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DATE: (Date of pronouncement)
DATE: April 23, 2012 (Date of publication)
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CITATION:

The “transfer pricing guidelines” laid down by the OECD make it clear that barring exceptional cases, the tax administration cannot disregard the actual transaction or substitute other transactions for them and the examination of a controlled transaction should ordinarily be based on the transaction as it has been actually undertaken and structured by the associated enterprises. The guidelines discourage re-structuring of legitimate business transactions except where (i) the economic substance of a transaction differs from its form and (ii) the form and substance of the transaction are the same but arrangements made in relation to the transaction, viewed in their totality, differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner. The OECD guidelines should be taken as a valid input in judging the action of the TPO because, in a different form, they have been recognized in India’s tax jurisprudence. It is well settled that the revenue cannot dictate to the assessee as to how he should conduct his business and it is not for them to tell the assessee as to what expenditure the assessee can incur (Eastern Investment Ltd 20 ITR 1 (SC), Walchand & Co 65 ITR 381 (SC) followed). Even Rule 10B(1)(a) does not authorise disallowance of expenditure on the ground that it was not necessary or prudent for the assessee to have incurred the same

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DATE: (Date of pronouncement)
DATE: April 18, 2012 (Date of publication)
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CITATION:

S.50C applies “where the consideration received or accruing as a result of the transfer by an assessee of a capital asset, being land or building or both, is less than the value adopted or assessed by any authority of a State Government for the purpose of payment of stamp duty …” S. 50C is a deeming provision and extends to only to land or building or both. A deeming provision can be applied only in respect of the situation specifically given and cannot go beyond the explicit mandate of the section. If the capital asset under transfer cannot be described as “land or building or both”, s. 50C will cease to apply. As the assessee had transferred booking rights and received back the booking advance, the booking advance cannot be equated with the capital asset and therefore s. 50C cannot be invoked (Tejinder Singh followed)

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COURT:
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DATE: (Date of pronouncement)
DATE: April 18, 2012 (Date of publication)
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CITATION:

After the Accountant Member passed the order formulating the questions for reference to the Third Member, he became functus officio. The opinion expressed by the Third Member was very much binding on the AM and he was bound to follow the opinion of the Third Member in its true letter and spirit. It was necessary for judicial propriety and discipline that the Member who is in minority must accept as binding opinion of the Third Member. The AM had no power to formulate new questions at the stage of giving effect to the opinion of the majority and his action was not sustainable in law

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COURT:
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COUNSEL:
DATE: (Date of pronouncement)
DATE: April 18, 2012 (Date of publication)
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CITATION:

The assessee’s argument that a “transfer” under a scheme of arrangement u/s 391-394 of the Companies Act is not a “slump sale” for purposes of s. 50B is not acceptable. S. 50B was inserted to supercede decisions which held that a slump sale (i.e. transfer of business as a going concern) was not taxable for want of cost of acquisition. The term ‘slump sale’ is defined in s. 2(42C) to mean the “transfer” of an undertaking as a result of a “sale”. The use of the word ‘transfer’ in s. 2(42C) is significant and any type of “transfer” which is in nature of slump sale i.e. when lump sum consideration is paid without values being assigned to individual assets and liabilities is covered by s. 2(42C) and s. 50B. This is the reasonable, plausible and natural grammatical meaning which has to be given to the definition of ‘slump sale’. It is not correct to construe the word ‘slump sale’ to mean that it applies to ‘sale’ in a narrow sense and as an antithesis to the word ‘transfer’ as used in s. 2(47). The intention of the legislature was to plug in the gap and tax slump sales and not to leave them out of the tax net. The term ‘slump sale’ has been used in the enactment to describe a particular and specific type of transfers called slump sales. The use of the word ‘sale’ in the term ‘slump sale’ does not narrow down the concept of ‘transfer’ as defined and understood in s. 2(47). All transfers in the nature of ‘sales’ i.e. ‘slump sales’ are covered by s. 2 (42C)

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DATE: (Date of pronouncement)
DATE: April 17, 2012 (Date of publication)
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CITATION:

In Bharati Shipyard Ltd the Special Bench held that the amendment to s. 40(a)(ia) by the FA 2010 w.e.f. 1.4.2010 could not be held to be retrospective from AY 2005-2006 on the ground that the amendment was not remedial and curative in nature. However, the Kolkata Bench had taken a contrary view in Virgin Creations vs. ITO and held that amendment by the FA 2010 was retrospective w.e.f. 1.4.2005. The view of the Kolkata Bench has been approved by the Calcutta High Court in CIT vs. Virgin Creations. The question as to whether a verdict of the Special Bench should be followed or that of a non-jurisdictional High Court should be followed is answered in Tej International (P) Ltd 69 TTJ (Del) 650 wherein it was held that in the hierarchical judicial system that we have in India, the wisdom of the court below has to yield to the higher wisdom of the Court above, and therefore, once an authority higher than this Tribunal has expressed its esteemed views on a an issue, normally, the decision of the higher judicial authority is to be followed. It was also held that the fact that the judgment of the higher judicial forum is from a non-jurisdictional High court does not alter this position. Consequently, Virgin Creations is followed and it is held that the amendment to s. 40(a)(ia) is retrospective from 1.4.2005 and any payment of TDS on or before the due date for filing the ROI is sufficient

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COURT:
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DATE: (Date of pronouncement)
DATE: April 17, 2012 (Date of publication)
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CITATION:

In Virgin Creations the Calcutta High Court has passed a reasoned order and held that the amendment to s. 40(a)(ia) is retrospective in nature. The binding nature of the decision of the Special Bench when a lone decision of non-jurisdictional High Court is available on the very same issue was examined in the Third Member decision in Kanel Oil & Export Ltd 121 ITD 596 where it was held that where there is only a judgement of the non-jurisdictional High Court prevails over an order of the Special Bench even though it is from the jurisdictional Bench (of the Tribunal). As the Calcutta High Court’s decision is the lone one on the issue whether s. 40(a)(ia) is retrospective, it has to be followed in preference to the decision of the Special Bench of the Tribunal in Bharti Shipyard Ltd. Consequently, amounts in respect of which TDS is paid on or before the due date of filing the ROI is eligible for deduction

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DATE: (Date of pronouncement)
DATE: April 17, 2012 (Date of publication)
AY:
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CITATION:

There is merit in the contention of the assessee that the requirement of s. 151(2) could have only been fulfilled by the satisfaction of the JCIT that this is a fit case for the issuance of a notice u/s 148. S. 151(2) mandates that the satisfaction has to be of the Joint
Commissioner. That expression has a distinct meaning by virtue of the definition in s. 2(28C). The CIT is not a JCIT within the meaning of s. 2(28C). The Additional Commissioner forwarded the proposal submitted by the AO to the CIT. The approval which has been granted is not by the Addl. CIT but by the CIT. There is no statutory provision under which a power to be exercised by an officer can be exercised by a superior officer. When the statute mandates the satisfaction of a particular functionary for the exercise of a power, the satisfaction must be of that authority. Where a statute requires something to be done in a particular manner, it has to be done in that manner (SPL’s Siddhartha Ltd followed)

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COUNSEL:
DATE: (Date of pronouncement)
DATE: April 17, 2012 (Date of publication)
AY:
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CITATION:

In AY 1999-2000, before expiry of the original time limit of five consecutive assessment years for which deduction was available as per then applicable law, the amended law became applicable and the assessee was accordingly eligible for deduction for the extended period of 10 years, as against 5 years allowed under the preamended law (DSL Software Ltd followed)

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COURT:
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SECTION(S):
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COUNSEL:
DATE: (Date of pronouncement)
DATE: April 17, 2012 (Date of publication)
AY:
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CITATION:

S. 23 (2) confers benefit “Where the property consists of a house or part of a house which (a) is in the occupation of the owner for the purposes of his own residence …“. A Hindu Undivided Family is not a fictional entity. It is nothing but a group of individuals related to each other by blood relations, or in a certain manner. A Hindu Undivided Family can be seen being a family of a group of natural persons. There is no dispute that the said family can reside in the house, which belongs to Hindu Undivided Family. A family cannot consist of artificial persons. U/s. 13 of the General Clauses Act, the words in masculine gender shall be taken to include females and words in singular shall include plural and vice versa. Therefore, the word ‘owner’ would include ‘owners’ and the words ‘his own’ would include ‘their own’. There is nothing, therefore, in the words used in s. 23(2), which excludes application of such provision to HUF, which is a group of individuals related to each other

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COURT:
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COUNSEL:
DATE: (Date of pronouncement)
DATE: April 15, 2012 (Date of publication)
AY:
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CITATION:

S. 153C authorises the AO to exercise jurisdiction over any person in whose case incriminating material has been found during the course of search conducted on another person. S. 153D provides that no order of assessment shall be passed by an AO below the rank of Joint Commissioner except with the prior approval of the Joint Commissioner. The fact that the heading to s. 153D refers to a “prior approval” and that it uses negative wording and the word “shall” makes the intention of the Legislature clear that compliance of s. 153D is mandatory. As the provision is mandatory, an act done in breach thereof will be invalid. Also, as the condition has been imposed in public interest, it cannot be waived by the assessee. Clause 9 of the Manual of Office Procedure also makes it clear that an assessment order under Chapter XIV-B can be passed only with the previous approval of the JCIT and that the approval must be in writing and stated to have been obtained in the body of the assessment order. Accordingly, in the absence of the JCIT’s approval, the AO had no jurisdiction to pass the s. 153C order and it was null and void (Ratnabai Dubhash 230 ITR 495 (Bom) & SPL’s Siddharth followed)

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