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DATE: (Date of pronouncement)
DATE: July 9, 2013 (Date of publication)
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CITATION:

A study of the partnership deed shows that Deloitte Haskins & Sells, Mumbai, which is the participating firm, is not a stranger to the assessee. The assessee can take policy decisions, which have a policy bearing on such firm, once there is an approval of the majority of the members of the “National Firm”. Mukund Dharmadhikari was representing Deloitte Haskins & Sells, Mumbai, and the endeavour of the assessee was to bring on board the participating firm, on which it had powers to make policy decision, so that they became entitled for a share of profit. In other words, the effort of the assessee was to bring indirectly into the partnership M/s Deloitte Haskins & Sells, Mumbai, which was already a participating firm. The assessee was a renowned partnership firm and was well aware that number of partners cannot exceed 20. It is a well settled principle of law that what is permissible is tax planning, but not evasion. When an attempt is made by a concern to evade tax using subtle camouflages, bounden duty of the authorities is to find out the real intention. It is the duty of the Court in every case, where ingenuity is expended to avoid taxing and welfare legislations, to get behind the smoke screen and discover the true state of affairs. The Court has to go into substance and not to be satisfied with the form. Though in Rashik Lal 229 ITR 458 (SC) & Bagyalakshmi 55 ITR 660 (SC) it was held that a partner may be a trustee or may enter into a sub-partnership with others, or can be a representative of a group of persons and that qua the partnership, he functions in his personal capacity, these decisions will not apply since the assessee was indirectly trying to bring in M/s Deloitte Haskins & Sells, Mumbai, another firm, which was already a participating firm, as its partner, circumventing the limit of maximum 20 members. The AO did not apply his mind and go into these aspects and so the CIT was justified in directing him to look into the issue.

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DATE: (Date of pronouncement)
DATE: July 8, 2013 (Date of publication)
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CITATION:

As the assessee had disclosed all details in the return of income, at the highest it can be said that the claim of the assessee was not sustainable in law. But as there was no furnishing of inaccurate particulars or concealment of income on the part of the assessee. penalty u/s 271(1)(c) could not be levied (Reliance Petroproducts 322 ITR 158 (SC) referred)

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DATE: (Date of pronouncement)
DATE: July 3, 2013 (Date of publication)
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CITATION:

The only interim relief which is prayed for is for stay of the operation of the impugned order of the CAT. As the Petitioner did not challenge the order dated 5.5.2012 and as on 31.8.2012 Shri. H. L. Karwa took over the charge of the post of the President and continues to hold the charge of the post till today and as the appointment of Shri. Veerabhadrappa was purely adhoc, it is not a fit case to grant interim relief. Prayer for interim relief is rejected.

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DATE: (Date of pronouncement)
DATE: June 24, 2013 (Date of publication)
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CITATION:

Rule 8D(2)(ii) is a computation provided in respect of expenditure incurred by way of interest which is not directly attributable to any particular income or receipt. This clearly means that interest expenditure which is directly relatable to any particular income or receipt is not to be considered under rule 8D(2)(ii). The AO has to show that the interest is not directly attributable to any particular income or receipt. In the assessee’s case, the interest has been paid on loans taken from banks for business purpose. There is no allegation that the loan funds have been diverted for making investment in shares or for non-business purposes. The loans are for specific business purposes and no bank would permit the loan given for one purpose to be used for making any investment in shares. Also, the assessee has substantial capital & reserves. Accordingly, the interest on the loans cannot be included in Rule 8D(2)(ii)

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DATE: (Date of pronouncement)
DATE: June 19, 2013 (Date of publication)
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CITATION:

Though BFSL was a shell company with no asset other than the land and by buying the shares of BFSL, DLF in effect purchased the land, the transaction cannot be said to a sham or an unreal one. In coming to the conclusion that the transaction is a colourable devise, the authorities have been carried away by the fact that the assessee was able to avoid payment of income tax. The assessee did resort to tax planning and took advantage of the law/ loopholes in the law. After seeing how the loophole was exploited within the four corners of the law, it is open to Parliament to amend the law plugging the loophole. However it cannot be done by judicial interpretation. S. 10(38) of the Act is unambiguous. If the share holder chooses to transfer the lands through a transfer of the shares of the company owning the land, it would be a valid legal transaction in law and cannot be said to be a colourable devise or a sham merely because tax is avoided thereby (McDowell 154 ITR 148 (SC), Azadi Bachao Andolan 263 ITR 706 (SC) & Vodafone International 341 ITR 1 (SC) referred)

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DATE: (Date of pronouncement)
DATE: June 17, 2013 (Date of publication)
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CITATION:

While it is true that a fiscal statute has to be construed strictly and nothing should be added to or subtracted from it, yet a strict construction of a provision does not rule out the application of the principles of reasonable construction to give effect to the purpose and intention of any particular provision of the Act. From a bare reading of s. 36(1)(v), it is manifest that the real intention behind the provision is that the employer should not have any control over the funds of the irrevocable trust created exclusively for the benefit of the employees. On facts, it is evident that the assessee had absolutely no control over the fund created by the LIC for the benefit of the employees of the assessee and further all the contribution made by the
assessee in the said fund ultimately came back to the Textool Employees Gratuity Fund, approved by the CIT. Thus, the conditions stipulated in s. 36(1)(v) were satisfied

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DATE: (Date of pronouncement)
DATE: June 17, 2013 (Date of publication)
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CITATION:

Firstly, it is the settled position of law that every tax exemption should have a sunset clause. As the exemption in s. 115JB(6) & 115-O(6) did not have a sunset clause, the flaw is removed by the impugned amendment. Secondly, the exemption created an inequality between SEZ companies and other companies which is now removed. Thirdly, the exemptions provided to SEZ companies resulted in erosion of tax base. Fourthly, the impugned amendment relates to fiscal policy of the state and any decision in the economic sphere is adhoc and experimental in its nature and the Government is well within it sovereign power to regulate the same. Lastly, the impugned amendments do not transgress any of the fundamental rights of the petitioners guaranteed under the Constitution. The legislature can never be precluded from exercising its legislative power by resort to the Doctrine of Promissory Estoppel. Since it is an equitable doctrine, it must yield when equity so requires. The courts would decline to enforce this doctrine if it results in great hardship to government and would be prejudicial to the public interest

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DATE: (Date of pronouncement)
DATE: June 13, 2013 (Date of publication)
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CITATION:

U/s 9(1)(i) income accruing or arising from any “business connection” in India is deemed to accrue or arise in India. The expression “business connection” is defined in Explanation 2 to s. 9 to include any business activities carried out by a person who is habitually acting on behalf of the non-resident in India. However, this does not include an authority to conclude contracts on behalf of the non-resident if the activities are limited to the purchase of the goods or merchandise for the non-resident. Under Explanation 1(b) to s. 9(1)(e) a non-resident is not liable to tax in India on any income attributable to operations confined to purchase of goods in India for export, even if the non-resident has an office or agency in India for that purpose and the goods are subjected by him to any manufacturing process before being exported from India. The result is that no income is deemed to accrue or arise in India to a non-resident, whether directly or indirectly through or from any “business connection“, if the activities are confined for the purpose of export

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DATE: (Date of pronouncement)
DATE: June 13, 2013 (Date of publication)
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CITATION:

On examining the terms and conditions, invoices, purchase orders and challans indicating payment of excise duty, there is no material on record to indicate that the transaction in question is a “contract for carrying out works“. Hence, s. 194C is not attracted. S. 194C has been amended by the Finance (No.2) Act, 2009, w.e.f. 1.10.2009 to provide that “work” includes manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer. It is clarified that the definition of the word “work” will not include manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person other than such customer

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DATE: (Date of pronouncement)
DATE: June 11, 2013 (Date of publication)
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CITATION:

It is a shocking to note that as a matter of fact, the said assessment order is no assessment order in the eyes of law. There is not even a whisper with regard to the receipt of donation of Rs. 1.57 crore. It is really not understandable under what circumstances the said assessment order came into existence. The assessment order is bereft of any discussion with regard to the genuineness of the donation given or the creditworthiness of the donor to part with such a huge amount. It is also shocking to note that the CIT passed an order dropping the proceedings for cancellation of registration without assigning any reason. One fails to understand what impelled him to do so. The order being bereft of any reason is no order in the eyes of law and is liable to be ignored being illegal and void. The income tax authorities are required to administer the Act. The right to administer cannot obviously include the right to mal-administer. Thus, we find no words to express anguish as what kind of governance it had been. Failure to give reasons amounts to denial of justice. It is a case where the AO, the Addl. CIT and the CIT have abdicated their duties. The Court in the exercise of supervisory jurisdiction under Articles 226 and 227 of the Constitution of India cannot be a mute spectator. Such actions on the part of the department not only bring disrepute to the department but also encourages the dishonest assessees and promotes the nefarious activities which not only causes loss to revenue but also promotes dishonestly. An honest tax payer feels cheated. Let the matter be examined by the Chief Commissioner of Income-tax and appropriate departmental proceedings may be taken out against the erring officials. A copy of this judgment may also be sent to the Chairman of the CBDT for appropriate action