{"id":13438,"date":"2016-04-19T14:09:00","date_gmt":"2016-04-19T08:39:00","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?page_id=13438"},"modified":"2016-04-19T14:10:53","modified_gmt":"2016-04-19T08:40:53","slug":"digest-of-important-case-laws-jan-december-2015","status":"publish","type":"page","link":"https:\/\/itatonline.org\/archives\/digest-of-important-case-laws-jan-december-2015\/","title":{"rendered":"Digest Of Important Case Laws: Jan &#8211; December 2015"},"content":{"rendered":"<div class=\"clock\">\n<table width=\"100%\" border=\"0\">\n<tr>\n<td><strong>Digest of important case law &#8211; Jan &#8211; December 2015 (Compiled by KSA Legal &#038; AIFTP)<\/strong><\/td>\n<\/tr>\n<tr>\n<td valign=\"top\">\n<script type=\"text\/javascript\"><!--\ngoogle_ad_client = \"ca-pub-6440093791992877\";\n\/* DLCenter_336x280 *\/\ngoogle_ad_slot = \"7705834990\";\ngoogle_ad_width = 336;\ngoogle_ad_height = 280;\n\/\/-->\n<\/script><br \/>\n<script type=\"text\/javascript\"\nsrc=\"http:\/\/pagead2.googlesyndication.com\/pagead\/show_ads.js\">\n<\/script>     <\/td>\n<\/tr>\n<tr>\n<td>\n<div class=\"journal2\"><a href=\"http:\/\/itatonline.org\/archives\/digest-of-important-case-laws-jan-december-2015\/consolidated-digest-case-laws-jan-dec-2015\/\" rel=\"attachment wp-att-13439\"\">Download <strong>Consolidated Digest<\/strong> (Jan 2015 to December 2015) in pdf format<\/a>\n<\/div>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<div class=\"journal2\"><a href=\"http:\/\/www.itatonline.org\/articles_new\/?dl_id=65\">Download Digest Of Important Judgements On <strong>Transfer Pricing, International Tax And Domestic Tax<\/strong> (Aug to Oct 2015) in pdf format <\/a><\/div>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<div class=\"journal2\"><a href=\"http:\/\/itatonline.org\/archives\/?dl_id=1371\" target=\"_blank\">Download <strong>Consolidated Digest<\/strong> (Jan 2014 to December 2014) in pdf format<\/a><\/a> <\/div>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<div class=\"journal2\"><a href=\"http:\/\/itatonline.org\/archives\/?dl_id=1357\" target=\"_blank\">Download <strong>Consolidated Digest<\/strong> (Jan 2013 to December 2013) in pdf format<\/a><\/div>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<div class=\"journal2\"><a href=\"http:\/\/itatonline.org\/archives\/?dl_id=1087\" target=\"_blank\">Download <strong>Consolidated Digest<\/strong> (Jan 2012 to December 2012) in pdf format<\/a> <\/div>\n<\/td>\n<\/tr>\n<tr>\n<td>\n<div class=\"journal2\"><a href=\"http:\/\/itatonline.org\/archives\/digest-of-important-case-laws-jan-september-2015\/\">Looking for the Previous Month&#8217;s digest? Click here.<\/a><\/div>\n<\/td>\n<\/tr>\n<\/table>\n<\/div>\n<p><script type=\"text\/javascript\"><!--\ngoogle_ad_client = \"ca-pub-6440093791992877\";\n\/* DLCenter_336x280 *\/\ngoogle_ad_slot = \"7705834990\";\ngoogle_ad_width = 336;\ngoogle_ad_height = 280;\n\/\/-->\n<\/script><br \/>\n<script type=\"text\/javascript\"\nsrc=\"http:\/\/pagead2.googlesyndication.com\/pagead\/show_ads.js\">\n<\/script>   <\/p>\n<div class=\"journal\">\n<p><strong>Journals Referred <\/strong>: BCAJ, CTR, DTR, ITD, ITR, ITR (Trib),  Income Tax Review, SOT, Taxman, Taxation, TLR, TTJ, BCAJ, ACAJ,  www.itatonline.org\n <\/div>\n<div>\n<div style='float:left; margin-top:5px ; margin-left:5px ; margin-right:10px ; margin-bottom:5px ;'>\n<\/div>\n<p><strong>S. 1 : Application of the Act-After extension of Income-tax Act,  1961 to State of Sikkim with effect from 1-4-1990, Sikkim State Income-tax  Manual, 1948, stands repealed and assessments made there under for assessment  years 1997-98 to 2005-06 were without authority of law, nonest and nullity.<\/strong><strong> <\/strong><br \/>\n  The assessee  university was established in the year 1995 by an enactment of the Sikkim State  Government. On 7-7-2006, the AO  passed an assessment order under the Sikkim State Income-tax  Manual, 1948,for the assessment years 1997-98 to 2005-06. The assessee filed an  appeal before the Special Commissioner for cancellation of the assessment  order, claimed refund of the <em>ad hoc<\/em> payment with interest and also  claimed exemption u\/s.17 of the Sikkim State Income-tax  Manual, 1948. The Special Commissioner upheld the order of AO.<br \/>\n  On a Writ  Petition by the assessee, the High Court observed that the Sikkim State Income-tax  Manual, 1948, stood repealed after extension of the Income-tax Act, 1961, in  the State of Sikkim with effect from 1-4-1990. It further observed that the  assessee was claiming its rights as an assessee under the Income-tax Act, 1961.  The High Court held that after extension of the Income-tax Act, 1961 to the  State of Sikkim, the Sikkim State Income-tax Manual, 1948, stands repealed and  the assessments made thereunder are without authority of law, non est and  nullity.(W.P. (C ) No. 30 of&nbsp; 2013 dt.  18-11-2014) (AYs. 1997-1998 to 2005-2006).<br \/>\n  <strong>Sikkim<\/strong><strong> <\/strong><strong>Manipal<\/strong><strong> <\/strong><strong>University<\/strong><strong> v. State of <\/strong><strong>Sikkim<\/strong><strong>(2015)55 taxmann.com 270 \/ 113 DTR 23 (2015) (<\/strong><strong>Sikkim<\/strong><strong>) (HC)<\/strong> <\/p>\n<p><strong>S. 2(1A) :  Agricultural income &ndash;Growing of mushroom-Within municipal limits- Income from  growing ofsaid mushroom to be treated as non-agricultural income.[S.10(1)]<\/strong><br \/>\n  Assessee claimed growing of mushroom as agricultural income . AO denied  the exemption. On appeal the Tribunal held that there was no land on which  tilling operations etc., was carried out, and same was basic operation for  carrying out agricultural activities, further, entire activity was carried on  in residential area within municipal limits and mushrooms were grown under  controlled conditions, since assessee had failed to explain basic agricultural  operations carried out in mushroom production, income from growing of said  mushroom to be treated as non-agricultural income. (ITA Nos. 377 &amp; 389 (Chd.) of 2012 dt. 28 -10 &#8211; 2014) (AY. 2003 -04  &amp; 200 4-05)<br \/>\n  <strong>Chander Mohan .v. ITO (2014) <\/strong><strong>52 taxmann.com 203 \/ (2015) 67 SOT  28 (Chd.)(Trib.)<\/strong><\/p>\n<p><strong>S. 2(15): Charitable  purpose-If the definition of &quot;charitable purpose&quot; is construed  literally, it is violative of the principles of equality &amp;  unconstitutional. Merely charging of fee does not destroy the character of a  charitable institution.[S.10(23C)(iv), Constitution of <\/strong><strong>India<\/strong><strong>, Art 14]]<\/strong><br \/>\n  The DGIT  (E) passed an order stating that though the assessee is engaged in &ldquo;the  advancement of any other object of general public utility&rdquo; as per s. 2(15) of  the Act, its object could not be regarded as &ldquo;charitable purposes&rdquo; due to the  new proviso to s. 2(15) and that it was not eligible for exemption u\/s  10(23C)(iv). It was held that as the assessee had huge surpluses in banks, it  had given its space for rent during Trade Fairs and Exhibitions, it had  received income by way of sale of tickets and income from food and beverage  outlets in PragatiMaidan, etc, the assessee was rendering service to a large  number of traders and industrialists in relation to trade, commerce and  business and was, therefore, hit by the expanded list of activities contained  in the proviso to Section 2(15). It was further observed that the service of  allotting space and other amenities like water, electricity and security, etc.  to the traders to conduct their exhibitions fell within the ambit of any  activity of rendering any service in relation to trade, commerce or business.  The assessee filed a writ petition claiming that the First Proviso to s. 2(15),  as amended by the Finance Act, 2008, is arbitrary and unreasonable and  violative of Article 14 of the Constitution of India. HELD by the High Court:<br \/>\n  (i) It is apparent that merely  because a fee or some other consideration is collected or received by an  institution, it would not lose its character of having been established for a  charitable purpose. It is also important to note as to what is the dominant  activity of the institution in question. If the dominant activity of the  institution was not business, trade or commerce, then any such incidental or  ancillary activity would also not fall within the categories of trade, commerce  or business. It is clear from the facts of the present case that the driving  force is not the desire to earn profits but, the object of promoting trade and  commerce not for itself, but for the nation &ndash; both within India and outside India. Clearly, this is a charitable purpose, which has as its motive  the advancement of an object of general public utility to which the exception  carved out in the first proviso to Section 2(15) of the said Act would not  apply;<br \/>\n  (ii) If a literal interpretation  were to be given to the said proviso, then it would risk being hit by Article  14 (the equality clause enshrined in Article 14 of the Constitution). It is  well-settled that the courts should always endeavour to uphold the  Constitutional validity of a provision and, in doing so, the provision in  question may have to be read down;<br \/>\n  (iii) Section 2(15) is only a  definition clause. The expression &ldquo;charitable purpose&rdquo; appearing in Section  2(15) of the said Act has to be seen in the context of Section 10(23C)(iv).  When the expression &ldquo;charitable purpose&rdquo;, as defined in Section 2(15) of the  said Act, is read in the context of Section 10(23C)(iv) of the said Act, we  would have to give up the strict and literal interpretation sought to be given  to the expression &ldquo;charitable purpose&rdquo; by the revenue;<br \/>\n  (iv)&nbsp; The correct interpretation of the  proviso to Section 2(15) of the said Act would be that it carves out an  exception from the charitable purpose of advancement of any other object of  general public utility and that exception is limited to activities in the  nature of trade, commerce or business or any activity of rendering any service  in relation to any trade, commerce or business for a cess or fee or any other  consideration. In both the activities, in the nature of trade, commerce or  business or the activity of rendering any service in relation to any trade,  commerce or business, the dominant and the prime objective has to be seen. If  the dominant and prime objective of the institution, which claims to have been  established for charitable purposes, is profit making, whether its activities  are directly in the nature of trade, commerce or business or indirectly in the  rendering of any service in relation to any trade, commerce or business, then  it would not be entitled to claim its object to be a &lsquo;charitable purpose&rsquo;. On  the flip side, where an institution is not driven primarily by a desire or  motive to earn profits, but to do charity through the advancement of an object  of general public utility, it cannot but be regarded as an institution  established for charitable purposes. (W.P.(C.) No of 1872\/2013, Dt.  22.01.2015.)<br \/>\n  <strong>India<\/strong><strong> Trade Promotion  Organization .v. <\/strong><strong>DGIT<\/strong><strong>(E)(2015) 371 ITR  333 \/ 229 Taxman 347 \/ 274 CTR 305 \/ 114 DTR 329 (<\/strong><strong>Delhi<\/strong><strong>)(HC)<\/strong><\/p>\n<p><strong>S. 2(15) : Charitable purpose &#8211; Activities carried out by a Trust for  providing employment to rural poor cannot be held as commercial activities.  [S.11] &ndash; Activities of Trust is eligible for exemption. <\/strong><br \/>\n  The assessee-trust contemplates to organize milk societies for facilitating  sale of milk; the underlying intention is to get good price for the milk sold  by the villagers and also to encourage them to rear their own milch animals.  The villagers can earn a decent livelihood by engaging themselves in rearing of  milch animals and selling of milk without middlemen and exploitation, through  the societies formed under the guidance of the assessee trust. This is the same  case with other proposed activities like ginning, spinning, fruit processing  etc., where labour of the village women-folk can be fruitfully deployed, to  keep away exploitation. The Hon&rsquo;ble Appellate Tribunal held that the economic  activities in the above nature cannot be treated as activities in the nature of  trade, commerce or business as contemplated in proviso to section 2(15).  Therefore, we find that the Director of Income-tax (Exemptions) has  characterized the activities of the assessee trust as commercial in nature  without going into the circumstances in which the activities are contemplated  to be carried on by the assessee trust. (ITA No. 2104 of 2013 dt.10-11-2014)<br \/>\n  <strong>Thamizh Thai  Seva Trust&nbsp; v.&nbsp; DIT (2015) 67 SOT 166 (URO)\/53 taxmmann.com  215 (Chennai)(Trib.)<\/strong><\/p>\n<p><strong>S.  2(15) : Charitable purpose -Advancement and development of trade, commerce and  industry in <\/strong><strong>India<\/strong><strong>, income earned from incidental activities is  eligible for exemption under section 11.[S.11, 12A] <\/strong><br \/>\n  Assessee Association was set up for the purpose of promotion and  protection of Indian Business &amp; Industry and was registered u\/s 12A. the  purpose for which the assessee association was established is a charitable  purpose within the meaning of section 2(15). The assessee is carrying out  activities which are incidental to the main object of the Association and which  are conducted only for the purpose of securing the main object which is the  advancement and development of trade and commerce and industry in India.  The activities are not in the nature of business and there is no motive to earn  profit. Thus, the incidental activities were well covered by the section 2(15)  and were thus &#8216;charitable&#8217; in nature. In such an eventuality, the application  of the section 11(4A) which applies only to business activities stands  absolutely negated. Thus the income of the assessee is exempt from tax under  section 11..(ITA No 1284 &amp; 1491 dt. 2-12-2014) (AY. 2008-09) <br \/>\n  <strong>Indian Chamber of Commerce v. ITO(E) (2014) 52  taxmann.com 52 \/ (2015) 67 SOT 176(URO) \/ 167 TTJ 1&nbsp; \/ 37 ITR 688 (Kol.)(Trib.)<\/strong><\/p>\n<p><strong>S. 2(15) :&nbsp; Charitable purpose-Receiving fees simplicitor  is not reason enough to hold that the activity is not a charitable activity.  The fundamental essence of the activity has to be seen<\/strong><br \/>\n  The assessee institution is set up  by the Indian Army and it seeks to promote the well being of their personnel  after their retirement from the service, as also of the widows and dependents  of the brave army men who sacrifice their lives, and help them integrate in the  civil society by taking up suitable employment. This is surely an activity of  general public utility, and, therefore, covered by the definition of  &lsquo;charitable purposes&rsquo; under section 2(15). The true test for deciding whether  an activity is business activity is (i) whether the said activity undertaken  with a profit motive, or (ii) whether the said activity has continued on sound  and recognized business principles, and pursued with reasonable continuity.  Clearly, therefore, in a situation in which an activity is not undertaken with  a profit motive or on sound and recognized business principles, such an  activity cannot be considered to be a business activity. ( ITA no. 2996\/Del\/  2011, dt. 22\/01\/2015) <br \/>\n  <strong>Army Welfare Placement Organization .v. DIT(E) (<\/strong><strong>Delhi<\/strong><strong>)(Trib.);  www.itatonline.org<\/strong><\/p>\n<p><strong>S. 2(22)(e)  : <\/strong><strong>Deemed dividend- Not a  shareholder-Not liable to tax.<\/strong><br \/>\n  Assessee was not liable to tax unless it was a  shareholder. (ITA No. 96 of 2013 dt. 30-04-2014)(AY. 2007-08)<br \/>\n  <strong>CIT v.  Karnataka Turned Components (P.) Ltd. (2014) 49  taxmann.com 299 \/ (2015) 229 Taxman 465 (Karn.)(HC)<\/strong><\/p>\n<p><strong>S.  2(22)(e) : Deemed dividend<\/strong> &ndash;<strong> Current account &ndash;Subsidiary company- In the course of business- Deeming  provision is not attracted.<\/strong><br \/>\n  When both  the Assessee Company and its subsidiary company maintain current accounts and  the subsidiary company advances on behalf of Assessee company for the purchase  of raw materials resulting into credit lying with the latter company and as  these transactions were made during the course of business, the deeming  provision u\/s. 2(22)(e) is not attracted.( I.T.A. NO. 238&nbsp; of 2003 dt.  15-10-2014)(AY. 1993-94)<br \/>\n  <strong>CIT  v. India Fruits Ltd. (2015) 274 CTR 67\/ 228 Taxman 243 (Mag)\/ 114 DTR 109 (AP)  (HC)&nbsp; <\/strong><\/p>\n<p><strong>S. 2(22)(e)  : Deemed dividend &ndash;No flow of fund or any benefit-Provision would not be  applicable.<\/strong><br \/>\n  Assessee was director in company SEPL, and partner in firm &#8216;SE&#8217;. One &#8216;M&#8217;,  who was employee of SEPL, was also proprietor of PSC. SEPL gave loan or advance  to PSC on 24-10-2005. On that day itself  PSC gave a loan of said amount to SE which gave back money to SEPL on that day  itself. Tribunal concluded that section 2(22)(e) was not attracted inasmuch as  transaction was a circuitous and money which initially belonged to SEPL was  returned to same company on very same day through PSC and there was no flow of  fund or any benefit from &#8216;SEPL&#8217; to &#8216;SE&#8217; or its partner, assesse. On facts  finding of Tribunal could not be said to be perverse and section 2(22)(e) would  not be applicable. (ITA No. 50 of 2012 dt. 17-06-2014) (AY. 2006-07)<br \/>\n  <strong>CIT v.  Pravin Bhimshi Chheda (2014) 48 taxmann.com 151  \/ (2015) 228 Taxman 340 (Mag.) (Bom.)(HC)<\/strong><\/p>\n<p><strong>S. 2(22)(e)  : Deemed dividend &ndash;Security deposit-Business transaction- Firm was not a&nbsp; shareholder-Deposit could not be treated as  deemed dividend.<\/strong><br \/>\n  Assessee-firm entered into an agreement with its sister concern to supply  its generator sets against a floating security deposit by said concern . In  turn, sister concern would supply electricity to assessee at concessional rate.  AO treated security deposit as deemed dividend in hands of assessee .Since  deposit made by sister concern was a business transaction arising in normal  course of business between two concerns and assesse. Firm was not a shareholder  in said company, said deposit could not be treated as deemed dividend.(ITA No. 223 of 2011 dt. 26-09-2014) (AY. 2006-07)<br \/>\n  <strong>CIT .v. Atul Engineering Udyog (2014) 51 taxmann.com 569 \/ (2015) 228  Taxman 295 (All.)(HC)<\/strong><\/p>\n<p><strong>S. 2(22)(e)  : Deemed dividend-Trade advance-Not a registered or beneficial shareholder- Not  liable to be assessed as deemed dividend <\/strong><br \/>\n  Assessee company received a sum from another company and on same date,  assessee paid certain amount to one &#8216;TR&#8217; who was director of both companies. AO  found that assessee showed received amount as trade advance and amount so paid  to &#8216;TR&#8217; was utilised by him for repayment of housing loan, accordingly AO held  that &#8216;trade advance&#8217; was nothing but loan received from company and he made  addition under section 2(22)(c). On appeal Court held that the&nbsp; assessee company was not a registered or  beneficial shareholder, therefore assessee was not liable to pay tax.)(TCA No. 747 of 2014 dt. 10-11-2014)(AY. 2005-06)<br \/>\n  <strong>CIT .v. Printwave Services (P.) Ltd. (2015) 373 ITR 665\/53 taxmann.com  392 \/ 228 Taxman 378 (Mag.)(<\/strong><strong>Mad.<\/strong><strong>)(HC)<\/strong><\/p>\n<p><strong>S. 2(22)(e)  : Deemed dividend &#8211; Assessee holding more than 10% of equity capital of two  private limited companies &#8211; Lending of money not part of business of companies  nor substantial part of business &#8211; No organised course of activity involving  dealings with anyone else except for assessee &#8211; Loan to assessee-Assessable as  deemed dividend.<\/strong><br \/>\n  The  Legislature has not used the expression &quot;major part of the business&quot;  but has designedly used the expression &quot;substantial part of the business  of the company&quot;. The expression &quot;business&quot; contemplates an  organised course of activity which is actually continued or contemplated to be  continued with a profit motive and not for sport or pleasure. In each case, the  true test is whether the lending of money constituted a substantial part of the  business of the company. Within the purview of the exclusionary provision, the  advance or loan must be, firstly, to a shareholder; secondly, the payment must  be in the ordinary course of business; and, thirdly, the lending of money must  constitute a substantial part of the business of the company. What constitutes  a substantial part of business is a question of fact. <br \/>\n  The assessee  held more than 10% of the shareholding of two private limited companies. He  received loans and advances from the two companies. Held, neither of the  companies, admittedly, lent any money to any entity, save and except to the  assessee. The lending of money was not a part of the business of the company,  nor for that matter, could it constitute a substantial part of the business.  There was no organised course of activity involving dealings with anyone else,  save and except for the assessee. The assessee was, therefore, unable to  establish that the exclusion was attracted.(ITA NO 252\/14 dt 9-12-2014)(AY. 2007-2008) <br \/>\n  <strong>Shashi  Pal Agarwal .v. CIT (2015) 370 ITR 720\/229 Taxman 307 (All.)(HC)<\/strong><\/p>\n<p><strong>S. 2(22)(e):Deemed  dividend-Not a shareholder- Provision&nbsp;  has to be construed strictly. If assessee is not a shareholder of  lending co, S. 2(22)(e) does not apply even if funds are ultimately paid by Co  in which assessee is a shareholder<\/strong><br \/>\n  The assessee received loan from one  NS Fincon Pvt. Ltd. The Revenue seeks to tax this loan as deemed dividend. The  case of the Revenue was that one Lafin Financial Services Pvt. Limited had  advanced money to NS Fincon Pvt. Ltd. who in turn advanced money to the  Assessee. The Assessee a 50% shareholder of Lafin Financial Services Pvt.  Limited and in view thereof, loan advanced by NS Fincon Pvt. Ltd. to the  Assessee is to be treated as a dividend in the hands of the Assessee. It is the  admitted position that the Assesee is not a shareholder in NS Fincon Pvt. Ltd.  The AO brought to tax the amount of loan received by the Asseseefrom NS Fincon  Pvt. Ltd. as deemed dividend under Section 2 (22)(e) of the Act. This was deleted  by the CIT(A) and the Tribunal. On appeal by the department to the High Court  HELD dismissing the appeal:<br \/>\n  The submission on behalf of the  Revenue made before us is that one has to look at the substance of the  transaction and that if one looks at the substance, then the Assessee would be  chargeable to tax. This is not acceptable as fiscal status have to be  interpreted strictly. Section 2 (22)(e) of the Act creates a fiction by  bringing to tax an amount as dividend when the amount so received is otherwise  then dividend. On a strict interpretation of Section 2(22)(e) of the Act,  unless the Assessee is the shareholder of the company lending him money, no  occasion to apply it can arise (AY. 2007-08) ( ITA No. 197 of 2013, 20.01.2015  ) <br \/>\n  <strong>CIT .v. Jignesh P. Shah(2015) 372 ITR 392\/ 274 CTR 198 \/ 229 Taxman 302\/  114 DTR 249 (Bom.)(HC)<\/strong><\/p>\n<p><strong>S. 2(28A) :  Interest&ndash;Usage charges-Liable to deduct tax at source. [S.10(15), 40(a)(i),195]<\/strong><br \/>\n  Assessee company was manufacturing wooden furniture&rsquo;s and trading of  timber. It paid usance charges to non-resident on import purchases. TheAO&nbsp; held that usance charges  paid to the non-resident was the income arising to the non-resident reckoning  within the meaning of provisions of section 5(2)(b), read with section  9(1)(v)(c)(b) and therefore, the assessee was liable to deduct TDS in  accordance with the provisions of section 195. Accordingly, he disallowed same  under section 40(a)(i).<br \/>\n  On appeal, the CIT(A) held that the usance charges paid by the assessee  were nothing but increased purchase price paid to the foreign sellers. Further,  he held that TDS was not deductible on usance charges, as the same was not in  the nature of interest and the recipient was a foreigner, whose income was not  taxable in India at all.<br \/>\n  On appeal by revenue&nbsp; it was contended  that in view of&nbsp; Explanation (2) to  section 10(15)(iv)(c) the usance charge in question was to be considered as  deemed interest. Tribunal held that said  charges would be considered as &#8216;interest&#8217; and liable to TDS. (AY. 2007-08) (ITA No. 374 (Pnj.) of 2013)dt.  28 August,   2014) <br \/>\n  <strong>ACIT<\/strong><strong> .v. Bhavan  Enterprises (2014) 52 taxmann.com 489 \/ (2015) 152 ITD 339 (Panaji)(Trib.)<\/strong><\/p>\n<p><strong>S. 2(29A) :  Long-term capital asset&ndash;Capital gains-Agreement with builder purchase of  undivided share and construction-Date of allotment of undivided share in land  was to be adopted as date of acquisition for computing capital gain instead of  date of sale deed. [S. 2(42A) 45] <\/strong><br \/>\n  The assessee had entered into an agreement dated 22-2-2005 for purchase of undivided share of land as well as for construction of  home by a project promoted by VHPL. Thereafter, the assessee sold the entire  unit by a sale deed dated 10-4-2008 and claimed the difference between the cost  of acquisition and sale consideration as long term capital gains.AO&nbsp; took a view that the undivided share of land  was registered on 4-8-2005 and since the property was purchased in the month of  August, 2005 and sold in April, 2008, the capital gains arising from sale would  be assessed as short term capital gains only and accordingly, denied benefit of  section 2(29A) made addition. Appeal claim&nbsp;  of assessee was allowed. On appeal by revenue the Court held that on the  basis of the admitted facts, the Tribunal placed reliance on&nbsp;Mrs.  Madhu Kaul&nbsp;v.&nbsp;CIT<em>&nbsp;<\/em>[2014] 363 ITR 54  (P&amp; H)(HC) where an identical issue arose as to whether the date of capital  gains should be reckoned from the date of allotment or it should be reckoned  from the date of actual sale, which is subsequent to the date of allotment. In  effect, the High Court held that the allottee gets the title to the property on  issuance of allotment letter and the payment in instalments is only a  consequential act upon which delivery of possession to the property flows. Circular No. 471 dated 15-10-1986<u>&nbsp;<\/u>speaks about the  right of an allottee over a property that has been allotted. The other issues  like payment of balance installments, delivery of possession, which takes place  after the allotment only, relates back to the original allotment, in the  present case, agreement. Therefore, the principle on which long term capital  gains should be determined has been clearly indicated in the circular. Appeal  of revenue was dismissed.&nbsp; (T. C. (A) No.  976 of 2014 dt. 25-11-2014) (AY.2009-10)<br \/>\n  <strong>CIT .v. S.R. Jeyashankar (2015) 373 ITR 120\/ 53 taxmann.com 107 \/ 228  Taxman 289 (<\/strong><strong>Mad.<\/strong><strong>)(HC)<\/strong><\/p>\n<p><strong>S. 2(42B) : Short term capital gain-Capital asset-Right in the agreement  &ndash;Transferred within 36 months-Assessable as short term capital gains .[S.  2(14),2(29B, 45]&nbsp; <\/strong><br \/>\n  Right in the agreement was transferred within 36 months hence  the gain is assessable as short term capital gains. (ITA No.4625\/Mum\/2014,  dt. 19.10.2014)&nbsp;( AY. 2005-2006) <br \/>\n  <strong>Prakash Shantilal Parekh&nbsp;.v.&nbsp;ITO (2015)  37 ITR 119 (Mum.)(Trib.)<\/strong><\/p>\n<p><strong>S. 2(47) : Transfer-Capital  asset- Capital gains- Accrual-Stock in trade-Land ceases to be a capital asset  on date of application for conversion into N. A. land. Pursuant to amendment to  s. 53A of Transfer of Property Act-Non-registered development agreement does  not result in transfer u\/s 2(47)(v) &#8211; Law in ChaturbhujDwarkadasKapadia 260 ITR  461 (Bom.) does not apply after amendment to s. 53A; [S.(2(14) 2(47)( v),(vi),  45, 48, Transfer of Property Act, 1882, S.53A]<\/strong><br \/>\n  (i) The land ceased to be a capital  asset from the date when assessee filed application before the Bangalore  Development Authority for conversion of land from &lsquo;agriculture&rsquo; to  non-agriculture. The intent of the assessee to hold the land as &lsquo;stock in  trade&rsquo; is further established by the fact that in the records of Revenue  Department land was registered as &lsquo;N.A. Land&rsquo; without which no residential  project could be carried thereon. The approval of plans to construct  residential villas by BDA further proves the intention of the appellants to  treat the land as commercial asset. Thus various steps taken by the assessee  are very much part of business activities involved in real estate development.<br \/>\n  (ii) Amendment made in section 53A  in 2001 is also relevant wherein an additional condition for registration of  the written agreement was introduced as a result of which if the agreement  between transferor and transferee is not registered, the transferor can  dispossess the transferee from the property. Simultaneously, a consequential  amendment was also been made in The Registration Act, 1908 to provide that  unless the documents containing contracts to transfer any immoveable property  for the purpose of section 53A of the TOPA is registered, it shall not have  effect for the purposes of section 53A of the TOPA. A perusal of the Section  reveals that registration of document is a sine qua non for applicability of  section 53A of TOPA which entitles the transferee to remain in possession of  the property.<br \/>\n  (iii) In the instant case,  Development Agreement was executed on stamp paper of Rs. 100\/- and the same was  not registered, hence, provisions of section 2(47)(v) of the Act are not  applicable since the conditions stipulated in section 53A of TOPA are  fulfilled.<br \/>\n  (iv) With respect to the decision of  the Bombay High Court in the case of&nbsp;<strong>ChaturbhujDwarkadasKapadiav.CIT  (2003)<\/strong>&nbsp;260 ITR  491(Bom)(HC), we found that the said decision is not applicable because the  said decision was in the context of transfer of capital asset. Although the  said decision was rendered in February 2003 the assessment year under its  consideration was A.Y.1996-97. Further for the purpose of assessment of capital  gains in the said case, all the conditions specified in Section 53A of the TOPA  were satisfied. Hence, the judgment was delivered qua the law prevailing in the  year of the transaction. Accordingly, the Hon&rsquo;ble Bombay High Court has discussed  all the conditions required to be complied under Section 53A of the TOPA, other  than the condition of registration, since the law provided only five conditions  at the time. Thus the case of&nbsp;<strong>ChaturbhujDwarkadasKapadia<\/strong>&nbsp;(supra) is of no help to Revenue to  bring the transaction within the purview of section 53A of TOPA. As provisions  of section 53A was amended in 2001 by which additional condition of  registration of the written agreement was introduced and since in the instant  case the agreement was not registered, the decision rendered by Hon&rsquo;ble Bombay  High Court in the case of&nbsp;<strong>ChaturbhujDwarkadasKapadia(2003)<\/strong>260  ITR 491 with respect to relevant provisions of section 53A applicable in A.Y.  1996-97 will not be applicable to the facts of instant case. We can therefore  safely conclude that the conditions stipulated in section 53A of TOPA are not  satisfied n the case of assessee as discussed above, there is no transfer as  per the provisions of section 2(47) of the Act.( ITA no. 1588\/Mum\/2013, dt.  25.02.2015) ( AY. 2008-09) <br \/>\n  <strong>Fardeen Khan .v. <\/strong><strong>ACIT<\/strong><strong>(2015) 117 DTR 130\/169 TTJ 398<\/strong><br \/>\n  <strong>(Mum.)(Trib.),www.itatonline.org<\/strong><\/p>\n<p><strong>S. 2(47)(v)  : <\/strong><strong>Transfer  &ndash;Development right-Possession of land was given-Capital gains-Held to be  transfer.[S. 45]<\/strong><br \/>\n  Assessee entered into development agreement with builder and developer  for transfer of development rights in respect of land. Developer took  possession of that land and started development work. Said transaction was to  be treated as transfer of right in property covered under section 2(47)(v) .(ITA  No. 336 of 2012 dt. 10-07-2014)<br \/>\n  <strong>Bertha T. Almeida v. ITO (2015) 53 taxmann.com 522 \/  229 Taxman 159 (Bom.)(HC)<\/strong><\/p>\n<p><strong>S. 2(47(v) :  Transfer-Capital gains-Development agreement-Consideration of 50% constructed  area-Liable to capital gain tax.[S.45]&nbsp; <\/strong><br \/>\n  The  assessee along with his brother were the owner and in possession of land. They  entered into a joint development agreement with &#8216;APL&#8217;. The assessee and his  brother had given an irrevocable license to the developer to enter and develop  the property. They have also executed a power of attorney in favour of the  developer to enable the developer to gets sanction site plans, license and  other approvals for the development of entire scheduled property. The developer  was authorized to avail loans and financial facilities from the financial  institutions.<br \/>\n  The  AO&nbsp; was of the view that the assessees  had surrendered their rights to the extent of 50 per cent in the land in lieu  of 50 per cent constructed area, whose cost was to be borne by the builder.  Thus, in the opinion of the AO, transfer of the land has taken place within the  meaning of section 2(47)(v) and the assessees were assessable for long term  capital gain. The CIT (A) on an analysis of the agreement had held that no  transfer of the asset in the case of the assessee as on the date of entering  into joint development and executing the power of attorney taken place.  Therefore, capital gain was not assessable. On appeal by revenue the  Tribunal&nbsp; up held the order of AO. (ITA  No. 676(Bang) of 2011 1-12-2014) (AY. 2007-08)<br \/>\n  <strong>ITO .v<em>.<\/em> N.S. Nagaraj (2014) 52  taxmann.com 511 \/ (2015) 152 ITD 262 \/ 118 DTR 163 (Bang.)(Trib.)<\/strong><\/p>\n<p><strong>S. 4 : <\/strong><strong>Charge of  income-tax&ndash;Overhead&nbsp; expenses in  construction of community centre-Minutes misread-Charges not received-Addition  was deleted.<\/strong><br \/>\n  Assessee had undertaken construction of project awarded to them by  Government . Assessing Officer relied upon minutes of meeting to hold that  assessee was entitled to overhead charges of 1.5 per cent not only in respect  of cost of construction of community centre but also on cost of construction of  residential flats and made addition. However, it was found that assessee never  received 1.5 per cent as overhead expenses for construction of residential  quarters and said minutes had been misread, therefore stand of assessee that  notes of meeting related to development of community centre complex and not to  residential quarters was correct. Additions confirmed by the Tribunal was  deleted. (ITA No. 339 of 2014 dt. 27-10-2014)(AY. 2002-03)<br \/>\n  <strong>Housing &amp; Urban Development Corporation Ltd. .v. Addl. CIT (2015) 54  taxmann.com 16 \/ 229 Taxman 157 (<\/strong><strong>Delhi<\/strong><strong>)(HC)<\/strong><\/p>\n<p><strong>S. 4 :  Charge of income-tax-Preoperative expenses-Amortisation of preliminary expenses  &ndash;Income from other sources-Interest income was to be adjusted against  pre-operative cost of plant and machinery cost of plant and  machinery.[S.35D,56]<\/strong><br \/>\n  Assessee set up an industrial undertaking at NEPZ to manufacture Halogen  lamp. Production was not yet started. Assessee invested share application money  received by it in FDRs for a short period for purpose of providing security for  obtaining letter of credit to import machineries. Since said deposit was made  under compulsion for having letter of credit, interest income was to be  adjusted against pre-operative cost of plant and machinery cost of plant and  machinery .(ITA No. 2 of 2013 dt. 25-07-2014) (AY. 1992-93)<br \/>\n  <strong>Phoenix Lamps India Ltd. .v. CIT (2014) 50 taxmann.com 320 \/ (2015) 228  Taxman 306 (Mag.) (All.)(HC)<\/strong><\/p>\n<p><strong>S. 4 :  Charge of income-tax-Protective assessment-Substantive basis-Double  taxation-Additions cannot be made in the hands of partners. [S. 143(3)]<\/strong><br \/>\n  Where additions were already made on substantive basis in case of  partnership firm or other partners and said additions had been finally  sustained by Tribunal, then same addition could not be made on protective basis  in hands of assessee being partner of firm .(D. B. IRA No. 34  of 1994 dt. 17-09-2014) (AY. 1986-87)<br \/>\n  <strong>CIT .v. Sobhrajmal (2014) 51 taxmann.com 506 \/ (2015) 228 Taxman 308  (Raj.)(HC)<\/strong><\/p>\n<p><strong>S. 4 :  Charge of income-tax&ndash;Deduction of tax at source-Compensation awarded under  Motor Vehicles Act is awarded in lieu of death of a person or bodily injury  suffered in a vehicular accident and it could not be taxed as income-Circular  of Board of Board to deduct tax at source was quashed. [S. 2(31), 2(42), 194A,  Motor Vehicles Act, 1988] <\/strong><br \/>\n  The Registrar of the High Court had put up a note that Bank Authorities  were making tax deductions on interest accrued on the term deposits,&nbsp;<em>i.e.<\/em>, fixed deposits made by  the Registry in terms of the orders passed by the Court in Motor Accident  Claims cases.<br \/>\n  The matter was referred to the Finance\/Purchase Committee for  examination. The Committee was of the view that since the dispute involved was  intricate and public interest was involved, it was recommended that the matter  required consideration on judicial side.<br \/>\n  The recommendation of the Committee was treated as Public interest  Litigation and&nbsp;<em>suo motu<\/em>&nbsp;proceedings were drawn.<br \/>\n  The department filed the reply and pleaded that in terms of&nbsp;Circular No. 8\/2011, dated 14-10-2011, issued by the income-tax  authorities, income-tax was to be deducted on the interest periodically  accruing on the deposits made on the court orders to protect the interest of  the litigants.<br \/>\n  The Court held that the circular, dated 14-10-2011, issued by the income-tax authorities, is not in tune with the mandate  of sections 2(42) and 2(31), read with section 6. The said circular also is not  in accordance with the mandate of section 194A hence the Compensation awarded under Motor Vehicles Act is awarded in lieu of death  of a person or bodily injury suffered in a vehicular accident and it could not  be taxed as income. Circular No. 8\/2011, dated 14-10-2011, issued by Income-tax  Authorities, whereby deduction of income-tax has been ordered on award amount  and interest accrued on deposits made under orders of Court in Motor Accident  Claims cases run contrary to mandate of granting compensation, thus, was  quashed.In case any such deduction has been made by  department, they are directed to refund the same, with interest at the rate of  12% from the date of deduction till payment. (CWPIL No. 9 of 2014 dt. 15-10-2014) <br \/>\n  <strong>Court on its own motion v. H.P. State Cooperative Bank Ltd. (2014) 52  taxmann.com 151 \/ (2015) 228 Taxman 151\/ 117 DTR 231\/ 276 CTR 264 (HP)(HC)<\/strong><\/p>\n<p><strong>S. 4 : Charge of  income-tax &ndash;Income which was taxed in the hands of <\/strong><strong>HUF<\/strong><strong>,&nbsp; cannot be taxed again as a  member of <\/strong><strong>HUF<\/strong><strong> in his individual capacity.[VDIS,1997, S.64, 65] <\/strong><br \/>\n  Once a particular amount was taxed in hands of HUF in terms of declaration made  under Voluntary Disclosure of Income Scheme, 1997, said amount could not be  taxed again in hands of assessee as a member of HUF in his individual capacity.(ITA No. 519 of 2008 dt. 08-07-2014) (AY.  1988-89 to 1997-98)<br \/>\n  <strong>CIT v. Kundanmal Babulal Jain (2014) 52 taxmann.com 303 \/ (2015) 228  Taxman 165 (Mag.)(Kar.)(HC)<\/strong><\/p>\n<p><strong>S. 4 : <\/strong><strong>Charge of income-tax -Principle of real income &#8211; Excess billing discovered and rectified-  Rectification by making appropriate entries in account books. [S.5,36(2),145]<\/strong><br \/>\n  The excess  surcharge which was not lawfully recoverable had to be set right, for which  permission of the Reserve Bank of India was  required in a procedure prescribed. The assessee had noticed the error and  rectified the mistake in the balance-sheet before the return was filed. It  offered to tax the actual income and deleted the income, which was relatable to  the erroneous claim under surcharge. Hence, the Tribunal was justified in  holding that there was no question of tax on a hypothetical income.<strong><\/strong><br \/>\n  (TC(A) No.  512\/14&nbsp; dt.27-10-2014)(AY.2005-2006) <br \/>\n  <strong>CIT  v. Tyco Sanmar Ltd. (2015) 370 ITR 173\/55 taxmann.com 449 (<\/strong><strong>Mad.<\/strong><strong>) (HC)<\/strong><\/p>\n<p><strong>S.4:Charge of income-tax-Joint  venture-Even if contract is awarded to the Joint Venture, the income is  assessable only in the hands of the person which has executed the work.[S.  2(31), 143(3),153A]<\/strong><br \/>\n  The High Court had to consider  whether the entire income earned by the joint venture company is liable to be  taxed in the hand of one of the members of the assessee company without  appreciating the fact that the contract was awarded to the assessee company and  not to the individual member of the assessee company. It also had to consider  the impact of&nbsp;<strong>C.H. Acthaiya<\/strong>&nbsp;218 ITR 239 (SC) and&nbsp;<strong>MurugesaNaicker  Mansion<\/strong>&nbsp;244 ITR  461 (SC) wherein it was held that AO is not precluded from taxing the right  person merely on the ground that a wrong person is taxable. HELD by the High  Court dismissing the appeal:<br \/>\n  The ITAT has as a matter of fact  found that the assessee\/ joint venture did not execute the contract work and  the said work was done by one of its constituents namely SMS Infrastructure  Limited. It is also found that the receipts for the said project work are  reflected in the books of account of SMS Infrastructure Limited and in return,  said SMS Infrastructure Limited has disclosed that income. The said return was  accepted by the Assessing Officer in the assessment made under Section 153A  read with Section 143 (3) of the Income Tax Act, 1961. It found that,  therefore, some income could not have been taxed again in the hands of joint  venture\/assessee.( ITA no. 44 of 2013, dt.02.03.2015.)<br \/>\n  <strong>CIT v. SMSL-  UANRCL (JV)(2015) 116 DTR 430 \/ 277 CTR 47 (Bom.)(HC),<\/strong><br \/>\n  <strong>www.itatonline.org<\/strong><\/p>\n<p><strong>S.4:Charge of  income-tax-Subsidy-Capital or revenue-Subsidy-Entertainment tax subsidy is a  capital receipt even though the source is the public who visit the cinema hall  after it becomes operational.[U.P.Entertainment and Betting Tax Act, 1979]<\/strong><br \/>\n  (i) The UP Scheme under which the  assessee claims exemption to the extent of entertainment tax subsidy, claiming  it to be capital receipt, is clearly designed to promote the investors in the  cinema industry encouraging establishment of new multiplexes. A subsidy of such  nature cannot possibly be granted by the Government directly. Entertainment tax  is leviable on the admission tickets to cinema halls only after the facility  becomes operational. Since the source of the subsidy is the public at large  which is to be attracted as viewers to the cinema halls, the funds to support  such an incentive cannot be generated until and unless the cinema halls become  functional.<br \/>\n  (ii) The State Government had  offered 100% tax exemptions for the first three years reduced to 75% in the  remaining two years. Thus, the amount of subsidy earned would depend on the  extent of viewership the cinema hall is able to attract. After all, the  collections of entertainment tax would correspond to the number of admission  tickets sold. Since the maximum amount of subsidy made available is subject to  the ceiling equivalent to the amount invested by the assessee in the  construction of the multiplex as also the actual cost incurred in arranging the  requisite equipment installed therein, it naturally follows that the purpose is  to assist the entrepreneur in meeting the expenditure incurred on such  accounts. Given the uncertainties of a business of this nature, it is also  possible that a multiplex owner may not be able to muster enough viewership to  recover all his investments in the five year period. 34. Seen in the above  light, we are of the considered view that it was unreasonable on the part of  the Assessing Officer to decline the claim of the assessee about the subsidy  being capital receipt. Such a subsidy by its very nature, was bound to come in  the hands of the assessee after the cinema hall had become functional and  definitely not before the commencement of production. Since the purpose was to  offset the expenditure incurred in setting up of the project, such receipt  (subject, of course, to the cap of amount and period under the scheme) could  not have been treated as assistance for the purposes of trade.&nbsp; ( ITA No. 586\/ 587\/2013&amp; 161&amp; 204\/  2014 dt. 30\/01\/2015 )  (AY. 2006-07 to 2009-10) <strong><\/strong><br \/>\n  <strong>CIT .v. Bougainvillea Multiplex entertainment (2015) 373 ITR 14\/229  Taxman 471 \/ 116 DTR 129 (<\/strong><strong>Delhi<\/strong><strong>)(HC);  www.itatonline.org<\/strong><\/p>\n<p><strong>S. 4 : Charge of income-tax-Capital or revenue-Business income-Receipt  on sale of carbon credit-Capital in nature.[S.28(i)]<\/strong><br \/>\n  Tribunal held that the receipt on sale of carbon credits was capital in  nature.&nbsp;(ITA NO 147\/Mds\/14, dt. 30-1-2015) ( AY. 2010-2011)<br \/>\n  <strong>ACIT<\/strong><strong> v. <em>&nbsp;<\/em>INTEX (2015) 38 ITR 496 (Chennai)(Trib)<\/strong><\/p>\n<p><strong>S. 4 : Charge of income-tax-Accrual-Grants from Government-To meet the  expenses &ndash;Not chargeable to tax-Amount not adjusted&nbsp; is to be chargeable to tax.[S.12A]&nbsp; <\/strong><br \/>\n  The assessee was a Government of  India agency under the Ministry of Shipping, Road Transport and Highways and  was granted registration under section 12A of the Act. The assessee claimed  that income from internal resources were grant from the Government and  therefore could not be chargeable to tax. The AO charged the income from internal  resources to tax. The CIT(A)(A) confirmed this. On appeal:<br \/>\n  &nbsp;<br \/>\n  Held, that,grants to  meet the expenses&nbsp; is not chargeable to  tax. Amount not adjusted&nbsp; is to be  chargeable to tax. (ITA Nos. 1994 to 2001\/Del\/2013, dt. 21.11.2014 )&nbsp;( AY. 1988-1989,  to&nbsp; 1996-1997 )<br \/>\n  <strong>Inland  Waterways Authority of <\/strong><strong>India<\/strong><strong>&nbsp;.<\/strong><strong>v.&nbsp;Add. CIT (2015) 37 ITR 332 (<\/strong><strong>Delhi<\/strong><strong>)(Trib.) <\/strong><\/p>\n<p><strong>S. 4 :Charge of income -tax-  Diversion of income-Income by over-riding title-Application of income-  Contribution of 1% of net profit to the Cooperative Education Fund maintained  by National Cooperative <\/strong><strong>Union<\/strong><strong> is an application of income. [S. 61, 62]<\/strong><br \/>\n  On facts, it is only after the net  profit reaches the co-operative society that the question of its disposal in  terms of the provisions arise of the Act of 1965 and not earlier thereto, net  profit is to be apportioned by transferring part of it as may be prescribed by  Rules to the reserve fund or to other funds. Part of the profits has to be  carried to the co-operative deduction fund constituted under the Rules and the  balance is available for utilisation for payment of dividends to the members,  bonus to the members and contribution to such other special funds as may be  specified in the Rules as per Sec.63(2). As already stated earlier, assessee is  not charging the amount of 1% on the profits of the year, in the year of  accrual but is claiming the amount paid during the year on the profits of  earlier year. This certainly indicates that the amounts have been received by  assessee and utilized by assessee, then only amount was remitted to the said  National Union under the Act. This indicates, there is no diversion at source  but is only appropriation of profits as per principles laid down. It is also an  admitted fact that there is no charge in the year in which assessee incurs losses.  It is only when there are profits the amount has to be paid. This also  distinguishes the issue that it is only an appropriation of profits earned but  not diversion of income. If it is to be considered as diversion at source by  overriding title, whether assessee incurs profits or loss, the said amount has  to be paid. This is not the case here. The amount at 1% is payable only when  assessee has profits in any year. This supports the view that this is not a  diversion at source but an appropriation of amounts.<br \/>\n  Following the principles laid down  in&nbsp;<strong>CIT vs. Jodhpur  Cooperative Marketing Society<\/strong>&nbsp;275  ITR 372 (Raj), we are of the opinion that the amount contributed by assessee to  the National Cooperative Union, New Delhi is appropriation from the net profits. There is a right to  receive the income independent of accrual and receipt of income by the assessee  before third party could lay claim to any part of it. Since income reached  assessee before it reached to a third party, there is no diversion. As already  stated, there is no payment in the year of losses. Therefore, payment under  section 63(1)(b) is only an appropriation of profit. Moreover, this amount paid  during the year is also not out of the profits of this year but profits of  earlier year. Therefore, on that count also amount cannot be allowed as  deduction during the year. ( ITA no. 1580\/Hyd\/2013, dt. 31.12.2014) ( AY.  2010-11) <br \/>\n  <strong>A. P.&nbsp; Mahesh Co-op Urban Bank  Ltd. .v. DCIT (Hyd.) (Trib.) www.itatonline.org <\/strong><\/p>\n<p><strong>S. 4 :  Charge of income-tax &ndash; Advance against depreciation by way of tariff  charges-Liability not includible in computation of taxable income.[S.145]<\/strong><br \/>\n  Assessee, a public sector company, engaged in selling electricity to  State Electricity Boards, received Advance Against Depreciation (AAD) by way of  tariff charge which was to be adjusted against future depreciation so as to  reduce tariff in future years, amount so received was to be regarded as  liability and, thus, not includible in computation of taxable&nbsp; income .(ITA Nos. 3013 to  3015 (Delhi) of 2010 dt. 30-09-2014) (AY. 2000-01, 2001-02 &amp; 2003-04)<br \/>\n  <strong>ACIT<\/strong><strong> .v. NHPC Ltd. (2014) 50  taxmann.com 221 \/ (2015) 67 SOT 130 (<\/strong><strong>Delhi<\/strong><strong>)(Trib.)<\/strong><\/p>\n<p><strong>S.  5 : Scope of total income -Accrual of  income-Mercantile system of accounting-Civil construction-Sums retained for  payment after expiry of defect-free period-Right to receive amount contingent  upon there being no defects-Accrual only on receipt of amount after defect-free  period.[S.145]<\/strong><br \/>\n  The  assessee, a civil contractor, was awarded a contract by the Hyderabad Municipal  Water Supply and Sewerage Board. The contract provided for deduction of 7.5 per  cent. from each bill. Out of this, 5 per cent.would be payable on successful  completion of the work and the balance 2.5 per cent. after the expiry of the  defect-free period. The assessee, for the assessment year 1996-97, did not  include the amount representing 2.5 per cent. of the bills. According to the  assessee, such amount could be shown as income, only on its being received. The  Assessing Officer held that since the assessee was following the mercantile  system of accounting, the amount of 2.5 per cent. of bills could be said to  have accrued to it, along with the amount paid under the bills and was liable  to be treated as income for that year. The Commissioner (Appeals) confirmed  this. The Tribunal held in favour of the assessee. On appeal :<br \/>\n  Held,  dismissing the appeal, that the right to receive that amount was contingent  upon there not being any defects in the work, during the stipulated period. It  was then, and only then, that the amount could be said to have accrued to the  assessee.(ITTA NO 135\/04 dt.16-12-2014) (AY. 1996-1997) <br \/>\n  <strong>CIT  v. Shanker Constructions (2015) 371 ITR 320 (T &amp; AP) (HC)<\/strong><\/p>\n<p><strong>S. 5 : Scope of total income-Accrual of income  outside and in India-Stock option-Not-ordinary resident-<\/strong> <strong>Only that portion of stock awards and stock  option transfer proceeds which are attributable to services rendered in India  can form part of total income of the relevant assessment year of the assessee  who is not-ordinarily resident-DTAA-India-USA&nbsp;  [S.9(1)(ii), 147, 148, Art 16]<\/strong><br \/>\n  Assessee is  an individual employed with M\/s. Microsoft India (R &amp; D) Hyderabad. The  Assessing Officer reopened the assessment under section 147 by issuing notice  under section 148. In response to the notice the assessee filed a letter  requesting to treat the return filed originally as a return in response to  notice under section 148. The Assessing Officer made the addition of the amount  of Rs. 1,49,80,713\/- being the stock award \/ SOTP. The CIT(A) confirmed the  addition made by the Assessing Officer.<br \/>\n  The Tribunal  remitted the matter to the Assessing Officer for taking a fresh decision and  held that only that portion of stock awards and stock option transfer proceeds  which are attributable to services rendered in India can form part  of total income of the relevant assessment year of the assessee who is  not-ordinarily resident. (ITA No. 220\/Hyd.\/2014 dt. 21-1-15) (AY. 2007-08)<br \/>\n  <strong>Anil Bhansali v. ITO (2015) 168 TTJ 412\/115 DTR 132 \/53&nbsp; taxmann.com 367 (Hyd.)(Trib.)<\/strong><\/p>\n<p><strong>S. 5 : Scope of  total income &ndash;Accrual&nbsp; of income-  Agreement was signed&nbsp; in the relevant  assessment year hence , income cannot be assessed for the relevant assessment  year.[S.145]&nbsp; <\/strong><br \/>\n  The  assessee was a state government undertaking, engaged in the business of power  generation. It supplies power&nbsp;<em>inter  alia<\/em>&nbsp;to DISCOMs, which again  were undertakings of the State Government. During the year under consideration,  huge amount due to the assessee by the DISCOMs running into thousand of crores  was outstanding. According to the AO&nbsp; the  assessee had right to claim interest on such dues and accordingly interest  receivable worked out at Rs. 233.75 crores was added by him to the total income  of the assessee.On appeal, the CIT(A)&nbsp;  found merit in the submissions made by the assessee on this issue and  deleted the addition made by the AO.&nbsp; On  appeal by revenue the&nbsp; Tribunal held&nbsp; that said agreement was effective from date of signing of  agreement i.e. 22-12-2009, and not in relevant assessment  year, therefore, assessee was not entitled to claim any interest on said  delayed payments for year under consideration and such interest income could  not be said to have accrued to assessee in relevant year . (ITA No. 600 (Hyd.) of 2014 dt. 17-09-2014) (AY. 2009-10)<br \/>\n  <strong>Dy.CIT  .v. Andhra Pradesh Power Generation Corporation Ltd. (2014) 52 taxmann.com 300  \/ (2015) 67 SOT 183 (Hyd.)(Trib.)<\/strong><\/p>\n<p><strong>S. 9(1) :  Income deemed to accrue or arise in <\/strong><strong>India<\/strong><strong> &#8211; Business  connection-Royalty-Deduction at source. [S.<\/strong><strong> 9(1)(vi),40(a)(i), 195] <\/strong><br \/>\n  Assessee company entered into an agreement with &#8216;F&#8217;, a foreign firm, to  provide investment advice for investments to be carried outside India.&nbsp; AO&nbsp;  held&nbsp; that payment made by  assessee to &#8216;F&#8217; were in nature of royalty. Tribunal held that in assessee&#8217;s own  case for earlier assessment year, it was held that said payment could not be  treated as royalty as it did not include any information provided in course of  advisory services and further, since services were rendered abroad, no part of  income had accrued or arise in India  and no tax would be deducted. Following said decision, assessee would not be  liable to deduct tax on said payment made. (ITA Nos. 1154 &amp; 1241 (Mds.) of  2014 dt. 22-08-2014)(AY. 2009-10 &amp;  2010-11)<br \/>\n  <strong>ACIT<\/strong><strong> .v. Sundaram Asset Management Co. Ltd. (2014) 52  taxmann.com 466 \/ (2015) 67 SOT 67 (URO)(Chennai)(Trib.)<\/strong><\/p>\n<table border=\"1\" cellspacing=\"0\" cellpadding=\"5\">\n<tr>\n<td width=\"90%\" valign=\"top\">The contents of this document are solely for informational purpose. It does not constitute professional advice or a formal recommendation. While due care has been taken in preparing this document, the existence of mistakes and omissions herein is not ruled out. Neither the author nor itatonline.org and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any actions taken in reliance thereon. No part of this document should be distributed or copied (except for personal, non-commercial use) without express written permission of itatonline.org. <\/td>\n<\/tr>\n<\/table>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Digest of important case law &#8211; Jan &#8211; December 2015 (Compiled by KSA Legal &#038; AIFTP)<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_acf_changed":false,"jetpack_post_was_ever_published":false,"footnotes":""},"class_list":["post-13438","page","type-page","status-publish","hentry"],"acf":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/pages\/13438","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/comments?post=13438"}],"version-history":[{"count":0,"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/pages\/13438\/revisions"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/media?parent=13438"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}