{"id":6954,"date":"2013-06-16T17:58:03","date_gmt":"2013-06-16T12:28:03","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?page_id=6954"},"modified":"2013-08-05T22:51:47","modified_gmt":"2013-08-05T17:21:47","slug":"digest-of-important-case-law-january-to-april-2013","status":"publish","type":"page","link":"https:\/\/itatonline.org\/archives\/digest-of-important-case-law-january-to-april-2013\/","title":{"rendered":"Digest of important case law &#8211; January To April 2013"},"content":{"rendered":"<div id=AddressingEnvelope>\n<a href=\"https:\/\/i0.wp.com\/itatonline.org\/archives\/wp-content\/uploads\/2008\/10\/ksalegal.gif\"><img data-recalc-dims=\"1\" loading=\"lazy\" decoding=\"async\" src=\"https:\/\/i0.wp.com\/itatonline.org\/archives\/wp-content\/uploads\/2008\/10\/ksalegal.gif?resize=157%2C133\" alt=\"\" title=\"ksalegal\" width=\"157\" height=\"133\" class=\"alignleft size-full wp-image-183\" \/><\/a><\/p>\n<div id=MainEnvelope>\nNo time to read through voluminous case reports?<\/p>\n<div id=RSVP>\nCan\u2019t separate the wheat from the chaff?\n<\/div>\n<div id=Invite>\nFret Not! The KSA Legal team will bring you up-to-speed with the choicest of case-law so you can focus your attention only on the important ones. This section is updated on a monthly basis so make sure you bookmark this page.\n<\/div>\n<p><DIV class=team>Compiled By: Ajay Singh, Paras Savla, Rahul Hakani, Rahul Sarda &#038; Neelam Jadhav<\/DIV><\/p>\n<\/div>\n<p><DIV class=clear-simple><\/DIV>\n<\/div>\n<div class=\"clock\">\n<table border=\"0\">\n<tr>\n<td colspan=\"2\"><strong>Digest of important case law &#8211; January 2013 to April 2013 <\/strong><\/td>\n<\/tr>\n<tr>\n<td width=\"264\" rowspan=\"2\" 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><\/p>\n<\/td>\n<td width=\"271\" 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><\/p>\n<\/td>\n<\/tr>\n<tr>\n<td valign=\"top\"><\/td>\n<\/tr>\n<tr>\n<td>Download <strong>January to April 2013<\/strong> Digest in pdf format<\/td>\n<td align=\"right\">Download <strong>Consolidated Digest<\/strong> (Jan 2012 to Sept 2012) in pdf format<\/td>\n<\/tr>\n<tr>\n<td align=\"left\" valign=\"top\"><a href=\"https:\/\/itatonline.org\/archives\/?dl_id=1033\" onclick=\"if (event.button==0) \r\n     setTimeout(function () { window.location = 'http:\/\/itatonline.org\/downloads.php?varname=dl_id=1033&varname2=consolidated_digest_of_case_laws_jan_2013_april_2013.pdf'; }, 100)\" ><strong>Click here to download the judgement (consolidated_digest_of_case_laws_jan_2013_april_2013.pdf) <\/strong> <\/a><\/p> <\/td>\n<td align=\"right\" valign=\"top\"><a href=\"https:\/\/itatonline.org\/archives\/?dl_id=901\" onclick=\"if (event.button==0) \r\n     setTimeout(function () { window.location = 'http:\/\/itatonline.org\/downloads.php?varname=dl_id=901&varname2=consolidated_digest_of_case_laws_jan_2012_sept_2012.pdf'; }, 100)\" ><strong>Click here to download the judgement (consolidated_digest_of_case_laws_jan_2012_sept_2012.pdf) <\/strong> <\/a><\/p> <\/td>\n<\/tr>\n<tr>\n<td colspan=\"2\"><a href=\"http:\/\/itatonline.org\/archives\/index.php\/digest-of-important-case-law-january-to-march-2013\/\">Looking for the Previous Month&#8217;s digest? Click here.<\/a> <\/td>\n<\/tr>\n<\/table>\n<\/div>\n<p><script type=\"text\/javascript\"><!--\ngoogle_ad_client = \"ca-pub-6440093791992877\";\n\/* DLCenter_728x90 *\/\ngoogle_ad_slot = \"3275635396\";\ngoogle_ad_width = 728;\ngoogle_ad_height = 90;\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.2(1A):  Agricultural Income-Assessee  filing letter explaining ownership of agricultural land purchased in 1986-87  and disclosing capital gains on sale thereof in subsequent year-Seized material  not suggesting inflation of agricultural income-Income not to be treated as  income from other sources. [S. 153A]<\/strong><br \/>\n  The Assessing Officer made an  addition on the ground that no agricultural lands were recorded in the  balance-sheet and the assessee had not shown any documentary evidence in  support of his claim. He accordingly treated the income claimed as not  agricultural income but as income from other sources. Before the Commissioner  (Appeals) the assessee contended that complete details of agricultural holdings  were filed before the Assessing Officer and that he had also offered capital  gains to tax on sale of agricultural lands in the financial year 2005-06, which  was accepted by the Assessing Officer. The Commissioner (Appeals) held that  this sort of addition could not be made in an assessment completed under  section 153A without any reference to the seized material and that it was also  not the case of the Assessing Officer that the seized material, if any,  suggested inflation of agricultural income. The Commissioner (Appeals) treated  the income as agricultural income and not as income from other sources as the  assessee had filed a letter explaining that the ownership of the agricultural  land purchased in the year 1986-87 by way of proper evidence and the  requirement of using material being found during the course of search operation  was not of any relevance and that it was not the case of the Assessing Officer  that the seized material, if any, suggested inflation of agricultural income.  On appeal :Held, that the order of the Commissioner (Appeals) was correct.  (A.Ys. 2002-2003 to&nbsp; 2008-2009 )<br \/>\n  <strong>ACIT&nbsp;  v.Mir Mazharuddin (2013) 22 ITR  314 (Hyd.)(Trib.) <\/strong> <br \/>\n  <strong>S.2(14):  Capital asset &ndash; Rural agricultural land &ndash; Distance of 5Km is held to be capital  asset and liable to be&nbsp; assessed as  capital gain.<\/strong><br \/>\n  The Central Government has published a  notification dated 6-1-1994  contemplating that the area up to a distance of 5 km from the municipal limits  of Panchkula in all directions shall not be an agricultural land. Since the  impugned land fell outside the 5 km limit, it was held to be capital Asset.&nbsp;The expression &#8216;Municipality&#8217; in section  2(14) of the Act is very wide. It is not restricted to a Municipality  constituted under the relevant Municipal Laws such as Haryana Municipal Act,  but it would include any other area known by any other name. Sub-clause (a) of clause (iii) of section 2 (14) deals  with an area which falls within the jurisdiction of a Municipality, whereas  clause (b) enable the Central  Government to declare an area situated within 8 kms from the local limits of  any Municipality referred to in clause (a) to notify having regard to extent and scope for urbanization of that  area. The Notification dated 6-1-1994 takes into its ambit an area within 5  kms of the Municipality in the expression &#8216;capital asset&#8217;. Therefore, the urban  area developed by the Authority forms part of a Municipality. The expression  &#8216;by any other name&#8217; appearing in item (a) of clause (iii) of Section 2 (14) has to be read&nbsp;ejusdem  generis&nbsp;with the earlier  expressions i.e. municipal corporation, notified area committee, town area  committee, town committee. In view of the above, it is held that the land,  subject matter of acquisition, is a capital asset falling within the scope of  clause (iii) of section 2(14).  (AY 2004-05)<br \/>\n  <strong>CIT  v.&nbsp; Rani Tara Devi (Smt.) (2013) 214  Taxman 321 (P&amp;H) (HC.)<\/strong><\/p>\n<p><strong>&nbsp;<\/strong><strong>S.2(14):Capital asset&ndash;Personal  effect&ndash;Inherited assets-Sale consideration is not liable to capital gain tax.  (S.45 )<\/strong><br \/>\n  Assessee sold certain items such as  furniture, carpets, paintings, watches and crystal items inherited from his  father in assessment year in question, said items being in nature of &#8216;personal  effects,&#8217; The Court held that the assessee was not liable to pay capital gain  tax on sale of those items. Amendment to section 2(14), which has  been brought about by the Finance Act, 2007 with, effect from 1-4-2008 and  which alters the clause pertaining to &#8216;personal effects,&#8217; has prospective  application. With effect from 1-4-2008 even paintings, sculptures, works of  art, archaeological collections and drawings, in addition to jewellery, have  been excluded from the expression &#8216;personal effects&#8217; which&nbsp; would be applicable from 1-4-2008.&nbsp; (A.Y. 2002-03)<br \/>\n  <strong>Faiz  Murtaza Ali v. CIT (2013) 214 Taxman 30 (<\/strong><strong>Delhi<\/strong><strong>) (HC)<\/strong><\/p>\n<p><strong>S.2(14):Capital  asset-Agricultural land situated beyond 8 kms from municipal limits and beyond  19 kms from centre of city-Not a capital asset&#8211;Land shown in revenue records  as agricultural compensation is not assessable as capital gains. (S.45 )<\/strong><br \/>\n  The assessee&#8217;s lands were  acquired by Reliance Projects Engineering Association Ltd&nbsp; through the Government of Gujarat and the  assessee received compensation. He claimed the same as the agricultural income  considering its agricultural nature. The Assessing Officer rejected the claim  holding, that the assessee failed to provide proof that the land was  agricultural and did not substantiate that the land was outside the purview of  the definition of &quot;capital asset&quot; under section 2(14) of the Act, and  treated the income as long-term capital gains. The Commissioner (Appeals) held  that the land was located in a village which was 19.34 kms away from the main  city. Further, the Commissioner (Appeals) opined that the Assessing Officer  invoked the powers conferred by the Act and have obtained the Government  records from the Land Revenue Department for ascertaining whether the land fell  within the boundaries of 8 kms from the municipal limits or not. Accordingly,  the Commissioner (Appeals) held that the land was located outside the village,  which was located at a distance of more than 19 kms away from city and granted  relief to the assessee. On appeal by the Department: <br \/>\n  Held, dismissing the appeal, that the land was located beyond 8 kms of the Municipal limits of the Jamnagar and was also located beyond  19 kms from the centre of the city of Jamnagar. On this issue, the  definition of capital asset provided in section 2(14)(iii) was not met. There  was no notification issued by the Central Government regarding the same being a  capital asset. Therefore, the land held by the assessee was agricultural land.  It was borne out from the records of the Revenue Department that the lands were  described by the District Collector, Jamnagar, as agricultural lands.  There was no material in the possession of the Assessing Officer to hold that  the land was a capital asset within the meaning of section 2(14) of the Act.  The decision of the Commissioner (Appeals) did not call for any interference  (A. Y. 2007-2008).<br \/>\n  <strong>ITO v. Amrutilal B. Shah(2013) 22 ITR  668(Mum) (Trib)<\/strong><br \/>\n  <strong>S.2(15):  Charitable purpose-Trade business or commerce-Public utility-Activity of  evolving, prescribing, standards Activities cannot be termed as business  activity-Exemption was granted. (S.10) (23C).<\/strong><br \/>\n  The  Bureau of Indian Standards (BIS), a sovereign entity created under the Bureau  of Indian Standards Act, 1986, had been granted exemption under section  10(23C).<br \/>\n  The  Director of Income-tax (Exemption) withdrew the said exemption on the ground  that activities of BIS were in the nature of business and hence, covered by the  proviso to section 2(15). The assessee challenged the said order by way of Writ  to the High Court, wherein it was held that, activities of Bureau of Indian  Standards (BIS) in prescribing of standards of goods\/articles and enforcing  those standards through accreditation and continuing supervision through  inspection, etc., cannot be considered as trade, business or commercial  activity merely because testing procedures involves charging of fees.  Accordingly allowing the Petition the DIG was directed to issue the exemption  certificate under section 10(23C) of the Act. <br \/>\n  <strong>Bureau  of Indian Standards v DGIT (Exemptions) (2013) 212 Taxman 210 (<\/strong><strong>Delhi<\/strong><strong>) (HC)<\/strong><\/p>\n<p><strong>S.2(22)(e):  Dividend- Deemed dividend-Share application money &#8211; Colour device &#8211; Not &ldquo;loan  or advance&rdquo;, cannot be assessed as deemed dividend.<\/strong><br \/>\n  &nbsp;The  assessee was a beneficial shareholder of three companies named Kingston  Properties P Ltd. (KPPL), New Dimensions Consultants P Ltd (NDCPL) &amp; R. S.  Estate Developers P Ltd (RSEDPL). NDCPL &amp; RESEDPL advanced various sums of  money to KPPL towards &ldquo;share application money&rdquo;. However, some of the advances  were returned by KPPL while some were adjusted towards allotment of shares. The  AO held that the transaction was a &ldquo;colourable device&rdquo; and a &ldquo;loan and advance&rdquo;  which fell within the ambit of s. 2(22) (e). The said &ldquo;loan and advance&rdquo; was  assessed as &ldquo;deemed dividend&rdquo; in the hands of the assessee &ndash; beneficial  shareholder &ndash; following Universal Medicare Pvt. Ltd. (2010) 324 ITR 263 (Bom).  The CIT (A) reversed the AO. On appeal by the department to the Tribunal HELD  dismissing the appeal:<br \/>\n  Share  application money or share application advance is distinct from &lsquo;loan or  advance&rsquo;. Although share application money is one kind of advance given with  the intention to obtain the allotment of shares\/equity\/preference shares etc.,  such advances are&nbsp; different form the normal  loan or advances specified both in section 269SS or 2(22) (e) of the Act.  Unless the mala fide is demonstrated by the AO with evidence, the book entries  or resolution of the Board of the assessee become relevant and credible, which  should not be dismissed without bringing any adverse material to demonstrate  the contrary. It is also evident that share application money when partly  returned without any allotment of shares, such refunds should not be classified  as &lsquo;loan or advance&rsquo; merely because share application advance is returned  without allotment of share. In the instant case, the refund of the amount was  done for commercial reasons and also in the best interest of the prospective  share applicant. Further, it is self-explanatory that the assessee being a  &lsquo;beneficial share holder&rsquo;, derives no benefit whatsoever, when the impugned  &lsquo;share application money\/advance&rsquo; is finally returned without any allotment of  shares for commercial reasons. In this kind of situations, the books entries  become really relevant as they show the initial intentions of the parties into  the transactions. It is undisputed that the books entries suggest clearly the  &lsquo;share application&rsquo; nature of the advance and not the &lsquo;loan or advance&rsquo;. As  such the revenue has merely suspected the transactions without containing any  material to support the suspicion. Therefore, the share application money may  be an advance but they are not advances which are referred to in section 2(22)  (e) of the Act. Such advances, when returned without any allotment or part  allotment of shares to the applicant\/subscriber, will not take a nature of the  loan merely because the same is repaid or returned or refunded in the same year  or later years after keeping the money for some time with the company. So long  as the original intention of payment of share application money is towards the  allotment of shares of any kind, the same cannot be deemed as &lsquo;loan or advance&rsquo;  unless the mala fide intentions are exposed by the AO with evidence. (A. Y.  2002-03 to 2007-08)<br \/>\n  <strong>DCIT  v. Vikas Oberoi (Mum.) (Trib.) www.itatonline.org. <\/strong><\/p>\n<p><strong>S.2(22)(e):Dividend-Deemed  dividend-Loans and advances-Legal fiction does not extend to broaden the  concept of shareholderto make tax loans or advances as deemed dividend in the  hands of deemed share holder. (Companies Act, S.153, 187C)<\/strong><br \/>\n  Duringsearch  various papers relatingshare holding pattern of Amod Stampings Pvt Ltd were  seized. It was found that said company had granted loans to various companies  wherein share holdings and voting power exceeded 10 percent.It was explained  that on creation of Trust a part of said company were settled in favour of  Trust and after excluding of shares the assessee did not have more than 10  percent voting power and the assessee had no beneficial interest in the said  Trust. The Assessing Officer held that creation of Trust was an afterthoughtand  taxed theamount as deemed dividend.Before Commissioner (Appeals) it was  contended that as per section 153 of the Companies Acta company is not  permitted to include the name of the trust in the register of members. It was  also contended that the provision of section 187C have been madeineffective  w.e.f.13th December, 2000 and therefore there is no requirement at present to  declare beneficial interest etc., therefore suchbeneficial interest was is not  declared in the register of the Company or the Registrar of the Companies.  However Commissioner (Appeals) up held the addition.On appeal the Tribunal held  that since the said Company was not permitted to include name of Trust in its  register, name which was earlier noted as shareholders remainedsame,  howeverthrougha Board meeting it was resolved to acknowledge change in vesting  of shares, hence in view of the facts deemed dividendcould not be taxed in  hands of assessee.Legal fiction created under section 2(22) (e) does not extend  further for broadening concept of shareholder so as to tax loans or advances as  &lsquo;deemed dividend&rsquo; in hands of a &#8216;deeming shareholder&#8217;. (.AY. 2006-07)<br \/>\n  <strong>Krupeshbhai  N. Patel v. Dy. CIT (2013) 140 ITD 176 (Ahd.) (Trib.)<\/strong><\/p>\n<table border=\"1\" cellspacing=\"0\" cellpadding=\"5\">\n<tr>\n<td width=\"90%\" valign=\"top\">\n<p>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. <\/p>\n<\/td>\n<\/tr>\n<\/table>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>No time to read through voluminous case reports? Can\u2019t separate the wheat from the chaff? Fret Not! The KSA Legal team will bring you up-to-speed with the choicest of case-law so you can focus your attention only on the important &hellip;<\/p>\n<p class=\"read-more\"> <a class=\"\" href=\"https:\/\/itatonline.org\/archives\/digest-of-important-case-law-january-to-april-2013\/\"> <span class=\"screen-reader-text\">Digest of important case law &#8211; January To April 2013<\/span> Read More &raquo;<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"parent":0,"menu_order":0,"comment_status":"open","ping_status":"closed","template":"","meta":{"_acf_changed":false,"footnotes":""},"class_list":["post-6954","page","type-page","status-publish","hentry"],"acf":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/pages\/6954","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=6954"}],"version-history":[{"count":0,"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/pages\/6954\/revisions"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/media?parent=6954"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}