{"id":9635,"date":"2015-02-08T17:15:15","date_gmt":"2015-02-08T11:45:15","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?page_id=9635"},"modified":"2015-02-08T17:15:15","modified_gmt":"2015-02-08T11:45:15","slug":"digest-of-important-case-laws-october-2014","status":"publish","type":"page","link":"https:\/\/itatonline.org\/archives\/digest-of-important-case-laws-october-2014\/","title":{"rendered":"Digest Of Important Case Laws &#8211; October 2014"},"content":{"rendered":"<div class=\"clock\">\n<table border=\"0\">\n<tr>\n<td colspan=\"2\"><strong>Digest of important case law &#8211; October 2014 (Compiled by KSA Legal &#038; AIFTP)<\/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 colspan=\"2\">\n<div class=\"journal2\"><a href=\"http:\/\/itatonline.org\/archives\/?dl_id=1365\" target=\"_blank\">Download <strong>Monthly<\/strong> October 2014 Digest in pdf format <\/a><\/div>\n<\/td>\n<\/tr>\n<tr>\n<td colspan=\"2\">\n<div class=\"journal2\"><a href=\"http:\/\/itatonline.org\/archives\/?dl_id=1366\" target=\"_blank\">Download <strong>Consolidated Digest<\/strong> (Jan 2014 to October 2014) in pdf format<\/a><\/a> <\/div>\n<\/td>\n<\/tr>\n<tr>\n<td colspan=\"2\">\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 colspan=\"2\">\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 colspan=\"2\">\n<div class=\"journal2\"><a href=\"http:\/\/itatonline.org\/archives\/digest-of-important-case-laws-september-2014\/\">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_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(14) : Capital  assets&ndash;Agricultural land-Land within 5 Kms of Local Municipal committee-  Assessable as capital gains.<\/strong><br \/>\n  During  relevant year assessee sold certain land situated in village&nbsp; which is situated within 5 Kms. of limits of  local Municipal Committee, hence liable to be assessed as capital gain. Order  of Tribunal was to be set aside and that of AO was restored (AY. 2002 &ndash; 03) <br \/>\n  <strong>CIT .v. Khazan Singh (2014) 225 Taxman 22((Mag.)\/ 46  taxmann.com 238 (P&amp;H)(HC) <\/strong><\/p>\n<p><strong>S.2(22)(e) :Deemed dividend &ndash;Only  registered share holder of a company can be said to be shareholder-Not  beneficial entitled to shares. <\/strong><br \/>\n  It is only  person whose name is entered in Register of shareholders of company as holder  of shares who can be said to be a shareholder qua company and not a person  beneficially entitled to shares, therefore, it is only where a loan is advanced  by company to registered shareholder and other conditions set out in section  2(22)(e) are satisfied, said amount of loan would be liable to be regarded as  deemed dividend within meaning of said section.(AYs. 2006 &#8211; 07 to 2008 -09)<strong> <\/strong><br \/>\n  <strong>CCIT  .v. Sarva Equity (P.) Ltd. (2014) 225 Taxman 172 \/ 44 taxmann.com 28  (Karn.)(HC)<\/strong><\/p>\n<p><strong>S. 2(22)(e) :Deemed dividend-Loan from  company-Assessable as deemed dividend.<\/strong><br \/>\n  Assessee taking  substantial part of loan from a company in which he was a director and having  substantial interest.Assesseefailed to establish that substantial part of  business of company was money-lending.Amount includible as income of assessee  as deemed dividend. &nbsp;(AY. 2008-2009) <br \/>\n  <strong>Krishna<\/strong><strong> Gopal Maheshwari v. Addl. CIT (2014) 363  ITR 280 \/ 223 Taxman 33 (All)(HC)<\/strong><\/p>\n<p><strong>S. 2(22)(e) : Deemed dividend&ndash;Lease for  its director-Released some other company in which directors had substantial  interest-Cannot be assessed as deemed dividend.<\/strong><br \/>\n  Where assessee  company having taken a property on lease from its directors, re-leased same to  another company in which those directors had substantial interest, security  deposits received by assessee from said company in terms of re-lease agreement  being an amount received in normal course of its business activity, could not  be brought to tax as deemed dividend under section 2(22)(e). (AYs. 2002-03, 2005-06  and 2006-2007)<br \/>\n  <strong>ACIT<\/strong><strong> .v. <\/strong><strong>Madras<\/strong><strong> <\/strong><strong>Madurai<\/strong><strong> Properties (P.) Ltd. (2014) 64 SOT 159 (URO) \/ <\/strong><strong>(2011) 9 taxmann.com 93 <\/strong><strong>(Chennai)(Trib.)<\/strong><strong> <\/strong><\/p>\n<p><strong>S. 2(42B) : Capital gains&#8211;Long-term  capital gains&#8211;Short-term capital gains&mdash;Right under agreement was acquired in  February 2005- Assessable as short term capital gains.[S.2(29A), 45]<\/strong><br \/>\n  Agreement for  purchase of property under attachment to bank in June 2001.Consideration for  sale paid in February 2004.Sale of property to third person in February 2005.  Rights under agreement acquired only in February 2004 hence gains on sale of  property assessable as short-term capital gains. (AY 2005-2006)<br \/>\n  <strong>Lachmandas and Sons v. Dy.  CIT (2014) 363 ITR 315 (Ker)(HC)<\/strong><\/p>\n<p><strong>S. 4:Income chargeable to tax-Mutuality-Transfer Fees received&nbsp; by Co-op Housing Society&nbsp; from incoming &amp; outgoing members (even in  excess of limits) is exempt on the ground of mutuality.<\/strong><br \/>\n  The assessee, a Co-operative  Housing Society, received a sum of Rs.39,68,000 on account of transfer of flat  and garage and credited it to &lsquo;general amenities fund&rsquo; as well as &lsquo;repair  fund&rsquo;. The assessee claimed that the said receipt is exempted from tax on the  ground of mutuality. However, the AO held that the principles of mutuality will  not apply. However, the CIT(A) and Tribunal allowed the assessee&rsquo;s claim by  relying on&nbsp;<a href=\"http:\/\/itatonline.org\/archives\/sind-co-op-housing-society-vs-ito-bombay-high-court\/\">Sind Co-operative Housing  Society vs. ITO<\/a>&nbsp;317  ITR 47. On appeal by the department to the High Court HELD dismissing the  appeal:<br \/>\n  The very issue and the very  question was raised repeatedly in the case of the assessee society. Repeatedly  the Revenue has failed in convincing the Tribunal that Sind Co-operative  Housing Society will not cover the Society&rsquo;s case. The contribution is made to  the repair fund or to the general fund and credited as such. While it may be  true that it is occasioned by transfer of a flat and garage, yet, we do not see  how merely because there was cap or restriction placed on the transfer fees or  the quantum thereof, in this case the principle of mutuality cannot be applied.  The underlying principle and of a co-operative movement has been completely  overlooked by the Revenue. The Revenue seems to be of the view that a  Co-operative Housing Society makes profit, if it receives something beyond this  amount of Rs.25,000. There has to be material brought and which will have a  definite bearing on this issue. If the amount is received on account of  transfer of a flat and which is not restricted to Rs.25,000\/- but much more,  then different consideration may apply. However, in the present case, what has  been argued and vehemently is the amount was received by the Society when the  flat and the garage were transferred. Therefore, it must be presumed to be  nothing but transfer fees. It may have been credited to the fund and with a  view to demonstrate that it is nothing but a voluntarily contribution or  donation to the Society, but still it constitutes its income. However, for  rendering such a conclusive finding there has to be material brought by the  Revenue on record. Beyond urging that it has been received at the time of a  transfer of the flat and credited to such a fund will not be enough to displace  the principle laid down in the decision of Sind Cooperative Housing Society.  The attempt of the Revenue therefore is nothing but overcoming the binding  judgment of this Court. In the present case, the Commissioner and the Tribunal  both have held that the receipt may have been occasioned by the transfer but  the principle of mutuality will still apply. It is a typical relationship  between the member of the Co-operative Society and particularly a Housing  Society and the Society which is a body Corporate and a legal entity by itself  that is forming the basis of the principle laid down by the Division Bench.  Co-operative movement is a socio economic and a moral movement. It has now been  recognized by Article 43A of the Constitution of India. It is to foster and  encourage the spirit of brotherhood and co-operation that the Government  encourages formation of Co-operative Societies. The members may be owning  individually the flats or immovable properties but enjoying, in common, the  amenities, advantages and benefits. The Society as a legal entity owns the  building but the amenities are provided and that is how the terms &ldquo;flat&rdquo; and  the &ldquo;housing society&rdquo; are defined in the statute in question. We do not  therefore find any reason to deviate from the principle laid down in Sind  Co-operative Housing Society&rsquo;s case and which followed a Supreme Court  judgment.( ITA no. 1474 of 2012, dt. 18\/12\/2014.) <br \/>\n  <strong>CIT .v. Darbhanga Mansion CHS  Ltd. (2015) 113 DTR 217 (Bom.) <\/strong><strong>(HC), www.itatonline.org<\/strong><\/p>\n<p><strong>S. 4 : Income chargeable to  tax- Diversion of income by over-riding title-Application of  income&#8217;-Contribution of 1% of net profit to the Cooperative Education Fund  maintained by National Cooperative Union is an application of income- Cannot be  allowed as deduction.[S.37(1)]<\/strong> <br \/>\n  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. 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.&rsquo;A&rsquo;) (AY. 2010-2011) <br \/>\n  <strong>A.P. 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;Capital or revenue-Compensation-Restrictive covenant-Non compete  fee-For five years-Part of business-Not deprived the source of business  activity- Assessable as revenue receipt. [S. 28(i)]<\/strong><br \/>\n  Assessee was engaged in manufacture of  dyestuffs and chemicals, pharmaceuticals and pesticides, pigments and  composites, etc. During relevant year, assessee sold its Oral Hygiene Business  (OHB) to another concern namely CPL. Assessee  also entered into a non-compete agreement in terms of which it agreed to  refrain from competing with CPL for a period of five years. In return of  income, assessee declared amount of non-compete fee as a capital receipt. AO,  however, treated amount of non-compete fee as a revenue receipt and,  accordingly, brought same to tax. It was noted that OHB sold by assessee was  not a part of its core business. Further, by agreeing to a restrictive  covenant, assessee was not deprived of a source of business activity rather  assessee transferred a particular activity under scheme of business  restructuring and to avoid adverse and tough situation in future. Even  otherwise, restriction under agreement was only for limited period of five  years and not for permanent or indefinite period.  (AY. 1995-96)<br \/>\n  <strong>Novartis India Ltd. .v. DCIT (2014)  64 SOT 182 (URO) \/ <\/strong><strong>45 taxmann.com 341 <\/strong><strong>(Mum.)(Trib.)<\/strong><strong> <\/strong><\/p>\n<p><strong>S. 5 : Scope of total income&ndash;Accrual of  income-Civil suit pending-Income has not accrued hence deletion&nbsp; of addition was held to be justified.<\/strong><br \/>\n  Assessee state  ware housing-corporation was engaged in business of warehousing and incidental  activity. Assesseehad raised higher warehousing bills to circle stamp depot  than that reflected in its books.AO&nbsp; made  addition as income. Tribunal has deleted the addition . On appeal Court held  that&nbsp; the&nbsp;  said income had not accrued to assessee as circle stamp depot had  resisted said demand and filed a civil suit, hence deletion of addition was  held to be justified .(AY. 2004 -05)<br \/>\n  <strong>CIT .v. Gujarat State Warehousing Co.  (2014) 225 Taxman 182 \/ 43 taxmann.com 301 (Guj.)(HC)<\/strong><\/p>\n<p><strong>S. 5 : Scope of total income&ndash;Method of  accounting-TDS&nbsp; credit-Real income has  materialized, has to be examined in context of commercial and business  realities of situation in which assessee is placed and not with reference to  system of accounting.[S. 145,199]<\/strong><br \/>\n  Assessee-individual  was working as consulting engineer and commission agent\/dealer in  air-conditioning. During assessment proceeding, AO observed that in balance  sheet certain amount was shown under heading &#8216;contingent Income&#8217;. AO further  observed that credit for TDS for said income had been claimed though receipt  was not offered for taxation and, therefore, he treated said amount as income  for current assessment year. It was found that commission earned from Dealer  had been offered for taxation on basis of completion of service and  installation contract in respective year and this method had been consistently  followed year to year by assesse.&nbsp; This  method was also seen in consonance with accounting method AS-9 in respect of  service contract and installation fee which states that revenue be recognized  only when equipment is installed and accepted by customer. Since work related  to installation and erection of equipment had been completed in subsequent  assessment years, accrual of income happened only in subsequent years and, when  assessee got an enforceable right to receive same. In view of above, addition  made by AO was rightly deleted by CIT (A).(AY. 2009-10)<br \/>\n  <strong>Addl.CIT  .v. Vinay V. Kulkarni (2014) 64 SOT 131 \/ <\/strong><strong>46 taxmann.com 370 <\/strong><strong>(Pune)(Trib.)<\/strong><strong> <\/strong><\/p>\n<p><strong>S. 5 : Scope  of total income&ndash;Income&ndash;Accrual-Interest on grants-Short term deposit in bank- interest  earned on short-term deposits could not be said to have accrued as income to  assessee. <\/strong><br \/>\n  Assessee-company  was a Special Purpose Vehicle created for purpose of implementing projects  funded under Industrial Infrastructure Upgradation Scheme by Department of  Industrial Policy and Promotion. During year it received grant from Central  Government and kept amount in short-term deposits in bank, as same was not  immediately utilized. It earned interest income on such deposits and claimed  that interest income had overriding charge on it and hence could not be treated  as its income . Central Government had given a clear instruction that interest  on short-term deposits either had to be refunded back to Government or to be  adjusted against future grants to be released for implementing project. In view  of aforesaid instruction interest earned on short-term deposits could not be  said to have accrued as income to assessee. Matter remanded. (AY. 2007-08 and  2008-09)<br \/>\n  <strong>Hyderabad Pharma Infrastructure &amp; Technologies Ltd. .v.  Addl.DIT (2014) 64 SOT 179 \/ <\/strong><strong>45  taxmann.com 339 <\/strong><strong>(Hyd.)(Trib.)<\/strong><strong> <\/strong><\/p>\n<p><strong>S. 5 : Scope  of total income &ndash;Income-Accrual-2 percent grant towards administrative  purposes- Matter remanded. <\/strong><br \/>\n  Assessee-company was a Special Purpose Vehicle conceived by Department of  Industrial Policy and Promotion [DIPP].During a meeting held on 9-12-2004, DIPP pointed out that 2 per cent of amount calculated from central  grant shall be made available for incurring administrative expenses by  assessee. CIT(A) treated 2 per cent of grant towards administrative expenses as  income of assessee. Tribunal held that&nbsp;  before treating 2 per cent of grant to be income of assessee had to  factually ascertain whether such grant had actually been sanctioned to assessee.  Matter remanded. (AYs.  2007-08 and 2008-09)<br \/>\n  <strong>Hyderabad Pharma Infrastructure &amp; Technologies Ltd. .v.  Addl. DIT (2014) 64 SOT 179 \/ <\/strong><strong>45  taxmann.com 339 <\/strong><strong>(Hyd.)(Trib.)<\/strong><strong> <\/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; October 2014 (Compiled by KSA Legal &#038; AIFTP) Download Monthly October 2014 Digest in pdf format Download Consolidated Digest (Jan 2014 to October 2014) in pdf format Download Consolidated Digest (Jan 2013 to December &hellip;<\/p>\n<p class=\"read-more\"> <a class=\"\" href=\"https:\/\/itatonline.org\/archives\/digest-of-important-case-laws-october-2014\/\"> <span class=\"screen-reader-text\">Digest Of Important Case Laws &#8211; October 2014<\/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,"jetpack_post_was_ever_published":false,"footnotes":""},"class_list":["post-9635","page","type-page","status-publish","hentry"],"acf":[],"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/pages\/9635","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=9635"}],"version-history":[{"count":0,"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/pages\/9635\/revisions"}],"wp:attachment":[{"href":"https:\/\/itatonline.org\/archives\/wp-json\/wp\/v2\/media?parent=9635"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}