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DATE: (Date of pronouncement)
DATE: April 1, 2014 (Date of publication)
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S. 158BC/ 158BD: Law on how & when “satisfaction” has to be recorded by AO to attain jurisdiction over non-searched person explained

(ii) The result is that for the purpose of s. 158BD a satisfaction note is sine qua non and must be prepared by the AO before he transmits the records to the other AO who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person u/s 158BC of the Act; (b) along with the assessment proceedings u/s 158BC of the Act; and (c) immediately after the assessment proceedings are completed u/s 158BC of the Act of the searched person

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DATE: (Date of pronouncement)
DATE: March 26, 2014 (Date of publication)
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Strictures passed regarding poor quality of orders of the ITAT. Government urged to ensure that only competent persons are appointed Members of the ITAT

We also notice that the members of the Tribunal have developed an unhealthy habit of quoting totally unrelated judgments which are not applicable at all to the facts of the case, to pass orders not otherwise sustainable on facts or in law. We strongly deprecate such a tendency on the part of the members of the Tribunal, which is quite naturally a professional Tribunal comprised of expert members, one member from the Revenue side and another member from the accounting side, with considerable experience in their respective fields and to whom we can attribute expertise. We feel sorry that the confidence posed by the Legislature is not being justified by passing orders that are outcome from the Tribunal now-a-days

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DATE: March 20, 2014 (Date of publication)
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S. 244A: Deductor entitled to interest on refund of excess TDS from date of payment

(ii) Providing for payment of interest in case of refund of amounts paid as tax or deemed tax or advance tax is a method now statutorily adopted by fiscal legislation to ensure that the aforesaid amount of tax which has been duly paid in prescribed time and provisions in that behalf form part of the recovery machinery provided in a taxing Statute. Refund due and payable to the assessee is debt-owed and payable by the Revenue. The Government, there being no express statutory provision for payment of interest on the refund of excess amount/tax collected by the Revenue, cannot shrug off its apparent obligation to reimburse the deductors’ lawful monies with the accrued interest for the period of undue retention of such monies. The State having received the money without right, and having retained and used it, is bound to make the party good, just as an individual would be under like circumstances. The obligation to refund money received and retained without right implies and carries with it the right to interest. Whenever money has been received by a party which ex ae quo et bono ought to be refunded, the right to interest follows, as a matter of course;

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DATE: (Date of pronouncement)
DATE: March 19, 2014 (Date of publication)
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A charitable and religious trust which does not benefit any specific religious community is not hit by s. 13(1)(b) & is eligible to claim exemption u/s 11

On facts, the objects of the assessee are not indicative of a wholly religious purpose but are collectively indicative of both charitable and religious purposes. The fact that the said objects trace their source to the Holy Quran and resolve to abide by the path of godliness shown by Allah would not be sufficient to conclude that the entire purpose and activities of the trust would be purely religious in color. The objects reflect the intent of the trust as observance of the tenets of Islam, but do not restrict the activities of the trust to religious obligations only and for the benefit of the members of the community. In judging whether a certain purpose is of public benefit or not, the Courts must in general apply the standards of customary law and common opinion amongst the community to which the parties interested belong to. Customary law does not restrict the charitable disposition of the intended activities in the objects. Neither the religious tenets nor the objects as expressed limit the service of food on religious occasions only to the members of the specific community. The activity of Nyaz performed by the assessee does not delineate a separate class but extends the benefit of free service of food to public at large irrespective of their religion, caste or sect and thereby qualifies as a charitable purpose which would entail general public utility. Even the establishment of Madarsa or institutions to impart religious education to the masses would qualify as a charitable purpose qualifying under the head of education u/s 2(15). The institutions established to spread religious awareness by means of education though established to promote and further religious thought could not be restricted to religious purposes. The assessee is consequently a public charitable and religious trust eligible for claiming exemption u/s 11

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DATE: (Date of pronouncement)
DATE: March 19, 2014 (Date of publication)
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Transfer Pricing: A transaction (such as a corporate guarantee) which has no bearing on profits, incomes, losses or assets of the enterprise is not an ‘international transaction’ u/s 92B(1) and not subject to transfer pricing

(iii) When an assessee extends assistance to the AE, which does not cost anything to the assessee and particularly for which the assessee could not have realized money by giving it to someone else during the course of its normal business, such an assistance or accommodation does not have any bearing on its profits, income, losses or assets, and, therefore, it is outside the ambit of international transaction u/s 92B (1)

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DATE: (Date of pronouncement)
DATE: March 19, 2014 (Date of publication)
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Transfer Pricing: After TPO determines the AMP expenditure incurred for benefit of AE, balance is deemed to be incurred for assessee’s business & is automatically allowable u/s 37(1)

The avowed object of the TP adjustment on account of AMP expenses is to first find out and attribute the amount spent by the assessee towards promotion of its foreign AE’s brand/logo etc and then make addition for such amount with appropriate mark-up. By this exercise, the total AMP expenses get segregated into two classes, viz., one benefiting the assessee’s business and two, benefiting the foreign AE by way of promotion of the brand. Whereas the first amount is deductible in full subject to the regular provisions, the second amount is added to the total income with suitable mark-up by way of the TP adjustment. Once the total amount of AMP expenses is processed through the provisions of Chapter X of the Act with the aim of making TP adjustment towards AMP expenses incurred for the foreign AE, or in other words such expenses as are not incurred for the assessee’s business, there can be no scope for again reverting to s. 37(1) qua such amount to make addition by considering the same expenditure as having not been incurred `wholly and exclusively’ for the purposes of assessee’s business. If the amount of AMP expenses is disallowed by processing under both the sections, that is 37 and 92, it will result in double addition to the extent of the original amount incurred for the promotion of the brand of the foreign AE de hors the mark-up

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DATE: March 11, 2014 (Date of pronouncement)
DATE: March 19, 2014 (Date of publication)
AY: 2008-09
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ITAT hauls up AO & DRP for “blatantly frivolous & unsustainable” additions. Suggests that accountability mechanism be set up to put a check on AO. Rationale for existence of ineffective DRP questioned


ITAT hauls up AO & DRP for “blatantly frivolous & unsustainable” additions. Suggests that accountability mechanism be set up to put a check on AO. Rationale for existence of ineffective DRP questioned

if an action of the AO is so blatantly unreasonable that such seasoned senior officers well versed with functioning of judicial forums, as the learned DRs are, cannot even go through the convincing motions of defending the same before us, such unreasonable conduct of the AO deserves to be scrutinized seriously. At a time when evolving societal pressures demand greater degree of accountability in the governance also, it does no good to the judicial institutions to watch such situations as helpless spectators. If it is indeed a case of frivolous addition, someone should be accountable for the resultant undue hardship to the taxpayer

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DATE: (Date of pronouncement)
DATE: March 18, 2014 (Date of publication)
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S. 220: After rejecting stay application AO must give reasonable time before taking steps for coercive recovery

Having said that this is a case in which technically no fault could be found with the assessing officer, we feel that there was there was an element of impropriety in his action in issuing the garnishee order under section 226(3) on 17.2.2014, the very day on which he rejected the stay application filed by the petitioner under section 220(3). It is expected of him, having rejected the stay application, to wait for a reasonable period before he takes coercive steps to recover the amounts since the petitioner, faced with an order rejecting the stay application, may need some time to make arrangements to pay the entire tax demand or come up with proposals for paying the same in instalments. That opportunity was not afforded by the assessing officer in the present cases. The assessing officer is a prospector of the revenue and he is no doubt expected to protect the interests of the revenue zealously, but such zeal has to be tempered with the rules of fair play and an anxiety to ensure that a opportunity is not lost to the assessee to make alternative arrangements for clearing the tax dues, once the stay applications filed under section 220(3) are rejected. Taking away the amount of Rs.43.87 crores from the bank account of the petitioner may perhaps not be legally faulted, but taking into account the haste with which the assessing officer acted in the present case it seems to us that there was an element of arbitrariness in the action of the assessing officer. In our opinion, since the stay applications filed by the petitioners are pending before the Tribunal, the more appropriate course would be to issue the following directions

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DATE: (Date of pronouncement)
DATE: March 18, 2014 (Date of publication)
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S. 147: Court can examine existence but not adequacy of reasons. AO is only required to provide material on which he relies to reopen the assessment

(ii) The law only requires that the information or material on which the AO records his or her satisfaction is communicated to the asseseee, without mandating the disclosure of any specific document. While the 2G Spectrum Report has not been supplied in this case on grounds of confidentiality, the reasons recorded have been communicated and do provide – independent of the 2G Report – details of the new and tangible information that support the AO’s opinion. These facts are capable of justifying the satisfaction recorded on their own terms, as discussed above. In this context, there is no legal proposition that mandates the disclosure of any additional document. This is not the say that the AO may in all cases refuse to disclose documents relied upon by him on account of confidentiality, but rather, that fact must be judged on the basis of whether other tangible and specific information is available so as to justify the conclusion irrespective of the contents of the document sought to be kept confidential.

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DATE: (Date of pronouncement)
DATE: March 18, 2014 (Date of publication)
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S. 142(2A): AO need not examine books of account before directing special audit. Q whether accounts are “complex” has to decided by AO & Court can interfere sparingly

(ii) The question whether the accounts and the related documents and records available with the A.O. present complexity is essentially to be decided by the A.O. and in this area the power of the court to intrude should necessarily be used sparingly. It is the A.O. who has to complete the assessment. It is he who has to understand and appreciate the accounts. If he finds that the accounts are complex, the court normally will not interfere under Article 226. The power of the court to control the discretion of the A.O. in this field is limited only to examine whether his discretion to refer the accounts for special audit was exercised objectively

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