associated enterprises’. Section 92A(1) and (2), in that sense, are required to be read together, even though Section 92A(2) does provide several deeming fictions which prima facie stretch the basic rule in Section 92A(1) quite considerably on the basis of, what appears to be, manner of participation in “control” of the other enterprise. What is thus clear that as long as the provisions of one of the clauses in Section 92A(2) are not satisfied, even if an enterprise has a de facto participation capital, management or control over the other enterprises, the two enterprises cannot be said to be associated enterprises

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DATE: February 14, 2020 (Date of pronouncement)
DATE: February 24, 2020 (Date of publication)
AY: 2008-09
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CITATION:
S. 68 Bogus Cash Credits: The expression “any previous year” does not mean all previous years but the previous year in relation to the assessment year concerned. If the cash credits are credited in the FY 2006-07, it cannot be brought to tax in a later AY.

The crucial phrase in Section 68 of the IT Act, which provides that the sum so credited in the books and which is not sufficiently explained, may be charged to the income tax as income of the assessee of “that previous year” also lends support to the contentions of Dr. Daniel

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DATE: January 8, 2020 (Date of pronouncement)
DATE: February 24, 2020 (Date of publication)
AY: -
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S. 11/ 12AA: The only requirement for granting registration is that the objects of the society should be charitable in nature and activities are genuine (i) A trust may be of a public charitable nature even if the control of the trust property is not vested in the public but is retained by the settlors, (ii) Registration u/s 12A cannot be declined on the ground that the Trust Deed does not contain "dissolution clause". This is totally irrelevant & beyond the scope of enquiry contemplated u/s 12A. of the Act, (iii) Registration cannot be refused for non furnishing of registration with the Registrar of Societies. Registration with the Registrar of Societies is not a precondition for granting registration u/s 12A.

In the instant case, the Ld. CIT(E) denied the registration by observing that the head of the society is restricted to be from Shree Dhar Vansh and no other member of the Sabha will have any right to raise any objection. In my opinion that cannot also be a ground to refuse the registration when the object of the assessee society are charitable in nature. On a similar issue the Hon’ble Kolkata High Court in the case of Smt. Ganesh Devi Rami Devi Charity Trust Vs. CIT reported at 71 ITR 696 held as under: ” (i) a trust may be of a public charitable nature even if the control of the trust property was not vested in the public but was retained by the settlers

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DATE: February 13, 2020 (Date of pronouncement)
DATE: February 22, 2020 (Date of publication)
AY: 2012-13
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S. 147 Reopening for Bogus Share Capital u/s 68: The parent co does not have sufficient funds to invest such huge amounts in Indian subsidiaries. The funds are routed through a web of entities spread across various jurisdictions, mostly in tax havens. The investments so made, are required to be investigated and the credit worthiness of the investing company is in jeopardy, in view of the information received from the investigation wing. This exercise can be undertaken during the re-reassessment proceedings to finally determine if the amounts represent undisclosed income of the assessee which is required to be taxed in its hands. At the stage of re-opening, only a reason to believe should exist with regard to escapement of income. Definite conclusion would be drawn after raising queries upon the assessee in the light of s. 68 of the Act (All imp verdicts referred)

Whilst it is the settled position in law that the sanctioning authority is required to apply his mind and the grant of approval must not be made in a mechanical manner, however, as noted by the Division Bench of the Calcutta High Court in Prem Chand Shaw (Jaiswal) v Assistant Commissioner, Circle-38, Kolkata [2016] 67 taxmann.com 339 (Calcutta), the mere fact that the sanctioning authority did not record his satisfaction in so many words would not render invalid the sanction granted under section 151(2) when the reasons on the basis on the basis of which sanction was sought could not be assailed and even an appellate authority is not required to give reasons when it agrees with the finding unless statute or rules so requires

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DATE: January 31, 2020 (Date of pronouncement)
DATE: February 22, 2020 (Date of publication)
AY: 1999-00
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CITATION:
S. 254(2): The Writ Petition to challenge the ITAT's order dismissing the MA does not appear to be bonafide. In the garb of the MA, the Petitioner sought review of the final order passed by the Tribunal and for rehearing of the appeal which is not permissible in law. Costs of Rs. 10,000 imposed on the Petitioner

In the instant case, what we notice is that not only was there no mistake apparent from the record but in the garb of the Misc. Application, petitioner had sought for review of the final order passed by the Tribunal and for rehearing of the appeal which is not permissible in law. In our view, Writ Petition does not appear to be bonafide

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