Digest Of Important Judgements In The Period From January To December 2018 (Updated July 2019)

The research team of AIFTP Journal Committee and KSA Legal Chambers have prepared a comprehensive digest of all important judgements delivered in the period from January to December 2018. The judgements are sorted section-wise and topic-wise and are accompanied with a crisp summary which provides the precise ratio of each judgement. The Digest will prove invaluable to busy tax professionals and taxpayers

S. 2(1A) : Agricultural income-Mushroom is not a ‘vegetable’, ‘plant’, ‘fruit’ or ‘animal’ but is a ‘fungus’. Anything which is produced by performing basic operations on the soil is an “agricultural product” and the income therefrom is “agricultural income”. The nature of the product and the fact that it is not a ‘plant’, ‘flower’, ‘vegetable’ or ‘fruit’ is irrelevant. The only relevant aspect is whether the production is by performing some basic operations on the soil. Accordingly the income from production and sale of Mushrooms can be termed as ‘agricultural’ income.[S. 10(1)]

Tribunal held that,Mushroom is not a ‘vegetable’, ‘plant’, ‘fruit’ or ‘animal’ but is a ‘fungus’. Anything which is produced by performing basic operations on the soil is an “agricultural product” and the income therefrom is “agricultural income”. The nature of the product and the fact that it is not a ‘plant’, ‘flower’, ‘vegetable’ or ‘fruit’ is irrelevant. The only relevant aspect is whether the production is by performing some basic operations on the soil. Accordingly the income from production and sale of Mushrooms can be termed as ‘agricultural’ income.(AY. 2008-09 to 2012-13)
DCIT v. Inventaa Industries Private Limited(2018) 168 DTR 81/ 172 ITD 1/ 194 TTJ 657/ 65 ITR 625 (Hyd)(Trib.)(SB).www.itatonline.org

S. 2(14)(iii) : Capital asset-Agricultural land-Solitary instance-Adventure in the nature of trade-Business-Purchase of agricultural land and sale of the said land after few years – Not deriving any income or not making any improvement of land and intention to earn profit cannot be the sole test to treat the transaction as adventure in the nature of trade – Solitary instance of sale alone could not characterise the transactions as an adventure in the nature of trade. [S. 2 (13)]
Dismissing the appeal of the revenue the Court held that the fact that there was an isolated transaction of sale which generated profit to the assessee would not result in the transaction being treated as an adventure in the nature of trade. Though there was an intention to derive profit on sale of such properties purchased as an investment, the assessee, from the circumstances also, was willing to hold it so that the eventual purchase gave him sufficient profit. This alone would take it out of the definition of adventure in the nature of trade and the solitary instance of sale alone could not characterise the transaction as an adventure in the nature of trade. Followed G. Venkataswami Naidu & Co. v. CIT (1959) 35 ITR 594 (SC). (AY.2008-09)
PCIT v. John Poomkudy (2018) 409 ITR 149/ (2019) 261 Taxman 56/ 174 DTR 370/ 307 CTR 81 (Ker) (HC)

S. 2(14)(iii) : Capital asset-Agricultural land-Beyond 8 kms from nearest Municipality-Nursery-Land record showing the land as agricultural land – Sale consideration is exempt from tax.[S. 45]
Dismissing the appeal of the revenue the Court held that; land revenue records showed that land specified was agricultural land and distance from nearest Municipality is beyond 8 Kms. even though assessee ran a nursery on agricultural land,the fact that there was loss and not income could not have made any difference to the nature and character of the land. (AY.2007-08)
PCIT v. P.S. Raghupathy (2018) 257 Taxman 225 (Mad)(HC)
Editorial : SLP of revenue is dismissed PCIT v. P.S. Raghupathy (2019) 261 Taxman 248 (SC)

S. 2(14)(iii) : Capital asset-Agricultural land-Adventure in the nature of land –Land was sold after a period of 16 months-Land shown as agricultural land in revenue records-Fact that said land had been sold to an industrial unit and had potential to be used for industrial purpose, could not be a determinative factor to treat profit earned by assessee on sale of agriculture land as business income-The intention of the purchaser cannot be the determinative factor to treat the profit earned by the assessee on sale of agriculture land as business income.[S. 28(i), 45]
Dismissing the appeal of the revenue the Court held that ;.assessee was an agriculturist and, land owned by him had been shown as agricultural land in revenue records. land in question was sold by assessee after a period of 16 months from purchase and, thus, it could not be a regarded as a case of ‘adventure in nature of trade’. Intention of purchaser could not be a determinative factor to treat profit earned by assessee on sale of agriculture land as business income. (AY.2009 10)
PCIT v. Heenaben Bhadresh Mehta. (2018) 409 ITR 196 / 257 Taxman 219 (Guj.)(HC)

S. 2(14)(iii) : Capital asset-Agricultural land-Land entered in revenue records as agricultural land-Agricultural income from land declared and accepted by the revenue-Onus is on department to prove contrary-Profits on sale of land is not assessable to capital gains tax. [S. 45]
Dismissing the appeal of the revenue the Court held that; if the land was recorded as agricultural land in the revenue records, the presumption that it was agricultural land and also when the agricultural income shown by the assessee was accepted by the revenue in earlier years. Referred Sarifabibi Mohamed Ibrahim v. CIT (1993) 204 ITR 631 (SC) (AY. 2010-11)
CIT v. Ashok Kumar Rathi. (2018) 404 ITR 173 / 302 CTR 490 (Mad.)(HC)

S. 2(14)(iii) : Capital asset-Agricultural land-8kms -Distance from Municipal limits to area in which land is situated is to be considered and not distance between particular land and municipal limit-Matter remanded. [S. 45,54F]
Tribunal held that,distance from Municipal limits to area in which land is situated and not distance between particular land and municipal limit. The issue raised by the assessee requires a proper investigation of facts and also determination of the fact whether the particular land is situated in the area which is beyond 8 kms from the Municipal limits.Matter remanded.(AY.2011-12)
Rakesh Garg. v. ITO (2018) 173 ITD 302 /(2019) 197 TTJ 632 / 174 DTR 246 (Jaipur)(Trib.)

S. 2(14)(iii) : Capital asset – Agricultural land-Capital gains-Business income-Sale of agricultural land purchased on good price and purchasing the land of higher volumes at different places cannot be regarded as trader-Entitle to exemption. [S. 2(14), 28(i)]
Allowing the appeal of the assessee the Tribunal held that; Sale of agricultural land purchased on good price and purchasing the land of higher volumes at different places cannot be regarded as trader assessee is held to be entitle to exemption. (AY. 2009-10)
Shailesh Gangaram Ramani. v. ITO (2018) 168 ITD 446 (Rajkot)(Trib.)

S. 2(15) : Charitable purpose–Medical reliefs-charging nominal fee for providing services exemption cannot be denied, proviso is held to be not applicable. [S. 11, 12AA]
AO held that the assessee is involved in trade commerce or business, rejected assessee’s claim by invoking proviso to S. 2(15) of the Act. CIT(A) held that mere receipt of nominal fees or charges did not tantamount that assessee was involved in any trade, commerce or business and allowed the exemption. On appeal by the revenue the Tribunal held that, charging nominal fee for providing services exemption cannot be denied, proviso is held to be not applicable. (AY.2010-11)
ITO v. Escorts Cardiac Disease Hospital Society (2018) 173 ITD 406 /(2019) 197 TTJ 708 / 174 DTR 321(Delhi)(Trib.)

S. 2(15) : Charitable purpose–Applicability of proviso to S. 2(15) of the Act is a question of fact and should be decided on facts of the case and no generalization is possible. [S. 11, 12]
The Tribunal after placing reliance on the CBDT Circular No. 11 of 2008 dated 19 December 2008 and the Finance Minister’s speech held that the applicability of proviso to section 2(15) of the Act is a question of fact and no generalisation is possible. Tribunal also further held that the said proviso does not apply to first 3 limbs of section 2(15) i.e. relief to poor, education or medical relief. Further Tribunal held that the proviso shall apply in cases wherein the assessee is engaged in any activity in nature of trade, commerce or business and the object of general public utility is only to mask or hide the true purpose of the business activity.
As in the present facts of the case the AO had not brought any material to show that the assessee was conducting its affairs solely on commercial lines with a motive to earn profit. Also no material was brought to show that the assessee company had deviated from its objects for which it has been constituted. Therefore it was held that the proviso to section 2(15) of the act is not applicable to the present facts of the case and deleted the addition made by the AO.
DCIT v. Raipur Development Authority Bajrang Market (2018) 64 ITR 41 (SN) (Raipur)(Trib.)
S. 2(22)(e) : Deemed dividend-Beneficial owner-Prima facie, CIT v. Ankitech Pvt Ltd (2012) 340 ITR 14 (Delhi)(HC) and CIT v. Madhur Housing and development company (2018) 401 ITR 152 (SC), is wrongly decided and should be reconsidered by larger Bench.
The term “shareholder”, post amendment, has only to be a person who is the beneficial owner of shares. One cannot be a registered owner and beneficial owner in the sense of a beneficiary of a trust or otherwise at the same time. The moment there is a shareholder, who need not necessarily be a member of the Company on its register, who is the beneficial owner of shares, the Section gets attracted without more. To state that two conditions have to be satisfied, namely, that the shareholder must first be a registered shareholder and thereafter, also be a beneficial owner is not only mutually contradictory but is plainly incorrect. Prima facie CIT v. Ankitech P. Ltd (2012) 340 ITR 14 (Delhi) (HC) CIT v. Madhur Housing and Development Co (2018) 401 ITR 152 (SC) is wrongly decided and should be reconsidered by larger bench. This being the case, we are prima facie of the view that the Ankitech P. Ltd judgment (supra) itself requires to be reconsidered, and this being so, without going into other questions that may arise, including whether the facts of the present case would fit the second limb of the amended definition clause, we place these appeals before the Hon’ble Chief Justice of India in order to constitute an appropriate Bench of three learned Judges in order to have a relook at the entire question.
National Travel Service v. CIT (2018) 401 ITR 154 / 162 DTR 201 / 300 CTR 582 / 253 Taxman 243 (SC)
CIT v. Mahavir Inductomelt (P) Ltd (2018) 401 ITR 154/ 162 DTR 201/ 300 CTR 582 (SC)

S. 2(22)(e) : Deemed dividend – Loan to share holder-Holding more than 10 per cent of equity shares of lending company and also having substantial interest in borrowing company- Amount of loan given by lender company to borrower company is held to be assessable as deemed dividend–Issue decided by Jurisdicinal High Court – Appeal is not maintainable. [S. 260A]
Dismissing the appeal of the assessee the Court held that ;the assessee was holding more than 10 per cent of equity shares of lending company and also having substantial interest in borrowing company i.e. 45 per cent shareholding of OFPL. Accordingly the order of Tribunal is affirmed. Issue decided by Jurisdicinal High Court,appeal is not maintainable.(AY.2007-08)
Sahir Sami Khatib. v. ITO (2018) 259 Taxman 160/ 172 DTR 305 / (2019) 411 ITR 637 (Bom.)(HC)www.itatonline.org
Sarosh Sami Khatib v. ITO (2018) 259 Taxman 160/ 172 DTR 305/ (2019) 411 ITR 637 (Bom.) (HC)
Editorial :Order in ITO v.Sahir Sami Khatib( 2015) 57 taxmann.com 13 (Mum) (Trib) is affirmed .

S. 2(22)(e) : Deemed dividend-Registered and beneficial share holder – Assessee is not share holder- Addition cannot be made as deemed dividend.
Mr John Geroge Nechupadom had more than 10 per cent share holding in Plant Lipids (P) Ltd . Plant Lipids (P) Ltd advanced the amount to Aromatic Ingrediants (P)Ltd . AO made addition as deemed dividend. Which was deleted by the Tribunal. On appeal by the revenue, dismissing the appeal the Court held that assessee is not the share holder hence deletion of addition by the Tribunal is held to be justified.(AY.2007-08)
CIT v. Net work Systems & Technologies (P) Ltd (2018) 172 DTR 445 (Ker.) (HC)

S. 2(22)(e) : Deemed dividend-Records of Registrar of Companies showing shareholding over 10 Per Cent.-Revised return filed before Registrar of companies subsequent to notice under Section 148-Loans received assessable as deemed dividend. [S. 147, 148]
Dismissing the appeals of the assessee court held that,records of Registrar of Companies showing shareholding over 10 Per Cent. Revised return filed before Registrar of companies subsequent to notice under Section 148.Loans received assessable as deemed dividend.No question of law.(AY.2000-01, 2003-04, 2004-05, 2005-06)
Lailabi Khalid. v. CIT (2018) 408 ITR 385 (Ker) (HC)

S. 2(22)(e) : Deemed dividend-Buy-back in excess of fair market price of shares–Direction of Tribunal to make an enquiry in to fair value of shares, which could have implication of deemed dividend –Direction is held to be valid.[S. 115QA, 254(1)]
Assessee bought back its own shares from its 99.99 per cent holding company at Mauritius at an abnormally high price. Tribunal held that payment for buy-back in excess of fair market price of shares of assessee, would certainly fall within ambit of section 2(22)(e) and could be taxed as dividends, in hands of assessee-company; however, since this aspect of matter had not been examined by authorities below, matter was remanded to assessing authority.On appeal Court held that, Tribunal was right and within its jurisdiction in directing examination of fair market value of shares bought-back by it during previous year relevant. (AY. 2011-12)
Fidelity Business Services India (P.) Ltd. v. ACIT (2018) 257 Taxman 266 / 304 CTR 244/ 169 DTR 73 (Karn.)(HC)

S. 2(22)(e) : Deemed dividend-Advance to Shareholder-Deemed dividend can be assessed only in hands of registered shareholder.
Dismissing the appeal of the revenue the court held that, deemed dividend can be assessed only in hands of registered shareholder. (AY. 2007-08, 2010-11)
CIT v. Ennore Cargo Container Terminal P. Ltd. (2018) 406 ITR 477 (Mad.) (HC)

S. 2(22)(e) : Deemed dividend-Current account-Advance to share holder-Transactions between shareholder and company were in nature of current account addition cannot be made as deemed dividend.
Dismissing the appeal of the revenue the Court held that,transactions between shareholder and company were in nature of current account addition cannot be made as deemed dividend.(AY.2009-10)
CIT v. Gayatri Chakraborty. (2018) 407 ITR 730/ 256 Taxman 156/ 303 CTR 541 / 168 DTR 91 (Cal) (HC)

S. 2(22)(e) : Deemed dividend-Trade advances which were in nature of commercial transactions cannot be assessed as deemed dividend
Dismissing the appeal of the revenue the Court held that; Trade advances which were in nature of commercial transactions cannot be assessed as deemed dividend
CIT v. Deepak Vegpro (P) Ltd. (2018)406 ITR 496 / 161 DTR 170 / 300 CTR 98 (Raj)(HC)

S. 2(22)(e) : Deemed dividend-Loan to shareholder — Finding that loan was not trading transaction therefore assessable as deemed dividend.
Allowing the appeal of the revenue the Court held that by analysing the transactions and evidences found that loan was not trading transaction therefore assessable as deemed dividend.
CIT v. Prasidh Leasing Ltd. (2018) 403 ITR 129 / 301 CTR 526 /163 DTR 475/254 Taxman 142 (Delhi) (HC)

S. 2(22)(e) : Deemed dividend-Trade discount – Agents’ deposit – Regular business transactions cannot be assessed as deemed dividend.
The word ‘advance’ which appears in the company of the word ‘loan’ could only mean such advance which carries with it an obligation of repayment and that the trade advances which are in the nature of money transacted to give effect to a commercial transaction would not fall within the ambit of the provision u/s 2(22) (e) of the Act. The amounts under the disputed heads were being received by the Assessee from its subsidiary only as part of regular business transactions, which was being accounted properly. Payments effected by the subsidiary and received by the Assessee, were as part of the regular business transactions and could not have been treated as ‘loan’ or ‘advances’ u/s 2(22) (e) of the Act. (AY. 1995-96 to 1997-98)
CIT v Malayala Manorama Co. Ltd. (2018) 405 ITR 595/ 162 DTR 281/ 301 CTR 552/ 253 Taxman 292 (Ker) (HC)
S. 2(22)(e) : Deemed dividend-loans from two companies addition cannot be made as deemed dividend [S. 260A]
Dismissing the appeal of the revenue the Court held that; the assessee had not made any payment by way of advance or loan to a shareholder, but on the contrary, had received loans from the two companieS. Therefore, if at all, the provisions of section 2(22)(e) were applicable to the companies which had made such payments, provided the assessee had the requisite shareholding. The assessee being the recipient of such amounts, the Tribunal was justified in holding that the provisions of section2(22)(e) could not be invoked. No question of law arose. (AY. 2010-11)
CIT v. Gladder Ceramics Ltd. (2018) 401 ITR 205 (Guj) (HC)

S. 2(22)(e) : Deemed dividend-Group companies – Amount received and also paid each other for the purpose of business transactions-No amount has gone to share holder-Addition is held to be not justified.
Tribunal held that,amount received from group companies and also paid each other for the purpose of business transactions.No amount has gone to share holder-Addition is held to be not justified.Followed earlier years order.(AY.2010-11)
Saamag Developers (P.) Ltd. v. ACIT (2018) 173 ITD 350 (Delhi) (Trib.)

S. 2(22)(e) : Deemed dividend-Holding cumulative preference shares with fixed rate of dividend-Advance of loan cannot be assessed as deemed dividend.
Dismissing the appeal of the revenue ; the Tribunal held that,holding shares in lender company without voting rights whereas it merely held non-cumulative preference shares with fixed rate of dividend in borrower company, amount of loan is question could not be added to as deemed dividend (AY.2006-07)
ACIT v. K.P. Singh. (2018) 171 ITD 638 (Delhi) (Trib.)

S. 2(22)(e) : Deemed dividend-Merely because the shares are held by the minor son of the assessee and the loan is received by the assessee it cannot be established that assessee is the beneficial shareholder of 10% or more –Loan cannot be assessed as deemed dividend-Alternatively the amount received was advance rent in the Course of business hence cannot be assessed as deemed dividend.
Tribunal held that for assessing the loans or advance the assessee must be the beneficial owner of the shares of 10% or more. In this case ld AO has not established whether the assessee is holding shares as the beneficial shareholder of 10% or more. Merely because the shares are held by the minor son of the assessee and the loan is received by the assessee it cannot be established that assessee is the beneficial shareholder of 10% or more and therefore such loan amount is not chargeable to tax in the hands of the assessee. Furthermore the submission of the assessee before the lower authorities that it is in the nature of advance rent as whenever the rent is payable by the company to the assessee same is deductible from this amount therefore it partakes the character of advance rent. The Ld. AO has also not categorically stated that this amount is not advance rent and not adjusted subsequently against the rent payable by the company to the assessee. According to us if it is an advance rent then it becomes a business transaction and the provisions of deemed dividend cannot apply to such transactions. the instant case, the deposits received by the assessee has already been held by us as sale consideration received on transfer of rights in the property and, thus, in our opinion, it is not in the nature of advance or deposits, which could be held as liable for deemed dividend in terms of section 2(22)(e) of the Act.(ITA No.4038/Del/2013, dt. 12.10.2018)(AY. 2006-07)
DCIT v. Moni Kumar Subha (Delhi)(Trib.),www.itatoline.org

S. 2(22)(e) : Deemed dividend-account showing movement of funds both ways between a debtor and a creditor – Held, current account transaction and therefore, S. 2(22)(e) would not apply.
Account showing movement of funds both ways between the creditor and debtor of the company. Tribunal held that a debit as a result of transactions in such current account cannot be treated as deemed dividend. (AY. 2010-11)
Ravindra R. Fotedar v. ACIT (2018) 192 TTJ 938 (Mum.)(Trib.)

S. 2(22)(e) : Deemed dividend-Amount received back given in earlier years cannot be assessed as deemed dividend.
Tribunal held that the, Amount received back given in earlier years cannot be assessed as deemed dividend.(AY.2010-11)
Nanak Ram Jaisinghani v. ITO (2018) 170 ITD 570 (Delhi) (Trib.)

S. 2(22)(e) : Deemed dividend-Director-Advance received for blocking deal of sale and purchase on behalf of the company for business transaction cannot be assessed as deemed divided.
Allowing the appeal of the assessee the Tribunal held that ; amounts advanced to assessee director by its company were for business transaction, same would not fall within definition of deemed dividend.(AY.2012-13)
Dinesh Pandeyv. DCIT (2018) 170 ITD 501 (Delhi)(Trib.)

S. 2(22)(e) : Deemed dividend-Share holders-Current and inter banking accounts between group companies cannot be considered as loans and advances and addition cannot be made as deemed dividend-No physical possession of accumulated profits, hence no addition can be made as deemed dividend.
Allowing the appeal of the assessee the Tribunal held that; Current and inter banking accounts between share holders group companies cannot be considered as loans and advances and addition cannot be made as deemed dividend. Tribunal also held that even otherwise also, the payer companies had already made their investment in capital field more than the accumulated profits and in that situation it cannot be considered that those companies were having physical possession of accumulated profits capable of being disbursed. Therefore, the additions in dispute stand deleted. (AY. 2008-09)
Saamag Developers (P.) Ltd. v. ACIT (2018) 168 ITD 649 (Delhi) (Trib.)

S. 2(24)(iv): Business Income—Amount paid by company towards personal expenses of assessee is held to be not taxable. [ S.4 ]
Dismissing the appeal of the revenue the Court held that; the Tribunal was right in holding that the amounts paid by the company towards personal expenses of the assessee could not be taxed in his hands under S. 2(24)(iv) of the Act, as the amount was routed through the franchisee, which was the Hindu undivided family of the assessee (AY. 2002-03)
CIT v. C. S. Seshadri. (2018) 404 ITR 191 (Mad.) (HC)

S. 2(28A) : Interest-Usance interest-Paid to holding company for delayed payment for purchase of goods was not part of purchase price, but interest–Liable to deduct tax at source-DTAA-India-Singapore [S. 40(a)(i),195, Art.7, 11]
Allowing the appeal of the revenue the Tribunal held that, usance charges paid by the respondent to its holding company for delayed payment of goods was not part of purchase price of goods but same was interest within meaning of S 2(28A) of the Act. CIT v. Vijay Ship Breaking Corpn. (2003) 261 ITR 113 (Guj.) (HC) (AY. 2003-04)
ACIT v. Overseas Trading and Shipping Co. (P.) Ltd. (2018) 173 ITD 446 (Rajkot) (Trib.)

S. 2(42C) : Slump sale-There was neither any plant, machinery, furniture and fixtures, nor was there any building in existence at time when land was sold therefore it was not a slump sale. [ S.50B ]
Dismissing the appeal of the revenue, the Court held that there was neither any plant, machinery, furniture and fixtures, nor was there any building in existence at time when land was sold therefore it was not a slump sale. (AY. 2004-05)
PCIT v. Linde India Ltd. (2018) 254 Taxman 204 / 302 CTR 262 (Cal.)(HC)

S. 2(47)(v) : Transfer – Development rights – Transfer of development rights as per share holder agreement with financial partner for development of integrated township by unregistered agreements, no liability of tax could be fastened on assessee on basis that possession of land had been handed over. [S. 28(i), 45, Registration Act 1908,S. 17(IA), Transfer property Act 1882, S. 53A]
Allowing the appeal of the assessee, the Tribunal held that; Transfer of development rights as per share holder agreement with financial partner for development of integrated township by unregistered agreements, no liability of tax could be fastened on assessee on basis that possession of land had been handed over. (AY. 2008-09, 2012-13)
Saamag Developers (P.) Ltd. v. ACIT (2018) 168 ITD 649 (Delhi) (Trib.)

S. 4 : Charge of income-tax – Legislative power of retrospective amendment – Legislature cannot by way of introducing an amendment overturn a judicial pronouncement to declare it to be wrong or nullity – Rather Legislature can amend provisions of any statute to remove basis of judgment-Clause in statute-Prohibiting payment of interest on amount of security deposit is not arbitrary or violative of Article 14 of the Constitution of India.[Art. 14]
On appeal, the Supreme Court held that :
(i) Legislature has the power to enact validating laws including the power to amend laws with retrospective effect to remove causes of invalidity. However, Legislature cannot set at naught the judgments which have been pronounced by amending the law not for the purpose of making corrections or removing anomalies but to bring in new provisions which did not exist earlier. The Legislature cannot, by way of introducing an amendment, overturn a judicial pronouncement and declare it to be wrong or nullity but it can amend the provisions of statute to remove the basis of judgment.
(ii) Any provision / clause in the enactment which prohibits payment of interest on the amount of security deposits cannot be said to be arbitrary or violative of Article 14 of the Constitution of India.
State of Karnataka.v. Karnataka Pawn Brokers Association (2018) 255 Taxman 12 (SC)

S. 4 : Charge of income-tax-Diversion of income by overriding title-Acted only broker-For determination of taxable income, written agreement is not relevant, conduct of parties can be considered accordingly only income that has actually accrued to the assessee is taxable. [S. 5, 145]
Dismissing the appeal of the revenue the Court held that ;The income that has actually accrued to the Respondent is taxable. What income has really occurred to be decided, not by reference to physical receipt of income, but by the receipt of income in reality. Given the fact that the Respondent had acted only as a broker and could not claim any ownership on the sum of RS. 14,73,91,000/-and that the receipt of money was only for the purpose of taking demand drafts for the payment of the differential interest payable by Indian Bank and that the Respondent had actually handed over the said money to the Bank itself, we have no hesitation in holding that the Respondent held the said amount in trust to be paid to the public sector units on behalf of the Indian Bank based on prior understanding reached with the bank at the time of sale of securities and, hence, the said sum of RS. 14,73,91,000/-cannot be termed as the income of the Respondent. In view of the above discussion, the decision rendered by the High Court requires no interference.(AY. 1991-92 to 1993-94)
DCIT v. T. Jayachandran(2018) 406 ITR 1/ 165 DTR 176/302 CTR 95/ 255 Taxman 344 (SC), www.itatonline.org
CIT v. HDFC Bank Ltd (2018) 165 DTR 176/302 CTR 95 / 255 Taxman 344 (SC)
CIT v. State Bank of India (2018) 165 DTR 176/302 CTR 95 / 255 Taxman 344 (SC)
CIT v. Indian Bank (2018) 165 DTR 176 /302 CTR 95 / 255 Taxman 344 (SC)
Editorial : T. Jayachandran v. Dy. CIT (2013) 263 CTR 629/ 87 DTR 73 /212 Taxman 620 (Mad) (HC)

S. 4 : Charge of income-tax-Share application money-The Interest accrued from share application money has statutorily required to be kept in separate account and was being adjusted towards the cost of raising share capital against public issue expenseS. [S. 56, 145]
Dismissing the appeal of the revenue the Court held that; interest accrued on account of deposit of share application money is not taxable income. Such interest is inextricably linked with the requirement to raise share capital and is thus adjustable towards the expenditures involved for the share issue. The fact that part of the share application money would normally have to be returned to unsuccessful applicants, and therefore, the entire share application money would not ultimately be appropriated by the Company, make no significant difference. The Interest earned from share application money has statutorily required to be kept in separate account and was being adjusted towards the cost of raising share capital against public issue expenses (CIT v. Bokaro Steel Ltd (1999) 236 ITR 315 (SC).(AY. 1999-2000 to 2001-02)
CIT v. Shree Rama Multi Tech Ltd(2018) 403 ITR 426/ 165 DTR 137/ 302 CTR 90/ 255 Taxman 136 (SC), www.itatonline.org

S. 4 : Charge of income-tax–Mutuality-Receipts by Co-operative society form its members i.e. Non-occupancy charges, transfer charges common amenity fund charges and other charges, are exempt from income-tax Act based on the principle of mutuality [S. 2(24), Maharashtra Co-operative Societies Act, 1960, S. 79A]
Dismissing the appeal of the revenue the Court held that; Receipts by Co-operative society form its members ie. Non-occupancy charges, transfer charges common amenity fund charges and other charges are exempt from income-tax Act based on the principle of mutuality. The notification dated 9, 2001 issued under section 79A of the Maharashtra Co-operative Societies Act, 1960 is applicable only to co-operative housing societies and has no application to premises society which consist of non-residential premiseS.
ITO v. Venkatesh Premises Co-operative Society Ltd (2018) 402 ITR 670/ 163 DTR 465/301 CTR 514/ 254 Taxman 313(SC)
Editorial:From the judgement of Bom.bay High Court in ITO v. Venkatesh Premises Co-operative Society Ltd (ITA No 680 of 2009 dt 11-1-2010)
Mittal Court Premises Co-operative Society Ltd. v. ITO (2010) 320 ITR 414 (Bom.) (HC), and CIT v. Shree Parleshwar Co-op-Housing Society Ltd (2017) 10 ITR-OL 202 (Bom.) (HC) is affirmed.

S. 4 : Charge of income-tax–Non–compete fee-Held to be capital receipt. [ S.28 (i) ]
Dismissing the appeal of the revenue the Court held that,non-compete agreement incorporated restrictive covenant on right of assessed to carry on his activity of development of software. It might not alter structure of his activity, in sense that he could carry on same activity in organization in which he had small stake, but it certainly impaired carrying on of his activity to that extent it was loss of source of income for him and it was of enduring nature, as contrasted with transitory or ephemeral loss. Non-Competition Agreement was genuine and payment made thereunder was indeed non-compete fee. (AY.1995-96)
CIT v. Tara Sinha. (2017) 158 DTR 193/ (2018) 305 CTR 522 (Delhi)(HC)

S. 4 : Charge of income-tax – Capital or revenue- Compensation awarded under Motor Vehicles Act or Employees’ Compensation Act in lieu of death of a person or bodily injury suffered in a vehicular accident, is a damage and not an income and cannot be treated as taxable income-Not liable to deduct tax at source on compensation and interest accrued thereon.[S. 194A]
Allowing the petition the Court held that,compensation awarded under Motor Vehicles Act or Employees’ Compensation Act in lieu of death of a person or bodily injury suffered in a vehicular accident, is a damage and not an income and cannot be treated as taxable income. Accordingly interest awarded by the Motor Accident Claims Tribunal on a compensation is also a part of compensation upon which tax is not chargeable hence the action of Insurance company deduct tax at source on the awarded compensation and interest accrued thereon is illegal and is contrary to the law of land. Accordingly respondent directed to refund the tax deducted at source.
National Insurance Company Ltd. v. Indra Devi (2018) 259 Taxman 579 (HP)(HC)

S. 4 : Charge of income-tax-Capital-Revenue-Amount received by assessee from assigning its business rights is held to be capital receiptS. Amount is also not to be included in computing book profits. [S. 155JB, 263]
Dismissing the appeal of the revenue the Court held that, amount received by assessee from assigning its business rights is held to be capital receipt. Amount is also not to be included in computing book profits.
CIT v. Om Metals Infraprojects Ltd (2018) 99 taxmann.com 228 / 259 Taxman 355 (Raj.)(HC)
Editorial : SLP of revenue is dismissed, CIT v. Om Metals Infraprojects Ltd (2018) 259 Taxman 354 (SC)

S. 4 : Charge of income-tax-Capital or revenue-Incentive for sale of Sugar is a capital receipt and hence not chargeable to tax.
Dismissing the appeal of the revenue the Court held that ; incentive for sale of Sugar is a capital receipt and hence not chargeable to tax.
CIT v. Kanoria Sugar And General Manufacturing Co. Ltd. (2018) 407 ITR 737 (Raj.) (HC)
Editorial : SLP of revenue is dismissed; CIT v. Kanoria Sugar And General Manufacturing Co. Ltd. (2018) 405 ITR 1 (St)
S. 4 : Charge of income-tax – Capital or revenue-Non-compete Amounts received by assessee under Non-Compete agreement constitute capital receipt-Revenue cannot ignore the specific terms of the agreements and render findings contrary thereto as regards the nature of the income received by the assessee-Form and substance of transaction-Substance of transaction to be considered. [S. 28(i)]
Allowing the appeals of the assessee the Court held that ; a close analysis of the terms of the non-competition agreement, it was abundantly clear that the consideration paid to the company as well as to the assessee was for preventing them from competing with the transferee companies in respect of specified products in specified areas. On its own finding the Tribunal held that it was the assessee who had pioneered the time release technology and promoted the company. This by itself would show that the technical know-how constituted a part of the capital. There was no material to show that the transaction was not genuine. Nor had any specific finding in that regard been rendered. Therefore, there was no reason to ignore the specific terms of the agreements and render findings contrary thereto as regards the nature of the income received by the assessee. The income in the hands of the assessee was a capital receipt. Though, the form in which the transaction which gives rise to income is clothed and the name which is given to it are irrelevant in assessing the nature of receipt arising from a transaction, for ignoring the specific terms of an agreement, a finding has to be necessarily rendered that those terms are a mere cloak or subterfuge for avoiding taxation.(AY. 1998-99, 1999-2000)
V. C. Nannapaneni. v. CIT(2018) 407 ITR 505 / 305 CTR 605/ 171 DTR 337 (T&AP) (HC)

S. 4 : Charge of income-tax–Capital or revenue-Subsidy-Technology upgradation of existing units as well as to set up new units with latest technology to enhance their viability and competitiveness in domestic and international markets-Capital receiptS. [S. 28(i)]
Dismissing the appeal of the revenue the Court held that ; the subsidy was clearly for purpose of upgrading machinery and plant and for acquiring capital assets and not for purpose of day-to-day business operations of assessee, held that quantum of subsidy received by assessee was a capital receipt.
CIT v. Gloster Jute Mills Ltd. (2018) 257 Taxman 512 (Cal.)(HC)

S. 4 : Charge of income-tax–Capital or revenue-Interest from mobilization advances made by it to contractor for purpose of facilitating smooth commencement and completion of work of construction-Receipts being intrinsically connected with construction business of assessee would be capital receipt and not income of assessee from any independent source. [S. 56]
Assessee is engaged in construction and development business, received certain amount by way of interest from mobilization advances made by it to contractor for purpose of facilitating smooth commencement and completion of work of construction. Allowing the appeal of the assessee the Court held that said receipt was adjusted against charges payable to contractor and, thus, resulted in reduction of cost of construction.Accordingly in view of decision in case of CIT v. Bokaro Steel Ltd. (1999) 236 ITR 315 (SC), receipts being intrinsically connected with construction business of assessee would be capital receipt and not income of assessee from any independent source.
Roads & Bridges Development Corporation of Kerala Ltd. v. ACIT (2018) 257 Taxman 392 (Ker.)(HC)

S. 4 : Charge of income-tax – Accrual of income-Method of accounting-Gain arising on account of securitization of lease receivables and credited to the Profit & Loss Account is a taxable receipt in the year of securitisation. [S. 145]
Dismissing the appeal of the assessee the Court held that, gain arising on account of securitization of lease receivables and credited to the Profit & Loss Account is a taxable receipt in the year of securitisation. Followed CIT v.T. V. Sunderam Iyengar (1996) 222 ITR 344 (SC). Argument that the entry represents hypothetical income and not real income and that the amount is assessable in subsequent years on receivable basis is not correct. Question of whether income can also be deferred to subsequent years under the “Matching concept” as per Taparia Tools Ltd v. JCIT (2003) 260 ITR 102 (Bom.)/ Taparia Tools Ltd v. JCIT (2015) 372 ITR 605 (SC) left open. (AY. 2002-03, 2003-04)
L & T Finance Limited v. DCIT(2018) 170 DTR 362 / 304 CTR 954 (Bom.)(HC),www.itatonline.org

S. 4 : Income chargeable to tax-Capital or revenue-Income from other sources-Interest on funds deposited with banks-Prior to commencement of commercial operations will be in nature of capital receipt and will be required to be set off against pre-operative expenditure capitalized under head capital work-in-progress-Cannot be taxed as income from other sourceS. [S. 5, 56,145]
Dismissing the appeal of the revenue the Court held that ; as per loan agreement executed between consortium of banks and assessee all disbursements were to be deposited in trust and retention account was to be subject to strict control and verification by senior lenders and all disbursements were to be utilized solely for purpose of implementation of project and no other purpose.Funds were thus inextricably linked to setting up of mega road projects and interest earned on such borrowed funds could not be classified as income from other sources. Accordingly the interest received prior to commencement of commercial operations of specified mega projects will be in nature of capital receipt and will be required to be set off against pre-operative expenditure capitalized under head capital work-in-progress and cannot be taxed under head income from other sourceS.
PCIT v. Road Infrastructure Development Corporation of Rajasthan Ltd. (2018) 257 Taxman 208 (Raj.)(HC)
Editorial : SLP is granted to the revenue,PCIT v. Road Infrastructure Development Corporation of Rajasthan Ltd. (2018) 257 Taxman 186 (SC)

S. 4 : Charge of income-tax-Power subsidy-Capital or revenue-Purpose test-Power subsidy which is available only to new units and units which have undergone an expansion, purpose being incentive as a capital subsidy has to be regarded as capital receipt. [S. 28(i)]
Dismissing the appeal of the revenue the Court held that; Power subsidy which is available only to new units and units which have undergone an expansion, purpose being incentive as a capital subsidy has to be regarded as capital receipts.
PCIT v. Shyam Steel Industries Ltd. (2018) 303 CTR 628/ 168 DTR 152(Cal) (HC)

S. 4 : Charge of income-tax–Interest on bank deposits out of share capital-Prior to commencement of business operations-Interest is liable to be assesses as income from other sources-interest income would go to reduce capital cost of project and was on capital account and same could not be taxed as income from other source. [S. 56, 145]
Dismissing the appeal of the revenue the Court held that; interest earned before commencement of business operations was not liable to be taxed as same was eligible for deduction against public issue expenses incurred by company, interest income would go to reduce capital cost of project and was on capital account and cannot be assessed as income from other sources. Followed CIT v. Bokorao Steel Ltd (1999) 236 ITR 315 (SC) (AY.2011-12)
PCIT v. Bank Note Paper Mill India (P.) Ltd. (2018) 256 Taxman 429 /(2019) 412 ITR 415 (Karn.)(HC) www.itatonline.org.
Editorial : Order in, ITO v Bank Note Paper Mill India P.Ltd (2017) 56 ITR 226 (Bang) (Trib.) is affirmed.

S. 4 : Charge of income-tax-Capital or revenue-Power subsidy received by assessee company from State Government under Power Intensive Industries Scheme, 2005, for setting up a new industrial unit in backward area was capital receipt and, thus, not liable to tax. [ S.28(i) ]
Dismissing the appeal of the revenue the Court held that, power subsidy received by assessee-company from State Government under Power Intensive Industries Scheme, 2005, for setting up a new industrial unit in backward area was capital receipt and, not liable to tax.(AY. 2001-01, 2003-04)
CIT v. Keventer Agro Ltd. (2018) 256 Taxman 437 (Cal.)(HC)

S. 4 : Charge of income-tax-Capital or revenue—Business of real estate-Compensation received under Arbitration Award is held to be capital receipt. [ S.28(i) ]
Dismissing the appeal of the revenue the Court held that, compensation received under Arbitration Award is held to be capital receipt. The purpose of the ultimate use of the assessee’s land when acquired was rendered irrelevant on account of the seller defaulting in its commitment. This rendered the amount expanded by the assessee immobile. The eventual receipt of the amounts determined as compensation or damages, therefore, fell into the capital stream.
CIT v. Aeren R Infrastructure Ltd. (2018) 404 ITR 318 (Delhi) (HC)

S. 4 : Charge of income-tax-Compensation received for loss of source of income and non competition fee is held to be capital receipt. [S. 17(3), 28(va), Prior to Amendment, 2016 wef 1-04-2107]
Dismissing the appeal of the revenue the Court held that; there cannot be a straight jacket black and white formula; the analysis to be conducted by the tax authorities or administration has to be a fact dependent one. The assessee had a dual role-both as shareholder and as Managing Director. As Managing Director, he received only the non-compete amounts for two yearS. It is quite possible that he could have been given this amount as a capital receipt at one go for whatever reasons and that the amount be spread over two years. Undoubtedly, the Parliament has intervened and deemed that such amounts. so far as they relate to consideration for professionals should be treated as income by virtue of the amendment of 2017. However, with respect to the Revenue’s contention that regardless of that amendment even in the pre-existing law, this amount had to be treated as receipts and therefore taxable as income, cannot be accepted. It also noted CIT v. Sapthagiri Distilleries Ltd. (2015) 53 Taxmann. com 218 (SC), where the Supreme Court had held that compensation received towards loss of source of income and non-competition fee would be treated only as capital receipts and not liable to tax. Having regard to these decisions and the fact that the view of the ITAT is a plausible one, no question of law arise.
CIT v. Satya Sheel Khosla. (2018) 164 DTR 293 / 305 CTR 534 (Delhi)(HC)

S. 4 : Charge of income-tax-Accrual-Contractor-Income in respect of sale of flats is accrued when possession was given of the flat and not when the allotment letter was issued.[S. 145]
Dismissing the appeal of the revenue, the court held that, Income in respect of sale of flats is accrued when possession was given of the flat and not when the allotment letter was issued. (ITA No. 853 of 2015 dt. 30-01-2018)(AY. 2007-08)
CIT v. Millennium Estate Pvt Ltd (Bom.)(HC) (2018)93 taxmann. com 41 / BCAJ-April-P. 74

S. 4 : Charge of income-tax-Capital or revenue-Sales tax subsidy is a capital receipt. [S. 264]
Allowing the petition against order u/s 264 the Court held that; the sales tax subsidy received by the assessee was to be treated as a capital receipt and was not to be added to its income. The orders of the Commissioner and the Assessing Officer, treating the sales-tax subsidy as revenue receipt, were to be set aside. (AY. 2007-08 to 2010-11)
Sunbeam Auto Pvt. Ltd. v. CIT (2018) 402 ITR 309 (Delhi)(HC)

S. 4 : Charge of income-tax-VAT subsidy-Refund of value added tax was held to be capital receipt and not chargeable to tax. [S. 2(24)(xviii), 43(1)]
Dismissing the appeal of the revenue the Court held that, refund of value added tax subsidy from Government of Bihar was held to be capital receipt and not chargeable to tax (AY. 2009-10)
CIT v. Deepak Vegpro Pvt. Ltd. (2018) 401 ITR 89/ 164 DTR 226/ 302 CTR 269 (Raj.)(HC)

S. 4 : Charge of income-tax-Accrual–Interest on project advance–Development agreement has not taken place as the interest has not accrued, income cannot be assessed on hypothetical basis. [S. 145]
Dismissing the appeal of the revenue, the Court held that ;there was no right to receive income of Rs. 1. 98 crores as interest as the development agreement has not been executed, therefore the interest has not accrued, income cannot be assessed on hypothetical basis. Further Board of directors of the assessee company had on 23 rd May 2007 passed a resolution, waiving the interest receivable. (AY. 2008-09)
CIT v. Godrej Reality (P) Ltd (2018) 161 DTR 417 / 300 CTR 257(Bom.)(HC)

S. 4 : Charge of income-tax–Capital or revenue-Notional sales tax–Question of law. [S. 260A]
On appeal by the revenue,High Court admitted the following question of law “ Whether on the facts and circumstances of the case and in law,the Tribunal was right in holding that notional sales-tax of Rs, 12, 52, 83, 84, 360 is capital in nature and not liable to tax. (AY. 2003-04 to 2006-07)
CIT v. Reliance Industries Ltd. (2018) 161 DTR 420 / (2019) 410 ITR 468 (Bom.)(HC)

S. 4 : Charge of income-tax–Capital or revenue–Causal and non –recurring-Capital gains-Compensation paid for breach of contract was held to be capital in nature. [S. 2(24), 10(33) 45, 55(2)(a)]
Dismissing the appeal of the revenue the Court held that; there was a breach of contract giving rise to a claim for damages and the compensation was paid on account of failure to honour the commitment. That was capital in nature. A detailed business plan was submitted by the assessee, which was rejected without any specific reason. Thus, there was a breach of the right of first refusal and a receipt of compensation after negotiation, which was shown as non-taxable capital receipt. The contention that such a receipt could not have been taxed as revenue receipt or casual income, was accepted by the Tribunal and had held that the amount received by the assessee by way of compensation, for breach of commitment, was not a capital gain, but a non-taxable capital receipt. (AY. 1998-99)
CIT v. Parle Soft Drinks (Bang.alore Pvt. Ltd. (2018) 400 ITR 108/ 161 DTR 86/ 252 Taxman 147 / 300 CTR 415 /(2017) 88 Taxmann.com 24 (Bom.) (HC)
CIT v. Parle Bottling Pvt. Ltd. (2018) 400 ITR 108/ 161 DTR 86 / 252 Taxman 147 / 300 CTR 415 (Bom.)(HC)
Editorial; Order in Parle Soft Drinks P. Ltd. v. JCIT (2013) 27 ITR 663 (Mum.) (Trib.) is affirmed . SLP of revenue is dismissed ;CIT v. Parle Soft Drinks (Bang.alore Pvt. Ltd. (2018) 258 Taxman 61 (SC)

S. 4 : Charge of income-tax–Sales tax subsidy-subsidy given to assessee post accomplishment of project or expansion there, without any obligation to utilize subsidy only for repayment of term loans undertaken by assessee for setting up new units/expansion of existing business, or to liquidate cost incurred in creating capital asset or its expansion, was only in nature of revenue receipt and was liable to be brought to tax. [ S.28(i )]
Tribunal held that any subsidy given to assessee post accomplishment of project or expansion there, without any obligation to utilize subsidy only for repayment of term loans undertaken by assessee for setting up new units/expansion of existing business, or to liquidate cost incurred in creating capital asset or its expansion, was only in nature of revenue receipt and was liable to be brought to tax. (AY.2008-09)
Maruti Suzuki India Ltd. v. ACIT (2018) 191 TTJ 148 (Delhi)(Trib.)

S. 4 : Charge of income tax–Capital or revenue-Subsidy-Additional Admitted-Excise duty refund and interest subsidy received from Government for setting up of an industry in the backward area was to be treated as a capital receipt.[S. 28(i), 254(1)]
On appellate Tribunal held that the limitation of power of the assessing authority (where the claim is not pressed through a return filed by the assesse) was not applicable to an appellate authority. The Tribunal further held that where a legal issue was raised for the first time before the appellate authority with facts being on record, the additional ground ought to have been admitted. Accordingly, relying on the decision in the case of Ahmedabad Electricity Co. Ltd. v. CIT (1993) 199 ITR 351 (FB)(Bom.) (HC), the Tribunal held that the additional ground was to be admitted. On merits, the Tribunal held that the benefit/ incentive was given for the overall development of the industry and the economy of the state of Jammu & Kashmir. Relying on the decision in the case of CIT v. Shree Balaji AlloyS. v. CIT (2011) 333 ITR 335 (J&K) (HC) the Tribunal held that the same ought to be treated the same as capital receipt.(AY. 2006-07)
Kashmir Steel Rolling Mills v. DCIT (2018) 195 TTJ 125 / 169 DTR 137 (Asr.)(Trib.)

S. 4 : Charge of income-tax-Capital or revenue-Incentive received under Package Scheme of Incentives of Govt. of Maharashtra is capital receipt and not liable to tax. [ S.28(i) ]
Tribunal held that sales tax incentive availed under package scheme of incentive of Government of Maharashtra is capital receipt and is not chargeable to tax.(AY.2005-06)
ACIT v. Ballarpur Industries Ltd(2018) 64 ITR 21(SN) / 168 DTR 225 / 193 TTJ 521 (Nag.)(Trib.)

S. 4 : Charge of income-tax – Carbon credit-Capital or revenue-Additional ground-Receipt from sale of carbon credit is capital receipt-Not taxable as income–Additional ground was admitted and remanded the matter for verification.[S. 2(24), 80IA(4), 115BBG, 254(1)]
On appeal, the CIT(A) held that the receipt from sale of carbon credits if power is generated and thus the gain derived was eligible for deduction u/s 80-IA(4).Aggrieved by the order,the Revenue filed an appeal before the Tribunal. The assessee also filed cross objection on the said. The assessee submitted that the Hon’ble Andhra Pradesh High Court in CIT v. My Home Power Ltd(2014) 365 ITR 82 (AP) (HC) had decided the issue of taxability of carbon credits in the favour of the assessee and the jurisdictional Bench in Shree Nakoda Ispat Ltd. in ITA No.109/BLPR/2011 had decided in favour of the assessee. Further, the assessee also pointed out that the Finance Act, 2017 w.e.f. 1st April, 2018 inserted section 115BBG for taxability of carbon credits @ 10% and that the amendment was prospective. The Tribunal admitted the ground raised by the assessee for adjudication and allowed the appeal of the assessee for statistical purposeS. (AY. 2011-12)
DCIT v. Godawari Power & Ispat Ltd. (2018) 68 ITR 19(SN) (Raipur)(Trib.)

S. 4 : Charge of income-tax–Capital or revenue-Capital gains-Capital asset-Right to sue-Development agreement-Builder-Right to sue is a right in personam which cannot be transferred and, thus, amount received as compensation in lieu of said right is not chargeable to tax. [S. 2(14), 2(47), 28(va), 45]
Tribunal held that compensation received by assessee in respect of right to sue for specific performance of its pre-emptive right to purchase of land is a personal right which did not fall within definition of ‘capital asset’ under S. 2(14) of the Act. Accordingly the damages received from potential purchaser for such relinquishment of right to sue is a capital receipt which is not taxable.Tribunal also held that the assessee had not received amount of damages under an agreement for not carrying out activity in relation to any business or not to share in know-how, patent, copyright, trademark, license etc. as specified under S. 28(va) of the Act enacted for its taxability under the head of business income. Consequently, it is opined that compensation received in lieu of ‘right to sue’ could not be regarded as revenue receipt. (AY.2008-09)
Bhojison Infrastructure (P.) Ltd. v. ITO (2018) 173 ITD 436/172 DTR 369/ 196 TTJ 518(Ahd.)(Trib.)

S. 4 : Charge of income-tax–Capital or revenue-compensation received on closure/ termination of business activity resulting in loss of source of income, impairing its profit making structure or sterilization of profit making apparatus is capital receipt. [S. 28(i)]
Dismissing the appeal of the revenue the Trib.inal held that; compensation received on closure/ termination of business activity resulting in loss of source of income, impairing its profit making structure or sterilization of profit making apparatus is capital receiptS. (ITA No.157/RPR/2014, dt. 23/10/2018)(AY. 2011-12)
DCIT v. Rishabh Infrastructure Pvt. Ltd. (2019) 174 DTR 357 / 196 TTJ 857 (Raipur)(Trib.),www.itatonline.org

S. 4 : Charge of income-tax–Forfeited amountcannot be assessed as income–Justified in reducing the said amount from cost of the land .[S. 51]
Tribunal held that amount forfeited cannot be assessed as income. Assessee is justified in reducing the said amount from cost of the land. (AY.2008-09)
Geeta Dubey (Smt.) v. ITO (2018) 172 ITD 538 (Indore) (Trib.)

S. 4 : Charge of income-tax–Capital or revenue-Sales tax subsidy – Purpose of sales tax subsidy scheme was to attract people to invest and take part in industrialization of certain areas in the State, either by setting up new unit or expanding existing unit – Subsidy was a non-taxable capital receipt. [S. 28(i)]
Hon’ble Tribunal held that the purpose of the subsidy scheme by the Government of Uttar Pradesh was to attract people to invest and take part in industrialization of certain areas in the State. The scheme nowhere stated that it is for the benefit of generating product purchases from the town/district of Uttar Pradesh. In light of the CIT v. Ponni Sugars and Chemicals Ltd. (2008) 306 ITR 392 (SC), since the objective of the scheme was to enable expansion or modernization of existing units, it is capital in nature. (AY. 1995-96 to 1998-99)
Grasim Industries Limited v. ACIT (2018) 193 TTJ 25 (UO) (Mum.)(Trib.)

S. 4 : Charge of income-tax–Capital or revenue-Entertainment subsidy received under Uttar Pradesh Government scheme for promotion of constructionof multiplexes is a capital receipt.[S. 2(24), 28(i) ]
AO treated entertainment subsidy granted by State of UP as revenue receipt holding the same to be for the purpose of helping multiplexes to run profitably and the same was upheld by CIT(A). On appeal, Tribunal noted that the assessee’s object to construct Multiplex Theatre Complexes was in line with the object of grant of subsidy which was for promotion of construction of multiplexes. Further, the collection was in form of an entertainment duty via sale of tickets for a limited period but its utilisation was predetermined and granted with an assurance to cover up cost of construction. Therefore, it was not attributed in any manner towards supplementing of day-to-day expenditure or in furtherance of profits and hence could not be said to be in character of revenue receipt. Thereby relying on the case of Chaphalker Brother, the Tribunal dismissed revenue’s appeal.
DCIT v. Shipra Hotels Ltd (2018) 63 ITR 70 (SN) 52 CCH 288 (Delhi)(Trib.)

S. 4 : Charge of income-tax-Compensation received by the assesse in lieu of withdrawal of criminal complaint filed against a person for impersonation and forging Assessee’s signature on a document relating to sale of shares of a company is not taxable as income.[S. 2(24), 28 (i)]
Dismissing the appeal of the revenue the Tribunal held that compensation received by the assesse in lieu of withdrawal of criminal complaint filed against a person for impersonation and forging Assessee’s signature on a document relating to sale of shares of a company is not taxable as income as the compensation received by the Assessee was not for his professional activities but for settlement of dispute between him and third party. Accordingly, the same cannot fit into the definition of income as per section 2(24) r.w.s 4 of the Act. (AY. 2011-12)
ACIT v. Jackie Shroff (2018) 167 DTR 133 / 172 ITD 425 / 194 TTJ 760 (Mum.)(Trib.)

S. 4 : Charge of Income tax–Capital or revenue- Subsidy received from Government for setting up of an industry in the backward area was to be treated as a capital receipt. [ S.28(i) ]
Dismissing the appeal of the revenue the Tribunal held that ; subsidy received from West Bengal Incentive Scheme from State Government for setting up of an industry in the backward area is to be treated as a capital receipt. (AY. 2005-06)
ACIT v. Pasadensa Foods Ltd. (2018) 163 DTR 243 / 192 TTJ 645 (Delhi)(Trib.)

S. 4 : Charge of income-tax – Discrepancy in AIR data and Form 26AS – Assessee disputed certain transaction reflected in AIR data but claimed credit of TDS – Held, not permissible – Held, AO to verify whether credit of TDS wrongly taken and whether the income does not belong to the assessee. [S.28(i), Form 26AS]
The assessee contradicted the AIR information by stating that certain transaction does not belong to it, however, it claimed the credit of TDS pertaining to such transaction. The Tribunal held that this was not permissible. Assessee had to prove that the income does not belong to it and that the credit for TDS was wrongly claimed. Accordingly, the matter was remitted back to AO to give any opportunity to the assessee (AY.2011-12).
Edel Commodities Ltd. v. Dy. CIT (2018) 194 TTJ 86 (Mum.)(Trib.)

S. 4 : Charge of income-tax –Development agreement-The “right to sue” which arises on breach of a development agreement is a “personal right” and not a “capital asset” which can be transferred. Consequently, the damages received for relinquishment of the “right to sue” is a non-taxable capital receipt .[S. 2(14) 28(va)]
Allowing the appeal of the assessee the Tribunal held that /The “right to sue” which arises on breach of a development agreement is a “personal right” and not a “capital asset” which can be transferred. Consequently, the damages received for relinquishment of the “right to sue” is a non-taxable capital receipt.(ITA. No. 2449/Ahd/2016, dt. 17.09.2018)(AY. 2008-09)
Bhojisaon Infrastructure Pvt. Ltd. v. ITO (Ahd.)(Trib.),www.itatonline.org

S. 4 : Charge of income-tax-Capital or revenue – Sales tax incentive-Remanded to the file of AO. [ S.28 (i) ]
The Tribunal held that the co-ordinate bench has restored the issue relating to sales tax incentive to the file of AO in assessment years 2007-08 and 2008-09. The Tribunal set aside the order of CIT(A) on this issue and restore the same to the file of AO with the directions in earlier years. (AY. 2009-10)
Dy. CIT v. Everest Industries Ltd. (2018) 192 TTJ 904 /168 DTR 178/90 taxmann.com 330 (Mum.)(Trib.)

S. 4 : Charge of income-tax – Subsidy received from Government for setting up of an industry in the backward area was to be treated as a capital receipt. [ S.28(i) ]
On Revenue’s appeal, relying on the Supreme Court’s decision in the case of Sahney Steel and Press Works v. CIT (1997) 228 ITR 253 (SC) and CIT v. Ponni Sugar & Chemicals Ltd. (2008) 306 ITR 392 (SC), the Tribunal held that ‘purpose test’ should be applied for determining the character of the subsidy. Since the subsidy in the present case was received by the assessee for setting up of an industry in the backward area of West Bengal, it was held that the CIT(A) rightly treated the same as capital in nature. (AY. 2005-06)
ACIT v. Pasadensa Foods Ltd. (2018) 163 DTR 243/ 192 TTJ 645 (Delhi)(Trib.)

S. 4 : Charge of income-tax-Personal effects-Sale of painting received by gift from father is held to be capital receipts – Amendment by Finance Act 2007 w.e.f. 1-04-2008 is prospective in nature. [S. 2(14),28(i)]
AO treated the sale of painting which was received by father Late Mr M. F. Husain as business income instead of capital receipt. On appeal the Tribunal held that the painting received by the assessee from his late father as gift is a personal effect and not liable to tax. Amendment by finance Act 2007 w. e. f. 1-04-2008 is prospective in nature. (AY. 2006-07)
Owais M. Husain v ITO(2018) 194 TTJ 102/ 167 DTR 49 (Mum.) (Trib.)

S. 4 : Charge of income-tax- Receipt arising on extra sale value of sugar did not arise to Assessee since the receipt was cast with the obligation to pay the same to sugar factories and hence, it had to be diverted by overriding title—Difference in profit was not to be included as income in hands of assessee.[ S.28(i) ]
Tribunal held that it was held that the Assessee/buyer had entered into agreements with three sugar factories which stipulated that in case the purchased sugar under the agreement is not exported for any reason, beyond the control of exporter, the buyer would then have the right to sell the sugar in domestic market. However, seller shall demand the difference towards additional realization and the buyer / exporter agreed for the same. Pursuant to the agreement, sugar which was picked up by the Assessee and in view of low quality of sugar, it could not be exported and it was sold in the open market. The Assessee in such scenario claimed to have sold the sugar at the rates lower than rates prevailing in the market in order to meet the demands of payment by the sugar factories. The average rate at which the Assessee sold the same was at Rs. 1233.50/-per quintal. However, ITAT had come to a finding that the sale price of sugar is to be adopted at RS. 1290/-per quintal. The Assessee claimed that extra amount arising on sale of sugar out of export quota of sugar is diverted by source, in view of the terms agreed upon by the assessee with the sugar factories. The question which arises is whether the amount reaches the hands of Assessee as its income and hence, is taxable in the hands of Assessee. In this regard, the ITAT has applied the principles laid down by the Supreme Court in CIT v. Sitaldas Tirathdas, holding that where there is an obligation to pay and it has to be diverted by overriding title, it could not be treated as income and that the difference in profit is not to be included as income in the hands of Assessee. (AY. 2002-03)
ACIT v. Deepak Jagdish Thakkar(2018) 161 DTR 49 / 191 TTJ 104 (Pune)(Trib.)

S. 4 : Charge of income-tax-Capital or revenue-Book profit-Sales tax subsidy granted by the Government for purpose of setting up or expansion of Mills would be capital receipt-Amended provisions treating subsidy or grant as income u/s 2(24)(xvii) are prospective in nature and not applicable to assessment year prior to AY. 2016-17)[S. 2(24)(xvii),28 (i),115JB]
Allowing the appeal of the assessee the Tribunal held that, Sales tax subsidy granted by the Government for purpose of setting up or expansion of Mills would be capital receipt and the said receipts cannot be added to book profit. Amended provisions treating subsidy or grant as income u/s 2(24)(xvii) are prospective in nature and not applicable to assessment year prior to AY. 2016-17) (ITA NoS. 979/1001/17 /Hyd/ 17 dt. 20-04-2018(AY. 2006-07, 2013-14)
Sanghai Industries Ltd. v. ACIT (Hyd.)(Trib.) www.itat.nic. (UR)

S. 4 : Charge of income-tax-Interest awarded under Land Acquisition Act is in nature of solatium and an integral part of compensation and receipt of same is a capital receipt whereas, interest awarded under the said act is on account of delayed payment of compensation and is revenue receipt. [S. 10(37), Land Acquisition Act, 1894, S, 28,34]
Tribunal held that; interest awarded under S. 28 of Land Acquisition Act is in nature of solatium and an integral part of compensation and receipt of said compensation is a capital receipt whereas, interest awarded under S. 34 of Land Acquisition Act is on account of delayed payment of compensation and is revenue receipt. (AY. 2011-12)
Dnyanoba Shajirao Jadhav v. (2018) 169 ITD 291 (Pune) (Trib.)

S. 4 : Charge of income-tax-Mutual concerns – Surplus earned was spent for common benefit of members for carrying on objects of the Club – Principle of mutuality is applicable and surplus cannot be brought to tax. [ S.28(i) ]
Dismissing the appeal of the revenue the Tribunal held that Surplus earned was spent for common benefit of members for carrying on objects of the Club therefore Principle of mutuality is applicable and surplus cannot be brought to tax. (AY. 2001-02 to 2010-11)
ITO v. Gymkhana Club. (2018) 168 ITD 64/ 167 DTR 113/ 192 TTJ 571 (Chd) (Trib.)

S. 4 : Charge of income-tax – Interest on amount of sundry debtors outstanding cannot be charged on accrual basis [S. 145]
Dismissing the appeal of the revenue, the Tribunal held that, Interest on amount of sundry debtors outstanding cannot be charged on accrual basis,whether to charge interest is business decision of assessee and not for assessing officer to consider. (AY. 2010-11)
DCIT v. Narayani Ispat Pvt. Ltd. (2018) 61 ITR 371 (Kol.) (Trib.)

S. 4 : Charge of income-tax-Pre-operative expenses— Interest from banks—Capital Receipt-Income from other sourceS. [S. 3,56, 145]
Assessee received interest from banks which was capitalized in the books of account as the interest accrued out of investment made in Banks from such borrowed Loan. AO assessed the interest as income from other sourceS. CIT (A) held that the very purpose of constitution of Assessee was to act as a SPV created by Govt of India and Govt. of West Bengal in form of JV with equal equity participation for implementation of rapid transport infrastructure in Kolkata.Both Central and State Govts were to provide requisite finances for implementation of such project. Funds from Central and State Govts flew directly to assessee as equity and subordinate Debt/LoanS. Objective was to create and maintain a fund for development of infrastructural assets on a continuing basiS. There was no profit motive as entire fund entrusted and interest accrued there from on deposits in bank though in name of assessee had to be applied only for purpose of welfare of State as provided in guidelines accordingly the method adopted by the assessee was up held. On appeal by the revenue the Tribunal up held the finding of the CIT(A).(AY.2010-11, 2011-12)
ITO v. Kolkata Metro Rail Corporation Ltd. (2017) 51 CCH 779 (2018) 196 TTJ 17(UO) (Kol) (Trib.)

S. 4 : Charge of income-tax-Celebrity-Damages for reputation-Compensation received by a film actress from Coca Cola India Limited (CCIL) towards damages caused to her reputation-Cannot be assessed as any benefit, perquisites arising to her out of exercise of profession-Not liable to tax [S. 2(24) 28 (i)]
Allowing the appeal of the assessee,Tribunal held that additional amount of RS. 95 lakhs received by assessee towards damages for being sexually harassed by Coca Cola India Limited (CCIL) employee, for having disparaged her professional reputation by false allegations and for repudiatory breach of contract by CCIL .Therefore such compensation could not be termed as any benefit, perquisites arising to assessee out of exercise of profession, hence, it cannot not be assessed as income either under S. 2(24) or under S. 28(i) and hence not liable to tax.(AY.2004-05)
Sushmita Sen. v. ACIT (2018) 172 DTR 201/ 196 TTJ 801 / (2019) 174 ITD 8 (Mum.) (Trib.)

S. 4 : Charge of income-tax – Income derived by a trade, professional or similar association from specific services performed for its members-Non-Resident-Mutuality – Liaison office of non-resident non profit organisation for the benefit of members in the absence of profit motive and surplus if any was ploughed back in to the organisation again to be utilised for same objects-Income cannot be asssseed as business income-Receipts from non members only 2.05% and also isolated incident which has not affected the dominant object of the applicant-Membership fee and contribution from members is also not liable to tax in India – Once principle of mutuality is applied, the question of a permanent establishment did not arise – Receipt or income cannot be taxed applying the principle of mutuality.[S. 28(iii)]
AAR held that Liaison office of non-resident non profit organisation for the benefit of members in the absence of profit motive and surplus if any was ploughed back in to the organisation again to be utilised for same objects therefore the income cannot be asssseed as business income. Receipts from non members only 2.05% and also isolated incident which has not affected the dominant object of the applicant. Membership fee and conTrib.ution from members is also not liable to tax in India under the provisions of income-tax Act or the DTAA. Once principle of mutuality is applied, the question of a permanent establishment did not arise. Where the principle of mutuality operates and the profits cannot be disTrib.uted, but only be utilised for the benefit of members and confined to the objects of the organisation, the receipts or income cannot be taxed.
International Zinc Association In re (2018) 404 ITR 766/167 DTR 81/ 303 CTR 474 (AAR)

S. 5 : Scope of total income–Charge of income-tax-Double taxation – Where the assessee has paid the income-tax at source in the State of Sikkim as per the law applicable at the relevant time in Sikkim, the same income was not taxable under the IT Act, 1961-. In a case of reasonable doubt, the construction most beneficial to the taxpayer is to be adopted. [S. 4,80TT,256(1),Sikkim State Income Tax Rules, 1948, Art. 371F]
Allowing the appeal of the assesse the Court held that; where theassessee has paid the income tax at source in the State of Sikkim as per the law applicable at the relevant time in Sikkim, the same income was not taxable under the IT Act, 1961. It is a fundamental rule of law of taxation that, unless otherwise expressly provided, income cannot be taxed twice. A taxing Statute should not be interpreted in such a manner that its effect will be to cast a burden twice over for the payment of tax on the taxpayer unless the language of the Statute is so compelling that the court has no alternative than to accept it. In a case of reasonable doubt, the construction most beneficial to the taxpayer is to be adopted. While S. 5 of the IT Act would not be applicable, the existing Sikkim State Income Tax Rules, 1948 would be applicable. Thus, on the income, it would appear that Income-tax would be payable, under Sikkim State Income Tax Rules, 1948 and not under the IT Act. Since Sikkim is a part of India for the accounting year, there would appear to be, on the same income, two types of income taxes cannot be applied. On the issue of double taxation reference was made to, Laxmipat Singhania v. CIT (1969) 72 ITR 291 (SC) (294) and Jain Brothers and Others v UOI (1970) 77 ITR 107 (SC). As regards other issue whether the income that is to be allowed deduction under section 80 TT of the IT Act is on ‘Net Income’ or ‘Gross Income’, becomes academic. (AY. 1986-87)
Mahaveer Kumar Jain v. CIT(2018) 404 ITR 738/165 DTR 113/ 302 CTR 1/ 255 Taxman 161(SC), www.itatonline.org

S. 5 : Scope of total income – Accrual – Interest – Interest on Inter-Corporate Deposits (ICDs) which had become non performing asset (NPA) in terms of prudential norms by RBI, having not accrued not assessable on “accrual” basis, in the hands of non-banking financial company.[S. 145]
Dismissing the appeal of the revenue the Court held that; Under section 45Q of the RBI Act read with the NBFCs Prudential Norms (Reserve Bank) Directions 1998, it was mandatory on the part of the assessee not to recognize the interest on the ICD as it had become a NPA. The assessee was bound to compute income having regard to the recognized accounting principles set out in Accounting Standard AS-9. AS-9 provides that if there are uncertainties as to recognition of revenue, the revenue should not be recognized. Accordingly, the argument of the revenue that the interest on the NPA can be said to have accrued despite it being a NPA is not acceptable.
CIT v. Vasisth Chay Vyapar (2018) 253 Taxman 401 / 301 CTR 263/ 163 DTR 169/ 410 ITR 244(SC)
Editorial : Order inCIT v. Vasisth Chay Vyapar (2011) 238 CTR 142 / 330 ITR 440 / 196 Taxman 169 / 49 DTR 300 (Delhi)(HC)

S. 5 : Scope of total income-Accrual-Mercantile system of accounting-Not liable to be taxed on notional interest on non-performing assets considering the guidelines of Reserve Bank of India. [S. 145]
Dismissing the appeal of the revenue the Court held that,though the assessee is following mercantile system of accounting, the interest on non performing assets is not taxable on accrual basis condidering the guidelines of Reserve Bank of India.
PCIT v. Kutch District Co-op Bank Ltd. (2018) 94 taxmann.com 298 (Guj.)(HC)
Editorial : SLP of revenue is dismissed,CIT v.Jamnagar District Co-Operative Bank Ltd (2018) 256 Taxman 212 (SC)

S. 5 : Scope of total income-Accrual-Mercantile system of accounting-Not liable to be taxed on notional interest on non-performing assets. [S. 145]
Dismissing the appeal of the revenue the Court held that, assessee a Co-operative Bank which followed mercantile system of accounting is not liable to be taxed on notional interest on non-performing assets.
PCIT v. Sarangpur Co-operative Bank Ltd. (2018) 258 Taxman 230 (Guj.)(HC)

S. 5 : Scope of total income-Accrual — Duty drawback is taxable when income has accrued.[S. 4, 145]
Court held that that,duty drawback is taxable when income has accrued.(AY.1999-2000)
CIT v. Maruti Udyog Ltd. (2018) 407 ITR 159 /(2019) 308 CTR 682 (Delhi) (HC)

S. 5 : Scope of total income-Co –operative society-Banking business-Accrual-Interest on doubtful debts or Non-Performing Assets (NPAs) without such interest being actually received or credited in profit & loss account of assessee-Not required to pay tax on interest income.[S. 43D]
Dismissing the appeal of the revenue, assessee, a co-operative society, carrying on banking business, was not required to pay tax on interest income on bad debts/doubtful debts or Non-Performing Assets (NPAs) without such interest being actually received or credited in profit & loss account of assessee.(AY. 2009-10, 2010-11)
CIT(A) v. Bijapur District Central Co-Opertaibe Bank Ltd (2018) 256 Taxman 51 (Karn)(HC)
Editorial : SLP of revenue is dismissed ; CIT v. Bijapur District Central Co-Opertaibe Bank Ltd(2019) 260 Taxman 297 (SC)

S. 5 : Scope of total income-Real income-Non-Banking financial company — Mercantile system of accounting —Interest on doubtful debts cannot be assessed as income.[S. 145]
Dismissing the appeal of the revenue the Court held that; the Tribunal was justified in holding that under the mercantile system of accounting, interest income did not accrue on the basis of the assessee’s contention that recovery as well as the interests on such deposits were doubtful. (AY. 2005-06)
CIT v. Pavitra Commercial Ltd. (2018) 402 ITR 66 (Delhi) (HC)

S. 5 : Scope of total income-Accrual-Interest on Government securities which has become due and payable alone can be considered as accrued and taxable. [S. 28(i), 145]
Dismissing the appeal of the revenue the Tribunal held that; Interest on Government securities which has become due and payable alone can be considered as accrued and taxable. Merely because in the books of account the interest income which is not due and payable is shown, that itself will not give a right to the Ld. AO to tax unless it has become due and payable as per section 5 of the Act. (AY.2008-09 to 2011-12)
ACIT v. Karnataka Bank Ltd.(2018) 63 ITR 433 (Bang.)(Trib.)

S. 5 : Scope of total income-Retention money-Merely because retention money was accounted for in books of account, same could not be brought to tax without income having been actually accrued-Retention money is taxable in assessment year in which it was actually received.[S. 4, 145]
Dismissing the appeal of the revenue the Tribunal held that, merely because retention money was accounted for in books of account, same could not be brought to tax without income having been actually accrued to assessee. Retention money is taxable in assessment year in which it was actually received by the assessee. (AY.2010-11, 2012-13)
DCIT v. Commtel Networks (P.) Ltd. (2018) 171 ITD 360 (Mum.) (Trib.)

S. 5 : Scope of total income-Accounting Standard 9-Accrual-Since agreement was valid for a period of five years and assessee had to carry on certain activities throughout period of five years by taking participation into management of business affairs of Vibes clinic among other responsibilities, assessee was justified in deferring income over a period of five years. [S. 145]
Allowing the appeal of the assessee the Tribunal held that; assessee had given its trademark ‘Vibes’ for a period of five years and received consideration, since agreement was valid for a period of five years and assessee had to carry on certain activities throughout period of five years by taking participation into management of business affairs of Vibes clinic among other responsibilities, assessee was justified in deferring income over a period of five years, i.e., tenure of agreement. (AY.2007-08)
Alankar Slimming & Cosmetic Clinic (P.) Ltd. v. ITO (2018) 171 ITD 1(Kol.)(Trib.)

S. 5 : Scope of total income-Non-Resident-Alleged deposit in HSBC foreign bank Account at Geneva- A non-resident having money in a foreign country cannot be taxed in India if such money has neither been received or deemed to be received, nor has it accrued or arisen to him or deemed to accrue or arise to him in India-Addition cannot be made for the alleged deposit in foreign Bank accounts [S. 5 (2),6, 9, 68]
Dismissing the appeal of the revenue the Tribunal held that, the assessee being a non-resident, having money in a foreign country cannot be called upon to pay income tax on that money in India unless it satisfies the tests of taxability on non-resident under the provisions of the Act, which in the instant case is not getting satisfied in the case of the assessee. Thus the bank account of HSBC Bank, Geneva is outside the purview of this Act. A non-resident having money in a foreign country cannot be taxed in India if such money has neither been received or deemed to be received, nor has it accrued or arisen to him or deemed to accrue or arise to him in India. Accordingly addition cannot be made for the alleged deposit in foreign Bank accounts. (AY. 2006-07, 2007-08)
Dy CIT v. Dipendu Bapalal Shah(2018) 171 ITD 602/(2019) 197 TTJ 149 (Mum.) (Trib.) www.itatonline.org

S. 5 : Scope of total income–Non-resident foreign national– Alleged deposits in HSBC Foreign Bank account at GENEVA– Deletion of the addition by the CIT(A) is held to be not justified– AO is directed to make further investigation to find out whether the source of the deposits in foreign account originated from India. [S. 5(2), 6, 9]
AO made an addition on the ground that the assessee could not prove with documentary evidences that the deposits are not from India. CIT(A) deleted the addition on the ground that it is a foreign bank account of a non-resident and the deposits therein cannot be added in the hands of the assessee individual. On appeal by the revenue, the Tribunal held that the assessee has used his invalid Indian passport which he should have surrendered to the Indian authorities in opening a bank account in Geneva. Hence, the intent of the assessee is not above board. Further it is settled law from the Hon’ble Apex Court in Kapurchand Shrimal (1981) 131 ITR 451 (SC) that the revenue authorities are entitled to look into the surrounding circumstances and economic reliability. The Assessing Officer is directed to make further investigation into the source of the deposits in the bank accountS. Accordingly, the matter was set aside to the Assessing Officer. (ITA No. 5889/Mum./2016 dt.01.06.2018) (AY. 2003-04),
DCIT v. Rahul Rajnikant Parikh & Ors (Mum.) (Trib.), www.itatonline.org

S. 5 : Scope of total income – Notional interest – Charging of notional interest for delayed remittance of collection made by its agent was held to be not justified. [S. 145]
Tribunal held that, since the assessee had not bargained for interest on late remittance of subscriptions, revenue authorities were not justified in charging notional interest due to delayed remittance of collection by its agent. (AY. 1987-88 to 1992-93)
Sahara India Ltd v ACIT (2018)168 ITD 1/ 164 DTR 49/ 192 TTJ 655 (TM) (Luck.)(Trib.)

S. 5 : Scope of total income-Non-resident — Employees of Indian company sent on assignments-Employees residents of those countries and liable to tax on their worldwide income in those countries for period of their assignment income did not accrue in India and not chargeable to tax in India — Indian Company is not liable to deduct tax on salaries paid in India — Once employees returned and became residents Indian Company can give credit for taxes deducted during deputation outside India-DTAA-India – Germany – USA [S. 2(45) 4, 5(2) 9(1)(ii) 15, 90, 192, art. 4(1), 23,25]
Authority held that; Employees of Indian company sent on assignments, employees residents of those countries and liable to tax on their worldwide income in those countries for period of their assignment income did not accrue in India and not chargeable to tax in India Indian Company is not liable to deduct tax on salaries paid in India. Once employees returned and became residents Indian Company can give credit for taxes deducted during deputation outside India.
Hewelett Packed India Software Operation P. Ltd., In re (2018) 401 ITR 339/ 162 DTR 337/ 301 CTR 12 (AAR)

S. 5 : Scope of total income-Non-resident — Employees of Indian company sent on assignments-Employees residents of those countries and liable to tax on their worldwide income in those countries for period of their assignment income did not accrue in India and not chargeable to tax in India — Indian Company is not liable to deduct tax on salaries paid in India — Once employees returned and became residents Indian Company can give credit for taxes deducted during deputation outside India-Indian company is not liable to deduct tax on split pay and perquisites received in India but accrued outside India. DTAA-India – USA [S. 2(45) 4, 5(2) 9(1)(ii), 15, 90, 192, art. 4(1), 25]
Authority held that; Employees of Indian company sent on assignments, employees residents of those countries and liable to tax on their worldwide income in those countries for period of their assignment income did not accrue in India and not chargeable to tax in India Indian Company is not liable to deduct tax on salaries paid in India. Once employees returned and became residents Indian Company can give credit for taxes deducted during deputation outside India. When payments were received from more than one source during a particular year, the present employer could give credit for the taxes deducted during his deputation outside India. In the absence of any other provision, recourse to the specific provision in S. 192(2) alone was possible. This provision cast an obligation on the employee to furnish to the employer, the applicant, such details of the salary, etc., received by him from the other employer, the tax paid or deducted therefrom, and other particulars, and the employer would examine and take into account such details before computing the tax deductible.
Texas Instruments (India) Pvt. Ltd., In Re (2018) 401 ITR 289 / 253 Taxman 509 /162 DTR 305/ 301 CTR 1 (AAR)

S. 6(1) : Residence in India – Individual – Non-resident-Assessee was outside India for a period of more than 182 day-,Salary income of assessee received outside India is not liable to tax merely because his foreign employer had deducted the tax at source on such income. [S. 5(2), 192]
Allowing the appeal of the assessee the Tribunal held that ; since assessee was outside India for a period of more than 182 days, he had became a non-resident. Accordingly the salary income of assessee received outside India is not taxable in India merely because was deducted on such income.(AY.2013-14)
Avdesh Kumar v. DCIT (2018) 172 ITD 73/ 67 ITR 42 (SN) (Delhi) (Trib.)

S. 6(1) : Resident in India-Scope of total income-Non-Resident-Stationed in Switzerland for 331 days-Rendered his services outside India-Foreign assignment allowance received by him abroad, was not liable to tax in India .[S. 5 (2)]
Dismissing the appeal of the revenue, the Tribunal held that ;since services of assessee were utilised outside India and, moreover, both accrual and receipt of income happened outside India, same was outside ambit of tax as per provisions of section 5(2) of the Act.(AY.2013-14)
DCIT v. Sudipta Maity. (2018) 172 ITD 94 (Kol.)(Trib.)

S. 6(5) : Residence in India-Deemed residence-Where status of assessee was taken as resident for computing his business income, his status would remain the same for salary income earned outside India. [S. 5]
On appeal, the Tribunal held that the residential status of the assessee for the business income earned by him was taken as resident. Thus, the assessee ought to be treated as a resident for other sources of income as well in light of section 6(5) and hence the matter was remanded back to the CIT(A). (AY. 2011-12)
ITO v. Rajesh Joshi (2018) 163 DTR 137 (Asr.)(Trib.)

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection – development of Basic engine-design a new 3 valve cylinder head for improvement of fuel efficiency, performance and meeting Indian emission standard – Payment is not royalty-DTAA-India – Australia. [S. 9(1)(vi), art. 6(2)]
Dismissing the appeal of the revenue the Court held that the engine has already been developed by the assessee and scope of the technical services agreement was only to design a new 3-valve cylinder head with a specified combustion system for considerable improvement of fuel efficiency, performance and meeting the Indian emission standardS. All products, design of the engines and vehicles are supplied by the assessee. On completion all the drawings are also delivered by the Austrian company to the assessee. The entire project was carried out in Austria and no part of the project was performed in India. Accordingly the payment does not constitute royalty. (AY. 2002-03)
DIT v. TVS Motors Co. Ltd. (2018) 259 Taxman 140 /(2019) 176 DTR 137 (Mad.)(HC)

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection – Representative assessee-Representative assessee not only represents an income which has directly arisen or accrued in India but also that which has indirectly arisen or accrued in this country, through a business connection-International Cricket Council chose India, Pakistan and Sri Lanka to co-host World Cup 1996- Order of Tribunal is setaside.[S. 5 (1) (5(2), 160, 161,163, 194E, 201(1)]
Allowing the appeal of the revenue the Court held that ; the Tribunal has made a complete misunderstanding of the law in entertaining the opinion that since the income made by the non-resident Cricket Boards were held to have directly arisen in India, this income could not be deemed to have arisen or accrued to the non-resident in India and the responsibility of the representative assessee was confined to accounting for income which had directly arisen or accrued in India. Furthermore, if the department chooses to make an assessment of the person resident outside India directly, there is no question of assessment of his agent or a representative assessee. In fact, section 166 very clearly lays down that nothing in the foregoing sections relating to representative assessee shall prevent either the direct assessment of the person for whom the money is receivable. The Tribunal, made a clear mistake in believing that since it was held in an earlier proceeding that the income in question arose in India, a representative assessee could not be liable because it was only liable according to it in respect of the income which was deemed to have arisen in India. The effect of the order of the Tribunal is that in spite of a foreign resident having an agent in India and income directly arising in this country to the foreign resident, the agent would escape liability to assessment. Accordingly the order of Tribunal is set aside. (AY. 1996-97)
DIT(IT) v. Board of Control for Cricket in Sri Lanka (2018) 259 Taxman 6 (Cal.)(HC)

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection-Reassessment-A representative assessee represents all income of a non-resident accruing or arising in India directly or indirectly from any business connection in India. It is wrong to contend that the representative assessee is not liable for income which has directly arisen or accrued in India. It is also wrong that if the department chooses to make an assessment of the person resident outside India directly, it cannot assess the agent or representative assessee. The Dept has the choice of proceeding against either-Order of Tribunal is set aside [S. 5, 9(1),148, 160,163
Question before the High Court was :
“Whether on the facts and in the circumstances of the case the Learned Tribunal erred in law in cancelling the order of assessment under section 147 passed by the Assessing Officer without considering its earlier decision wherein the Learned Tribunal held that the order under Section 163 treating PILCOM as agent of Non-Resident Boards and players was valid?”
Allowing the appeal of the revenue the Court observed that,the Tribunal, in our opinion, made a clear mistake in believing that since it was held in an earlier proceeding that the income in question arose in India, a representative assessee could not be liable because it was only liable according to it in respect of the income which was deemed to have arisen in India. The effect of the order of the Tribunal is that inspite of a foreign resident having an agent in India and income directly arising in this country to the foreign resident, the agent would escape liability to assessment. In those circumstances, the order of the Tribunal dated 6th June, 2007 is set aside. The questions of law framed by the order of this Court dated 26th August, 2008 are answered in the affirmative in favour of the Revenue. The orders of the Assessing Officer and of the Commissioner of Income Tax (Appeals) are affirmed. The points left open by the Tribunal in its impugned order may be decided by it in accordance with law.
DIT v. Board of Control for Cricket in Sri Lanka Through PILCOM (2018) 259 Taxman 6 / 305 CTR 965/ 172 DTR 325(Cal)(HC)www.itatonline.org

S. 9(1)(i) : Income deemed to accrue or arise in India –Business connection-Liaison Offices In India is not permanent establishment —Income directly or indirectly attributable to these branches or offices was not taxable in India-DTAA-India Japan. [Art. 5(6)(E)]
Dismissing the appeal of the revenue the Court held that;the Tribunal was right in holding that the Indian branches or offices of the assessee and their activities could not be regarded as permanent establishments of the assessee in India and the income directly or indirectly attributable to these branches or offices was not taxable in India, that the assessee did not have any permanent establishment in India and its income from business turnover or imports in India was exempt in India in view of the Double Taxation Avoidance Agreement between India and Japan and that the burden of proof had shifted to the authorities. (AY. 2001-02)
DIT v. Mitsui And Co. Ltd. (2018) 407 ITR 294 (Delhi) (HC)

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection-Permanent establishment—Nomanagement activity was conducted in India-There was no fixed place of Permanent establishment-No business connection question of estimated income did not arise—Not liable to deduct tax at source or interest- DTAA-India –South Korea.[S. 234A, 234B,Art.5,7]
AO assessed in its entirety as permanent establishment of assessee, also agency PE as place of management for Southeast operations and also service PE which was affirmed by DRP. On appeal Tribunal held that there was seamless information exchange between employees of assessee and expat employees, however such information exchange related to models/designs to liking of Indian consumers, plans and strategies relating to sale of products, detailed stock/logistical status, market strategies both mid and long terms etc. None of statement showed that any activity of global business management (GBM) had ever been conducted in India or market survey conducted in India had nothing to do with business of Indian subsidiary. Accordingly in absence of proof as to any management activity of assessee being conducted in India it could not be held that through expatriate employees assessee was conducting business of assessee in India. There was no fixed place PE of assessee constituted through expatriated employeeS. Tribunal also held that as there was no business activity that was conducted by assessee through expatriate employees, thus question of estimated income did not arise and consequently liability of assessee to deduct tax at source or interest liability u/s 234 A and 234B also did not arise.(AY. 2004-09 to 2014-15)
Samsung Electronics Co. Ltd. v. Dy. CIT (IT) (2018) 170 DTR 85 / 64 ITR 99 / 193 TTJ 769 (Delhi)(Trib.)

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection – Various coordination/facilitation services rendered- Business of developing and producing entertainment serials for audio visual platform-Consideration cannot be assessed as royalty-DTAA-India-South Africa. [S. 9(1)(vi),9(1) (vii), Art. 12]
Tribunal held that, various coordination/facilitation services rendered such as, arranging for locational crew, producer, transportation, paper work for various stunts to be performed and other requirements for setting up and filming series, etc., were in nature of Line Production Services, same could not be termed as technical, managerial or consultancy services. Accordingly the consideration received by assessee for rendering of aforesaid services, could not be brought to tax as FTS. Tribunal also held that the consideration cannot be taxes as royalty since ownership of copyright remained vested with Endemol India. (AY. 2012-13)
Endemol South Africa (Proprietary) Ltd. v. Dy. CIT (2018) 172 DTR 111 / 196 TTJ 594 / 67 ITR 520 / 98 taxmann.com 227 (Mum.)(Trib.)

S. 9(1)(i) : Income deemed to accrue or arise in India– Reimbursement of expenses – Failure to substantiate on basis of any clinching evidence – Assessable as business income-India-Nether land.[art.7,12]
Tribunal held that assessee failed to substantiate on basis of any clinching evidence that consideration received for services rendered by it to Indian Hotels were in nature of reimbursement of expenses incurred by assessee and there was no markup or profit made by rendering said services, its claim that same not being in nature of income, was not liable to be taxed in India, could not be accepted.(AY.2009-10)
Renaissance Services BV. v. DIT (IT) (2018) 171 ITD 381/ 171 DTR 30/ 195 TTJ 1049(Mum.) (Trib.)

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection-Subsidiary of a foreign company constitutes “business connection” and/ or “fixed Permanent Establishment” and/or “Dependent Agent Permanent Establishment” of assessee in India-Held No, (b) whether any attributes of profits on account of signing, network planning and negotiation of off-shore supply contracts in India could be attributed to such business connection/ permanent establishment-Held No and (c) whether notional interest on delayed consideration of supply of equipment and licensing of software taxable in the hands of assessee as interest from vendor financing-Held No-DTAA-India – Finland – Majoriy view is in favour of the assesee. [Art.5, 7]
These appeals pertaining to Assessment Years 1997-98 & 1998-99 have been taken up for hearing by this Special Bench in pursuance of direction given by the Hon’ble Delhi High Court vide judgment and order dated 7th September, 2012, passed in ITA Nos. 395 of 2005; 1137 & 1138 of 2006, 503 and 1324 of 2007; and 30 of 2008. The Hon’ble High Court has remanded certain issues back to the Tribunal to be decide afresh as to, firstly, whether the Indian subsidiary of the assessee would provide business connection or a permanent establishment in India; secondly, even if so, then is there any attributes of profits on account of assigning, networking planning and negotiation of off-shore contract supply in India and if yes then to what extent and basis thereof; and lastly, the question of notional interest on delayed consideration received for supply of equipment and software, is taxable in the hands of the assessee as interest from vendor financing.
All the issues referred by the High Court is answered in favour of the assessee by majority view. ie, Merely having a subsidiary company or if foreign enterprise has a control on that company which carries out the business in that country (India) will not itself constitute a PE. Nothing is taxable on account of signing, network planning and negotiation of off-shore supply contracts, therefore, there is no question of any attribution of income on account of these activities which are purely related to supply contracts. Accordingly, the issue of attribution which has been remanded back by the Hon’ble High Court has become purely academic. After considering the relevant finding and rival contentions, we find that, it has not been brought on record that in any of the contract the assessee had charged any interest on delayed payment or providing any credit facilities to its customers or any customer has paid any such amount for each day elapsed from the due date to the actual payment. Once none of the parties have either acknowledged the debt or any corresponding liability of the other party to pay, then it cannot be held that any income should be taxed on notional basis which has neither accrued nor received by the assessee.
Minority view, is; the Tribunal held that the assessee company had a PE in India, by way of the premises and existence of its Indian subsidiary Nokia India Pvt Ltd, and that the profit attributable to the specified operations of this PE are 3. 75% of total sales of the equipment in India. In the result, while I uphold the action of the CIT(A) in principle, I marginally reduce the quantum of profits attributable to the PE. As against profit @ 5% of sales held to be attributable to the Indian PE, I hold the profit on 3. 75% of sales to be attributable to PE in respect of the specified activities.. In the result, in my considered view, the plea of the assessee against the existence of business connection and the existence of permanent establishment is to be rejected, and plea of the assessee on the attribution of profit is to be partly accepted in the terms indicated above. To this extent, even as I humbly bow to the majority so far results of these appeals are concerned, I disassociate myself with the order as finalized by the majority. Save on the above points, I am in considered agreement with the conclusions arrived at in the lead order and I respectfully endorse the same.(AY.1997-98,1998-99)
Nokia Networks OY, v. JCIT (2018) 65 ITR 23 /167 DTR 137/195 TTJ 137 / 171 ITD 1 (SB) (Delhi (Trib.) www.itatonline.org

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection-Profit earned from offshore supply of installation and commissioning activities of equipments relatable to operations carried out in India is held to be taxable since it had supervisory Permanent establishment in India – DTAA-India-China .[Art.5]
Tribunal held that,profit earned from offshore supply of installation and commissioning activities of equipments relatable to operations carried out in India is held to be taxable since it had supervisory Permanent establishment in India. (AY. 2013-14)
Shanghai Electric Group Co. Ltd v. Dy. CIT (2018) 170 ITD 34 /165 DTR 225 (Delhi) (Trib.)

S. 9(1)(i) : Income deemed to accrue or arise in India – Company situated in UAE but having effective control and management situated in Germany could not claim benefit of the India-UAE tax treaty but it can claim benefits of the India-Germany tax treaty.-DTAA-India UAE Germany.[Art.4,8,29]
The assessee was a shipping company. It was denied the benefit of India-UAE DTAA shipping company by invoking article 29 on grounds that the said company had got registration for doing its business in UAE whereas its place of effective control and management was situated outside UAE. In order to invoke article 29 of India-UAE DTAA, what is to be established is that if assessee-company was not formed in UAE, it would not have been entitled for such benefits. It was noted that the entire share capital of the assessee company was held by German entities but then in Indo-German DTAA also same treaty protection with regards to taxability of shipping profits only in State of residents were available and hence the assessee company was to be formed in UAE or in Germany, would not have any material difference so far as non-taxability of said income in India is concerned. (AY. 2008-09)
ITO (IT) v. Martrade Gulf Logistics FZCO-UAE (2018) 162 DTR 22 / 191 TTJ 575 (Rajkot)(Trib.)

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection-Shipping, Inland waterways transport-Matter remanded-DTAA-India – Singapore. [Art.8,24]
Tribunal held that even if income was actually exempt from tax in residence jurisdiction, given unambiguous thrust of treaty on income being subjected to tax in one contracting State to be able to claim treaty protection in other contracting State, and avoidance of double non-taxation being a clear objective of the Indo Singapore tax treaty, such an exempt income would also be eligible to get treaty protection in source State. Since revenue authorities failed to consider aforesaid aspect of case, impugned order was to be set aside and matter was to be remanded back to CIT(A)for adjudication de novo in light of evidence adduced by assessee. (AY. 2015-16)
BP Singapore Pte Ltd. v. ITO IT (2018) 168 ITD 325 (Rajkot) (Trib.)

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection-In absence of furnishing any shred of credible evidence that shows direct involvement from Japan in making sales to customers in India estimation of rate of net profit at 10 per cent was reasonable and amount of net profit attributable to marketing activities carried out in India would be 30 per cent of amount of net profit relatable to sales in India- DTAA-India –Japan, [Art. 5, 7(a),(7)(c)]
Tribunal held that, No evidence had been brought on record to demonstrate as to how customers in India were approaching assessee in Japan to discuss and finalize their requirements and prices. In absence of assessee furnishing any shred of credible evidence showing its direct involvement from Japan in making sales to customers in India and proving that role of DAIPL was simply confined to a communication channel, entire activity starting from identifying customers, approaching them, negotiating prices with them and finalization of products and prices were done by DAIPL in India not only for products sold directly by them as disTrib.utor, but also for which assessee was claiming to have made direct saleS. As the DAIPL was dependent agent PE of assessee in India and estimation of rate of net profit at 10 per cent was reasonable and amount of net profit attributable marketing activities carried out in India would be 30 per cent of amount of net profit relatable to sales in India. (AY.2006-07)
Daikin Industries Ltd. v. ACIT (2018) 171 ITD 301/65 ITR 693/ 195 TTJ 663 /( 2019) 177 DTR 214(Delhi) (Trib.)

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection-Franchise of Dominos Pizza-Profit and loss from business belonged to Jubilant and no activities were carried out by jubilant on behalf of assessee, Jubilant did not constitute a Permanent Establishment of assessee in India hence not liable to tax in India-DTAA-India-UK.[Art.5]
Assessee, US company, entered into Master Franchise Agreement (MFA) with Indian company (Jubilant) for franchise of Dominos Pizza Store and provided certain store/consultancy services to Jubilant and assessee was entitled to charge 3 per cent of sales of store of Jubilant and further 3 per cent on sale of their sub-franchise store. The AO held that, assessee had exclusive franchise right in India and Jubilant did not have economic independence and its modus operandi was not on principal to principal basis and, therefore, Jubilant was dependent agent Permanent Establishment.Tribunal held that profit and loss from business belonged to Jubilant and no activities were carried out by Jubilant on behalf of assesse, therefore, Jubilant did not constitute a Permanent Establishment of assessee in India. (AY.2012-2013)
DCIT v. Dominos Pizza International Franchising Inc. (2018) 171 ITD 321 / 193 TTJ 963 / 166 DTR 201 (Mum.)(Trib.)

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection-For considering the permanent establishment in Article 5(2)(i) the threshold duration is 9 months-Income is not chargeable to tax in India-DTAA-India–Mauritius. [S. 90, Art. 5(2)(i),7]
It has been held by the appellate Tribunal that PE establishment in Article 5(2)(i) of DTAA between India and Mauritius, the threshold duration is 9 months. Contract duration of both contracts are less than the said threshold and therefore, assessee does not have a PE as per that Article. Income is not chargeable to tax in India.(AY. 2006-07)
GIL Mauritius Holdings Ltd. v. Dy. DIT (IT) (2018) 196 TTJ 896 (Delhi)(Trib.)

S. 9(1)(i) : Income deemed to accrue or arise in India-Permanent Establishment-Global payment solutions facilitating use of electronic forms of Payment, ie by credit card, instead of cash and cheques-Banks and financial Institutions–There was a fixed place permanent establishment, service permanent establishment and dependent agent permanent establishment-On such attribution of income to the permanent establishment, the tax was required to be withheld at full applicable rate at which the non-resident is subjected to tax in India.Even automatic equipment like server can also create a permanent establishment and there was no requirement of human intervention-DTAA-India-Singapore .[Art. 5, 7, 12]
AAR held that the applicant had a permanent establishment in India under the provisions of article 5 of the DTAA in respect of the services rendered with regard to use of a global network and infrastructure to process card payment transactions for customers in India. There was a fixed place permanent establishment, service permanent establishment and dependent agent permanent establishment.On such attribution of income to the permanent establishment, the tax was required to be withheld at full applicable rate at which the non-resident is subjected to tax in India.Even automatic equipment like server can also create a permanent establishment and there was no requirement of human intervention.
Mastercard Asia Pacific Pte. Ltd. Singapore, In Re (2018) 406 ITR 43/ 303 CTR 305/ 167 DTR 321 (AAR)

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection-Front-end fee payable by a customer in India, for appraisal of loan application carried out outside India, under financing arrangement with Applicant is not taxable as income from ‘interest’ and said fee is also not taxable as fee for technical services (FTS) under as they do not pass ‘make available’ test-Not liable to deduct tax at source – DTAA India-France . [S. 195, Art. 12, 13]
AAR held that Front-end fee payable by a customer in India, for appraisal of loan application carried out outside India, under financing arrangement with Applicant is not taxable as income from ‘interest’ and said fee is also not taxable as fee for technical services (FTS) under as they do not pass ‘make available’ test.
Societe De Promotion Et De Participation Pour La Cooperation Economique, In re (2018) 256 Taxman 129/166 DTR 361 / 303 CTR 144 (AAR)

S. 9(1)(i) : Income deemed to accrue or arise in India – Permanent establishment-Main business and revenue earning activities of assessee carried on in and from Saudi Arabia, and monitored by Saudi Arabian Ministry-Services carried on by Indian Company in nature of support services only and not constituting main business of Non-Resident-Non-Resident retaining with itself authority to finalise marketing strategies and terms of contracts directly with customers — Indian Company cannot be held to be a Permanent Establishment of Non-Resident- DTAA-India-Kingdom of Saudi Arabia.[Art, 5, 12]
AAR held that, main business and revenue earning activities of assessee carried on in and from Saudi Arabia, and monitored by Saudi Arabian Ministry.Services carried on by Indian Company in nature of support services only and not constituting main business of Non-Resident.Non-Resident retaining with itself authority to finalise marketing strategies and terms of contracts directly with customers.Indian Company cannot be held to be a Permanent Establishment of Non-Resident. Considering the contract the AAR held that performance of service the Indian Company could not be termed as agent of the applicant, as this was done on its own behalf as per the role assigned to it.AAR also held that the applicant had given an undertaking in the question itself that the Indian company would be compensated on arm’s length basis in accordance with the Indian transfer pricing laws and legislation.
Saudi Arabian Oil Company, In Re (2018) 405 ITR 83 / 303 CTR 225/ 167 DTR 185(AAR)

S. 9(1)(1) : Income deemed to accrue or arise in India – Permanent Establishment – Payment received by the applicant from the Indian hotel owner for provision of global reservation services (“CRS”) would be chargeable to tax in India under S. 9(1)(1) read with articles 5 and 7 of the India-Luxemburg DTAA as business income and is attributable to the applicant’s permanent establishment in India. Duty of Authority to look at all aspects of questions set forth to enable it to pronounce ruling on substance of questions posed. Giving Ruling on stream of income without regard to other business operations and streams of income leaving other provisions open for regular assessment -DTAA-India – Luxembourg. [Art. 5,7, 12, R.12]
AAR held that payment received by the applicant from the Indian hotel owner for provision of global reservation services(“CRS”) would be chargeable to tax in India under S. 9(1)(1) read with articles 5 and 7 of the India-Luxemburg DTAA as business income and is atttrubutable to the applicant’s permanent establishment in India. In view of this the question whether these payments would be characterised as “royalty” or fees for technical services “becomes wholly academic and is therefore, not considered necessary to be answered. AAR also held that duty of Authority to look at all aspects of questions set forth to enable it to pronounce ruling on substance of questions posed. Giving Ruling on stream of income without regard to other business operations and streams of income leaving other provisions open for regular assessment.
Frs Hotel Group (LUX) S. A.R.L., IN RE (2018) 404 ITR 676/ 167 DTR 57 / 256 Taxman 361/ 303 CTR 652 (AAR)

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection–Title in equipment imported transferred outside India —Delivery of equipment outside Indiaand consideration for supply of plant and equipment paid in Euros to Bank outside India – Not liable to deduct tax at source. [S. 195]
AAR held that, title in equipment imported transferred outside India delivery of equipment outside India and consideration for supply of plant and equipment paid in Euros to Bank outside India therefore the applicant is not liable to deduct tax at source.
Michelin Tamil Nadu Tyres P. Ltd., In Re. (2018) 401 ITR 164/ 301 CTR 397 / 163 DTR 385 (AAR)

S. 9(1)(i) : Income deemed to accrue or arise in India-Business connection-Technical and equipment and services for events – DTAA-India – Belgium–Portugal. [S. 9(1)(vii), 90, 195,Art. 7, 12]
Applicant provided with exclusive office space as well as on-site space and lockable space for storing tools and equipment, identifiable place of business at its disposal, constitutes permanent establishment therefore income from activity is chargeable to tax in India as business profits.
Organising committee of commonwealth games not acquiring Know-how or ability to use it. “Make Available” clause is not satisfied. Income does not constitute royalty hence income is not taxable as fees for technical services
Production Resource Group, In Re v. (2018) 401 ITR 256/ 301 CTR 62 / 163 DTR 266 (AAR)

S. 9(1)(v) : Income deemed to accrue or arise in India – Interest-DTAA would apply only when recipient of interest was not having a permanent establishment in country where it had received interest-DTAA-India – France. [Art. 12]
Allowing the appeal of the assesse the Tribunal held that; provisions of sub-article (1) and (2) of article 12 of India-France DTAA would apply only when recipient of interest was not having a permanent establishment in country where it had received interest. (AY. 2005-06)
Credit Agricole Corporate & Investment Bank v. DIT (IT) (2018) 168 ITD 553 (Mum.) (Trib.)

S. 9(1)(v) : Income deemed to accrue or arise in India – Interest-Guarantee fee earned by the assessee on providing guarantee to various banks to extend credit facilities to its Indian subsidiaries would not fall within the term interest and also in view of clause 3 of Article 23 of the India UK treaty in the absence of any specific provision dealing with corporate or bank guarantee recharge, had to be taxed in India as ‘Income from Other Sources’. Also amount paid by AE for seconding its employee was taxable in India or not was remanded back to determine the nature of services rendered in light of the secondment agreement-DTAA-India–UK. [S. 9(1)(vii), Art. 23(3)]
The assessee provided guarantee to various banks to extend credit facilities to its Indian subsidiaries and the guarantee fee charged by it would not fall within expression of ‘interest’ and in view of clause (3) of article 23 India-UK Treaty, in absence of any specific provision dealing with corporate/bank guarantee recharge, same had to be taxed in India as ‘Income from other sources’.

The assessee received certain amount from its subsidiary on account of services rendered by senior management employee seconded to it. The assessee submitted that the said amount represented expenditure incurred by them on employee and same was reimbursed by Indian entity whereas the AO took a view that seconded person was rendering specialist consultancy services for benefit of India AE and chargeable to tax in India. However, since the assessee failed to bring the secondment agreement and the salary reimbursement agreement on record, the matter was restored back to the AO to determine the nature of services rendered. (AY. 2011-12).
Johnson Matthey Plc v. Dy. CIT(IT) (2018) 161 DTR 132 / 191 TTJ 1 (Delhi)(Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty – Fees for technical services – Developed basic engine and sent same to a non-resident company of Austria to design a new 3-valve cylinder head for improvement of fuel efficiency, performance and meeting Indian emission standard, payment made to Austrian company would not constitute royalty-DTAA-India –Austria. [Art. 6(2),12]
Dismissing the appeal of the revenue the Court held that, Developed basic engine and sent same to a non-resident company of Austria to design a new 3-valve cylinder head for improvement of fuel efficiency, performance and meeting Indian emission standard, payment made to Austrian company would not constitute royalty.(AY.2002-03)
DIT v. TVS Motors Co. Ltd. (2018) 259 Taxman 140/ (2019) 176 DTR 137 (Mad.)(HC)

S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty-Deduction at source-Non-resident- Licence fee–Paid for copy righted article-Maintenance fees -Training fees-Not liable to deduct tax at source- DTAA-India – USA .[S. 195, 197,201, Art.7,12]
AO held that foreign remittance made by assessee to Fair Isaac International Corpn. towards ‘license fees’ was by way of “royalty” was taxable in India as contemplated in Article 12 of the India-USA Tax Treaty as the assessee neither withheld tax while making remittance nor obtained a certificate for non-deduction of tax at source u/s. 197, AO treated the assessee as being in default within meaning of S.201 which was up held by the CIT(A).Tribunal held that the assessee has had made remittance for a non-exclusive and non-transferable license to use copyrighted article i.e “Blaze advisor” software by Fair Isaac International Corpn which had retained with itself copyrights of same, therefore, amount received by said company/ licensor from assessee did not give rise to any royalty income within meaning of Article 12(3) of the India-USA tax treaty. No liability was cast upon assessee to deduct tax at source at time of making of remittance, hence assessee could not be treated as an assessee in default within meaning of S. 201. The said company did not have a PE in India, hence its business profits from rendering maintenance services also could not be brought to tax in India under Article 7 of India-USA Tax Treaty.Accordingly not liable to deduct tax at source.Rendering of training services by F company could also assume same character as that of software license receipts, and as such would be in nature of its business profits under Article 7 of the India, accordingly not liable to deduct tax at source.(AY. 2009-10)
Reliance General Insurance Co. Ltd. v. ITO (IT)(2018) 171 DTR 185 / 196 TTJ 244/ 67 ITR 26 (SN) (Mum.) (Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty-Purchase of software does not fall in realm of ‘royalty’-No liability to withhold tax-Cannot be held to be in default-DTAA-India–USA-Singapore –Germany .[S. 90(2),194, 195 201(1) (201(IA)]
Allowing the appeal of the assessee the Tribunal held that payment made for purchase of software was not royalty as per definition of ‘royalty’ under DTAA between India and USA, Germany and Singapore, since term ‘royalty’ under DTAA with these different countries had not been amended. Law could not compel a person to do something which was impossible to perform. Even if definition of ‘royalty’ under the Act stand amended but assessee was not liable to withhold tax on payments made to Non-resident entities on account of purchase of software. As on date of payment, assessee was not liable to withhold tax u/s 195 thus no liability could be fastened on assessee to deduct tax at source on basis of subsequent amendments made in the Act in relation to payments made to Non-resident, on date anterior to date of amendment, though retrospectively applied, Clarificatory nature of amendment to section 9(1)(vi) was applied.(AY.2007-08)
Tata Technologies Ltd. v. Dy. CIT (IT)(2018) 193 TTJ 833 (Pune) (Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty –Amount paid by AE for sale of software is not royalty-Right to use copy right –Matter remanded-DTAA-India –Belgium.[S. 90,Art.12(3)]
Tribunal held that there is a distinction between definition of royalty under the Act and royalty under India Belgium DTAA, however, neither the AO nor the DRP has done such exercise. In view of the aforesaid, the issue is restored to the AO for de novo adjudication after due opportunity of being heard to the assessee keeping in view the observations hereinabove. It was further held by the ITAT that, once in the case of the payer, the payment made to the assessee towards the sale of software is not in the nature of royalty, it cannot be treated as royalty in the case of assessee. (AY. 2014-15)
Agfa Healthcare N.V. v Dy.CIT (2018) 172 DTR 153/196 TTJ 690 (Mum.) (Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India-Royalty-Distributor /reseller agreement and service agreement for support to end users and after sales services have to be read together to examine nature of income-Access to trademarks, intellectual property, technical knowhow, derivative works, brand features, confidential information, etc., while discharging its obligation under both agreements – Amount payable under distributor /reseller agreement was ‘Royalty’-DTAA-India – Ireland. [S. 195, 201, Art. 12]
Assessee entered into service agreement with its Irish group company (‘X’) for providing support services for placing advertisements on online portal of its parent company (‘Y’). These services involved administering internal and government’s guidelines in relation to global advertisements before the advertisements could be placed on Y’s web properties and also customer support services post-sales. Thereafter, Assessee and ‘X’ entered into another agreement pursuant to which Assessee became an authorized distributor /reseller of online advertisement space in India. Assessee credited an amount as payable to X under distributor /reseller agreement. AO held that the amount payable was ‘royalty’ and tax was liable to be deducted. Held : It was observed that the distributor /reseller agreement obligated the assessee to provide certain services which was dischargeable only through services agreement. To execute services agreement, Assessee was given license to use confidential information, technical knowhow, trade mark, brand features, derivative works, etc. Tribunal held that consideration paid by Assessee was on account of use these intangibles is certainly ‘royalty’ u/S. 9(1)(vi) as well as under Article 12 of DTAA. (AY. 2007-08 to 2015-16)
Google India (P.) Ltd. v. Jt. DIT(IT) (2018) 194 TTJ 385 (Bang.) (Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty-Assessee, a US company, was wholly owned subsidiary of an Indian company entered into an agreement with another US company to acquire patent and technical information related to manufacturing of two products belonging to said foreign company-Assessee got said products manufactured from its holding company in India and same were subsequently sold in US – This shows clear business connection with India-royalty paid by assessee to US company in terms of patent agreement was taxable in India under S. 9(1)(vi) of the Act.
Where assessee, a US based company, entered into an agreement with another US company in terms of which it acquired patent and technical information related to manufacture of two products, in view of fact that assessee company got said products manufactured from its holding company in India which were subsequently sold in USA, it is a case where there is clear business connection with India. Thus, royalty paid by assessee to said US based company is taxable in India under S. 9(1)(vi) of the Act. (AY. 2009-10)
Dorf Ketal Chemicals LLC v. Dy. CIT (2018) 165 DTR 215 / 193 TTJ 390 (Mum.) (Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty or business profits – Income from supply of software embedded in hardware- Income relatable to supply of software cannot be treated as royalty income.[S. 9(1)(i)]
Tribunal held that though the income from supply of computer software has been brought within the ambit of ‘royalty’ by insertion of Explanation 4 to section 9(1)(vi) by Finance Act, 2012 w.e.f. 1st June, 1976, when a software is embedded in hardware and there is one composite price, the entire amount remains as business income and a part of the same cannot be considered as royalty. (AY. 2002-03 to 2006-07)
Bentley Nevada LLC v. Jt. DIT (IT) (2018) 164 DTR 1/192 TTJ 651 (Delhi)(Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India –Non-resident-Royalty-Wireless agreement with Tata and Reliance – Burden is on revenue to prove taxability in India-Not taxable in India-DTAA-India-USA.[S.9(1)(vi)( c) , Art,12 (7)(b)]
Allowing the appeal of the assessee the Tribunal held that ; according to sub-clause (c) of section 9(1)(vi), in the case of a non-resident, the burden is on the Department to prove that the royalty is payable in respect of any right, property or information used or services utilised for the purpose of a business or profession carried on by such person in India or for the purpose of making or earning any income from any source in India. In the absence of any such evidence filed by the Department, the original equipment manufacturers were not carrying on any business in India. Even for some of the years it was shown that the original equipment manufacturers were carrying on business in India but not with respect to the code division multiple access patent technology, those were all the evidence showing the business of the original equipment manufacturers for GSM technology. Therefore there was no evidence to suggest that the original equipment manufacturers who had made payments of royalty, were carrying on any business in India of the code division multiple access patent technology leading to their taxability in India. Therefore royalty income of the assessee earned from the original equipment manufacturers situated outside India for the patents licensed to the original equipment manufacturers for manufacture of the code division multiple access network outside India was not chargeable to tax under section 9(1)(vi)(c). As the revenue was not chargeable to tax in India in terms of the Act the question of looking at the provision of article 12(7) of the Agreement did not arise. (AY.2009-10 to 2012-13)
Qualcomm Incorporated v. DIT (2018) 65 ITR 248 (Delhi) (Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty-Domain name is an intangible asset which is similar to trademark. Consequently, income from services rendered in connection with such domain name registration is assessable as “royalty”-DTAA-India-USA. [S. 115A, Art. 12]
Dismissing the appeal of the assesse the Tribunal held that ;Domain name is an intangible asset which is similar to trademark. Consequently, income from services rendered in connection with such domain name registration is assessable as “royalty”,therefore, the charges received by the assessee for services rendered in respect of domain name is royalty within the meaning of Clause (vi) read with Clause (iii) of Explanation 2 to Section 9(1) of Income-tax Act. (AY. 2013-14)
Godaddy. com LLC v. ACIT (2018) 193 TTJ 137/ 170 ITD 217/165 DTR 57 (Delhi)(Trib.), www.itatonline.org

S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty-Professional charges paid by assessee to a non-resident company located in Bang.ladesh could not be brought to tax in India as royalty – DTAA-India – Bangladesh.[Art .13(2)]
Professional charges paid by assessee to a non-resident company located in Bang.ladesh could not be brought to tax in India as royalty. Followed order of earlier year. (AY. 2005-06 to 2006-07)
DCIT v. KPMG Advisory Services (P.) Ltd. (2018) 168 ITD 34 (Mum.) (Trib.)

S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty-Payment of SAP charges made to Associated enterprise for use of licensed software was liable to tax as royalty in India and liable to deduct tax at source-DTAA-India-Germany .[S. 195, 201(1), 201(IA), Art. 12].
Dismissing the appeal of the assessee the Tribunal held that; payment of SAP charges made to Associated enterprise for use of licensed software was correctly regarded as royalty by the lower authorities according to article 12 of the DTAA. In view of this, the above payment made by the assessee to its holding company is chargeable to tax as royalty according to Act as well as according to the double taxation avoidance agreement. Therefore, on such payment assessee should have deducted tax at source under the provisions of S. 195 at the beneficial rate of 10 per cent provided under the double taxation avoidance agreement. In view of this, the order passed by the Assessing Officer is correctly confirmed by the CIT(A) (AY. 2000-01 to 2006-07)
SMS Iron Technology (P.) Ltd. v. ITO (2018) 168 ITD 376 (Delhi) (Trib.)

S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical services –Transfer of technical knowledge, experience, skill, Know-how or process or consists of development and transfer of technical plan or design — Payment to us company for providing management, financial, legal, public relations, treasury and risk management services is not for included services —Payment is not taxable in India-When DTAA is more beneficial than income tax-Act ,DTAA is applicable-DTAA-India – USA.[S. 90, Art.12]
Allowing the appeal of the assessee the Court held that ; the DTAA having defined “included services”, which was technical and consultancy services ; but specifically having defined it quite distinctly from the all inclusive definition in the Income-tax Act, even by section 90(3) the definition in the DTAA is to be adopted to decide taxation or its avoidance.There was no technology transfer ; nor was there a plan or strategy relating to management, finance, legal, public relations or risk management transferred to the assessee. The services promised by the non-resident company were only to advice on such aspects as were specifically referred to in the agreement. The non-resident company only assisted the Indian company in making the correct decisions on such aspects as were specifically referred to in the agreement, as and when such advice was required. There was no transfer of technology or know-how, even on managerial, financial, legal or risk management aspects ; which would be available for the Indian company to be applied without the hands-on advice offered by the U. S. company. The advice offered on such aspects would have to be on a factual basis with respect to the problems arising at various points of time and there was no transfer of technical or other know-how to the Indian company. Particularly under the double taxation avoidance agreement, none of these aspects on which the U. S. company had promised to advice the Indian company would fall under the “included services” and the “fees for included services” would not be taxable in India. (AY.2007-08)
US Technology Resources (Pvt.) Ltd. v. CIT(2018) 407 ITR 327/ 171 DTR 225 (Ker) (HC)

S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical services – Services of Crew under separate agreement – Matter remanded to Tribunal-DTAA-India-Germany.[S. 10(15A),Art. 111]
Court held that the Tribunal has not examined the applicability of DTAA and service agreement .As there was no discussion in the orders of the Tribunal whether the payments made under the technical support agreement or the crew lease agreements were not payments for technical services, apart from an a priori assumption that the question of taxation did not arise if there was no permanent establishment. Accordingly the orders were set aside and remanded to Tribunal.
DIT (Inv) v. Modiluft Ltd. (2018) 404 ITR 228 / 255 Taxman 481/ 169 DTR 289 (Delhi) (HC)

S. 9(1)(vi) : Income deemed to accrue or arise in India – Royalty-fee for technical services-Income from offshore sale of products could not be construed to be FTS or royalty liable to tax in India –DTAA-India-Australia. [ Art .12 (3)]
Income from offshore sale of products could not be construed to be FTS or royalty liable to tax in India. Repair work undertaken by assessee at its overseas workstations located outside India and since it was in connection with supply of plant and machinery on hire to be used for extraction or production of mineral oils, same would clearly fall within sweep of exclusion contemplated in Explanation 2 to S. 9(1)(vii).Since rendering of repair work by assessee outside India would not enable ONGC personnel to make use of any technical knowledge, experience in future, amount received by assessee could not be brought to tax as ‘royalty’ or ‘fee for technical service’ under article 12 (3) of India-Australia DTAA. Since various activities undertaken by assessee under contract with ONGC were seperate, divisible and independent of each other, taxability of revenue from such activities was required to be undertaken separately. ( AY.2011-12)
Cameron Australasia Pty. Ltd v. Dy.CIT (2018) 66 ITR 262 / 196 TTJ 39/ 96 taxmann.com 331(2019) 175 DTR 386 (Mum.) (Trib.)

S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical services-business of providing transportation, logistics, and supply chain solutions – Issue was sent back to for deciding whether services involved in the agreement satisfy ‘ make Available’ criteria or not— DTAA-India –Singapore.[Art.12(4)]
Tribunal held that the assessee had not provided complete details, accordingly in the interest of justice, whole issue set back to file of AO for deciding whether services involved in the agreement satisfy ‘ make Available’ criteria or not. (AY. 2010-11)
Ceva Asia Pacific Holdings Co. Pte Ltd. (2018) 192 TTJ 1 (UO)
(Dehil)(Trib.)

S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical services-Income arising from rendering of advisory services in a foreign country cannot be taxed as fees for technical service where the assesse does not have a permanent establishment in India-Reimbursement cannot be asseees as income-DTAA-India-USA.[S. 92, Art, 7,12]
Tribunal held that, perusal of clauses of Agreement between assessee and TIL clearly showed that they were purely in nature of advisory services. Accordingly theIncome arising from rendering of advisory services in a foreign country cannot be taxed as fees for technical service where the assesse does not have a permanent establishment in India. Reimbursement cannot be asseees as income.(AY.2002-03, 2003-04)
Add. CIT (I) v. Timken Company (2018) 192 TTJ 823 (Kol) (Trib.)

S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical services-Fees for Services received by UAE Company from Indian company was business income in hands of said company as per DTAA between India and UAE and in absence of any PE of any said company in India, business income could not be taxed in India-DTAA-India-UAE.[Art. 5, 7, 12]
Assessee, UAE based company provided management and technical consultancy services to its Indian AE and received a fee. It did not offer said fee for taxation on ground that DTAA does not have any specific clause on taxability of fees for technical services and, hence, said receipt was taxable as business income. Since employees of assessee had worked for an aggregate period of 156 solar days and, thus, period of working was less than 9 months, assessee had no PE in India, and, consequently, impugned receipt was not taxable in India. (AY. 2011-2012)
Booz & Company (ME) FZ-LLC v. Dy. DIT(IT) (2018) 192 TTJ 33(UO) (Mum.)(Trib.)

S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical services-A Limited Liability Partnership incorporated under Laws of United Kingdom (UK), providing legal advisory services to its clients worldwide including India-By rendering those services, assessee did not ‘make available’ any technical knowledge, know-how or experience to its clients-Amount received by it was not taxable in India as fee for technical serviceS. – Article 15 of India-UK DTAA applies to determine taxable income in hands of individual and not other persons, assessee being a partnership firm, amount of fee received by assessee for rendering legal advisory services was not taxable in India-Reimbursement of expenses being of routine nature and, moreover, there was no mark up involved amount in question could not be brought to tax as assessee’s income-DTAA-India-UK. [S. 90, Art. 5(2)(k), 7, 13, 15 ]
A Limited Liability Partnership incorporated under Laws of United Kingdom (UK), providing legal advisory services to its clients worldwide including India. By rendering those services, assessee did not ‘make available’ any technical knowledge, know-how or experience to its clientS. Accordingly the amount received by it was not taxable in India as fee for technical services-Article 15 of India-UK DTAA applies to determine taxable income in hands of individual and not other persons, assessee being a partnership firm, impugned amount of fee received by assessee for rendering legal advisory services was not taxable in India. Reimbursement of expenses being of routine nature and, moreover, there was no mark up involved amount in question could not be brought to tax as assessee’s income. (AY.2012-13)
Linklaters LLP v. DCIT (2018) 172 ITD 459/ 171 DTR 19 (Mum.) (Trib.)

S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical services-Referral fee earned by the assessee is held to be not taxable in India – DTAA-India-Switzerland.[Art. 7]
The Tribunal held that the referral fee earned by the assessee could not be construed to be attributable to assessee’s PE in India. Therefore, the same is not taxable in India as per Art. 7 of DTAA between India & Switzerland. The Tribunal further held that since the appeal filed by the revenue is dismissed the appeal & C.O. filed by the assessee is infructuous. (AY. 2011-12)
Credit Suisse AG v. Dy. CIT (2018) 192 TTJ 67 (UO)(Mum.)(Trib.)

S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical services – Training services rendered by assessee to Indian Hotels could not be held to be technical services, nor same could have been characterized as ‘ancillary and subsidiary’ services-DTAA-India-Netherland .[Art.12(5)(a)]
Tribunal held that consideration received for providing training services to Indian Hotels could not be held to be technical services, nor same could have been characterized as ‘ancillary and subsidiary’ services. (AY.2009-10)
Renaissance Services BV. v. DIT (IT) (2018) 171 ITD 381/ 171 DTR 30 / 195 TTJ 1049 (Mum.) (Trib.)

S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical services-Inspection and survey of imported and exported cargo and certifying in relation to quality and price — No technical knowledge, experience, skill, know-how or processes made available to recipient of service — Not chargeable to tax in India-DTAA-India – UK .[Art.13(4)(c)]
Tribunal held that,inspection and survey of imported and exported cargo and certifying in relation to quality and price.No technical knowledge, experience, skill, know-how or processes made available to recipient of service. Not chargeable to tax in India(AY.2010-11 2014-15)
Inspectorate International Ltd. v. ACIT (2018) 65 ITR 333/ 171 ITD 630 (Delhi)(Trib.)

S. 9(1)(vii) : Income deemed to accrue or arise in India-Fees for technical services – Payments made towards allocation of expenses cannot be treated as fees for technical services-DTAA-India – France.[Art. 13]
Allowing the appeal of the assesse, the Tribunal held that; Payments made towards allocation of expenses cannot be treated as fees for technical services (AY. 2005-06)
Credit Agricole Corporate & Investment Bank v. DIT (IT) (2018) 168 ITD 553 (Mum.) (Trib.)

S. 10(6A) : Foreign company-Contract approved by Indian Government-Royalty or fees for technical services- Grossing up amount – Entitle to exemption – Reversal of provision for royalty –Deletion of addition is held to be justified.[S. 143(3), 154]
Dismissing the appeal of the revenue the Tribunal held that following the order for earlier years the deduction was allowed.Tribunal also held that in totality of above said facts and circumstances, what had to be accounted for by assessee was revised royalty and not royalty which was provision made during year before finalization of figures of sales. Order of DRP in deleting proposed addition was upheld. Reversal of provision for royalty –Deletion of addition is held to be justified.(AY.2010-11)
Dy.CIT v. Skoda Auto A.S. (2018) 168 DTR 465 / 195 TTJ 961 (Pune) (Trib.)
S. 10(10A) : Commutation of pension-Employees of statutory corporations cannot be regarded as employees of State or Central Government and exemption is not available, however as the assessee was under bonafide belief and discharged its obligation u/s 192, proceedings u/s 201(1), 201(IA) were quashed [S. 192, 201(1), 201(IA)]
Tribunal held that assessee being a statutory corporation its employees could not be regarded as State or Central Government employees and, therefore, exemption under S. 10(10AA)(i) was not available and assessee was liable to deduct tax at source. However, since the assessee was under bona fide belief that its employees were to be regarded as employees of State Government and that its employees were entitled to exemption of entire sum of unutilized leave encashment under S. 10(10AA)(i), assessee had discharged its obligation under S. 192, proceedings under S. 201(1) and 201(1A) were to be quashed.(AY.2013-2014-15)
KPTCL v. ITO (2018) 170 ITD 587 (Bang.) (Trib.)

S. 10(10B) : Compensation – Workman-De facto termination of employment on payment of agreed compensation — Eligible for exemption – Quantum to be examined by the AO.
Tribunal held that; the order passed by the Industrial Tribunal was admittedly under the Industrial Disputes Act 1947, and once it was held that the order stood modified so as to take into account the payment of Rs. 6. 50 lakhs by the employer, the payment could not but be treated as a compensation under the Industrial Disputes Act, 1947. The first limb of section 10(10B) was thus satisfied. However, that one of the important restrictions on the amount eligible for exemption under section10(10B) was that it should not exceed fifteen days’ average pay for every completed year of services or part thereof in excess of six months. This aspect of the matter had not been examined. Therefore the claim in principle was upheld but the matter was remitted to the Assessing Officer for examination of the quantification. (AY. 2008-09)
Vishnu Mohan T. Nair v. ITO (2018) 61 ITR 796/ 168 ITD 469 / 192 TTJ 872/ 165 DTR 17 (Ahd.) (Trib.)

S. 10(10C) : Public sector companies-Voluntary retirement scheme-ICICI Bank-Early Retirement Option Scheme-Entitled to exemption even though the assessee had filed revised return under S. 139(5), for relevant year beyond prescribed time period. [S. 139(5)]
Court held that, assessee, who retired from ICICI Bank under early retirement option scheme, is entitled to benefit of exemption under S. 10(10C), even though the assessee had filed revised return under S. 139(5), for relevant year beyond prescribed time period.(AY.2004-05)
N. Annamalai v. PCIT (2018) 257 Taxman 192 (Mad)(HC)

S. 10(10C) : Public sector companies-Voluntary retirement scheme –Employee of ICICI Bank –Entitle for exemption. [ R.2BA ]
Allowing the appeal of the assessee the Court held that Voluntary Retirement Scheme was put to judicial scrutiny in view of Rule 2BA.In CIT v. Koodathil Kallyatan Ambujakshan (2008)219 CTR 80 /(2009) 309 ITR 113 (Bom.) (HC), held that exemption u/s 10(10C) was applicable to employees, who took benefit of Scheme framed by RBI. Against said order no appeal was preferred by Department and hence, same had attained finality. Accordingly the assessee is eligible for exemption u/s 10(10C) and Rule 2BA could not exceed provisions of Act. Also relied Chandra Ranganathn & Co v.CIT dt. 21-10-2009 CA.NO 6997-7002 of 2009 (SC).
R.M. Lakshmanan v.CIT (A). (2018) 170 DTR 140 (Mad) (HC)
S. 10(10C) : Public sector companies-Voluntary retirement scheme-Employee of bank having opted for voluntary retirement under Voluntary Retirement Scheme was eligible for exemption.
Allowing the petition the Court held that ; employee of bank having opted for voluntary retirement under Voluntary Retirement Scheme was eligible for exemption. Followed Chandra Ranganathan v.CIT (2010) 326 ITR 49 (SC) and CIT v. Koodathil Kalyatan Ambuakshan (2009) 309 ITR 113 (Bom.) (HC)
A.Kumarappan v. CIT (2018) 257 Taxman 318 (Mad.)(HC)
R. Banumurthy v.CIT (2018) 257 Taxman 578 (Mad) (HC)

S 10(13A) : Exemption — Special allowance — House property loss — Employees claiming interest on housing loan and also exemption on account of house rent allowance are governed by two independent provisions-Entitlefor exemption.[S. 22, 192]
Some employees of the assessee had claimed deduction on account of interest on housing loan and also exemption on account of house rent allowance u/S. 10 of the Act for payment made on account of rent. This was not accepted by the AO as the deduction, according to him, resulted in allowing double benefit to the concerned employees which was not permissible. The CIT(A) held that these two benefits were governed by two independent provisions and since the concerned employees had satisfied the conditions for claiming the benefits under these two independent provisions, there was no violation on the part of the assessee. Order of Tribunal is affirmed by the Tribunal.(AY. 2012-13)
ACIT v. Shri SDV International Logistics Ltd. (2018) 68 ITR 35 (SN) (Kol) (Trib.)

S. 10(14) : Special allowance or benefit-Employees of Life Insurance Corporation- Fixed conveyance allowance, additional conveyance allowance and expenses under head reimbursement of expenses scheme is entitled to exemption-Tax deducted at source to be reimbursed to the employees and benefit under S. 89 to be extended on reimbursement of deduced amount.[S. 10(14)(ii), 89, 192, R. 2BB]
Allowing the petitions the Court held that,fixed conveyance allowance, additional conveyance allowance and expenses under head reimbursement of expenses scheme is entitled to exemption.Tax deducted at source to be reimbursed to the employees and benefit under S. 89 to be extended on reimbursement of deduced amount.
K. S. Chaudhary and others v. Life Insurance Corporation of India (2018) 409 ITR 258 (Delhi) (HC)
Rajesh Kumar Gupta v. Senior Divisional Manager, Life Insurance Corporation of India ((2018) 409 ITR 258 (Delhi) (HC)

S. 10(14) : Special allowance or benefit-Allowance received by employee to cover expenses incurred wholly in performance of duties —Extra payment to meet costs in Foreign location is not entitled for exemption.[S. 15, 17, 192]
Dismissing the appeal of the assessee the Court held that ;if an allowance is paid to the assessee to meet his personal expenses at the place where the duties of his office are ordinarily performed, it is not exempt under S. 10(14) of the Act. Allowance such as city compensatory allowance necessitated by the high cost of living in big cities and not granted with reference to the nature of duties but exclusively with reference to the place of posting is not exempt from tax under S. 10(14) of the Act. For being exempt under S 10(14) of the Act, an allowance should have specifically been granted wholly in the performance of duties. (AY. 2001-02 to 2003-04)
Sun Outsourcing Solutions P. Ltd. v. CIT (2018) 407 ITR 480 / 171 DTR 358/ 357 CTR 537 (T&AP) (HC)

S. 10(20) : Local authority – Urban improvement Trust constituted under Rajasthan Urban Improvement Act, 1959 is not local authority , hence not entitle to exemption-The functional test” as laid down in UOI v. R.C. Jain, (1981) 2 SCC 308 is not applicable after amendment of section 10 (20) of the Act by Finance Act, 2002. [S. 10(20A]
Allowing the appeal of the revenue the Court held that ; Urban improvement Trust constituted under Rajasthan Urban Improvement Act, 1959 is not local authority , hence not entitle to exemption .The High Court based its decision on the fact that functions carried out by the assessee are statutory functions and it is carrying on the functions for the benefit of the State Government for urban development. The said reasoning cannot lead to the conclusion that it is a Municipal Committee within the meaning of Section 10(20) Explanation Clause (iii). The High Court has not adverted to the relevant facts and circumstances and without considering the relevant aspects has arrived at erroneous conclusions. Judgments of the High Court are unsustainable. The functional test” as laid down in UOI v. R.C. Jain, (1981) 2 SCC 308 is not applicable after amendment of section 10 (20) of the Act by Finance Act, 2002.(AY. 2003-04 to 2009-10)
ITO v. Urban Improvement Trust (2018) 409 ITR 1/ 259 Taxman 61/ 171 DTR 81/ 305 CTR 121 (SC),www.itatonline.org
Editorial : From the Judgments, CIT v. Urban Improvement Trust, Alwar (2018) 171 DTR 98 / 305 CTR 138(Raj) (HC)/ Urban Improvement Trust, Kota v. ITO (2018) 171 DTR 98/ 305 CTR 138 (Raj) (HC)/ Urban Improvement Trust, Kota v. ITO (2018) 171 DTR 109/ 305 CTR 149 (Raj) (HC)

S. 10(20) : Local authority –New Okhla Industrial Development Authority (NOIDA) is not local authority-Hence is not exempted from payment of income-tax under S. 10(20) and S. 10(20A).Followed, New Okhla Industrial Development Authority (NOIDA) v. CCIT (2018) 406 ITR 178/ 95 taxmann.com 58/ 303 CTR 448 / 168 DTR 48 (SC)
New Okhla Industrial Development Authority (NOIDA) is not local authority.Hence is not exempted from payment of income-tax under S. 10(20) and S. 10(20A) of the Act Followed, New Okhla Industrial Development Authority (NOIDA) v. CCIT (2018) 406 ITR 178/95 taxmann.com 58/ 303 CTR 448 / 168 DTR 48 (SC) . (AY. 2010-11, 2011-12)
New Okhla Industrial Development Authority (NOIDA)(No.2) v. CCIT (2018) 406 ITR 209/ 168 DTR 145/ 257 Taxman 3 / 303 CTR 553 (SC)
CIT v. HDFC Ltd (2018) 406 ITR 209/ 168 DTR 145/ 303 CTR 553 (SC)
CIT v. Rajesh Projects (India) (P) Ltd (2018) 406 ITR 209/ 168 DTR 145/ 257 Taxman 3/ 303 CTR 553 (SC)
Greater Noida Industrial Development Authority v. ACIT (2018) 406 ITR 209/168 DTR 145/ 303 CTR 553 (SC)
ITO v. United Bank of India (2018) 406 ITR 209/ 168 DTR 145 / 303 CTR 553 (SC)

S. 10(20) : Local authority –Industrial township referred to in proviso to Article 243Q is not equivalent to a “municipality” and a “local authority”–Income is not entitle for exemption. [S. 10(20A), Art. 243P, 243Q]
Dismissing the appeal of the assessee, the Court held that New Okhla Industrial Development Authority (NOIDA) is not covered by the word /expression of ‘Municipality’ in clause (e) of Article 243P. It is neither included in sub-clause (ii) of Explanation, nor it covered by S. 10(20) except clause (ii). NOIDA was constituted under S. 3 of the U.P. Industrial Area Development Act, 1976 by notification dt. 17-4-1976. The Act was enacted by State Legislature to provide for the constitution of an Authority for the development of certain areas in the State of UP in to industrial and urban township, under the 1976 Act, various functions had been entrusted to the Authorities. Thus NOIDA is not a local authority, hence is not exempted from payment of income-tax under S. 10(20) and S. 10(20A) of the Act. (AY.2003-04, 2004-05)
New Okhla Industrial Development Authority (NOIDA) (No. 1) v. CCIT (2018) 406 ITR 178 / 256 Taxman 396 / 303 CTR 448 / 168 DTR 48 (SC)/ www.itatonlin.org

S. 10(23) : Sports association – Pendency of application for notification-AO is directed to consider assessee’s claim of exemption in case a notification is issued by appropriate authority for the relevant assessment year. [S. 12A].
Tribunal held that application for issuance of notification under S. 10(23) for the relevant assessment year is pending before appropriate authority, AO is directed to consider assessee’s claim of exemption in case a notification is issued for the relevant year by appropriate authority. (AY.1999-2000)
Board of Control for Cricket in India. v. ITO (2018) 196 TTJ 1067 / (2019) 174 ITD 159 (Mum.)(Trib.)
S. 10(23A) : Professional association or institution – Approval for exemption granted by Central Government to undivided State Bar Council of Madhya Pradesh vide notification dated 09-08-1966 – Notification and exemption would equally apply to the State Bar Council of Chattisgarh by virtue of provisions of S. 78 and 79 of the Madhya Pradesh Reorganisation Act, 2000 (‘the Act of 2000’) wef 01-11-2000.
On Writ filed, Court held that notification dated August 9, 1966 granting exemption to the erstwhile State Bar Council of Madhya Pradesh, is law within the meaning of S. 2(f) of the Act of 2000 which was in existence earlier for exempting erstwhile State Bar Council of Madhya Pradesh and would now also be applicable to the State Bar Council of Chhattisgarh (on division), by virtue of S. 78 and 79 of the Act of 2000, till it is modified or altered by competent authority w.e.f. 01-11-2000. (AY. 2009-2010)
State Bar Council of Chhattisgarh.v. CIT (2018) 166 DTR 185 / 303 CTR 499 (Chhattisgarh)(HC).

S. 10(23C) : Educational institution – Mere spending a meagre amount, out of total income derived by trust, towards distribution of clothes to relatives of students-Exemption cannot be denied.[S. 10(23C)(iiiad), 12A, 12AA]
Assessee-trust was established predominantly with an object of providing education to all sections of society. AO rejected assessee’s claim holding that apart from educational activity, assessee was also doing other charitable acts like providing clothing and food to parents of studentS. On writ the court held that mere spending a meagre amount, out of total income derived by trust, towards distribution of clothes to relatives of students exemption cannot be denied.(AY. 2014-15)
Sri Sai Educational Trust v. CIT(E) (2019) 259 Taxman 472 (Mad.)(HC)

S. 10(23C) : Educational institution – Accumulation income-Educational purposes-Assessee-school’s utilization of the amount of receipts (exceeding one crore) for purchase of land for further extension of school building, is to be considered for educational purpose only, hence, exemption is eligible.[S. 10(23C)(vi)]
On appeal, the High Court held that the amount of receipt during the assessment years in question exceeded more than RS. 1 crore, and the assessee-school utilised the amount for purchase of land for further extension of school building, which was for educational purpose only; exemption under S. 10(23C)(vi) was rightly granted to the assessee. (AY. 2015-2016)
CIT (E).v. Managing Committee, Arya High School (2018) 304 CTR 548 / 168 DTR 257 (P&H) (HC)

S. 10 (23C) : Educational institution-Registration u/s 12AA is not mandatory to claim exemption.[S. 12AA, 10 (23C(iiiad)]
Dismissing the appeal of the revenue the Court held that,obtaining registration under S. 12AA is not mandatory to claim exemption under S. 10(23C)(iiiad) of the Act. (AY.2007-08)
CIT v. Shanti Devi Educational Trust (2018) 409 ITR 522/ (2019) 261 Taxman 339 (P&H) (HC)
Editorial : SLP of revenue is dismissed, CIT v. Shanti Devi Educational Trust (2018) 405 ITR 20 (St.)
S. 10 (23C) : Educational institution-Exemption cannot be denied only on the ground that institution has earned surplus when the institution is solely for educational purposes.
Allowing the petition the Court held that; the assessee was a society registered under the Societies Registration Act, 1860. Its main purpose, aims and objects, as stated in its memorandum of association was to impart education along with ancillary objects. Accordingly the denial of exemption was not justified only on the ground that institution has earned surplus.
J. B. Memorial Manas Academy Management Society. v. CIT (2018) 408 ITR 255 / 259 Taxman 537(Uttarakhand) (HC)

S. 10(23C) : Educational institution-Notice issued by authority other than prescribed authority—Order withdrawing approval is held to be invalid. [S. 11(5), 13]
Dismissing the appeal of the revenue the Court held that ; notice issued by authority other than prescribed authority hence the order withdrawing approval is held to be invalid.
CIT v. Modern School Society (2018) 407 ITR 228 (Raj.)(HC)

S. 10(23C) : Educational institution-Disproportionate fee structure-Maximummoney for purpose of expansion of institution-Matter remanded to decide the issue after considering the ratio in American Hotel & Lodging Association Institute v CBDT (2008) 301 ITR 86 (SC) and Queen’s Educational Society v. CIT(2015) 372 ITR 699 (SC).[S. 10(23C)(vi)]
Allowing the appeal of the revenue against the order of single Judge the Court held that, assessee is engaged in imparting education, application for exemption under S. 10(23C)(vi) was allowed without considering revenue’s objection that assessee had disproportionate fee structure which was devised to earn maximum money for purpose of expansion of institution which did not fall within ambit of charitable activity, impugned order was to be set aside and, matter was to be remanded back for disposal afresh after considering the ratio in American Hotel & Lodging Association Institute v CBDT (2008) 301 ITR 86 (SC) and Queen’s Educational Society v CIT(2015) 372 ITR 699 (SC).
CIT v. J.B. Memorial Manas Academy Management Society. (2018) 256 Taxman 191 / 303 CTR 811 / 166 DTR 329 (Uttarakhand) (HC)
S. 10 (23C) : Educational institution-Withdrawal of approval-Collection of capitation fee-Illegal activities-Rs 52 crores was collected as anonymous donations – Sham or bogus trusts cannot be held to be entitle to exemption.
Dismissing the petition the Court held that ; withdrawal of approval is held to be justified, as the Trust has collected capitation fee, carried out illegal activities and Rs .52 crores was collected as anonymous donations. Court also observed that the Trust has acted against public policy by collecting capitalisation fee which is contrary to the direction of Supreme Court. Court also held that Trust is a sham or bogus trusts cannot be held to be entitle to exemption.
Navodya Education Trust v UOI (2018) 405 ITR 30 / 253 Taxman 412/ 302 CTR 381 / 165 DTR 16 (Karn) (HC)

S. 10 (23C) : Educational institution-Kindergarten Class — Though the provisions of right to education Act is not applicable to assessee exemption cannot be denied. [S. 10(23)(vi),Right of Children to Free and Compulsory education Act, 2009]
Dismissing the appeal of the revenue the Court held that; Though the provisions of right to education Act is not applicable to assessee as its school is only from class play to class K. G, exemption cannot be denied. (AY. 2013-14)
CIT v. Infant Jesus Education Society. (2018) 404 ITR 85 (P&H) (HC)

S. 10(23C) : Educational institution – Merely on the ground that surplus of society was utilized for expansion of school building, exemption cannot be denied. [S. 10(23C)(vi)]
Allowing the petition the Court held that merely because surplus earned by assessee educational institution was used for expansion of school building etc., it could not be held that assessee did not exist solely for educational purpose. Accordingly the denial of exemption was held to be not justified.
Mallikarjun School Society v. CCIT (2018) 254 Taxman 170 /166 DTR 338 / 304 CTR 887(Uttarakhand)(HC)

S. 10 (23C) : Exemption-Approval granted is held to be valid till it is withdrawn-Amount spent on the object was held to be allowable. [S. 10(23C)(iv)]
Dismissing the appeal of the revenue the Court held that the, approval granted is held to be valid till it is withdrawn. Accordingly the amount spent on the object was held to be allowable. (AY. 2012-13)
CIT v. Haryana State Pollution Control Board. (2018) 403 ITR 337 (P&H) (HC)

S. 10 (23C) : Educational institution-Merely because surplus profit earned in educational activities did not automatically presuppose a business activity that invalidated the exemption as long as surplus was utilised for charitable purposes. [S. 2(15), 10(23C)(via),11(4A)]
Dismissing the appeals and allowing the petition, the court held that, Merely because surplus profit earned in educational activities did not automatically presuppose a business activity that invalidated the exemption as long as surplus was utilised for charitable purposes. The assessee which maintained its eleven schools and the 120 satellite schools in furtherance of the education joint venture agreements with an educational purpose, that also was qualified as “charitable purpose” within the meaning of S. 2(15) and was not in contravention of S. 11(4A). (AY. 1998-99, 2008-09)
DIT v. Delhi Public School Society. (2018) 403 ITR 49/ 165 DTR 257 / 255 Taxman 78 / 305 CTR 500 (Delhi) (HC)
Editorial : SLP of revenue is dismissed, DIT (E) v. Delhi Public Schools Society(2018) 259 Taxman 404/ (2019) 260 Taxman 88 (SC)

S. 10 (23C) : Educational institution-Application for exemption was made before wrong authority-Authority concerned should have forwarded to the correct authority instead of rejecting the said application after enquiries. [S. 10(23C) (iv)]
Allowing the petition the Court held that; when the assessee filed the application before the wrong authority, it should have been returned. Instead of returning the assessee’s application, an enquiry was held and additional material was sought, thereby making the assessee believe that its application was pending consideration. Therefore, on the facts of the case, the blame was equally apportionable to both parties. If the assessee were entitled to exemption on the merits, it would be iniquitous to deny consideration of its application, merely because it was not addressed to the correct authority. Therefore, it would be in the fitness of things, if the application dated September 30, 2015, filed by the assessee were treated as the one filed before the competent authority, i. e., the Commissioner (E). The Assistant Commissioner (E) was to forward the application filed by the assessee for exemption in form 56 along with the enclosures to the Commissioner (E) and the Commissioner (E) shall hold an enquiry, pass an appropriate order and communicate it to the assessee. (AY. 2015-16)
Telangana State Pollution Control Board v. CIT(2018) 402 ITR 267/ 166 DTR 117 / 302 CTR 509 (T&AP) (HC)

S. 10(23C) : Educational institution — Delay in disposal of application-Exemption cannot be denied for the AY.2016-17 [S. 10(23C)(vi)]
On account of the inordinate delay on the part of the Commissioner in granting approval to the assessee filed the return claiming exemption for the AY.2016 17, however the CIT(E) has granted exemption from the AY.2017 18 onwards.Tribunal held that,the CIT (E) was not justified in refusing the approval for the AY.2016-17. (AY. 2016 – 2017)
C. M. Public School v. CIT (2018) 64 ITR 573 (Chd)(Trib.)
S. 10 (23C) : Educational institution- Society running a non profit educational institution-Exemption cannot be denied merely because assessee was simultaneously running profitable hotel, when the exemption was claimed only for educational activities-Matter remanded. [S. 10(23)(iiiab)]
Allowing the appeal of the assessee the Tribunal held that ; Society running a non profit educational institution, exemption cannot be denied merely because assessee was simultaneously running profitable hotel, when the exemption was claimed only for educational activities. Matter remanded. (AY. 2013-14)
Chandigarh Institute of Hotel Management & Catering Technology (CIHMCT) v. DCIT (2018) 172 ITD 356 (Chd.)(Trib.)

S. 10(23C) : Educational institution-Object clause-Wrong jurisdiction-When trust filed affidavit stating that the trust was created with main object of educating public by establishing schools, technical colleges and other educational institutes and it was not doing any activities other than educational services, registration cannot be denied merely because aims and object of assessee-trust included some clauses which were not for purposes of education. [S. 10(23C)(vi)]
Tribunal held that; when trust filed affidavit stating that the trust was created with main object of educating public by establishing schools, technical colleges and other educational institutes and it was not doing any activities other than educational services, registration cannot be denied merely because aims and object of assessee-trust included some clauses which were not for purposes of education. Tribunal also held that application for exemption cannot be denied as the society is having its registered office at Chennai and having got its registration under section 12AA from Chennai, instant application was filed at wrong jurisdiction. Tribunal held that it is appropriate to remand back the case to the file of Commissioner (E) to decide afresh within 3 months of the order.
St. Mary’s Education Trust. v. CIT (2018) 172 ITD 513 / 172 DTR 321/ 196 TTJ 1117 (Asr.) (Trib.)
S. 10(23C) : Educational institutions-For grant of approval u/S. 10(23C)(vi) the institution must exist solely for educational purpose and not for profit. The other objects such as encourage sportsman and adventurous spirit in the pupils and those connected with the institution; to print, publish and exhibit films, journals, periodicals, books for the diffusion of useful knowledge and to provide residential accommodation either free of cost and educate, train and assist financially the social workers, staff, students, orphans objects other than educational objects-Rejection of application for grant of approval is justified.[S. 10(23C)(vi)]
Tribunal held that, for grant of approval u/s. 10(23C)(vi) the institution must exist solely for educational purpose and not for profit. The other objects such as encourage sportsman and adventurous spirit in the pupils and those connected with the institution; to print, publish and exhibit films, journals, periodicals, books for the diffusion of useful knowledge and to provide residential accommodation either free of cost and educate, train and assist financially the social workers, staff, students, orphans Objects other than educational objects-Rejection of application for grant of approval is justified.(AY. 2014-2015)
Desales Educational Society. v. PCIT (E) (2018) 171 ITD 170 (Vishakha)(Trib.)

S. 10 (23C) : Educational institutions-Any income-Addition made as cash credits would also qualify the exemption. [S. 68, 115BBC]
Dismissing the appeal of the revenue the Tribunal held that; S. 10(23C) refers any income received by any trust is exempt, therefore addition made as cash credits would also qualify for exemption. Provision of S. 11BBC is brought in to statute with Finance Act, 2002 with effect from 1-4-2003 will apply to the assessment year 2011-12 onwardS. (AY. 2010-11, 2011-12)
ACIT v. (E) Gurudatta Shikshan Sanstha. (2018) 168 ITD 191 /192 TTJ 746 / 165 DTR 70 (Pune) (Trib.)

S. 10(23FB) : Venture capital fund-Exemption-Real estate business-Since real estate sector was removed from the negative list with effect from 5-4-2004, much before the assessee came in to existence-Entitle to exemption-Revision order is held to be bad in law. [S. 115U, 263]
The assessee trust is registered as a Venture Capital Fund. The Assessee claimed exemption u/s 10(23FB) of the Act. The AO allowed the claim. CIT in revision proceedings held that the assessee had derived income out of investment in Venture Capital Undertakings which were in real estate business and since real estate undertaking appeared in negative list under third Schedule of SEBI (Venture Capital Funds) Regulations,1996, same is not eligible exemption under S. 10(23FB) of the Act. On appeal allowing the appeal of the assesssee the Tribunal held that, since real estate sector was removed from the negative list with effect from 5-4-2004, much before the assessee came in to existence the assessee entitle to exemption. Accordingly the evision order is held to be bad in law and even on merit the assessee is entitle to exemption . (AY.2013-14)
Milestone Real Estate Fund v ACIT (2018) 172 ITD 370 (Mum.) (Trib.)

S. 10(23G) : Infrastructure undertaking-Certain incomes of Infrastructure Capital Funds or Infrastructure Capital Companies—Investment in distribution of electricity and not generation of electricity -Not entitle for exemption. [S. 80IA(4)]
Assessee claimed exemption u/s 10(23G). AO held that the assessee was not entitled for exemption. CIT(A) by referring to S. 80(IA(4) held that the companies in which assessee made investments were not eligible for business. Tribunal held that S. 80(IA)(4) applies only to enterprises carrying on business of developing, operating and maintaining or developing or maintaining infrastructure facility where as when assessee had made investments in companies which were not generating or producing electricity and were only distributing electricity, it was not eligible for exemption as provided u/s 10(23G of the Act.(AY. 2003-04 to 2007-08)
Cholamandalam Ms General Insurance Company Ltd. v. ACIT (2018) 170 DTR 22 / 195 TTJ 166 (Chennai) (Trib.)

S. 10(27) : Co-operative society-Schedule Castes or Schedule Tribes – Matter remanded for fresh disposal.
Tribunal held that ;records of the assessee, a co-operative society claiming exemption under S. 10(27) did not reveal as to whether all individuals admitted as nominal members belonged to schedule Tribes and how much loan was granted to them and hence the matter was remanded back for disposal afresh. (AY. 2009-10)
ITO v. Mizoram Co-operative Apex Bank Ltd. (2015) 154 ITD 421 / (2018) 191 TTJ 371 (Guwahati) (Trib.)
S. 10(34) : Dividend – Domestic companies-Tax on distribution of profits – Applicable only for amounts which suffered tax u/s 115O does not apply to deemed dividends. [S. 2(22)(e), 115O]
Dismissing the appeal the Court held that dividend will be exempt only for amounts which suffered tax u/s 115O and does not apply to deemed dividend. (AY. 2005-06)
DR. T. J. Jaikish v. CIT (2018) 403 ITR 256 (Ker) (HC)

S. 10(37) : Capital gains- Acquisition of agricultural land-Interest-Interest awarded on enhanced compensation paid by Government for acquisition of agricultural land under S. 28 of Acquisition Act would partake of character of compensation and would be eligible for exemption.[Land Acquisition Act, 1894,S. 10(37), 56(2)(vii)]
Tribunal held that,interest awarded on enhanced compensation paid by Government for acquisition of agricultural land of assessee under S. 28 of Acquisition Act would partake of character of compensation and would be eligible for exemption.(AY. 2013-14)
ITO v. Vinayak Hari Palled. (2018) 173 ITD 399 (Bang.) (Trib.)

S. 10(37) : Capital gains-Agricultural land-With in specified urban limits – Interest on compensation- Interest awarded under section 28 of Land Acquisition Act, 1894 on enhanced compensation paid for acquisition of agricultural land, would be eligible for exemption. [S. 56, Land Acquisition Act, 1894,S. 28]
Tribunal held that ;interest awarded under section 28 of Land Acquisition Act, 1894 on enhanced compensation paid for acquisition of agricultural land, would be eligible for exemption. (AY.2013-14)
ITO v. Sangappa S. Kudarikannur. (2018) 172 ITD 332 (Bang.) (Trib.)

S. 10(38) : Long term capital gains from equities-Insurance business-Sale of investments is exempt from tax. [S. 2(29B), 45]
Sale of investments by insurance co is exempt from tax being long term capital gains. (AY. 2006-07)
PCIT v. New India Assurance Co. Ltd. (2018) 254 Taxman 238 (Bom.)(HC)

S. 10(46) : Authority-Greater Noida Industrial Development Authority which is engaged in undertaking works relating to housing schemes and land development schemes including acquisition, distribution , sale and letting of properties is entitle to exemption.
Allowing the petition the Court held that, the petitioner was to provide amenities and facilities in industrial estate and in industrial area in the form of road, electricity, sewage etc. The assessee necessarily required money and funds, which were received from the State Government. Assessee, given the regulatory and administrative functions performed is required and charges fee, cost and consideration in the form of rent and transfer of rights in land, building and movable properties. Similarly payments had to be made for acquisition of land, creation and construction of infrastructure and even buildings. Carrying out and rendering the said activities was directly connected with the role and statutory mandate assigned to the assessee. It had not been asserted and alleged that these activities were or were undertaken on commercial lines and intent. Assessee did not earn profits or income from any other activity unconnected with their regulatory and administrative role. Income in the form of taxes, fee, service charges, rents and sale proceeds was intrinsically, immediately and fundamentally connected and forms part of the role, functions and duties of the assessee. Accordingly the Court held that the petitioner is entitle exemption u/s 10(46) of the Act.
Greater Noida Industrial Development Authority v. UOI (2018)406 ITR 418/ 254 Taxman 289/ 303 CTR 512 / 167 DTR 153 (Delhi)(HC)

S. 10A : Free trade zone-Profits of business-Export turnover – Total turn over-Export turnover is the numerator whereas the total turnover is the denominator in the formula for computing profit from exportS. Software development charges are to be excluded while working out the deduction admissible on the ground that such charges are relatable towards expenses incurred on providing technical services outside India. [S. 80HHC. 80HHE)
Dismissing the appeals of the revenue the Court held that; if the deductions on freight, telecommunication and insurance atTrib.utable to the delivery of computer software u/s 10A of the IT Act are allowed only in Export Turnover but not from the Total Turnover then, it would give rise to inadvertent, unlawful, meaningless and illogical result which would cause grave injustice to the assessee which could have never been the intention of the legislature As the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd. Even in common parlance, when the object of the formula is to arrive at the profit from export business, expenses excluded from export turnover have to be excluded from total turnover also. Otherwise, any other interpretation makes the formula unworkable and absurd. Hence, we are satisfied that such deduction shall be allowed from the total turnover in same proportion as well.
CIT v. HCL Technologies Ltd (2018) 404 ITR 719/ 165 DTR 305/302 CTR 191 / 255 Taxman 313 (SC), www.itatonline.org
CIT v. Aditi Technologies (P) Ltd (2018) 165 DTR 305/302 CTR 191 / 255 Taxman 313 (SC), www.itatonline.org

S. 10A : Free trade zone- Development of software-Receiving basic engine from non-eligible unit, developed software at its eligible unit-Entitle for exemption.[S. 260A]
Dismissing the appeal of the revenue High Court held that, receiving basic engine from non-eligible unit, developed software at its eligible unit the assessee is entitle to exemption. Finding of the AO that software was substantially developed at non-eligible unit and thereafter it was placed in hard disk and shifted to eligible unit only with an intent to claim exemption was rightly rejected by the Tribunal. (AY.2009-10)
CIT v. Ajay Agarwal (HUF) (2018) 99 taxmann.com 18/ 259 Taxman 134 (Bom.) (HC)
Editorial : SLP of revenue is dismissed,CIT v. Ajay Agarwal (HUF) (2018) 259 Taxman 133 (SC)

S. 10A : Free trade zone – Export turn over-Total turn over Expenses excluded from export turnover should also be excluded from total turnover.
Dismissing the appeal of the revenue the Court held that; Expenses excluded from export turnover should also be excluded from total turnover. Court also observed that,when a particular word is not defined by the Legislature and an ordinary meaning is to be attributed to it, the ordinary meaning is to be in conformity with the context in which it is used. (AY.2005-06)
PCIT v. Cypress Semiconductors Technology India Pvt. Ltd. (2018) 408 ITR 531 (Karn) (HC)

S. 10A : Free trade zone – Depreciation and other deductions –
-Neither any deduction claimed by assessee for Assessment Years prior to amendment nor exemption granted — Ten years’ relief allowed by later amendment in 2003 —Interpretation-Legislative intent-The intent of the Legislature while it made those amendments was not to curtail the relief to an assessee, who had not availed of double benefit-Matter remanded to Appellate Tribunal for reconsideration. [S. 10A(6)]
On appeal High Court held that the matter required reconsideration because the assessee had not claimed any benefit or deduction in respect of the assessment years 1993-94, 1994-95 and 1995-96 and no exemption had been granted to it. Although it was contended by the Department that a specific bar was created by the 2001 amendment by which the right of the assessee to have sought anything beyond April 1, 2001, was not there and its rights had stood extinguished or exhausted by way of deemed fiction, the later amendment in 2003, allowed ten years relief. The intent of the Legislature while it made those amendments was not to curtail the relief to an assessee, who had not availed of double benefit. The matter was remanded to the Tribunal.(AY. 1993-94, 1994-95, 1995-96)
Phoenix Lamps Ltd. v. CIT ( 2017) 87 taxmann.com 353 / (2018) 405 ITR 189 (All) (HC)
Editorial: SLP of revenue is dismissed as the Tribunal has passed the final order after the remand CIT v. Phoenix Lamps Ltd ( 2019) 263 Taxman 338 (SC)

S. 10A : Free trade zone–Total turn over–Export turn over– Deductions on freight,telecommunication and insurance attributable to delivery of computer software are to be allowed from total turnover-Eligible for exemption export should earn foreign exchange, it does not mean that undertaking should personally export goods manufactured /software developed by it outside Country.
Dismissing the appeal of the revenue the Court held that for eligible for exemption export should earn foreign exchange, it does not mean that undertaking should personally export goods manufactured /software developed by it outside Country. It might export out of India by itself or export out of India through another STP Unit. If deductions on freight telecommunication and insurance attributable to delivery of computer software were allowed
only in Export turn over but not from total turn over then it would give rise to inadvertent un lawful and illogical result which would cause grave in justice to assessee which could never been intention of the legislature. Followed Tata Eixsi Ltd v. ACIT (2015) 127 DTR 327 (Kran) (HC) (AY. 2009-10)
PCIT v. Arowana Consulting Ltd. (2018) 171 DTR 445/ (2019) 306 CTR 238 (Karn.),(HC)
S. 10A : Free trade zone – For computing deduction if export turnover is arrived at after excluding certain expenses, said expenses should also be excluded from total turnover.
Dismissing the appeal of the revenue Court held that,while computing deduction if export turnover in numerator is to be arrived at after excluding certain expenses, said expenses should also be excluded in computing export turnover as a component of total turnover in denominator.(AY.2010-11)
PCIT v. Tesco Hindusthan Service Centre (P.) Ltd. (2018) 96 taxmann.com 74 (Karn.)(HC)
Editorial : SLP of revenue is dismissed,PCIT v. Tesco Hindusthan Service Centre (P.) Ltd. (2018) 257 Taxman 92 (SC)

S. 10A : Free trade zone-Export amount was not received with in specified time denial of exemption was held to be justified. [S. 260A]
Dismissing the appeal, that the conclusion arrived at by the Tribunal regarding the claim of the assessee under section 10A of the Act was based upon concurrent findings of fact recorded by it after appreciating the material on record. Since the appeal was based purely upon the findings of fact recorded after appreciation of the evidence on record, in the absence of any perversity, it would not give rise to any question of law. (AY. 2007-08)
Sahjanand Laser Technology Ltd. (2018) 401 ITR 478 (Guj) (HC)
S. 10A : Free trade zone- Trail production-Commercial production-Trial production was different from commercial production and benefit of exemption provision was allowable from date of commercial production-Exemption is available for the AY.2010-11. [S. 10B]
Allowing the appeal of the assessee the Tribunal held that Trial production was different from commercial production and benefit of exemption provision was allowable from date of commercial production.When the assessee company itself has not claimed exemption for AY 2000-01, incubatory period, cannot be considered as production period merely on the basis of token invoice issued for trial verification of its cost. Even otherwise, the letter issued by the assessee company dated 30.04.2000 to Assistant Director, STPI, Noida intimating date of commencement for production of sale in global market as 30.04.2000 has not been disputed by the Revenue rather entire assessment has been made on the basis of token invoice dated 31.03.2000 issued for trial verification by the assessee company. Followed CIT v. Nestor Pharmaceuticals Ltd (2010) 231 CTR 337 (Delhi) (HC) (AY.2010-11)
North Shore Technologies (P) Ltd. v. ITO (2018) 161 DTR 233/ 62 ITR 294 / 192 TTJ 629 (Delhi) (Trib.)
S. 10A : Free trade zone- Sale by the assessee to HO outside India would amount to Export eligible for deduction u/s 10A of the Act.[ S.80IA(8) ]
Mere absence of any specific provision treating inter-branch transfer as export, would not deny deduction u/s 10A to the assessee on transfer of software to HO outside India. Further, this logic was also strengthened by provision of section 80IA(8) which is part of section 10A. (AY. 2008-09)
Dy. CIT v. Virage Logic International (2018) 63 ITR 10 (SN)(Delhi)(Trib.)

S. 10A : Free trade zone-Communication charges and travelling and conveyance expenses is to be excludible both from export turnover and total turnover-Interest earned on fixed deposits is part of business income which is deductible.
Tribunal held that, communication charges and travelling and conveyance expenses is to be excludible both from export turnover and total turnover. Interest earned on fixed deposits is part of business income which is deductible. (AY.2008-09)
Toshiba Embedded Software (India) Pvt. Ltd. v. DCIT(2018) 64 ITR 675 (Bang.) (Trib.)
S. 10A : Free trade zone – Period of ten consecutive years to be reckoned from year of commencement of manufacture and not from incorporation.
The Appellate Tribunal held that though the assessee came into existence on August 4, 1998, the assessee ventured into the operation of manufacturing software from AY. 2000-01 only. Hence, the assessee is eligible for exemption for a period of ten consecutive assessment years beginning with the AY. 2000-01 to the AY. 2009-10.(AY 2009-10)
Aspire Systems (I) P. Ltd. v. Dy. CIT (2018) 62 ITR 656 (Chennai)(Trib.)

S. 10A : Free trade zone-Eligible for set off unabsorbed depreciation. [S. 32]
The Tribunal held that the unabsorbed depreciation for the assessment years 1993-94 to 1995-96 pertained to the period before April 1, 2001 and, therefore, could not be set off against the income of the assessment year 2003-04. The High Court remitted the matter for reconsideration holding that the assessee had not claimed any benefit or any deduction in respect of the years 1993-94, 1994-95, 1995-96 and no exemption was granted to the assessee. The intent of the Legislature while making these amendments was certainly not to curtail relief to an assessee, who had not availed of double benefit. Allowing the appeal of the assesse the Tribunal held, that it was not the Department’s case that any double benefit has been availed of by the assessee. The assessee would be eligible for set off of unabsorbed depreciation for the assessment years 1993-94 to 1995-96 against the income of the assessee for the assessment year 2003-04. Therefore the Assessing Officer was directed to allow set off of unabsorbed depreciation to the assessee. (AY. 2003-04)
Pheonix Lamps Ltd. v. Add. CIT (2018) 61 ITR 756 (Delhi) (Trib.)

S. 10A : Free trade zone-Communication charges to be excluded from export turnover as well as from total turnover.
Dismissing the appeal of the revenue, the Tribunal held that, Communication charges to be excluded from export turnover as well as from total turnover. (AY. 2008-09)
DCIT v. Verisign Services India Pvt. Ltd. (2018) 61 ITR 315 (Bang.) (Trib.)

S. 10A : Free trade zone – If the assessee suo motu makes the adjustment and offers higher income, S. 10A/10B deduction cannot be denied. Also, as such notional income is not “export turnover”, the condition in S. 10A/10B that foreign exchange must be brought to India does not apply. [S. 10B, 92CA]
Tribunal held that the assessee is not entitled to S. 10A/ 10B deductions in respect of transfer pricing adjustments applies only where the adjustment is made by the AO/ TPO. If the assessee suo motu makes the adjustment and offers higher income, S. 10A/10B deduction cannot be denied. Also, as such notional income is not “export turnover”, the condition in S. 10A/10B that foreign exchange must be brought to India does not apply (Deloitte Consulting v. ITO in ITA No. 157/Mum./2012 dt. 15-07-2015) (Mum.) (Trib.) is not followed as it is contrary to CIT v. iGate Global Solutions Ltd (ITA No. 453/2008, dt. 17. 06. 2014, (Karn) (HC)). (ITA No. 1051/Pun/2015, dt. 12. 03. 2018)(AY. 2011-12)
Approva Systems Pvt. Ltd. v. DCIT(Pune)(Trib.), www.itatonline.org

S. 10AA : Special economic zones-Derived from-Surplus amount in freight export account and in insurance export account was derived from export activities eligible for deduction.
Dismissing the appeal of the revenue, the Court held that ; Surplus amount in freight export account and in insurance export account was derived from export activities eligible for deduction.(AY.2010-11)
PCIT v. Vedansh Jewels (P.) Ltd. (2018)97 taxmann.com 521/ 258 Taxman 155 (Raj) (HC)
Editorial : SLP of revenue is dismissed ;PCIT v. Vedansh Jewels (P.) Ltd. (2018) 258 Taxman 154 (SC)

S. 10AA : Special economic zones-Industrial undertaking-Investment in Plant and Machinery for new unit was substantial compared to value of machinery shifted — Entitled to exemption.
Dismissing the appeal of the revenue the Court held that ;substantial new capital was introduced in the new unit. All other requirements of S. 10AA had also been fulfilled. Hence the industrial undertaking was entitled to exemption.
CIT v. Green Fire Exports. (2018) 404 ITR 266 (Raj) (HC)
CIT v. Jagdish Prasad Soni (2018) 404 ITR 266 (Raj) (HC)

S. 10AA : Special economic zones-Assessee manufacturing different items in different units – No dispute about unit wise profitability declared by assesse – Remand report accepting cost of goods were reconciled – Addition made by AO to be deleted.
The AO had made an adjustment on account of supressed profits, by taking the net profit ratio at the rate of unit which was exempted under section 10AA of the Act, ignoring the fact that both the units were engaged in manufacture of similar item and were located in the same area, with the exempted unit only declaring abnormally high profit. The DRP had directed to delete the said addition made by AO.

The DRP held that the assesse was not asked by the AO to furnish the details with respect to distinctive items manufactured by each units. The AO conceded the original claim of the assessee that it was manufacturing different items in different units and the unit-wise profitability, declared by the assesse, was correct and all the details with respect to manufacturing units were produced before the AO at the at the time of assessment proceedings. The taxable units were manufacturing H7 bulbs meant for European markets which fetched a high profit, whereas H4 bulbs were meant for the local market where the returns were low.
The Tribunal held that the factual finding of the DRP was not contradicted by the Department. It was the discretion of the assesse to arrange its affairs in a manner which advanced its interest subject to the conditions that the transactions in questions are bona fide. In the remand report it was accepted by the AO that cost of H4 and H7 bulbs reconcile. The DRP duly considered the remand report and the submissions of the assesse and thereafter reached a conclusion in which there was no infirmity. Thus the Tribunal dismissed the Department’s appeal.
Dy. CIT v.Phoenix Lamps Ltd (2018) 64 ITR 466(Delhi)(Trib.)

S. 10AA : Special economic zones- Merely because consideration was received after 6 months from close of FY, deduction could not be denied to assessee on such sum—AO was directed to consider a sum as export turnover – Deduction cannot be allowed on unbilled revenue as it does not qualify the definition of export and export turnover. [S. 10A(3) ]
Provisions of S. 10AA does not provide any time-limit of bringing such consideration into India like S. 10A(3) which provided for receipt of consideration or sale proceeds in India in convertible foreign exchange within a period of 6 months from end of previous year, or within such further period as competent authority might allow in this behalf. Provision of S. 10A(5) speaks about audit of accounts and submission of report of an accountant in specified Performa. In this case same was complied with by assessee. There was no time-limit prescribed for bringing consideration of export into India. Merely because consideration was received after 6 months from close of FY, deduction could not be denied to assessee on such sum. Accordingly the AO was directed to consider a sum as export turnover of assessee and grant deduction u/s 10AA. Tribunal also held that deduction u/s 10AA cannot be allowed on unbilled revenue as it does not qualify the definition of export and export turnover.
BT E-Serv (India) P. Ltd v. (2018) 195 TTJ 137 (Delhi)(Trib.)

S. 10AA : Special economic zones- Once claim of deduction had been accepted in first year of operations and also in second year, then in third year same could not be withdrawn by examining factors which were required to be seen in first year of claim.-Without withdrawing or setting aside relief granted for first assessment year, AO cannot with draw relief for subsequent assessment years. [S. 10AA(4),10B]
Allowing the appeal of the asseee the Tribunal held that,in first year of operation assessee had claimed deduction u/s 10AA which was duly supported by audit report in Form 56F and such claim had been allowed by AO in scrutiny proceedings after completing assessment u/s 143(3), in subsequent assessment year also, similar claim for deduction u/s 10AA had been allowed by AO in order passed u/s 143(3) Tribunal held that conditions laid down in section 10AA (4) had to be seen on date of formation, whether undertaking had violated any conditions prescribed therein or not. Once claim of deduction u/s 10AA had been accepted in first year of operations and also in second year, then in third year same could not be withdrawn by examining factors which were required to be seen in first year of claim. AO could not deny claim of deduction u/s 10AA with assessee. Assessee continued to make addition to fixed assets in SEZ unit independently and there was no iota of any material to show that additions to fixed assets had been by way of transfer from EOU units. Followed. CIT v. Western Outdoor Interactive Pvt. Ltd.(2012) 349 ITR 309 (Bom.(HC))
Macquarie Global Services Pvt. Ltd. (2018) 163 DTR 305 / 62 ITR 666/ 192 TTJ 613 (Delhi)(Trib.)

S. 10B : Export Oriented undertakings – Entitle for deduction in respect of ‘Deemed Export’ of goods made through a third party – The word ‘Export’ read with Exim Policy would certainly include ‘Deemed Export’ within the ambit of ‘Export Turnover’. [S. 10B(2), 10B(9A)]
Assessee being a 100% Export Oriented Unit (EOU) for AYs in respect of deemed export of goods made by it during period under consideration through a third party. The Tribunal held that assessee was entitled to deduction under section 10B in respect of its profits and gains from its businesS. The High Court relied on the order of its coordinate bench in the case of CIT v Tata Elxsi Ltd (2016) 127 DTR 327)(Karn.)(HC) and agreed with the view taken by the earlier division bench and dismissed the appeal of the revenue. The High Court held that the word ‘export’ read with background of Exim Policy of Union of India would certainly include ‘Deemed Export’ also within ambit of ‘Export Turnover’ as explained in Explanation 2 of section 10B(9A). Further, there was no restriction imposed under section 10B(2) on quantum of deduction eligible under section 10B(1) with reference to export of goods manufactured by unit itself. Therefore, benefit of deduction under section 10B(1) cannot be restricted merely because the third party through which export has been made in not a 100% EOU. (AY. 2009-10, AY. 2010-11, 2011-12)
PCIT v. International Stones India Pvt. Ltd. (2018) 168 DTR 21 / 304 CTR 492 / 102 CCH 311 (Karn.)(HC)

S. 10B : Export Oriented undertakings–Entitle deduction in respect of ‘Deemed Export’ of goods made through a third party– The word ‘Export’ read with Exim Policy would certainly include ‘Deemed Export’ within the ambit of ‘Export Turnover’. [S. 10B(2), 10B(9A)]
Assessee being a 100% Export Oriented Unit (EOU) for AYs in respect of deemed export of goods made by it during period under consideration through a third party. The Tribunal held that assessee was entitled to deduction under section 10B in respect of its profits and gains from its businesS. The High Court relied on the order of its coordinate bench in the case of CIT v Tata Elxsi Ltd (2016) 127 DTR 327)(Karn.)(HC) and agreed with the view taken by the earlier division bench and dismissed the appeal of the revenue. The High Court held that the word ‘export’ read with background of Exim Policy of Union of India would certainly include ‘Deemed Export’ also within ambit of ‘Export Turnover’ as explained in Explanation 2 of section 10B(9A). Further, there was no restriction imposed under section 10B(2) on quantum of deduction eligible under section 10B(1) with reference to export of goods manufactured by unit itself. Therefore, benefit of deduction under section 10B(1) cannot be restricted merely because the third party through which export has been made in not a 100% EOU. (AY. 2009-10, AY. 2010-11, 2011-12)
PCIT v. International Stones India Pvt. Ltd. (2018) 168 DTR 21 / 304 CTR 492 / 102 CCH 311 (Karn.)(HC)

S. 10B : Export oriented undertakings –Interest free funds-Artificially imputing non-existent interest costs and denying deduction to the assessee was held to be not justified. [S. 10B(7), 80IA(10)]
Tribunal held that, where the facts and circumstances suggest that the provision of interest free funds to the assesse claiming deduction u/S. 10B was bonafide, artificially imputing non-existent interest costs and denying deduction to the assessee was not warranted.AO was directed to exclude the interest cost imputed for the purpose of determination of profits of the assesse u/S. 10B of the Act. (AY. 2008-09, 2011-12)
Nabros Pharma Ltd. v. ACIT (2018) 68 ITR 6 (SN) (Ahd) (Trib.)

S. 10B : Export oriented undertakings-Delay of one month in uploading the return-System was affected by virus-Reasonable cause – Exemption cannot be denied. [S. 139(1) ]
Allowing the appeal of the assesssee the Tribunal held that ;when assessee had completed audit, but return was uploaded belatedly. Reason given was that computer got infected and it took some time to set it right so that assessee could upload entire data. This reasoning given was supported by certificate from computer specialist, who attended to problem. Explanation given that computers got infected was reasonable explanation given in circumstances, delay in filing return was not intentional delay but beyond reasonable control of assessee. Denial of exemption is held to be not justified.(AY. 2008-09,2011-12)
Bartronics India Ltd. v. Dy.CIT (2018) 65 ITR 540 (Hyd)(Trib.)

S. 10B : Export oriented undertakings- Manufacture-Processed Foods, Pickles, Fresh Fruits and vegetables — Neither the AO nor the Assessee brought on record the process of manufacturing activities – Matter remanded to the AO to find out whether there was manufacture per se, or not, what was the break-up of the exports of the processed foods, pickles, fresh vegetables and fruits separately, and after determining all the facts, the Assessing Officer shall re-adjudicate the issue after granting the assessee adequate opportunity to substantiate its case.
Tribunal held that what was the process done by the assessee and whether or not there was actual manufacture had not been shown on record. The licence issued to the assessee as a 100 per cent. export oriented undertaking showed that under the head “products manufactured” it was specified “processed foods, pickles, fresh fruits and vegetables”. Admittedly, fresh fruits and vegetables were not manufactured itemS. What was the break-up of the processed foods, pickles, fresh fruits and vegetables which have been exported, had not been brought on record. In the assessment order, the Assessing Officer had made a blanket disallowance, the assessee had only given a general reply and claimed the issue to be covered by various case law. Neither the Department nor the assessee had placed the facts before the Tribunal. Therefore the issue was restored to the Assessing Officer for readjudication after verification, if necessary physical verification, as to the activities undertaken by the assessee at its eligible unit in respect of which claim of deduction under section 10B was being made. As to whether there was manufacture per se, or not, what was the break-up of the exports of the processed foods, pickles, fresh vegetables and fruits separately, and after determining all the facts, the Assessing Officer shall readjudicate the issue after granting the assessee adequate opportunity to substantiate its case. (AY.2006-07)
India Agro Exports P. Ltd. v. ITO (2018) 65 ITR 81 (SN) (Chennai) (Trib.)

S. 10B : Export oriented undertakings-Newly established hundred per cent export-oriented undertakings-Research and development in pharmaceutical, in the export drug related services-. Tribunal set aside the matter to AO to decide the nature of business of the company and also to ascertain the claim under S. 10B of the Act. [S. 10A]
Tribunal held that the both the lower authorities have been failed to ascertain that what assessee is actually doing and just bury the lead. Assessee is claiming that he has been doing research and development in pharmaceutical, in the export drug related serviceS. The assessee claimed that they fall in the category of back office operation and in the audit report it is also mentioned that assessee is doing research and development work related to drugs and healthcare. But both authorities have not ascertained to the effect that what actually assessee is doing. Therefore, Tribunal set aside the orders of the CIT(A) in both appeals and remitted this matter back to the file of the ld. AO to decide the nature of business of the company. Also directed AO to ascertain that how assessee can get benefit u/s 10B and accordingly, to decide the matter as per law. (AY.2008-09 2009-10)
ACIT (OSD) v. Oxygen Healthcare Research P. Ltd (2018) 64 ITR 93 (Ahd.)(Trib.)

S. 10B : Export oriented undertakings-Delay of one month in filing return — System of assessee affected by virus —Entitled to exemption.[S. 139(1)]
Tribunal held that the assessee had completed audit as on September 2, 2008, but the return was uploaded belatedly. The reason given was that the computer got infected and it took some time to set it right so that the assessee could upload the entire data. The reasoning given was supported by a certificate from a computer specialist, who attended to the problem. Therefore, the explanation was reasonable. Hence the delay was not an intentional delay but beyond the reasonable control of the assessee. The return was to be considered as return filed prior to due date. The Assessing Officer was directed to allow the exemption.(AY.2008-09)
Bartronics India Ltd. v. DCIT (2018) 65 ITR 540/ 195 TTJ 314 (Hyd) (Trib.)
S. 10B : Export oriented undertakings- Interest from fixed deposits made with Bank for obtaining letters of credit which has direct nexus with export activities is to be includable in computing the income-Matter was remanded for verification-Insurance claim which has direct nexus with industrial undertaking are eligible for deduction. Foreign exchange gain on sale of forward exchange contract arising out of eligible undertaking is entitle to deduction.Export proceeds that were unrealized, claimed that period for realization, had been extended by RBI Master Circular dated 1-7-2005 was directed to be allowed subject to verification.[S. 10A]
Allowing the appeal of the assessee the Tribunal held that ; Interest from fixed deposits made with Bank for obtaining letters of credit which has direct nexus with export activities is to be includable in computing the income. Matter was remanded for verification. Insurance claim which has direct nexus with industrial undertaking are eligible for deduction.Foreign exchange gain on sale of forward exchange contract arising out of eligible undertaking is entitle to deduction.Export proceeds that were unrealized, claimed that period for realization, had been extended by RBI Master Circular dated 1-7-2005 was directed to be allowed subject to verification.(AY.2003-04, 2005-06, 2006-07))
Moser Baer India Ltd. v. DCIT (2018) 170 ITD 522 (Delhi) (Trib.)

S. 11 : Property held for charitable purposes-Application of income-Any excess expenditure incurred by the trust/charitable institution in earlier assessment year could be allowed to be set off against income of subsequent years. [ S.11(1)(a) ]
Affirming Delhi High Court’s view,in Subros Educational Society(IT No. 382 of 2015 dt 23rd Sept., 2015),that any excess expenditure incurred by the trust/charitable institution in earlier assessment year could be allowed to be set off against income of subsequent years, the Supreme Court dismissed the Miscellaneous Application of the Revenue.
CIT (E).v. Subros Educational Society (2018) 303 CTR 1 / 166 DTR 257 (SC)

S. 11 : Property held for charitable purposes – Application of income-Write back of depreciation was allowed to be carried forward for application of income of subsequent years [S. 32]
Dismissing the appeal the Court held that, the High Court has allowed the assessee to write back the depreciation for this year and even for previous years and if that is done, the AO is directed to modify the assessment determining the higher income and allow the recomputed income with written back of by the assessee to be carried forward for subsequent years as application for charitable purposes Though the question was answered in favor of the revenue, relief was granted to the assessee as application of income. (AY. 2005-06)
Lissie Medical Institutions v. CIT (2018) 161 DTR 73/300 CTR 130 (SC)

S. 11 : Property held for charitable purposes -CIT(A) can set aside an assessment order, if AO fails to comply the direction of CIT(A) in an earlier order while granting relief to the assessee [S. 11(5) 13(1)(d), 250]
Question admitted before the High Court was “ whether on the facts and in the circumstances of the case, the Tribunal failed to appreciate that the original order of assessment dated 16-3-88 was farmed without allowing the benefits of section 11 of the Act and hence the assessee could not have raised the ground of method of computing taxable income,if any when applying section 11 of the Act.in an appeal against the said order “ Allowing the appeal of the assessee the Court held that, CIT(A) can set aside an assessment order if AO fails to comply the direction of CIT(A) in an earlier order while granting relief to the assessee.(AY. 1985-86)
Cotton Textiles Exports Promotion Council v. ITO (2018) 169 DTR 141 (Bom.)(HC)

S. 11 : Property held for charitable purposes- Accumulation of income-Explanation of purposes for which funds accumulated was furnished during course of assessment proceedings is a sufficient compliance. [S. 11(2), form No 10]
Dismissing the appeal of the assessee the Court held that, the assessee had submitted the background under which the board of trustees had met, had considered the material and eventually had passed a formal resolution, which was filed along with the return, setting apart the funds for the ongoing hospital projects of the trust and for modernization of the existing hospitalS. Therefore there was no error in the order of the Tribunal allowing the claim for deduction made by the assessee. (AY.2008-09)
CIT v. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust. (2018) 409 ITR 591/(2019) 261 Taxman 229 (Guj) (HC)
Editorial: SLP of revenue is dismissed, CIT v. Bochasanwasi Shri Akshar Purshottam Public Charitable Trust ( 2019) 263 Taxman 247 (SC)

S. 11 : Property held for charitable purposes –Institution imparting education in Banking is entitle to exemption-Grant or refusal to grant exemption under S. 10(22) or 10 (23C) is not relevant.[S. 2(15), 10 (22),10 (23C), 12A]
Dismissing the appeal of the revenue the Court held that, institution imparting education in Banking is entitle to exemption-Grant or refusal to grant exemption under S. 10(22) or 10 (23C) is not relevant.(AY. 2008-09)
CIT v. Indian Institute Of Banking And Finance. (2018) 408 ITR 558/ 303 CTR 750 / 166 DTR 253(Bom.) (HC)
Editorial : Order in Indian Institute of Banking and Finance v. DDIT (E) (2015) 39 ITR 323 (Mum.) (Trib.) is affirmed.

S. 11 : Property held for charitable purposes – Application of income-Adjustment of excess expenditure against income of current year amounts to application of income.[S. 12]
Dismissing the appeal of the revenue the Court held that ; Adjustment of excess expenditure against income of current year amounts to application of income.(AY.2011-12)
CIT v. Shushrutha Educational Trust. (2018) 408 ITR 536 (Karn) (HC)

S. 11 : Property held for charitable purposes – Amount paid to employing foreign personnel for imparting education in India, amount set apart for payment in previous year and paid in subsequent year, expenditure of earlier years adjusted against income of current year ,amounts to application of income – When purposes of accumulation is mentioned in Form 10 charitable merely failure to give details — Exemption cannot be denied.[Form 10]
Dismissing the appeals of the revenue the Court held that ;amount paid to employing foreign personnel for imparting education in India, amount set apart for payment in previous year and paid in subsequent year, expenditure of earlier years adjusted against income of current year ,amounts to application of income. Court also held that when purposes of accumulation is mentioned in Form 10 charitable merely failure to give details, exemption cannot be denied (AY.2008-09,2009-10)
CIT v. Ohio University Christ College (2018) 408 ITR 352 /(2019) 306 CTR 282/ 174 DTR 10(Karn) (HC)
Editorial : Order in Dy.DIT v. Ohio University Christ College (2015) 44 ITR 291 (Bang.) (Trib.) is affirmed.

S. 11 : Property held for charitable purposes – Accumulation of income did not exceed 15 per cent of income-Entitle for exemption [S. 12A, 263]
Dismissing the appeal of the revenue the Court held that ;accumulation of income of assessee during relevant year did not exceed 15 per cent of its income. Entitle for exemption. (AY.2005-06)
CIT v. Agricultural Produce Market Committee. (2018) 408 ITR 231 /257 Taxman 234 (Karn)(HC)

S. 11 : Property held for charitable purposes – Corpus donation-Corpus donation on which it earned interest, in view of specific direction of donors that said interest would also form part of corpus and entitle for exemption.[S. 11(1)(d), 62,63]
Assessee received corpus donation on which it earned interest. Assessees claim for exemption on interest earned on corpus donation was rejected.Tribunal allowed the claim.On appeal dismissing the appeal of the revenue the Court held that, in view of specific direction of donors that said interest would also form part of corpus, accordingly assessee’s claim for exemption under S. 11 in respect of interest so earned was to be allowed.(AY. 2007-08 to 2012-13)
CIT (E) v. Mata Amrithanandamayi Math Amritapuri (2017) 85 Taxmann.com 26 (Ker.) (HC)
Editorial : SLP of revenue is dismissed,CIT (E) v. Mata Amrithanandamayi Math Amritapuri. (2018) 256 Taxman 62 (SC)

S. 11 : Property held for charitable purposes – Surplus earned from organizing exhibition-As separate books of account is not maintained denial of exemption was held to be justified. [S. 11(4A)]
Dismissing the appeal of the assessee the Court held that S. 11(4A) obliges an institution which seeks to have benefit of S. 11 if it carries on business incidental to its business objects, to maintain separate books of account. Since exhibition organized by assessee was a well-organised and regular activity incidental to business of assessee but no separate books of account were maintained for purposes of carrying out said exhibition and thus, requirement of maintaining separate books of account was not satisfied accordingly the assessee was not entitled to exemption. (AY. 1992-93)
Indian Machine Tools & Manufacturers Association v. DIT(E) (2018) 254 Taxman 243 / 165 DTR 1/ 302 CTR 289 (Bom.)(HC)

S. 11 : Property held for charitable purposes – Society registered at the instance of the Reserve Bank of India for the purpose of assisting banks and financial institutions, for the improvement of their performance is held to be charitable in nature. [S. 2(15),13(8)].
Dismissing the appeal of the revenue the Court held that; Society registered at the instance of the Reserve Bank of India for the purpose of assisting banks and financial institutions, for the improvement of their performance is held to be charitable in nature. (AY. 2010-11, 2011-12)
CIT v. Institute of Development and Research in Banking Technology. (2018) 400 ITR 66/ 165 DTR 104 (T & AP) (HC)
Editorial : Institute for Development and Research in Banking Technology v. ADIT (E)(2015) 42 ITR 219 (Hyd) (Trib.) is affirmed

S. 11 : Property held for charitable purposes – Education-Accumulation-Section 11(1B) is not applicable where the assessee-society accumulated its income under section 11(2). [S. 12AA]
Tribunal held that the assessee had purchased land and used accumulated amount for charitable and educational purposes. Section 11(1B) is not applicable where the assessee-society accumulated its income under section 11(2). (AY.2008-09)
ACIT v. Scientific and Educational Advancement Society (2018) 196 TTJ 740 /( 2019) 174 DTR 266 (Delhi)(Trib.)

S. 11 : Property held for charitable purposes-Dividend income – Income can be taxed if the investment is in violation of the provision-Exemption cannot be denied to the Trust in respect of other income.[S. 11(5), 12AA,13(1)(d)]
The assesse is a charitable institution registered u/s 12AA (1) of the IT Act. It earned dividend income, other than income eligible for exemption u/s 11. The AO denied benefit of exemption u/s 11(1) for the entire income for violation ofprovision of S. 13(1)(d) read with S. 11(5) pertaining to mode of investment. CIT (A) held that benefit of exemption for entire income could not have been denied and at best AO could have denied exemption to extent of dividend income earned. Tribunal affirmed the order of CIT(A).(AY.2010-11)
ITO v.The Times Centre For Media And Management StudieS. (2018) 168 DTR 14/194 TTJ 715 (Delhi) (Trib.)

S. 11 : Property held for charitable purposes-Object to promote and safeguard rubber industries-Receipts from non-members and other sources was utilised/applied solely towards promotion of objects of association- No portion was paid or transferred directly or indirectly to its members-Proviso to S 2(15) is not attracted-Exemption cannot be denied-Contribution made to an association, formed with an object to promote and safeguard rubber industries, to corpus of Rubber Skill Development Centre, a section 25 company formed under Prime minister Sector Skill development programme, was not a case of investment as envisaged under S. 11(5) read with 13(1)(d)-Exemption cannot be denied.[S. 2(15), 12AA, 13(1)(d)].
Assessee company, registered under section 12AA, was formed with an object for promoting and safeguarding rubber industry.AO held that the objects of assessee were not for benefit of general public at large, but were limited only to members of assessee-association, therefore, assessee was only a mutual association and not charitable. Further, assessee’s receipts from non-members and other sources such as income received from advertisements, sale of books and periodicals, magazine subscription, interest income on fixed deposits and cumulative deposits, etc. was hit by amended proviso to S. 2(15) of the Act. Tribunal held that, memorandum of Association of assessee prescribed that income and property of association when so ever derived would be applied solely towards promotion of objects of association and that no portion thereof would be paid directly or indirectly to members of association. Further, upon winding up or dissolution of association, surplus remaining after satisfaction of all debts and liabilities, if any, would not be paid or distributed amongst members of association but would be given to some other association or institution having similar objects. Accordingly there was no justification for AO to hold that since objects of assessee sought to promote and protect interests of a particular trade and industry, same lost character of being charitable. The fact that some of activities carried out by an entity involving charging of fee, etc. had resulted in a surplus could not ipso facto be determinative of fact that there was an element of profit motive. Therefore, proviso to S 2(15) could not be invoked.Tribunal also held that,contribution made by to an association, formed with an object to promote and safeguard rubber industries, to corpus of Rubber Skill Development Centre, a section 25 company formed under Prime minister Sector Skill development programme, was not a case of investment as envisaged under section 11(5) read with 13(1)(d), and, thus, assessee could not be denied exemption under section 11 of the Act. (AY. 2011-12, 2013-14)
All India Rubber Industries Association. v. ADIT (E) (2018) 173 ITD 615 / 175 DTR 409 /( 2019)198 TTJ 388 (Mum.) (Trib.)

S. 11 : Property held for charitable purposes – Nursing school located in hospital’s premises-Running hospital and nursing school were intricately connected and dependent on each other and thus, was one inseparable activity entitling to exemption.[S. 2(15) 12A]
Assessee was running hospital along with nursing school. AO granted exemption claimed by assessee under S. 11 in respect of income received from hospital, however, denied same with respect to nursing school. CIT(A) also confirmed the denial of exemption. On appeal by revenue the Tribunal held that since nursing school was located within hospital’s premises and students of nursing school got training in hospital, assessee’s activities of running hospital and nursing school were intricately connected and dependent on each other and thus, was one inseparable activity and therefore, both were entitled to exemption. (AY.2011-12)
MAJ Hospital. v. DCIT (2018) 173 ITD 554 / 196 TTJ 1149 /(2019) 173 DTR 236(Cochin)(Trib.)

S. 11 : Property held for charitable purposes-Application of income-Expenditure incurred in an earlier year could be adjusted against income of succeeding year while computing taxable income of succeeding year.[S. 12,12A]
Expenditure incurred in an earlier year could be adjusted against income of succeeding year while computing taxable income of succeeding year.Followed CIT v. Institute of Banking Personnel Selection [2003] 264 ITR 110 (Bom.) (HC).(AY.2012-13)
ITO v. Namma Sangha. (2018) 173 ITD 297 (Bang.) (Trib.)

S. 11 : Property held for charitable purposes – Application of income-Honorarium to doctors outside India for attending a seminar conducted for benefit of its parent body – Payments covered under FEMA-RBI approval is not obtained – Application of income is rejected.[S. 11(1)(c)]
Assessee conducted a seminar for benefit of its parent body which was attended by doctors coming from abroad.Assessee paid honorarium to those doctors and claimed said payment as application of income.AO held that though the payments were made outside India through banking channels and, even though said transactions were covered under FEMA, yet assessee did not obtain approval of RBI, accordingly the claim for application of income is rejected.CIT(A) allowed the claim of the assessee. On appeal by the revenue the Tribunal up held the order of the AO. (AY.2010-11)
ITO v. Escorts Cardiac Disease Hospital Society. (2018) 173 ITD 406 /(2019) 197 TTJ 708 / 174 DTR 321(Delhi) (Trib.)

S. 11 : Property held for charitable purposes-Education-Providing hostel facility to students is an essential component of education institution and also an aid for attaining educational object-Entitle to exemption.[S. 2(15) 12, 12AA]
Allowing the appeal of the assessee the Tribunal held that; providing hostel facility is an essential component of an educational institution and it is an aid for attaining educational objects, accordingly entitle to exemption .(AY.2013-14)
Shree Ahmedabad Lohana Vidyarthi Bhavan. v. ITO (2018) 172 ITD 11 / 171 DTR 339/ 196 TTJ 131(Ahd) (Trib.)

S. 11 : Property held for charitable purposes–Sports association-– Merely because some sponsorship was accepted from a private company for Asian games and Youth Olympic games, exemption cannot be denied.[S. 2(15)]
Dismissing the appeal of the revenue, the Tribunal held that ; there was no material which suggests that the assessee was conducting its affairs solely on commercial lines with the motive to earn profit. There is also no evidence that the assessee has deviated from its objects which it has been pursuing since past many decades. Thus, proviso to S. 2(15) of the Act is not applicable to the assessee. The assessee cannot lose its character of charitable purpose merely because some sponsorship was accepted from a private company in respect of Asian games and Youth Olympic games (.AY.2011-12)
Dy. CIT v. India Olympic Association (2018) 171 ITD 674 / 66 ITR 82 /170 DTR 321/195 TTJ 859 (Delhi)(Trib.)

S. 11 : Property held for charitable purposes-Accumulation of income — Allowable at fifteen per cent. on gross receipts.[ S.11(1)(a) ]
AO had restricted the accumulation up to the extent of 15 per cent. of the net receipts only, Tribunal held that the accumulation under S. 11(1)(a) of the Act is to be allowed at 15 per cent. of gross receipts, as claimed by the assessee. (AY. 2012-2013)
Green Wood High Trust v. ACIT(E) (2018) 62 ITR 264 (Bang.)(Trib.)

S. 11 : Property held for charitable purposes- Revenue had not proved that registration granted u/S. 12AA had been withdrawn- Claim of exemption u/S. 11 would not be denied-Matter reamanded to CIT(A). [S. 12AA,13]
On appeal, the Tribunal held that the revenue was not able to demonstrate that the exemption granted to the assessee u/S. 12AA had been withdrawn. Therefore, unless the registration was withdrawn, the assessee would be eligible for exemption u/S. 11 unless it was hit by the provisions of S. 13 of the Act. Further, the Tribunal held that since the contentions of the assessee were not considered by CIT(A), the matter was to be remitted back to the CIT(A) for fresh adjudication of exemption u/S. 11 of the Act. (AY. 2011-12)
Artificial Limbs Manufacturing Corporation of India v. ACIT (2018) 63 ITR 1 (Luck)(Trib.)

S. 11 : Property held for charitable purposes-Micro financing activity is in nature of trade, commerce or business hence is not entitle to exemption as charitable purpose. [S. 2(15)]
Tribunal held that micro financing activity is in nature of trade, commerce or business hence is not entitle exemption as charitable purpose. (AY. 2007-2008, 2009 – 2010)
Shalom Charitable Ministries of India v. ACIT (2018) 171 ITD 338/ 195 TTJ 340(Cochin) (Trib.)

S. 11 : Property held for charitable purposes- Advancement of objects of general public utility Predominant object of assessee society was promotion of game of tennis – Receipts of incidental business income of assessee while carrying out objects of advancement of general public utility over and above prescribed limit under second proviso to section 2(15) would be subject to taxation and not entire income. [S. 2(15), 10(23C), 13]

Tribunal held that predominant object of assessee society was promotion of game of tenniswhich is advancement of objects of general public utility.Income from organizing of Davis Cup up to the limit prescribed as per the second proviso to section 2(15), which for the assessment year under consideration is Rs. 25 lacs, will be treated as income from ‘charitable purposes’ and the assessee will be entitled to claim the exemption u/s 11 of the Act up to that extent in respect of the said income along with other income, if any, from the non-business activity of the assessee. However, the income over and above amount for Rs. 25 lacs from the business activity i.e. from the exploitation of its right to hold Davis Cup will be treated as ‘business income’ of the assessee and will be liable to include in its total income. The assessing officer, therefore, is directed to bifurcate the income from commercial activity and non-commercial activity and assess the income of the assessee as directed above. With the above observations, the appeal of the assessee is treated as partly allowed.(ITA No. 1382/CHD/2016, dt. 26.07.2018)(AY. 2013-14)
Chandigarh Lawn Tennis Association v. ITO(2018) 95 taxmann.com 308 (Chd.)(Trib.), www.itatonline.org

S. 11 : Property held for charitable purposes –Educational activities-Denial exemption is not justified only on account of charging fees from students – Receipts cannot be assessed as income from other sources – The assessee is entitle to exemption.[S. 2(15), 12, 56]
Tribunal held that the educational activity had been specifically treated as charitable purpose under S. 2(15) of the Act. The charging of fee would not take the assessee out of the ambit of charitable activity. The fees charged from the students had been applied for the purpose of carrying out charitable activity. The income by way of fee can be held to be derived from property held under trust. The receipts were not liable to be taxed under the head “Income from other sources”. The assessee is entitle to exemption.(AY.2010-11)
Rama Devi Memorial Society, City Public School v. JCIT(2018) 65 ITR 50 (Delhi) (Trib.)

S. 11 : Property held for charitable purposes-Providing technical and managerial services to common people through IT for efficient functioning in government departments and it was charging service fee in addition to statutory fee levied by government and assessee could enhance its fees, since assessee’s activities were not charitable. [S. 2(15), 12AA]
Tribunal held that the Society which is providing technical and managerial services to common people through IT for efficient functioning in government departments and it was charging service fee in addition to statutory fee levied by government and assessee could enhance its fees, since assessee’s activities were not charitable first proviso to S. 2(15) is applied.(AY.2010-11, 2014-15)
Sukhmani Society for Citizen Services. v. ACIT (2018) 171 ITD 32 / 194 TTJ 937 / 169 DTR 89(Asr) (Trib.).

S. 11 : Property held for charitable purposes – Advance of loan to another trust where the common trustees had no substantial interest and advance not being investment there is no violation hence exemption cannot be denied and registration cannot be refused.[S. 10(23C)(vi),13(1)(d)]
Allowing the appeal of the assessee the Tribunal held that ; Advance of loan to another trust where the common trustees had no substantial interest and advance not being investment there is no violation, hence exemption cannot be denied and registration cannot be refused .(AY.2007-08)
Puran Chand Dharmarth Trust. v. ITO (2018) 170 ITD 687/ 168 DTR 1 / 194 TTJ 643/ 64 ITR 50 (SN)(Delhi) (Trib.)

S. 11 : Property held for charitable purposes – Depreciation-Income to be computed in normal commercial manner without classification under various heads referred in S. 14 of the Act. [S. 14, 32]
Dismissing the appeal of the revenue the Tribunal held that income referred to S. 11(1)(a) of the Act was to be computed in accordance with the normal provisions Act but in accordance with the normal rules of accountancy under which the depreciation was to be allowed while computing such income.(AY. 2009-10)
Dy.CIT v. Nirma University (2018) 64 ITR 60 (Ahd) (Trib.)

S. 11 : Property held for charitable purposes-Providing knowledge, information, awareness, demonstrations, etc., to members of Fragrance and Flavours industry is charitable purpose hence entitle to exemption .[S. 2(15)]
Allowing the appeal of the assessee the Tribunal held that; receipt of subscriptions from members, sale of publications, Fafai Journal, holding of workshops & conferences, directory receipts etc., were provided for facilitating dominant object of assessee-trust, viz., providing knowledge, information, awareness, demonstrations, etc., to members of Fragrance and Flavours industry is charitable purpose and entitle to exemption. (AY. 2009-10)
Fragrance & Flavours Association of India. v. DIT (E) (2018) 170 ITD 312(Mum.) (Trib.)

S. 11 : Property held for charitable purposes-The denial of exemption was held to be justified as the Trust was running schools and institutes on a commercial basis however donations made by the assessee to another charitable trust should be regarded as application of income towards the object of the trust. [S. 2(15) 13]
The denial of exemption was justified demonstrating the fact that the trust was not existing for charitable purposes and was running schools and institutes on a commercial basis however donations made by the assessee to another charitable trust should be regarded as application of income towards the object of the trust. However, the Tribunal also held that the donations made by the assessee to another charitable trust should be regarded as application of income towards the object of the trust. (AY. 2007-08, 2009-10, 2010-11)
IILM Foundation v. Addl. DIT(E) (2018) 61 ITR 186 (Delhi)(Trib.)

S. 11 : Property held for charitable purposes – Order of CIT(A) accepting the Trust as charitable Trust and allowing the exemption was set aside. [S. 12AA]
On appeal by the revenue the Tribunal held that, CIT(A) did not consider the findings of the AO while deciding the issue on merits It was found that the assessee was not granted registration u/s. 12A. The assessee should have moved a separate appeal to the appropriate authority against the rejection order u/s. 12AA(1)(b)(ii). Accordingly the Tribunal held that CIT (A) should consider contention raised by department and decide issue afresh and then pass a speaking order. (AY. 2013-14)
Dy. CIT v. Dayanand Dinanath Group of Institutions Educational Society (2018) 62 ITR 97 (Delhi)(Trib.)
S. 11 : Property held for charitable purposes-Charging of fees for educational activities which has to be applied for the object of the trust has to be seen as application of income-There is no disharmony between S. 10(23C) and S. 11 and exemption cannot be denied. [S. 10(23C) 12, 12A]
Allowing the appeal of the assesse, the Tribunal held that; Charging of fees for educational activities which has to be applied for the object of the trust has to be seen as application of income. There is no disharmony between S. 10(23C) and S. 11 and exemption cannot be denied. (AY. 2011-12)
Adarsh Public School v. JCIT (2018) 169 ITD 255 (Delhi) (Trib.)

S. 11 : Property held for charitable purposes – Quality control accreditation of organisations-Application fees membership fees and fees for organising seminars-Entitle to exemption.[S. 2(15), 12]
The assesse was established by the Ministry of Industry and registered under the Societies Registration Act, 1860 and u/s 12A of the Act. Dismissing the appeal of the revenue the Tribunal held that, the amount received by the assesse as application fees membership fees and fees for organising seminars etc is entitle to exemption.(AY. 2013-14)
Dy. CIT v. Quality Council of India (2018) 63 ITR 43 (SN)(Delhi) (Trib.)

S. 11 : Property held for charitable purposes – Development fund- Capital or revenue – Development fund along with tuition fee in a single receipt of fees from students was held to be revenue receipts and cannot be held to be capital receipt.[S. 4, 12A]
Allowing the appeal of the revenue the Tribunal held that; Development fund received along with tuition fee in a single receipt of fees from students was held to be revenue receipts and cannot be held to be capital receipt. (AY. 2012-13)
ACIT (E) v. Scholars Education Trust of India. (2018) 168 ITD 183 (Jaipur) (Trib.)

S. 11 : Property held for charitable purposes – letting out function hall cannot be considered as commercial activity-Exemption is entitle-No disallowance can be made for failure deduct tax at source when the income of the assessee was held to be exempt. [S. 2(15), 12A, 12AA, 40(a)(ia)]
Dismissing the appeal of the revenue the Tribunal held that; the proviso to section 2(15) was never meant to deprive genuine trusts and institutions whose main object was charity but which in the process of achieving the main object undertook some income generating activity which was ancillary and incidental to the main object, therefore letting out function hall cannot be considered as commercial activity. Tribunal also held that no disallowance can be made for failure deduct tax at source when the income of the assessee was held to be exempt. (AY. 2012-13)
ITO v. Kalinga Cultural Trust. (2018) 61 ITR 24 (Hyd) (Trib.)

S. 11 : Property held for charitable purposes-Charitable purpose-Mere passing book entries cannot be considered as held to be —Depreciation.[S. 2(15, 12, 32]
Dismissing the appeal of the revenue, the Tribunal held that; mere passing accounting entries in books of account transferring excess of Income over expenditure account to two different accounts is not applying profit for non-charitable activities. Assessee is entitle to exemption. Tribunal also held that a Trust is entitled to claim depreciation on assets on which deduction was allowed as application of income. (AY. 2007-08)
DIT v. Fortune Society For Development And Promotion Of International BusinesS. (2018) 61 ITR 284 (Delhi) (Trib.)
S. 11 : Property held for charitable purposes-Promotion of cricket-No violation of any condition of S. 13-Expenditure incurred not for the object of Trust-Entire claim of exemption cannot be denied-Exemption can be denied only to the extent of expenditure which was not incurred for object of Trust-Travel expenses of office bearer-No detailes furnished – disallowance is held to be justified-Expenditure on account of purchase of complementary tickets for different international matches for VIPs so as to popularise game of cricket amongst VIPs-Held to be allowable as expenditure-Expenditure towards foreign travel of its office bearers for purpose of attending a meeting-Held to be allowable-Entertainment expenditure for wine, food and gift incurred by a charitable trust, engaged in promotion of cricket, for Government officials and other persons during a meeting is held to be not allowable.[S. 12A,13]
Tribunal held that, when the expenditure is incurred is not for the object of the Trust and there is no violation of any of condition of S. 13, entire exemption cannot be denied. Exemption can be denied only to the extent of expenditure which was not incurred for object of Trust.As no details of ravel expenses of office bearers were furnished disallowance is held to be justified.Expenditure on account of purchase of complementary tickets for different international matches for VIPs so as to popularise game of cricket amongst VIPs-Held to be allowable as expenditure. Expenditure towards foreign travel of its office bearers for purpose of attending a meeting is held to be allowable. Entertainment expenditure for wine, food and gift incurred by a charitable trust, engaged in promotion of cricket, for Government officials and other persons during a meeting is held to be not allowable . (AY. 1999-2000, 2000-01)
Board of Control for Cricket in India. v. ITO (2018) 196 TTJ 1057/ (2019) 174 ITD 159 (Mum.)(Trib.)

S. 12A : Registration – Trust or institution-Charitable purpose-The CIT has no power to cancel/withdraw/recall the registration certificate granted u/s 12A until express power to do so was granted by S. 12AA(3), till 1-10-2014. S. 21 of the General Clauses Act cannot be applied to support the order of cancellation of the registration certificate .[General clauses Act, S. 21]
Allowing the appeal the Court held that; The CIT has no power to cancel/withdraw/recall the registration certificate granted u/s 12A until express power to do so was granted by S. 12AA(3), till 1-10-2014. S. 21 of the General Clauses Act cannot be applied to support the order of cancellation of the registration certificate. (C A No. 6262 OF 2010, dt. 16. 02. 2018)
Industrial Infrastructure Development Corporation (Gwalior)M. P. Ltd. v. CIT (2018)403 ITR 1/ 163 DTR 49 / 301 CTR 153/ 253 Taxman 480(SC)

S. 12A : Registration –Trust or institution- Registration cannot be denied merely on ground that secretary of society was getting lease rent for land given to society for running school or his wife who had requisite qualification was teaching in school and was being paid salary. [S. 13]
Assessee educational society, set up with various aims and objects including improvement in standard of education of backward students of rural areas, was running a school and Commissioner had not doubted genuineness of aims and objects of assessee, application under section 12A could not be rejected merely on ground that secretary of society was getting lease rent for land given to society for running school or his wife who had requisite qualification was teaching in school and was being paid salary.
CIT (E) v. Ambala Public Educational Society (2018) 259 Taxman 575 (P&H)(HC)

S. 12A : Registration –Trust or Institution-Merely because the charitable activity may mutually benefit members-Object itself would not cease to be charitable in nature [S. 2 (15)]
On appeal, High Court held that the provisions contained under S. 12A nowhere empowers the CIT to assess the objects vis-a-vis the books of accounts; even otherwise, it is not to be seen at this stage as to whether the fulfilment of the charitable purpose would eventually benefit the members of the society. Hence, CIT was rightly directed by ITAT to grant registration.(AY.2013-14)
CIT.v. Chhattisgarh Urology Society (2018) 303 CTR 299 / 166 DTR 114 (Chhattisgarh)(HC)

S. 12A : Registration –Trust or institution-Seed certification agency-Advancement of object of general public utility – Entitle to registration.[S. 2(15)]
Dismissing the appeal of the revenue the Court held that ; providing services of seed certification agency is an advancement of general public activity. Entitle to registration.(AY. 2002-03 to 2005-06)
CIT v. Rajasthan State Seed And Organic Production Certification. (2018) 408 ITR 513 (Raj) (HC)

S. 12A : Registration –Trust or institution-Registration of a trust does not involve enquiry into actual activities or application of funds, etc. and at that stage only enquiry required to be conducted is with respect to object of trust alone.[S. 2(15), 11 12AA]
Dismissing the appeal of the revenue the Court held that; the registration of a trust does not involve enquiry into actual activities or application of funds, etc. and at that stage only enquiry required to be conducted is with respect to object of trust alone; and if assessee is found to have been engaged in any non-charitable activity, benefit of exemption may be denied.

CIT v. Babu Ram Education Society (2018)(2018) 96 taxmann.com 606 (All.)(HC).
Editorial : SLP is granted to the revenue ;CIT v. Babu Ram Education Society (2018) 257 Taxman 558 / 96 taxmann.com 607 (SC)

S. 12A : Registration –Trust or institution-Non disposal of application for registration after expiry of six months period is deemed to be granted automatically on expiry of six months period.[ S.12AA(2) ]
Dismissing the appeal of the revenue the Court held that; where assessee-society filed an application under section 12A for grant of registration and same was responded after nine months, registration was deemed to be granted automatically on expiry of six months period as specified in section 12AA(2).
CIT v. TBI Education Trust (2018) 257 Taxman 355 / 172 DTR 347/ (2019) 306 CTR 295 (Ker)(HC)

S. 12A : Registration –Trust or institution-Cricket association holding commercial tournaments on behalf of Board of Control for cricket in India is entitle exemption.The court admitted the appeal on the question whether the Tribunal erred in holding that even after addition to the objects clauses of the assessee-trust made without intimation to the Department, the registration could not be ipso facto cancelled under section 12AA(3) on the ground that the registration granted under section 12A and the benefits flowing therefrom, could not continue after amending the objects without the approval of the competent authority. [S. 2(15) 12AA(3), 260A]
Court held thatCricket association holding commercial tournaments on behalf of Board of Control for cricket in India is entitle exemption. The court admitted the appeal on the question whether the Tribunal erred in holding that even after addition to the objects clauses of the assessee-trust made without intimation to the Department, the registration could not be ipso facto cancelled under section 12AA(3) on the ground that the registration granted under section 12A and the benefits flowing therefrom, could not continue after amending the objects without the approval of the competent authority.(AY.2009-10)
PCIT v. Maharashtra Cricket Association. (2018) 407 ITR 9 (Bom.) (HC)

S. 12A : Registration –Trust or institution-when there is no change in objects of Trust, registration cannot be cancelled on the ground that there was amendment in respect of appointment of chief trustees and manner of managing the trust.[S. 11, 12AA(3), 13]
Dismissing the appeal, of the revenue the Court held that ;when there is no change in objects of Trust, registration cannot be cancelled on the ground that there was amendment in respect of appointment of chief trustees and manner of managing the trust.
CIT(E) v. Sadguru Narendra Maharaj Sansthan. (2018)407 ITR 12 (Bom.) (HC)

S. 12A : Registration – Trust or institution-Cancellation notice having been issued on 6. 03. 2012, it did not suffer from any jurisdictional error. Matter was remanded to Tribunal to decide the issue on merits. [S. 2(15)]
Allowing the appeal of the assessee the Court held that; Cancellation notice having been issued on 06. 03. 2012, it did not suffer from any jurisdictional error. Matter was remanded to Tribunal to decide the issue on merits.
ACIT v. Agra Development Authority (2018) 407 ITR 562 /163 DTR 121 / 302 CTR 308 (All)(HC)

S. 12A : Registration – Trust or institution-Though the object is charitable the assesse has not carried out any charitable activity of general public utility by utilising the funds which are meant for charitable purpose hence not entitle to exemption. [S. 2(15)]
Dismissing the appeal of the assessee the Court held that; though the object is charitable the assessee has not carried out any charitable activity of general public utility by utilising the funds which are meant for charitable purpose , hence not entitle to exemption.
Norka Roots. v. CIT(2018) 401 ITR 224 (Ker) (HC)

S. 12A : Registration – Trust or institution-Appeal before CIT(A) is continuation of original assessment proceedings —. Proviso to S. 12A(2) is declaratory and will have and has retrospective effect[S. 11]
Dismissing the appeal of the revenue the Court held that; Proviso to S. 12A(2) inserted with effect from 1-10-2014 stating that registration will have effect prior years in respect of which assessment proceeding pending. Proviso is declaratory and will have and has retrospective effect. Appeal is a continuation of the original proceedings and assessment proceedings pending before an appellate authority should be deemed to be assessment proceedings pending before the Assessing Officer.
CIT v. Shree Shyam Mandir Committee. (2018) 400 ITR 466 (Raj) (HC)

S. 12A : Registration –Trust or institution-Proviso to S. 12A(2) which was added by Finance Act, 2014 shall be retrospective in operation— Entitled to get benefit of registration, [S. 10(23C) (iiiad), 10 (23C)(vi),12AA]
AO held that the assessee got registration under S 12A w.e.f. 01.04.2011 only, therefore, it was also not eligible for exemption of its income under S 11/12 for year under consideration which was affirmed by CIT (A).Tribunal held that, assessment order was passed on 29th January, 2014 and amendment was made in S. 12A by Finance Act, 2014 by inserting a provision w.e.f. 1st October, 2014. Registration was granted on dated 09-04-2012 which was effective from 01-04-2011 and assessment order was passed on 29-01-2014, therefore, in present case, assessment proceedings could be construed as pending as on date of order u/s 12AA.Amendment made by Finance Act, 2014 by inserting a proviso in S.. 12A should be construed retrospectively in operation because legislator in its wisdom had brought this proviso to prevent genuine hardship which could be caused on assessee due to non-registration u/s 12A. Accordingly the assessee should be entitled to get benefit of registration, therefore, orders passed by both AO and CIT(A) was set aside and remanded case to AO to decide afresh. (AY. 2011-12)
Sai Wiran Wali Educational Trust. (2018) 170 DTR 337 / 195 TTJ 956 (Asr.)(Trib.)

S. 12A : Registration –Trust or institution- Educational trust-Registration could not be denied on ground that assessee should have sought approval under S. 10(23C)(vi) of the Act. Matter remanded to CIT (E), in accordance with law. [S. 10(23C)(iiiad), 10(23C(vi)]
Tribunal held that,educational trust which is engaged in running, managing and developing school to awaken nation’s spirit and scientific approach in students and to motivate poor and disabled students by providing educational facilities along with scholarships, registration could not be denied on ground that assessee having been claiming exemption under section 10(23C)(iiiad) should have sought approval under S. 10(23C)(vi) of the Act. Matter remanded to CIT (E), in accordance with law.
Swami Vivekanand Education Society v. CIT (E) (2018) 173 ITD 101 (Chd) (Trib.)

S. 12A : Registration –Trust or institution-Strictures-Society are to set up and carry on the administration and management of an academic institution at Anandpur sahib to be known as ‘Sri Dashmesh Academy’ for imparting education of high standard in general and training for administrative service and armed forces in particular to the children of persons domiciled in Punjab–The properties of the trust, have been created and constituted out of 100% grants given by the State and Central Government and have now been attempted to be shifted in the hands of the private management, may be distributed amongst the private individual members of the trust-The above facts and circumstances also cast doubt about the functioning and genuineness of the objects of the trust-Rejection of application for registration is held to be justified-Exemplary cost of Rs. 1 lakh levied upon trust for fraud in wrongly seeking exemption on basis that it is controlled & managed by the Govt. The ITAT is deemed to be a Civil Court and its proceedings are deemed to be judicial proceedings within the meaning of S. 193 & 228 & of the Indian Penal Code. Any attempt to play fraud on the ITAT by way of conveying wrong and false facts and pleadings is required to be strictly dealt with. [S. 11, 254(1),IPC S. 191, 228]
Tribunal held that,the facts on the file speaks that the trustees in violation of the ‘MOA’ and ‘Regulations’ of the trust have shifted control & management of the Trust from the state and central government officials unto themselves. Under the circumstances, the Ld. CIT(E) had a valid and reasonable apprehension that in case of dissolution, the properties of the trust, which admittedly have been created and constituted out of 100% grants given by the State and Central Government and have now been attempted to be shifted in the hands of the private management, may be disTrib.uted amongst the private individual members of the trust. The above facts and circumstances also cast doubt about the functioning and genuineness of the objects of the trust. Accordingly the order of the CIT(E) in rejecting the application of the trust for registration u/s 12A of the Act.
Tribunal alsoheld that it is a clear and visible attempt on behalf of the trust to mislead this Bench of the Tribunal by way of concealing the real and true facts that the Members of the Trust have, by not extending the term of Board of Governors, conveniently entrusted unto themselves the control and management of the Trust. Had the case of the Trust been not carefully examined, these important and relevant facts would have remained wrapped under the carpet, and the Trust could have managed to get the relief of exemption from taxation by presenting wrong and false factS. This is a clear case of an attempt to play fraud not only with the lower Income Tax authorities, but also upon this Tribunal, which is deemed to be a Civil Court for the purpose of discharging its functions and the proceedings before this Appellate Tribunal are deemed to be judicial proceedings within the meaning of sections 193 & 228 for the purpose of section 196 of Indian Penal Code. In view of this, any attempt to play fraud on the Court by way of conveying wrong and false facts and pleadings is required to be strictly dealt with. Hence, the appeal of the assessee is hereby dismissed with exemplary costs of Rs. 1,00,000/-to be recoverable as arrears of tax Revenue by the Department.
Sri Dashmesh Academy Trust v.CIT (E)(2019) 174 ITD 527 ß(Chd)(Trib.),www.itatonline.org

S. 12A : Registration –Trust or institution- Registration cannot be denied on the ground that the return of income was filed in response to notice u/s 148 of the Act-Requirement of filing report of audit in prescribed form is merely procedural and, therefore, directory in nature and not mandatory for the purpose of claiming exemption under S. 11 and 12 of the Act. .[S. 11, 148]

Tribunal held that, registration cannot be denied on the ground that the return of income was filed in response to notice u/s 148 of the Act. Requirement of filing report of audit in prescribed form is merely procedural and, therefore, directory in nature and not mandatory for the purpose of claiming exemption under S. 11 and 12 of the Act. (AY.2012-13)
Genius Education Society v. ACIT (E) (2018) 172 ITD 640/ (2019) 176 DTR 73/ 198 TTJ 498 (Chd.) (Trib.)

S. 12A : Registration –Trust or institution-Education-Profit-making per se cannot be regarded as detrimental as long as a society pursue a charitable purpose; activities of a trust/institution promoting education need not target to serve poor, but it should function in conformity with its objects-matter remanded. [S. 2(15)]
Tribunal held that,profit-making per se cannot be regarded as detrimental as long as it feeds a charitable purpose. Tribunal also held that ‘education’ is a ‘charitable purpose’ per se; however, activities, of an educational trust would not necessarily have to be targeted to serve or educate poor but it should function in conformity with its objects. Matter remanded. (AY.2017-18)
Lord Shiva Educational Welfare Society. v. CIT (2018) 172 ITD 429 (Asr) (Trib.)

S. 12A : Registration –Trust or institution-Corpus donations received by trust with specific directions by donors to be applied towards specific purpose be treated as capital receipt- Corpus donation cannot be taxed though the trust is not registered. [S. 2(24) iia),11, 12AA]
Allowing the appeal of the assessee the Tribunal held that ;corpus donations received by assessee-trust with specific directions by donors to be applied towards specific purpose for which respective fund was created would be treated as capital receipt. Accordingly the corpus donation is not taxable though the trust is not registered under S. 12A of the Act. (AY. 2012-13)
Bank of India Retired Employees Medical Assistance Trust v. ITO (2018) 172 ITD 78/ 172 DTR 140/ 196 TTJ 706(Mum.) (Trib.)

S. 12A : Registration – Trust or institution-Corpus contributions being capital receipts, cannot be charged to tax though the trust is not registered .[S. 2(24)(iia),12AA]
Dismissing the appeal of the revenue the Tribunal held that, corpus conTrib.utions being capital receipts, cannot be charged to tax though the trust is not registered. (AY. 2005-06)
ITO v. Serum Institute of India Research Foundation. (2018) 169 ITD 271 / 195 TTJ 820(Pune) (Trib.)

S. 12A : Registration – Trust or institution-Registration can not be refused on the ground of non – production of books of accounts. [S. 2(15), 11]
Allowing the appeal of the assessee the Tribunal held that ;CIT is not justified in rejecting registration on the ground that the non-production of books and vouchers means that the genuineness of the charitable activities cannot be verified. The CIT is entitled only to examine the objects of the trust at the stage of registration and not the books of account.
Vidyadayani Shiksha Samiti v. CIT(2018) 161 DTR 265/ 191 TTJ 355 / 62 ITR 487 (Delhi)(Trib.)

S. 12A : Registration – Trust or institution-Excess of income over expenditure, which was transferred to its reserve and surplus account cannot be assessed as income-First proviso to section 12A(2) inserted by Finance (No. 2) Act, 2014 with effect from 1-10-2014, has to be applied retrospectively. [S. 2(15), 10(23C)(vi),11(5)]
The AO held that the Assessee society was neither registered under section 12A nor approved under section 10(23C)(vi). Therefore excess of income over expenditure, which was transferred to its reserve and surplus account was added to the returned income. In Appeal CIT(A) confirmed the order of the AO. On appeal to the Tribunal, allowing the appeal of the assesse the Tribunal held that; first proviso to section 12A(2) inserted by Finance (No. 2) Act, 2014, with effect from 1-10-2014, being a beneficial provision intended to mitigate hardships in case of genuine charitable institutions, has to be applied retrospectively. Therefore, the order of the CIT(A) is set aside and, consequently, the addition sustained by here is deleted. (AY. 2011-12)
Punjab Educational Society v. ITO (2018) 168 ITD 109/ 61 ITR 622 (Asr) (Trib.)

S. 12A : Registration – Trust or institution-Denial of exemption was held to be not justified, when the exemption was allowed consistently – Rejection of SLP cannot be construed as having effect of elocution of law by Supreme Court. [S. 2(15) 11]
Allowing the appeal of the assesse the Tribunal held that, mere dismissal of SLP by Supreme Court against judgment of J&K High Court in case of Jammu Development Authority could not be construed as having effect of elocution of law by Supreme Court on subject against assessee and benefit of exemption under section 11 could not be denied to assessee, a development authority when it had been granted exemption in past consistently. (AY. 2012-13, 2013-14)
Moradabad Development Authority v. ACIT (2018) 168 ITD 564/ 162 DTR 17 /191 TTJ 761 (Delhi) (Trib.)

S. 12AA : Procedure for registration –Trust or institution-In the absence of any cogent material or evidence to establish any violation of provisions of S. 12AA(3),cancellation of registration retrospectively is held to be not justified. [S. 11, 12AA(3)]
Dismissing the appeal of the revenue the Court held that, in the absence of any cogent material or evidence to establish any violation of provisions of S. 12AA(3),cancellation of registration retrospectively is held to be not justified.
CIT v. Rama Educational Society (2018) 99 taxmann.com 281/ 259 Taxman 369 (All) (HC)
Editorial : SLP is granted to the revenue, CIT v. Rama Educational Society (2018) 259 Taxman 368 (SC)

S. 12AA : Procedure for registration –Trust or institution-Animal care-Amount spent was less than 10 lakhs towards animal care such as food medical etc-Activities would be included under S. 2(15) of the Act, accordingly benefit of S. 80G(5) (vi) would also be available – Entitle to registration. [S. 2(15), 11, 13, 80G(5)(vi)]
Dismissing the appeal of the revenue the Court held that Amount spent was less than 10 lakhs towards animal care such as food medical etc. Activities would be included under S. 2(15) of the Act, accordingly benefit of S. 80G(5) (vi) would also be available. Entitle to registration. Followed CIT v. Shri Balaji Samaj Vikas Samiti (2018) 403 ITR 398 (All) (HC)
CIT v. Animal Care Society (2018) 99 taxmann.com 232 / 259 Taxman 350(All) (HC)
Editorial : SLP of revenue is dismissed CIT v. Animal Care Society (2018) 259 Taxman 349(SC)

S. 12AA : Procedure for registration –Trust or institution-At the time of registration what has to be looked in to is whether the trust is a genuine or it is a sham institution-Registration allowed by the Tribunal is held to be justified .[S. 11, 12,80G]
Dismissing the appeal of the revenue the Court held that, at the time of registration what has to be looked in to is whether the trust is a genuine or it is a sham institution. Registration allowed by the Tribunal is held to be justified.
CIT v. Dali Bai Sewa Sansthan (2018) 99 taxmann.com 289/ 259 Taxman 347 (Raj.) (HC)
Editorial : SLP of revenue is allowed CIT v. Dali Bai Sewa Sansthan (2018) 259 Taxman 346 (SC)

S. 12AA : Procedure for registration –Trust or institution-Non communication of changes in the object clause – Registration cannot be refused. [S. 11, 13]
Dismissing the appeal of the revenue the Court held that; non communication of changes in the object clause. Registration cannot be refused.Real purpose of registration is to be seen that object falls within definition of section 12AA and proviso; and mere non-communication of changes in objects clause to authority will not automatically cancel registration; rather, it will be open for department, while making assessment, to follow provision of section 11(5) and section 13 to disallow expenses or income, as the case may be, if same is not as per approved bye-laws.(AY. 2005-06, 2008-09, 2009-10)
CIT v. Rajasthan Cricket Association. (2018) 98 Taxman.com 425/ (2019) 260 Taxman 149(Raj) (HC)
Editorial : SLP is granted to the revenue, CIT v. Rajasthan Cricket Association. (2018) 259 Taxman 90 (SC)

S. 12AA : Procedure for registration – Trust or institution – Genuineness of trust and its activities are not doubted – Registration cannot be refused.[S. 2(15), 11]
On appeal, the High Court held that the Tribunal was justified in its findings to grant registration under S. 12AA by observing that there was no requirement for any trust to be registered with the Charity Commissioner of the Devasthan Department of Rajasthan and the CIT (E) has to leave its examination only to the objects of the trust and genuineness of the activities which have been examined and no defect has been pointed out by CIT.
CIT (E).v. Shri Suparasnath Jain Sangh Trust (2018) 304 CTR 110 / 167 DTR 129 (Raj) (HC)

S. 12AA : Procedure for registration –Trust or institution-Delay of 18 years 3 months and 21 days-Registration was granted prospectively with effect from 1-4-2007 relevant to assessment year 2008-09 and onwards, i.e., prospectively is held to be justified-Order of Tribunal to grant the registration retrospectively was set aside.
Allowing the appeal of the revenue the Court held that ; Tribunal was not justified in condoning the delay of delay of 18 years 3 months and 21 dayS. Granting of registration prospectively by the Commissioner,with effect from 1-4-2007 relevant to assessment year 2008-09 and onwards is held to be justified. (AY. 2008-09)
CIT v. Hemla Trust (2018) 258 Taxman 406 / 172 DTR 417/ 307 CTR 576 (Mad.)(HC)

S. 12AA : Procedure for registration –Trust or institution-Supplying food to poor school children on funds earmarked and disbursed by State Government-Implementation of such schemes would not lead to any charitable activity-Not entitle to registration.[S. 2(15),11]
Allowing the appeal of the revenue the Court held that ; supplying food to poor school children on funds earmarked and disbursed by State Government.Implementation of such schemes would not lead to any charitable activity hence not entitle to registration.The sub-contract of the assessee cannot be considered to be a charitable activity, especially since the supply of food is with the funds of the State Government, received by the assessee as contract amounts.
CIT v. Annadan Trust (2018) 258 Taxman 54/(2019) 174 DTR 412 (Ker.)(HC)

S. 12AA : Procedure for registration –Trust or institution-Transfer of funds to another charitable institution —Cancellation of registration is not justified [S. 11]
Dismissing the appeal of the revenue the Court held that ; the Tribunal found that the foreign remittances were duly authorised by the competent authority under the Foreign ConTrib.ution (Regulation) Act, 2010. There was no stipulation in the memorandum of association of the assessee-trust prohibiting any transfer of funds to another charitable trust which was also registered under the provisions of the 1961 Act. The cancellation of registration because the remittances had been transferred to another charitable institution was erroneous. The Tribunal was justified in setting aside the order of cancellation. (AY.2011-12)
CIT v. Maria Social Service Society. (2018) 408 ITR 462 (Karn) (HC)

S. 12AA : Procedure for registration –Trust or institution-At time of initiation of proceedings for cancellation of registration in year 2008, Commissioner did not have such a power in terms of sub-section (3) of section 12AA and, accordingly the order was to be set aside. [S. 12A]
Dismissing the appeal of the revenue the Court held that ;provision empowering cancellation of registration of trust granted under section 12A was brought in by sub-section (3) of section 12AA by Finance Act, 2010, with effect from 1-6-2010, and, thus, at time of initiation of proceedings for cancellation of registration in year 2008, Commissioner did not have such a power in terms of sub-section (3) of section 12AA and, consequently, the order was set aside

PCIT v. JIS Foundation (2018) 89 taxmann.com 226 (Cal) (HC)
Editorial : SLP of revenue is admitted ; PCIT v. JIS Foundation (2018) 257 Taxman 261 / 96 taxmann.com 257 (SC)/257 Taxman 553 /96 taxmann.com 611 (SC)

S. 12AA : Procedure for registration –Trust or institution-On receipt of registration Form 10 was filed claiming the benefit of S. 11 of the Act-Single judge was justified in condoning the delay in submission of Form 10 and directing the AO to allow accumulation of income.[S. 11(2), Form 10].
Dismissing the appeal of the revenue the Court held that ; on receipt of registration Form 10 was filed claiming the benefit of S. 11 of the Act. Accordingly the single judge was justified in condoning the delay in submission of Form 10 and directing the AO to allow accumulation of income. (AY.2006-07)
DIT (E) v. Chennai Port Trust. (2018) 256 Taxman 101 (Mad)(HC)

S. 12AA : Procedure for registration –Trust or institution-Failure to dispose of application before expiry of 6 Months does not result in deemed grant of registration.
Allowing the appeal of the revenue the Court held that ; failure to dispose of the application for registration by granting or refusing registration before the expiry of the period of six months, provided under S. 12AA(2) of the Act, did not result in deemed grant of registration. CIT v. Muzafar Nagar Development Authority (2015) 372 ITR 209 (FB) (All) (HC) is applied.(AY. 2008-09)
CIT v. Shri Awadh Bihari Shri Ram Lok Vikas Sansthan. (2018) 404 ITR 640 (All) (HC)

S. 12AA : Procedure for registration –Trust or institution-Cancellation of registration on basis of violation of S. 13(1)(c) of the Act is held to be not valid [S. 11, 13(1)(c)]
Dismissing the appeal of the revenue, the Court held that ; cancellation of registration on basis of violation of S. 13(1)(c) of the Act is held to be not valid.Cancellation of registration of Trust under S. 12AA(3) of the Act is only in two contingencies, one the activities of the Trust are not genuine or the trust is not being carried out in accordance with the objects of the Trust.
CIT v. Sadguru Narendra Maharaj Sansthan(2018) 165 DTR 101 / 302 CTR 304 (Bom.) (HC)

S. 12AA : Procedure for registration –Trust or institution-Registration cannot be refused on the ground that the Trust deed does not contain dissolution clause.[S. 12A]
Dismissing the appeal of the revenue the Court held that, registration cannot be refused on the ground that the Trust deed does not contain dissolution clause.Court observed that S. 55 of the Maharashtra Public Trust Act, 1950 takes care of such contingency. (ITA No. 247 of 2015 dt 31-07-2017)(AY.2012-13)(ITA No 1247 /Mum./ 2013 dt 14-07-2014)
CIT(E) v. Tara Educational & Charitable Trust (Bom.) (HC) (UR)

S. 12AA: Procedure for registration – Trust or institution-Providing mid-day meals at Village Schools is charitable purpose which is entitle to registration. [S. 2(15)]
Dismissing the appeal of the revenue the Court held that the activity performed by the assessee was inseparably linked to the “charitable purpose” of providing mid-day meals at village schoolS. The total receipts of the assessee were below the limit of Rs. 10 lakhs as stipulated under the second proviso to S. 2(15) of the Act. Therefore, the Tribunal had rightly concluded that the restriction created by the first proviso to S. 2(15) of the Act did not operate against the assessee and therefore the activity of the assessee, even though it might have involved an activity in the nature of trade, commerce or business, would fall within the ambit of general public utility and therefore be a charitable purpose under S. 2(15) of the Act.
CIT v. Shri Balaji Samaj Vikas Samiti. (2018) 403 ITR 398/ 254 Taxman 93 / 302 CTR 397 / 164 DTR 56 (All) (HC)
S. 12AA : Procedure for registration – Trust or institution-Genuineness of activities of the asessee was not doubted hence refusal of registration was held to be not justified [S. 12A]
Dismissing the appeal of the revenue the Court held that; it was rightly concluded by the Tribunal that the Commissioner was not justified in rejecting the application for registration, under section 12AA, of the assessee-society by insisting on conditions not contemplated by the statute. The Department had not been able to produce any material on record to show that the approach adopted by the Tribunal was legally unsustainable or to show that the view taken by it was erroneous. No question of law arose.
CIT v. Shri Mahavir Jain Society (Regd.) (2018) 402 ITR 301/ 302 CTR 497/ 166 DTR 198 (P&H)(HC)

S. 12AA : Procedure for registration – Trust or institution-Rejection of application for failure to produce Trust deed was held to be not justified, when the assessee was registered under State Wakf Board .[ R. 17A]
Dismissing the appeal of the revenue the Court held that; the factum of existence of a trust could also be established by producing documents evidencing its creation. The order passed by the Wakf Board recognised various Daudi Vora trusts and the assessee had also listed its objects, who would be the managers of the trust and how such managers would be appointed or removed. The Tribunal had gone through the registration details of the assessee as contained in the order of the Wakf Board and was satisfied that the full details of the functions of the trust were available which established the existence of the trust, its registration by the State Wakf Board and also contained the details of its objects, the manner of appointment of mutawalli, etc. The Tribunal was right in holding that looking to the nature of the assessee-trust no separate trust deed was required for registration under section 12AA as it was registered with the State Wakf Board.
CIT v. Dawoodi Bohra Masjid. (2018) 402 ITR 29 / 163 DTR 257 / 301 CTR 268 / 90 taxmann.com 312 (Guj) (HC)

S. 12AA : Procedure for registration – Trust or institution-Alleged misuse of funds is not a ground for refusing registration [S. 11, 12A]
Dismissing the appeal of the revenue the Court held that; Alleged misuse of funds is not a ground for refusing registration.
CIT v. Chaudhary Son Pal Singh. (2018) 401 ITR 509 (All) (HC)

S. 12AA : Procedure for registration –Trust or institution-Dissolution clause – Trust cannot be refused registration on the ground that there is no clause on disTrib.ution of asset on dissolution,when the Trust is Registered with sub –Registrar as charitable Trust – Matter remanded [S. 80G Rajasthan Public Trust Act 1959]
Allowing the appeal of the assesee the Tribunal held that Trust cannot be refused registration on the ground that there is no clause on distribution of asset on dissolution, when the Trust is Registered with sub –Registrar as charitable Trust. It is the charity commissioner who will decide the distribution of assets on dissolution.Matter remanded.
Sidha Sthan Shri Kapaleshwar Mahadev Sanyas Ashram Trust v. CIT (2018) 162 DTR 202/ 191 TTJ 131 (Jaipur) (Trib.)

S. 12AA : Procedure for registration –Trust or institution-Registration cannot be refused on the ground that all initial trustees had taken citizenship of foreign country – Order of CIT(E) rejection of registration and application u/s 80G is set aside.[S. 80G, FEMA, 1999, S. 6(5) Indian Trust Act 1882, S. 10,60, 73]
CIT (E) rejected the registration application under on ground that all initial trustees had taken citizenship of foreign country and thus there was violation of provisions of S 73 of Indian Trust Act, 1882. On appeal the Tribunal held that S. 73 of 1882 Act per se cannot invalidate a trust, but rather provides bar for appointment of non-resident as a trustee.S. 60 of Trust Act only provides for a right of beneficiary to have proper trustees, but it does not impinge upon validity of trust. Accordingly the rejection of application is held to be not proper.
Global Academy of Emergency Medicine v. CIT(2018) 196 TTJ 273 / 171 DTR 73 /(2019) 175 ITD 96 (Delhi) (Trib.)

S. 12AA : Procedure for registration –Trust or institution-Educational institution-At time of considering assessee’s application for registration under section Commissioner is only entitled to see whether objects of trust are charitable in nature and whether its activities are genuine or not – Rejection of application on the ground that the asessee is primarily engaged in business of education on commercial basis with a profit motive without providing any element of charity to public at large is held to be not justified. [S. 2(15), 11]
Allowing the appeal of the assessee the Tribunal held that ; at time of considering assessee’s application for registration under section 12AA, Commissioner is only entitled to see whether objects of trust are charitable in nature and whether its activities are genuine or not. Rejection of application on the ground that the asessee is primarily engaged in business of education on commercial basis with a profit motive without providing any element of charity to public at large is held to be not justified .
Fateh Chand Trust & College Committee v. CIT (E) (2018) 67 ITR 564 (Agra)(Trib.)

S. 12AA : Procedure for registration –Trust or institution-Cancellation of registration-Educational institutions-Collected huge amount of capitation fee from students for admission to medical colleges-order passed by CIT(E) cancelling registration granted to as well as withdrawing exemption granted to it under S 10(23C)(vi) and 10(23C)(via) of the Act is held to be justified-However denial of registration merely on ground that some part of land on which assessee had setup an university was not in ownership of said university as per certain Government notification, same was unjustified-Matter remitted back to the CIT(E) for the AY.2009-10. [S. 10(23C)(vi), 10(23C)(via),12A]
Assessee, trust which is running various educational institutions, collected huge amount of capitation fee from students for admission to medical collegeS. CIT(E) cancelled the registration granted under S. 12AA as well as withdrawing exemption granted to it under sections 10(23C)(vi) and 10(23C)(via) of the Act. On appeal the Tribunal held that cancellation of registration and withdrawal of approval can be made from retrospective date.Tribunal also held that, since non-genuineness of activities of assessee-trust were found from assessment year 2009-10 when assessee had received huge capitation fee in cash, cancellation of registration or withdrawal of approval had to be given from assessment year 2009-10. However denial of registration merely on ground that some part of land on which assessee had setup an university was not in ownership of said university as per certain Government notification, same was unjustified-Matter remitted back to the CIT(E) for the AY.2009-10. (AY.2006-07, 2017-18, 2009-10)
Indian Medical Trust. v. PCIT (2018) 173 ITD 508 (Jaipur) (Trib.)

S. 12AA : Registration –Trust or institution- CIT(E) has to examine the objects of the trust and if they are found to be charitable, the assessee deserves to be granted registration.[S. 12A]
Allowing the appeal of the assessee the Tribunal held that; CIT(E) has to examine the objects of the trust and if they are found to be charitable, the assessee deserves to be granted registration.
Aasho Charitable Trust v. CIT (E) (2018) 163 DTR 193 / 192 TTJ 86 (Delhi)(Trib.)

S. 12AA : Registration–Trust or institution-Procedure for registration of trust-CIT(E) has to examine the objects of the trust and if they are found to be charitable, the assessee deserves to be granted registration The quantum of the genuineness of the activity can be examined only after the trust comes fully into operation.
Allowing the appeal of the assessee the Tribunal held that; CIT(E) has to examine the objects of the trust and if they are found to be charitable, the assessee deserves to be granted registration The quantum of the genuineness of the activity can be examined only after the trust comes fully into operation. (AY.2016-17)
ACE Vision Educational & Charitable Trust v. CIT (E) (2018) 168 DTR 458 / 194 TTJ 764 (Chd.)(Trib.)

S. 12AA : Procedure for registration –Trust or institution-Failure to dispose application with in prescribed period of six months-registration would be deemed to have been granted from date of inception of assessee-University. [S. 12A]
Allowing the appeal of the assessee the Tribunal held that;since, in instant case, CIT(E) failed to dispose of assessee’s application within prescribed period of six months without any justifiable reason, registration would be deemed to have been granted from date of inception of assessee-University. Accordingly the impugned order granting registration from prospective date, i.e. from 1-4-2016 was to be set aside and, Commissioner was to be directed to grant registration with effect from 1-4-1998.
Visvesvaraya Technological University v. CIT (2018) 171 ITD 414 (Bang.)(Trib.)

S. 12AA : Procedure for registration –Trust or institution-Refusal of registration was held to be not justified without bringing any evidence to demonstrate that the object of the Trust is not charitable.[S. 2(15)]
The Tribunal held that the CIT was not justified in refusing the registration u/S. 12AA without bringing an iota of evidence that objects of assessee are not charitable in nature. The assessee deserves to be granted registration u/S. 12AA.
Aasho Charitable Trust v. CIT (E) (2018) 192 TTJ 86 (Delhi)(Trib.)

S. 12AA : Procedure for registration – Trust or institution – Power to reject application cannot be delegated by the CIT to its subordinates. [S. 12A]
The Assessee had made an application for registration under S. 12A of the Act. Pursuant to which it received a show cause notice from the office of CIT(E), which was signed by Dy.CIT(E). Assessee furnished various information/clarifications to the Dy.CIT(E), who conducted the proceedingS. No proceedings were conducted by the CIT(E). Also no opportunity of being heard was given to the assessee by CIT(E) before rejecting assessee’s application under S. 12A of the Act.
On appeal the ITAT held that reasonable opportunity of being heard before refusing the registration u/s 12A ought to be given to the Assessee. Further the CIT cannot delegate the power of refusing the registration u/s 12A to a subordinate, reliance was placed on jurisdictional high court ruling in case of CIT v.Ameliorating India (2017) 399 ITR 196 ( P&H) (HC). Hence the ITAT held that the order passed CIT(E) without observing the due process of law, was procedurally deficient, constituting an irregularity and restored the matter back to the CIT(E).
Parmeshwari Hansraj Jain Khanga Dogra Trust v. CIT(E) (2018) 192 TTJ 45 (UO)(Ars)(Trib.)

S. 12AA : Procedure for registration – Trust or institution – Establishment of diagnostic center is in line or coherent with objective of medical relief – Non-communication of amended trust deed is a mere irregularity.
Tribunal following the decision of Moolchand Kairati Ram Trust (ITA No. 141 of 2013)(Delhi) (HC) held that establishment of a diagnostic center was in the line or coherent of its existing objects. ITAT further observed that CIT had only mentioned that establishing diagnostic center was a commercial venture but had not established that why it should not be construed as medical relief to the public (medical relief to poor is one of the original objects of the trust). ITAT further held that non communication of amended trust deed to the department in Form 10A was a mere irregularity and on basis of which registration under section 12A cannot be cancelled.
Paramount Charity Trust v. CIT (2018) 63 ITR 577 (Ahd.)(Trib.)

S. 12AA : Procedure for registration –Trust or institution-Filing or non-filing of return of income or payment of tax has nothing to do with genuineness of activities of an institution-Benefit of S. 11 is subject to application of income and income can also be taxed u/s 13 if there is violation-CIT (E) is directed to grant registration to the assessee forthwith .[S. 2(15) 11, 13(1)(b)]
Allowing the appeal of the assessee the Tribunal held that ; filing or non-filing of return of income or payment of tax has nothing to do with genuineness of activities of an institution. Benefit of S. 11 is subject to application of income and income can also be taxed u/s 13 if there is violation.CIT (E) is directed to grant registration to the assessee forth with.
B.S. A. College. v. CIT (E) (2018) 170 ITD 485 (Agra) (Trib.)

S. 12AA : Procedure for registration –Trust or institution-Genuineness of Trust is established – Registration cannot be refused.[S. 2(15),12A]
Allowing the appeal of the assessee the Tribunal held that the assessee had established that it was doing the genuine charitable activities to achieve the object of the Trust making every possible efforts by giving own rent free accommodation to the Trust, hence the refusal of registration was held to be not valid . Accordingly the Commissioner was directed to grant the registration u/s 12AA of the Act.
Shabad Foundation v. CIT (2018) 64 ITR 72/ 167 DTR 381/ 192 TTJ 633(Delhi)(Trib.)

S. 12AA : Procedure for registration – Trust or institution-Mainly on ground that it was charging hefty fee from students registration cannot be refused as society is providing free education to needy students and free medical aid to needy patients.[S. 2(15)]
Allowing the appeal of the assessee the Tribunal held that rejection of application for registration was not justified; mainly on ground that it was charging hefty fee from students registration cannot be refused as society is providing free education to needy students and free medical aid to needy patientS.
B. B. Educational Society. v. CIT (2018) 170 ITD 362(Delhi) (Trib.)

S. 12AA : Procedure for registration – Trust or institution-Bogus donation – Merely on the basis of information received from Investigation Wing without supplying the copy to the assessee, cancellation of registration is held to be bad in law. [S. 12A,35(1)(iii), 80G]
Allowing the appeal of the assessee the Tribunal held that; Merely on the basis of information received from Investigation Wing that assessee-trust was receiving bogus donation from various parties which were returned to them subsequently after charging certain amount of commission, without supplying the copy to the assessee, cancellation of registration is held to be bad in law. (AY. 2017-18)
Bioved Research Society. v. CIT (2018) 170 ITD 160 (All.) (Trib.)

S. 12AA : Procedure for registration – Trust or institution – Registration granted cannot be denied in the subsequent years when there is no change in the objects of the assessee only on the presumption that proviso to S. 2(15) is applicable. [S. 2(15)]
On appeal the Tribunal held the, registration granted cannot be denied in the subsequent years when there is no change in the objects of the assessee only on the presumption that proviso to S. 2(15) is applicable. (AY. 2003-04 to 2013-14)
HMDA v. CIT(E) (2018) 161 DTR 82 / 191 TTJ 122 (Hyd.)(Trib.)

S. 12AA : Procedure for registration – Trust or institution-Amount from settler company and same was given as donation to another charitable institution, refusal of registration is held to be justified as the assessee has not carried out any charitable activities.[S. 2(15)
Dismissing the appeal of the Assessee the Tribunal held that, though the Trust was created as an instrument to carry out CSR functions of its settler company it has not carried out any charitable activities. Amount received from settler company and same was given as donation to another charitable institution therefore the assessee trust cannot be treated as trust for benefit of general public hence refusal of registration is held to be justified. (AY. 2016-17)
Goenka Charitable Trust v. CIT (E) (2018) 62 ITR 129/89 taxmann. com 311 (Asr.)(Trib.)

S. 12AA : Procedure for registration – Trust or institution-Registration cannot be denied only on the ground that the Trust was formed by company for complying corporate social responsibility requirement .[S. 11, 80G]
Tribunal held that, registration cannot be denied only on the ground that the Trust was formed by company for complying corporate social responsibility requirement unless genuineness of activities or object is doubted. (AY. 2016-17)
Nanak Chand Jain Charitable Trust. v. CIT (2018) 169 ITD 534 (Delhi) (Trib.)

S. 12AA : Procedure for registration – Trust or institution-Assessee, a body corporate, was formed under U. P. Urban Planning and Development Act, 1973, to promote and secure development of local area is eligible for registration.[S. 2(15)]
Allowing the appeal the Tribunal held that, Assessee, a body corporate, was formed under U. P. Urban Planning and Development Act, 1973, to promote and secure development of local area is eligible for registration(AY. 2014-15)
Firozabad Shikohabad Development Authority. v. CIT (2018) 169 ITD 202 (Agra) (Trib.)

S. 12AA : Procedure for registration-Trust or institutionPromotion of State Cricket – Entitle to registration [S. 2(15), 12A]
Allowing the appeal of the assessee the Tribunal held that;the object of the association is promotion of State Cricket, activities of the assessee was not in doubt hence the asseessee was held to be entitle to registration. (AY. 1997-98, 2011-12)
Orissa Cricket Association v. CIT (2018) 61 ITR 675 (Cuttak) (Trib.)

S. 12AA : Procedure for registration – Trust or institution-Impart education in the field of nursing is entitle to registration. [S. 2(15)]
Allowing the appeal of the assessee the Tribunal held that; the object of the assesse to impart education in the field of nursing being charitable object is entitle to registration.
Trisha Welfare Society. v. CIT (E) (2018) 168 ITD 207 (Agra) (Trib.)

S. 12AA : Procedure for registration – Trust or institution-Application of income – Funds were diverted to non charitable purposes hence cancellation of registration was held to be valid.[S. 11, 12A]
Dismissing the appeal of the revenue, the Tribunal held that,the assessee had given donations to various societies, but had neither established user of donations for charitable purposes, nor demonstrated that said donee society was a charitable society registered under section 12A, assessee was not entitled to claim donations as application of its income and, thus, registration granted under section 12A be cancelled by invoking provisions of section 12AA(3) of the Act. (AY. 2008-09, 2009-10, 2010-11)
Winsome Foundation v. CIT (2018) 168 ITD 575 / 192 TTJ 756/ 164 DTR 241 (Chd) (Trib.)

S. 13 : Denial of exemption-Trust or institution-Investment restrictions-Shares received by way of gift failed to dispose off or convert said shares in to permissible investments – Denial of exemption is to be restricted to only income earned from shares to be taxed at marginal rate under S. 164(2) and not on entire income of the assessee.[S. 11,13(1)(d) (iii),164(2)]
Dismissing the appeal of the revenue the Court held that, denial of exemption under S. 13(1)(d)(iii) of the Act is to be restricted to only income earned from shares to be taxed at marginal rate under S. 164(2) and not entire income of assessee.
CIT(E) v. Santokba Durlabhji Trust Fund (2018) 93 taxmann.com 324 (Raj)(HC)
Editorail : SLP is garnted to the revenue,CIT(E) v. Santokba Durlabhji Trust Fund (2018) 93 taxmann.com 325 (SC)

S. 13 : Denial of exemption-Trust or institution-Investment restrictions-Trust was restrained from converting shares held by it in private limited company to other forms of permissible investment by virtue of restraint order of High Court in case of settlors from whom it had received shares, it could not be held liable for violation of provisions of S. 11(5) read with S. 13(1)(d) for holding shares for more than prescribed period-Exemption cannot be denied.[S. 11(5),113(1)(d)]
Dismissing the appeal of the revenue the Court held that as a result of a dispute which arose amongst the family members of Dr.Bhai Mohan Singh, the assessee was restrained from converting the shares held in DGHPL to other permissible form of investment before the time limit prescribed in clause (iia) of proviso to S. 13(1)(d) of the Act. The conversion could ultimately take place in 2012 after the restraint was lifted. There was no violation of provisions of S. 11(5) read with S. 13(1)(d) for holding shares for more than prescribed period. Exemption cannot be denied.(AY.2007-08)
CIT v.Bhai Mohan Singh Foundation (2018) 95 taxmann.com 332 (Delhi) (HC)
Editorial : SLP of revenue is dismissed;CIT v. Bhai Mohan Singh Foundation. (2018) 257 Taxman 90 (SC)

S. 13 : Denial of exemption-Trust or institution-Investment restrictions-Holding shares in a company-Denial of exemption to be restricted to income from shares to be taxed at marginal rate under S. 164(2) [S. 11,13(1))(d)(iii), 164 (2)]
Dismissing the appeal of the revenue the Court held that ; denial of exemption to be restricted to income from shares to be taxed at marginal rate under S. 164(2) of the Act.
CIT v. Santokba Durlabhji Trust Fund. (2018) 406 ITR 457 (Raj) (HC)
Editorial : SLP is granted to the revenue ; CIT v. Santokba Durlabhji Trust Fund. (2018) 404 ITR 2 (St)
S. 13 : Denial of exemption-Trust or institution-Investment restrictions – Trust is not paying the rent which it occupied third and fourth floor- Repair and renovation of building owned by Trustee done by the Trust – Assessing Officer could not have disallowed expenditure incurred towards repairs and renovation of building owned by trustee on ground that it was in contravention of provisions of section 13(1)(c) as a benefit had accrued to trustee through such payment as the trustees were required to repay the expenditure incurred – Matter remanded. [S. 11, 12]
Trust is occupying the third and fourth floor which belong to trustee and it is not paying any rent. Repair and renovation of building dine by the Trust. AO disallowed the expenditure on the ground, it was in contravention of S. 13 of the Act.On appeal the Tribunal held that the Assessing Officer could not have disallowed expenditure incurred towards repairs and renovation of building owned by trustee on ground that it was in contravention of provisions of section 13(1)(c) as a benefit had accrued to trustee through such payment as the trustees were required to repay the expenditure incurred Matter remanded. (AY. 2012-13)
Children Welfare Education Trust. v. ITO (E) (2018) 172 ITD 650 (Mum.) (Trib.)

S. 13 : Denial of exemption-Trust or institution-Investment restrictions – Land and interest free loan given to a trust not registered u/s 12AA – Held, objects of the assessee and the recipient trust were same would not make the latter a registered trust u/s 12AA – Denial of exemption is justified. [S. 11, 12AA]
Assessee trust made available land and also gave interest free loan to a trust which was not registered u/s 12AA. Accordingly, exemption u/s 11 was denied. On appeal to the Tribunal, it held that, in the absence of registration u/s 12AA, dealing with an unregistered trust by trust which is registered would affect the exemption available u/s 11. Objects of the trusts, even if identical, would not make an unregistered trust, as registered u/s 12AA of the Act. Held, exemption u/s 11 was to be denied. (AY. 2009-10)
DIT(E) v. Paramasiva Naidu Muthuvel Raj Education Trust (2018) 66 ITR 3 (SN.) (Chennai.)(Trib.)

S. 13 : Denial of exemption-Trust or institution-Investment restrictions-High rate of profit margin-Hefty salary to related trustees, scholarship in foreign currency, use of luxury cars without maintaining the log book, denial of exemption was held to be justified – Donation to another trust was held to be application of income.[S. (2(15), 11, 12, 13]
Dismissing the appeal of the assessee the Tribunal held that; the trust has paid hefty salary to related trustees, scholarship in foreign currency, Trustees have used luxury cars without maintaining the log book and earned high rate of profit margin hence denial of exemption was held to be justified. Tribunal also held that donation to another trust was held to be application of income (AY. 2007-08 to 2010-11)
IIM Foundation v. ADIT (E) (2018) 61 ITR 186 (Delhi) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income – Stock in trade – Controlling interest – Principle of apportionment-Only that expenditure which is “in relation to” earning dividends can be disallowed-AO has to record proper satisfaction on why the claim of the assessee as to the quantum of suo moto disallowance is not correct. [R. 8D]
Court held that; The argument that S. 14A & Rule 8D will not apply if the “dominant intention” of the assessee was not to earn dividends but to gain control of the company or to hold as stock-in-trade is not acceptable. S. 14A applies irrespective of whether the shares are held to gain control or as stock-in-trade. However, where the shares are held as stock-in-trade, the expenditure incurred for earning business profits will have to be apportioned and allowed as a deduction. Only that expenditure which is “in relation to” earning dividends can be disallowed u/s 14A & Rule 8D. The AO has to record proper satisfaction on why the claim of the assessee as to the quantum of suo moto disallowance is not correct.(AY. 2002-03, 2008-09, 2009-10)
Maxopp Investment Ltd. v. CIT (2018) 402 ITR 640/ 164 DTR 1 / 254 Taxman 325 (SC)
PCIT v. State Bank of Patiala (2018) 402 ITR 640/ 164 DTR 1/254 Taxman 325 (SC)
Editorial : Maxopp Investment Ltd v CIT (2012) 347 ITR 272 (Delhi) (HC) is affirmed.
Decision of special Bench in ITO v. Daga Capital Management (2009) 312 ITR (AT) 1 (Mum.) (SB) is referred

S. 14A : Disallowance of expenditure-Exempt income – Rule 8D cannot be held to be applicable retrospectively and cannot be applicable to pending assessments.[R. 8D]
Court held that, rule8D is prospective in operation and could not have been applied to any assessment year prior to Assessment Year 2008-09. (AY. 2003-04)
CIT v. Essar Teleholdings Ltd(2018) 401 ITR 445 / 162 DTR 225/ 300 CTR 561 / 253 Taxman 321 (SC)
Editorial : CIT v. Firestone International P. LTD. (2015) 378 TR 558 (Bom.) (HC) and CIT v. Essar Teleholdings Ltd(Bom.) (HC) is affirmed

S. 14A : Disallowance of expenditure-Exempt income – Mixed funds-Having sufficient own funds – No disallowance can be made.[R.8D]
Dismissing the appeal of the revenue the assessee had sufficient own funds, hence no disallowance can be made. (AY. 2008-09, 2009-10)
CIT v. Gujarat State Fertilizers And Chemicals Ltd. (2018) 409 ITR 378 (Guj) (HC)

S. 14A : Disallowance of expenditure-Exempt income-Recording of satisfaction-Mixed funds – Maxopp Investment Ltd. v. CIT (2018) 402 ITR 640 (SC) does not lay down a proposition that the moment it is demonstrated that the assessee had availed of mixed funds, i. e., interest-free as well as interest bearing funds and utilized them for making investments into securities earning tax-free income and the rest applicability of section 14A read with rule 8D would be automatic Resorting to the method prescribed under rule 8D is not automatic-Deletion of addition by the Tribunal is held to be justified. [R.8D]
Dismissing the appeal of the revenue the Court held that,Maxopp Investment Ltd. v. CIT (2018) 402 ITR 640 (SC) does not lay down a proposition that the moment it is demonstrated that the assessee had availed of mixed funds, i. e., interest-free as well as interest bearing funds and utilized them for making investments into securities earning tax-free income and the rest applicability of section 14A read with rule 8D would be automatic Resorting to the method prescribed under rule 8D is not automatic-Deletion of addition by the Tribunal is held to be justified.(AY.2010-11)
CIT v. Shreno Ltd. (2018) 409 ITR 401 /(2019) 261 Taxman 239 (Guj) (HC)

S. 14A : Disallowance of expenditure-Exempt income – No disallowance can be made when the assessee has not earned any exempt income during the year.[R.8D]
Dismissing the appeal of the revenue the Court held that, no disallowance can be made when the assessee has not earned any exempt income during the year.(AY. 2010-11)
CIT v. Goldman Sachs Services P. Ltd. (2018) 409 ITR 268 (Karn) (HC)

S. 14A : Disallowance of expenditure-Exempt income – Disallowance cannot exceed exempt income [S. 263,R.8D]
Dismissing the appeal of the revenue the Court held that disallowance u/s 14A cannot exceed exempt income.(AY.2010-11)
PCIT v. State Bank of Patiala (2018) 99 taxmann.com 285 / 259 Taxman 315 (P& H) (HC)
Editorial : SLP of revenue is dismissed, PCIT v. State Bank of Patiala (2018) 259 Taxman 314(SC)

S. 14A : Disallowance of expenditure-Exempt income-Tribunal remanding the issue of interest expenses and deleting other expenses-– Order of Tribunal is up held-No question of law . [S. 254(1), 260A, R.8D]
Dismissing the appeal of the revenue the Court held that Held,Tribunal remanding the issue of interest expenses and deleting other expenses is up held. (AY. 2008-09)
CIT v. Ultra Tech Cement Ltd. (2018) 407 ITR 500 (Bom.) (HC)
Editorial : SLP of revenue is dismissed; CIT v. Ultra Tech Cement Ltd. (2018) 406 ITR 12 (St)

S. 14A : Disallowance of expenditure-Exempt income-Investment in subsidiary-Own interest free funds are more than the investment in subsidiaries – No disallowance can be made. [R.8D]
Dismissing the appeal of the revenue the Court held that, since the assessee company was having interest free funds of its own far excess of the investment made in subsidiary companies, which yielded the presumption is that the assessee has used its own funds hence no disallowance can be made. (AY.2006-07)
CIT v. NHPC Ltd (2018) 408 ITR 237/ 304 CTR 612 / 167 DTR 33 (P& H) (HC)

S. 14A : Disallowance of expenditure-Exempt income-Rule 8D is prospective in operation and is not applicable in assessment years 2004-05, 2005-06 and 2006-07.[R.8D]
Dismissing the appeal of the revenue the Court held that ; rule 8D of the Income-tax Rules, 1962 inserted with effect from February 14, 2007 is prospective in operation and is not applicable in assessment years 2004-05, 2005-06 and 2006-07. (AY.2004-05 to 2006-07)
CIT v. Jammu Central Co-Op. Bank Ltd. (2018) 407 ITR 362 (J&K) (HC)

S. 14A : Disallowance of expenditure-Exempt income –Sufficient funds-Onus is on department to establish nexus between expenditure disallowed and earning of interest income —Deletion of disallowance is held to be justified.[R.8D]
Court held that ;the Tribunal had rendered a factual finding that the assessee was seized of sufficient funds which it could have invested and therefore, the deletion of disallowance, by the Tribunal, on account of interest under section 14A was right. (AY.1999-2000)
CIT v. Maruti Udyog Ltd. (2018) 407 ITR 159 /( 2019) 308 CTR 682 (Delhi) (HC)

S. 14A : Disallowance of expenditure-Exempt income –Investment in shares – Not from borrowed funds –No disallowance can be made. [S. 10(34), R.8D]
Dismissing the appeal of the revenue the Court held that investment in shares were from own funds and not from borrowed funds, hence no disallowance can be made. (AY. 2008-09, 2009-10)
PCIT v. Rasoi Ltd. (2018) 407 ITR 126 (Cal) (HC)

S. 14A : Disallowance of expenditure-Exempt income-The expression “does not form part of the total income” in S. 14A envisages that there should be an actual receipt of the income, which is not includible in the total income-If no exempt income is received or receivable during the relevant previous year, no disallowance can be made .[R.8D]
Dismissing the appeal of the revenue the Court held that ; The expression “does not form part of the total income” in S. 14A envisages that there should be an actual receipt of the income, which is not includible in the total income. If no exempt income is received or receivable during the relevant previous year, no disallowance can be made. Followed Chem Invest Ltd v. CIT (2015) 378 ITR 33 (Delhi) (HC) (749 /2014 dt. 22-09-2015) (ITA No. 51 of 2016, dt. 13.10.2016)
PCIT v. Ballapur Industries Ltd.(Bom.)(HC),www.itatonline.org

S. 14A : Disallowance of expenditure-Exempt income-Disallowance cannot be made in excess of actual exempted income-Matter remanded.[R.8D]
Allowing the appeal of the assessee the Court held that the,AO as well as Appellate Authority disallowed expenses incurred by assessee bank in earning exempt income in excess to actual exempt income, same was per se absurd and hypothetical and therefore, matter was to be remanded back to AO.(AY.2011-12)
Pragathi Krishna Gramin Bank. v. JCIT (2018) 256 Taxman 349 (Karn)(HC)

S. 14A : Disallowance of expenditure-Exempt income-Invested own money therefore no disallowance of interest can be made in respect of borrowed funds. [S. 36(1)(iii), R. 8D]
Dismissing the appeal of the revenue the Court held that; the assessee has Invested own money therefore no disallowance of interest can be made in respect of borrowed fundS.
CIT v. Deepak Vegpro (P) Ltd. (2018) 406 ITR 496/ 161 DTR 170 / 300 CTR 98 (Raj)(HC)

S. 14A : Disallowance of expenditure-Exempt income-Net interest-Prior to its amendment with effect from 2-6-2016, amount of expenditure by way of interest would be interest paid by assessee on borrowings minus taxable interest earned during financial year. [R. 8D]
Dismissing the appeal of the revenue, the Court held that; Prior to its amendment with effect from 2-6-2016, amount of expenditure by way of interest would be interest paid by assessee on borrowings minus taxable interest earned during financial year. (AY. 2008-09)
PCIT v. Nirma Credit & Capital (P.) Ltd (2017) 85 taxmann. com 72 / (2018) 300 CTR 286/ 161 DTR 333 (Guj)HC)

S. 14A : Disallowance of expenditure-Exempt income-Assessing Officer cannot attribute administrative expenses for earning tax free income in excess of total administrative expenditure. [R. 8D]
Dismissing the appeal of the revenue, the Court held that, Assessing Officer cannot attribute administrative expenses for earning tax free income in excess of total administrative expenditure. (AY. 2008-09)

PCIT v. Adani Agro (P) Ltd. (2018) 253 Taxman 507 (Guj.)(HC)

S. 14A : Disallowance of expenditure – Exempt income -Only those instruments/securities which yielded exempt income during previous year relevant to assessment year would be considered for computing disallowance-If disallowance falls below disallowance under section 14A offered by assessee in return of income, revenue cannot charge tax on income which never was income of assessee chargeable to tax [ S. 139,143(3) ,R.8D ]

Tribunal held that only those instruments/securities which yielded exempt income during previous year relevant to assessment year would be considered for computing disallowance. The Tribunal also held that if disallowance falls below disallowance under section 14A offered by assessee in return of income, revenue cannot charge tax on income which never was income of assessee chargeable to tax .( AY. 2011-12-, 2012-13)

Sajjan India Ltd v. ADIT (2018) 89 taxmann.com 21 (Mum) (Trib)

S. 14A : Disallowance of expenditure-Exempt income-Sub-section (2) of section 14A does not authorize or empower AO to apply prescribed method irrespective of nature of claim made by assessee, AO has to first consider correctness of claim of assessee having regard to accounts of assessee. [R.8D]
Allowing the appeal of the assessee the Tribunal held that; if AO want to disturb computation of assessee regarding disallowance that it had incurred more expenditure in relation to exempt income, it was pre-requisite in order to invoke provisions of Rule 8D of the Rules that AO had to record his objective satisfaction regarding assessee’s claim of expenses in relation to exempt income or disallowance u/s 14A read with Rule 8D having regard to accounts of assessee Followed Godrej & Boyce Mfg. Co. Ltd. v. DCIT (2010) 328 ITR 81 (Bom.) (HC). (AY.2009-10)
Morgan Stanley Investment Management (P) LTD. v. DCIT(2017) 160 DTR 19/ (2018) 191 TTJ 365 (Mum.) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income-No disallowance in relation to shares and securities held as stock in trade and where owned funds are more than the value of shares and securities.[R.8D]
No disallowance in relation to shares and securities held as stock in trade and where owned funds are more than the value of shares and securities(AY.2009-10 to 2012-13)
Rajasthan State Industrial Development & Investment Corporation Ltd v. DCIT (2018) 195 TTJ 35 (Jaipur)(Trib.)

S. 14A : Disallowance of expenditure-Exempt income – Investments out of own funds and free reserves not liable for disallowance-2% of dividend income was disallowed towards administrative expenses.[R.8D]
The Tribunal after discussing the decision the following case laws Reliance Utilities & Power Ltd(2009)313 ITR 340 (Bom.) (HC) High Court in the case of JCIT v. Beekay Engineering Corporation (2010) 325 ITR 384(Chhattisgarh) (HC)) and PCIT v. Sintex Industries Ltd (Guj) (HC)(. TA No.291 of 2017 dt. 04.05.2017) held that no disallowance of interest can be made as the assessee had sufficient own funds and free reserveS. However, considering the huge investments, 2% of the dividend income should be disallowed towards administrative expenses. (AY. 2011-12)
DCIT v. Godawari Power & Ispat Ltd. (2018) 68 ITR 19 (SN) (Raipur) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income-If there were funds available both interest-free and over draft and/or loans taken, then a presumption would arise that investments would be out of interest-free fund generated or available with company, if interest-free funds were sufficient to meet investments. [R.8D]
Allowing the appeal of the assessee the Tribunal held that; If there were funds available both interest-free and over draft and/or loans taken, then a presumption would arise that investments would be out of interest-free fund generated or available with company, if interest-free funds were sufficient to meet investmentS. Followed, CIT v. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom.) (HC) and Wool combers of India Ltd.’s case (1982) 134 ITR 219 (Cal) (HC). (AY 2008 – 2009)
Bennett Coleman & Co. Ltd. v. Addl. CIT(2017) 168 ITD 631/ (2018) 164 DTR 145 / 192 TTJ 377 (Mum.)(Trib.)

S. 14A : Disallowance of expenditure-Exempt income–When no exempt earned during the assessment year, no disallowances can be made.[R.8D]
Tribunal held that ; When no exempt earned during the assessment year, no disallowances can be made.(AY.2009-10, 2012-13)
ACIT v. Gini & Jony Ltd. (2018) 172 ITD 472 / 67 ITR 45 (SN) (2019) 197 TTJ 322/ 178 DTR 114(Mum.)(Trib.)

S. 14A : Disallowance of expenditure-Exempt income– Disallowance cannot exceed exempt income notwithstanding Assessee’s suo-motu disallowance is more than exempt income. [R.8D]
Assessee company made suo motu disallowance u/S. 14A r.w.r. 8D, which was much more than the exempt income. The AO enhanced the disallowance by recomputing amount u/r. 8D(2)(ii) and 8D(2)(iii). The Tribunal observed that Assessee’s own funds were higher than investments and that disallowance could not be made u/r. 8D(2)(ii). It further held that the disallowance u/s. 14A could not exceed the exempt income, notwithstanding that Assessee’s suo-motu disallowance was more than exempt income. (AY. 2012-13)
Gold Seal Engineering Products P. Ltd. v. ACIT (2018) 66 ITR 37 (SN)(Mum.) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income–Provision would not apply where no exempt income was received or receivable during relevant previous year by assessee.[R.8D]
Dismissing the appeal of the revenue the Tribunal held that;provision would not apply where no exempt income was received or receivable during relevant previous year by assessee. Followed Cheminvest Ltd. v CIT (2015) 378 ITR 33 (Delhi)(HC)(AY.2010-11)
ACIT v. Dish TV India Ltd. (2018) 194 TTJ 897/ 169 DTR 253 (Mum.)(Trib.)

S. 14A : Disallowance of expenditure-Exempt income –Disallowances can be made only where the AO recorded his satisfaction as to how the claim of the Assessee that no expenditure was incurred to earn exempt income is incorrect.[R.8D]
Dismissing the appeal of the revenue the Tribunal held hat ;I the absence of any finding by the Ld. AO as to how the claim of the Assessee that no expenditure was incurred for earning exempt income is incorrect, resort cannot be had to the provisions of sub-rule (2) of Rule 8D of the Rules. (AY.2008-09 to 2011-12)
ACIT v. Karnataka Bank Ltd.(2018) 63 ITR 433 (Bang.)(Trib.)

S. 14A : Disallowance of expenditure-Exempt income-Disallowance has to be made where the assessee cannot furnish any evidence to prove that the investments were made in earlier years. [R.8D]
Tribunal held that since assessee has not furnished any evidence to prove its contention that the investment in tax free bond thereof are made in earlier years. As rule 8D have incorporated for the AY. 2008-09 on wards assessee squarely covered with the provision of S. 14A(3) which makes it mandatory to make disallowance as per the provision of section 14A (2) r.w. rule 8D of Income-tax Rules, 1962.
Dy.CIT v. Rasna Pvt Ltd. (No 2) (2018) 66 ITR 689 (Ahd.)(Trib.)

S. 14A : Disallowance of expenditure-Exempt income-Disallowance cannot exceed amount of exempt income and if there is no exempt income, no disallowance can be made. [R.8D]

Dismissing the appeal of the revenue the Tribunal held that ; disallowance cannot exceed amount of exempt income and if there is no exempt income, no disallowance can be made. (AY.2013-14)
ACIT v. Satish Kumar Agarwal. (2018) 172 ITD 143 (Jaipur) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income –Net of interest-Benefits of netting of interest under rule 8D(2)(ii) be allowed without even emphasising on need of having any inextricable link between interest earned and interest paid prior to 2-6-2016. [R. 8D(2)(ii)]
Dismissing the appeal of the revenue the Tribunal held that ;for the purpose of applying rule 8D(2)(ii) prior to its amendment with effect from 2-6-2016, what would be considered as amount of expenditure by way of interest would be the interest paid by the assessee on the borrowings minus the interest income earned during the financial year. The interest income earned during the year being more than the interest expenditure incurred, the disallowance made by the AO on account of interest u/s. 14A by applying rule 8D(2)(ii) was deleted by the CIT(A) on the ground that there was no net interest expenditure incurred by the assessee. Before the ITAT revenue challenged the same stating that there nothing brought on record to show an inextricable link between the interest earned and interest paid. Tribunal affirmed the order of CIT(A).(AY.2009-10)
Dy. CIT v. UMIL Share & Stock Broking Services Ltd. (2018) 171 ITD 713 / 170 DTR 441 / 196 TTJ 91(Kol.)(Trib.)

S. 14A : Disallowance of expenditure-Exempt income –Income from other sources-Dividend income on investment made in Oman-No disallowances can be made-DTAA-India-Oman. [S. 90(2), Art. 25, R.8D]
Dismissing the appeal of the revenue the Tribunal held that ; Dividend income earned from investment made in Oman is chargeable to tax in India under head ‘Income from other sources’ and would form part of total income; rebate of taxes had to be allowed from total taxes in terms of section 90(2), read with article 25 of Indo-Oman DTAA, and, consequently, provisions of S. 14A were not applicable to dividend received. (AY.2006 07)
ACIT v. Indian Farmers Fertiliser Cooperative Ltd. (2018) 171 ITD 504 (Delhi) (Trib.)

S. 14A : Disallowance of expenditure–Exempt income–There was no exempt income earned and interest expense was not related to strategic investments of the company-Disallowance is not justified. [R. 8D]
On Revenue’s appeal, the Tribunal observed that the CIT(A) rightly relied on the decision of Taikisha ? and negated the stand taken by the AO. The Tribunal observed that, the interest expenditure was on account of non-fulfillment of delivering a constructed area within the timelines stipulated in the agreement and therefore, assessee paid the requisite expenditure. Therefore, the interest expense was not related to the investment made in unquoted shares of its subsidiary company. Further, the Tribunal held that the investments made in subsidiary companies were not meant to generate dividend income but were strategic in nature. Additionally, the Tribunal observed that there was no exempt income credited in the P&L account and the shareholder’s funds were in excess of the amount invested and thus logically, the investments had been made out of self-generated funds and not interest bearing funds. Therefore, the disallowance u/s. 14A was rightly deleted. (AY. 2011-12)
ACIT v. Paras Buildtech (India) (P.) Ltd. (2018) 62 ITR 284 (Delhi) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income-Disallowance cannot made as without bringing basic fact that expenditure actually incurred to earn exempt income-Matter remanded to the AO. [R.8D(2)(ii)]
The Tribunal held that, the AO has mechanically applied the formula without bringing the basic facts i.e. amount of expenditure incurred for earning exempt income. Accordingly the matter remanded to the AO. (AY. 2007 – 2008)
Oricon Enterprises Ltd. v. ACIT (2018) 171 ITD 231/ 67 ITR 433 (Mum.) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income–Share capital along with reserve and surplus is many times higher than the amount invested in shares – No disallowance can be made.[8D(2)(ii)]
It has been held by the appellate Tribunal that if an assessee has interest free funds as well as interest bearing funds at its disposal, then the presumption would be that investments were made from interest free funds at its disposal. Since the assessee’s share capital along with reserve and surplus is far in excess of its investment in shares, etc. yielding exempt income, no disallowance can be made. (AY.2008-09)
DLF Commercial Developers Ltd. v. Dy. CIT (2018) 164 DTR 207/192 TTJ 769 (Delhi)(Trib.)

S. 14A : Disallowance of expenditure-Exempt income-Assessing Officer not giving cogent reason for rejecting suo motu disallowance made by Assessee—Assessee need not maintain separate books for expenses incurred in earning exempt income —No disallowances can be made. [R.8D]
Allowing the appeal of the assessee the Tribunal held that ; the Assessing Officer had not given any cogent reason as to why he was not satisfied with the suo motu disallowance made by the assessee. The Assessing Officer’s comment that the assessee did not maintain separate books of account for the expenses incurred in relation to earning of income not includible in the total income was tantamount to the Assessing Officer being of the opinion that the assessee should maintain separate books for this purpose. This was not required in terms of law. The Assessing Officer committed an error in assuming so. Thus, the disallowance made by the Assessing Officer under rule 8D was deleted. Followed,Maxopp Investment Ltd. v. CIT (2018) 402 ITR 640 (SC)(AY.2011-12)
M. Junction Services Ltd. v. (2018) 65 ITR 40 (SN) (Kol) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income –Sufficient interest free own funds to cover investment in shares and mutual funds etc –No disallowance can be made .[R.8D(2)(ii)]
Allowing the appeal of the assessee the Tribunal held that ; where assessee had sufficient interest free own funds to cover investments in shares, mutual funds, etc. which generated exempt dividend, no disallowance can be made. (AY.2008-09)
Tata Hitachi Construction Machinery Company Ltd. v. DCIT (2018) 170 ITD 720 /65 ITR 86 (SN)(Bang.)(Trib.)
S. 14A : Disallowance of expenditure-Exempt income-Disallowance has to be made even if the assessee has not earned any tax free income on the investment-Revision was held to be valid . [S. 263, R. 8D]
Dismissing the appeal of the assessee against the revision order of the Commissioner of Income-tax, the Tribunal held that, Disallowance has to be made even if the assessee has not earned any tax free income on the investment. Tribunal held that Cheminvest Ltd v. CIT (2015) 378 ITR 33 (Delhi) (HC) is not binding on the assessee as it is a non-jurisdictional High Court. CBDT ‘s Circular 5/2/2014 is accordance with Godrej & Boycee Manufacturing. Co Ltd v. Dy. CIT (2017) 394 ITR 449 (SC) & Maxopp Investment Ltd v. CIT (2018) 402 ITR 640 (SC) (AY. 2012-13)
Lally Motors India (P) Ltd v. PCIT (2018) 170 ITD 370/ 93 taxmann. com 39/ 171 DTR 106 / 195 TTJ 728 / 64 ITR 45 (SN) (Asr.) (Trib.) www.itatonline.org

S. 14A : Disallowance of expenditure-Exempt income – No disallowance can be made if no exempt income is earned. [R. 8D]
No disallowance can be made if no exempt income is earned. Followed CIT v. IL&FS Energy Development Corporation Ltd. (2017) 297 CTR 452 (Delhi) and Redington (India) P. Ltd. v. CIT (2016) 97 CCH 219 (Mad) (HC) which also considers the Circular No. 05/2014 dt. 11. 02. 2014(2014) 361 ITR 94 (St). (AY. 2009-10 to 2011-12)
HLL Lifecare Limited v. ACIT (2018) 191 TTJ 1 (UO) / 66 ITR 361 (Cochin) (Trib.

S. 14A : Disallowance of expenditure-Exempt income–The AO has to first record satisfactionhaving regard to accounts of the assessee that the claim made by the assessee with regard to non-incurrence of any expenditure for the purpose of earning income is incorrect before proceeding to make any disallowance. [R.8D]
The Tribunal held that the AO had not raised any query with the regard to disallowance under S. 14A in the entire assessment proceedings. It is the duty of the AO to record satisfaction in terms of S. 14A(2) read with Rule 8D(1) of the Rules, before proceeding to make disallowance as per Rule 8D(2) of the Rules. It is the duty of the AO first to disturb the stand of the assessee of not making any disallowance under S. 14A by recording proper satisfaction having regard to the accounts of the assessee in terms of S. 14A (2) of the Act read with Rule 8D(1) of the Rules which was not present in the present case and hence deleted the disallowance made under S. 14A (AY. 2010-11)
IMC Ltd. v. Dy. CIT (2018) 191 TTJ 73 (Kol.)(Trib.)

S. 14A : Disallowance of expenditure – Exempt income – AO has neither considered contention of the assessee nor recorded the satisfaction, hence disallowance is not justified. [R. 8D]
Tribunal held that, AO has neither considered contention of the assessee nor recorded the satisfaction hence disallowance is not justified. (AY .2007-2008 – 2010 – 2011)
Garuda Imaging & Diagnostics (P) Ltd. v. ACIT (2018) 191 TTJ 765 (Delhi)(Trib.)

S. 14A : Disallowance of expenditure-Exempt income-Investments in shares and mutual funds from own funds-Interest expenses cannot be disallowed.[R. 8D]
Allowing the appeal of the assessee the Tribunal held that the, assessee, had surplus own funds to make investments in shares and mutual funds and it had not used borrowed funds, therefore interest expenses cannot be disallowed. (AY. 2008-09)
Bennett Coleman & Co. Ltd. v. ACIT (2017) 168 ITD 631/(2018)192 TTJ 377 / 164 DTR 145 (Mum.) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income – Satisfaction to be recorded by the Assessing Officer,it cannot be substituted by recorded satisfaction of Commissioner of Income tax (Appeals) .[S. 251, R. 8D]
Allowing the appeal of the assesse, the Tribunal held that; though the power of CIT(A) is co – terminus with that of Assessing officer, it is Assessing Officer who has to record his satisfaction with regard to correctness of assessee’s claim before proceeding to disallow expenditure under section 14A and satisfaction to be recorded by Assessing Officer under section 14A(2) cannot be substituted by satisfaction recorded by first appellate authority. (AY. 2010-11)
Arnav Gruh Ltd. v. DCIT (2018) 168 ITD 518 (Mum.) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income – AO cannot straight way make disallowance without rejecting the disallowance computed by the assessee.[R. 8D]
Dismissing the appeal of the appeal of the revenue the Tribunal held that; AO cannot straight way make disallowance without rejecting the disallowance computed by the assessee. (AY. 2010-11)
DCIT v. Vantage Advertising P. LTD. (2018) 61 ITR 564 (Kolk) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income – When there is no exempt income earned during the relevant period, no disallowance can be made.[R. 8D]
Allowing the appeal of the assessee the Tribunal held that; When there is no exempt income earned during the relevant period, no disallowance can be made. (AY. 2013-14)
Moonrock Hospitality P. Ltd. v. DCIT (2018) 61 ITR 667 (Delhi) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income – When there is no exempt income during the relevant year no disallowance can be made. [R. 8D]
Tribunal held that, when there is no exempt income during the relevant assessment year, no disallowance can be made, even otherwise the assessee had sufficient surplus interest-free funds to make in vestment in exempt yielding assets. (AY. 2011-12)
ACIT v. Progressive Constructions Ltd (2018) 161 DTR 289 /63 ITR 516 / 191 TTJ 549 (SB) (Hyd) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income-No disallowance can be made for securities held as stock in trade-Interest free funds available with assessee, no disallowance can be made [R. 8D, 36(1)(iii)]
Tribunal held that,no disallowance can be made for securities held as stock in trade. Interest free funds available with assessee, no disallowance can be made.(AY. 2009-10, 2010-11)
Siddhesh Capital Market Services P. Ltd. v. (2018) 61 ITR 400 / 52 CCH 3(Mum.) (Trib.)

S. 14A : Disallowance of expenditure-Exempt income – PSU bonds of NTPC – Disallowance was restricted to 1 percent of exempt income.[R. 8D]
On facts the Tribunal in respect of exempt income of PSU Bonds of NTPC the disallowance under section 14A was restricted to 1 per cent of exempt income .(AY. 1992-93)
DCIT v. Growmore Leasing & Investment Ltd. (2018) 168 ITD 1 (Mum.)(Trib.)

S. 14A : Disallowance of expenditure-Exempt income – When there is no exempt income disallowance cannot be made. [R. 8D]

Tribunal held that, when there is no exempt income disallowance cannot be made. (AY. 2009-10, 2010-11)
ACIT v. Claridges Hotels Pvt. Ltd. (20180 61 ITR 135 (Delhi) (Trib.)

S. 15 : Salaries-The Income-tax Act, 1961 will override the Companies Act-Even the illegal payment or the payment received by the assessee contrary to the provisions of the Companies Act by way of salary has to be assessed as income in the assessee’s hands provided the income was not recovered by the company .[S. 5]
Dismissing the appeal of the assessee the Tribunal held that ; what was paid to the assessee was a salary in the capacity as managing director of the company. Therefore at the time of payment the assessee had all the right to retain the money. Subsequently, the company revised the salary on the basis of the provisions of the Companies Act restricting the salary to 5 per cent. of the net profits of the company. The Income-tax Act, 1961 will override the Companies Act. Even the illegal payment or the payment received by the assessee contrary to the provisions of the Companies Act by way of salary has to be assessed as income in the assessee’s hands provided the income was not recovered by the company. (AY.2009-10)
Nate Nandha v. ACIT(2018) 65 ITR 72(SN) (Chennai) (Trib.)

S. 15 : Salaries- Salary paid to manging Director in excess of ceiling prescribed by as per Companies Act is taxable as salary provided the excess amount paid was not recovered by the Company.[S. 5]
Dismissing the appeal of the assessee the Tribunal held that, Salary paid to manging Director in excess of ceiling prescribed by as per Companies Act is taxable as salary provided the excess amount paid was not recovered by the Company. (AY.2009-10)
Nate Nandha Nee Natarajan Nandagopal v. ACIT (2018) 171 ITD 399 /170 DTR 81 / 195 TTJ 644 (Chennai) (Trib.)

S. 17 : Perquisite-Salary-Amount received by an employee from redemption of Stock Appreciation Rights (SARs) cannot be assessed as “perquisite” or as “profits of business” .[S. 17(2)(iii), 28(iv), 45]
Dismissing the appeal of the revenue, the Court held that, Amount received by an employee from redemption of Stock Appreciation Rights (SARs) can not be assessed as “perquisite” u/s 17(2) (iii) or as “profits of business” u/s 28 (iv) or as “capital gains”,despite no “cost of acquisition. Circular No 710 dt 24-071995, was considered. The Court also held that; the Respondent got the Stock Appreciation Rights (SARs) and, eventually received an amount on account of its redemption prior to 01. 04. 2000 on which the amendment of Finance Act, 1999 (27 of 1999) came into force. In the absence of any express statutory provision regarding the applicability of such amendment from retrospective effect, we do not find any force in the argument of the Revenue that such amendment came into force retrospectively. It is well established rule of interpretation that taxing provisions shall be construed strictly so that no person who is otherwise not liable to pay tax, be made liable to pay tax. (CIT v. Infosys Technologies Ltd (2008) 297 ITR 167 (SC),Sumit Bhattacharya v. ACIT (2008) 112 ITD 1(SB) (Mum.)(Trib.) (AY. 1998-99)
ACIT v. Bharat V. Patel (2018) 404 ITR 37/ 165 DTR 218 / 302 CTR 110 / 255 Taxman 324 (SC), www.itatonline.org

S. 17 : Perquisite – Salary-Employees deputed abroad — Extra payment to meet costs constitute perquisites-Liable to deduct tax at source.[S. 15, 17(2),192]
Dismissing the appeal of the assessee the Court held that S. 17 of the Income-tax Act, 1961 defines perquisites. It is an inclusive definition which takes within its sweep various things, including any sum paid by the employer in respect of any obligation, which, but for such payment, would have been payable by the assessee. Accordinglyextra payment to meet costs constitute perquisites. (AY. 2001-02 to 2003-04)
Sun Outsourcing Solutions P. Ltd. v. CIT (2018) 407 ITR 480/ 171 DTR 358/ 305 CTR 537 (T&AP) (HC)

S. 17 : Perquisite – Salaries-Shares were not allotted by company to assessee in his capacity of being an employee-No benefit was received by assessee – Addition cannot be made as perquisites.[S. 15. (17(2), 56(2) (vii)]
The revenue contended that provisions of section 17 that there would be a tax liability even if section 56(2)(vii) does not apply, as the assessee being an employee of the company. The Tribunal held that the provisions of section 17 do not apply to the shares allotted by the company to the assessee as the shares were not allotted by the company to the assessee in his capacity of being an employee of the company. The shares were offered and allotted to the assessee by the company by virtue of the assessee being a shareholder of the company. Therefore the provisions of section 17 are not applicable. Circular No. 710 dated 24-7-1995 also supports the assessee’s stand that where shares are offered by company to a shareholder, who happens to be an employee of the company at the same price as have been offered to other shareholders or the general public, there will be no perquisite in the shareholder’s hands. In the instant case, the shares were offered to the assessee and other shareholders at a uniform rate of Rs. 100 and therefore, the difference between the fair market value and issue price cannot be brought to tax as a perquisite under section 17 of the Act.
ACIT v. Subhodh Menon. (2019) 175 ITD 449/175 ITD 449/ 198 TTJ 79 (Mum.) (Trib.)www.itatonline.org.
ACIT v. P.N.Ramaswamy (2019) 175 ITD 449/175 ITD 449/198 TTJ 79(Mum.) (Trib.)www.itatonline.org

S. 17 : Perquisite-Employee Stock Option Plans-Tax arises in hands of employees, on date of allotment of shares and not on date of exercise of option. [S. 15, 17(2),192, 201(1A)]
Assessee deducted perquisite tax on ESOP on date of allotment of shares. AO held that perquisite tax on ESOP should have been deducted on date of exercise of option. Allowing the appeal of the assessee the Tribunal held that as per S. 17(2)(vi) obligation for withholding tax accrues only, when shares are allotted after completion of commitments on part of person who exercised option and not on date of exercise of option.(AY.2012-13)
Bharat Financial Inclusion Ltd. v. DCIT (2018) 172 ITD 198 (Hyd) (Trib.)

S. 17 : Perquisite-Interest free loan is taxable as perquisites in the hands of employee as per Rule 3 of the IT Rules . [S. 17(2) (viii) R.3(7)(i)]
Dismissing the appeal of the assessee the Tribunal held that Interest free loan is taxable as perquisites in the hands of employee as per Rule 3 (7)(i) of the IT Rues .(ITA No.2172 / M /2016 dt. 16-05-2018)(AY.2011-12)
Neha Saraf v. ITO (Mum.) (Trib.) www.itatonline.org

S. 17 : Perquisite-Purchase of property from a company wherein the assessee is also director can not be assessed as perquisite in lieu of salary as there was no employer and employee relation ship [S. 17(2)(iii), 50C]
Assessee purchased the property from the Company. The value paid was less than the fair value of property as per the stamp valuation. AO treated the difference as perquisite in the hands of the assessee. On appeal allowing the appeal of the assessee,the Tribunal held that; to treat any sum as a perquisite in lieu of salary as per S. 17(2)(iii) it is incumbent on part of Assessing Officer to establish on record that a benefit in nature of salary is given by an employer to an employee; establishment of employer-employee relationship between assessee and company is essential. Tribunal also held that, the legal fiction created under S. 50C in so far as it enables the Assessing Officer to adopt the value for stamp duty purpose as the deemed sale consideration cannot be extended to assess the buyer of the immovable properties to tax on the differential amount. Though, the Assessing Officer has consciously not referred to the provisions of S. 50C, however, there is no room for doubt that applying the deeming fiction of S 50C, the Assessing Officer has adopted the stamp duty value as the deemed sale consideration while making the addition. Therefore the addition made of Rs. 1. 95 crores is unsustainable in law. (AY. 2010-11,2012-13)
Keshavji Bhuralal Gala v. ACIT (2018) 169 ITD 23/ 165 DTR 8/193 TTJ 227/ 63 ITR 67 (SN)(Mum.) (Trib.)
S. 22 : Income from house property – Business income-Real estate developer-Main object is not acquiring and holding properties-Rental income is held to be assessable as income from house property.[S. 28(i)]
Dismissing the appeal of the revenue the Court held that, the assessee is in the business of development of real estate projects and letting of property is not the business of the assessee. Following the ratio in CIT v. Sane & Doshi Enterprises (2015) 377 ITR 165 (Bom.) (HC) wherein the Court held that the rental income received from unsold portion of the property constructed by real estate developer is assessable as income from house property. Considered the decision in Chennai Properties and Investments Ltd Chennai v CIT ((2015) 373 ITR 673 (SC) and Rayala Corporation Pvt Ltd v ACIT (2016) 386 ITR 500 (SC) (ITA No. 347 of 2016 dt. 31-07-2018)(Arising ITA No. 4475 / Mum./2011 dt 19-02 2014)
CIT v. Gundecha Builders (2019) 102 taxmann.com 27(Bom.)(HC) www.iatonline.org

S. 22 : Income from house property-letting out of its permanent structured on regular basis is assessable as income from house property-Receipt of license fee for use of craft stalls organized with object of promoting tourism, is taxable as business income .[S. 28 (i)]
Income earned by the assessee from the letting out of its permanent structure on regular basis is assessable as income from house property. Receipt of license fee for use of craft stalls organized with object of promoting tourism, is taxable as business income. (AY. 2004-05 to 2009-10)
Delhi Tourism & Transport Development Corp. Ltd. v. Dy. CIT (2018) 194 TTJ 305 / 170 DTR 129(Delhi)(Trib.)

S. 22 : Income from house property – Rental income is held to be assessable as income from house property though the land is not owned by the assesse. [S. 24, 27(iiib), 56]
Assessee has claimed the lease rent as deduction and rental income was shown as income from other sources. Dismissing the appeal of the assesse the Tribunal held that; it is not essential that a person who owns a building should be owner of land upon which it stands for assessing rental income under head Income from House Property hence the lower authorities were justified in assessing the income as income form house property and not allowing the lease rent as deduction. (AY. 2011-12)
JG Exports v. ITO (2018) 168 ITD 21(Chennai) (Trib.)

S. 23 : Income from house property-Annual value – Interest free security deposit- Interest offered as income from other sources-Notional interest on interest free deposit cannot be considered to determine annual letting value of property-Notional addition would amount to double taxation.[S. 22, 23(1)(b)]
Dismissing the appeal of the revenue the Court held that ;once interest on interest free security deposits received by assessee from tenant was offered to tax as income from other sources, adding of notional interest on interest free security deposit to determine ‘Annual letting value’ of property would amount to double taxation.(AY. 2004-05 to 2007-08)
PCIT v. Karia Can Co. Ltd. (2018) 257 Taxman 189 (Bom.) (HC)

S. 23 : Income from house property-Annual value-Vacancy allowance-Construction business-Some flats constructed by assessee were not let out during year-Properties held as stock-in-trade were not let out for any previous years, vacancy allowance is not available-Liable to pay tax on the sum for which the property might reasonably be expected to let from year to year under S. 23(1)(a) of the Act. [S. 22,23(1)(a), 23(1)(c)]
Dismissing the appeal of the assessee the Court held that; where properties held as stock-in-trade were not let out for any previous years, there would be no question of availing vacancy allowance given in S. 23(1)(c) and assessee would be liable to pay tax on the sum for which the property might reasonably be expected to let from year to year under S. 23(1)(a) of the Act.(AY. 2005-06,2006-07)
Ansal Housing& Construction Ltd. v. ACIT (2018) 89 Taxmann.com 238 (Delhi) (HC)
Editorial : SLP is granted to the assessee, Ansal Housing & Construction Ltd. v. ACIT (2018) 256 Taxman 294 (SC)

S. 23 : Income from house property-Annual value-Vacancy allowance-When property had remained let out for a period of 36 months, and thereafter could not be let out and had remained vacant during whole of year under consideration, but had never remained under self-occupation of assessee, ‘annual value’ of said property was to computed at nil.[S. 23(1)(a),23(1)(c)]
Allowing the appeal of the assessee the Tribunal held that,when property of assessee had remained let out for a period of 36 months, and thereafter could not be let out and had remained vacant during whole of year under consideration, but had never remained under self-occupation of assessee, ‘annual value’ of said property was to be computed at nil by taking recourse to section 23(1)(c) of the Act. (AY.2011-12, 2012013))
Sonu Realtors (P.) Ltd. v. DCIT (2018) 173 ITD 82 (Mum.) (Trib.)

S. 23 : Income from house property-Annual value – Vacancy allowance-Flat was not in a position to be let out de hors removal of defects and, therefore, benefit of vacancy allowance in respect of period taken for carrying out necessary alterations. [S. 23(1)(c)]
Allowing the appeal of the assessee,the Tribunal held that, the flat owned by the assessee which was constructed by the builder was not fully in accordance with sanctioned plan and some alteration was required to bring it under proper plan. Accordingly it could be concluded that flat was not in a position to be let out de hors removal of defects and, therefore, benefit of vacancy allowance in respect of period taken for carrying out necessary alterations under S. 23(1)(c) was to be allowed. (AY. 2012-13)
Saif Ali Khan Pataudi v. ACIT (2018) 172 ITD 345 /195 TTJ 513 / 169 DTR 305 (Mum.) (Trib.)

S. 23 : Income from house property-Annual value – Stock in trade-Construction completed, Feb 2013-Income cannot be estimated on ground that said property remained unsold and vacant at end of financial year, since there was no possibility to let out property just after its completion.[S. 23(1)(a)]
Allowing the appeal of the assessee the Tribunal held that,provisions of S 23(1)(a) could not be applied in assessee’s property due to peculiar reason that completion was completed only in month of Feb, 2013 and it was not possible to let out property just after its completion, i.e., only after one month. (AY. 2013-14)
Raj Landmark (P.) Ltd. v. ITO (2018) 172 ITD 339 (Jaipur) (Trib.)

S. 23 : Income from house property-Annual value – When part of the house is occupied during the year and part is let out only actual rent received by the assessee has to be considered. [S. 22]
Dismissing the appeal of the revenue the Tribunal held that ;since assessee had occupied part of house for his residential purposes during year under consideration, Annual value for entire house could not be adopted. Only actual rent received has to be considered.(AY.2013-14)
ACIT v. Satish Kumar Agarwal. (2018) 172 ITD 143 (Jaipur) (Trib.)

S. 23 : Income from house property-Annual value – Notional interest on interest-free security deposit cannot be added while computing annual value. [S. 23(1)(b), 23(1)(ii)]
Tribunal held that;notional interest on interest-free security deposit cannot be added while computing annual value. (ITA No.4038/Del/2013, dt. 12.10.2018)(AY. 2006-07)
DCIT v. Moni Kumar Subha (Delhi)(Trib.),www.itatoline.org

S. 23 : Income from house property-Annual value-vacancy allowance-The words ‘property is let’ does not mean ‘property actually let out’. If property is held with an intention to let out in the relevant year coupled with efforts made for letting it out, it could be said that such a property is a let out property and the same would fall within the purview of S. 23 (1)(c) and be eligible for vacancy allowance. A reasonable approach should be taken on the assesse’s attempts to let out and infallible proof should not be demanded.[S. 22, 23(1)(c)]
Allowing the appeal of the assessee the Tribunal held that ; The words ‘property is let’ does not mean ‘property actually let out’. If property is held with an intention to let out in the relevant year coupled with efforts made for letting it out, it could be said that such a property is a let out property and the same would fall within the purview of S. 23 (1)(c) and be eligible for vacancy allowance. A reasonable approach should be taken on the assesse’s attempts to let out and infallible proof should not be demanded.(2012-13)
Sachin R. Tendulkar v. DCIT (2018) 172 ITD 266/ 169 DTR 169/195 TTJ 241 / 66 ITR 74(SN)(Mum.)(Trib.),www.itatonline.org

S. 23 : Income from house property-Annual value- Stock in trade –Unsold flats which are held by a builder as stock in trade cannot be brought to tax under the head ‘income from house property’. They are only assessable as business profits when sold. [S. 22]
Dismissing the appeal of the revenue the Tribunal held that, unsold flats which are held by a builder as stock in trade cannot be brought to tax under the head ‘income from house property’. They are only assessable as business profits when sold. (Followed Runwal Constructions v. ACIT ITA No 5408/5409 /Mum./2016 dt. 22-02-2018)(ITA NO.6037/Mum./2016, dt. 27.06.2018)(AY. 2012-13)
ITO v. Arihant Estate Pvt.Ltd. (Mum.)(Trib.), www.itatonline. Org

S. 23 : Income from house property – Annual value – The assessee has the option to claim as self occupied property which is more beneficial to him.[S. 22]
Allowing the appeal of the assessee the Tribunal held that, the Income – tax Act, nowhere states that option o selecting a self occupied property, once exercised, cannot be changed. Accordingly the tax payer can change his selction during assessment proceedingS. (ITA No. 5616/Mum./2015 dt. 23-05-2018, “ F”)(AY. 2011-12)
Venkatavarthan N. Iyengar v. ACIT (Mum.) (Trib.) (UR)

S. 23 : Income from house property-Annual value – Though property remained vacant during relevant previous year benefit of S. 23(1)(c) is available. [S. 23(1) (c)]
Dismissing the appeal of the revenue the Tribunal held that ;in order to avail benefit of S. 23(1) (c) it is not necessary that property should have been actually let in relevant previous year or during any time prior to relevant previous year, therefore, where properties remained vacant during relevant previous year, the assessee could still avail deduction under S 23(1)(c) of the Act. (AY. 2008-09 to 2013-14)
ITO v. Metaoxide (P.) Ltd. (2018) 170 ITD 235 (Mum.) (Trib.)

S. 23 : Income from house property-Annual value-Deemed rent to be computed on the basis of Municipal rateable value and not on the basis of market rent .[S. 22]
AO estimated the rent based on the inspectors report which was based on the local enquiry conducted in the surrounding areas of the building situated. On appeal Tribunal following the ratio in CIT v. Tip Top Typography (2014) 368 ITR 330 (Bom.) (HC) directed the AO to compute the deemed rent as per Municipal rateable value.(AY. 2006-07)
Owais M. Husain v ITO (2018) 194 TTJ 102/ 167 DTR 49(Mum.) (Trib.)

S. 23 : Income from house property-Annual value – Assessee has the option to claim as self occupied property which is more beneficial-Though the option was exercised while filing the return the assessee which can changed in appellate proceedings before CIT (A) if it is beneficial to assessee. [S. 22]
Allowing the appeal of the assessee the Tribunal held that, Assessee has the option to claim as self occupied property which is more beneficial to him. Following the ratio in Balmukund Acharya v DCIT (2009) 310 ITR 310 (Bom.) (HC) the Tribunal held that AO should not take advantage of assessee’s ignorance of law. On facts though the option was exercised while filing the return the assessee changed the option in appellate proceedings before CIT (A), which was dismissed by the CIT(A). Tribunal set aside the order of CIT(A) and directed the AO allow the exemption as per the option of the assessee. (ITA NO. 2552 /Mum./2010 ‘A’ dt. 21-09-2011) (AY. 2004-05)
Asha Bhosle v. ITO (Mum.) (Trib.) (UR)

S. 23 : Income from house property-Annual value-Municipal valuation can be a pointer for fetching reasonable rental value, however multiplication factor derived for another property located in different locality, though in same city, cannot be applied blindly. [S. 22,24]
Tribunal held that though the Municipal valuation can be a pointer for fetching reasonable rental value for a given property but in determining reasonable rental value, a multiplication factor derived from one set of data for another property located in different locality, though in same city, cannot be applied blindly, Matter remanded. (AY. 2008-09)
ACIT v. Kamini Sundararam. (Smt.) (2018) 168 ITD 513 (Chennai) (Trib.)

S. 24 : Income from house property – Income from other sources-Co-operative society-Deductions-letting out space on terrace for installation of mobile tower/antenna was taxable as income from house property-deduction is available.[S. 22, 24(a), 56]
Allowing the appeal of the assessee the Tribunal held that, letting out space on terrace for installation of mobile tower/antenna was taxable as income from house property and not as income from other sources. Deduction is available.(AY.2013-14)
Kohinoor Industrial Premises Co-operative Society Ltd. v. ITO (2018) 173 ITD 263 / (2019) 174 DTR 349 / 197 TTJ 966 (SMC) (Mum.) (Trib.)

S. 28(i) : Business income – Sub lease of property – Assessable as business income and not as income for other sources.[S. 56]
Assessee was engaged in business of development of Bio-Tech Park, construction, leasing and sale of commercial properties. AO assessed the sub lease of property as income from other sources.Tribunal held that assessee’s business of development of Bio-Tech Park had already commenced, and therefore, sub-lease income was assessable as business income. On appeal High Court up held the order of the Appellate Tribunal.(AY. 2010-11)
PCIT. v. International Biotech Park Ltd. (2018) 259 Taxman 14 (Bom.)(HC)

S. 28(i) : Business income- Income from house property-Construction of shopping malls-Commercially exploit property by way of complex commercial activities and, it was not a case of letting out property simplicitor -Rental income is assessable as business income. [S. 22]
Assessee was engaged in construction of various shopping malls.It leased out commercial space in malls and also rendered certain other ancilliary services to occupiers of shops/stallS. AO treated rental income earned by assessee under head ‘Income from house property. Tribunal held that intention of assessee-company was to commercially exploit property by way of complex commercial activities and, it was not a case of letting out property simplicitor hence rental income is assessable as business income. High court up held the order of the Tribunal.
PCIT v. E City Real Estate (P.) Ltd. (2018) 100 taxman 93 /259 Taxman 410 (Bom.) (HC)
Editorial : SLP is granted to the revenue ;PCIT v. E City Real Estate (P.) Ltd. (2018) 259 Taxman 409 (SC)

S. 28(i) : Business income—Capital gains—Conversion of agricultural land into residential plots and sale of residential plots-Consideration over fair market value to be assessed as business income-No question of law.[S. 4, 45, 260A]
Dismissing the appeal of the assessee the Court held that ; Conversion of agricultural land into residential plots and sale of residential plots-Consideration over fair market value to be assessed as business income. No question of law.(AY.2011-12)
Mahaveer Yadav v. ITO (2018) 408 ITR 19 (Raj) (HC)
Editorial : Order of Tribunal in Mahaveer Yadav v. ITO (2018) 52 CCH 495/ 169 ITD 717 / 194TTJ 358 (Jaipur) (Trib.) is affirmed.

S. 28(i) : Business income–Engaged in business of leasing, hire purchase and other financial activities-Amount was recognized as a profit on securitization of lease receivables in its profit & loss account – Assessable as business income-Matching concept was never even argued or raised before the Tribunal or raised before the High Court cannot be raised first time while arguing before the High Court.[S. 145, 260A]
Dismissing the appeal of the assessee the Court held that; assessee NBFC was engaged in business of leasing, hire purchase and other financial activities, which securitized certain amount as rent receivables from April 2002 to March 2004 and adjusted a part of said amount against rent receivable in its books of account and balance amount was recognized as a profit on securitization of lease receivables in its profit & loss account. Amount credited to profit and loss account is held to be assessable as business income.Contention that it was notional gain was rejected. As regards the contention of the assessee that the “matching concept” was not applied by the authorities below. Court held that in fact, on going through the orders passed by the authorities below, the “matching concept” was never even argued or raised before them. Therefore, this argument can never give rise to a substantial question of law in the facts and circumstances of the present case. (AY. 2002-03, 2003-04)
L & T Finance Ltd. v. Dy. CIT (2018) 258 Taxman 282 (Bom.)(HC)

S. 28(i) : Business income – Business of leasing out of land and getting rental income as land premium-land premium received by assessee was part and parcel of its business receipt and, hence, same was a taxable revenue receipt.[S. 4, 10(20A)]
Dismissing the appeal of the assessee the Court held that; assessee was a Government company established with main object to develop industrial area for industrial growth in State. land premium received by assessee was part and parcel of its business receipt and, hence, same was a taxable revenue receipt.(AY. 2003-04, 2004-05, 2006-07, 2007-08 to 2010-11)
M.P. Audyogik Kendra Vikas Nigam (Indore) Ltd. v. ACIT (2018) 258 Taxman 372 / 171 DTR 305/ 305 CTR 457(MP)(HC)

S. 28(1) : Business income-Capital gains-sale of shares-Short period of holding shows that intention of assessee is to earn profit at earliest possible occasion-Assessee is moving as per stock market trend and selling shares at first available opportunity. This type of activity of sale and purchase is rightly termed, not as investment, but as trading .[S. 45]
Dismissing the appeal of the asesee the Court held that ; Short period of holding shows that intention of assessee is to earn profit at earliest possible occasion. Assessee is moving as per stock market trend and selling shares at first available opportunity. This type of activity of sale and purchase is rightly termed, not as investment, but as trading.(AY.2007-08)
Ramilaben D. Jain v. ACIT (2018) 407 ITR 589 /258 Taxman 97 (Bom.)(HC),www.itatonlne.org

S. 28(i) : Business income–Capital gains-Buying and selling of shares frequently and volume and magnitude being very high assessable as business income and not as capital gains. [S. 45]
Dismissing the appeal of the assessee; the Tribunal, after analysing transactions of shares in details including volume of holding, duration of holding, and income derived as dividend to investment made, had rightly held that income arising from sales of shares was assessable as business income. (AY. 2010-11)
Rakesh Kumar Gupta v. CIT (2018) 254 Taxman 394 (Delhi)(HC)

S. 28(i) : Business income–Capital gains-Adventure in the nature of trade – Assessable as business income [S. 2(13), 45, Foreign Exchange Management (Acquisition & Transfer of Immovable Property in India, Regulation 2000) S. 47]
Dismissing the appeal of the assesee the Court held that; the assesee purchased the land on 16-8-2006 while he was still a non-resident Indian and thereafter he did not do any agricultural operations on that land. After retaining it for about two years, he sold it. He did not obtain the permission of the RBI under rule 47 of the Foreign Exchange Management (Acquisition & Transfer of Immovable Property in India) Regulations, 2000, which prohibits acquisition of agricultural land by an NRI. The fact that he had levelled the land and enhanced its saleability was also an indication of his intention to resell the land even when he purchased it. He had made huge profits consequent to the sale and therefore undoubtedly the transaction amounts to ‘adventure in the nature of trade’. The profit which he made out of this sale would therefore be chargeable to tax under the head ‘income from business’. (AY. 2009-10)
V. A. Jose v. Dy. CIT (2018) 252 Taxman 386 (Ker.)(HC)

S. 28(i) : Business income – Income from house property-License fee to operate hotel for a specified period was held to be assessable as income from business and not as income from house property [S. 22]
Allowing the appeal of the assessee the Court held that; License fee to operate hotel for a specified period was held to be assessable as income form from business and not as income from house property.(AY. 2005-06)
Palmshore Hotels (P.) Ltd. v. CIT (A)(2018) 252 Taxman 191 (Ker.)(HC)
Editorial : Order in Palmshore Hotels (P.) Ltd. v. CIT (2012) 28 taxmann. com 156 (Cochin) (Trib.) is reversed

S. 28(i) : Business income – Income from house property-ware housing-Exploitation of commercial assets –Assessable as business income.[S. 22]
Allowing the appeal of the assessee the Tribunal held that ; assessee had not merely leased out 4 walls of warehouse, it had also provided essential and necessary services of supervisory, loading and unloading, handling, security and transporting to all clients including Hindustan Lever Ltd. on daily basis during working hours. Therefore, that was subservient to warehousing activity. Assessee was liable to pay service tax on service of storage and warehousing since service of storage and warehousing had been included as taxable service.Lease income received by assessee on account of let out of warehouses was ‘profits and gains from business or profession’.(AY.2000-01 02-03 to 06-07, 2001-02, 2008-09)
Nutan Warehousing Company Pvt. Ltd. v. Dy.CIT (2018) 170 DTR 377 / 195 TTJ 919 (Pune) (Trib.)

S. 28(i) : Business income-Income from house property-Income from letting out of premises/developed space along with other amenities in industrial park/SEZ is to be charged under head profits and gains of business. [S. 22]
Dismissing the appeal of the revenue the Tribunal held that ;income from letting out of premises/developed space along with other amenities in industrial park/SEZ is to be charged under head profits and gains of businesS. Tribunal also referredCBDT Circular No.16/2017 dated 25.04.2017 has clarified that income from letting out of premises/developed space along with other amenities in an industrial park/SEZ is to be charged under the head ‘Profits and Gains of Business’. (AY. 2011-12)
ACIT v. Grew Industries Pvt. Ltd. (2018) 66 ITR 116 (Mum.)(Trib.)
S. 28(i) : Business income-Agricultural income- Contract of growing and transporting grass-Growing and extracting grass – Agricultural Income – Transporting and relaying grass-Service – Business income. [S. 2(1A),10(1)]
The assesse was awarded a contract of growing and delivering grass at the venue of contract. Payment was made on the basis of milestones and not apportioned into agricultural and business activity. Partly allowing the appeal of the assesse the Tribunal held that the activity of growing and extracting grass would be considered as an agricultural activity.The subsequent activity of transporting the grass and relaying it at the fields would be in the nature of service and considered as a business activity which needed to be brought to tax. (AY.2011-12)
Hortus Consultants Pvt. Ltd. v. ITO (2018) 192 TTJ 465 / 165 DTR 147 (Hyd) (Trib.)

S. 28(i) : Business income-Capital gains-Conversion in to stock in trade-Development agreement-Project completion method-Advance received equivalent to share cannot be taxed in the year of receipt –As per the agreement,right to collect said amount would crystallize on day when tenements or portion of land would be sold/handed over by developers to prospective buyers in subsequent year-Taxable in subsequent year-Capital gains arising on conversion of land into stock-in-trade prior to development agreement would also be taxed in subsequent year in which the right to collect the amount is crystallized-Conversion of capital asset into stock-in-trade, capital gains had to be worked out on basis of fair market value of property as on date of conversion and not on basis of existing market value of property.[S. 4, 5,45, 145]
Tribunal held that, advance received equivalent to share cannot be taxed in the year of receipt.As per the development agreement right to collect said amount would crystallize on day when tenements or portion of land would be sold/handed over by developers to prospective buyers in subsequent year. Developer had recognized completion and sale of developed portion in subsequent assessment year 2011-12, business profits arising would be taxable in assessment year 2011-12.Capital gains arising on conversion of capital asset into stock-in-trade would also be taxed in in subsequent assessment year 2011-12 in which business profits were to be taxed. On conversion of capital asset into stock-in-trade, capital gains had to be worked out on basis of fair market value of property as on date of conversion and not on basis of existing market value of property.(AY.2009-10)
ITO v.Vilas Babanrao Rukari (HUF) (2018) 171 ITD 532 / 194 TTJ 954/ 167 DTR 353 (Pune) (Trib.)

S. 28(i) : Business income-Agricultural income – Where the agricultural activities were carried out by the farmers mere supervision by the Assessee without carrying basic operation would not qualify as agricultural activities and accordingly income of the Assessee from processing, packing and sale of various seeds procured from farmers was liable to be treated as business income and not agricultural income.[S. 10(1)]
Tribunal held that the actual cultivation on the land like tilling, sowing, etc. was being done by the farmers and that the farmers are not the employees of the assessee company. Tribunal held that therefore, mere supervision by the assessee without the carrying of the basic operations would leave no manner of doubt that no agricultural income arose in the hands of the assessee. The argument of the assessee that the company is an artificial person and could not have conducted the agricultural operations by itself and, therefore, required such kind of an arrangement with the farmers for earning agricultural income was rejected by the Tribunal. The Tribunal also observed that had it been the case where the actual agricultural operations were carried out by the employees of the assessee company, it would have been a different case altogether. Accordingly, the appeal of the Assessee was dismissed by the Tribunal and claim of exemption u/s 10(1) was rejected.
P.H.I. Seeds Pvt. Ltd. v. DCIT (2018) 165 DTR 129 /192 TTJ 412(Delhi)(Trib.)

S. 28(i) : Business income-In terms of memorandum of association, main object of assessee company was to acquire properties and to further let out such properties, income earned from such letting out was to be brought to tax as ‘business income’ and not as ‘income from house property’ .[S. 22, 27(iiib), 269UA(f)]
Tribunal held that assessee’s main object as stated in its Memorandum of Association was to acquire on license or by purchase, lease, exchange, hire or otherwise lands and property of any tenure, or premises in any part of India and to license or sub-license or lease or sub-lease or let, such lands or property or premises or any part thereof, clearly spells out that the assessee’s main business is to carry out systematic and regular activity in the nature of business of letting out property. S. 27(iiib) read with S. 269UA(f) of the Act is not applicable in the instant case as the agreement is only for use of property and not for the transfer of the same. Since the company is neither the owner nor the deemed owner in terms of S. 27(iiib), the ‘Contribution from Shops’ cannot be assessed under the head ‘Income from house property’. Tribunal relied on the decisions in case of Chennai Properties & Investments Ltd v. CIT (2015) 373 ITR 673) (SC), Rayala Corpn. (P.) Ltd v. ACIT (2016) 386 ITR 500)(SC) and Bom.bay Plaza (P.) Ltd(2016) 161 ITD 552 (Kol)and upheld the assessee’s claim that the income from granting premises on sub-license was to be assessed under the head income from business.
Oberoi Investments (P) Ltd. v. ACIT (2018)161 DTR 257 (Kol) (Trib.)

S. 28(i) : Business income-Hire charges –Activity of the assessee being business activity,hire charges received is assessable as business income and not as income from other sources [S. 56]
Allowing the appeal of the assessee the Tribunal held that ; since activity carried out by assessee was in nature of business activity, hire charges received is assessable as business income and not as income from other sources.(AY.2010-11)
Nanak Ram Jaisinghani v. ITO (2018) 170 ITD 570 (Delhi) (Trib.)

S. 28(i) : Business income-Providing warehousing services along with other facilities such as security service and other services to keep goods safe and under hygienic conditions, said activity systematically undertaken by assessee is assessable as business income and not as income from house property,wrongly deduction of tax at source would not change character of income to rental income. As regards rejection of books of account and estimation of income was set a side to CIT(A) for re adjudication [S. 22, 194I]
Dismissing the appeal of the revenue the Tribunal held that; Providing warehousing services along with other facilities such as security service and other services to keep goods safe and under hygienic conditions, said activity systematically undertaken by assessee is assessable as business income and not as income from house property. Merely because one of contracting parties had wrongly deducted TDS under section 194I, same would not change character of income to rental income. As regards the issue of rejection of books of account and estimation of income was set a side to CIT(A) for re adjudication.
DCIT v. Tewari Warehousing Co. (2018) 170 ITD 339 (Kol) (Trib.)

S. 28(i) : Business income – Penny stock – Donation-Assessable as business income and not as short-term capital gains, deduction of donation was held to be allowable. [S. 35,45]
Allowing the appeal of the assesse the Tribunal that; If the purchase of shares has been made solely and exclusively with the intention to resell at a profit and the purchaser has no intention of holding them, the transaction is an “adventure in the nature of trade” and the gains are assessable as “business profits” and not as “short-term capital gains” accordingly the deduction u/s 35 was held to be allowable. Tribunal held that the AO was not justified in assessing the sale consideration as short term capital gains.(AY. 2011-12)
Prem Jain (Smt) v. ITO (2018) 63 ITR 52(SN)(Delhi)(Trib.), www.itatonline.org

S. 28(i) : Business income-Income from house property-Manufacturing activities were closed and premises given on lease, rental income is held to be assessable as business income and remuneration paid to directors is held to be allowable deduction. [S. 22, 37(1)]
Allowing the appeal of the assessee, the Tribunal held that,though Manufacturing activities were closed and premises given on lease, rental income is held to be assessable as business income since main activity of assessee is letting out the properties. As the rental income is assessed under the head business income remuneration paid to directors is also held to be allowable deduction. Followed Rayala Corpn.P. Ltd v. ACIT (2016) 386 ITR 500/ 243 Taxman 360 (SC) (AY. 2011-12)
Bharat Tiles & Marble (P) Ltd v. Dy. CIT (2018) 170 ITD 26 (Mum.)(Trib.)

S. 28(i) : Business loss-Capital or revenue—Investment in shares as Stock-in-trade—Consistency method-Loss is allowable as business loss. [S. 45]
Allowing the appeal of the assessee the Court held that, the memorandum of association of the assessee authorised it to deal in shares and services. Further, it stated that as authorised, the assessee had purchased mutual funds units during the financial year 2000-01 and sold the units during the same year. The trading in such units was done in the ordinary course of its business and the loss was revenue in nature. The assessee consistently followed the same method showing the transactions as trading business. Accordingly, the claim of the assessee with regard to loss that arose from trading in shares was to be allowed as a business loss as claimed by the assessee. (AY. 2001-02)
Calibre Financial Services Ltd. v. ITO (2018) 409 ITR 410/ (2019) 260 Taxman 201 (Mad) (HC)

S. 28(i) : Business loss-Fertiliser Bonds Issued By Central Government In Lieu of subsidy—Sale of Bonds at price Lower than face value—Loss is allowable as business Loss.
Dismissing the appeal of the revenue the Court held that, the fertilizer bonds were issued by the Central Government in lieu of subsidy. When they were sold at a lower price and the assessee suffered loss, it was required to be allowed as business loss. (AY. 2008-09, 2009-10)
CIT v. Gujarat State Fertilizers And Chemicals Ltd. (2018) 409 ITR 378 (Guj) (HC)

S. 28(i) : Business loss-Advance written off-Matter was remanded back to Assessing Officer for deciding as to whether there was actual irrecoverability of advances which assessee chose to write off in its account and claimed write off amount as business loss.
Court held that there was no proper analysis of nature of advances which were sought to be written off, therefore, matter was to be remanded back to Assessing Officer for deciding as to whether there was actual irrecoverability of advances which assessee chose to write off in its account and claimed write off amount as business loss. (AY. 2004-05)
PCIT v. Linde India Ltd. (2018) 254 Taxman 204 / 302 CTR 262 (Cal.)(HC)

S. 28(i) : Business loss-Fluctuation in rate of exchange in case of loans utilised for working capital of the business is held to be allowable expenditure.[S. 37(1)]
Dismissing the appeal of the revenue the Court held that, Fluctuation in rate of exchange in case of loans utilised for working capital of the business is held to be allowable expenditure. Relied CIT v. Woodward Governor India Pvt Ltd (2009) 312 ITR 254 (SC) (ITANo. 806 of 2015 dt. 26-02-2018)(AY. 2009-10)
PCIT v. Aloka Exports (Bom.)(HC) (2018) BCAJ-May. 62 (UR)

S. 28(i) : Business loss — Fluctuation in foreign exchange rate was held to be allowable. [S. 37(i)]
Assessee following Accounting Standard 11 and paying tax on foreign exchange gains of earlier years was held to be allowable. (AY. 2009-10)
PCIT v. Samwon Precision Mould Mfg. India Pvt. Ltd. (2018) 401 ITR 486 (Delhi) (HC)

S. 28(i) : Business Loss—Write off of stores and parts-Imported goods were lying in custody of port authorities in bonded warehouse-Relinquishing its right and title to goods-Goods lost their life for use in its business-loss is incidental to business and allowable as business loss. [S. 37(1)]
The expenses incurred when materials were imported, such expenses incurred for such import were for the purpose of business pending capitalisation, i.e. utilisation thereof. However, the assessee relinquished the right and title to those goods in accordance with the Customs Act, 1962 considering the goods so lying with the port authorities had lost their life for use in the assessee’s businesS. Further the payments towards insurance, warehouse rent and other charges would become uneconomic in true commercial sense. It is a business loss which is allowable as deduction. (AY.2005-06)
ACIT v. Ballarpur Industries Ltd.(2018) 64 ITR 21 (SN) / 168 DTR 225 / 193 TTJ 521 (Nag)(Trib.)

S. 28(i) : Business loss- Write off of advances made for running and development of business is held to be allowable as deduction.[S. 37(1)]
Tribunal held that basic analogy for allowing write-off was to consider real nature of transaction. Advances were made for running of business and Expenditure was not incurred for new project, neither it was totally disconnected with business activities carried out by assessee. Accordingly, Tribunal held that amount was advanced for tractor division of assessee in normal course of business and is allowable.(AY.2002-03, 2003-04)
Mahindra & Mahindra Ltd v.Dy CIT (2018) 193 TTJ 618 (Trib.) (Mum.)(Trib.)

S. 28(i) : Business loss—Litigation and bona fide dispute about goods at Bangladesh border-Foreseeable Loss — Held to be allowable.[S. 37(1), 145]
Allowing the appeal of the assessee the Tribunal held that a loss is brought to the books at the point of time when it can be reasonably foreseen. This approach underlies the accountancy principle of conservatism which was duly recognised by the Supreme Court in the case of Chainrup sampatram v. CIT(1953) 24 ITR 481 (SC). (AY.2008-09, 2009-10)
Rasna P. Ltd. v. DCIT(2018) 63 ITR 28 (SN)(Ahd) (Trib.)
S. 28(i) : Business Loss — Soft drinks — Product having limited shelf Life —Non useable or non saleable which was destroyed – Allowable as business loss.
Tribunal held that the product having limited shelf Life which are non useable or non saleable which was destroyed is allowable as business loss.(AY.2008-09, 2009-10)
Rasna P. Ltd. v. DCIT(2018)63 ITR 28 (SN)(Ahd) (Trib.)

S. 28(i) : Business loss – Mark to market loss in derivative transactions – derivatives held as stock-in-trade – valued on the principle of cost or market value whichever is lower – Held, allowable.
The Tribunal held that when the derivatives are held as stock-in-trade, the mark to market loss on such derivatives is allowable, since such stock is valued on the principle of cost or market value whichever is lower. CBDT Circular no. 3/2010 not binding on the appellate authorities and that the same is going against the judgment of the Apex Court. (AY. 2011-12).
Edel Commodities Ltd. v. Dy. CIT (2018) 194 TTJ 86 (Mum.)(Trib.)

S. 28(i) : Business loss-Value of shares held as stock-Devalued in books to evade tax-Claim being notional loss not allowable as business loss .[S. 145]
Tribunal held that the assessee purchased the shares at Rs 155 per share and valued at Rs 10 per share as on 31-3-2002, so as to claim a notional loss in transaction of purchase of shares, though there was no fall in value of share of company in market. Accordingly the disallowance of loss is held to be justified.(AY. 2002-03 to 2005-06)
Elem Investments (P.) Ltd. v. ACIT (2018) 172 ITD 58(Hyd) (Trib.)

S. 28(i) : Business loss- Speculation –Tax planning-The fact that the assessee bought and sold shares of groups concerns with a view to book loss and off-set the capital gains from another transaction does not mean that the loss can be treated as bogus if the documentation is in order. The loss cannot be treated as “speculation loss” under the Explanation to S. 73 because the shares were held as investments.
Dismissing the appeal of the revenue the Tribunal held that ;The fact that the assessee bought and sold shares of groups concerns with a view to book loss and off-set the capital gains from another transaction does not mean that the loss can be treated as bogus if the documentation is in order. The loss cannot be treated as “speculation loss” under the Explanation to S. 73 because the shares were held as investmentS. The assessee-company has given scientific reasons for investment in these companies which are supported by documentary evidences. The Revenue has only contended that Ld. CIT(A) has not seen whose shares are sold by the assessee-company. However, complete details of purchase and sales are mentioned in the orders of the authorities below supported by documentary evidenceS. (ITA.No.3661/Del./2014, dt. 01.10.2018)(AY. 2009-10)
ACIT v. RJ Corp. Ltd. (Delhi) (Trib.),www.itatonline.org

S. 28(i) : Business loss-Forfeiture of security-Capital or revenue-Encashment of bank guarantee for failure to construct bus shelter with in time prescribed in the agreement is allowable as business loss.
Assessee entered into an agreement with Delhi transport corporation for setting up 400 bus queue shelters under build operate and transfer basis. Assessee was to construct above shelters and operate them for 10 years and thereafter they were to be transferred to Delhi transport Corporation. Assessee was required to pay Delhi transport Corporation monthly revenue of Rs. 4.09 crores in respect of fees for 400 bus shelters and it was free to earn revenue through advertisement etc. to be displayed on those bus shelterS. In terms of assessment, assessee was to give a performance security to Delhi transport Corporation. Since assessee failed to construct bus shelters within time prescribed in agreement, DTC encashed amount of performance security. Assessee debited said amount in profit and loss account and claimed deduction for same. Assessing Officer rejected assessee’s claim taking a view that loss was of capital nature. On appeal Tribunal held that,the assessee was engaged in business of constructing bus shelters and loss of bank/performance guarantee occurred during course of business of assessee, it could not be regarded as capital expenditure when assessee failed to create requisite bus shelters within prescribed time period. therefore, impugned order was to be set aside and assessee’s claim for deduction was to be allowed.(AY.2009-10)
Green Delhi BQS Ltd. v. ACIT (2018) 170 ITD 738/ 194 TTJ 909 /( 2019) 174 DTR 202 (Delhi) (Trib.)

S. 28(1) : Business loss — Forward and derivative contracts — gains on account of foreign exchange difference — Marked to Market Loss-Matter remanded for actual verification of entries in the books of account.[S. 37(1)]
Assessee in instant year passing reversal entry debiting provision and crediting profit and loss account Tribunal held that there is discrepancy between claim in this year and disallowance in earlier year therefore the issue to be examined by reference to actual books of account and entries therein.(AY.2010-11)
CIT v. Kiran Gems Pvt. Ltd. (2018) 64 ITR 689 (Mum.) (Trib.)

S. 28(i) : Business loss — Fluctuation in foreign exchange loss — Derivative Contracts —Actual contract for sale of Merchandise is not speculative transaction is deductible.[S. 43(5)]
Tribunal held that, fluctuation in foreign exchange loss in derivative Contracts is actual contract for sale of Merchandise is not speculative transaction is deductible. (AY.2008-09)
Toshiba Embedded Software (India) Pvt. Ltd. v. DCIT(2018) 64 ITR 675 (Bang.) (Trib.)

S.28(i) : Business loss-Derivatives-loss at end of year on mark to market basis could not be disallowed on ground that same was contingent in nature [S. 37(1)]
Tribunal held that assessee, carrying on trading activities in stock and commodities and held derivatives as stock-in-trade, its claim for loss at end of year on mark to market basis could not be disallowed on ground that same was contingent in nature.(AY.2011-12)
Edel Commodities Ltd. v. DCIT (2018) 170 ITD 402/ 166 DTR 289/194 TTJ 86 (Mum.) (Trib.)

S. 28(i) : Business loss-Advance to purchase of land-loss incurred on account of irrevocable advance paid for purchase of land for construction of office is held to be allowable as business loss.
Tribunal held that the, assesse did not acquired any capital asset, it simply paid advance amount to acquisition of capital asset such amount of loss was incidental to the business, hence allowable as business loss. (AY 2006 – 2007 to 2008-2009)
Dy. CIT v. Mcnally Bharat Engineering Co. Ltd. (2018) 191 TTJ 822 (Kol.)(Trib.)

S. 28(i) : Business loss – Retention money-Advances to the companies which are in nature of irrevocable which are written off in the books is allowable as business loss.
Advance money given as retention to the companies for contract. Neither the interest nor principle amount settled against the same by these companies. Said advances were in nature of irrevocable and having nexus with the business hence allowable as business loss. (AY. 2006 – 2007 to 2008-2009)
Dy. CIT v. Mcnally Bharat Engineering Co. Ltd. (2018) 191 TTJ 822 (Kol.)(Trib.)

S. 28(i) : Business loss – Government deposits written off is held to be allowable as business loss. [S. 37 (i)]
Government old deposits write of owing smallness of amount in books of accounts are allowed as business loss and the efforts involved in recovering the said amounts is allowable as business expenditure. (AY. 2006 – 2007 to 2008-2009)
Dy. CIT v. Mcnally Bharat Engineering Co. Ltd. (2018) 191 TTJ 822 (Kol.)(Trib.)

S. 28(i) : Business loss-Advance made to parties for purchase of goods, consumables which are written off in the books is held to be allowable as business loss.
Advances given to various parties for purchase of goods, electrical installation, consumable stores which have nexus with business hence allowable as business loss. (AY. 2006 – 2007 to 2008-2009)
Dy. CIT v. Mcnally Bharat Engineering Co. Ltd. (2018) 191 TTJ 822 (Kol.)(Trib.)

S. 28(i) : Business loss-Trade advances written off was held to be allowable as business loss.
Tribunal held that, Trade advances written off was held to be allowable as business loss. (AY. 2009-10, 2010-11)
ACIT v. Claridges Hotels Pvt. Ltd. (20180 61 ITR 135 (Delhi) (Trib.)

S. 28(iv) : Business income-Waiver of loan-Remission or cessation of trading liability – Loan waiver cannot be assessed as cessation of liability, if the assessee has not claimed any deduction u/s 36(1)(iii) of the Act qua the payment of interests in any previous year and S. 28(iv) does not apply if the receipts are in the nature of cash or money [S. 4, 36(1)(iii),41(1)]
Dismissing the appeal of the revenue the Court held that; S. 28(iv) of the IT Act does not apply on the present case since the receipts are in the nature of cash or money and S. 41(1) of the IT Act does not apply since waiver of loan does not amount to cessation of trading liability. It is a matter of record that the Respondent has not claimed any deduction under S. 36 (1) (iii) of the IT Act qua the payment of interest in any previous year.
CIT v. Mahindra and Mahindra Ltd(2018) 404 ITR 1/ 165 DTR 337/ 302 CTR 213/ 255 Taxman 305 (SC), www.itatonline.org
CIT v. Dholgiri Industries (P) Ltd (2018) 404 ITR 1/ 165 DTR 337/302 CTR 213// 255 Taxman 305 (SC), www.itatonline.org
CIT v. Jindal Equipments Leasing & Consultancy Services Ltd (2018) 404 ITR 1/ 165 DTR 337//302 CTR 213// 255 Taxman 305 (SC), www.itatonline.org
CIT v. Ramaniyam Homes (P) Ltd (2018) 404 ITR 1/ 165 DTR 337 (SC)/ /302 CTR 213 /255 Taxman 305 www.itatonline.org
Editorial : Mahindra and Mahindra Ltd v. CIT (2003) 261 ITR 501 (Bom.) (HC)is affirmed

S. 28(iv) : Business income-Profits chargeable to tax-Remission or cessation of trading liability- Loan waiver cannot be assessed as cessation of liability if the assessee has not claimed any deduction.[S. 41(1)]
Dismissing the appeal of the revenue the Court held that,Loan waiver cannot be assessed as cessation of liability if the assessee has not claimed any deduction.High Court observed that the Honourable Supreme Court in CIT v Mahindra & Mahindra Ltd (2018) 404 ITR 1 (SC) held that, on a plain reading of S. 28(iv) of the Act, it appears that for the applicability of said provision, the income which can be taxed shall arise from the business or profession. Also in order to invoke this provision, the benefit which is received has to be in some other form rather than in the shape of money.Accordinfly the Loan waiver cannot be assessed as cessation of liability if the assessee has not claimed any deduction. (ITA No. 431 of 2016 dt. 21-08-2018) (AY.2008-09) (Arising from, ITA No.6211 / Mum./ 2011 dt. 17-06-2015).
PCIT v. Graviss Hospitality Ltd (Bom.) (HC) (UR)

S. 28(iv) : Business income-Value of any benefit or perquisites-Converted in to money or not –Non compete fee-Capital or revenue-Compensation of Rs 40 crores for discontinuing commodity trading business-Commodity trading was transferred entirely to its group concern without there being any impairment to business/profit making apparatus of assessee-company-Taxable as business – However when there was no principal and agent relationship between assessee and parent company, compensation received by assessee for discontinuing commodity trading was not from parent company and was not in lieu of surrender of any agency, compensation did not fall within ambit of taxation under section 28(ii)(c). [S. 28(ii)(c)]
Assessee has shown the compensation of Rs 40 crores received from BNP Paribas for discontinuing commodity trading business shown as towards loss of source of income/profit earning apparatus and therefore it was a non-taxable capital receipt. AO held that the compensation is taxable as business income. In appeal CIT(A) confirmed the addition and also held that the amount to be taxable under section 28 (ii) (c) of the Act. Dismissing the appeal of the assesssee the Tribunal held that new company GCL was incorporated under same group by common promoters whereby assessee’s commodity trading was transferred entirely along with its clientele to new floated company GCL and in eyes of clients, business was carried on in same name.Accordingly the profit making apparatus of assessee-company/group company was not impaired by discontinuance of commodity trade business of assessee per se therefore the amount received as compensation could not be termed as a capital receipt. Tribunal also held that going by plain meaning of section 28(va), amount of compensation received for not carrying any activity in relation to any business (i.e. commodity trading business) would be taxable under section 28(va) of the Act. Tribunal also held that when there was no principal and agent relationship between assessee and parent company, compensation received by assessee for discontinuing commodity trading was not from parent company and was not in lieu of surrender of any agency, compensation did not fall within ambit of taxation under section 28(ii)(c). (AY.2009-10)
Geojit Investment Services Ltd. v. JCIT (2018) 172 ITD 279/ 196 TTJ 837 / 67 ITR 156 (Cochin) (Trib.)

S. 28(iv) : Business income-Value of any benefit or perquisites-Converted in to money or not-Purchase of shares of a non-related company at a price less than fair value as it was a loss making concern cannot be assessed as benefit or perquisites.[S. 2(24)]
Dismissing the appeal of the revenue the Tribunal held that ; Purchase of shares of a non-related company at a price less than fair value as it was a loss making concern cannot be assessed as benefit or perquisiteS. (AY.2010-11)
ACIT v. Swiftsol (I) (P.) Ltd. (2018) 171 ITD 577 (Nag.) (Trib.)

S. 28(iv) : Business income-Value of any benefit or perquisites-Converted in to money or not-Purchase of property from a company wherein the assessee is also director can not be assessed as profit and gain of business or profession.
Allowing the appeal of the assessee the Tribunal held that, purchase of property from a company wherein the assessee is also director cannot be assessed as profit and gain of business or profession as the transaction relating to purchase had been shown as an investment activity by assessee in its books which was accepted by the revenue, therefore, if at all there was any benefit or perquisite, it could not be said to be arising from a business or exercise of a profession by assessee and hence could not have been treated as profit and gain of business or profession. (AY. 2010-11,2012-13)
Keshavji Bhuralal Gala v. ACIT (2018) 169 ITD 23/165 DTR 8/193 TTJ 227/ 63 ITR 67 (SN)(Mum.)(Trib.)

S. 28(iv) : Business income-Benefit or perquisite – Brand ambassador-Gift of car received for doing promotional activities was held to be taxable as professional income. Gift of watch was also held to be perquisite .
Dismissing the appeal of the assesse the Tribunal held that the gift of car received for doing promotional activities was held to be taxable as professional income, though there was no written agreement for the promotion. Gift of watch was also held to be perquisite .(AY. 2010-11)
Priyanka Chopra (Ms); DCIT v. (2018) 169 ITD 144/ 163 DTR 122 / 192 TTJ 343 (Mum.)(Trib.)

S. 28(va) : Business income-Non-Resident —Non-compete fee — Negative covenant for three years only and not permanently- Receipts is taxable as business income but not taxable in India in absence of any permanent establishment of non-Resident In India – There was no transfer of any capital asset hence not liable to capital gains tax-DTAA-India-United Kingdom .[S. 45 2(47) Art. 7 (1)]
AAR held that the receipts arising out of a negative covenant not to carry on a business were taxable as business income under section 28(va).S. 28(va) of the Act nowhere provides that the recipient of non-compete fee must already be carrying on business which he has agreed not to carry on further. The section applies to any person who has received or is entitled to receive a sum in consideration for agreeing not to carry out any activity in relation to any business and is not restricted to only that business which he was already carrying on. Whether the receiver of the non-compete fee was carrying on any business or whether he was carrying on the same business or a different business than that of the payer of the non-compete fee or the transferor of shares, etc. was totally irrelevant while considering taxability under section 28(va)(a). AAR also held that in the absence of any permanent establishment of the applicant in India, such business income would not be taxable in India by virtue of article 7 of the DTAA. There was no transfer of any capital asset hence not liable to capital gains tax .
HM Publishers Holdings Ltd., In Re (2018) 405 ITR 441/ 303 CTR 775/ 167 DTR 439 (AAR)

S. 30 : Rent rates, taxes, repairs and insurance for buildings –Rent paid –Dispute pending and keys of premises were lying with police – Rent paid is held to be allowable deduction-No question of law.[S. 37(1), 260A]
Dismissing the appeal of the revenue the Court held that ;Dispute pending and keys of premises were lying with police.Rent paid is held to be allowable deduction. Court also observe that, it isnot within domain of Court exercising jurisdiction under section 260A to enquire into correctness of that Tribunal’s finding and return a contrary finding that assessee was not a tenant, and was not using premises for business purposes, overturning ruling of Tribunal.
CIT v. Eveready Industries (India) Ltd. (2018) 258 Taxman 313 (Cal.)(HC)

S. 32 : Depreciation – Public roads treated as building and allowed depreciation-Optical fibres used exclusively for computer configuaration were part of computer system and thus eligible for higher rate of depreciation.
Dismissing the appeal of the revenue the Court held that the Tribunal is justified in treating Public roads treated as building and allowed depreciation. Optical fibres used exclusively for computer configuaration were part of computer system and thus eligible for higher rate of depreciation.
PCIT v. GVK Jaipur Expressway Ltd. (2018) 100 taxmann.com 95 / 259 Taxman 430 (Raj) (HC)
Editorial : SLP of revenue is dismissed ;PCIT v. GVK Jaipur Expressway Ltd. (2018) 259 Taxman 429 (SC)

S. 32 : Depreciation-Unabsorbed depreciation-Set-off-For the AY 1997-98, the claim for set off of unabsorbed depreciation is allowable against the income from other sources-However, in AY 1998-99, set off of carry forward unabsorbed depreciation could be allowed only against the profits and gains arising from business or profession [S. 28(i),32(2), 56, 263]
On appeal, held by the High Court that :
a) Whatever be the intention expressed in the Budget Speech, the law passed by the Parliament alone is relevant and external aid need be resorted to only if there any ambiguity in the provision incorporated; and
From the relevant provisions [S. 32(2)], it is clear that for the AY 1997-98 (ie., PY 1996-97), assessee is entitled to set-off unabsorbed depreciation against the IFOS also; however, in AY 1998-99, set off of carry forward unabsorbed depreciation could be allowed only against the profits and gains arising from business or profession. Followed Peerless General Finance and Investment Company Limited v. CIT (2017) 11 SCC 482. Appeal of the revenue is partly allowed. (AY. 1997-1998 1998-1999)

CIT.v. Cochin Shipyard Ltd. (2018) 305 CTR 439 / 168 DTR 140 (Ker)(HC)

S. 32 : Depreciation-Capital or revenue expenditure-Technical know how payment-Agreement providing for payment of lump-sum consideration in five instalments-held to be capital in nature-Allowing the miscellaneous application the Court held that the assessee is entitle to depreciation.[S. 37]
In HondaSiel Cars India Ltd. v. CIT(2017) 395 ITR 713 (SC) the Court held that, Technical know how payment as per the agreement providing for payment of lump-sum consideration in five instalments is held to be capital in nature. Allowing the miscellaneous application the Court held that the assessee is entitle to depreciation.(AY. 1999-2000 to 2005-06)
Honda Siel Cars India Ltd. v. CIT(2018) 409 ITR 42/(2019) 306 CTR 165/ 173 DTR 104 / 260 Taxman 371 (SC)
Editorial : Order in HondaSiel Cars India Ltd. v. CIT(2017) 395 ITR 713/ 249 Taxman 1 (SC)

S. 32 : Depreciation –Charitable Trust-Entitle to depreciation.[S. 11]
Dismissing the appeal of the revenue the Court held that ; Charitable Trust is entitle to depreciation. (AY.2011-12)
CIT v. Shushrutha Educational Trust. (2018) 408 ITR 536 (Karn) (HC)

S. 32 : Depreciation – Dumper’ and Valvo machines used by assessee for his own mining purposes as well as giving them on hire, were eligible for higher rate of depreciation.
Dismissing the appeal of the revenue the Court held that,dumper and valvo machines, used by assessee for his own mining purposes as well as giving them on hire, were eligible for higher rate of depreciation. Expression used in sub-clause (ii) of clause 3 of Entry No. III of Appendix-1, namely motor buses, motor lorries and motor taxies is having wide amplitude and term motor lorries used therein, would include dumper and Volvo machines. (AY. 2011-12)
PCIT v. Amar Singh Bhandari (2018) 258 Taxman 227 (Raj.)(HC)

S. 32 : Depreciation – Trade mark-Trademark was advertised for sale promotions of assessee’s products – Entitle depreciation.
Dismissing the appeal of the revenue the Court held that ; Trade mark purchased by assessee used by the assessee for advertising for sale promotion of assesse’s products which is entitle to depreciation. Depreciation cannot be disallowed on the ground that the assessee is not engaged in manufacturing activity. (AY. 2010-11)
CIT v. Sinochem India Co. (P.) Ltd. (2018) 258 Taxman 30 //170 DTR 21 / 304 CTR 822 (Delhi)(HC)

S. 32 : Depreciation — Erection of windmills — Amount paid for Infrastructure — Depreciation is allowable.
Allowing the appeal the Court held that ; the Tamil Nadu Electricity Board had nothing to do with the registration of land, much less with its development or processing. Neither did the record reveal nor did the Department assert that the assessee purchased the land from TNEB. In order to install the wind turbine generators, the assessee must have excavated some earth on the land it purchased. Such excavation, did not amount to improving the land ; rather, it amounted to a preparatory step for erecting the wind turbines. Therefore, the land evacuation, if any, must be taken as part of infrastructure development for establishing the windmills. The depreciation is allowable.(AY.2006-07)
Muthoot Finance Ltd. v. JCIT (2018) 408 ITR 491/ 169 DTR 272 /(2019) 306 CTR 396 (Ker) (HC)

S. 32 : Depreciation — Rate of depreciation —All equipment formed part of Life Saving Equipment —Denial of depreciation on computer is held to be not proper [ITRules 1962, Appex. I, Part A iii 3(Xia)(D).]
Dismissing the appeal of the revenue the Court held that, all equipment formed part of Life Saving Equipment.Denial of depreciation on computer is held to be not proper. Accordingly depreciation @ 40 % is allowed on computer. (AY.2012-13)
CIT v. Vasantha Subramanian Hospitals Pvt. Ltd (2018) 408 ITR 176/ 258 Taxman 396 / 172 DTR 423/ (2019) 307 CTR 569(Mad) (HC)

S. 32 : Depreciation-Plant and machinery put to use in April 1992 — Depreciation is not allowable for the assessment Year.
Allowing the appeal of the revenue the Court held that ;the actual business of printing and publishing commenced at the Palakkad unit only in April, 1992 and therefore the plant and machinery was not put to use during the assessment year under consideration. The Tribunal was therefore, not justified in allowing the depreciation on that account to the assessee. (AY.1992-93)
CIT v. Malayala Manorama Co. Ltd. (2018) 405 ITR 249 / 171 DTR 254(Ker) (HC)

S. 32 : Depreciation –Leasing of vehicles-Asset utilized for the purposes of business-Entitle to depreciation
Dismissing the appeal of the revenue the Court held that ; when the assessee is in the business of leasing as long as asset is utilized for purpose of business, the depreciation is allowable.Followed I.C.D.S Ltd v. CIT (2013) 350 ITR 527 (SC)(AY. 1997-98)
CIT v. Shriram Chits & Investments (P.) Ltd. (2018) 257 Taxman 395/ 2019) 410 ITR 10 (Mad.)(HC)

S. 32 : Depreciation — Actual cost —Customs duty paid could be capitalised with retrospective effect and depreciation was to be calculated by including the said amount.[S. 43(1)]
Court held that ; Customs duty paid could be capitalised with retrospective effect and depreciation was to be calculated by including the said amount. (AY.1999-2000)
CIT v. Maruti Udyog Ltd. (2018) 407 ITR 159/(2019) 308 CTR 682 (Delhi) (HC)

S. 32 : Depreciation – Charitable Trust-Depreciation is allowable Computation provision did not discriminate between a charitable Trust and other assesseS. [S. 11, 12A, 263]
Dismissing the appeal of the revenue the Court held that,charitable trust is entitle to claim depreciation.Computation provision did not discriminate between a charitable Trust and other assesses. (AY.2005-06)
CIT v. Agricultural Produce Market Committee. (2018) 408 ITR 231/ 257 Taxman 234 (Karn)(HC)

S. 32 : Depreciation-Stay order from Court-Factory could not run due to stay order of Court-Depreciation cannot be disallowed.
Dismissing the appeal of the revenue the Court held that ; as the Factory could not run due to stay order of Court, depreciation cannot be disallowed. Business is not closed permanently.(AY.2009-10)
PCIT v. Babul Products (P.) Ltd. (2018) 257 Taxman 100 (Guj.)(HC)
Editorial : Order in Babul Products (P.) Ltd v. ACIT (2017) 167 ITD 402 (Ahd) (Trib.) is affirmed.

S. 32 : Depreciation-Preoperative expenses — Capital expenditure — Entitle to depreciation.
Dismissing the appeal of the revenue the Court held that, the amounts expended by an assessee, which are preoperative in nature and are in fact made prior to coming in or the existence of the business itself would be a capital expenditure and entitle to depreciation.(AY.1993-94)
CIT v. Phonex Lamps India Ltd. (2018) 406 ITR 550 (All) (HC)

S. 32 : Depreciation — Additional depreciation — Manufacture –Ready mix concrete is an article which has been manufactured — Entitled to additional depreciation on plant and machinery used in manufacture of ready mix concrete. Transit Mixer and Trucks used to transport ready mix concrete whether plant and machinery involved in manufacture of ready mix concrete is question to be decided by Tribunal — Matter remanded. [S.32(1)(iia)]

Court held that; considering the high degree of precision and stringent quality control observed in the selection and processing of ingredients as also the specific entry in the Central Excise Tariff First Schedule, heading 3824 50 10 which deals with “Concretes ready to use known as “Ready mix concrete”, though the ready mix concrete did not have a shelf-life, the final mixture of stone, sand, cement and water in a semi-fluid state, transported to the construction site to be poured into the structure and allowed to set and harden into concrete was a thing or article manufactured. Court also held that the assessee, though engaged principally in the business of construction, was entitled to additional depreciation under section 32(1)(iia) for the plant and machinery used in the manufacturing activity being the production of ready mix concrete. Court further observed that the question whether additional depreciation was permissible on the actual cost of transit vehicles acquired by the assessee in the previous year, had to be considered by the Tribunal. Whether the subject vehicles, in the nature of the process involved, qualified to be treated as plant and machinery was to be decided by the Tribunal. Matter remanded.(AY.2006-07)
Cherian Varkey Construction Co. (P.) Ltd. v. UOI(2018) 406 ITR 262/ 169 DTR 456 / 304 CTR 601 (Ker) (HC)

S. 32 : Depreciation-Carry forward and set-off of unabsorbed depreciation of Assessment Year 1999-2000 and Assessment Year 2000-2001 against the profits of Assessment Year 2009-2010 without appreciating that as per the provisions of S. 32(2) as they stood prior to the amendment by Finance Act, 2001 w.e.f. 01.04.2002, such unabsorbed depreciation was eligible for carry forward and set-off.[S. 32(2)]

Department relied upon the orders in the case of CIT v. Milton Pvt Ltd (ITA No.2301 of 2013) and CIT v. Confidence Petroleum India Ltd. (ITA No. 582 of 2014), both of which were admitted on similar questions of law on 24th February, 2017 and 3rd April, 2017 respectively accordingly the matter may be referred to larger Bench.Dismissing the appeal of the revenue the Court held that , there is no conflict between CIT v. Hindustan Unilever Ltd (2017) 394 ITR 73 (Bom.) & CIT v. Milton Pvt Ltd, CIT v. Confidence Petroleum India Ltd,because while the former is at the stage of final hearing, the latter is at the stage of admission. Accordingly, the request for reference to a larger Bench is not acceptable. Merely filing of an SLP would not make the order of this Court bad in law or give a license to the Revenue to proceed on the basis that the order is stayed and/or in abeyance. Unabsorbed depreciation is allowed to be set off. Followed Dy. CIT v. General Motors India P. Ltd (2013) 354 ITR 244 (Guj) (HC)Motor and General Fine Ltd. v. ITO (2017) 393 ITR 60 (Delhi)(HC ,and the CBDT Circular No.14 of 2001 dt. 22-11-2001. Court also observed appeals filed by the Revenue on identical question of law were not entertained by following the decisions, Hindustan Unilever Ltd. (supra) CIT v. Arch Fine Chemicals Pvt. Ltd.(ITA No. 1037 of 2016 dt.6-12.2016) CIT v. Bajaj Hindustan Ltd (ITA No. 134 of 2016, 135 of 2016, 136 of 2016, 140 of 2016, 141 of 2016 and 148 of 2016) on on 13th June, 2018.PCIT v.. Hindustan Antibiotics Ltd, ITA No 1042 of 2015 dt. 20-02-2018. Court also held that merely filing of an SLP from the order of Hindustan Unilever Ltd. (supra) would not make the order of this Court bad in law or give a license to the Revenue to proceed on the basis that the order is stayed and/or in abeyance.(ITXA No 293 of 2016 dt. 03.08.2018)
PCIT v. Associated Cable Pvt. Ltd. (Bom.)(HC), www.itatonline.org

S. 32 : Depreciation – Higher rate – Transportation-Motor lorries used for providing specialized equipments and trained manpower for mining and transportation of excavated minerals on hire is eligible for higher rate of depreciation.
The High Court held that the terms of the tender suggested that, essentially, the assessee was awarded contract for providing specialized equipments and trained manpower for mining and transportation of excavated minerals on hire and hence there is no error in the view taken by the Tribunal of confirming the claim of assessee for higher depreciation on motor lorries used in assessee’s business of transportation of goods on hire. (AY. 2012-2013)
PCIT.v. Durga Construction Co. (2018) 255 Taxman 449 (Guj)(HC)
S. 32 : Depreciation – Tribunal’s observation that transaction lacks bonafides–No material to dislodge factual findings recorded by Tribunal – Matter remanded to AO by Tribunal justified.
Court held that there is absolutely no reason to dislodge the factual findings of Tribunal as there are serious doubts on the bonafides of the transaction ie the dates and events were not clear and user of machinery between 22-7-1994 and 22-9-1995 had not been verified by AO, and hence matter rightly remanded by Tribunal to the file of AO to ascertain complete facts of the case. (AY. 1996-1997)
Sterling Holiday Financial Services Ltd.v. ACIT (2018) 255 Taxman 184 (Mad)(HC)

S. 32 : Depreciation-Printer being a part of computer, is eligible for depreciation at higher rate of 60 per cent.
Dismissing the appeal of the revenue the Court held that,printer being a part of computer, is eligible for depreciation at higher rate of 60 per cent. (AY. 2003-04, 2004-05)
CIT v. Cactus Imaging India (P.) Ltd. (2018)406 ITR 406/ 256 Taxman 32 (Mad)(HC)

S.32 : Depreciation – Hospital equipments-Since assessee could neither sell said hospital equipments as scrap nor it could use them and same were also written off in its books of account, written down value of hospital equipments was to be allowed as depreciation. [S. 32(1)(iii)]
Dismissing the appeal of the revenue the court held that; as per principle laid down in S. 32(1)(iii) where a plant and machinery is discarded/destroyed in previous year, amount of money received on sale as such or as scrap or any insurance amount received to extent it falls short of written down value is allowed as depreciation, provided same is written off in books of account. Since assessee could neither sell said hospital equipments as scrap nor it could use them and same were also written off in its books of account, written down value of hospital equipments was to be allowed as depreciation. (AY. 2007-08)
CIT (E) v. Bhatia General Hospital (2018) 405 ITR 24 / 254 Taxman 285 (Bom.)(HC)

S. 32 : Depreciation —Machinery utilised for trial runs is entitle to depreciation.
Dismissing the appeal of the revenue the Court held that Machinery utilised for trial runs is entitle to depreciation. Once a plant commences operation, even if the product is substandard and not marketable, the business can be said to have been set up. Mere breakdown of machinery or technical snags that may have developed after the trial run which had interrupted the continuation of further production for a period of time cannot be held to be a ground to deprive the assessee of the benefit of depreciation.(AY. 1997-98)
PCIT v. Larsen And Toubro Ltd. (2018) 403 ITR 248 /89 taxmann.com 186 (Bom.) (HC)
Editorial : SLP of revenue is dismissed, PCIT v. Larsen and Toubro Ltd. (2018) 259 Taxman 79 (SC)

S. 32 : Depreciation–Option-Newly established industrial undertakings-Back ward areas–Additional question was admitted and the matter was remanded to the Tribunal to consider factual aspect. [S. 80HH, 260A(4)]
On appeal by the revenue, the Court has admitted additional question, whetherthe assesse can disclaim depreciation when it claimed deduction u/s 80HH. The matter was remanded to the Tribunal to consider factual aspect. (AY. 1989-90)
CIT v. Auto Mobile Corporation of Goa Ltd (2018) 405 ITR 310/ 164 DTR 168 (Bom.) (HC)

S. 32 : Depreciation — For the prior period the revenue cannot thrust upon the depreciation on the basis of written down value, in the preceding years, if the assessee had not claimed it. [S. 32, Expl. 5, 43(6)]
Dismissing the appeal of the Revenue the Court held that; The Tribunal has given the finding that, going by the wording of the ground it is not permissible to apply the Expln. 5 to S. 32(1) and therefore, the claim of depreciation, which was optional could not be thrust on the assessee for the prior period and the AO was not justified in allowing depreciation on the basis of written down value after allowing depreciation to the assessee in the preceding years. (AY. 2003-04 to 2006-07)
CIT v. Reliance Industries Ltd (2018) 161 DTR 420/(2019) 410 ITR 468 (Bom.) (HC)
Editorial : Matter remanded to High Court, CIT v. Reliance Industries Ltd (2019) 410 ITR 466 /175 DTR 1/ 307 CTR 121 (SC)

S. 32 :Depreciation — Unabsorbed depreciation —Effect of amendment to Section 32(2) by Finance Act, 2001 —Unabsorbed depreciation or part thereof not set off till assessment year was allowed to be set off and carry forward-Provision to be construed in its own terms, benefit or advantages not to be restricted .[S. 32(2)]
Dismissing the appeal of the revenue the Court held that; the rationale for the amendment of section 32(2) that the restriction against set off and carry forward limited to eight years, beyond which the benefit could not be claimed under the provisions of the 1961 Act, was for the reasons deemed appropriate by Parliament. The limit was imposed in the year 1996 through the Finance (No. 2) Act, 1996. Had the intention of Parliament been really to restrict the benefit, of unlimited carry forward prospectively, there were more decisive ways of doing so, such as, an expressed provision or an exception or proviso. The absence of any such legislative device meant that the provision had to be construed in its own terms and not so as to restrict the benefit or advantage it sought to confirm. No question of law arose. Provision to be construed in its own terms, benefit or advantages not to be restricted (AY. 2010-11)
PCIT v. British Motor Car Co. (1934) LTD (2018) 400 ITR 569/ 162 DTR 1 / 300 CTR 337(Delhi) (HC)

S.32 : Depreciation-Charitable trust – Depreciation is allowable on assets whose cost of acquisition allowed as application to charitable purpose [S. 12AA, 13(3)]
Dismissing the appeal of the revenue, the Court held that, Depreciation is allowable on assets whose cost of acquisition allowed as application to charitable purpose.
CIT v. Shyam Lal Panwar Anandi Devi Memorial Charitable Trust. (2018) 400 ITR 393 (Raj) (HC)

S. 32 : Depreciation-Application of income as cost of assets-– Disallowance of depreciation-Amendment applies prospectively [S. 11 (6)]
Dismissing the appeal of the revenue, the Court held that ;provision disallowance of depreciation on assets whose cost allowed as application of income applies prospectively (AY. 2010-11, 2011-12)
CIT v. Institute for Development and Research in Banking Technology. (2018) 400 ITR 66 / 165 DTR 104/302 CTR 332 (T & AP) (HC)
Editorial : Institute for Development and Research in Banking Technology v. ADIT (E)(2015) 42 ITR 219 (Hyd) (Trib.) is affirmed

S.32 : Depreciation — Block of assets — Sale of bottles and crates was not revenue receipts, sale proceeds to be reduced from block of assets [S. 2(11), 43(5)]
Dismissing the appeal of the revenue the Court held that; Sale of bottles and crates was not revenue receipts, sale proceeds to be reduced from block of assets. (AY. 1998-99)
CIT v. Parle Soft Drinks (Bang.alore Pvt. Ltd. (2018) 400 ITR 108 / 161 DTR 86 / 252 Taxman 147/ 161 DTR 86 / 300 CTR 415/ (2017) 88 Taxmann.com 61 (Bom.) (HC)
CIT v. Parle Bottling Pvt Ltd (2018) 400 ITR 108/ 161 DTR 86 / 252 Taxman 147 / 300 CTR 415 (Bom.) (HC)
Editorial; Order in Parle Soft Drinks P. Ltd. v. JCIT (2013) 27 ITR 663 (Mum.) (Trib.) is affirmed
Editorial : SLP of revenue is dismissed; CIT v. Parle Soft Drinks (Bang.alore Pvt. Ltd. (2018) 256 Taxman 61 (SC)

S. 32 : Depreciation—Improvements on leasehold premises—Capital expenditure— Entitle to depreciation.
Tribunal held that ; Spirit and text of Explanation 1 to section 32 was that any capital expenditure by assessee on a building not owned by him in which he carried on business, should be considered as building owned by him for purposes of section 32, to extent of amounts spent on construction of structure or doing of any work in or in relation to and by way of renovation or extension or improvement to building. Accordingly entitle to depreciation.(AY. 2005-06, 2009-10 to 2013-14)
Carrier Air-Conditioning & Refrigeration Ltd. v. ACIT (2018) 172 DTR 49 / 195 TTJ 777 (Delhi) (Trib.)

S. 32 : Depreciation-Film and serial broadcasting rights-Intangible assets – Entitle to depreciation [S. 37(1)]
Dismissing the appeal of the revenue the Tribunal held that Film and serial broadcasting rights are intangible assets which is entitle to depreciation.(AY. 2009-10)
Sun TV Network Ltd v. ACIT (2018) 196 TTJ 944 / 172 DTR 345(Chennai)(Trib.)

S. 32 : Depreciation-Pollution control equipment – Failure of the authorities to examine the nature of equipment – Matter remanded.
Assessee claimed depreciation on pollution control equipment. AO held that description of assets as stated by assessee did not fall in category of 100% depreciation, therefore, AO allowed only 15% depreciation on Plant & Machinery as applicable to general Plant & Machinery and made disallowance. DRP confirmed disallowance on reason that assessee did not prove that pollution control equipment was required for purpose of business and such equipment was used in controlling pollution-emanating from manufacturing operations of tax payer. Tribunal held that, the assessee had purchased Plant & Machinery which was categorized by him as pollution control equipment. What sort of evidence was required to establish that these were used in controlling pollution was not specified by DRP. Use of machinery in business had not been doubted even by AO as he allowed depreciation at 15%. Assessee categorized certain equipment as pollution control equipment, nature of equipment was to be examined in context of business operations of assessee, the aspect of the assessee had not correctly appreciated by AO or DRP, therefore issue was set as side for re-examination of nature of equipment purchased and its utilization in business. (AY.2008-09 to 2011-12)
Bartronics India Ltd. v. Dy.CIT (2018) 65 ITR 540 (Hyd.)(Trib.)

S. 32 : Depreciation – Paper Brand-Trade marks-Intangible assets-Eligible depreciation.[S. 32(1) (ii)]
Relying on the order dt. 11.5.2017 in ITA No. 2263/Del/2012 (AY 2008-09) in case of ABC Paper Ltd, Tribunal held that the definition of “intangible assets” under S. 32(1)(ii) is an inclusive definition which not only includes know-how, patents, copyrights, trademarks, licences, franchises but also any other business or commercial rights of similar nature. Therefore, the interpretation of the AO, that since “brand” is not specifically mentioned in S. 32(1) (ii), it cannot be equated with “trade mark” and hence, depreciation on the same is not admissible is not proper. (AY.2006-07 to 2013-14)
DCIT v. Kuantum Papers Ltd(2018) 62 ITR 439 (Delhi) (Trib.)

S. 32 : Depreciation-Charitable trust-Amendment in S. 11(6) is prospective and applicable for and from 2015-16 onwards-Depreciation is allowable on assets even though cost of same was allowed as application. [S. 11(6)]
Tribunal held that, Amendment in S. 11(6) is prospective and applicable for and from 2015-16 onwards-Depreciation is allowable on assets even though cost of same was allowed as application. Followed CIT v. Rajasthan & Gujarati Charitable Foundation (2018) 402 ITR 441(SC) (AY.2011-12)
MAJ Hospital. V. DCIT (2018) 173 ITD 554/ (2019) 173 DTR 236/196 TTJ 1149 (Cochin) (Trib.)

S. 32 : Depreciation-Building-Partly used for business – Depreciation on Building is disallowable in proportion of let out to total constructed area of the building. [S. 38]
Assessee company had two building structures at one location. It had let-out only a part of one such structure of the building. The rent received from the said letting was offered as “Income from House Property”. The AO disallowed depreciation on both the structures. Appeal of the assessee was dismissed by CIT(A). The Tribunal held that the depreciation was disallowable in proportion of let out constructed area to the total constructed area of the building. (AY. 2012-13)
Gold Seal Engineering Products P. Ltd. v. ACIT (2018) 66 ITR 37 (SN)(Mum.) (Trib.)

S. 32: Depreciation-Set-off of Unabsorbed depreciation – Any unabsorbed depreciation available on 01.04.2002 i.e AY 2002-03 would be carried forward as per amended provisions of 32(2) of the Act without any time limit. [S. 32(2)]
Dismissing the appeal of the revenue the Tribunal held that unabsorbed depreciation for earlier years upto AY 2001-02 would become the depreciation for AY 2002-03. And as per the amendment to section 32(2) of the Act by FA ,2001, this unabsorbed depreciation for AY 2002-03 would be carried forward for subsequent years and be set-off against income of the future years without any time limit instead of the alleged time limit of 8 years. Followed General Motors India Pvt Ltd v. DCIT (2013) 354 ITR 244 (Guj)(HC)(AY. 2006-07)
ACIT v. Panchmahal Steel Ltd. (2018) 64 ITR 49 (Ahd.)(Trib.)

S. 32 : Depreciation-Injection moulding machine falls under the category of ‘Moulds’ and therefore shall qualify for higher rate of depreciation.
The Tribunal held that since the appellant was engaged in the manufacture and printing of laminated pouches and plastic bags, the injection moulding used in such manufacturing could only be termed as moulding machine which shall qualify for higher depreciation @ 30% instead of 15%. Further, assessee’s contention that the entire plant and machinery including office equipment, lab equipment etc.should also fall under the block of ‘moulds’ was dismissed by the Tribunal since they formed a part of separate block of assets.
DCIT v SB Packaging Ltd. (2018) 63 ITR 569 / 52 CCH 511 (Delhi)(Trib.)

S. 32:Depreciation – UPS and Date drive part of computer system and eligible for higher rate of depreciation
UPS and Data drive are to be treated as part and parcel of computer system and depreciation has to be allowed at higher rate of 60 per cent on such items as applicable to computer. (AY. 2008-09)
Eastman Industries Ltd. v. ACIT (2018) 63 ITR 181 (Delhi) (Trib.)

S. 32 : Depreciation- Computer peripherals-Eligible higher rate of depreciation.
The Tribunal directed to allow depreciation on the computer printers at the higher rate as claimed by the assessee by following the judgement of Hon’ble Delhi High Court in CIT v. BSES Yamuna Powers Ltd. (2010) TIOL 636 (Delhi) (AY. 2006-07)
CEVA Freight India (P) Ltd. v. Dy. CIT (2018) 192 TTJ 887 / 172 DTR 55 (Delhi)(Trib.)

S. 32 : Depreciation-Non compete fee-Depreciation is held to be not allowable.
The Tribunal held that depreciation is not allowable on the amount of non compete fee. (AY. 2007-08)
Dy. CIT v. Excelax Bio Polymers (P) Ltd. (2018) 192 TTJ 49 (UO)(Delhi)(Trib.)

S. 32 : Depreciation — Goodwill —Goodwill in books of assessee on account of rounding off of decimal in share exchange ratio not an artificial one-Entitle depreciation.
Tribunal held that goodwill in books of assessee on account of rounding off of decimal in share exchange ratio not an artificial one accordingly entitle to depreciation. (AY. 2014-15)
Mtandt Rentals Ltd. v. ITO (2018) 65 ITR 63 (SN) (Chennai) (Trib.)

S. 32 : Depreciation- Goodwill-Intangible asset-Goodwill will fall under the expression ‘or any other business or commercial rights of similar nature’ hence depreciation is available on genuine goodwill. Whether there is transfer of goodwill and valuation done by the assessee is erroneous has to be decided by division Bench, accordingly the matter is sent back to division Bench.
Special bench of the ITAT held that,goodwill will fall under the expression ‘or any other business or commercial rights of similar nature’ hence depreciation is available on genuine goodwill. Followed CIT v. Smifs Securities Ltd. (2012) 348 ITR 302 (SC).However the question whether when a firm has been succeeded by a company and net assets of the firm have vested in the company, there is any transfer of goodwill in the real sense and whether the valuation of goodwill done by the assessee is erroneous has to be decided by the Division Bench. Accordingly the matter is sent back to division Bench for disposing off the appeal in above terms. (AY. 2001-02)
CLC & Sons Pvt. Ltd. v. ACIT(2018) 168 DTR 157/ 171 ITD 139/ 194 TTJ 700 (SB) (Delhi)(Trib.) www.itatonline.org

S. 32 : Depreciation-Motor Car — Company purchasing car in name of its manager which is used for the purpose of its business is entitle to depreciation.
Tribunal held that, Company purchasing car in name of its manager which is used for the purpose of its business is entitle to depreciation. (AY.2010-11, 2011-12)
CIT v. Ahmedabad Strips P. Ltd. (2018) 64 ITR 683 (Ahd) (Trib.)

S. 32 : Depreciation — Additional depreciation — Lab Equipment and Electrical Items is essential for manufacturing process which is entitled to additional depreciation [S. 32(1)(iii)]
Tribunal held that, Lab Equipment and Electrical Items is essential for manufacturing process which is entitled to additional depreciation (AY.2010-11, 2011-12)
CIT v. Ahmedabad Strips P. Ltd. (2018) 64 ITR 683 (Ahd) (Trib.)

S. 32 : Depreciation-Lease premises-Notionally estimated cost and capitalised for restoration of office spaces for setting up of cell site towers – Depreciation is held to be not allowable. [S. 43(1)]
Assessee entered into lease agreement with owners of various office spaces for setting up of cell site towers.Assessee, was obliged to restore site to its original condition at expiry of lease period. Assessee estimated a sum to be incurred on restoration of sites and capitalized same to cost of cell site towers at very threshold of entering into lease agreements and claimed depreciation on such estimated restoration cost Tribunal held that depreciation is not allowable on notionally estimated the cost and capitalised for restoration of office spaces for setting up of cell site towers .(AY.2009-10)
DCIT v. Vodafone Essar Digilink Ltd. (2018) 170 ITD 430 / 193 TTJ 150 / 166 DTR 233/ 64 ITR 392(Delhi) (Trib.)

S. 32 : Depreciation—Toll bridge – BOT basis-Intangible asset, depreciation is allowable.
As per Circular no. 9 of 2014 issued by the Board, the assessee can claim amortisation of the expenditure also shows that the expenditure incurred by the assessee has to be treated as a capital expenditure by treating it as intangible asset. The expenditure has to be allowed as deduction in each year, so as to arrive at real profit. The provisions of depreciation or amortisation are only aimed at arriving at the true profit, though the methodology is different. The claim of depreciation was consistently being allowed, in which event, it may not be proper, for the interregnum period to disallow the claim of depreciation. (AY. 2007-08 to 2009-10)
Godavari Toll Bridge (P) Ltd. v. ACIT (2018) 163 DTR 17 / 191 TTJ 568 (Vishakha)(Trib.)

S. 32 : Depreciation-Computer-Film projector cannot be said to be computer eligible for higher rate of depreciation @ 60%.
Dismissing the appeal of the assessee,the Tribunal held that, the Film projector is eligible depreciation at 15% and cannot be said to be computer which is eligible for higher rate of depreciation @ 60%. (AY. 2013-14)
Cinetech Entertainment India (P) Ltd v. ITO (2018) 169 ITD 218 (Mum.) (Trib.)

S. 32 : Depreciation —Batteries used along with Ups and forming system for power back up in case of power failure was entitled to depreciation at 60%.
Dismissing the appeal of the revenue the Tribunal held that; the batteries which were used along with UPS and which formed a system for power back up in case of power failure qualified for depreciation at 60 per cent. (AY. 2010-11)
DCIT v. Lotwin Online Lottery P. Ltd. (2018) 61 ITR 661 (Mum.) (Trib.)

S. 32 : Depreciation — Advertising Company — Hoardings is entitled to 100 Per Cent. depreciation.
Dismissing the appeal of the revenue the Tribunal held that; hoardings is entitled to 100 Per Cent. depreciation. (AY. 2010-11)
DCIT v. Vantage Advertising P. LTD. (2018) 61 ITR 564 (Kol) (Trib.)

S. 32 : Depreciation — Leasehold rights of coal bearing Land — Intangible Assets — Not entitled to depreciation [S. 32(1)(iii)]
Tribunal held that; the depreciation was not allowable under section 32(1)(iii) in respect of intangible assets. (AY. 2008-09)
Mahanadi Coalfields Ltd. v. DCIT (2018) 61 ITR 585 (Ctk) (Trib.)

S. 32 : Depreciation-Unabsorbed depreciation allowance available in assessment years 1995-96 to 2001-02, to be carried forward to succeeding years. [S. 32(2)]
Allowing the appeal of the assessee the Tribunal held that; the provisions of S. 32(2) as amended by Finance Act, 2001 would allow unabsorbed depreciation allowance available in assessment years 1995-96 to 2001-02, to be carried forward to succeeding years, and if any unabsorbed depreciation or part thereof could not be set off till assessment year 2002-03, then it would be carried forward till time it is set off against profits and gains of subsequent years. (AY. 2009-10)
RB Polymers Ltd. v. CIT (2018) 168 ITD 463(Kol) (Trib.)

S. 32 : Depreciation – Right to operate the toll road /bridge-Commercial rights which is entitle to deprecation. [S. 32(1)(ii)]
Tribunal held that; right to operate the toll road /bridge and collect toll charges in lieu of investment made by it in implementing the project is an intangible asset in the nature of license or akin to license as well as a business or commercial rights, which is entitle to depreciation. (AY. 2011-12)
ACIT v. Progressive Constructions Ltd (2018) 161 DTR 289/ 63 ITR 516/191 TTJ 549 (SB) (Hyd) (Trib.)

S. 32 : Depreciation —Block of assets-Loss on sale of motor car debited in Profit and loss account was held to be not allowable, however depreciation was held to be allowable after reducing sale proceeds from remaining block of assets[S. 2(11)]
Tribunal held that; Loss on sale of motor car debited in Profit and loss account was held to be not allowable, however depreciation was held to be allowable after reducing sale proceeds from remaining block of assets. Matter remanded. (AY. 2009-10)
Pearl Freight Services P. Ltd. v. ACIT (2018) 61 ITR 390 (Mum.) (Trib.)

S. 32 : Depreciation — Catalyst is entitle to depreciation.
The Tribunal held that the assessee was entitled to depreciation on catalyst. (AY. 2009-10)
ACIT v. Chambal Fertilisers And Chemicals Limited. (2018) 61 ITR 33 (Jaipur) (Trib.)

S. 32 : Depreciation — Depreciation cannot be disallowed on motor car only on the reason that cars were parked on promoter’s premises.
Tribunal held that,Depreciation cannot be disallowed on motor car only on the reason that cars were parked on promoter’s premises. (AY. 2009-10, 2010-11)
ACIT v. Claridges Hotels Pvt. Ltd. (20180 61 ITR 135 (Delhi) (Trib.)

S. 32 : Depreciation — Gym equipment installed in premises of assessee’s Managing Director was held to be allowable.[S. 2(11)]
Tribunal held that asset acquired during running of Hotel business was held to allowable though the Gym equipment installed in premises of assessee’s Managing Director was held to be allowable. (AY. 2009-10, 2010-11)
ACIT v. Claridges Hotels Pvt. Ltd. (20180 61 ITR 135 (Delhi) (Trib.)

S. 32A : Investment allowance-Development rebate-Transfer of asset within 8 years to the retiring partner, denial of benefit of investment allowance/development rebate was justified. [S. 2(47),34(3),35A,155(4A)]
Dismissing the appeal of the assessee the Court held that, Transfer of asset within 8 years to the retiring partner, denial of benefit of investment allowance/development rebate was justified, since there is neither any evidence or material available on record nor it is the claim of the assessee that the said machinery was utilized by the retiring partner for the balance period to satisfy the mandate of S. 35A of the Act. (AY. 1986-87, 1987-88)
Jupiter Radios (Regd.) v. Dy. CIT (2017) 88 Taxmann. com 93 / (2018) 163 DTR 233 (Delhi)(HC)

S. 33AB : Tea development account – Amount withdrawn from NABARD deposit account accordance with tea development Scheme 2007 was not utilised the entire amount with in year in which withdrawal was made but utilised partly after the end of said year amount cannot be taxed by deeming fiction [S. 33AB(7), 139(1)]
Allowing the appeal of the assessee the Tribunal held that, Amount withdrawn from NABARD deposit account accordance with tea development Scheme 2007 was not utilised the entire amount with in year in which withdrawal was made but utilised partly after the end of said year amount cannot be taxed by deeming fiction. (AY. 2011-12)
Stewart Holl (India) Ltd v. Dy. CIT (2018) 170 ITD 1 /193 TTJ 878/166 DTR 143(Kol) (Trib.)

S. 35 : Scientific research-Weighted deduction —Date of approval is not relevant — Application for approval in December 2006 and approval was granted in October 2008 — Entitle to weighted deduction.[S. 35(2AB)]
Allowing the appeal of the assessee the Court held that ;once an application is filed by the assessee to the prescribed authority, the assessee would have no control over when such application is processed and decided. Even if therefore, the application is complete in all respects and the assessee is otherwise eligible for grant of such approval, approval may take some time to come by. The claim for deduction cannot be defeated on the ground that such approval was granted in the year subsequent to the financial year in which the expenditure was incurred. In order to avail of the deduction under section 35(2AB) what is relevant is not the date of recognition or the cut-off date mentioned in the certificate of the prescribed authority or even the date of approval, but the existence of recognition. On appeal High Court held that ; the Assessing Officer was not right in restricting the deduction to expenditure incurred prior to April 1, 2008. He had to recompute such deduction and give its effect to the assessee for the relevant assessment year. (AY. 2008-09)
Banco Products (India) Ltd. v. DCIT (2018) 405 ITR 318/ 205 Taxman 244 (Guj) (HC)

S. 35 : Scientific research expenditure-Retrospective cancellation of approval, donor’s claim of deduction could not be denied as at the time of receipt of donation institute was benefitted by the approval as per S. 35(1)(ii).[S. 35(1)(ii)]
Allowing the appeal of the asssessee the Tribunal held that ; retrospective cancellation of approval, donor’s claim of deduction could not be denied as at the time of receipt of donation institute was benefitted by the approval as per S. 35(1)(ii).(AY. 2014-15)
P.R. Rolling Mills (P.) Ltd. v. DCIT (2018) 171 ITD 683 / 196 TTJ 494 (Jaipur)(Trib.)

S. 35 : Scientific research – When recognition to facility given by prescribed authority is maintained, the deduction to be allowed-Non-receipt of Form No. 3CM is a procedural lapse and is not fatal for denial of claim of deduction [S. 35(2AB]
Tribunal held that prescribed authority till 1-4-2016 has no authority to look into nature and quantum of expenditure except in first year to see investment in land and building and after recognition of facility and approval by DSIR, Assessing Officer is to allow claim of assessee after verifying same. under amended provisions of section 35(2AB) by Finance Act, 2015 with effect from 1-4-2016, besides maintaining separate accounts of R & D facility, copy of audited accounts have to be submitted to prescribed authority. If recognition to facility given by prescribed authority which is mandate of S. 35(2AB) is maintained, assessee has to be accorded deduction under S. 35(2AB); non-receipt of Form No. 3CM is a procedural lapse and is not fatal for denial of claim of deduction under S. 35(2AB) of the Act.(AY.2010-11)
Minilec India (P.) Ltd. v. ACIT (2018) 171 ITD 124 (Pune) (Trib.)

S. 35 : Scientific research-Rejection of weighted deduction in respect of donation cannot be denied when the institution was enjoying approval within the meaning of S. 35(1)(ii) as on date of receipt of donation, no matter that the approval was cancelled subsequently with retrospective effect.
Allowing the appeal of the assessee the Tribunal held that, rejection of weighted deduction in respect of donation cannot be denied when the institution was enjoying approval within the meaning of S. 35(1)(ii) as on date of receipt of donation, no matter that the approval was cancelled subsequently with retrospective effect. (AY.2014-15)
Vora Financial Service P. Ltd. v. ACIT(2018) 171 ITD 646/ 194 TTJ 746 / 65 ITR 77 (SN)/ ( 2019) 178 DTR 58 (Mum.)(Trib.), www.itatonline.org

S. 35 : Scientific research-Deduction on account of purchase of ‘assets’ for its in-house R&D facility is allowable as deduction. Objective behind exclusion clause in S. 43(4)(ii) is to be that expenditure on scientific research should be incurred on research actually carried out by assessee in-house and assessee should not spend money in acquiring rights in or arising out of scientific research carried on by some other person. [S. 35(1)(iv), 43(4)(ii)]
Allowing the appeal of the assessee the Tribunal held that, deduction on account of purchase of ‘assets’ for its in-house R&D facility is allowable as deduction. Objective behind exclusion clause in S. 43(4)(ii) is to be that expenditure on scientific research should be incurred on research actually carried out by assessee in-house and assessee should not spend money in acquiring rights in or arising out of scientific research carried on by some other person. Tribunal also held that if interpretation sought to be urged by revenue was to be accepted, then benefit sought to be conferred by provisions of section 35(1)(iv) would virtually be denied in all cases by invoking exclusion clause in section 43(4)(ii).(AY.2008-09)
Tata Hitachi Construction Machinery Company Ltd. v. DCIT (2018) 170 ITD 720/65 ITR 86 (SN)(Bang.) (Trib.)

S.35 : Scientific research – Approval of competent authority is mandatory to claim weighted deduction [S. 35(2AB)]
Dismissing the appeal of the assesssee, the Court held that; Approval of competent authority is mandatory to claim weighted deduction. As per certificate issued by competent authority in Form 3CM, assessee’s R&D facility had been approved for period from 1-4-2011 to 31-3-2013 on basis of application filed by assessee in prescribed Form 3CK on 12-8-2011, for the AY. 2008-09 weighted deduction was held to be not allowable. (AY. 2008-09)
PCP Chemicals (P.) Ltd. v. ITO (2018) 168 ITD 26 (Mum.) (Trib.)

S. 35AB : Know-how – Acquiring know how means acquiring on ownership basis or on lease deduction can not be allowed as revenue expenditure.[S. 37(1)]
Question for consideration was “Whether on the facts and the circumstances of the case and in law, the Tribunal was right in law to hold that the assessee had acquired the ownership rights in the technical knowhow included in the agreement in contradistinction to lease of rights in such knowhow and accordingly the assessee was entitled to deduction under Section 35AB as against under Section 37(1) of the Act ?

Court held that; on the application of law to the facts in the present facts, the expenditure on account of technical knowhow incurred under the Agreement dated 19th June, 1984 is classifiable under S. 35AB of the Act and not under S. 37 (1) of the Act. Therefore, question is answered in the affirmative in favour of the respondent Revenue and against the applicant assessee. (Dy. CIT v. Anil Starch Products Ltd (2015) 232 Taxman 129 (Guj)(HC)and Diffusion Engineers Ltd v. Dy. CIT (2015) 376 ITR 487 (Karn)(HC)(based on CIT v. Swaraj Engines Ltd (2008) 301 ITR 284 (P& H)(HC) dissented from)(ITR No. 13 of 2001, dt. 27. 04. 2018) (AY. 1986-87)
Standard Batteries Ltd. v. CIT (2018) 166 DTR 289/ 255 Taxman 380 / 304 CTR 1(Bom.)(HC), www.itatonline.org

S. 35AD : Deduction in respect of expenditure on specified business-Hotel business-Certification of Hotel as three-Star Category Hotel in subsequent year —Deduction cannot be denied on the ground that Certification was in later year. [S 35D(5)(aa)]
Dismissing the appeal of the revenue the Court held that, the application filed by the assessee for classification was made on April 19, 2010 and thereafter certain procedures were to be followed and an inspection was required to be conducted for such purpose. The manner in which the inspection was conducted and the time frame taken by the competent authority were beyond the control of the assessee. The Department had not disputed the operation of the new hotel from the financial year 2010-11 as it had accepted the income, which was offered to tax from the newly established hotel which became fully operational in the year 2010. Nowhere in the clause (aa) to sub-section (5) of section 35AD was it mandated that the date of the certificate was to be with effect from a particular date. Therefore, the provision which was to encourage the establishment of hotels of a particular category, should be read as a beneficial provision and therefore, the interpretation given by the Tribunal were valid and justified. Therefore, the Tribunal was right in concluding that the assessee is entitled to claim deduction under section 35AD(5)(aa) for the assessment year 2011-12. (AY.2011-12)
CIT v. Ceebros Hotels Pvt. Ltd. (2018) 409 ITR 423/(2019) 261 Taxman 41 (Mad) (HC)

S. 35AD : Deduction in respect of expenditure on specified business-Hotel business-Granted certification for categorization of its hotel as three star hotel-Entire capital expenditure is allowable as deduction.
Dismissing the appeal of the revenue the Tribunal held that once the certificate is issued by the competent authority for categorization of its hotel as three star hotel, entire capital expenditure is allowable as deduction.(AY.2012-13)
ACIT v. River View HotelS. (2018) 171 ITD 404 (Ahd) (Trib.)

S. 35B : Export markets development allowance –Agent-Expenditure incurred in the promotion of the sale outside India-Not discharged the onus of establishing that the expenditure was wholly or exclusively incurred for the purposes mentioned in S. 35-B(1)(b)(iv) of the Act-Not entitle to weighted deduction.[S. 35B(1)(b) (iv)]
Court held that in the present case, the assessee has not discharged the onus of establishing that the expenditure was wholly or exclusively incurred for the purposes mentioned in S. 35B(1)(b)(iv) of the Act. The Tribunal fell in error in holding otherwise. This question is answered in the negative, in favour of the Revenue, and against the assessee. (C. No. 71 of 1993, dt. 01.05.2018) (AY.1984-85)
CIT v. the K.C.P Ltd (2018) 409 ITR 436 (AP)(HC),www.itatonlin.org

S. 35D : Amortisation of preliminary expenses-Expenses incurred on issue of public subscription of shares or of debentures of the company, any payment made against commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus would be eligible for benefit.
Dismissing the appeal of the revenue the court held that; expenses incurred on issue of public subscription of shares or of debentures of the company, any payment made against commission, brokerage and charges for drafting, typing, printing and advertisement of the prospectus would be eligible for benefit.(AY.1993-94)
CIT v. Phonex Lamps India Ltd. (2018) 406 ITR 550 (All) (HC)

S. 35D : Amortization of preliminary expenses – Fees paid for increasing the authorize share capital of the assessee company which has been registered in an earlier year is not allowable as a preliminary expense .[S. 40(a)(ia), 194J]
Fees paid for increasing the authorize share capital of the assessee company which has been registered in an earlier year is not allowable as a preliminary expense (AY. 2011-12)
Campbell Shipping (P) Ltd. v. ITO (2018) 192 TTJ 24 (Mum.)(UO)(Trib.)

S. 35D : Amortisation of preliminary expenses-No disallowances can be made as there was no material to show that the business income of shipping division was offered on basis of tonnage tax scheme.[S. 37(1)]
Dismissing the appeal of the revenue the Tribunal held that; No disallowances can be made as there was no material to show that the business income of shipping division was offered on basis of tonnage tax scheme. (AY. 2009-10)
ACIT v. Chambal Fertilisers And Chemicals Limited. (2018) 61 ITR 33 (Jaipur) (Trib.)

S. 35DD : Amortisation of expenditure – Amalgamation – Demerger-Travelling expenses incurred wholly and exclusively for purpose of scheme of demerger is entitled for deduction.
Dismissing the appeal of the revenue the, Tribunal held that any expenditure wholly and exclusively in relation to scheme of demerger could not be allowed as deduction from profits of business in one go but same had to be amortized for income tax purposes over a period of five years and deduction would be allowed accordingly. There was no pre-condition set out in section 35DD mandating any certification from auditor. Tax auditor indeed did not report this claim u/s. 35DD but tax auditor’s non-report could not disentitle assessee from making a claim which was otherwise legally permissible. (AY.2012-13).
Onprocess Technology India Pvt. Ltd. v. DCIT (2018) 195 TTJ 292 (Kol) (Trib.)

S. 35DDA : Amortisation of expenditure-Voluntary retirement scheme-Deduction relating to Financial Year 2000-01, Being Fifth Year deduction is available.
Dismissing the appeal of the revenue the Court held that, any deduction claimed for the financial year 2000-01 under S. 35DDA was to be considered for the assessment year 2001-02, when the section was incorporated with effect from April 1, 2001. Moreover, the Assessing Officer had allowed the voluntary retirement scheme payments in the earlier years and deduction claimed, in the assessment year in question, was only a consequential relief for the fifth year. S. 35DDA did not preclude the assessing authority to consider the voluntary retirement scheme payment as revenue expenditure. The Tribunal rightly upheld the findings recorded by the Commissioner (Appeals). No question of law arose. (AY.2005-06)
CIT v. Eco Auto Components Pvt. Ltd. (2018) 409 ITR 202 (P&H) (HC)

S. 35E : Expenditure on prospecting – Minerals – Amortisation-10% of expenses was held to be allowable.
Tribunal held that; 10% of expenses was held to be allowable. (AY. 2008-09)
Mahanadi Coalfields Ltd. v. DCIT (2018) 61 ITR 585 (Ctk) (Trib.)

S. 36(1)(ii) : Bonus or commission-Directors and employees-payment of bonus was part of employment agreement and it was a performance based payment—Allowable as deduction .
Dismissing the appeal of the revenue the Court held that, all the four employee directors own identical number of shares i.e. 12.20% aggregating to 49% shares in respect of company. Nevertheless the bonus which has been paid to each of them is different. This is evidence of the fact that the payment of bonus was a performance based payment and entirely dependent on the performance of the employee. This also explains the fact that employee directors were paid at a much higher rate than the other employees of the company as the payment of the bonus is performance based and not designation based. In the above view, it is clear that the payment made to the four employee directors of the company is not a payment made in lieu of dividend as in fact found on facts by the ITAT. When bonus payment made by assessee was entirely dependent on performance basis of its employees, benefit of deduction u/s 36(1)(ii) can be claimed by assessee. Followed CIT v. Shahzada Nand and Sons (1977)108 ITR 358(SC)(AY.2009-10)
PCIT v. New Silk Route Advisors P. Ltd. (2018) 170 DTR 257 (Bom.)(HC)

S. 36(1)(ii) : Bonus or commission-Restriction of allowance would apply only to an employee who is also share in company-Payment made to agent who was an MD of company in earlier years and in the relevant year he was not an employee-Disallowance cannot be made.
Allowing the appeal of the assessee the Tribunal held that ; restriction of allowance would apply only to an employee who is also share in company.Payment made to agent who is not an employee during the relevant year. Disallowance cannot be made.(AY.2009-10)
Nat Steel Equipment (P.) Ltd. v. DCIT (2018) 171 ITD 482 / 171 DTR 49/195 TTJ 796 (Mum.) (Trib.)

S. 36(1)(ii) : Interest on borrowed capital-Utilized for purchase of shares-Allowable as deduction.
The Tribunal allowed the cross objection filed by the assessee and held that once the department has accepted that the borrowings were used for business purposes in the earlier year, it cannot take a different stand in the relevant year and therefore, interest paid on the said borrowings is allowable as deduction. (AY. 2004-05)
Abhinand Investment Ltd. v. ITO (2018) 192 TTJ 51 (UO) (Kol.) (Trib.)

S. 36(1)(iii) : Interest on borrowed capital-loan was used for acquiring or construction of assets that were used for earning taxable income-Interest expenditure is held to be allowable .
AO held that interest paid by assessee on capital borrowed could not be allowed as deduction.Tribunal held that since interest was paid by assessee on loan used for acquiring or construction of assets that were used for earning taxable income, its claim for interest expenditure had to be allowed. On appeal High Court up held the order of the Tribunal. (AY. 2010-11)
PCIT. v. International Biotech Park Ltd. (2018) 259 Taxman 14 (Bom.)(HC)

S. 36(1) (iii) : Interest on borrowed capital-Interest free loans to subsidiaries-Advance to sister concern for business purposes – Allowable as deduction.
Dismissing the appeal of the revenue the Court held that money borrowed by assessee even when advanced to its subsidiary for some business purpose would qualify for deduction of interest paid on such borrowingS. (AY. 1988-89)
PCIT v. Reebok India Company. (2018) 259 Taxman 100 (Delhi)(HC)

S. 36(1)(iii) : Interest on borrowed capital-Commercial expediency – Interest free advance to third parties-Interest paid is held to be allowable as deduction.
Dismissing the appeal of the revenue the Court held that,merely because non-interest bearing advances were given to third parties, that would not justify a finding that the test of “commercial expediency” was not satisfied. Interest-free advances were advanced to the parties connected with the business of the assessee. Money taken on loan was not diverted for non-business purpose. The unsecured loans were not used for personal purpose. According the interest paid on capital borrowed for the purpose of business had to be allowed as a deduction. (AY.2011-12)
CIT v. Reebok India Company. (2018) 409 ITR 587 (Delhi)(HC)
Editorial : Reebok India Company v. Dy CIT (2017) 56 ITR 211 (Delhi) (Trib.) is affirmed.

S. 36(1)(iii) : Interest on borrowed capital-Development and construction of residential building-Followed Accounting Standard-Disallowance of interest is not justified on the ground that interest on borrowings was included in closing work in progress.[S. 145]
Dismissing the appeal of the revenue the Court held that, when the assessee has followed the accounting standard, interest on borrowed capital cannot be disallowed on the ground that, interest on borrowings was included in closing work in progress.(AY. 2012-13)
PCIT v. Milroc Good Earth Property & Developers LLP (2018) 256 Taxman 257 (Bom.) (HC)

S. 36(1)(iii) : Interest on borrowed capital-loan amount was used for acquiring or construction of assets that were used for earning taxable income- Interest expenditure is allowable as deduction.
Dismissing the appeal of the revenue the Court held that, Interest paid on borrowed capital which was used for acquiring or construction of assets that were used for earning taxable income. Interest expenditure is held to be allowable as deduction. (AY.2010-11)
PCIT v. International Biotech Park Ltd. (2018) 259 Taxman 14 (Bom.) (HC)

S. 36(1)(iii) : Interest on borrowed capital — New line of business-Amount must have been used for acquisition of asset and asset must have been used – Interest is not allowable.
Dismissing the appeal of the assessee the Court held that ;the assessee did enter a new line of business, unconnected to its existing business, and it had not by then commenced that new businesS. Accordingly the interest paid on borrowed amount for acquisition of asset which was not put to use during the relevant year, therefore interest is not allowable.(AY.2006-07)
Muthoot Finance Ltd. v. JCIT (2018) 408 ITR 491/ 169 DTR 272 /(2019) 306 CTR 396 (Ker) (HC)

S. 36(1)(iii) : Interest on borrowed capital – Advances made to sister concerns from own funds – No disallowances can be made.[S. 37(1)]
Dismissing the appeal of the revenue the Court held that, Advances made to sister concerns from own funds accordingly, no disallowances can be made.Followed S. A. Builders Ltd v. CIT (2007) 288 ITR 1 (SC) (AY.1999-2000)
CIT v. Basti Sugar Mills Co. Ltd. (2018) 408 ITR 184 / 259 Taxman 97 (Delhi) (HC)

S. 36(1)(iii) : Interest on borrowed capital-Amount borrowed utilised for purchase of capital assets — Interest is deductible.
Dismissing the appeal of the revenue the Court held that ;amount borrowed was utilised for purchase of capital assets. Interest is deductible.
CIT v. Kanoria Sugar And General Manufacturing Co. Ltd. (2018) 407 ITR 737 (Raj) (HC)
Editorial : SLP of revenue is dismissed; CIT v. Kanoria Sugar And General Manufacturing Co. Ltd. (2018) 405 ITR 1 (St)

S. 36(1)(iii) : Interest on borrowed capital – 15% rate of interest was paid on borrowed capital – Allowable as deduction on principle of commercial expediency.[S. 37(1)]
Dismissing the appeal of the revenue the Court held that the Tribunal was right in deleting the addition made on account of interest expenditure at the rate of 15 per cent. Looking to the commercial expediency, it could not be said that the Tribunal had committed any error in deleting the addition.(AY.2008-09)
CIT v. Shree Benzophen Industries Ltd. (2018) 405 ITR 185 (Guj) (HC)
Editorial : SLP of revenue is dismissed ; CIT v. Shree Benzophen Industries Ltd. (2018) 401 ITR 170 (St)

S. 36(1)(iii) : Interest on borrowed capital —Capital can be used for acquisition of capital asset —Premature redemption of premium notes — Liability for interest is not contingent —Interest is deductible.
Allowing the appeal of the assessee the Court held that ;the non-convertible debentures and secured premium notes were both freely transferable. If the promoters’ secured premium notes holders and the banks and financial institutions therefore, traded in such secured premium notes, that would not indicate any colourable device of tax planning. Mere early redemption also would not be enough to hold that from the inception there was a device created by the company to defeat the Revenue’s interests. The interest was deductible.In order to claim deduction under section 36(1)(iii) of the Income-tax Act, 1961, all that is necessary is that the money, i. e., capital, must have been borrowed by the assessee, that it must have been borrowed for the purpose of business and lastly, that the assessee must have paid interest on the borrowed amount. All that is germane is whether the borrowing was, or was not, for the purpose of the business. The provision makes no distinction between money borrowed to acquire a capital asset or a revenue asset.(AY.1999-2000)
Nirma Ltd v. ACIT (2018) 405 ITR 277 (Guj) (HC)

S. 36(1)(iii) : Interest on borrowed capital-Advances were made out of interest free funds available with assessee-Allowable as deduction.
Dismissing the appeal of the revenue, the Court held that, when advances were out of interest free funds available with assessee, expenditure on borrowed amount is allowable as deduction.(AY. 2012-13)
PCIT v. Holy Faith International P. Ltd (2018) 407 ITR 445 (P& H) (HC)

S.36(1)(iii) : Interest on borrowed capital-Construction business-Stock in trade-Interest paid on borrowings for purchase land-Allowable as revenue expenditure.
Court held that; plot of land was purchased in course of business of assessee, same formed part of stock-in-trade of assessee, therefore, interest paid on loan taken for purchase of said plot of land is to be allowed as revenue expenditure.(AY. 1998-99)
Jayantilal Investments v. ACIT (2018) 257 Taxman 103 / 170 DTR 220 (Bom.)(HC)

S. 36(1)(iii) : Interest on borrowed capital-Manufacture and sale of fruit juice and like products-Joint venture company for production of milk-Interest borrowed for setting up of joint venture is held to be allowable as deduction.
Dismissing the appeal of the revenue the Court held that ; company engaged in business of manufacture and sale of fruit juice and like products entered into an agreement for setting-up of joint venture company with a Central Government agency and a State Government entity was well within purview of business operations of assessee. Accordingly interest paid on funds borrowed by assessee had to be regarded as a payment made for purpose of business of assessee and a permissible deduction. (AY. 2001-01, 2003-04)
CIT v. Keventer Agro Ltd. (2018) 256 Taxman 437 (Cal) (HC)

S.36(1)(iii) : Interest on borrowed capital-Firm-Exempt income-Capital assets received in form of shares in names of partners and not firm — Failure to establish shares forming part of capital account of firm —Disallowance was held to be justified.[S. 14A, 263]
Dismissing the appeal of the assesse the Court held that; since the assessee had failed to establish that the capital assets received were ever part of the firm’s capital account, the deduction claimed under section 14A could not have been allowed and had rightly been disallowed. The Tribunal had recorded a finding that the assessee was a firm and was assessed as a firm. The assessee was not trading in shares and its business was different in nature. The amount which was received as capital assets in the shape of shares were in the names of the partners and did not form part of the capital account of the firm, and therefore, the claim made by the assessee under section 36(1)(iii) read with section14A was not allowable in favour of the partners as, such a deduction could have only been granted to a firm. (AY. 2001-02)
Shiva Auto Mobiles (Auto Division) v. CIT (2018) 402 ITR 427 (All) (HC)

S.36(1)(iii) :Interest on borrowed capital – Advance to subsidiaries-Presumption is that the advance was from the interest free generated or available with the company-Disallowance of interest was held to be not valid.
Dismissing the appeal of the revenue the Court held that; when the advance made to subsidiaries the presumption is that the advance was from the interest free generated or available with the company hence disallowance of interest was held to be not valid. (AY. 2003-04 to 2006-07)
CIT v. Reliance Industries Ltd (2018) 161 DTR 420/ (2019) 410 ITR 468 (Bom.) (HC)
Editorial : Affirmed, CIT v. Reliance Industries Ltd (2019) 410 ITR 466 /175 DTR 1/ 307 CTR 121 (SC)

S.36(1)(iii) : Interest on borrowed capital — Interest free advances out of surplus funds hence interest was held to be allowable.
Tribunal held that; the assessee had advanced interest-free loans out of its surplus funds, the question of disallowing the expenditure in respect of interest incurred on the borrowed funds did not arise, inasmuch as, no part of the borrowed funds had been advanced by the assessee to the concerned partieS. The Tribunal was justified in upholding the deletion of disallowance of interest expenseS. (AY. 2007-08)
PCIT v. Sahjanand Laser Technology Ltd. (2018) 401 ITR 478 (Guj) (HC)

S. 36(1)(iii) : Interest on borrowed capital-Borrowings for expansion of business, interest was held to be allowable as deduction-Amendment to S. 36,with effect From 1-4-2004 is prospective and not retrospective. [S. 37(1)]
Dismissing the appeal of the revenue the Court held that the expenditure claimed under section 36(1)(iii) of theIncome-tax Act, 1961 on account of interest paid on borrowed capital for expansion of business was allowable revenue expenditure. The Explanation to the proviso to section 36(1)(iii) had not made the amendment retrospective but only prospective.
CIT v. Modern Threads (I) Ltd. (2018) 400 ITR 381 (Raj) (HC)
CIT v. Modern Syntex (2018) 400 ITR 381 (Raj) (HC)

S. 36(1)(iii) : Interest on borrowed capital – Advance to director for the purpose of business-Disallowance of interest cannot be made.
Dismissing the appeal of the revenue, the Court held that; advance was paid to director to acquire guest house for the business purposes, disallowance of interest was held to be not justified. (AY. 2009-10)
CIT v. Mira Exim Ltd. (2018) 400 ITR 28 (Delhi) (HC)

S. 36(1)(iii) : Interest on borrowed capital-Finance cost-Advertising agency- Held to be not allowable as revenue expenditure as no business income was earned from advertising business or real estate business during the year.[S. 37(1)]
AO held that finance cost could not be allowed as business expenses as there was no business activity during year under consideration which was up held by the CIT(A). Tribunal held that merely because revenue accepted said claim of interest as business expenses in earlier years in summary proceedings u/s. 143(1) did not create res-judicata as revenue had never gone into details of said claim as return of income was accepted in summary manner u/s 143(1) without scrutiny. Tribunal also held that when there is no income earned by assessee from advertising business as well from real estate business then finance cost incurred as interest on Bank Overdraft could be disallowed.(AY.2012-13)
Dheeraj Consultancy (P) Ltd v. ACIT (2018) 168 DTR 52 / 193 TTJ 638 (Mum.) (Trib.)

S. 36(1)(iii) : Interest on borrowed capital-Advance to group concerns out of its own funds –Commercial needs-Disallowance of interest is held to be not justified.
Tribunal held that the assessee had demonstrated with evidence that loans to group companies were out of its own funds and also such loans had been given in commercial interest, therefore, AO was incorrect in disallowing proportionate interest on loans given to group companies. Assessee was holding more than 33% equity stake in company for which loans have been given and also derived commercial benefit–Therefore, AO was incorrect in holding that assessee had diverted interest bearing funds to give loans to group companies. (AY.2011-12)
Scrabble Entertainment Ltd. v. ACIT (2018) 169 DTR 51 /193 TTJ 418 (Mum.) (Trib.)

S. 36(1)(iii) : Interest on borrowed capital – Provision for interest on funds provided by government – Held to be allowable, subject to verification of payments in the subsequent years.
Tribunal held that, where provision was made on a reasonable and scientific basis, the same had to be allowed as a deduction after verification of the fact that the assesse actually paid the said amount in the subsequent years. (AY. 2008-09)
M. P. Police Housing Corporation Ltd. v ACIT (2018) 68 ITR 53 (Indore) (Trib.)

S. 36(1)(iii) : Interest on borrowed capital –No proportionate disallowance of interest can be made unless the department establishes that the borrowed funds were utlilised for advancing interest free funds to relatives.
Tribunal held that where Department failed to establish nexus between interest bearing funds borrowed and interest free advances given to relatives of Assessee, no proportionate disallowance can be made for interest on borrowed funds (AY.2010-11)
ACIT v. Rohit Kochar (2018) 68 ITR 67 (SN) (Delhi) (Trib.)

S. 36(1)(iii) : Interest on borrowed capital-Loan taken for purchase of shares – Shares held as stock in trade – Business expenditure – Accepted in earlier year – Allowable as deduction-Department cannot take a different stand. [S. 37(1)]

Theassesse is engaged in the business of dealing in shareS. It had paid interest on borrowed funds utilized for advance towards share application money. These shares were held as stock in trade by the assesse. Hence, it could be safely concluded that the assesse had utilized the borrowed funds for business purposes. The department had accepted borrowing being used for business purposes in the earlier year. Thus, allowing the appeal of the assesse the Tribunal held that the department cannot take a different stand during the year and directed the AO to delete the disallowance made towards interest paid on borrowed funds. (AY.2004-05)
ITO v. Abhinand Investment Ltd.(2018) 192 TTJ 51(UO) (Kol)(Trib.)

S. 36(1)(iii): Interest on borrowed capital-Interest paid on loan borrowed for renovation and modernization in assessee’s factory premises-Allowable as deduction.
Tribunal held that loan was taken for the purpose of renovation carried out in the factory hence allowable as deduction.(AY. 2011-12)
Laboratories Griffon (P) Ltd v .Dy CIT (2018) 170 ITD 387/65 ITR 317 /193 TTJ 855 ( 2019) 178 DTR 355 (Kol) (Trib.)

S.36(1)(iii): Interest on borrowed capital-Mixed funds-Presumption is that the advance to sister concern is made from own funds-Dept’s argument that Maxopp Investment Ltd v.CIT (2018) 402 ITR 640 (SC) /Avon Cycles Ltd v.CIT (P&H (HC) (ITA No 277 of 13) overrules the presumption that advances to sister concerns are made from own funds and not borrowed funds is not correct-No disallowances can be made.
Dismissing the appeal of the revenue the Tribunal held that, presumption is that the advance to sister concern is made from own funds is good law.Dept’s argument that Maxopp Investment Ltd v.CIT (2018) 402 ITR 640 (SC) /Avon Cycles Ltd v.CIT (P&H (HC) (ITA No 277 of 13) overrules the presumption that advances to sister concerns are made from own funds and not borrowed funds is not correct hence no disallowances can be made.(ITA No. 470/Chd/2018, dt. 16.10.2018)(AY.2014-15)
ACIT v. Janak Global Resources Pvt.Ltd. (Chd.)(Trib.),www.itatonline.org

S. 36(1)(iii) : Interest on borrowed capital- Finance charges shall not be deductible where the activity carried out by assessee was as investment activity. [S. 37(1)]
Tribunal held that ; assessee itself admitted that it was in activity of investment in group companies for acquiring controlling interest and such investment had been treated as long term investment in its financial statements. Statutory auditors of company reported that company was not engaged in carrying on any business or as part of its business activity of acquisition of shares except making long term investmentS. Accordingly the AO and CIT(A) were right in treating activity carried out by assessee as investment activity and accordingly finance charges was not deductible u/s 36(1)(iii). (AY. 2003 – 2004)
Asia Investments Private Limited v. ACIT (2018) 167 DTR 59 / 63 ITR 535 / 193 TTJ 214 (Mum.)(Trib.)

S. 36(1)(iii) Interest on borrowed capital – Where capital was borrowed for acquisition of fixed assets and only a part of assets were put to use, then interest was to be allowed only to the extent the assets were operational during the current year.
Tribunal held that only one unit commenced in the preceding year and the other unit was set up and commenced in the subsequent year. Accordingly, in view of proviso to section 36(1)(iii) of the Act, only those assets which were put to use in the current year, was operational in nature and only to that extent interest on borrowed capital for
acquisition of assets was to be allowed as a deduction. (AY. 2005-06)
ACIT v. Pasadensa Foods Ltd. (2018) 163 DTR 243 /192 TTJ 645 (Delhi)(Trib.)

S. 36(1)(iii) : Interest on borrowed capital – Disallowance cannot be made as Assessee established that loan advanced at interest lower than interest paid on unsecured loans out of interest free funds.
Assessee advanced loan for interest @ 6% and paid interest on most of the unsecured loans @ 18%. Assessee established that the loan was given out of interest free fundS. The AO could not bring on record any evidence to show that the interest free funds were used for any other purposeS. Tribunal held that if the interest free surplus funds are available to the assessee, assessee is free to use the funds at his option and deleted the disallowance so made. (AY. 2014-15)
Grandhi Sri Venkata Amarendra v. ACIT (2018) 66 ITR 66 (SN)(Vishakha.)(Trib.)

S. 36(1)(iii) : Interest on borrowed capital–AO cannot step into the shoes of the businessmen – Interest is allowable on borrowed funds used for the purpose of business.
The AO had made the disallowance u/s 36(1)(iii) of the Act on the premise that the assessee could have repaid the borrowed funds out of sale proceed of the land and could have reduced the interest burden. The ITAT reiterating the favourable CIT(A) order held that the AO cannot step into the shoes of the businessmen and decide as to how the mange the affairs. For making disallowance u/s 36(1)(iii), the AO has to demonstrate that borrowed funds were diverted for non-business purpose and as in the present case the AO has not gathered any evidence to prove the same, therefore the disallowance made by the AO u/s 36(1)(iii) was deleted by the ITAT.
DCIT v. Rajendra Bansilal Raisoni (2018) 66 ITR 655 / 53 CCH 606(Pune)(Trib.)

36(1)(iii) : Interest on borrowed capital – Interest in share capital of other companies – Held, for business purpose therefore, no disallowance u/s 36(1)(iii). Such investment as well as such interest cannot be considered for computing disallowance u/s 14A.[S. 14A, R..8D(2)(ii)]
AO disallowed interest in respect of investment made in shares of companies out of interest bearing funds u/s 36(1)(iii) on the ground of non-business purpose. CIT(A) held that investments are for business purpose therefore, no disallowance u/s 36(1)(iii) required. However, he made disallowance u/s 14A of the Act. The Tribunalheld that investment in the companies were for business purpose and therefore, interest was allowable u/s 36(1)(iii) of the Act. Further, it was held that such investment cannot be considered for the purpose of Rule 8D(2)(ii). Also, interest attributable to such investment cannot be considered for the purpose of Rule 8D(2)(ii) as such interest is allowable as business expenditure u/s 36(1)(iii). (AY. 2009-10)
CIT v. VBC Ferro Alloys Ltd. (2018) 63 ITR 633 (Hyd.)(Trib.)

S.36(1)(iii) : Interest on borrowed capital-Business expenditure-Advance to subsidiary companies out of borrowed funds who further gave said advances to SPVs of assessee who utilised for carrying on business activities of construction and development of airports – No business activities under taken – Expenditure incurred on finance charges is held to be not allowable as deduction- there is evidence of nexus of borrowing funds being invested in sister concern and assessee sources of income can only be earning dividend income, the entire interest income has to be considered for disallowance under section 14A under rule 8D2(i)/(ii) for the impugned assessment year. [S. 14A, 37(1),R.8D(1)(ii)]

Dismissing the appeal of the assessee the Tribunal held that ; advance to subsidiary companies out of borrowed funds who further gave said advances to SPVs of assessee who utilised for carrying on business activities of construction and development of airports.As no business activities under taken, expenditure incurred on finance charges is held to be not allowable as deduction. Tribunal also held that there is evidence of nexus of borrowing funds being invested in sister concern and assessee sources of income can only be earning dividend income, the entire interest income has to be considered for disallowance under section 14A under rule 8D2(i)/(ii) for the impugned assessment year. (AY.2012-13
GVK Airport Developers Ltd. v. ITO (2018) 172 ITD 109/ 195 TTJ 246 / 66 ITR 9 (SN)/ 169 DTR 209(Hyd.)(Trib.)

S. 36(1)(iii) : Interest on borrowed capital –Captive power plant for expansion of existing business-Allowable as deduction irrespective of fact whether such power plant had commenced production or not in year under consideration.
Dismissing the appeal of the revenue the Tribunal held that; interest incurred on power plant was incidental to pharma unit, irrespective of fact whether such power plant had commenced production or not in year under consideration assessee’s claim was to be allowed.(AY. 1998-99 to 2002-03)
DCIT v. Core Health Care Ltd. (2018) 171 ITD 455 (Ahd) (Trib.)

S. 36(1)(iii) : Interest on borrowed capital-Finance Charges-Not deductible as these expenses were not relatable to the main business activity of the assessee. [S. 57(iii)]
Tribunal held that finance charges was not deductible u/s 36(1)(iii) as these expenses were not related to the main business activities of the assessee. An alternate plea was made by the assessee to allow finance charges under S. 57(iii) of the Act. So far as alternate plea of the assessee that dividend income earned for the year under consideration is taxable, the corresponding expenditure incurred including interest was allowed on proportionate basis considering the total dividend income earned by the assessee. (AY. 2003-04)
Asia Investments Pvt Ltd v. ACIT (2018) 63 ITR 535 / 193 TTJ 214 (Mum.)(Trib.)

S. 36(1)(iii) : Interest on borrowed capital — Disallowance on interest debited to profit and loss account as attributable to amounts invested in capital work-in-progress is justified.
Disallowance on interest debited to profit and loss account as attributable to amounts invested in capital work-in-progress is justified. (AY.2010-11)
Joy Alukkas (India) Ltd. v. ACIT (2018) 65 ITR 409 (Cochin) (Trib.)

S. 36(1)(iii) : Interest on borrowed capital – Own funds more than investment-Disallowance of interest cannot be made.
Tribunal held that investment had been done out of mixed source of fundS. The assessee had sufficient own funds which covered more than the investment made. Moreover, the Commissioner (Appeals) had given a finding that the loan funds were for a specific purpose and there had been no dilution of the funds. Therefore no disallowance could be made.(AY.2010-11)
CIT v. Kiran Gems Pvt. Ltd. (2018) 64 ITR 689 (Mum.) (Trib.)

S. 36(1)(iii) : Interest on borrowed capital-Interest on loan taken for renovation and modernisation of factory premises is allowable as deduction.
Dismissing the appeal of the revenue the Tribunal held that, Interest on loan taken for renovation and modernisation of factory premises is allowable as deduction.(AY.2011-12)
DCIT v. Laboratories Griffon (P.) Ltd. (2018) 170 ITD 387 / 65 ITR 317 /193 TTJ 855/ 178 DTR 355 (Kol) (Trib.)

S. 36(1)(iii) : Interest on borrowed capital-Work in progress-Expansion of existing business-interest on capital work-in-progress representing amount incurred on installation of new towers, is held to be not allowable as deduction.Matter was setaside to AO to verify if investment was made from interest free funds no disallowances can be made.
Tribunal held that since process of installation of towers was still going on at end of year interest on capital work-in-progress representing amount incurred on installation of new towers, is held to be not allowable as deduction.The contention advanced by the assessee a business in existence and capital is borrowed for acquisition of asset for extension of such existing business. Is also rejected. The contention that the investment in CWIP was made out of own interest free funds and hence no interest can be attributed to any capital borrowed for the purpose of making such an investment. The matter was set aside for verification. It is made clear that if there is some direct borrowing for investing in CWIP, then interest paid on such borrowing has to be disallowed. If, on the other hand, there is no specific borrowing, the financing of CWIP has to be treated as out of interest free shareholders’ fund. In such a scenario, no disallowance of interest can be made as the interest free shareholders’ fund would be higher than the amount of investment in CWIP.(AY.2009-10)
DCIT v. Vodafone Essar Digilink Ltd. (2018) 170 ITD 430 / 193 TTJ 150 /166 DTR 233 / 64 ITR 392 (Delhi) (Trib.)

S. 36(1)(iii) : Interest on borrowed capital-Having its own capital at end of financial year relevant assessment year for advancing money for not charging interest, interest payment cannot be disallowed.
Dismissing the appeal of the revenue the Tribunal held that. when the assesee is having, Having its own capital at end of financial year relevant assessment year for advancing money for not charging interest, interest payment cannot be disallowed. (AY. 2010-11)
DCIT v. Narayani Ispat Pvt. Ltd. (2018) 61 ITR 371 (Kol.) (Trib.)

S. 36(1)(iii) : Interest on borrowed capital-Investment in subsidiaries-Nexus was established-Interest was held to be allowable deduction.
Tribunal held that, interest paid on borrowed money was held to be allowable as deduction as nexus was established. (AY. 2009-10)
ACIT v. Chambal Fertilisers And Chemicals Limited. (2018) 61 ITR 33 (Jaipur) (Trib.)

S. 36(1)(iii) : Interest on borrowed capital —Interest free fund was used for purchase of land and construction of godown hence interest paid on borrowed capital was held to be allowable.
Tribunal held that; interest free fund was used for purchase of land and construction of godown hence interest paid on borrowed capital was held to be allowable. (AY. 2013-14)
DCIT v. Incite Homecare Products (P.) Ltd. (2018) 61 ITR 94 (Chd.) (Trib.)

S. 36(1)(iv) : Contribution to recognized provident fund – Amalgamated company-Matter remanded.[S. 37(1)]
The assessee made payment on account of conTrib.ution to a superannuation fund relating to the erstwhile amalgamated company. Since that company was amalgamated with effect from the AY 2003-04, the AO held that the assessee was not eligible for deduction u/S. 36(1)(iv) because this particular fund was not recognised as per rule 2, Part B of Schedule 6 to the Act. Tribunal remanded the matter for verification.(AY.2005-06)
ACIT v. Ballarpur Industries Ltd. (2018) 64 ITR 21 (SN)/ / 168 DTR 225 / 193 TTJ 521 (Nag)(Trib.)

S.36(1)(iv) : Contribution to recognized provident fund – Contribution to provident fund which is constituted under Gujarat Co Operative Societies Act, 1961 is eligible deduction.[S. 2(38) 40A(9),Gujarat Co-operative Societies Act, 1961,S. 71, 72]
ConTrib.ution to a provident fund which has been constituted under section 72 of Gujarat Co-operative Societies Act, 1961 and administered under section 71 of said Act would be treated as a fund contemplated in definition of section 2(38) and provisions of sections 36(1)(iv) and 40A(9) would apply to such a fund. ConTrib.ution is eligible for deduction. (AY. 2010-11)
Shree Kadodara Vibhag Nagrik Bachat Ane Dhiran Karnari Sahkari Mandli Ltd. v. ITO (2018) 171 ITD 431 (Ahd,) (Trib.)

S.36(1)(v): Contribution approved gratuity fund-ConTrib.utions paid to LIC as premium for policy obtained for indemnification of gratuity liability towards employees, even for prior years, when employees were in employment of company taken over by assessee would be eligible for deduction.[S. 37(1)]
Allowing the appeal of the assessee the Court held that; contributions paid by the assessee to the LIC as premium for the policy obtained for indemnification of the gratuity liability towards the employees even for the prior years, when the employees were in the employment of the Company taken over would be eligible for deduction.
Nortrans Marine Services (P.) Ltd. v. ACIT (2018) 258 Taxman 115 / 305 CTR 321/ 170 DTR 108(Ker.)(HC)

S. 36(1)(v); Contribution approved gratuity fund-Payment to a gratuity fund on a date prior to date of approval of a gratuity fund-Deduction cannot be denied.
Tribunal held that, payment to a gratuity fund on a date prior to date of approval of a gratuity fund. Deduction cannot be denied. Followed,CIT v. Jaipur Thar Grameen Bank(2016) 388 ITR 228(Raj) (HC) .Tribunal observed that, notwithstanding the effective date of approval set out by the Commissioner in his approval order, the approval granted to the employees’ gratuity trust must be treated as effective from date of set-up of trust and, on that basis, the contribution made by the assessee to the said trust was held to be admissible as deduction under S. 36(1)(v) of the Act.
Prakash Software Solution (P) Ltd. v. ITO (2018) 161 DTR 9 / 191 TTJ 64 (Ahd.) (Trib.)

S. 36(1)(va) : Any sum received from employees -Employer’s conrtribution is allowable as deduction if the payment is made before due date of filing of return u/s 139(1)- Deduction in respect of employees’ contribution to ESI and EPF is available only if same is paid within due date as specified under relevant statutes. [S. 2(24)(x), 43B, 139(1)]
Court held that payments of employer’s conTrib.ution to provident fund and ESI made on or before due date for filing return of income under S. 139(1), has to be allowed as deduction under S. 43B of the Act. As regards employee’s contribution is concerned, assessee is entitled to get deduction of amount as provided under S. 36(1)(va) only if amounts so received from employee is credited in specified account within due date as provided under relevant statuteS. (AY.2008-09)
Popular Vehicles & Services (P.) Ltd. CIT (2018) 406 ITR 150/ 257 Taxman 120/ 304 CTR 407 / 169 DTR 303 (Ker)(HC)

S. 36(1)(va) : Any sum received from employees – EPF-ESI-ConTrib.ution from employees has to be paid with in due date as per particular enactment-Disallowance is held to be justified. [S. (2924)(x), 43B]
Dismissing the appeal of the assessee the Court held that, the belated payment made by the assessee in this case was not the “employer’s contribution ” but on the other hand, it was the “employees’ contribution “, which it had received already. Therefore, the Assessing Officer was justified in disallowing the payment on the ground that the payment was made beyond the due date. (AY.2015-16)
Unifac Management Services (India) Pvt Ltd v.DCIT (2018) 409 ITR 225/(2019)260 Taxman 60 / 175 DTR 5 / 307 CTR 168 (Mad) (HC)

S. 36(1)(va) : Any sum received from employees – Provident fund and employees State Insurance-Allowable as deduction though the amount was deposited after the due date but before the due date of filing of return.[S. 43 B,139(1)]
Provident fund and employees State Insurance,amount deposited after due date but before the due date of filing of return allowable as deduction.(AY. 2011-12)
DCIT v. Godawari Power & Ispat Ltd. (2018) 68 ITR 19 (SN)(Raipur) (Trib.)

S. 36(1)(va) : Any sum received from employees –Employees’ contribution to PF and ESIC-Amounts not deposited in relevant fund before due date as prescribed in Explanation to section 36(1)(va)-No deduction is allowable even though same was deposited before due date as stipulated under section 43B of the Act. [S. 43B, 139(1)]
Tribunal held that ; the amounts not deposited in relevant fund before due date as prescribed in Explanation to section 36(1)(va) of the Act. Accordingly no deduction is allowable even though same was deposited before due date as stipulated under section 43B of the Act. (AY.2013-14)
Ocean Agro (India) Ltd. v. DCIT (2018) 172 ITD 157 (Ahd) (Trib.)

S. 36(1)(va) : Any sum received from employees-Employees contribution to PF and ESI was allowable deduction to the assessee if deposited before due date of filing of return u/s 139(1) of the Act. [S. 139(1)]
Tribunal held that the employees contribution to PF and ESI was allowable deduction to the assessee if deposited before due date of filing of return u/s 139(1) of the Act.
Powerware India P. Ltd. v. ITO (2018) 61 ITR 746 (Cuttack) (Trib.)
S. 36(1)(vii) : Bad debt – Mere write off is sufficient and it is not necessary to establish that debt had become irrecoverable.
Dismissing the appeal of the revenue the Court held that ; Mere write off is sufficient and it is not necessary to establish that debt had become irrecoverable. (AY.2007-08)
CIT v. Vishal Transformers And Switchgears Pvt. Ltd. (2018) 405 ITR 266 (All) (HC)

S. 36(1)(vii) : Bad debt – Sums written off in books of assessee ia sufficient to claim the bad debt and assessee is not required to prove the recoverability of debt.
Dismissing the appeal of the revenue the Court held that, Sums written off in books of assessee ia sufficient to claim the bad debt and assessee is not required to prove the recoverability of debt.Circular No. 551, dt.23 -01-, 1990 (1990) 183 ITR 7 (St) (AY.2005-06)
CIT v. Eco Auto Components Pvt. Ltd. (2018) 409 ITR 202 (P&H) (HC)

S. 36(1)(vii) : Bad debt-Failure of subscribers of chit fund to make payment of their instalments is allowable as bad debt.
Dismissing the appeal of the revenue the Court held that ; in view of decision in case of Sriram Chits & Investments (P.) Ltd. v. UOI AIR 1993 SC 2063,/(1994) 79 Comp Cas 298 (SC) where prize chit winner defaulted in his payments of instalments, same was to be allowed as bad debt. (AY. 1997-98)
CIT v. Shriram Chits & Investments (P.) Ltd. (2018) 257 Taxman 395 / (2019) 410 ITR 10 (Mad.)(HC)

S.36(1)(vii): Bad debt-Business loss-Finance company-Advances in form of equity participation to derive income- Investment written off is allowable as bad debt.[S. 28(i)]
Dismissing the appeal of the revenue the Court held that, where monies were advanced through the mechanism of equity participation, the intention of the assessee was to derive income rather than to increase its investment on the capital side. If it were profits with the assessee from the investment it would have been on the revenue side of income and since it was the converse, the losses were properly and rightly claimed as bad debts by the assessee. Referred Badridas Daga v. CIT (1958) 34 ITR 10 (SC) and Associated Banking Corporation of India Ltd v.CIT (1956) 56 ITR 1 (SC)
CIT v. Industrial Finance Corporation Of India Ltd. (2018) 404 ITR 629 (Delhi) (HC)
Editorial : SLP of revenue is dismissed, CIT v. Industrial Finance Corporation Of India Ltd. (2018) 401 ITR 171 (St.)(SC)

S. 36(1)(vii) : Bad debt-Unrealizable subscription dues from the cable operators written off by the assessee in the books of accounts is allowable as bad debt.
Unrealizable subscription dues from the cable operators written off by the Assessee in the books of accounts is allowable as bad debts.Followed,TRF Ltd v. CIT (2010) 323 ITR 397 (SC) (AY. 2008-09)
Sun TV Network Ltd v. ACIT (2018) 196 TTJ 944 / 172 DTR 345(Chennai)(Trib.)

S. 36(1)(vii) : Bad Debt — Write-off in books of account sufficient compliance, no further requirement to prove debt has become bad.
In respect to trade debtors, write-off of bad debts in the books of account was sufficient for claiming deduction under the amended provisions of S.36(1)(vii) and the assessee was not further required to prove that the debt had become bad. (AY.2005-06)
ACIT v. Ballarpur Industries Ltd.(2018) 64 ITR 21(SN)/ 168 DTR 225 / 193 TTJ 521 (Nag)(Trib.)
S.36(1)(vii) : Bad debts– Provision for bad and doubtful debts which was not written off cannot be allowable as deduction.
Tribunal held that provision for bad and doubtful debts which was not written off cannot be allowable as deduction.(AY. 2007-08, 2009-10)
Shalom Charitable Ministries of India v. ACIT (2018) 171 ITD 338 / 195 TTJ 340 (Cochin)(Trib.)

S.36(1)(vii) :Bad debt-Amount written in books of account although the entry was back dated was held to be allowable as deduction.
Dismissing the appeal of the revenue the Tribunal held that; Amount written in books of account although the entry was back dated was held to be allowable as deduction. (AY. 2011-12)
DCIT v. Associated Pigments Ltd. (2018) 61 ITR 553 (Kol.) (Trib.)

S.36(1)(vii): Bad debt-Amounts written off was held to be allowable as deduction.
Tribunal held that the amount written off was held to be allowable as deduction. (AY. 2009-10, 2010-11)
ACIT v. Claridges Hotels Pvt. Ltd. (20180 61 ITR 135 (Delhi) (Trib.)

S. 36(1)(viia) : Bad debt-Provision for bad and doubtful debts-Schedule bank-Aggregate average advance made by rural branches of scheduled bank would be computed by taking amount of advances made by each rural branch as outstanding at end of last day of each month comprised in previous year which had to be aggregated separately. [R.6ABA]
Dismissing the appeal of the revenue the Court held that; for purpose of S. 36(1)(viia), aggregate average advance made by the rural branches of scheduled bank would be computed by taking amount of advances made by each rural branch as outstanding at the end of the last day of each month comprised in the previous year which had to be aggregated separately.(AY.2008-09,2009-10)
PCIT v. UttarBang.a Kshetriya Gramin Bank (2018) 408 ITR 393/ 256 Taxman 72 (Cal)(HC)

S.36(1)(viia) : Bad debt-Provision for bad and doubtful debts-Schedule bank – Claim which is disallowed as bad debt can not be allowed in the absence of provision made for the same in profit and loss account under bad debt [S. 36(1)(viii)]
Tribunal held that,claim which is disallowed as bad debt can not be allowed in the absence of provision made for the same in profit and loss account under bad debt.(AY.2012-13)
Jila Sahakari Kendriya Bank Maryadit. v. DCIT (2018) 173 ITD 211 / 66 ITR 73 (SN)(2019) 197 TTJ 851 (Indore) (Trib.)

S.36(1)(viia) : Bad debt-Provision for bad and doubtful debts-Schedule bank-Provision for standard assets is purely contingent hence cannot be allowed as deduction.
Allowing the appeal of the revenue, the Tribunal held that, provision for standard asset is purely contingent and cannot be allowed as deduction. (AY.2010-11, 2011, 12]
ACIT v. Chaitanya Godavari Grameena Bank. (2018) 170 ITD 668/ 66 ITR 31 (SN)(Vishakha)(Trib.)

S. 36(1)(viia) : Bad debt-Provision for bad and doubtful debts-Schedule bank – Rural or Non Rural advances-Entitled for deduction subject to upper limit of deduction laid down in said section-Matter remanded.
Tribunal held that provision for bad and doubtful debts is created, in respect of rural or non-rural advances by debiting profit and loss account is entitled for deduction subject to upper limit of deduction laid down in said section. Matter remanded for verification.(AY.2010-11, 2011, 12]
ACIT v. Chaitanya Godavari Grameena Bank. (2018) 170 ITD 668 / 66 ITR 31 (SN)(Vishakha)(Trib.)

S. 36(1)(viii) : Eligible business-Special reserve-Artificial increase of profit by assessee by adding back amortization and depreciation in SLR investment so as to arrive higher amount of profit for claiming deduction under section 36(1)(viii) was unjustified.
Dismissing the appeal of the assessee the Court held that ; Artificial increase of profit by assessee by adding back amortization and depreciation in SLR investment so as to arrive higher amount of profit for claiming deduction under section 36(1)(viii) was unjustified. (AY.2012-13)
Pragathi Krishna Gramin Bank. JCIT (2018) 256 Taxman 349 (Karn.)(HC)

S. 37(1) : Business expenditure–Pendency of constitutional validity of proviso to Rule 9A-Matter remanded to CIT(A) to decide on merits.[R.9A]
During pendency of appeal against assessment order passed under section 143(3), assessee filed a petition challenging constitutional validity of proviso to rule 9A, since assessee’s appeal was pending before Commissioner (Appeals) on merits, interest of justice would be served by not examining presently issue of constitutional validity and legality of proviso to rule 9A.Matter remanded.
Satish Yashwant Kulkarni v. UOI (2018) 259 Taxman 489 (Bom.)(HC)

S. 37 (1) : Business expenditure—Travelling expenditure of wife of Company’s senior executive accompanying him abroad for his medical treatment — Expenditure is held to be not allowable.[S. 264]
Court held that,travelling expenditure of wife of Company’s Senior Executive accompanying him abroad for his medical treatment is not allowable as business expenditure. Accordingly dismissal of revision application is valid.
Harrisons Malayalam Ltd. v. CIT (2018) 409 ITR 621 (Ker) (HC)

S. 37(1) : Business expenditure-Granting monetary benefit to legal heir of a former employee on the basis of resolution passed by the cpmpany is allowable as business expenditure.
Dismissing the appeal of the revenue the Court held that, granting monetary benefit to legal heir of a former employee on the basis of resolution passed by the cpmpany is allowable as business expenditure,though the company did not have any pension scheme.(AY.2003-04)
CIT v. India Motor Parts & Accessories Ltd (2018) 255 Taxman 132 (Mad)(HC)

S. 37(1) : Business expenditure –Capital or revenue-Product development expenses-Expenditure incurred improving quality of existing products – Held to be allowable as revenue expenditure.
Dismissing the appeal of the revenue the Court held that, product development expenses which is incurred improving quality of existing products and not involve development of new product is held ato be allowable as revenue expenditure.(AY. 2001-02)
CIT v. Arvind Products Ltd (2018) 255 Taxman 472 (Guj) (HC)
S. 37(1) : Business expenditure –Ad hoc disallowance of 10% claim-Bricks, machinery repairs, cartage, labour expenses-No adhoc disallowances can be made without rejecting the books of account and also allowed in the past consistently such expenses in scrutiny assessments.[S. 143(3), 144]
Dismissing the appeal of the revenue the Court held that the Tribunal was justified in holding that no ad hoc disallowances of 10% of claim in respect of bricks, machinery repairs, cartage, labour expenses etc can be made without rejecting the books of account and also in the past, consistently such expenses were allowed in scrutiny assessments.(AY. 2010-11)
PCIT v. R. G. Buildwell Engineers Ltd (2018) 99 taxmann.com 283 / 259 Taxman 371 (Delhi) (HC)
Editorial : SLP of revenue is dismissed, PCIT v. R. G. Buildwell Engineers Ltd (2018) 259 Taxman 370 (SC)

S.37(1) : Business expenditure-Ad-hoc disallowance of 5%-Tribunal is justified in holding that where the assessee had furnished names and PAN numbers of all vendors to whom it had paid repair and maintenance charges for their services disallowance of ad-hoc disallowance of 5% of expenses is held to be not justified.
Dismissing the appeal of the revenue the Court held that,Tribunal is justified in holding that where the assessee had furnished names and PAN numbers of all vendors to whom it had paid repair and maintenance charges for their services disallowance of ad-hoc disallowance of 5% of expenses is held to be not justified.(AY.2005-06)
PCIT v. Rambagh Palace Hotels (P.) Ltd. (2018) 259 Taxman 31 (Delhi) (HC)

S. 37(1) : Business expenditure – Capital or revenue-Encashment of bank guarantee-Failure to perform its part of concessionaire agreement, DTC encashed bank guarantee-Allowable as revenue expenditure..
Dismissing the appeal of the revenue the Court held that ; since property constructed was not owned by assessee but by third party i.e. DTC, expenditure incurred in question by assessee was not capital expenditure but revenue expenditure. Even otherwise, since payment made by assessee was on account of failure to perform its part of agreement including operation and maintenance of bus shelters, same was necessarily revenue in character.(AY. 2009-10)
PCIT v. Green Delhi BQS Ltd. (2018) 259 Taxman 153/ (2019) 175 DTR 131 / 307 CTR 809 (Delhi) (HC)

S. 37(1) : Business expenditure – Capital or revenue-Assessee did not purchase and acquire title in the trademark or retain any rights in the mark – Lump-sum payment was for obtaining an advantage in carrying on its business as it merely facilitated the assessee’s business in India and hence of revenue nature.
Held by the High Court, that assessee was not the owner of the trademark and it only had permission / approval to use such trademark and any benefit of the use of the trade mark during the period when it stood licensed to the assessee inures to the owner of trademark. The use of trademark thus merely facilitated the assessee’s business and the lump-sum payment was for the purpose of obtaining an advantage in carrying on its business hence of revenue nature. (AY. 1996-1997)
Hilton Roulunds Ltd.v. CIT (2018) 304 CTR 721 /167 DTR 131 / 255 Taxman 209/ (2019) 412 ITR 436 (Delhi) (HC)

S. 37(1) : Business expenditure –Publicity expenses- Donations to support educational and social activities is held to be allowable as business expenditure.
Dismissing the appeal of the revenue the Court held that ; donations to support educational and social activities is held to be allowable as business expenditure.
PCIT v. Lord Chloro Alkali Ltd. (2018) 97 taxmann.com 513/ 258 Taxman 131 (Raj) (HC)
Editorial : SLP of revenue is dismissed. PCIT v. Lord Chloro Alkali Ltd. (2018) 258 Taxman 130 (SC)

S. 37(1) : Business expenditure – Salary paid to a sweeper for cleaning premises and hall which is in the name of founder of the company is held to be not allowable as deduction.
Allowing the appeal of the revenue the Court held that; salary paid to a sweeper for cleaning premises and hall which is in the name of founder of the company is held to be not allowable as deduction. (AY. 1999-2000)
CIT v. Malayala Manorama Co. Ltd. (2018) 258 Taxman 238 /(2019) 410 ITR 423 (Ker.)(HC)

S. 37(1) : Business expenditure-Software development -Provision towards liability for warranty for goods supplied was not crystalised during relevant year and it was merely provisional in nature-Not allowable as deduction.[S. 145]
Dismissing the appeal of the assessee the Court held that ;on a perusal of working submitted by assessee, it is found that there is absolutely no historical trend based on which, the assessee has made such a deduction. In fact, everything appears only to be a provision and nothing has been substantiated and as rightly pointed out by the Assessing Officer, the assessee has failed to crystalise the said provision at the end of the previous year. (AY. 2001-02)
Laser Soft Infosystems Ltd. v. ITO (2018) 258 Taxman 308 (Mad.)(HC)

S. 37(1) : Business expenditure –Commission payments made to agents who procured orders and themselves were made liable to recover price of goods sold by them – Held to be allowable as deduction.
Allowing the appeal of the assessee the Court held that ; since agents of assessee made themselves liable to recover price of goods sold by them, they were del cedere agents, therefore, commission payment made to these two agents would be allowed as business expenditure. (AY. 2003-04)
Landis + GYR Ltd. v. CIT (2017) 77 taxmann.com 253 (Cal) (HC)

Editorial : SLP of revenue is accepted ; CIT v. Landis + GYR Ltd. (2018) 258 Taxman 60 (SC)

S. 37(1) : Business expenditure – Capital or revenue-In view of fact that advanced technology software become obsolete within short intervals-Expenditure incurred on software expenses is held to be revenue expenditure.
Dismissing the appeal of the revenue the Court held that, in view of fact that advanced technology software become obsolete within short intervals. Expenditure incurred on software expenses is held to be revenue expenditure. (AY. 2000-01, 2001-02)
CIT v. Lakshmi Vilas Bank Ltd. (2018) 258 Taxman 193 / 304 CTR 798 / 170 DTR 270 (Mad.)(HC)

S. 37(1) : Business expenditure –Security charges-merely for non filing of confirmation disallowances cannot be made-Order of Tribunal is affirmed.
Dismissing the appeal of the revenue the Court held that,security charges paid cannot be disallowed merely because for non filing of confirmation only when small portion was allowed by the Tribunal.
CIT v. Eveready Industries (India) Ltd. (2018) 258 Taxman 313 (Cal.)(HC)

S. 37(1) : Business expenditure-Provision for medical benefit of its employees post retirement –Held to be allowable.
Dismissing the appeal of the revenue the Court held that, provision for medical benefit of its employees post retirement is held to be allowable, it is not contingent liability.
CIT v. Eveready Industries (India) Ltd. (2018) 258 Taxman 313 (Cal.)(HC)

S. 37(1) : Business expenditure – Sales incentive was payable only after and when dealers had met sales figures from 1-4-2003 to 30-06-2004 in this period – Expenditure cannot be disallowed on the ground that it pertaining to earlier year.[S. 145]
Dismissing the appeal of the revenue the Court held that Sales incentive was payable only after and when dealers had met sales figures from 1-4-2003 to 30-06-2004 in this period.Accordingly the expenditure cannot be disallowed on the ground that it pertaining to earlier year when complete details on account of incentive etc. were furnished. (AY. 2005-06)
PCIT v. Escorts Ltd. (2018) 258 Taxman 402 (Delhi)(HC)

S. 37(1) : Business expenditure–Capital or revenue-Manufacture of PVC and caustic soda and business of shipping, starting textile business-Abandoned project-Manufacture of New venture was managed from common funds, control over all business units and there was unity of control, it could not be said that pre-operative expenditure was incurred on a new line of business-Held to be allowable as revenue expenditure.
Allowing the appeal of the assessee the Court held that ;assessee which is engaged in business of manufacture of PVC, caustic soda and business of shipping, started a textile business. As the project did not materialize abandoned the project and expenditure incurred on abandoned project is held to be as revenue expenditure,since new venture was managed from common funds, control over all business units was in hands of assessee and there was unity of control, it could not be said that pre-operative expenditure was incurred by assessee on a new line of business. (AY. 2000-01)
Chemplast Sanmar Ltd. v. ACIT (2018) 258 Taxman 297/(2019) 412 ITR 323 (Mad.)(HC)

S. 37(1) : Business expenditure–Foreign education and training expenses of a partner –Held to be allowable as business expenditure as the post graduate course underwent was directly related to profession carried on by firm-Professional fee received by firm had substantially increased after completion of post graduate degree by said partner, several important contracts were secured by firm, which firm attributed to educational qualification and expertise acquired by said partner abroad.
Allowing the appeal of the assessee the Court held that; the expenditure incurred on foreign education and training expenses of a partner is held to be allowable as business expenditure as the post graduate course underwent was directly related to profession carried on by firm and professional fee received by firm had substantially increased after completion of post graduate degree by said partner, several important contracts were secured by firm, which firm attributed to educational qualification and expertise acquired by said partner abroad.(AY. 2001-02)
Aswathanarayana & Eswara v. Dy. CIT (2018) 258 Taxman 210 (Mad.)(HC)

S. 37(1) : Business expenditure — Marketing expenses-Multi-Speciality Hospital — Gifts to doctors-Matter Remitted To Assessing Officer for verification to find out whether for canvasing for patients.
Allowing the appeal of the revenue the Court held that ; whether gifts to doctors for canvasing for patients or the gifts were given to the doctors who were employed by it.Accordingly the matter was remitted to the AO for verification. The AO was to redo the assessment on consideration of the materials that were to be placed by the assessee to establish its stand that the gifts were given to its doctors, that it was not a prohibited practice and that it was not for the purpose of referring or canvassing patients. (AY.2012-13)
CIT v. Vasantha Subramanian Hospitals Pvt. Ltd (2018) 408 ITR 176 /258 Taxman 396/ 172 DTR 423/(2019) 307 CTR 569 (Mad) (HC)

S. 37(1) : Business expenditure-Provision for warranty which is made on scientific basis is deductible. [S. 145]
Dismissing the appeal of the assessee the Court held that ; the practice of making a provision for warranty claims had been found to be consistent, scientific and regular, accordingly the provision for warranty was deductible. (AY. 2009-10)
CIT v. Acer India Pvt. Ltd. (2018) 408 ITR 24 (Karn) (HC)

S. 37(1) : Business expenditure-Expenditure on acquisition of distributin rights of feature films —Film must be commercially exploited and income received and credited in books — Feature films never exhibited and no amount credited in profit and loss account —Deduction is not allowable.[R.9B]
Dismissing the appeal of the assessee the Court held that; there could be no deduction permissible on the cost of acquisition without generation of income credited in the books of account. The films in question were never commercially exploited and generated no income. The assessee was required to credit the amount realised by it by exhibiting the film in the profit and loss account. The feature films were never exhibited and there was no amount credited in the profit and loss account as amount received on exhibition of films. The finding of the Appellate Tribunal is up held.
Malayala Manorama Co. Ltd.v. ACIT (2018) 408 ITR 125 (Ker) (HC)

S. 37(1) : Business expenditure — Capital or revenue – No distinction between feature films and TV Serials-Write off of expenditure incurred on abandoned Tele serial is held to be revenue expenditure-CBDT Circular No 16 of 2015 dt.6-10-2015 is applied.[R.9A].
Dismissing the appeal of the revenue the Court held that ;write off of expenditure incurred on abandoned Tele serial is held to be revenue expenditure. CBDT Circular No 16 of 2015 dt.6-10-2015 is applied. Though the circular pertained to a feature film, there could not be any distinction between tele serial and feature film as the circular dealt with the aspect in respect to the cost of production of a film. (AY.2002-03)
CIT v. Prasad Productions. (2018) 407 ITR 541 (Mad) (HC)

S. 37(1) : Business expenditure — Capital or revenue-Payment of non-Compete fees for retention of expertise — Expenditure incurred on account of non-compete fees is held to be revenue expenditure.
Allowing the appeal of the assessee the Court held that ; the advantage of restraining the individuals from engaging in competition was in the field of facilitating its own business and rendering it more profitable. Since there was no increase in the fixed capital, the payment did not encroach in the capital field. The payments made towards restrictive covenants ensured the continued presence and support of the individuals in its business operations. It also ensured the credibility in public perception and reassured the potential investors that the performance of the assessee would remain optimum. through such continued association. The test of enduring benefit could not be applied blindly without regard to the facts and circumstances that arose in a given case. The conclusion of the Tribunal that the payment of non-compete fees had an enduring benefit and was capital in nature did not take into account the commercial benefit received by the assessee. (AY.1996-97)
Hatsun Agro Products Ltd. v. JCIT (2018) 407 ITR 674 (Mad) (HC)
S. 37(1) : Business expenditure — Amount spent on construction of houses for poor in Centenary Year — Expenditure not for purposes of business hence not allowable as deduction.
Allowing the appeal of the revenue the Court held that; it was the assessee’s own initiative to provide houses for the poor, an act of charity, done in connection with its centenary celebrationS. Although the assessee may have got popularity in carrying out the noble cause, with considerable expenditure, resulting in enhanced circulation, it could not be termed as an expenditure incurred wholly or exclusively for the business of the assessee under S. 37. The benefit derived by the business was only incidental and the assessee never intended it as a business promotion. The expenditure hence could not be allowed under S. 37, being not one “wholly or exclusively laid out or expended for the business” of the assessee. (AY.1992-93)
CIT v. Malayala Manorama Co. Ltd. (2018) 405 ITR 249 / 171 DTR 254 (Ker) (HC)

S. 37(1) : Business expenditure-Capital or revenue-Non-compete fee for five years – Allowable as revenue expenditure.
Allowing the appeal of the assessee the Court held that ; since payment made as non-compete fee did not entail any enduring benefits to assessee in its business, same was to be allowed as revenue expenditure.Followed, Empire Jute Co. Ltd. v. CIT (1980) 124 ITR 1 (SC). (AY. 2000-01)
Asianet Communications Ltd. v. CIT (2018) 407 ITR 706/ 257 Taxman 473 /(2019) 175 DTR 202 (Mad.)(HC)

S. 37(1) : Business expenditure-Capital or revenue-Amount paid to associate company, (G4S) for providing expert advisory and other security related services and knowhow inter-alia including use of trademarks-Not allowable as business expenditure as the amount was not incurred for wholly and exclusively for business purposes,as the assessee has not led any evidence to establish the manner in which the technical know-how as acquired from G4S had been used in its business.
Dismissing the appeal of the assessee the Court held that ;the assessee has not led any evidence to establish the manner in which the technical know-how as acquired from G4S had been used in its business. The authorities have also held that the Incident Report Format produced on account of ERP obtained from an Associate Enterprise to whom the payment was made, was in fact being carried out by the assessee even prior to entering into an agreement dated 27-12-2007 with G4S. The concurrent finding recorded is that the assessee had offered no explanation as to the manner in which the agreement had helped the assessee to carry out its business. These are findings of facts. Thus, mere entering into an agreement with it being actually put to use, cannot lead to the conclusion that the payment made under the agreement was for knowledge to be used in its business. (AY. 2008-09, 2009-10)
Monitron Security (P.) Ltd. v. CIT (2018) 257 Taxman 351 (Bom.)(HC)

S. 37(1) : Business expenditure-Real income theory-application of income-diversion of income by overriding title-Distributable Surplus paid is application of income and not allowable as business expenditure .[S. 4,28(i), 29, 145]

Allowing the appeal of the revenue , the Court held that ; Distributable surplus paid is application of income and not allowable as business expenditure.Payment made did not amount to “diversion of income at source by overriding title”. Income from business of manufacture and sale of Liquor will be taxable in the hands of the Assessee by applying the principle of real income theory.(AY. 2008-09 to 2012-13)
PCIT v. Chamundi Winery and Distillery (2018) 408 ITR 402 / 171 DTR 1 / 305 CTR 337(Karn)(HC),www.itatonline.org

S. 37(1) : Business expenditure –Capital or revenue-Business carried on leased premises-Expenditure on repairs and refurbishing is revenue expenditure — Expenditure on erecting structures —Matter remanded-The court also directed that since the lease deeds produced before the court were not registered the Deputy Commissioner was to impound the documents and refer them to the District Registrar for proper stamping and the assessee would also be obliged to register the deeds. [S. 32(1)]
Court held that the expenses incurred for repairs, refurbishing and making improvements to the buildings taken on lease were deductible. If it were found that the investments made in the property spread over the period of lease, together with the lease rent payable as per the agreement, would constitute the ostensible lease rent for the building, the investment made for constructing superstructures, has to be deemed to be revenue expenditure, otherwise it should be treated as capital expenditure and in the latter event allowable as depreciation. Matter remanded. The court directed that since the lease deeds produced before the court were not registered the Deputy Commissioner was to impound the documents and refer them to the District Registrar for proper stamping and the assessee would also be obliged to register the deeds. (AY.2007-08 to 2010-11)
Indus Motor Company Pvt. Ltd. v. DCIT (2018) 407 ITR 112 /253 Taxman 97 / 161 DTR 377 /301 CTR 715(Ker) (HC)
Editorial : SLP is granted to revenue, Dy. CIT v. Indus Motor Co. (P) Ltd (2018) 257 ITR 259/ 406 ITR 19 (St.) / 257 Taxman 559 (SC)

S. 37(1) : Business expenditure-Capital or revenue-Payment of a one-time fee to continue the business of mining constitutes revenue expenditure.
Dismissing the appeal of the revenue the Court held payment of a one-time fee to continue the business of mining constitutes revenue expenditure explained with reference to R.B.Seth Moolchand Sugachand v CIT (1972) 86 ITR 647 (SC) and Bikaner Gypsums Ltd v. CIT (1991) 187 ITR 39 (SC)(GA 2977 of 2015 In ITAT 133 of 2015, dt. 21.06.2018)
PCIT v. Rungta Mines Ltd ( 2018) 96 taxmann.com 166 (Cal)(HC),www.itatonlin.org

S. 37(1) : Business expenditure-Education expenses of director’s son-No direct nexus with the business of the company – Not allowable as deduction.
Dismissing the appeal of the assessee the Court held that the, expenditure incurred on the education expenses of director’s son is allowable expenditure as the expenses has no direct nexus with the business of the company. Appellants did not place better particulars on record like, basic qualification of Harsh Kumar; subjects in which he did his administration course; how such subjects has-had nexus to business activities of appellant and so on. Though a contract was placed on record whereby Harsh Kumar had agreed to render his services after completing his education and training, but that itself was not sufficient to hold that the appellants-assessee has proved nexus between the expenditure and its business activitieS. (AY.1997-98)
Indian Galvanics Cyrium Foils Ltd. v. DCIT (2018) 257 Taxman 32 / 303 CTR 800/ 168 DTR 241 (Bom.) (HC)

S. 37(1) : Business expenditure-Capital or revenue -Abandoned projects-State Government ordered closure of implementation of said project–Same line of existing business-Allowable as business expenditure.
Allowing the appeal of the assessee the Court held that ;expenditure incurred for implementation of new project in same line of business which was abandoned as per the order of State Govt, since said project was in same line of existing business of assessee and there was no creation of any new asset of enduring nature, entire exp. incurred on said project was to be allowed as revenue expenditure.(AY. 1998-99,1999-2000)
Tamilnadu Magnesite Ltd. v. ACIT (2018) 407 ITR 543/ 257 Taxman 79 / 171 DTR 151/ 305 CTR 269(Mad) (HC)

S. 37(1) : Business expenditure – Capital or revenue-Purchase of computer software for up-gradation of existing computer software – Revenue expenditure even though it provides enduring benefit-Expenses for employees welfare-foster safe working environment is revenue expenditure-The test of one-time payment or not is not the sole test to determine nature of expenditure.
Court held that (i).he expenses incurred on purchase of computer software for upgrading existing software for solving specific problems of users was to bring greater efficiency in the functioning of assessee’s business and hence was of revenue nature. Following Supreme Court decision in case of Empire Jute Co Ltd v. CIT (1980) 124 ITR 1 (SC) the High Court further held that the test of enduring benefit is not conclusive test and cannot be applied blindly and mechanically without regards to particular facts of a given case. (ii) : The expenses incurred to ensure good health and safety of its employees and to provide accident free environment are of revenue nature and the test of one-time payment or not is not the sole test to determine nature of expenditure. (AY. 2008-2009)
PCIT.v. Holcim Services (South Asia) Ltd (2018) 255 Taxman 392 (Bom.)(HC)

S. 37(1) : Business expenditure – Sales commission paid to agent in Iraq in relation to sale of trucks and particular person to be treated as allowable business expenditure – Capital or revenue-Drawings and designing charges related to computer software – Cannot be treated as capital asset.
Court held that,(i)he allowability of commission paid to Mr ‘M’, an Iraqi agent, on sale of fork lift trucks and spares and whether such person is an agent or not is a pure question of fact and the Tribunal’s finding of fact on this cannot be interfered (ii) Computer software is a capital asset and eligible for depreciation, however, any payment made for drawings and designs in relation to such computer software cannot be considered as capital asset.
PCIT.v. TIL Ltd (2018) 255 Taxman 373 (Cal.)(HC)

S. 37(1) : Business expenditure — Expenditure incurred on Freebies provided to medical consultants, consultancy or honorarium fee, registration, sponsorship and training — Matter remanded to Tribunal to reconsider the issue.[S. 254(1)
Allowing the appeal of the assessee the Court held that as regards expenditure incurred on Freebies provided to medical consultants, consultancy or honorarium fee, registration, sponsorship and training the assessee discharged the burden by placing all relevant details thereby discharging initial onus.Burden is on department to prove contrary.Tribunal has dealt with only one issue. Matter remanded to Tribunal to consider the applicability of Circular No 5 of 2012 dt 1-08-2012 (2012) 346 ITR 95 (St), and decide according to law.(AY.2011-12)
Boston Scientific India P. Ltd. v. ACIT (2018) 405 ITR 412 (Delhi) (HC)

S. 37(1) : Business expenditure-Amount paid to cane growers in excess of price determined in Sugarcane Control order, to be allowed as deduction.
Dismissing the appeal of the revenue the Court held that, amount paid to cane growers in excess of price determined in Sugarcane Control order, to be allowed as deduction in view of business expediency, as entire business of assessee was dependent upon supplies of sugarcane. (AY.1990-91)
CIT v. Aruna Sunrise Hotels Ltd. (2018) 256 Taxman 43 (Mad)(HC)

S. 37(1) : Business expenditure-Capital or revenue – Software-Expenditure incurred on acquiring licences to use software which did not confer any enduring benefit hence allowable as revenue expenditure.
Allowing the appeal of the assessee the Court held that,nature of articles acquired were licences to use software which did not confer any enduring right on assessee. Moreover, assessee’s objective was not to carry on software business, rather it used computer software as a tool to maximize its performance and streamline its efficiency.Accordingly expenditure incurred by assessee on acquiring licences to use software which did not confer any enduring benefit on assessee, hence allowable as revenue expenditure.
Oriental Bank of Commerce v. ACIT (2018) 256 Taxman 24 / 168 DTR 345/ 304 CTR 981 (Delhi)(HC)

S. 37(1) : Business expenditure – Capital or revenue – Expenses on restructuring of business is held to be allowable as revenue expenditure- Sale of one of unit- Expendiure is allowable .
Dismissing the appeal of the revenue the Court held that, Expenses on restructuring of business is held to be allowable as revenue expenditure.Expenses of sale of one unit is held to be allowable business expenditure .
PCIT v. Akzo Noble India Ltd. (2018) 256 Taxman 1/ ( 2019) 413 ITR 79 (Cal)(HC)

S. 37(1) : Business expenditure-Accrued or contingent Liability — Enhanced Licence fee payable to Railways is held to be allowable as deduction.[S. 36, 145]
Dismissing the appeals of the revenue the Court held that, the assessee’s liability to pay the enhanced licence fee to the Railways for the assessment year in question was an accrued liability that arose in the year in which the payment was made.
CIT v. Jagdish Prasad Gupta. (2018) 405 ITR 29 (Delhi) (HC)

S. 37(1) : Business expenditure-Allocation of expenses-Difference between “Res Judicata” and “Consistency Principle” – If the Revenue has accepted a practice and consistently applied and followed it, the Revenue is bound by it. The Revenue can change the practice only if there is a change in law or change in facts and not otherwise .[S. 143(3)]

Allocation of expenses . Difference between “Res Judicata” and “Consistency Principle” “res judicate” does not apply to income-tax matters, the principles of consistency does. If the Revenue has accepted a practice and consistently applied and followed it, the Revenue is bound by it. The Revenue can change the practice only if there is a change in law or change in facts and not otherwise . (AY.2008-09)
PCIT v. Quest investment Advisors Pvt. Ltd(2018) 409 ITR 545/ 257 Taxman 211/ 169 DTR 216/ 304 CTR 637 (Bom.)(HC), www.itatonlineorg

S. 37(1) : Business expenditure-Club expenses – Payment made for acquiring membership in a social club is not allowable as business expenditure, in the absence of any evidence to effect that membership was acquired for entertaining customer.
Dismissing the appeal of the assessee the Court held that, Payment made for acquiring membership in a social club is not allowable as business expenditure, in the absence of any evidence to effect that membership was acquired for entertaining customer .
L. Jairam Parwani v. Dy. CIT (2018) 225 Taxman 362 (Mad) (HC)
S. 37(1) : Business expenditure-Acceptance of deposits prohibited by law-Interest paid on deposits is held to be not allowable as deduction in view of Explanation to S. 37(1) of the Act. [Kerala Money Lenders Act, 1958,S. 4, 17, RBI Act, 1934 S. 45S]
Allowing the appeal of the revenue the Court held that, interest paid on deposits in violation of S. 4 of the Kerala Money Lenders Act and S. 45S of the RBI Act, is held to be not allowable as deduction, since the acceptance of deposits being prohibited by law, Explanation to S. 37(1) of the Act is applicable. (AY. 2007-08 to 2012-13)
CIT v. Arun Thomas (2018) 161 DTR 161/300 CTR 276 (Ker) (HC)

S. 37(1) : Business expenditure – Expenses incurred prior to setting up of business is held to be not allowable as business loss .[S. 28(i)]
Dismissing the appeal of the assessee the Court held that; since assessee failed to produce necessary evidence in support of its claim that business was set up and it was ready to commence, expenditure incurred by assessee prior to setting up of business could not be allowed. (AY. 2005-06)
ALD Automotive (P.) Ltd. v. Dy. CIT (2018) 254 Taxman 233 (Bom.)(HC)

S. 37(1) : Business expenditure-Capital or revenue-Fees paid for Licence to use copy right was held to be allowable as revenue expenditure.
Dismissing the appeal of the revenue the Court held that the assessee was granted only licence to use copy right therefore the fees paid was allowable as revenue expenditure. (AY. 2009-10)
PCIT v. Mobisoft Tele Solutions (P) LTD. (P) LTD. (2018) 404 ITR 203 / 163 DTR 289 / 301 CTR 582/90 taxmann. com 383 (P&H) (HC)

S. 37(1) : Business expenditure – Commission paid to related directors of the assessee company is held to be allowable as business expenditure.
Dismissing the appeal of the revenue the Court held that; Commission paid to related directors of the assessee company is held to be allowable as business expenditure as the assessee had been paying commission to Agents regularly year after year; that it was not doubted by revenue and same was accepted; further, that receipts of same were duly shown by commission agents in their balance sheet and profit and loss accounts and that they had paid tax thereon, which was also accepted by revenue. (AY. 1994–95, 1996-97, 1997-98)
CIT v. Hind Nihon Proteins (P.) Ltd. (2018) 404 ITR 193/ 254 Taxman 210 (Delhi)(HC)

S. 37(1) : Business expenditure-Lease rent paid for shed taken on lease was held to be allowable as business expenditure considering the business expediency.
Dismissing the appeal of the revenue the Court held that; Lease rent paid for shed taken on lease was held to be allowable as business expenditure considering the business expediency. (AY. 2010-11)
PCIT v. SRBS Entertainment (2018) 254 Taxman 193 (P&H)(HC)

S. 37(1) : Business Expenditure – Commission – Expenditure incurred was reasonably linked with its business which was confirmed by the parties hence allowable as business expenditure.
Dismissing the appeal of the revenue the Court held that; Commission expenditure incurred was reasonably linked with its business which was confirmed by the parties hence allowable as business expenditure. (AY. 2006-07)
CIT v. Mohan Export IndiaPvt. Ltd. (2018) 403 ITR 207/162 DTR 247 /253 Taxman 386 (Delhi) (HC)

S.37(1) : Business expenditure – Provision for deficiency in service – Ascertained liability-Profits chargeable to tax-Remission or cessation-Addition cannot be made. [S. 145]
Dismissing the appeal of the revenue the Court held that,the Assessee has accepted and admitted their liability to pay the principal. The deduction towards provision made on account of claim by the principal contractor due to deficiency in contract cannot be disallowed where the documents filed by assessee to prove the claim remained undisputed. (AY. 1997-98)
CIT v Narinderjit Singh (2018) 161 DTR 200 / 300 CTR 217 (Delhi)(HC)

S. 37(1) : Business expenditure – Bank-Provision for interest on over due deposits being ascertained liabilities which is crystallised during the relevant previous year is held to be allowable as deduction.[S. 145]
Allowing the appeal of the assessee the Tribunal held that; Provision for interest on over due deposits being ascertained liabilities which is crystallised during the relevant previous year is held to be allowable as deduction.(AY. 2009-10)
Oriental Bank of Commerce v. Addl. CIT (2018) 401 ITR 65/ 162 DTR 257 /254 Taxman 197/ 304 CTR 363 (Delhi)(HC)

S. 37(1) : Business expenditure – Expenditure on levelling of land was held to be allowable – Presumption applies only to the extent of documents seized.[S. 132(4A]]
That the allowance of expenditure for levelling the land was to be confined to the amounts revealed from the seized documents, whether it was cash or cheque payments. Presumption applies only to the extent of documents seized(AY. 2007-08, 2008-09)
CIT v. Damac Holdings Pvt. Ltd. (2018) 401 ITR 495/253 Taxman 123 (Ker) (HC)

S. 37(1) : Business expenditure – Expenditure incurred fpr acqudsition of application software which was subsequently abandoned would be allowable in year of writeoff as revenue expenditure. [S. 145]
Allowing the appeal of the assessee the Court held that, expenditure incureed for acquisition of application software which was subsequently abandoned would be allowable in year of writeoff as revenue expenditure. (AY. 1999-00)
Maruti Udyog Ltd v. CIT (2018) 406 ITR 562/253 Taxman 60/161 DTR 1 (Delhi) (HC)

S. 37(1):Business expenditure – Capital or revenue-Membership fee paid to National Stock Exchange for procurement of permanent right in form of licence to carry on trade was held to be capital in nature.
Dismissing the appeal of the assessee the Court held that; the membership fee paid by the assessee represented money paid to procure a permanent right in the form of a licence to carry on trade and the expenditure incurred was not revenue but capital in nature. (AY. 1996-97)
Abhipra Capital Ltd. v. DCIT(2018) 402 ITR 1/ 254 Taxman 19 /164 DTR 250/ 303 CTR 534 (Delhi) (HC)

S. 37(1) : Business expenditure — Expenditure in excess of 6 Per cent. of initial issue expenses of asset management company was held to be deductible. Expenditure relating to Information Technology Infrastructure was also held to be allowable. [Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 R. 52]
Reading the proviso to regulation 52 of the Securities and Exchange Board of India (Mutual Funds) Regulations, 1996, it is manifest that any excess over the 6 per cent. initial issue expense shall be borne by the asset management company, therefore expenditure in excess of 6 Per cent. of initial issue expenses of asset management company was held to be deductible. Expenditure relating to Information Technology infrastructure was held to be allowable. (AY. 2006-07)
CIT v. Ing Investment Management (India) P. Ltd. (2018) 401 ITR 405 (Bom.) (HC)

S. 37(1) : Business expenditure – Capital or revenue-Non compete fee was held to be capital in nature .
Dismissing the appeal of the asessee the Court held thatthe payment was made by assessee to SML towards non-compete fee and for other obligation and recitals imposed upon SML, ie., obtaining permissions from financial institutions, obtaining approvals from governmental authorities, income tax authorities, indemnity towards other losses, if any, and maintenance of confidentiality about agreement as also all intellectual property and other data and information,hence the payment was clearly for an enduring benefit and not just towards non-compete obligation and, thus, capital in nature. (AY.1994-95)
GKN Driveline India Ltd. v. CIT (2018) 252 Taxman 297/ 169 DTR 360 (Delhi)(HC)

S. 37(1) : Business expenditure —Accrual-Enhancement of Licence fee payable to Railways in the year in which payment was issued.
Dismissing the appeal of the revenue the Court held that ;the assessee’s liability to pay enhanced licence fee to the Railways was an accrued liability that arose in the year in which the payment was issued.
CIT v. Jagdish Prasad Gupta. (2018) 400 ITR 583 (Delhi) (HC)

S. 37(1) : Business expenditure — Capital or revenue-— Expenditure on issue of debentures was held to be allowable as revenue expenditure irrespective of nature of debenture.
Dismissing the appeal of the revenue the Court held that; Expenditure on issue of debentures was held to be allowable as revenue expenditure irrespective of nature of debenture.
CIT v. Modern Threads (I) Ltd. (2018) 400 ITR 381 (Raj) (HC)
CIT v. Modern Syntex (2018) 400 ITR 381 (Raj) (HC)

S. 37(1) : Business expenditure – Capital or revenue-Sub-lease-Payment made to vacate the premises-Through negotiation assessee acquired some kind of an enduring right of possession over occupied area of said premises surrendered to them by those occupants—It had incidents of permanence— Expenditure is capital in nature.
Court held that in the present case, it is just not established how the business of the assessee was perceived to grow out of the property acquired by them by negotiating the eviction of the said occupants. In fact, through the negotiation the assessee acquired some kind of an enduring right of possession over the occupied area of the said premises surrendered to them by those occupants. It had the incidents of permanence. If an expenditure is incurred for possession of an asset or for right of a permanent character, then expenditure can be considered as capital in nature.
United Spirits Ltd v. CIT (2018) 257 Taxman 458 / (2019) 173 DTR 315 / 306 CTR 484 (Cal)(HC)

S. 37(1) : Business expenditure— Capital or revenue –Royalty payment for use of licensed information-Revenue expenditure.
Royalty payment for use of licensed information is held to be revenue expenditure. (AY.2008-09)
Maruti Suzuki India Ltd. v. ACIT (2018) 191 TTJ 148 (Delhi)(Trib.)

S. 37(1) : Business expenditure—Sharing resources expenditure with other group companies –Held to be revenue expenditure.
Company transformed it’s dealerships to one-stop shop for sale of its products and providing all related facilities of financing, insurance, auto-card, purchase and sale of used cars, etc. AO made ad-hoc disallowances holding same to be relatable to/ towards sharing of Assessee’s resources with other group companies. CIT(A) upheld order of AO. Allowing the appeal of the assessee, the Tribunal held that there was no material brought on record to controvert plea of assessee that they have provided support to Insurance subsidiaries due to its business exigency rather than supporting said companies and it was in best interests of MSIL to do so for maximizing their profits, as such related cost was allowable business expenditure for company.Accordingly expenditure being business expenditure would have to be allowed as deduction. (AY.2008-09)
.
Maruti Suzuki India Ltd. v. ACIT (2018) 191 TTJ 148 (Delhi)(Trib.)

S. 37(1) : Business expenditure –Club and Membership subscription- Held to be allowable deduction.
Dismissing the appeal of the revenue the Tribunal held that club and membership fee of director is held to be allowable as business expenditure. FollowedUnited Glass Manufacturing Co. Ltd. Followed CIT v. United Glass Manufacturing Co Ltd (.(AY. 2008-09, 2010-11, 2011-12)
Dy.CIT v. Deloitte Touche Tohmatsu India (P) Ltd. (2018) 193 TTJ 65 (UO) (Mum.) Trib.)

S. 37(1) : Business expenditure—Compensation payable—Unascertainable liability—Not allowable as deduction.[S. 145]
Tribunal held that,Liability to make payment of insurance claim accrued only in year in which loss or damage was ascertained and compensation payable to insured person was determined. Since in instant case amount of compensation payable to insured person was not determined during year, same could not be allowed merely because incident happened during year. (AY. 2003-04 to 2010-11)
ACIT v. United India Insurance Co. Ltd. (2018) 67 ITR 191 /195 TTJ 65 (UO) (Chennai) (Trib.)

S. 37(1) : Business expenditure—Provision towards Employees Short term benefits –Held to be not allowable as deduction.
Provisions made for Employees short term benefit could not be allowed as deduction. Accounting Standard issued by the ICAI cannot override the provisions of Rule 5 of First Schedule to the Income-tax Act, and therefore, provisions made for Employees short term benefit cannot be allowed as deduction.(AY. 2003-04 to 2010-11)
ACIT v. United India Insurance Co. Ltd. (2018) 67 ITR 191 /195 TTJ 65 (UO) (Chennai) (Trib.)

S. 37(1) : Business expenditure—Payment to motor car dealers-Genuineness of payment was not in doubt-Disallowances cannot be made.
Dismissing the appeal of the revenue the Tribunal held that the Assessee had filed copies of invoice, confirmation letters from service providers and details of premium collected by motor vehicle dealers from customers as there was no doubt about genuineness of service rendered by car dealers. Deletion of addition is held to be justified.(AY. 2003-04 to 2010-11)
ACIT v. United India Insurance Co. Ltd. (2018) 67 ITR 191 /195 TTJ 65 (UO) (Chennai) (Trib.)

S. 37(1) : Business expenditure—Demurrage charges— Held to be allowable-Corporate responsibility and expenditure commission-Held to be not allowable as no details were filed.
Tribunal held that allowability of expenditure of port charges as well as demurrage charges had to be determined having regard to clauses of agreement. Appellant had to bear expenditure of port charges relating to export of cargo and demurrage charges. Accordingly the expenditure is held to be allowable business expenditure. No details of corporate responsibility expenditure was filed, accordingly held to be not allowable.As regards the commission payment no details were filed hence held to be not allowable.(AY.2012-13)
NMDC Ltd v. Dy. CIT (2017) 190 TTJ 757 /(2018) 162 DTR 114 (Hyd) (Trib.)

S. 37(1) : Business expenditure –Apportionment of expenses – STP unit and non-STP unit – Matter remanded.
Allowing the appeal of the assessee the Tribunal held that ; there must be direct nexus between profits and gains of industrial undertaking and expenses which were sought to be apportioned/attributable to it. Neither AO nor CIT(A) had examined nature of expenses and its nexus between STP unit or non-STP unit. Under these set of facts, issue required fresh examination at end of AO referred Zandu Pharmaceutical Works Ltd . (AY. 2004-05, 2005-06)
Firstsource Solutions Ltd v. Dy.CIT (2018) 168 DTR 161 /( 2019) 197 TTJ 486(Mum.)(Trib.)

S. 37(1) : Business expenditure—Provision of various expenses— Following the rule of consistency and accounting principle – Addition was deleted.[S. 145]
AO held that mere provision made by assessee for expenses was not allowable unless it was shown that liability had accrued during year under consideration accordingly AO disallowed said claim which was affirmed by CIT(A). Allowing the appeal of the assessee the Tribunal held that these provisions related to expenses of routine nature and such kind of provisions were made year after year and actual payments made against these provisions were usually debited to concerned Provision account and balance, if any, should be transferred to Profit and Loss account. as same was in accordance with accounting principles and requirements. Addition was deleted. (AY. 2004-05, 2005-06)
Firstsource Solutions Ltd v. Dy.CIT (2018) 168 DTR 161/( 2019) 197 TTJ 486 (Mum.)(Trib.)

S. 37(1) : Business expenditure—Compensation payable—Unascertainable liability— Not allowable as deduction.[S. 145]
Assessee made provision of certain amount on account of insurance claim incurred but not reported and claim incurred but not enough reported. Hence, a provision was made for all unsettled claims on basis of claim lodged by insured persons. AO disallowed the provision. On appeal CIT(A) allowed the claim.On appeal by the revenue the Tribunal held that liability to make payment of insurance claim accrued only in year in which loss or damage was ascertained and compensation payable to insured person was determined. Since in instant case amount of compensation payable to insured person was not determined during year, same could not be allowed merely because incident happened during year. Provision is held to be not allowable.(AY. 2003-04 to 2007-08)
Cholamandalam Ms General Insurance Company Ltd. v. ACIT (2018) 170 DTR 22 / 195 TTJ 166 (Chennai) (Trib.)

S. 37(1) : Business expenditure-Commission expenses –Documentary evidences to prove genuineness of commission transaction was produced –Statement recorded cannot be used against the asseessee without giving an opportunity of cross examination. [S. 131]
Allowing the appeal of the assessee the Tribunal held that the assessee has produced documentary evidence to prove the genuiness of commission payment.Tribunal also held that Statement recorded cannot be used against the asseessee without giving an opportunity of cross examination. (AY.2008-09)
Shree Bishandas Iron v. DCIT (2018) 162 DTR 209/ 191 TTJ 624 (Kol) (Trib.)

S. 37(1) : Business expenditure—Purchase cost of programs and film rights—Amortisation of inventories – Consistent method of accounting – AO is not justified in treating programs and film rights as intangible assets and allowing deprecation @25%.[S. 32 (2) (ii)]
Assessee amortized the “inventories” as per the method of accounting consistently followed by him over the years. AO made on account of expenditure in respect of programs and film rights by treating purchase cost of programs and film rights as intangible assets and allowing deprecation @25%. CIT(A) deleted addition. Dismissing the appeal of the revenue the Tribunal held that assessee amortized “inventories” as per method of accounting consistently followed by him over years. Appeal of revenue was dismissed.(AY.2011-12)
ACIT. v. Zee Media Corporation Ltd (2018) 193 TTJ 36 (UO) (Mum.) (Trib.)

S. 37(1) : Business expenditure – Capital or revenue-Franchise fee-For participation in league – Held to be revenue expenditure-When no match of IPL Season-2 was played till 31.03.2009, no expenditure in respect of Franchise fee accrued at all during year under consideration—Thus, it could not be held as revenue expenditure in hands of assessee during year under consideration .[S. 145]
Franchise fee would be in the nature of revenue expenditure where payment of Franchise fee facilitated participation in league and operating team is restricted only to year to which payment pertained, and there is neither creation of asset or generation of benefit of enduring nature in hands of assessee.When no match of IPL Season-2 was played till 31.03.2009, no expenditure in respect of Franchise fee accrued at all during year under consideration—Thus, it could not be held as revenue expenditure in hands of assessee during year under consideration. (AY.2009-10)
Knight Riders Sports PVT. LTD. v. ACIT (2017) 51 CCH 591 / (2018) 193 TTTJ 313 Mum.) (Trib.)

S. 37(1) : Business expenditure-Security services for stadium—Payment of RS. 75 lac was made by assessee to Kolkata Police Welfare fund, not by its choice, but as per directions of CAB who was responsible to arrange for security in stadium at time of staging of matches by assessee –Held to be allowable business expenditure.
Security charges for stadium and payment made by assessee to Kolkata Police Welfare fund as per the directions of Cricket Association Board who is responsible to arrange for security in stadium at time of staging of matches by assessee, is an allowable expenditure. (AY.2009-10)
Knight Riders Sports P. Ltd v. ACIT (2017) 51 CCH 591 / (2018) 193 TTTJ 313 Mum.) (Trib.)

S. 37(1) : Business expenditure – Coaching services – Held to be allowable as business expenditure.
Mr. John Buchanan provided coaching services to assessee team, viz. Kolkata Knight Riders in IPL Season-1. Revenue failed to place on record any irrefutable documentary evidence to conclude that no coaching services were provided by Mr. John Buchanan to assesse’s cricket team for IPL Season-1. Accordingly the claim of assessee as regards expenditure incurred in respect of coaching fees paid to Mr. John Buchanan for IPL Season-1 was found to be in order.(AY.2009-10)
Knight Riders Sports P. Ltd v. ACIT (2017) 51 CCH 591 / (2018) 193 TTTJ 313 Mum.) (Trib.)

S. 37(1) : Business expenditure -Security charges—Visits of actors, celebrities and VIPs was part of strategic planning by assessee for generating higher revenues—Held to be allowable business expenditure.
Presence of celebrities at matches staged by assessee was in interest of business of assessee. When actors, celebrities and VIPs would be invited by assessee, same would be keeping in view their popularity and to avoid any untoward incident carrying heavy burden and obligation of providing necessary security cover to them.Thus assessee remained under obligation of providing requisite security cover to such actors, celebrities and VIPs.Claim of assessee incurred for security for VIPs and celebrities who attended matches at Eden Garden was well in order. Held to be allowable as business expenditure.(AY.2009-10)
Knight Riders Sports P. Ltd v. ACIT (2017) 51 CCH 591 / (2018) 193 TTTJ 313 Mum.) (Trib.)

S. 37(1) : Business expenditure-Designing and exhibition of player outfits —Held to be revenue expenditure.
Assessee following mercantile method of accounting, therefore, expense which was incurred during year under consideration was recognized and claimed as a deduction.Followed Mysore Spinning and Manufacturing Co. Ltd. v. CIT (1966) 61 ITR 572 (Bom.)(HC).(AY.2009-10)
Knight Riders Sports P. Ltd v. ACIT (2017) 51 CCH 591 / (2018) 193 TTTJ 313 Mum.) (Trib.)

S. 37(1) : Business expenditure—Expenditure incurred by assessee for providing training to persons through Apparel Training & Development Centre in form of assistance of Rs. 2,000/-per trainee was in category of corporate social responsibility (CSR) was held not allowable unless and until expenditure was incurred wholly and exclusively for purpose of business of assessee.
Tribunal held that,Corporate social responsibility provision had been brought in companies Act 2013 and consequential amendment was brought to Income -tax Act u/s 37(1) by way of insertion of explanation w.e.f. 01.04.2015. When specific provision had been brought into statute for allowing such expenditure w.e.f. 01.04.2015 then prior to said provisions deduction in respect of expenditure incurred under Corporate Social Responsibility was not allowable unless and until expenditure was incurred wholly and exclusively for purpose of business of assessee .Accordingly the expenditure incurred by assessee for providing training to persons through Apparel Training & Development Centre in form of assistance of Rs. 2,000/-per trainee was in category of corporate social responsibility (CSR) had no direct connection/nexus with business activity of assessee. In absence of any provisions in Income -tax Act same could not be allowed prior to insertion of explanation 2 to section 37(1) w.e.f. 01.04.2015.(AY.2009-10, 2010-11, 2011-12, 2012-13)
Rajasthan State Industrial Development & Investment Corp. Ltd.(2018) 195 TTJ 35 (Jaipur) (Trib.)

S. 37(1)) : Business expenditure – Rural development expenses –Held to be allowable as business expenditure-Leave encashment scheme-Held to be allowable.
Expenditure has been incurred by the assessee in vicinity of its mining areas and its workers and its employees are also benefited by incurrence of such expenditure, and also, assessee has established the necessary nexus of such expenditure for the purpose of smooth running of its business operation, such such expenditure should be held as allowable deduction. Payment made by assessee is within the framework of the leave encashment scheme, same is an allowable deduction, even though claim for the same is not made in the return of income but during the assessment proceedings. (AY.2014-15)
Rajasthan State Mines & Minerals Ltd. v. ACIT(2018) 196 TTJ 768 /( 2019) 174 DTR 383 (Jaipur) (Trib.)

S. 37(1) : Business expenditure-Preliminary and preoperative expenses-Branch office at UAE-Existing business in UAE-Disallowance of expenditure is held to be not justified.
Assessee had incurred various expenditure including registration charges, rent of premises, travelling expenses of its personnel and other miscellaneous expenses to set up a branch office in UAE in connection with its existing business. Assessee was already in business of sales in UAE and only for facilitation of its business had set up a branch office. Therefore, expenditure incurred by assessee was a revenue expenditure which cannot be considered as preliminary and preoperative expenses. (AY.2011-12)
Scrabble Entertainment Ltd. v. ACIT (2018) 169 DTR 51 /193 TTJ 418 (Mum.) (Trib.)

S. 37(1) : Business expenditure –Disproportionate increase in expenses- Disallowance of 10% of the business promotion expenses is held to be justified.
Tribunal held that,when there is a disproportionate increase in expenses vis-à-vis the increase in gross receipts, personal element to the tune of 10% of business promotion expenses could not be ruled out and therefore, the same was disallowable (AY.2010-11)
ACIT v. Rohit Kochar (2018) 68 ITR 67 (SN) (Delhi) (Trib.)

S. 37(1) : Business expenditure-Penalty –Fine-Illegal mining- Compensation is not penalty-Allowable as deduction.
Tribunal held that the compensation paid by Assessee company to Government, as per directions of Supreme Court, to conduct mining in area beyond its sanctioned lease area would be allowed as business expenditure; it was compensatory in nature and not a penalty.(AY. 2013-14, 2014-15)
NMDC v. ACIT (2018) 68 ITR 532/ (2019) 175 ITD 332 / 177 DTR 385 / 199 TTJ 772 (Hyd)(Trib.)

S. 37(1) : Business expenditure-Capitalised in the books of account as work in progress-Revised return claiming as allowable revenue expenditure-Held to be allowable.[S. 145]
Tribunal held that though the expenditure is capitalised in the books of account, if the expenditure is held to be allowable as revenue, on the basis of revised return the same is allowable as deduction.(AY 2009-2010)
Dy.CIT v.BCH Electric Ltd (2018) 63 ITR 58 (SN) (Kol.)(Trib.)

S. 37(1) : Business expenditure — Provision for warranty expenses — provision made based on transactions carried out in preceding three years on scientific basis and method consistently followed in past such expenditure is allowable. [S. 145]
The provision for warranty was being made on the basis of the past experience and had been computed in a systematic and scientific manner, these warranty expenses were towards expenses which had been incurred or were likely to be incurred within the period for which the warranty had been assured to the customers against the sale of products and as such, such expenses were deductible as business expenditure. Such expenditure having been incurred wholly for the purpose of business was fully allowable as business expenditure.(AY.2009-10)
Dy.CIT v.BCH Electric Ltd. (2018) 63 ITR 58 (SN) (Kol.)(Trib.)

S. 37(1) : Business expenditure — Provision for non-moving inventory — consistent treatment from year to year in return, allowable for deduction.[S. 145]
The assessee made provision for non-moving inventory and claimed the provision as deduction in the return. The AO observed that the provision represented un-crystallised and unascertained liability debited to the profit and loss account not allowable as expenses under the provisions of the Act. The ITAT held, that the consistent treatment given by the assessee from year to year with regard to the treatment of provision for non-moving inventory in the return therefore the said disallowance is not sustainable. (AY.2009-10)
Dy.CIT v.BCH Electric Ltd. (2018) 63 ITR 58 (SN) (Kol.)(Trib.)

S. 37(1) : Business expenditure –Brand building-Advertisement expenses-Held to be revenue expenditure
Expenditure incurred in making advertisement of the products by the assessee is in the course of earning of profit without touching the capital asset. Therefore, the expenditure incurred by the assessee is revenue. (AY. 2009-10, 2010-11, 2012-13)
ACIT v. Jansons Industries Ltd. (2018) 194 TTJ 19 (UO)(Chennai)(Trib.)

S. 37(1) : Business expenditure – Capital or revenue-Software-License fee connectivity charges and coordination charges is allowable as revenue expenditure
Tribunal held that,license fee, connectivity charges and co-ordination charges were paid for the limited right to use of software and there was no vesting of enduring benefit or irrevocable transfer of rights. Thus, the charges paid are revenue in nature and allowable.(AY.2010-11)
DCIT v. G.E. Capital Business Process Management Services Pvt. Ltd (2017) 51 CCH 0158/ 63 ITR 337 (Delhi)(Trib.)

S. 37(1) : Business expenditure –Capital or revenue-Royalty and logo fees are allowable as revenue expenditure.
Tribunal held that, payment made for use of technical know-how and trademark and not for transferring the full ownership of know-how and thus the expenditure is revenue in nature.(AY. 2011-12)
GKN Driveline (India) Ltd. v. DCIT (2018) 62 ITR 784 (Delhi) (Trib.)

S. 37(1) : Business expenditure – Provision for warranty claims is allowable expenditure.
Provision for warranty on the basis of technical estimation is a provision for ascertained liability hence allowable as deduction.Followed,Rotork Controls India (P.) Ltd. (2009) 314 ITR 62 (SC).
(AY. 2011-12)
GKN Driveline (India) Ltd. v. DCIT (2018) 62 ITR 784 (Delhi) (Trib.)

S. 37(1) : Business expenditure – Corporate Social responsibility (CSR)expenses are allowable as business expenditure-Amendment in S. 37(1) for disallowing CSR expenses referred to in S. 135 of Companies Act, 2013 would not apply to earlier years.
Expenditure incurred on social responsibility is incurred wholly and exclusively for the purpose of business or profession and also the amendment in S. 37(1) for disallowing CSR expenses referred to in section 135 of Companies Act, 2013 would not apply to earlier years. (AY. 2011-12)
DCIT v. Godawari Power & Ispat Ltd. (2018) 68 ITR 19(SN) (Raipur)(Trib.)

S. 37(1) : Business expenditure – Charity/ Pooja and festival expenses are allowable as deduction.
Expenses on charity /pooja and festival is held to be allowable as business expenditure.(AY. 2011-12)
DCIT v. Godawari Power & Ispat Ltd. (2018) 68 ITR 19(SN) (Raipur)(Trib.)

S. 37(1) : Business expenditure – Payment made to doctors Convention fees is allowable expenditure-Not prohibited by law.

Tribunal held that,Medical Council of India guidelines apply only to doctors and do not govern other entities and thus the guidelines cannot decide the allowability or otherwise of an expenditure under the Income-tax Act. Payment made to doctors Convention fees is allowable expenditure. (AY. 2011-12)
India Medtronic P.Ltd v. DCIT (2018) 64 ITR 9 (SN)/ 95 taxmann.com 21 (Mum.) Trib.)

S. 37(1) : Business expenditure -Legal and professional charges-Retainership fees – Held to be allowable as deduction.
Tribunal held that the professionals appointed were experts in their respective fields, and that their services were retained to groom and train the new recruits as no suitable replacement was readily available. Accordingly allowable as deduction.(AY.2011-12)
Laboratories Griffon (P) Ltd v.Dy CIT (2018) 170 ITD 387/65 ITR 317 /193 TTJ 855 ( 2019) 178 DTR 355 (Kol)(Trib.)

S. 37(1) : Business expenditure – Foreign tour expenses – Research manager – Only 20% of expenditure is held to be personal in nature by the CIT(A)is upheld.
Assessee deputed its Research Manager to visit China, Paris & Hongkong/Bang.kok with objective of promoting export of company and for exploring new source of raw materials, packing materials, manufacturing machines etc. and claimed deduction on account of same. Before the Tribunal, assessee had submitted a chart showing the increase in export turnover over the years pursuant to the visit of the Manager abroad. Tribunal upheld the order of the CIT(A) disallowing 20% of the amount as personal in nature. (AY.2011-12)
Laboratories Griffon (P) Ltd(2018) 170 ITD 387/65 ITR 317 /193 TTJ 855 ( 2019) 178 DTR 355 (Kol) (Trib.)

S. 37(1) : Business expenditure –Capital or revenue-Expenses on electric repairs and maintenance — consumable expenses —Fabrication charges-Revenue in nature
Tribunal held that considering the nature of business of the assessee, the expenses incurred on electrical repairs and maintenance were in nature of consumable expenses are revenue in nature. The Assessing Officer had not pointed out which capital had been generated by the assessee for purchasing tube rods and electrical wireS. Fabrication charges is held to be allowable as deduction. (AY. 2012-13)
ITO v. Jaidka Woolen and Hosiery Mills P. Ltd. (2018) 68 ITR 216 (Delhi) (Trib.)

S. 37(1) : Business expenditure-Adhoc expenditure –Company –No personal expenses-car running and telephone expenses —Disallowances cannot be made.
Tribunal held that in case of company there is company and as such there might not be any personal expenses incurred by the assessee on account of car running and telephone expenses. The ad hoc addition made by the Assessing Officer without pointing out any specific inadmissible expenses incurred by the assessee was wholly unjustified and it was to be deleted.(AY. 2012-13)
ITO v. Jaidka Woolen and Hosiery Mills P. Ltd. (2018) 68 ITR 216 (Delhi) (Trib.)

S. 37(1) : Business expenditure — Provision for damaged goods-Held to be allowable.
Following the earlier order, the Tribunal held that, provision for damaged goods is held to be allowable.(AY.2008-09, 2009-10)
Rasna P. Ltd. v. DCIT(2018) 63 ITR 28 (SN)(Ahd) (Trib.)

S. 37(1) : Business expenditure – Travel expenses-Adhoc disallowance-Company – Directors-No adhoc disallowance can be made in respect of use of vehicles by directors of company disallowance unjustified.
Tribunal held that in the case of company no ad hoc disallowance could be made from total travel and conveyance expenses incurred by assessee company on ground that expenses were in respect of use of vehicles by directors of assessee company was personal in nature. Followed Sayaji Iron & Engg.Company Ltd v CIT (2002) 253 ITR 749 (Guj) (HC) (AY.2011-12)
Seal For Life India (P.) Ltd. v. DCIT (2018) 173 ITD 229 /(2019) 197 TTJ 742/ 174 DTR 281 (Ahd) (Trib.)

S. 37(1) : Business expenditure-Company – Corporate status-Employee benefits, finance costs and administrative and other expenses can not be disallowed as the said expenditure were necessary to maintain its corporate status.

Tribunal held that, Employee benefits, finance costs and administrative and other expenses can not be disallowed as the said expenditure were necessary to maintain its corporate status. (AY.2012-13)
T.A. Taylor (P.) Ltd. ACIT (2018) 173 ITD 237/66 ITR 146 (Chennai) (Trib.)

S. 37(1) : Business expenditure-Dormant-Society which was engaged in business of electricity distribution under license issued by State Government -License granted to assessee was expired-licence was not renewed – No intention to discontinue of business-temporary phenomenon and assessee would resume business soon after license was renewed-Expenditure claimed by assessee were allowable business expenditure.[S. 28(i), 70,72]
AO held that business of assessee was closed down due to non-renewal of license accordingly disallowed the expenditure. Assessee contended that handing over business to MSEDCL by MERC was a temporary phenomenon and assessee would resume business soon after license was renewed.Tribunal held that, ongoing litigation for grant of license ever since 2011 till 2018 demonstrated assessee’s strong intention to continue business. Decision of assessee of giving VRS to 1522 employees was a prudent commercial decision and same could not be interpreted against assessee as lack of intention to resume business. Assessee received compensation of RS. 1 crore every month from MSEDCL and reported same to income tax office every year.Accordingly the assessee could be said to have intention to resume its business, thus, expenditure claimed by assessee were allowable business expenditure. The set off of carry forward of the unabsorbed loss issue needs to be decided as per the provisions of section 70 to 72. Thus, the Assessing Officer is directed to pass a speaking order.(AY.2012-13)
Mula Pravara Electric Co-op. Society Ltd. v. DCIT (2018) 173 ITD 313 / (2019) 175 DTR 273 (Pune) (Trib.)

S. 37(1) : Business expenditure-Setting up of business-Service industry for managing mutual funds-Upon its incorporation, assessee took various steps to commence its business such as hiring of people application to SEBI, organizing for space etc, and this amounted to setting up business- Expenses are allowable.
Allowing the appeal of the assessee the Tribunal held that,upon its incorporation, assessee took various steps to commence its business such as hiring of people application to SEBI, organizing for space etc, and this amounted to setting up business and the entire expenses are allowable.(AY.2007-08)
Pinebridge India (P.) Ltd. v. ACIT (2018) 173 ITD 341/ 196 TTJ 1 (UO)/ 67 ITR 74 (SN)(Mum.) (Trib.)

S. 37(1) : Business expenditure-Provision for development expenses-Consistent accounting pattern-Held to be allowable.[S. 145]
Tribunal held that the assessee had maintained books of account on same accounting pattern in earlier years as well and same was accepted by Tribunal. Accordingly, the claim of development expenses is held to be allowable.(AY.2010-11)
Saamag Developers (P.) Ltd. v. ACIT (2018) 173 ITD 350 (Delhi) (Trib.)

S. 37(1) : Business expenditure-Commission –Prior period expenditure-Expenditure for earlier year in its ledger account in respect of commission pertaining to current year- Merely on the basis of entries in books of account disallowance cannot be made.[S. 145]
Tribunal held that, merely on the ground that in ledge account the expenditure of commission was debited for earlier year, though the commission pertaining to current year, disallowance cannot be made (AY.2003-04)
ACIT v. Overseas Trading and Shipping Co. (P.) Ltd. (2018) 173 ITD 446 (Rajkot) (Trib.)

S. 37(1) : Business expenditure-Sales promotion expenses-When all relevant details for sales promotion expenses was filed, without verifying veracity of said expenses under S 133(6) and 131, disallowance cannot be made.[S. 131, 133(6)]
Tribunal held that the assessee has filed all relevant details, addresses of all parties were available in relevant bills filed by the assessee. As the AO failed to verify the genuineness of expenses by calling information u/s 133(6) and 131 od the Act, deletion of addition by CIT(A) is held to be justified.(AY.2003-04)
ACIT v. Overseas Trading and Shipping Co. (P.) Ltd. (2018) 173 ITD 446 (Rajkot) (Trib.)

S. 37(1) : Business expenditure-Warranty expenses-In terms of tripartite agreement entered into between assessee, a Russian company and Indian Air Force, assessee had to supply engines of aircrafts to Indian Air Force manufactured by Rusian company-warranty in respect of engines so supplied was responsibility of assessee for a specified period-Warranty expenses is held to be allowable.
Tribunal held that, in terms of tripartite agreement entered into between assessee, a Russian company and Indian Air Force, assessee had to supply engines of aircrafts to Indian Air Force manufactured by Rusian company-warranty in respect of engines so supplied was responsibility of assessee for a specified period-Warranty expenses is held to be allowable.(AY.2006-07)
Indo Russian Aviation Ltd. v. ACIT (2018) 173 ITD 597/171 DTR 409/196 TTJ 656 (Pune) (Trib.)

S. 37(1) : Business expenditure-Expenditure incurred prior to setting up its business is held to be not allowable-Just because the Assessing Officer had accepted the contention of the assessee in the earlier year on a wrong footing that would not be a reason to accept the claim that rule of res judicata would apply, when the facts showed a totally different scenario.
Allowing the appeal of the assessee the Tribunal held that, the assessee was yet to start commercial production and no revenue was generated by it. The assessee had just completed the process of registering the lease of the land and started the setting up of its plant, in such land during relevant previous year. The sale of a bus which was given free of cost by a company abroad could not be construed as the start of commercial operations. Just because the Assessing Officer had accepted the contention of the assessee in the earlier year on a wrong footing that would not be a reason to accept the claim that rule of res judicata would apply, when the facts showed a totally different scenario. The expenditure claimed by the assessee was incurred prior to setting up its business and was not allowable.(AY.2010-11)
DCIT v. Daimler India Commercial Vehicles (P.) Ltd. (2018) 65 ITR 610 (Chennai) (Trib.)

S. 37(1) : Business expenditure – Ad hoc disllaowance-Entertainment expenditure — Disallowance on ad hoc basis is held to be not proper.
Tribunal held that when the assessee has produced sufficient documentary evidence to prove genuineness of the transaction, Disallowance on ad hoc basis is held to be not proper.(AY.2007-08)
Exxon Mobil Company India P. Ltd. v. ACIT (2018) 65 ITR 583 /196 TTJ 1070 / 97 taxmann.com 43 (Mum.) (Trib.)

S. 37(1) : Business expenditure – Penal interest-Service tax-Payment of interest on delayed remittances of services tax is only compensatory in nature and would not be in nature of penalty which would be hit by Explanation to S. 37(1).
Allowing the appeal of the assessee the Tribunal held that,payment of interest was only compensatory in nature and would not be in nature of penalty which would be hit by Explanation to S. 37(1). Accordingly no disallowance can be made.(AY.2012-13)
Velankani Information Systems Ltd. v. DCIT (2018) 173 ITD 19 /172 DTR 356/ 196 TTJ 1128 (Bang.) (Trib.)

S. 37(1) : Business expenditure – Income-tax-Delay in payment of tax deduction at source-Interest paid under S. 201(1A) is in nature of tax and not allowable as business expenditure. [S. 2(43),40(ii),201(IA)]
Dismissing the appeal of the assessee, the Tribunal held that, interest paid under S. 201(1A) for delay in depositing tax deducted at source, is in nature of tax and same cannot be allowed as a deduction. Followed CIT v. Chennai Properties & Investment Ltd (1999) 239 ITR 435 (Mad) (HC), Dy.CIT v. Narayani Ispact (P) Ltd (ITA No. 2127(Kol) of 2014 dt 30-8-2017 is not followed.(AY.2 012013)
Velankani Information Systems Ltd. v. DCIT (2018) 173 ITD 19/172 DTR 356/ 196 TTJ 1128 (Bang.) (Trib.)

S. 37(1) : Business expenditure-Illegal payments-Interest-Bogus purchases – Survey by Maharashtra VAT Authorities-Interest paid under S. 30(2) of MVAT Act, 2002 was not penal in nature hence allowable ; however, interest paid under S. 30(4) of MVAT Act, 2002 which was in addition to interest payable under section 30(2) was penal in nature and could not be allowed in view of provision of Explanation 1 to S. 37(1) [MVAT Act, 2002, S. 25, 29(3),30(2) 30(4)]
During course of search and survey operations conducted by Maharashtra VAT Authorities, sales tax authorities have found that the assessee was indulged in bogus purchases by way of accommodation entries where in assessee had wrongly claimed input tax credits on these alleged bogus purchaseS. The assessee has claimed input tax credits were set off by assessee against its output VAT liabilities. In order to buy peace and end litigation under MVAT Act, 2002, assessee paid additional tax along with payment of interest under S. 30(2) and 30(4) of MVAT Act, 2002 of the Act. Interests paid was claimed as business expenditure deduction.Tribunal held that interest paid under S. 30(2) of MVAT Act, 2002 was not penal in nature hence allowable ; however, interest paid under S. 30(4) of MVAT Act, 2002 which was in addition to interest payable under section 30(2) was penal in nature and could not be allowed in view of provision of Explanation 1 to S. 37(1) of the Act.(AY.2009-10, 2012-13)
ACIT v. Gini & Jony Ltd. (2018) 172 ITD 472 /67 ITR 45 (SN)(2019) 197 TTJ 322/ 178 DTR 114(Mum.) (Trib.)

S. 37(1) : Business expenditure – Provision for warranty-Marketing of software products -Authorities were justified in restricting amount of allowable provision at 2.14 per cent of sale as adopted in earlier years, as there was no reversal after expiry of relevant period based on actual utilisation. [S. 145]
Tribunal held that Revenue Authorities were justified in restricting amount of allowable provision at 2.14 per cent of sale as adopted in earlier years, as there was no reversal after expiry of relevant period based on actual utilisation. (AY.2013-14, 2014-15)
Apple India (P.) Ltd. v. DCIT (2018) 172 ITD 553 / 172 DTR 367/ 196 TTJ 1139 (Bang.) (Trib.)

S. 37(1) : Business expenditure – Vehicle expenses and insurance on vehicle- Personal expenses – Disallowance of 10% of expenses is held to be justified.
Confirming the order of CIT(A) the Tribunal held that disallowance of 10% of Vehicle expenses and insurance on vehicle being personal expenses is held to be justified.(AY. 2004-05 to 2010-11)
Geeta Dubey (Smt.) v. ITO (2018) 172 ITD 538 (Indore) (Trib.)

S. 37(1) : Business expenditure – Interest paid on loan taken on land for purchase of land, is held to be not allowable as business expenditure as commission is the main source of income and not the sale of land.
Tribunal held that since sale of land is not main source of income, Interest paid on loan taken on land for purchase of land, is held to be not allowable as business expenditure. (AY.2007-08)
Geeta Dubey (Smt.). v. ITO (2018) 172 ITD 538 (Indore) (Trib.)

S. 37(1) : Business expenditure – Making charges paid to Goldsmiths allowable as the Assessee offered to tax the making charges collected from customers.
Assessee paid making charges at different rates depending upon grades and location of Goldsmiths. AO allowed the expenses by applying lowest rate of making charges to total weight of gold and disallowed the excess by pointing out certain deficiencies in the vouchers and that the identity of Goldsmiths could not be verified. Tribunal observed that only amounts involved in defective vouchers should be disallowance. It observed that no specific defect was found other than few unsigned vouchers and non-maintenance of stock register. Since the making charges were collected from customers and offered to tax , the disallowance held unjustified. (AY. 2014-15)
Grandhi Sri Venkata Amarendra v. ACIT (2018) 66 ITR 66 (SN)(Vishakha.)(Trib.)

S. 37(1) : Business expenditure –Actual payments made to Group Gratuity Scheme are allowable as deduction even though the same is not approved by the CIT [S. 36(1)(v)]
Dismissing the appeal of the revenue, the Tribunal held that; Actual payments made to Group Gratuity Scheme are allowable as deduction even though the same is not approved by the CIT.Followed District Co-operative Central Bank, Eluru . (AY.2013-14, 2014-15)
ACIT v. Guntur District Co-operative Bank Ltd (2018) 66 ITR 61 (SN) (Vishakha) (Trib.)

S. 37 (1) : Business expenditure-Provision for standard asset being required only to meet the unexpected eventuality is purely contingent in nature and hence is not allowable as a deduction.
Allowing the appeal of the revenue the Tribunal held that ;Provision for standard asset being required only to meet the unexpected eventuality is purely contingent in nature and hence is not allowable as a deduction. followed Chaitanya Godavari Grammena Bank . (AY.2013-14 2014-15)
ACIT v. Guntur District Co-operative Bank Ltd (2018) 66 ITR 61 (SN) (Vishakha)(Trib.)

S. 37(1) : Business expenditure-Provision for fall in the value of investment held as stock-in-trade by bank is allowable as a deduction.
Dismissing the appeal of the revenue the Tribunal held that ;provision for fall in the value of investment held as stock-in-trade by bank is allowable as a deduction. FollowedCanara Bank v. JCIT (2016) 68 taxmann.com 128 wherein it was held that the directions of the RBI are only disclosed norms and they have nothing to do with computation of taxable income. It was also held that where investments are forming part of stock-in-trade, loss arising on account of fall in value of securities should be recognized and allowed as a deduction. (AY.2008-09 to 2011-12)
ACIT v. Karnataka Bank Ltd.(2018) 63 ITR 433 (Bang.)(Trib.)

S. 37(1) : Business expenditure-Corporate entity – Even if no business was carried out during the year, expenditure incurred by it has to be allowed.
During assessment proceedings, AO found that assessee had claimed expenditure towards business expenses but assessee had not carried out any business during year under consideration. Therefore, AO disallowed the said amount and added back the same to income of assesse. CIT(A) set aside the order of the AO. The Tribunal held that in case of Preimus Investment And Finance Ltd (ITA 4879/M/12) dt. 13 May 2015, it was held that expenditure incurred for retaining status of company, namely miscellaneous expenses, salary, legal expenses, travel expenses, would be expenditure wholly and exclusively for purpose of making and earning income. There was no doubt that assessee was a corporate entity and even if it did not carry any business activity it had to incur some expenditure to keep up its corporate entity. Therefore expenditure incurred had to be allowed and thereby Revenue’s appeal was dismissed.
Ozoneland Agro Pvt. Ltd v. DCIT (2018)53 CCH 427 / 64 ITR 6 (SN)(Mum.)(Trib.)www.itatonline.org

S. 37(1) : Business expenditure – Capital or revenue-Expenses on renovation and refurbishing of a leased property – Held, expenses incurred to facilitate carrying out of catering / canteen services at the leased premises and formed integral part of profit earning process of assessee’s business – Held, revenue expenditure.
Expenditure incurred on a leased property in the nature of construction of working slabs / counters for various purposes, teakwood partitions, stainless steel shutters, pipelines, purchase of tables, chairs, centrifugal blowers and fresh air inlets, duct fabrication, Stainless steel Hoods, POP ceilings, electrical works, water connections, paintings etc. & various other items of similar nature were mainly to facilitate carrying out of catering / canteen services at the leased premises and formed part and parcel of assessee’s trading operations and constitute an integral part of profit earning process ofassessee’s business. Same was held by the Tribunal to be revenue in nature. (AY. 2002-03, 2003-04, 2009-10)
Dy. CIT v. Sodexo Food Solutions India P. Ltd. (2018) 66 ITR 52 (SN)(Mum.)(Trib.)

S. 37(1) : Business expenditure – Compounding fees paid to RBI for post-facto approval from FIPB – Held, amount compensatory in nature and therefore, allowable as deduction. [Explanation.]
Assessee paid aforesaid sum of Rs. 18 Lacs to Reserve Bank of India [RBI] as compounding fees under the provisions of Foreign Exchange Management Act, 1999. Assessee was categorized as operating company for the purposes of FIPB and FEMA. Subsequently, the assessee made investment in shares of its wholly owned subsidiary companies and accordingly its category changed from operating company to operating-cum-holding company, which required prior approval of FIPB. However, the said approval was not obtained and the assessee applied for post-facto approval of the same from FIPB which was granted subject to compounding of the same by RBI. Held, such compounding fees was compensatory in nature and therefore, allowable. (AY.2002-03, 2003-04, 2009-10)
Dy. CIT v. Sodexo Food Solutions India P. Ltd. (2018) 66 ITR 52 (SN))(Mum.)(Trib.).)

S. 37(1) : Business expenditure – Capital or revenue-Royalty paid in the nature of spectrum charges to Government of India as a percentage of revenue on regular basis – Also, license fee paid for telecommunication services to Government of India based on revenue share and on regular basis – Held, both are revenue expenditure – S. 35ABB is not applicable.[S. 35ABB]
The Tribunal held that royalty paid by the assessee in the nature of spectrum charges to Government of India as a percentage of revenue on regular basis as also the license fee paid for telecommunication services to Government of India based on revenue share on regular basis were revenue expenditure allowable as deduction and that section 35ABB was not applicable. (AY.2009-10)
Dy. CIT v. Vodafone Essar Digilink Ltd. (2018) 193 TTJ 150 / 64 ITR 392 / 170 ITD 430/ 166 DTR 233 (Delhi)(Trib.)

S. 37(1)-Business expenditure – Commission to directors against personal guarantee – Matter remitted to the AO to verify whether as per the bank documentation, director eligible for commission.
Assessee claimed deduction of guarantee commission paid to directors for personal guaranty for availing loan facility. It was held that, unless it was ascertained from original bank documentations that said bank documents/ agreements contained terms and conditions, as stipulated by RBI in its guidelines, it was not possible to decide whether commission paid by assessee company to its directors in lieu of their personal guarantee was lawful/justified or not. Accordingly, matter was to be remanded back for disposal afresh. (AY. 2008-09)
Eastman Industries Ltd. v. ACIT (2018) 63 ITR 181 (Delhi) (Trib.)

S. 37(1) : Business expenditure – Foreign exchange fluctuation loss-Advance of loan to Indian Permanent Establishment – loss is allowable as deduction – DTAA-India-Spain [S. 9(1)(i),Art.7]
Spanish company, advanced loan to its Indian Permanent Establishment in foreign currency for execution of project in India, which incurred foreign exchange fluctuation loss on account of differential value in INR, such fluctuation loss was allowable as deduction in hands of Indian Permanent Establishment.(AY.2014-15)
Cobra Instalaciones Y Servicios SA v. DCIT (2018) 65 ITR 714 / 172 ITD 18 / 171 DTR 198/ 195 TTJ 1038 (Delhi) (Trib.)

S. 37(1) : Business expenditure-Sales promotion expenses-supply of certain products free of cost to Government hospitals and other hospitals in pursuance of purchase order placed by such hospitals-Allowable as business expenditure-Circular No 5/2012 dt. 1-8-2012 (2012) 346 ITR 95 (St) is prospective in nature.
AO held that goods supplied to doctors and other professional association free of cost were prohibited in terms of CBDT Circular No. 5/2012 dated 1-8-2012, accordingly disallowed the expenditure. Dismissing the appeal of the revenue the Tribunal held that ; CBDT circular no. 5/2012 dated 1-8-2012 (2012) 346 ITR 95 (St) is prospective in nature and, thus, not applicable to case of assessee.Tribunal also held that. since goods were supplied to hospitals in pursuance to purchase order, it could not be concluded that products were supplied free of cost; thus, claim of assessee of expenditure under head sales promotion expenses was to be allowed.(AY.2012-13)
DCIT v. Esaote India (NS) Ltd. (2018) 172 ITD 299 / 172 DTR 427/ 196 TTJ 1091 (Ahd) (Trib.)

S. 37(1) : Business expenditure-Insurance premiums of employees’ family members in terms of employment rules framed by assessee-company –Allowable as business expenditure. [S. 17 (2)(iv)]
Allowing the appeal of the assessee the Tribunal held that ; insurance premiums of employees’ family members in terms of employment rules framed by assessee-company is allowable as business expenditure. (AY.2009-10)
Loesche India (P.) Ltd. v. ACIT (2018) 172 ITD 176 / 195 TTJ 33(UO)(Delhi) (Trib.)

S. 37(1) : Business expenditure- Service charges paid to SRSR Advisory Services Pvt Ltd for advisory services in assessee business area, accounting services, collection of interest and dividend, taxation, ROC related matters and maintenance of its land properties etc.-Allowable as business expenditure.
Tribunal held that ; service charges paid to SRSR Advisory Services Pvt Ltd for advisory services in assessee business area, accounting services, collection of interest and dividend, taxation, ROC related matters and maintenance of its land properties etc. is held to be allowable as business expenditure.(AY.2005-06)
Fincity Investments (P.) Ltd. v. ACIT (2018) 172 ITD 204/ 172 DTR 396(Hyd) (Trib.)
Veeyes Investments (P) Ltd v. ACIT (2018) 172 ITD 218/(2019) 197 TTJ 261/ 175 DTR 109 (Hyd) (Trib.)

S. 37(1) : Business expenditure -Payment of Rs. 20000/ made as per direction of Inspector of Legal Metrology as compensation/damages to avoid any future litigation – Allowable as business expenditure.
Payment of Rs. 20000/ made as per direction of Inspector of Legal Metrology as compensation/damages to avoid any future litigation is held to be allowable as business expenditure. (AY.2013-14)
Ocean Agro (India) Ltd. v. DCIT (2018) 172 ITD 157 (Ahd) (Trib.)

S. 37(1) : Business expenditure – Commercial expediency-Business man’s point of view-Service charges were paid to company SRSR for providing advisory services in assessee’s business area, accounting services, collection of interest and dividend, taxation, ROC related matters and maintenance of its land, properties, etc-There being no dispute that services was rendered to assessee, Assessing Officer cannot step into shoes of assessee to-re fix amount that should have been paid.S. 37(1) does not have any restriction to amount paid so long expenditure is incurred for business.
Assessee has paid service charges of Rs 3 lakhs per month to company SRSR for providing advisory services in assessee’s business area, accounting services, collection of interest and dividend, taxation, ROC related matters and maintenance of its land, properties, etc. Assessing officer estimated at Rs 25000 per month. On appeal the Tribunal held that, there being no dispute that services was rendered to assessee, Assessing Officer cannot step into shoes of assessee to-re fix amount that should have been paid.S. 37(1) does not have any restriction to amount paid so long expenditure is incurred for business. (referred,CIT v. Bharat Carbon & Ribbon Mfg. Co. (P.) Ltd. [1999]239 ITR 505 (SC),Sasson J. David & Co. (P.) Ltd. v. CIT [1979] 118 ITR 261 (SC)). Birla Cotton Spinning & Weaving Mills Ltd. v. CIT [1967] 64 ITR 568 (Cal.) (HC). CIT v. Dhanrajgiri Raja Narasingiri [1973] 91 ITR 544 (SC) Jamshedpur Motor Accessories Stores v. CIT [1974] 95 ITR 664 (Pat.) (HC) J.K. Woollen Mfgr. v. CIT [1969] 72 ITR 612 (SC). I CIT v. Chandulal Keshavlal & Co. [1960] 38 ITR 601 (SC), (AY.2005-06)
Elem Investments (P.) Ltd. v. ACIT (2018) 172 ITD 58(Hyd) (Trib.)

S. 37(1) : Business expenditure- Travelling expenditure-Fringe benefit tax on travelling expenses incurred by it during year, travelling expenses could not be disallowed on account of personal expenditure. [S. 115JB]
Tribunal held that ; once Fringe benefit tax (FBT) was paid, no disallowance could be made on account of personal expenditure; thus, travelling expenditure was to be allowed .(AY.2007-08)
Second Leasing (P.) Ltd. v. ACIT (2018) 171 ITD 508 / 171 DTR 97/196 TTJ 117 (Delhi) (Trib.)

S. 37(1) : Business expenditure-Capital or revenue-Depreciation-One time consolidated fee paid to holding company –Held to be capital in nature – Depreciation is allowable.[S. 32(1)(ii)]
Dismissing the appeal of the assessee the Tribunal held that, onetime consolidated fees paid to its holding company, GRM, for use of trademark is held to be capital in nature,an enduring benefit and was applicable till assessee ceased to be subsidiary of GRM however one time consolidated amount being in nature of intangible asset, depreciation is allowable. (AY.2010-11)
GMR Airport Developers Ltd. v. ITO (2018) 171 ITD 595 (Hyd) (Trib.)

S. 37(1) : Business expenditure-Capital or revenue-Annual licence fee payable on the basis of turnover achieved is held to be allowable as revenue expenditure.
Allowing the appeal of the assessee the Tribunal held that; annual licence fee payable on the basis of turnover achieved is held to be allowable as revenue expenditure. (AY.2010-11)
GMR Airport Developers Ltd. v. ITO (2018) 171 ITD 595 (Hyd) (Trib.)

S. 37(1) : Business expenditure-Capital or revenue-Trade mark expenses for use allowable as revenue expenses .
Where payment was made by assessee for ‘use of’ trademarks and not for acquiring trademarks as an owner, and ownership in trademarks would remain intellectual property of licensor, said payment was to be treated as a revenue expenditure (AY. 2007-08)
GKN Driveline (India) Ltd. v. Dy. CIT (2018) 62 ITR 784 (Delhi)(Trib.)

S. 37(1) : Business expenditure- Capital or revenue-Renovation of leased office premises is revenue expenses allowable. [S. 31]
Expenditure incurred on renovation of leased office premises is revenue expenses allowable u/s 37 of the Act.(AY. 2011-2012)
Genesisi Datacomp P. Ltd. v. ITO (2018) 63 ITR 699 (Mum.)(Trib.)

S. 37(1) : Business expenditure – Discount and commission – In absence of full details, entire payment cannot be allowed – cash discount of 1% to keep the buyer in good humor allowable in the interest of justice.
The assesse had claimed deception under the head commission and discount. AO disallowed the same on the ground that sales were already offered net of discount and therefore, there cannot be any further allowance in absence of evidence of any further discount. Before the Tribunal, assessee argued that the issue was covered by earlier year’s Tribunal order. Held, the basis of earlier years order was different and therefore, that judgment would not apply. Further, in so far as additional discount is concerned, the claim of the assessee that the same was allowed to keep the buyers in good humour merits acceptance, however, in absence of full details, cash discount at 1% to be allowed.(AY. 2013-14)
Purnima Sahoo (Smt.) v. ITO (2018) 62 ITR 54 (Cuttack)(Trib.)

S. 37(1) : Business expenditure – Corporate social responsibility – peripheral development expenses and community development expenses allowable.
Assessee obligated to spend certain sums towards corporate social responsibility. There is obligation on the part of the assessee to give support to the people displaced due to setting up of industry on their landS. Such community development expenses and peripheral development expenses are allowable deduction. (AY.2004-05, 2008-09, 2011-12)
Rashtriya Ispat Nigam Ltd. v. Jt. CIT (OSD) (2018) 62 ITR 696 (Vishakha)(Trib.)

S. 37(1) : Business expenditure – Accrued or contingent liability – provision towards expenditure for closure of mines being merely a statutory provision relating to operation of mine, no deduction for proportionate expenditure to the period for which mines operated allowable.
Provision towards expenditure for closure of mines being merely a statutory provision relating to operation of mine, no deduction for proportionate expenditure to the period for which mines operated allowable. (AY. 2004-05, 2008-09, 2011-12)
Rashtriya Ispat Nigam Ltd. v. Jt. CIT (OSD) (2018) 62 ITR 696 (Vishakha)(Trib.)

S. 37(1) : Business expenditure – Accrued or contingent liability – provision for post-retirement medical benefits, future encashment leave and long service award based on actuarial valuation is allowable.
Provision for post-retirement medical benefits, future encashment leave and long service award based on actuarial valuation is allowable. (AY.2004-05, 2008-09, 2011-12)
Rashtriya Ispat Nigam Ltd. v. Jt. CIT (OSD) (2018) 62 ITR 696 (Vishakha)(Trib.)

S. 37(1) : Business expenditure – Subsidiary company – Gratuity and leave wages of employees-Deduction cannot be allowed in two entities-Matter remanded to the AO.
Tribunal held that statutory, deduction cannot be allowed in two entities. Matter remanded to the AO. (AY. 2007-2008)
Oricon Enterprises Ltd. v. ACIT (2018) 171 ITD 231 / 67 ITR 433 (Mum.)(Trib.)

S. 37(1) : Business expenditure-Trust – No authorization in trust deed to pay remuneration-Remuneration paid by trust to its employees is not allowable.
Tribunal held that since there was no authorization in trust deed about the payment of remuneration, so remunerations paid by trust to employees was not sanctioned in trust deed, same was not correct as per law, hence is same is not allowed for deduction. (AY. 2007-08, 2009-10)
Shalom Charitable Ministries of India v. ACIT (2018)171 ITD 338 / 195 TTJ 340 (Cochin)(Trib.)

S. 37(1) : Business expenditure – Self made vouchers-Disallowance of 20% amount towards self made vouchers is justified.
The Tribunal held that in a normal trade practice, it is not possible to prove 100 per cent bills and receipts from recipients and there is chance of making payments by way of self-made vouchers, and chance of inflating expenditure by way of self-made vouchers, therefore, 20 per cent disallowance of self made voucher is justified. (AY. 2007-08)
Shalom Charitable Ministries of India v. ACIT (2018) 171 ITD 338 / 195 TTJ 340 (Cochin) (Trib.)

S. 37(1) : Business expenditure-AO disallowed expenses on account of business promotion and vehicle maintenance on estimate basis without bringing any cogent material on record for disallowing expenses.
On appeal before the Tribunal, it was held that the department could not controvert the finding of the CIT(A) and AO failed to bring any documentary evidence on record to establish that business promotion expenses were incurred for personal use. In result the revenue appeal was dismissed. (ITA No. 5254/Del/2014) (AY. 2011-12)
ACIT v. Mohinder Kumar Jain (2017) 62 ITR 176 (Delhi) (Trib.)

S. 37(1) : Business expenditure –Compelled to make cash payments to labourers at work sites in remote areas, genuineness of expenditure could not be doubted. However, where no proper documentation or bills or vouchers were maintained, disallowance was to be restricted to 10 percent of the total claim.
On appeal, the Tribunal observed that the AO did not doubt the genuineness of the expense but disallowed the claim for want of original bills and vouchers. Further, it observed that the payments were made to labourers at work sites mainly in the remote areas. The Tribunal also observed that, there was increase in turnover and investments in fixed assets of the company, whereas the wage expenses were one third of the wage expenses of the earlier assessment years. On the aforesaid basis, the Tribunal concluded that the expenses were incurred in the course of business operation of the assessee. However, as proper bills and vouchers were not maintained, the disallowance was restricted to 10 per cent of the claim. (AY. 2012-13)
Anil Contractors P. Ltd. v. DCIT (2018) 63 ITR 4(SN) (Cuttack) (Trib.)

S. 37(1) : Business expenditure – Dinner expenses and gift expenses were incurred while holding meetings in hotel with senior doctors, for upgradation of skills and discussion of latest techniques and methods, such expenses were to be allowed as business expenditure.
On appeal, the Tribunal held that these expenses were incurred for updation of knowledge and for the profession of the assesse. The gift items were presented to doctors in lieu of their professional fees and likewise the dinner expenses were supported by adequate bills and vouchers and therefore, these were to be allowed as a business expenditure. (AY. 2010-11)
Amit Ghose v. DCIT (2018) 63 ITR 44 (SN)(Kol) (Trib.)

S. 37(1) : Business expenditure –Advertisement and publicity expenses were incurred for dissemination of knowledge for public at large, such expenses were to be allowed as business expenditure.
On appeal, the Tribunal held that the expenses were incurred for the general welfare of the public at large. Further, it held that the guidelines issued by the Indian Medical Council were for the purpose of compliance with professional ethics. Such guidelines could not be equated to any legal provision having a statutory force and thus the expense was to be allowed as a business expenditure. (AY. 2010-11)
Amit Ghose v. DCIT (2018) 63 ITR 44 (SN) (Kol) (Trib.)

S. 37(1) : Business expenditure-Growing tea-The expenditure relating to the maintenance of cattle owned by the employees was considered as expenditure of tea operation-The recoveries from employees against such expenditure were disclosed under other income.-Since expenditure incurred on cattle keepers was purely labour welfare measure which was approved by Plantation Labour Committee, expenditure incurred was directly relatable to tea business of assessee, therefore, same should be treated as expenditure under Rule 8 of the I.T. Rules. [R.8]
Tribunal held that, the expenditure relating to the maintenance of cattle owned by the employees was considered as expenditure of tea operation. The recoveries from employees against such expenditure were disclosed under other income. Since expenditure incurred on cattle keepers was purely labour welfare measure which was approved by Plantation Labour Committee, expenditure incurred was directly relatable to tea business of assessee, therefore, same should be treated as expenditure under Rule 8 of the I.T. Rules. (AY. 2010-11, 2011-12 2012-13)

Kannan Devan Hills Plantations Co. Pvt. Ltd. v. ACIT (2018) 62 ITR 451 (Cochin)(Trib.)

S. 37(1) : Business expenditure – Capital or revenue –Amortization of premium paid on leasehold land – Premium in nature of rent – Allowable as revenue expenditure.
Tribunal held that the assessee had entered into an agreement with various parties for the purchase of leasehold lands at various places, which were to be used for its business operations, for establishing retail outlets, liquid petroleum gas bottling plants and refineries. The leasehold premium amortised by the assessee was in the nature of compensation paid to the landlords, in addition to the rent. Since the leasehold premium amortised by the assessee was in the nature of rent, it was to be allowed as a revenue expenditure in the hands of the asseessee. (AY. 2006-07, 2007-08)
Bharat Petroleum Corporation Ltd. v. ACIT (OSD) (2018) 63 ITR 244 (Mum.)(Trib.)

S. 37(1) : Business expenditure — Capital or revenue -Collaboration agreement for expansion of existing business — Project abandoned without acquiring any new asset for enduring benefit —Expenses allowable as revenue expenditure.
Tribunal held that, when project is abandoned without acquiring any new asset for enduring benefit. Expenses is allowable as revenue expenditure. (AY.2009 10 to 2013-14)
Manipal Health Systems P. Ltd. v. ACIT (2018) 65 ITR 51(SN)) (Bang.) (Trib.)

S. 37(1) : Business expenditure-Capital or revenue -Expenditure incurred on renovation of leasehold building is revenue expenditure.
Held that the expenditure incurred by the assessee on renovation of leasehold building was revenue expenditure and not a capital expenditure though it was of enduring benefit or advantage unless at the end of the term of lease, the items on which expenditure was spent could be retrieved by the assessee. (AY.2010-11)
Joy Alukkas (India) Ltd. v. ACIT (2018) 65 ITR 409 (Cochin) (Trib.)

S. 37(1) : Business Expenditure — Bogus purchases — Disallowance of 15% of unverifiable purchases is held to be justified.
Tribunal held that,disallowance of 15% of unverifiable purchases is held to be justified (AY.2012-13)
ACIT v. Sharma East India Hospitals And Medical Research Ltd. (2018) 65 ITR 46 (SN) (Jaipur) (Trib.)

S. 37(1) : Business expenditure-Settlement charges paid to SEBI without admitting or denying guilt and was paid just to settle dispute, said settlement charges/consent fee could not be equated with penalty for violation of law under Explanation 1 to S. 37(1) of the Act and is allowable as business expenditure. [Securities and Exchange Board of India Act, 1992,S. 11, 1B and of SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 R.11]
Dismissing the appeal of the revenue the Tribunal held that ; payment to SEBI without admitting or denying guilt and was paid just to settle dispute, said settlement charges/consent fee could not be equated with penalty for violation of law under Explanation 1 to S. 37(1) of the Act and is allowable as business expenditure. Referred ITO v. Reliance Shares & Stock Brokers (P.) Ltd. (2015) 67 SOT 73 (Mum.) (Trib.). (AY.2011-12)
DCIT v. Anil Dhirajlal Ambani. (2018) 171 ITD 144 / 66 ITR 607 / 172 DTR 17 / 195 TTJ 867(Mum.) (Trib.)

S. 37(1) : Business expenditure-Warranty provision-Following consistent method in creating similar warranty provision year after year, no adhoc addition could be made. stores and spares expenses pertained to normal repairs and maintenance of manufacturing facility and salary, wages and staff welfare were related to normal business expenditure, no ad hoc disallowance could be made. [S. 145]
Allowing the appeal of the assessee, the Tribunal held that ; since assessee had been following consistent method in creating similar warranty provision in other assessment years as well and no disallowance was made at revenue’s behest, assessee’s claim of warranty provision being computed on scientific basis, was to be accepted.Tribunal also held that stores and spares expenses pertained to normal repairs and maintenance of manufacturing facility and salary, wages and staff welfare were related to normal business expenditure, no adhoc disallowance could be made. (AY.2000-01, 2001-02)
Hitachi Home & Life Solutions (I) Ltd. v. ACIT (2018) 171 ITD 65 (Ahd) (Trib.)

S. 37(1) : Business expenditure-Warranty provision-Services by way of repair and replacement for a pre-defined period, said provision was eligible for deduction.[S. 145]
Tribunal held that where assessee, engaged in providing marketing, technical support installation and Commissioning services to telecommunication sector, made a provision for warranty services by way of repair and replacement for a pre-defined period, said provision was eligible for deduction.(AY.2008-09)
Huawei Telecommunication (India) Company (P.) Ltd. v. ACIT (2018) 171 ITD 19 (Delhi) (Trib.)
S. 37(1) : Business expenditure –Notional addition-Sale at discounted price to retailers was to increase volume of sales through e-commerce-Where a trader transfers his goods to another trader at a price less than market price and transaction is a bona fide one, taxing authority cannot take into account market price of those goods, ignoring real price fetched to ascertain profit from transaction-Revenue cannot bring to tax hypothetical income accordingly the addition was deleted.[S. 2(24),4, 28(1), 40(A)(2)(a),145]
Assessee company is engaged in business of wholesale trader/disTrib.utor of books, mobiles, computers and related accessories. Assessee sold the goods to retailers at a price less than their cost price to increase volume of sales through e-commerce. AO rejected the explanation of assessee and made addition on notional basis which was confirmed by the CIT(A). On appeal allowing the appeal of the assessee the Tribunal held that when a trader transfers his goods to another trader at a price less than market price and transaction is a bona fide one, taxing authority cannot take into account market price of those goods, ignoring real price fetched to ascertain profit from transaction. The Tribunal also held that even otherwise, since assessee had not incurred any expenditure to acquire marketing intangibles or for creation of goodwill, impugned order passed by Assessing Officer was not sustainable. Revenue cannot bring to tax hypothetical income accordingly the addition was deleted. (Referred, CIT v. Shoorji Vallabhdas & Co (1962) 46 ITR 144 (SC) CIT v. Calcutta Discount Ltd. (1973) 91 ITR 8(SC) CIT v. A. Raman & Co. (1968) 67 ITR 11 (SC) and A. Khader Basha v. ACIT (2015) 232 Taxman 434(Karn) (HC).(AY.2015-16)
Flipkart India (P.) Ltd. v. ACIT (2018) 170 ITD 751 /166 DTR 305 /64 ITR 358 / 193 TTJ 685 (Bang.) (Trib.)

S. 37(1) : Business expenditure-Lease hold premises – Repairs and maintenance- Order of CIT(A) lacked quasi-Judicial investigation and analysis fair to both the assessee as well as the department-Repair and maintenance expenses and business promotion expenses-Matter was remanded to CIT(A) for fresh adjudication.
Tribunal held that the order of CIT(A) lacked quasi-Judicial investigation and analysis fair to both the assessee as well as the department. Accordingly the matter was remanded to CIT(A) for fresh adjudication and to consider whether Repair and maintenance expenses and business promotion expenses allowable as deduction by bringing out facts and verification.(AY.2011-12)
Dy CIT v. Amar Brothers Global P. Ltd (2018) 64 ITR 69 (SN)(Luck.) (Trib.)

S. 37(1) : Business expenditure –Keyman insurance policy in the name of directors is held to be allowable as business expenditure.
Allowing the appeal of the assessee the Tribunal held that ; Keyman insurance policy in the name of directors is held to be allowable as business expenditure though it is referred as life insurance policies .(AY.2011-12, 2012-13)
Arcadia Share & Stock Brokers (P.) Ltd. v. ACIT (2018) 170 ITD 616 (Mum.) (Trib.)

S. 37(1) : Business expenditure-Capital or revenue-Right to use technical know is held to be revenue expenditure.
Allowing the appeal of the assessee the Tribunal held that the ; assessee acquired merely right to draw upon technical knowledge of foreign companies for a limited purpose of carrying on its business, and that foreign companies did not part with any of their assets absolutely, therefore the,assessee had not, acquired any asset or advantage of an enduring nature for benefit of its business and that payments were, revenue in nature.(AY.2005-06-2006-07)
Moser Baer India Ltd. v. DCIT (2018) 170 ITD 522 (Delhi) (Trib.)

S. 37(1) : Business expenditure – Capital revenue-Opening of new stores /outlets expenditure on salaries, machinery and other repairs, travelling conveyance professional fees, electricity expenses telephone expenses etc is held to be revenue expenditure.
Dismissing the appeal of the revenue the Tribunal held that, expenses incurred on opening of new stores /outlets expenditure on salaries, machinery and other repairs, travelling conveyance professional fees, electricity expenses telephone expenses etc is held to be revenue expenditure.(AY. 2010-11)
ACIT v. Reliance Digital Retail Ltd (2018) 166 DTR 194 /194 TTJ 113(Mum.) (Trib.)
ACIT v. Reliance Fresh Reality Ltd (2018) 166 DTR 194/194 TTJ 113 (Mum.) (Trib.)
ACIT v. Reliance Hyper Reality Ltd(2018) 166 DTR 194/194 TTJ 113(Mum.) (Trib.)

S. 37(1) : Business expenditure – Interest under Jharkhand VAT Act, 2005 being compensatory nature is allowable as deduction. Penalties being not compensatory nature is held to be not allowable [Jharkhand VAT Act, 2005 S. 30(1), 30(3), 30(4)(d),63(3)]
Interest paid under S. 30(1) of Jharkhand VAT Act 2005 being compensatory in nature, is allowable deduction as business expenditure Penalties imposed is not allowable deduction. (AY. 2010-11)
Bokaro Power Supply Co. Ltd. v. Dy. CIT (2018) 191 TTJ 22 /163 DTR 259 (Delhi)(Trib.)

S. 37(1) : Business expenditure – Amortisation of expenses – Development of roads and highways in build operate and transfer agreements – Benefit of circular cannot be thrust upon the assessee if it has not claimed.
Tribunal held that the assessee neither in the preceding assessment years nor in the instant assessment year had claimed it as deferred revenue expenditure hence there was no scope to examine whether the expenditure could have been amortised over the concession period in terms of CBDT circular No. 9 of 2014 dt. 23-04 2014(2014) 364 ITR 1 (St). More over the CBDT Circular was for the benefit of the assessee. Therefore,the benefit in terms of Circular could be granted,provided the assessee makes a claim in terms of it. The benefit of the Circular could not be thrust upon the assessee if it was not claimed. (AY. 2011-12)
ACIT v. Progressive Constructions Ltd (2018) 161 DTR 289/ 63 ITR 516 /191 TTJ 549 (SB) (Hyd) (Trib.)

S. 37(1) : Business expenditure-Legal expenses – Merely because the payment was made cheque and TDS was deducted expenses cannot be allowed, in the absence of any documentary evidence connecting expenditure incurred for business auxiliary service with business of assessee.
Allowing the appeal of the revenue the Tribunal held that, merely because the payment was made cheque and TDS was deducted expenses cannot be allowed, in the absence of any documentary evidence connecting expenditure incurred for business auxiliary service with business of assessee. (AY.2011-12)
DCIT v. Anjali Hardikar (Smt.) (2018) 170 ITD 398 (Pune) (Trib.)

S. 37(1) : Business expenditure-Foreign tour expenses of Research manager of export is held to be allowable as the turnover has increased in succeeding years.
Dismissing the appeal of the revenue the Tribunal held that ; Foreign tour expenses of Research manager of export is held to be allowable as the turnover has increased in succeeding years (AY.2011-12)
DCIT v. Laboratories Griffon (P.) Ltd. (2018) 170 ITD 387/65 ITR 317 /193 TTJ 855 (Kol.) (Trib.)

S. 37(1) : Business expenditure-Distribution of gift articles – Accommodation entries-Bogus purchases – Disallowance was restricted to 30 % of the claim.
Tribunal held that, assessee had produced bills and invoices for purchase of Dinner set and had made payment through banking channel but assessee had failed to give list of recipients of gift material or confirmation,therefore the assessee’s claim should be restricted to 30 per cent of its claim and assessee would get partial relief. (AY.2011-12)
DCIT v. Laboratories Griffon (P.) Ltd. (2018) 170 ITD 387 /65 ITR 317 / 193 TTJ 855/ ( 2019) 178 DTR 355(Kol) (Trib.)

S. 37(1) : Business expenditure-Capital or revenue – Payment of spectrum charges to Department of Telecommunications on quarterly basis is held to be revenue expenditure.[S. 35BB]
Tribunal held that payment of spectrum charges was not meant for obtaining a license to use spectrum, but for actual use of it on regular basis which is allowable as revenue expenditure.(AY.2009-10)
DCIT v. Vodafone Essar Digilink Ltd. (2018) 170 ITD 430 / 193 TTJ 150/ 166 DTR 233/ 64 ITR 392 (Delhi) (Trib.)

S. 37(1) : Business expenditure-Professional fees paid to retired employees of assessee who were expert in this field is held to be allowable as deduction.
Dismissing the appeal of the revenue the Tribunal held that ; professional fees paid to retired employees of assessee who were expert in this field is held to be allowable as deduction. (AY.2011-12)
DCIT v. Laboratories Griffon (P.) Ltd. (2018) 170 ITD 387 /65 ITR 317 / 193 TTJ 855/( 2019) 178 DTR 355 (Kol) (Trib.)

S. 37(1) : Business expenditure-Circular No. 5/2012 dated 01-8-2012 (2012) 346 ITR 95(St)prohibiting pharmaceutical companies from giving any monetary benefits to doctors, was applicable from assessment year 2013-14 onwards-As the addition was deleted consequently penalty levied was also deleted. [S. 271(1)(c)]
The assessee, a pharmaceutical company paid certain commission to doctorS. The AO relying on Circular No. 5/2012 dated 01-08-2012 (2012) 346 ITR 95(St). which prohibits pharmaceutical companies from giving any monetary benefits to doctors disallowed said payments of commission. The AO also passed a penalty order under section 271(1)(c) in respect of said disallowance. On further appeal, it was noted that Co-ordinate Bench of Tribunal in a case involving similar issue had held that Circular dated 01-08-2012 was applicable from assessment year 2013-14 onwards and, hence, disallowance made in relevant year on basis of said circular was not justified. Thus, in view of order passed by Co-ordinate Bench, impugned disallowance made by Assessing Officer was to be deleted and consequently penalty levied under S. 271(1)(c) was also deleted . (AY. 2011-12).
ITO v. Sunflower Pharmacy (2018) 62 ITR 275 (Ahd.)(Trib.)

S. 37(1) : Business expenditure – Bogus purcahses-The assessee was doing major works for Govt. Departments and the said Departments also confirmed the authenticity of work and merely because the assessee could not produce the parties, purchases could be held as non-genuine. Disallowance was confirmed of only Rs 5 lakhs. [S. 131, 145]
Tribunal held that the assessee had done major works for the Government departments and they confirmed the authenticity of the work. The assessee continuously declared a net profit in the range of 1. 71% to 4. 65% and the disallowance made by the AO if accepted would increase the net profit to the tune of 25. 15% which was abnormal. The suppliers of these goods had no permanent place for carrying on the business. There were no defects in the books of account of the assessee. The disallowance confirmed by the CIT(A) of Rs. 15 lakhs was to be reduced to RS. 5 lakhs. (AY. 2011-12)
IHR Associates v. Dy. CIT (2018) 61 ITR 70 (Chd)(Trib.)

S. 37(1) : Business expenditure — Advertisement expenditure on project is held to be allowable though no income was offered during the year. [S. 145]
Advertisement expenditure on project is held to be allowable though no income was offered during the year. (AY. 2013-2014)
Dy. CIT v. Ramkay Wavoo Developers P. Ltd. (2018) 62 ITR 376 (Chennai)(Trib.)

S. 37(1) : Business expenditure — Freebies to Doctors-Advertisement and sales promotion expenses incurred by the Pharmaceutical company cannot be disallowed, on the basis circulars by Medical Council of India.
The Circular issued by the CBDT enlarging the scope of disallowance to the pharmaceutical companies was without any enabling notification or Circular of the Medical Council of India. Therefore a pharmaceutical company is outside the scope of the circular by the Medical Council of India or the CBDT, therefore expenditure on advertisement and sale promotion is allowable as business expenditure. (AY. 2010-11).
Emcure Pharmaceuticals Ltd. v. Dy. CIT (2018) 62 ITR 744 (Pune)(Trib.)

S.37(1) : Business expenditure – Capital or revenue – Debenture whether convertible or non convertible are in nature of loan at the time of issuance therefore expenditure incurred are allowable as business expenditure.
Expenditure incurred on issue of foreign currency convertible bonds debentures at the time of issuance, expenditure are allowable as revenue expenditure. (AY. 2006 – 2007 to 2008-2009)
Dy. CIT v. Mcnally Bharat Engineering Co. Ltd. (2018) 191 TTJ 822 (Kol)(Trib.)

S. 37(1) : Business expenditure – Damages-Expenses on repair of goods returned back on account of low quality was held to be allowable as business expenditure.
Dismissing the appeal of the revenue the Tribunal held that; Expenses on repair of goods returned back on account of low quality was held to be allowable as business expenditure. (AY. 2008-09 to 2010-11)
EPCOS India (P.) Ltd. v. ITO (2018) 169 ITD 541 /65 ITR 20 (SN)(Kol.) (Trib.)

S. 37(1) : Business expenditure – Entry tax – e-challan containing all relevant details including name of assessee, impugned disallowance was to be deleted, matter was set aside for verification.
Tribunal held that the assessee had brought on record e-challan containing all relevant details including name of assessee, accordingly the matter was remanded for verification and allow. (AY. 2014-15)
ACIT v. Safe Decore (P.) Ltd. (2018) 169 ITD 328/165 DTR 339/193 TTJ 898 (Jaipur) (Trib.)

S. 37(1) : Business expenditure-Corporate entity – Administrative expenditure to maintain status of the company, is held to be allowable though the manufacturing activity of fragrance and flavours was discontinued. [S. 57(iii)]
Allowing the appeal of the assessee, the Tribunal held that, Administrative expenditure to maintain the status of the company and for said purposes it was necessary to maintain clerical staff and secretary or accountant and incur incidental expensed is held to be allowable though the manufacturing activity of fragrance and flavourswas discontinued. Tribunal also held that so long as the company is in operation and its name is not struck off from Registrar of Companies the administrative expenses will be allowable as deduction .(Referred,CIT v. Ganga Properties Ltd. (1993) 199 ITR 94 (Cal) (HC)(AY. 2008-09, 2009-10)
Sai Fragrance & Flavours (P.) Ltd. v. ACIT (2018) 169 ITD 235 (Mum.) (Trib.)

S. 37(1) : Business expenditure – Bank-Amortisation of premium paid for purchase of securities was to be allowed as deduction.
Allowing the appeal of the assessee, the Tribunal held that, Amortisation of premium paid for purchase of securities was to be allowed as deduction. (AY. 2009-10)
Allahabad Bank v. DCIT (2018) 169 ITD 189 (Kol) (Trib.)

S. 37(1) : Business expenditure-Advertisement, Marketing and business promotion expenses (AMP) by pharmaceutical company for promoting sale and brand was held to be allowable business expenditure. Revision was held to be not valid .[S. 263],
Allowing the appeal of the assessee the Tribunal held that, Advertisement, Marketing and business promotion expenses (AMP) by pharmaceutical company for promoting sale and brand, where through conferences and seminars, doctors were updated about latest developments in medical field was held to be allowable business expenditure. Revision was held to be not valid. (AY. 2011-12)
Solvay Pharma India Ltd. v. PCIT (2018) 169 ITD 13/ 192 TTJ 394 /163 DTR 249/ 62 ITR 643 (Mum.) (Trib.)

S. 37(1) : Business expenditure – Development rights-Payment to its shareholders for withdrawal of winding up petition against company in order to clear title of property is held to be allowable as business expenditure.
Dismissing the appeal of the revenue the Tribunal held that; Payment to its shareholders for withdrawal of winding up petition against company in order to clear title of property is held to be allowable as business expenditure as the payment was made to protect business interest and to safe guard from losseS. (AY. 2008-09)
DCIT v. Cowtown Land Development (P.) Ltd. (2018) 168 ITD 705 (Mum.) (Trib.)

S. 37(1) : Business expenditure-Expenses to keep its status of the Company active was held to be allowable as business expenditure as business loss. [S. 28(i)]
Allowing the appeal of the asessee the Tribunal held that, expenses to keep its status of the Company active was held to be allowable as business expenditure and as business loss. (AY. 2012-13)
Kesha Appliances Pvt. Ltd v. ITO (2018) 63 ITR (Trib.) 294 (Delhi) (Trib.)

S. 37(1) : Business expenditure – Commission agents – Confirmation and tax was deducted at source-Disallowance on the basis of presumption was held to be not valid.
Dismissing the appeal of the revenue the Tribunal held that; The assessee had discharged its onus by filing all possible details including confirmations and certificates of tax deduction at source and successfully established that the genuine expenditure had been expended for the business purposes. On the other hand, the Assessing Officer could not gather the positive evidence for the Department and had taken a decision based on presumptions and not on the facts on record. It was not the case of the Assessing Officer that the commission had been paid to bogus parties which had come indirectly to the assessee through cash. In the absence of any proof the Assessing Officer should not have given such finding. (AY. 2009-10)
ACIT v. Kiwifx Solutions. (2018) 61 ITR 780 (Ahd) (Trib.)

S. 37(1) : Business expenditure – Capital or revenue-Annual lease premium paid for acquiring mining rights on a land was capital expenditure.
Allowing the appeal of the revenue, the Tribunal held that; Annual lease premium paid for acquiring mining rights on a land was capital expenditure. Tribunal also held that if the payment is capital in nature, expenditure cannot be allowed on staggered basis. Even for the purpose of spreading over period of lease, it is essential that the expenditure should be in the nature of revenue expenditure.(AY. 2008-09 to 2012-13)
ACIT v. K. R. Kaviraj. (2018) 168 ITD 491 (Bang.) (Trib.)

S. 37(1) : Business expenditure-Premium paid for Keyman Insurance was allowable in year in which premium was paid.
Allowing the appeal of the revenue the Tribunal held that, Premium paid for Keyman Insurance was allowable in year in which premium was paid. (AY. 2008-09 to 2012-13)
ACIT v. K. R. Kaviraj. (2018) 168 ITD 491 (Bang.) (Trib.)

S. 37(1) : Business expenditure-Discount on shares allotted by assessee to its employees under ESOP scheme out of its share capital is an allowable deduction.
Dismissing the appeal of the revenue the Tribunal held that; Discount on shares allotted by assessee to its employees under ESOP scheme out of its share capital is an allowable deduction. Followed Biocon Ltd. v. Dy. CIT (LTU)(2013) 144 ITD 21 (Bang.) (SB) (Trib.)(AY. 2009-10)
DCIT v. Kotak Mahindra Bank Ltd. (2018) 168 ITD 529 (Mum.) (Trib.)

S. 37(1) : Business expenditure — Contribution to staff welfare fund was held to be allowable expenditure.
Dismissing the appeal of the revenue the Tribunal held that; Contribution to staff welfare fund was held to be allowable expenditure. (AY. 2004-05, 2005-06, 2008-09)
ITO v. West Bengal Tourism Development Corporation Ltd. (2018) 61 ITR 728 (Kol) (Trib.)

S. 37(1) : Business expenditure — Commission crystallised relevant year, therefore allowable as deduction .
Dismissing the appeal of the revenue the Tribunal held that, commission payable to manging director in respect of profit for earlier year determined during the year was held to be allowable as deduction. (AY. 2011-12)
DCIT v. Associated Pigments Ltd. (2018) 61 ITR 553 (Kol) (Trib.)

S. 37(1) : Business expenditure — Advertising company — Purchase of Angles and channels was held to be allowable as deduction.
Tribunal held that, Purchase of Angles and channels was held to be allowable as deduction. (AY. 2010-11)
DCIT v. Vantage Advertising P. LTD. (2018) 61 ITR 564 (Kol) (Trib.)

S. 37(1) : Business expenditure—Capital or revenue-Development expenditure—Depreciation was held to be allowable at 10% and balance was held to be disallowable. [S. 32]
Tribunal held that on development expenditure 10% depreciation was held to be allowable and balance was held to be not allowable. (AY. 2008-09)
Mahanadi Coalfields Ltd. v. DCIT (2018) 61 ITR 585 (Cuttack ) (Trib.)

S. 37(1) : Business expenditure —Subscriptions in the nature of annual membership was held to be allowable.
Subscriptions in the nature of annual membership was held to be allowable. (AY. 2008-09)
Mahanadi Coalfields Ltd. v. DCIT (2018) 61 ITR 585 (Cuttack) (Trib.)

S. 37(1) : Business expenditure-Interest for delay in making payment of Service tax and Tax deducted at source being compensatory in nature and not penalty in nature was held to be allowable deduction.
Dismissing the appeal of the revenue, the Tribunal held that; Interest for delay in making payment of Service tax and Tax deducted at source being compensatory in nature and not in the nature of penalty hence allowable deduction. (AY. 2010-11)
DCIT v. Narayani Ispat Pvt. Ltd. (2018) 61 ITR 371 (Kol.) (Trib.)

S. 37(1) : Business expenditure-Freight expenses cannot be disallowed on the ground that no subsidiary ledger was maintained.
Dismissing the appeal of the revenue the Tribunal held that; Freight expenses cannot be disallowed on the ground that no subsidiary ledger was maintained. (AY. 2010-11)
DCIT v. Narayani Ispat Pvt. Ltd. (2018) 61 ITR 371 (Kol) (Trib.)

S. 37(1) : Business expenditure – Goods destroyed by order of Court order in terms of provisions of prevention of Food Adulteration Act cannot be allowable as business expenditure in view of Explanation to S. 37(1) [Prevention of Food Adulteration Act, 1954]
Allowing the appeal of the revenue, the Tribunal held that ;amount spent by assessee in respect of manufacturing goods which were ordered to be destroyed by court in terms of provisions of Prevention of Food Adulteration Act,1954 cannot be allowed as deduction in view of applicability of Explanation to S. 37(1) of the Act. (AY. 2012-13)
ACIT v. Vishnu Packaging. (2018) 168 ITD 103 /191 TTJ 468/ 161 DTR 201 (Ahd.) (Trib.)

S. 37(1) : Business expenditure – When income is assessed as from profits of business, then expenses incurred by assessee for purpose of earning such income is allowable.
Allowing the appeal of the assesse, the Tribunal held that; when income is assessed as from profits of business, then expenses incurred by assessee for purpose of earning such income is allowable. On facts since the assesse has agreed to disallowance of 25% of expenses before the AO, balance 75% was allowed. (AY. 2011-12)
G. Chella Krishna v. (2018) 168 ITD 117 (Chennai) (Trib.)

S. 37(1) : Business expenditure-Club expenses of employees was held to be allowable as business expenditure.
The Tribunal held that theClub expenses of employees was held to be allowable as business expenditure. (AY. 2009-10)
ACIT v. Chambal Fertilisers And Chemicals Limited. (2018) 61 ITR 33 (Jaipur) (Trib.)

S. 37(1) : Business expenditure-Donation to trust was held to be allowable as deduction.
Tribunal held that the donation made by the assessee to the trust for welfare of the employees was expenditure wholly and exclusively for the purpose of the assessee’s business and the expenses allowable deduction.
(AY. 2009-10)
ACIT v. Chambal Fertilisers And Chemicals Limited. (2018) 61 ITR 33 (Jaipur) (Trib.)

S. 37(1) : Business expenditure-Reversal of excess income booked earlier year was held to be allowable as deduction.
Tribunal held that Reversal of excess income booked earlier year was held to be allowable as deduction. (AY. 2009-10)
ACIT v. Chambal Fertilisers And Chemicals Limited. (2018) 61 ITR 33 (Jaipur) (Trib.)

S. 37(1) : Business expenditure-Godown rent, travelling expenses was held to be allowable as deduction.
Amount crystallised during the year and travelling expenses was held to be allowable as deduction. (AY. 2009-10)
ACIT v. Chambal Fertilisers And Chemicals Limited. (2018) 61 ITR 33 (Jaipur) (Trib.)

S. 37(1) : Business expenditure – Deep excavation and road work related to mining operation was held to be allowable deduction. Miscellaneous capital expenditure was held to be not allowable.
Tribunal held that deep excavation and road work relating to mining operation was held to be allowable as deduction. The Tribunal also held that, Miscellaneous capital expenditure was held to be not allowable. (AY. 2009-10)
ACIT v. Chambal Fertilisers And Chemicals Limited. (2018) 61 ITR 33 (Jaipur) (Trib.)

S. 37(1) : Business expenditure — Adhoc disallowance was held to be not sustainable.
The Tribunal held that,adhoc disallowance was held to be not sustainable, therefore expenses of running and maintenance of cars was held to be not disallowable unless the AO pin point specific nature of expenditure incurred was not for the purpose of business. (AY. 2009-10, 2010-11)
ACIT v. Claridges Hotels Pvt. Ltd. (20180 61 ITR 135 (Delhi) (Trib.)

S. 37(1) : Business expenditure — Civil contractor — Purchases-No defects was found in the books of account – No disallowance can be made.[S. 145]
Tribunal held that; the assessee had done major works for the Government departments and they confirmed the authenticity of the work. The assessee continuously declared a net profit in the range of 1. 71 per cent. to 4. 65 per cent. and the disallowance made by the Assessing Officer if accepted would increase the net profit to the tune of 25. 15 per cent. which was abnormal. The suppliers of these goods had no permanent place for carrying on the business. There were no defects in the books of account of the assessee. The disallowance confirmed by the CIT(A) of Rs. 15 lakhs was to be reduced to Rs. 5 lakhs. (AY. 2011-12)
DCIT v. IHR Associates. (2018) 61 ITR 70 (Chd) (Trib.)

S. 37(1) : Business expenditure — Bogus purchases —Civil contractor-Merely on the basis of information form sales tax department purchases cannot be disallowed without giving an opportunity of cross examination.
Tribunal held that, Merely on the basis of information form sales tax department purchases cannot be disallowed without giving an opportunity of cross examination when the payments were through banking channel and the quantity and quality of the material, duly certified by the engineer of the Municipal Corporation, that too subject to tax deduction at source, retention amount, etc. (AY. 2009-10)
ACIT v. Pinaki D. Panani. (Smt.) (2018) 61 ITR 7 (Mum.) (Trib.)

S. 37(1) : Business expenditure-Bogus purchase-Restriction of profit rate of 12. 5% per. cent. of bogus purchases was held to be proper.
Dismissing the appeal of the revenue the Tribunal held that; admittedly, it was a bogus purchase but the assessee had produced complete reconciliation of purchase and sales and stock tally. Even the payments were by account payee cheque to the party. Even the Assessing Officer had not doubted the consumption of material purchased and it meant that the assessee had obtained bogus bill from the party and actually purchased material from grey market at a lesser price and also to avoid value added tax payment. The CIT(A) had rightly applied the profit rate at the rate of 12. 5 per cent. of bogus purchases. (AY. 2009-10)
CIT v. Shekhar M. Kharote. (2018) 61 ITR 182 (Mum.) (Trib.)

S. 37(1) : Business expenditure-Real estate developer –Advertising and business promotion-Corporate brand identity exercise , logo design etc is allowable as deduction as it is not attributable to any particular project-Amount spent on Liaisoning work in relation to a particular project has to be capitalised to concerned project-Method of accounting – AS-7 or AS 9 or ICAI guidance note on accounting for real estate transactions, 2006 cannot be said to be either cash system of accounting or mercantile system of accounting, only up to AY. 2012-13. [S. 145
Tribunal held that assessee being a real estate developer amount spent on advertising and business promotion, corporate brand identity exercise , logo design etc is allowable as deduction as it is not attributable to any particular project.Amount spent on Liaisoning work in relation to a particular project has to be capitalised to concerned project.Tribunal also held that as regards method of accounting is concerned AS-7 or AS 9 or ICAI guidance note on accounting for real estate transactions, 2006 cannot be said to be either cash system of accounting or mercantile system of accounting, only up to AY. 2012-13, because S. 145 of the Act has undergone some statutory amendments.(AY.2012-13)
Indiabuild Villas Development (P.) Ltd. v. DCIT(2018) 196 TTJ 386 / (2019) 174 ITD 497/ 175 DTR 226 (Bang.) (Trib.)

S. 37(1) : Business expenditure-Claim for gifts given to disTrib.utors/dealers for promotion where in assessee failed to give list of recipients to be disallowed to the extent of 30% .
Tribunal held that since the assessee had failed to give list of recipients of gift material or confirmation, directed to disallow 30% of the claim of the assessee.(AY. 2011-12)
Laboratories Griffon (P) Ltd(2018) 170 ITD 387/65 ITR 317 /193 TTJ 855 ( 2019) 178 DTR 355 (Kol)(Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident-Operated outside India-Not liable to deduct tax at source. [S. 195]
Dismissing the appeal of the revenue the Court held that ; there was no factual determination that the non-resident agent who operated outside India had any income which arose in India. Without these foundational facts, the question of applying section 195 of the Act would not arise. (AY.2001-02)
CIT v. Maruti Suzuki India Ltd. (2018) 407 ITR 165 (Delhi) (HC)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident – Fes for technical services-Service of market survey rendered by foreign agents is only incidental to function of commission agent, it cannot be regarded as FTS-Not liable to deduct tax at source.[S. 9(1)(vii), 40(a)(ia),195]
Allowing the appeal of the assessee the Court held that service of market survey rendered by foreign agents is only incidental to function of commission agent, it cannot be regarded as FTS.Accordingly the assessee is not liable to deduct tax at source.(AY.2009-10)
Evolv Clothing Co. (P.) Ltd. v. ACIT (2018) 407 ITR 72 / 257 Taxman 171/ 168 DTR 1 (Mad) (HC)
Editorial : Order in ACIT v. Evolv Clothing Co. (P.) Ltd (2013) 142 ITD 618(Chennai) (Trib.) is reversed

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident – No business connection in India – Reimbursement of expenses – Matter remanded-DTAA-India – Bang.ladesh-Nepal .
Tribunal held that DRP has not considered the assessee’s claim for non-deduction of tax at source with regard to payments made to non-residents in the light of the respective DTAAs and also assessee failed to furnish the copies of the Agreements with the payees. Accordingly the disallowance made u/s 40 (a) was set aside.(AY.2010-11)
Philip Morris Services India S. A. v. ACIT (2018) 172 DTR 192 / 66 ITR 97 /(2019) 197 TTJ 128 (Delhi) (Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident-Re-insurance Premium— Liable to deduct tax at source – Disallowance is held to be justified.
Tribunal held that unless a branch was established in India, non-resident insurance company could not do any business after 2014.Thus, profit of non-resident re-insurance company was taxable in India and hence, assessee was liable to deduct tax u/s 40(a)(i).AO rightly disallowed re-insurance premium. (AY. 2003-04 to 2010-11)
ACIT v. United India Insurance Co. Ltd. (2018) 67 ITR 191 /195 TTJ 65 (UO) (Chennai) (Trib.)
S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident – Reimbursement of expenses –Not liable to deduct tax at sourceS.
Tribunal held thatreimbursement of expenditure incurred by non-resident surveyors who were engaged by assessee to estimate and quantify damages occurred outside country. Entire services of surveyors were rendered outside country, therefore, income of surveyors was not liable for taxation in India in respect of service rendered to assessee. Not liable to deduct tax at source.(AY. 2003-04 to 2010-11)
ACIT v. United India Insurance Co. Ltd. (2018) 67 ITR 191 /195 TTJ 65 (UO) (Chennai) (Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident –Re-insurance Premium— Profit of non-resident re-insurance company was taxable in India-liable to deduct tax.[Insurance Act 1938, S. 2(9),114A]
The assessee was an insurance company and paid re-insurance premium to non-resident re-insurance company. AO disallowed claim on ground that TDS was not deducted before making such payment. On appeal, CIT(A) confirmed decision. Tribunal unless a branch was established in India, non-resident insurance company could not do any business after 2014. Thus, profit of non-resident re-insurance company was taxable in India and hence, assessee was liable to deduct tax at source.(AY. 2003-04 to 2007-08)
Cholamandalam Ms General Insurance Company Ltd v. ACIT. (2018) 170 DTR 22 / 195 TTJ 166 (Chennai) (Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident-Amount not claimed as expenditure-No disallowance can be made-Exemption certificate for non deduction of tax at source- Once certificate has been issued no disallowances can be made-If income is not chargeable to tax in India-No disallowance can be made-Once it is held that income is not chargeable to tax in India, no disallowance can be made. [S. 195, 197]
Tribunal held that ; if no deduction is claimed for an expenditure, there can be no question of disallowance. Once the department has issued certificate for non-deduction of tax at source, there can be no disallowance. Once it is held that income is not chargeable to tax in India, no disallowance (AY. 2004-05 to 2009-10)
Delhi Tourism & Transport Development Corp. Ltd. v. Dy. CIT (2018) 194 TTJ 305 (Delhi)(Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident – Airfreight— Payments on behalf of its clients as Clearing and Forwarding Agent which were reimbursed-Expenditure was not claimed as deduction-No disallowance can be made.[S. 44B, 172]
Tribunal held that the assessee made payments on behalf of its clients as Clearing and Forwarding Agent which were reimbursed to assessee. Assessee did not make claim of deduction in P & L A/c. Since, under domestic Law as well as under DTAA, income received by non-resident airline/shipping companies or their Agents, were not taxable in India, therefore, assessee was not liable to deduct TDS.
KGL Network (P) Ltd. v. ACIT (2018) 195 TTJ 265/(2019) 176 DTR 102 (Delhi) (Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident –Providing services of AMC and installation, commissioning services, for equipment supplied by its group entities to customers in India-Not liable to deduct ta at source-DTAA-India –USA [S. 195, Art.12 (4)]
Tribunal held that service rendered by AE to assessee was as per agreement according to which services provided by AE to assessee were in nature of assistance in troubleshooting, isolating problem and diagnosing related trouble and alarms and equipment repair services wherein, equipments would be shipped to US by assessee as and when required. It was agreed between parties that AE would be providing such services remotely and noon-site support services would be provided to customers of assessee. Services rendered by AE does not satisfy ‘make available’ requirement as per Article 12(4). Hence, revenue received by AE in view of services rendered to assessee’s customer was not taxable in India as per Article 12(4) of India-US DTAA, applicability of S. 195 was not applicable hence no disallowances can be made. (AY. 2012-13, 2013-14, 2014-15)
Ciena Communications India Pvt. Ltd. v. ACIT (2018) 196 TTJ 425 /( 2019) 176 DTR 262 / 98 taxmann.com 458 (Delhi)(Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident-Marketing expenses— Payment made by assessee to foreign entities towards marketing and sale support services were not chargeable to tax in India and assessee was right in law in not deducting any tax thereon- DTAA-India-USA . [S. 195,Art.24(1)]
Tribunal held that, foreign payees rendered only marketing and sales support services for canvassing assessee’s BPO business in foreign countries and, therefore, no technical service was either rendered nor any technical know-how, drawings and designs were made available by them to assessee in India to enable it to carry on its BPO businesS. Payments were made to entities based in USA and, therefore, provisions of DTAA between India and USA came into play. Payment made by assessee to foreign companies for receiving marketing and support service should come within ambit of “fees for technical services” as defined in DTAA and hence not taxable in India. Almost 70% of total payment was made by assessee to its wholly owned subsidiary which was incorporated in USA and assessee itself directly owned 100% of its issued equity capital. In assessee’s case, shares of B company that incorporated in USA were 100% owned by Indian Tax Resident and, therefore, conditions of Article 24(1)(a) were clearly fulfilled. Payment made by assessee to foreign entities towards marketing and sale support services were not chargeable to tax in India and assessee was right in law in not deducting any tax thereon.(AY.2012-13).
Onprocess Technology India Pvt. Ltd. v. DCIT (2018) 195 TTJ 292 (Kol.) (Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident – Engaged in distribution of recharge pens of various DTH providers via online network-Servers of USA based company Amazon for which it paid web hosting charges-No control over server or severs space being deployed by Amazon, while providing e-services as per agreement-Not royalty-Not liable to deduct tax at source-Amendment, if any, to scope of royalty by an amendment in 2012 by Finance Act with retrospective effect cannot fasten assessee with liability to withhold tax for the years which have already been closed prior to insertion of amendment-DTAA-India-USA. [S. 9(1)(vi), Art.12]
AO held that web hosting charges for use of severs, was nothing but charges paid for use of commercial equipments within meaning of section 9(1)(vi), read with Explanation 2 and Explanation 5 of the said clause, thereby, assuming character of royalty hence liable to deduct tax at source. On appeal the Tribunal held that since assessee did not possess and did not have any control over server or severs space being deployed by Amazon, while providing e-services as per agreement, then there was no scope to construe that e-service charges paid to Amazon could be described as royalty. Accordingly the assessee is not liable to deduct tax at source hence no disallowances can be made.Amendment, if any, to scope of royalty by an amendment in 2012 by Finance Act with retrospective effect cannot fasten assessee with liability to withhold tax for the years which have already been closed prior to insertion of amendment.(AY.2011-12)
EPRSS Prepaid Recharge Services India (P.) Ltd. v. ITO (2018)196 TTJ 529 / 100 taxmann.com 52 /(2019)173 DTR 308 (Pune)(Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident – Business possibilities in the field of energy sector – Expenses incurred for the purpose of PE are to be allowed-DTAA-India-USA-Mauritius .[S. 9(1)(i),195 Art.5, 7. 15]
Dismissing the appeal of the revenue the Tribunal held that ; expenses incurred for the purpose of PE are to be allowed, there is no restriction on allowability of such expenses. Tribunal also held that,if employee has spent only a part of their time in India and his staying in India was much less than period of 180 days and even if the employees were sent by the US AE, then also in terms of article 15 of India US DTAA, the employees could not be taxed in India, because they have stayed in India for a period of less than 183 days. Accordingly the Tribunal held that disallowance cannot be made by invoking the provision of S. 40(a)(i) cannot be made. (AY. 1998-99)
Dy. CIT (IT) v. Unocol Bharat Ltd. (2018) 171 DTR 329 / 196 TTJ 646 / 68 ITR 24 (SN)/ 99 taxmann.com 158 (Delhi) (Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident-Payment for providing global support services — No technical Knowledge, experience, skill, know-how, or process made available to the assesessee- Payment is not for technical services — Not liable to deduct tax at Source. — No Disallowance-DTAA-India-Singapore. [S. 9(1)(vii),195]
Allowing the appeal of the assessee, the Tribunal held that,payment for providing global support services and no technical Knowledge, experience, skill, know-how, or process made available to the assesessee, hence payment is not for technical services. Accordingly the assessee is not liable to deduct tax at source hence no disallowance can be made.(AY.2007-08)
Exxon Mobil Company India P. Ltd. v. ACIT (2018) 65 ITR 583/196 TTJ 1070 / 97 taxmann.com 43 (Mum.) (Trib.)

S. 40(a)(i); Amounts not deductible-Deduction at source-TDS deposited beyond the due date but before the due date of filing the Return of income is an allowable expenditure.[S. 139(1)]
Tribunal held that,TDS deposited beyond the due date but before the due date of filing the return of income is an allowable expenditure. relied in CIT v. Naresh Kumar (2014)362 ITR 256 (Delhi) (HC) where it has been held that the provisions of S. 40(a)(ia) were to be interpreted liberally and equitably keeping in mind the object and purpose behind the same so that the assessee do not suffer unintended and deleterious consequences and therefore the amendment to S. 40(a)(ia) as made by Finance Act, 2010 was retrospective in nature and therefore the amount of TDS which is deposited late but before due date of filing of return of income enables the assessee to claim the deduction of the expenditure in the concerned year itself. Accordingly, Tribunal deleted the disallowance. (AY. 2005-06, 2007-08)
L&T Finance Ltd (2018) 62 ITR 298/192 TTJ 9(UO) (Mum.) (Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Testing fee to Kema, Netherlands-Payment made to non-resident-Where knowledge of testing is not made available to assessee, same could not be considered as fee for technical services and assessee is not liable to deduct tax at source.[S. 195]
Tribunal held that ;transformers manufactured by assessee were sent to Netherlands for testing and Netherlands Company sent only report. Therefore, knowledge of testing was not made available to assessee. Hence, it could not be considered as fee for technical services. In view thereof payment made to Kema, Netherlands was not liable to deduct tax at source. (AY.2007 – 2008)
ACIT v Areva T&D India Ltd. (2018) 193 TTJ 11 (UO) (Chennai) (Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident – Interest – Royalty-Fees for technical services – foreign agency commission – services rendered outside India – Held, no tax to be deducted at source – Held, no disallowance can be made. [S. 195]
Commission paid to foreign agents for services rendered outside India was not fees for technical services and was not taxable in India. Accordingly, it was held that there was no liability to deduct tax at source and no disallowance can be made u/s 40(a)(i). (AY.2011-12)

Dy. CIT v. Sterling Ornament (P.) Ltd. (2018) 65 ITR 492 (Delhi)(Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident-Royalty-Fees for technical services-Income deemed to accrue or arise in India-Affiliation fee-One time payment to US. company, which did not provide for transfer of technology cannot be assessed as royalty –Not liable to deduct tax at source-No disallowance can be made-DTAA-India-USA.[S. 9(1)(vi),195,Art.12]
Allowing the appeal of the assessee the Tribunal held that, one time payment of affiliation fee to US company which did not provide technical knowledge or use of technical knowledge cannot be assessed as royalty either under the Act as well as under DTAA. Not liable to deduct tax at source ,hence no disallowance can be made.(AY.2006-07)
Customer Lab Solutions (P.) Ltd. v. ITO (2018) 171 ITD 552/ 170 DTR 225/ 195 TTJ 841 (Hyd.) (Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident –The administrative fee paid to EGC of US and EGC of Singapore-Not liable to deduct tax at source – DTAA-India- [Art. 12]
The Tribunal following the earlier year held that the amount paid by the assessee is not chargeable under article 12 of DTAA because no service were ‘made available’ to the assessee by the service providers. The Tribunal deleted the disallowances. (AY. 2006-07)
CEVA Freight India (P) Ltd. v. Dy. CIT (2018) 192 TTJ 887 / 172 DTR 55(Delhi)(Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source – Expenses on maintenance of aircraft contract to foreign company – payments business receipts not taxable in India – Not liable to deduct tax at source. [S. 195]
Tribunal held that the expenditure had been incurred by the assessee in pursuance of a maintenance contract. The payment made towards annual maintenance contracts would fall under the category of works contract. The payment given by the assessee would constitute business receipts in the hands of the recipient and it was not taxable in India as the recipient has not permanent establishment in India. Hence, the assessee was not required to deduct TDS under S. 195 of the Act, as no part of the amount is chargeable in India in the hands of recipient. The expenditure is allowable. (AY. 2012-13)
DHL Air Limited v. Dy. CIT(IT) (2018) 63 ITR 149 (Mum.)(Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident –legal and professional services-Not liable to deduct tax at source- DTAA-India-USA. [S. 195, Art.15]
On appeal to Tribunal, it was observed that the service provider i.e.
non-residents neither did have any permanent establishment in India nor any of its personnel stayed for more than 90 days in India during the relevant previous year. Thus, it was held that such payment of
Rs. 1.46 crores as legal and professional charges to non-resident could not be disallowed u/s. 40(a)(i) of the Act as such payments did not fulfil the conditions specified in Article 15 (Independent Personnel Service) of DTAA between India and USA and therefore, were not taxable in India. Further, it was held that the payment of Rs.43 lakhs for obtaining assessment report from non-resident service provider does not fulfil the condition of Article 12 (Fees for technical services) of DTAA between India and Singapore and therefore not taxable in India. Thus, Tribunal upheld the order of CIT(A) in deleting the disallowances made by the AO u/s. 40(a)(i) for non deduction of tax u/s. 195 of the Act. (AY. 2007-08)
DLF Limited v. Addl. CIT (2018) 63 ITR 22 (Delhi) (Trib.)

S. 40(a)(i) : Amounts not deductible-Deduction at source-Non-resident – Professional fees paid to foreign company to know about tax law applicable in that Country could not be taxed in India as per Art 14 of the OECD Model Tax Convention hence not liable to deduct tax at source.
Dismissing the appeal of the revenue the Tribunal held that; Professional fees paid to foreign company to know about tax law applicable in that Country could not be taxed in India as per Art 14 of the OECD Model Tax Convention hence not liable to deduct tax at source. (AY. 2006-07 to 2008-09)
ACIT v. Deloitte Haskins & SellS. (2018) 170 ITD 267/ 196 TTJ 355 /( 2019) 174 DTR 289 (Mum.) (Trib.)

S. 40(a)(i) : Amounts not deductible-Payment to non – resident-Proviso amended by Finance (No. 2) Act, 2004 is not applicable for year 2002-03, hence not liable to deduct tax at source. [S. 9(1)(i),195]
Dismissing the appeal of the revenue the Tribunal held that; proviso to section 40(a)(i) (substituted by Finance (No. 2) Act, 2004) is not having retrospective effect and is not applicable for year 2002-03, hence not liable to deduct tax at source. (AY. 2002-03
DCIT v. Hazaria Cryogenic Engineering & Construction Management (P.) Ltd. (2018) 168 ITD 568 (Mum.) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-The amendment made by the Finance Act, 2010 in Section 40(a)(ia) of the IT Act is retrospective in nature i. e. from the date of insertion of the said provision w. e. f AY. 2005-06 .
Dismissing the appeal of the revenue the Court held that ;The amendment to S. 40(a)(ia) by the Finance Act, 2010 w. e. f 01. 04. 2010 to provide that all TDS made during the previous year can be deposited with the Government by the due date of filing the return of income should be interpreted liberally and equitably and applied retrospectively from the date when S. 40(a)(ia) was inserted i. e., with effect from the AY 2005-2006 so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates. The amendment is curative in nature and should be given retrospective operation as if the amended provision existed even at the time of its insertion. i. e. from the date of insertion of the said provision w. e. f. AY. 2005-06.)(AY. 2005-06)
CIT v. Calcutta Export Company(2018) 404 ITR 654/ 165 DTR 321/302 CTR 201/ 255 Taxman 293 (SC), www.itatonline.org
CIT v. Rajendra Kumar (2018) 165 DTR 321/302 CTR 201// 255 Taxman 293 (SC), www.itatonline.org
CIT v. Harish Chand Ahuja (2018) 165 DTR 321/302 CTR 201 / 255 Taxman 293 (SC), www.itatonline.org
S. 40(a)(ia) : Amounts not deductible-Deduction at source-Reimbursement of “shared services cost” to holding company – Reading of relevant clauses of agreement do not lead to inference that amount is paid on estimation-Not liable to deduct tax at source [S. 194C. ]
Dismissing the Departmental appeal, the High Court held that the Tribunal was justified in holding that the payment / reimbursement of “shared services cost” to holding company was genuinely incurred by the assesse, wholly and exclusively for the purpose of its business and is paid based on actual expenditure incurred, hence allowable as business expenditure. Not liable to deduct tax at source. (AY. 2008-2009)
CIT.v. ASK Wealth Advisors (P) Ltd. (2018) 168 DTR 349 (Bom.) (HC)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Insertion of second proviso by the Finance Act, 2012, with effect from April1, 2003, is declaratory and curative and applicable retrospectively with effect from 1-4-2005 — Payee offering to tax sum received in its return — No disallowance can be made. [S. 37(1), 201 (1)]
Dismissing the appeal of the revenue the Court held that,the rationale behind the insertion of the second proviso to section 40(a)(ia) was declaratory and curative and thus, applicable retrospectively with effect from April 1, 2005. However under the first proviso to section 201(1) inserted with effect from July 1, 2012, an exception had been carved out which showed the intention of the Legislature not to treat the assessee as a person in default subject to fulfilment of the conditions as stipulated thereunder. No different view could be taken regarding the introduction of the second proviso to section 40(a)(ia), which was intended to benefit the assessee, with effect from April 1, 2013 by creating a legal fiction in the assessee’s favour and not to treat him in default of deducting tax at source under certain contingencies and that it should be presumed that the assessee had deducted and paid tax on such sum on the date of furnishing of the return by the resident payee. (AY.2012-13)
CIT v. Shivpal Singh Chaudhary. (2018) 409 ITR 87 (P&H) (HC)

S. 40(a)(ia) : Amounts not deductible-Deduction at source – Fees for professional or technical services-third party administrator for insurance companies – Payment through assessee-Not liable to deduct tax at source-No disallowances can be made. [S. 194J, 260A.]
Dismissing the appeals of the revenue the Court held that ; the Tribunal had found that the assessee only facilitated the payments by the insurer to the insured for availing of the medical facilities. The assessee did not render any professional services to the insurer or the insured and only collected the amount from the insurer and passed it on to the various hospitals which provided medical services to the insured. Accordingly no disallowances can be made.(AY.2009-10)
CIT v. Health India TPA Services P. Ltd. (2018) 408 ITR 34 (Bom.) (HC)
Editorial : Decision in ACIT v. Health India TPA Services P. Ltd (2014) 31 ITR 407 (Mum.)(Trib.) is affirmed.

S. 40(a)(ia) : Amounts not deductible-Deduction at source – Fees for professional or technical services-third party administrator for insurance companies – Payment through assessee-Not liable to deduct tax at source-No disallowances can be made.[S. 194J, 260A]

Dismissing the appeals of the revenue the Court held that ; the Tribunal had found that the assessee only facilitated the payments by the insurer to the insured for availing of the medical facilities. The assessee did not render any professional services to the insurer or the insured and only collected the amount from the insurer and passed it on to the various hospitals which provided medical services to the insured. Accordingly no disallowances can be made. Court also held that the Department could not be permitted to raise the same questions as had been earlier dealt with in the Division Bench judgments and orders of the court. (AY.2008-09)
CIT v. Dedicated Healthcare Services (TPA) India Pvt. Ltd. (2018) 408 ITR 36 / 304 CTR 937/ 259 Taxman 192 / 170 DTR 345(Bom.) (HC)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Interest-Payment for delayed allotment of land by Housing Corp. is not interest since there was neither any borrowing of money nor was there incurring of debt on part of assessee hence not liable to deduct tax at source-No disallowance can be made.[S. 2(28A), 194A]
Dismissing the appeal of the revenue the Court held that ; payment for delayed allotment of land by Housing Corp. is not interest since there was neither any borrowing of money nor was there incurring of debt on part of assessee hence not liable to deduct tax at source. Accordingly no disallowance can be made.(AY.2005-06, 2006 -07))
PCIT v. West Bengal Housing Infrastructure Development Corporation Ltd. (2018) 257 Taxman 570/ (2019) 306 CTR 601/ 173 DTR 377 / 413 ITR 82(Cal) (HC)
Editorial: SLP of revenue is dismissed , PCIT v. West Bengal Housing Infrastructure Development Corporation Ltd ( 2019) 263 Taxman 237 (SC)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Reimbursement of lease rent charges – Not liable to deduct tax at source-Provision for contingent liability for which bills were not received during year under consideration and TDS was deducted as and when final bills were received – No disallowance can be made.[S. 194I,
Dismissing the appeal of the revenue the Court held that; reimbursement of lease rent charges, not liable to deduct tax at source. Similarly provision for contingent liability for which bills were not received during year under consideration and TDS was deducted as and when final bills were received.No disallowance can be made. (AY. 2009-10)
PCIT v. Sanghi Infrastructure Ltd. (2018) 257 Taxman 371 (Guj.)(HC)

S. 40(a)(ia) : Amounts not deductible-Deduction at source- Contractors – Purchase of packing material-Right of ownership of packing material was only transferred to assessee only when it was purchased from suppliers-Not liable to deduct tax at source –No disallowance can be made.[S. 194C]
Dismissing the appeal of the revenue the Court held that ;when purchasing the packing material; right of ownership of packing material was only transferred to assessee only when it was purchased from suppliers.Accordingly not liable to deduct tax at source.(AY. 2008-09)
PCIT v. Shalimar Chemical Works Ltd. (2018) 257 Taxman 590 (Cal.) (HC)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Commission or brokerage – Selling expenses which consisted of target incentives to distributors -Not liable to deduct tax at source-No disallowance can be made.[S. 194H]
Dismissing the appeal of the revenue the Court held that; the assessee did not have any right or control over goods sold to dealers and disTrib.utors and all stocks belonged to buyers. Moreover, assessee paid target incentives to dealers only for increasing its sales volume. Accordingly not liable to deduct tax at source. (AY. 2008-09)
PCIT v. Shalimar Chemical Works Ltd. (2018) 257 Taxman 590 (Cal.) (HC)

S. 40(a)(ia) : Amounts not deductible-Deduction at source –Commission – Principal to principal-Discount to advertisement agency – Not liable to deduct tax at source –No disallowance can be made.[S. 194H]
Dismissing the appeal of the revenue the Court held that ; Tribunal was right in concluding that the payment was on the basis of principal to principal and did not constitute commission and deleting the disallowance made by the assessing authority for non-deduction of tax at source from the commission or discount paid by the assessees to the advertising agency under section 194H.
PCIT v. Bhim Sain Garg Through Legal Heir Shailendra Garg. (2018) 407 ITR 388 (Raj) (HC)
PCIT v. Shailendra Garg (2018) 407 ITR 388 (Raj) (HC)
Editorial : SLP of revenue is dismissed, PCIT v. Bhim Sain Garg Through Legal Heir Shailendra Garg. (2018) 406 ITR 9 (St).

S. 40(a)(ia) : Amounts not deductible-Deduction at source –
Payment of labour charges through labour contractor — No contract between assessee and sub-contractor — Not liable to deduct tax at source-No disallowance can be made.[S. 194C]
Dismissing the appeal of the revenue the Court held that;payment of labour charges through labour contractor as there was no contract between assessee and sub-contractor therefore the assessee is not liable to deduct tax at source hence no disallowance can be made.(AY.2007-08)
PCIT v. Swastik Construction. (2018) 407 ITR 42 / 254 Taxman 163 (Guj) (HC)

S. 40(a)(ia) : Amounts not deductible-Deduction at source – No contract between assessee and parties of hired Vehicles on freight basis for transportation on behalf of principal — Not liable to deduct tax at source.[S. 194C]
Dismissing the appeal of the revenue the Court held that, there was no contract between assessee and parties of hired Vehicles on freight basis for transportation on behalf of principal, accordingly the assessee is not liable to deduct tax at source. (AY.2008-09)
CIT v. Shark Roadways Pvt. Ltd. (2018) 405 ITR 78 (All) (HC)

S. 40(a)(ia) : Amounts not deductible-Deduction at source – Professional fees – Failure to deduct tax at source – Disallowance was held to be justified.
Dismissing the appeal of the assessee the Court held that failure to deduct tax at source on professional fees, the disallowance was held to be justified.(AY.2009-10)
Ravi Mallick, prop. of Sunkraft designs v. DCIT (2018) 404 ITR 250 (P&H) (HC)

S. 40(a)(ia) : Amounts not deductible-Deduction at source – A co-operative society formed for the welfare of the employee of the life insurance corporation and all members of assessee is not liable to deduct tax at source-Decision of jurisdictional High Court is binding on the AO .[S. 194A.]
Allowing the petition the Court held that; a co-operative society formed for the welfare of the employee of the life insurance corporation and all members of assessee is not liable to deduct tax at source. Court also observed that; Coimbatore District Central Bank Ltd. v. ITO (2016) 382 ITR 266 (Mad) (HC) which the respondent has not gone through the decision, copy of which was filed by the petitioner along with their reply to the show-cause notice. The Assessing Officer was bound by the decision rendered by the jurisdictional High Court. It is stated that as on date there is no appeal by the revenue as against the decision. That apart, in the assessee’s own case for the previous assessment years, the Tribunal has held in favour of the petitioner assessee. Mere pendency of an appeal would not amount to an order of stay. Therefore, even assuming appeals have been presented as long as orders passed by the Tribunal has not been stayed or set aside, it is binding upon the Assessing Officer. (AY. 2015-16)
LIC Employees Co-operative Bank Ltd. v. ACIT (2018) 408 ITR 287/254 Taxman 119 (Mad.)(HC)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Recipient has filed belated return hence conditions not satisfied – Liable to deduct tax at source-Liable to pay tax with interest. [S. 201(1).]
Dismissing the appeal of the revenue the Court held that, to avail of the benefit of the second proviso to S. 40(a)(ia) of the Act, 1961introduced by the Finance Act, 2012 read with the first proviso to S. 201(1), there should be a return filed under S. 139 with computation of income including such amounts received as also the payment of tax on such income. Only if all the three conditions are satisfied, would the beneficial provision be applicable to an assessee who had failed to deduct tax at source. When an assessee has failed to deduct tax by virtue of the proviso to S. 201(1), he would be treated as not an “assessee-in-default” only when the person from whom tax was to be deducted has paid the tax. On facts the recipient has filed belated return hence conditions not satisfied. Accordingly the assessee is liable to deduct tax at source-Liable to pay tax with interest.Hindustan Coca Cola Beverage (P) Ltd. v. CIT(2007(293 ITR 226 (SC) is distinguished. (AY. 2007-08, 2008-09, 2009-10)
Academy Of Medical Sciences v. CIT (2018) 403 ITR 74 / 254 Taxman 419/ 170 DTR 388/ 305 CTR 659 (Ker) (HC)

S. 40(a)(ia) : Amounts not deductible-Deduction at source– Proviso excepting assessee from disallowance where payee has declared payment in his return and paid tax thereon has retrospectively applicable, hence no disallowance can be made. [S. 201(1).]
Dismissing the appeal of the revenue the Court held that; The second proviso to S. 40(a)(ia) of the Income-tax Act, 1961 introduced by the Finance Act, 2012 (which provides that where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B but is not deemed to be an assessee-in-default under the first proviso to S. 201(1), i. e., the payee has filed a return taking into account such sum for computing his income, has paid the tax due on such income declared and furnishes a certificate to this effect from an accountant, the assessee shall not be subject to disallowance in respect of such sum) has retrospective application. (AY. 2009-10)
CIT v. Manoj Kumar Singh. (2018) 402 ITR 238 / 303 CTR 294 / 167 DTR 179(All) (HC)

S. 40(a)(ia) : Amount not deductible-Deduction at source-Purchase made from different group companies – Difference of opinion–Matter was referred to Chief Justice for appropriate order-DTAA-India Japan – USA.[S. 9(1)(i), 90, 195,Art,24]
Mitsubishi-group company engaged in Sogo Shosha activities did not deduct TDS from payments for purchases made to different group companies incorporated in Japan, Singapore, US, Thailand, in view of difference of opinion between Judges in respect of assessee’s TDS obligations, matter was placed before Chief Justice for appropriate order. (AY. 2006-07)
CIT v. Mitusubishi Corporation India (P.) Ltd. (2018) 252 Taxman 31 (Delhi)(HC)
Editorial : Mitusubishi Corporation India (P.) Ltd. v. ACIT (2014) 62 SOT 58 (URO) / 41 taxmann. com 162 (Delhi) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source–A party cannot be called upon to perform an impossible Act i. e. to comply with a provision not in force at the relevant time but introduced later by retrospective amendment. S. 40(a)(i) disallowance can be made only, if the royalty falls under Explanation 2 to S. 9(1)(vi) but not if it falls under Explanation 6 to S. 9(1)(vi).[S. 9(1)(vi), 194C,194J, 195]
Dismissing the appeal of the revenue the Court held that; A party cannot be called upon to perform an impossible Act i. e. to comply with a provision not in force at the relevant time but introduced later by retrospective amendment. S. 40(a)(i) disallowance can be made only if the royalty falls under Explanation 2 to S. 9(1)(vi) but not if it falls under Explanation 6 to S. 9(1)(vi). (AY.2009-10)
CIT v. NGC Networks (India)(Pvt. Ltd(2018) 167 DTR 245/ 304 CTR 306 (Bom.)(HC), www.itatonline.org

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Compensation paid to joint venture – Not liable to o deduct tax at source-Disallowance was held to be not justified.[S. 194H, 194J]
Dismissing the appeal of the revenue the Court held that; whether the transaction is genuine of sham is a question of fact transaction being purchase and sale transaction and dispute was only in respect of sharing of profit the, no disallowance can be made for failure to deduct tax at source on the compensation paid to joint venture. (AY. 2006-07)
Entrepreneurs (Calcutta) Pvt. Ltd. v. CIT (2018) 400 ITR 521 (Cal) (HC)

S. 40(a)(ia) : Amounts not deductible-Deduction at source – Payment being not fees for technical services,not liable to deduct tax at source-DTAA-India – Canada .[S. 9(2), Art 12]
Dismissing the appeal of the revenue the Court held that, payment being not fees for technical services the assesse is not liable to deduct tax at source. (AY. 2009-10)
CIT v. Mira Exim Ltd. (2018) 400 ITR 28 (Delhi) (HC)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Non-resident – Commission-Obligation to deduct tax at source arises only if the sum is chargeable to tax in India, even after insertion of Explanation 2 to S. 195(1) by Finance Act 2012 with retrospective effect from 01. 04. 1962 .
Dismissing the appeal of the revenue the Court held that; Explanation 2 to S. 195(1) inserted by Finance Act 2012 with retrospective effect from 01. 04. 1962 has bearing while ascertaining payments made to non-residents is taxable under the Act or not. However, it does not change the fundamental principle that there is an obligation to deduct TDS only if the sum is chargeable to tax under the Act. If the conclusion is arrived that such payment does not entail tax liability of the payee under the Act, S. 195(1) does not apply. Relied G. E. India Technology Centre P. Ltd v. CIT (2010) 327 ITR 456 (SC).
PCIT v. Nova Technocast Pvt. Ltd (2018) 166 DTR 426 / 304 CTR 670 (Guj)(HC), www.itatonline.org

S. 40(a)(ia) : Amounts not deductible-Deduction at source – Commission-Incentive to retailers—Not liable to deduct tax at source, [S. 194H]

Tribunal held that transaction between assessee and its retailers is on principal to principal basiS. Accordingly the incentive paid by assessee to retailers/shopkeepers does not qualify as commission for purpose of TDS u/s 194H of the Act.
Anil Dhawan v. Dy.CIT (2018) 195 TTJ 42 (UO) (Chd) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source – Interest – Commission – Brokerage-Insurance commission –Reinsurance premium from various insurance companies – Not liable to deduct tax at source.[S. 194D]
Tribunal held that responsibility of paying commission was not on assessee. Commission was deducted by respective insurance companies who were paying re-insurance premium to assessee at time of making payment. Accordingly the assessee is not liable to deduct tax at source. (AY. 2003-04 to 2010-11)
ACIT v. United India Insurance Co. Ltd. (2018) 67 ITR 191 /195 TTJ 65 (UO) (Chennai) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Short deduction of deduction at source –No disallowance can be made. [S. 194C, 194J, S. 201.]
Tribunal held that,if there was short deduction, revenue was free to proceed to pass an order u/s 201 of Act, but no disallowance can be made. (AY.2011-12)
Scrabble Entertainment Ltd. v. ACIT (2018) 169 DTR 51 /193 TTJ 418 (Mum.) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source -No part of services had been either rendered or received in India-Not liable to deduct tax at source on payments made to a non-resident company having no PE in India. [S. 195]
Tribunal held that all payments related to liaisoning and related services had been paid to non-resident company having no PE in India providing local assistance and local liaisoning services to assessee for its project in Saudi Arabia. No part of services had been either rendered or received in India. Thus, the AO erred in disallowing liaisoning and other services u/s 40(a)(i). (AY.2008-09)
Dy.CIT v. Libra Techon Ltd (2018) 195 TTJ 105 (UO)/ 53 CCH 472 / 67 ITR 14 (SN)(Mum.) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Credit card commission-Payments to banks on account of utilization of credit card facilities would be in nature of bank charge and not in nature of commission-Not liable to deduct tax at source.[S. 194H]
Allowing the appeal of the assessee the Tribunal held that, sale made on basis of a credit card is clearly a transaction of merchant establishment only and credit card company only facilitates electronic payment, for a certain charge and, thus, commission retained by credit card company is in nature of normal bank charges and not in nature of commission/brokerage for acting on behalf of merchant establishment. Accordingly payments to banks on account of utilization of credit card facilities would be in nature of bank charge and not in nature of commission within meaning of S. 194H.(AY.2012-13)
Velankani Information Systems Ltd. v. DCIT (2018) 173 ITD 19 /172 DTR 356/ 196 TTJ 1128 (Bang.) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source –Payment of Honorarium to directors- Company director is different from director of Co operative Society –Not liable to deduct tax at source–Recipient has offered the honorarium as income- No disallowance can be made.[S. 2(7) 2,(19),192, 194J(1)(ba), 201.]
AO held that the assessee has failed to deduct tax at source in respect of honorarium paid to directors.Accordingly he disallowed the honorarium paid to directors, which was affirmed by CIT(A.). Allowing the appeal of the assessee the Tribunal held that, honorarium paid was not ‘professional fee’ to be covered under provisions of S. 194J of the Act. Even if it was to be considered as payment to director, provisions of S. 194J(1)(ba) specified that any remuneration or fees or commission by whatever name called other than those on which tax was deductible u/s 192 to director of ‘company’ were covered by definition of fees for professional or technical serviceS. Director referred to therein was not equivalent to ‘director’ of assessee. Company was different from co-operative society as they were defined u/s 2(17) and 2(19) separately. Just because person administering society was also referred to as director, provisions of S. 194J could not be attracted to payment of honorarium made to director of assessee-society. Accordingly, there was no violation of S. 194J of the Act.Tribunal also held that the assessee had produced evidence showing that respective persons have paid/filing returns of income and AO had not initiated any proceedings u/s 201 for violation of TDS provisions under any other provisions of Act, disallowance u/s 40(a)(ia) could not be sustained.(AY.2013-14)
Sai Datta Mutual Aided Co-Operative Credit Society v. ACIT (2018) 169 DTR 65/ 194 TTJ 970 (Hyd) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source –Clearing and forwarding charges-Reimbursement of expenses-Agreement was not furnished – Matter remanded.[S. 172, 194C]
Appeal by revenue the Tribunal held that, the Commissioner (Appeals) had not afforded any opportunity to Assessing Officer to verify bills and nature of expenses.and also since assessee had not furnished C&F agreement and material with regard to payment made towards reimbursement of expenses, matter was to remanded back to file of Assessing Officer for necessary verification.(AY. 2011-12)
ACIT v. Best India Tobacco Suppliers (P.) Ltd. (2018) 173 ITD 222 / 66 ITR 84 (SN)(Vishakha) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-MIS Services, Cost Allocation, Corporate Allocation Charges and Legal Expenses-Since services could not be said to have made available technical skill, knowledge and know-how in legal sense of ‘make available’ clause-Not liable to deduct tax bat source-DTAA-India-USA . [S. 9(1)(vii),195, Art.12.]
Allowing the appeal of the assessee the Tribunal held, MIS Services, Cost Allocation, Corporate Allocation Charges and Legal Expenses. Since services could not be said to have made available technical skill, knowledge and know-how in legal sense of ‘make available’ clause, the assessee is not liable to deduct tax at source.No disallowance can be made.(AY.2011-12)
Seal For Life India (P.) Ltd. v. DCIT (2018) 173 ITD 229/(2019) 197TTJ 742/ 174 DTR 281 (Ahd.) (Trib.)
S. 40(a)(ia) : Amounts not deductible-Deduction at source – Maistries-leaders of shipping labour groups-Payment to shipping labour group leaders is not liable to deduct tax at source – No disallowances can be made.[S. 194C]
Tribunal held that,merely handing over labour payments to one or two persons on site for distributing amount among labours does not partake character of availing service of labour contractor and, hence not liable to deduct tax at source.Accordingly no disallowances can be made.(AY. 2012-13, 2014-15)
ACIT v. A. Kasiviswanadham. (2018) 173 ITD 478/66 ITR 525 (Visakha) (Trib.)
A. K. V. Logistics Pvt. Ltd; ACIT v (2018) 66 ITR 525 /173 ITD 478 (Vishakha)(Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Payment to charitable organisation-Exemption was granted to charitable organisation and no tax was to be paid – Disallowance cannot be made in view of second proviso with retrospective operation. [S. 11, 12,197(1), 201.]
Allowing the appeal of the assessee the Tribunal held that charitable organisation to which payment was made without deduction of tax at source has shown the receipt and claimed exemption which was allowed. As no tax is to be paid by charitable organisation disallowance cannot be made in view of second proviso with retrospective effect. Accordingly the assessee could not be treated as assessee in default. Accordingly no disallowance can be made.(AY.2009-10)
Peerless Hospitex Hospital And Research Centre Ltd. v. ITO (2018) 65 ITR 67 (SN) (Kol.) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Contractors-No Express or implied contract between assessee and maistries -No contract between assessee and maistries and payments to labour through maistries does not attract tax deduction at source.[S. 194C]
Tribunal held that there must be a contract for deduction of tax at source including supply of labour for carrying out any work. The payment was genuine. The assessee had got the work done by the labourers under their supervision. The Department could not establish that there was an express or implied contract between the assessee and maistries. Therefore the payment made to the labour through maistries could not be construed as made under a contract between the assessee and the maistries and did not attract the tax deduction at source under section 194C and consequently no disallowance was called for under S. 40 (a)(ia). (AY.2011 – 2012 to 2014 – 2015)
ACIT v A. Kasiviswanadham and A. K. V. Logistics Pvt. Ltd. (2018) 66 ITR 525(Vishakha)(Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source – Short deduction – Precedent-Deducted the tax applying the provision of S. 194C @2% instead of 194J @ 10%-No disallowances can be made .[S. 194C, 194J]
Dismissing the appeal of the revenue the Tribunal held for short deduction of tax no disallowance can be made. Followed,CIT v. S. K. Tekriwal (2014 361 ITR 432 (Cal)(HC), CIT v. Kishor Rao (HUF) (2016) 387 ITR 196 (Karn) (HC)(instead CIT v. PVS Memorial Hospital Ltd.(2016) 380 ITR 284/ (60 taxmann.com 69(Ker) (HC) .Tribunal held that in the absence of any decision by jurisdictional High Court, decision of non-jurisdictional High Court which is favorable to the assessee had to be accepted. (AY. 2010-11)
ACIT v. Dish TV India Ltd. (2018) 194 TTJ 897 / 169 DTR 253 (Mum.)(Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source – Contractor – In absence of express or implicit contract between the assesse and the maistries, payments made to the labourers through maistries / group leaders did not attract deduction at source hence no disallowances can be made.[S. 194C]
Dismissing the appeal of the revenue the Tribunal held that n absence of express or implicit contract between the assesse and the maistries, payments made to the laborers through masteries / group leaders did not attract deduction at source hence no disallowances can be made.(AY. 2012-13)
ACIT v. Kasiviswanadham (A)(2018) 66 ITR 525 (Vishakha) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Word ‘payable’ occurring in section 40(a)(ia) not only covers cases where amount is yet to be paid but also those cases where amount has actually been paid.
Allowing the appeal of the revenue the Tribunal held that ; Word ‘payable’ occurring in section 40(a)(ia) not only covers cases where amount is yet to be paid but also those cases where amount has actually been paid.(AY. 2008-09)
ACIT v. Guntur District Co-operative Bank Ltd (2018) 66 ITR 61 (SN) (Vishakha) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Interest-Where recipient/deductee had already paid tax on impugned amount of interest under section 194A received from assessee by filing return of income, such interest payment could not be disallowed-Second Proviso to section 40(a)(ia) has retrospective effect from 1-4-2005 .[S. 194A, 195(3). 201(1).]
Dismissing the appeal of the revenue the Tribunal held that ;where recipient/deductee had already paid tax on impugned amount of interest under section 194A received from assessee by filing return of income, such interest payment could not be disallowed.(AY. 2012-13)
DCIT v. Esaote India (NS) Ltd. (2018) 172 ITD 299 / 172 DTR 427/ 196 TTJ 1091(Ahd) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Supplier transported goods to assessee through their own transport agency-there was no contract between assessee and transporter-Not liable to deduct tax at source.[S. 194C]
Allowing the appeal of the assessee the Tribunal held that ; when supplier transported goods to assessee through their own transport agency, there was no contract between assessee and transporter. Accordingly the assessee is not liable to deduct tax at source.(AY.2006-07)
K.V. Satyanarayana Murthy. v. ITO (2018) 172 ITD 7 (Vishakha) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source – Certain income and expenditure are merely pass through entries and there is no case of any adverse revenue implication, no disallowance can be made.
On appeal to Tribunal, it was observed that the assessee had neither credited rental income nor claimed any expenditure on account of payment made to the trust in profit and loss account. Tribunal further observed that such entries were merely pass through entries without any adverse revenue implication and thus upheld the order of CIT(A) deleting the disallowance.(AY.2007-08)
DLF Limited v. Addl. CIT (2018) 63 ITR 22 (Delhi) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Payee has offered income in their return-No disallowance can be made-Matter remanded to CIT(A) to pass a speaking order.[S. 194J]
When payee has offered the alleged amount as income in their return of income and paid the required tax thereon, the assessee should not be treated as assessee in default and no disallowance u/s. 40(a)(ia) is required. Matter remanded to the CIT(A) to consider and pass a speaking order after giving the assessee proper opportunity of being heard. (AY. 2011-12)
Campbell Shipping (P) Ltd. v. ITO (2018) 192 TTJ 24 (UO) (Mum.)(Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Cash payments to temporary data entry operators below prescribed limit for deduction of tax at source — Disallowance was held to be not justified.
Dismissing the appeal of the revenue the Tribunal held that ;cash payments to temporary data entry operators below prescribed limit for deduction of tax at source, disallowance was held to be not justified as the professional charges was incurred wholly and exclusively for the purpose of business. (AY.2009-10)
ACIT v. Shruti Nanda (Smt). (2018) 65 ITR 189 (Delhi) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source–Tax on payment duly paid by recipient and receipt reflected in return —AO was directed to decide a fresh-Shipping expenses and freight and forwarding charges—AO was directed to decide a fresh.[S. 172, 201(IA).]
Tribunal held that the recipients of the amount had deposited the tax due on the sums and reflected the receipts in their returns. Therefore the matter was remanded to the Assessing Officer to decide afresh in view of the proviso to S. 40(a)(ia) read with S. 201(1A) of the Act. The AO was also directed to decide afresh the addition of shipping expenses and freight and forwarding charges, in view of the parameters as prescribed under section 172 as well as the other disallowances qua legal expenses, advertising and publicity expenses, freight and forwarding expenses and IHC/THC/C & F expenses in accordance with law. The onus to show that the section 40(a)(i) or 40(a)(ia) was not attracted in the facts and circumstances of the case, was on the assessee. (AY.2005-06)
PMS Diesels. v. ACIT (2018) 65 ITR 19 (SN) (Amritsar) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source -Payee in its return disclosing payment received, no disallowance can be made for failure to deduct tax at source – Second proviso to S. 40(a) of the Act is to be read as applicable with retrospective effect.
Tribunal held that when the payee in its return disclosing payment received, no disallowance can be made for failure to deduct tax at source.Second proviso to S. 40(a) of the Act is to be read as applicable with retrospective effect.(AY.2010-11, 2011-12)
CIT v. Ahmedabad Strips P. Ltd. (2018) 64 ITR 683 (Ahd) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source –Labour charges-Payee had shown the amount as income in his hand hence no disallowance could be made.[S. 194C, 201 (1)]
Allowing the appeal of the assessee the Tribunal held that ; when the Payee had shown the amount as income in his hand hence no disallowance could be made .(AY.2012-13)
Jashojit Mukherjee. v. ACIT (2018) 170 ITD 701/195 TTJ 697 (Kol) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source -Professional fees-Failure to deduct tax at source-Disallowance was held to be justified.[S. 194J]
Tribunal held that, professional fees paid without deduction of tax at source, disallowance is held to be justified.(AY.2010-11)
Nanak Ram Jaisinghani v. ITO (2018) 170 ITD 570 (Delhi) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source – Purchase of raw materials-Not liable to deduct tax at source [S. 194C.]
The Tribunal held that the CIT(A) was right in holding that the provisions of section 194C are not applicable to the transactions of purchase of goods and accordingly deleted the disallowance made by the AO under section 40(a)(ia) in respect of the payments made for purchase of raw materials, no interference is warranted. (AY. 2010-11)
Eshan Minerals (P) Ltd. v. Dy. CIT (2018) 191 TTJ 753 (Pune)(Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source – Payment of commission to foreign agent – Not liable to deduct tax at source, hence, no disallowances can be made. [S. 5(2)(b),9(1)(i), 195]
Dismissing the appeal of the revenue the Tribunal held that; Payment of commission to foreign agent, the tax was not liable to be deducted hence no disallowances can be made. CBDT Circulars NoS. 7 dated 22. 10. 2009, 23 dated 23 July 1969, 163 dated 29th May 1975 and 786 dated 7th February 2000 considered. (ITA No. 434 & 446/Agra/2015, dt. 11. 04. 2018)(AY. 2010-11, 2011-12)
ACIT v. Manufax (India) S. B. (Agra)(Trib.), www.itatonline.org
S. 40(a)(ia) : Amounts not deductible-Deduction at source – Contractor-The matter was restored back to the AO to verify as to whether tax was deposited by the parties or not. [S. 194C(6), 194C(7).]
On appesl the assessee contend that since the payee had a permanent account number, no tax was required to be deducted at source under S. 194C(6) of the Act, that there was no reference in the Act as to which form or which time was referred to in S. 194C(7), and that this was purely procedural, which should not be a cause for disallowance and hence the matter was remitted to the AO who would verify the details whether parties had deposited the tax or not . (AY. 2012-13)
Indo Swiss Anti-Shock Ltd. v. ITO(2018) 62 ITR 280 (Ahd.)(Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-payment to purchase of raw materials is not liable to deduct tax at source. [S. 194C]
Provision of S. 194C is not applicable to the payment made for purchase of raw materials for the business hence no disallowance can be made for failure to deduct tax at source. (AY. 2010 – 2011)
Eshan Minerals (P) Ltd. v. Dy. CIT (2018) 161 DTR 369 / 191 TTJ 753 (Pune)(Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Retrospective operation — If the recipients had paid due taxes on the amount received from the assessee no disallowance can be made. AO was directed to verify whether the recipient has paid the taxes on amount received from the assesse .[S. 194A,194C]
Tribunal held that; If the recipients had paid due taxes on the amount received from the assessee no disallowance can be made. AO was directed to verify whether the recipient has paid the taxes on amount received from the assesse. Followed CIT v. Ansal Land Mark Township Pvt. Ltd. (2015) 377 ITR 635 (Delhi) (HC). (AY. 2012-13)
Powerware India P. Ltd. v. ITO(2018) 61 ITR 746 (Cuttack) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Payment to foreign shipping companies,S. 172 is applicable hence not liable to deduct tax at source [S. 172,194C, 195.]
Dismissing the appeal of the revenue, the Tribunal held that; Payment to foreign shipping companies,S. 172 is applicable hence not liable to deduct tax at source, u/s 194C or u/s 195 of the Act. (AY. 2011-12)
DCIT v. Associated Pigments Ltd. (2018) 61 ITR 553 (Kol) (Trib.)
S. 40(a)(ia) : Amounts not deductible-Deduction at source-Advertisement on hoardings-Short deduction of tax at source applying wrong section, no disallowance can be made. [S. 194C, 194I]
The Commissioner (Appeals) deleted disallowance made by the Assessing Officer following the decision of the hon’ble Calcutta High Court in CIT v S. K. Tekriwal (2014) 361 ITR 432 (Cal) (HC) wherein it was held that section 40(a)(ia) could not be invoked where there was a short deduction and could be invoked only when there was non-deduction. He did not go into the question as to whether the payment fell within the ambit of section 194C or section 194-I. On appeal by the revenue the Tribunal held that; the decision of the Calcutta High Court was binding on the Tribunal being on the decision of the jurisdictional High Court. Therefore the order of the Commissioner (Appeals) on this issue did not call for any interference. (AY. 2010-11)
DCIT v. Vantage Advertising P. LTD. (2018) 61 ITR 564 (Kol.) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source – Recipients had offered the income,hence no disallowance can be made. The AO was directed to verify said aspects .
Allowing the appeal of the assessee the Tribunal held that; the assessee had furnished documentary evidence to demonstrate that recipient of finance charges paid by assessee had offered it as income in return of income hence no disallowances can be made. The AO was directed to verify the aspects. (AY. 2012-13)
Vardhvinayak Township Development (P.) Ltd. v. DCIT (2018) 168 ITD 456 (Mum.) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Reimbursement of expenses-Not liable to deduct tax at source-No disallowance can be made for failure to deduct tax at source. [S. 194I]
Dismissing the appeal of the revenue the Tribunal held that, reimbursed actual cost incurred by KPMG on various services such as premises taken on rent, communication expenses, office space charges etc., since there was no profit element involved in payments in question, assessee was not required to deduct tax at source while making said payments. (AY. 2005-06 to 2006-07)
DCIT v. KPMG Advisory Services (P.) Ltd. (2018) 168 ITD 34 (Mum.) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source-Gas Transmission charges cannot be treated as fees for technical services hence the assessee was not liable to deduction of tax at source u/s 194J. [S. 194C, 194J]
Dismissing the appeal of the revenue the Tribunal held that, Gas Transmission charges cannot be treated as fees for technical services hence the assessee was not liable to deduction of tax at source u/s 194J.Deduction of tax at source u/s194C was held to be justified. (AY. 2009-10)
ACIT v. Chambal Fertilisers And Chemicals Ltd(2018) 61 ITR 33 (Jaipur) (Trib.)
S. 40(a)(ia) : Amounts not deductible-Deduction at source-Interest paid to head office abroad — Income received on account of interest from Indian branches — Indian Branches are not required to deduct tax at source [S. 195]
Allowing the appeal of the assessee the Tribunal held that; Interest paid to head office abroad and income received on account of interest from Indian branches, Indian branches are not required to deduct tax at source. (AY. 2005-06)
Bank of Tokyo-Mitsubishi, UFJ Ltd. v. DCIT (2018) 61 ITR 272 (Delhi) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source –Payment to web hosting charges to Amazon Web Services LLC (USA) (AWS) is not liable to deduct tax at sourcr- Web hosting charges cannot constitute “royalty” under Explanation 2 to S. 9(1)(vi) read with the India USA DTAA-Not liable to deduct tax at souce-DTAA-India –USA. [S. 9(1)(vi), 195]
Allowing the appeal of the assessee the Tribunal held that,the assessee in the present case did not use or acquire any right to use any industrial, commercial or scientific equipment while using the technology services provided by Amazon and hence, the payment made by assessee cannot be said to be covered under clause (iva) to Explanation 2 of section 9(1)(vi) of the Act.In other words, even if the retrospective amendment is held to be applicable, the case of assessee of payment to Amazon being outside the scope of said Explanation 2(iva) to section 9(1)(vi) of the Act, cannot make the assessee liable to deduct tax at source. In other words, the assessee is not liable to deduct withholding tax and such non deduction of withholding tax does not render the assessee in default and consequently, no disallowance of amount paid as web hosting charges is to be made in the hands of assessee for such non deduction of withholding tax and hence, provisions of section 40(a)(i)of the Act are not attracted. (ITA No.828/PUN/2016 ITA No.1204/PUN/2016, dt. 24.10.2018)(AY. 2010-11, 2011-12)
EPRESS Prepaid Recharge Services India P. Ltd. v. ITO (Pune)(Trib.),www.itatonline.org

S. 40(a)(ia) : Amounts not deductible-Deduction at source – Handling charges paid to shipping agents of non-resident shipping companies was held to be not liable to deduct tax at source, and also the department had already granted exemption certificate to non-resident ship owners. [S. 194C]
Tribunal held that,as per CBDT Circular No. 723 dated 19-9-1995, payment made to shipping agents of non-resident shipowners did not require deduction of tax at source Tribunal also held that the department had already granted exemption certificate to non-resident ship owners that there was no obligation on assessee to deduct tax at source in respect of payments made to their shipping agents accordingly no disallowances can be made. (AY. 2014-15)
ACIT v. Safe Decore (P.) Ltd. (2018) 169 ITD 328/165 DTR 339 /193 TTJ 898 (Jaipur) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source Commission paid to foreign agents abroad for rendering services in their respective countries is not taxable in India hence not liable to deduct tax at source–DTAA-India-Hong Kong-Art. 7 OECD Model tax Convention. [S. 9(1)(i), 195]
Allowing the appeal of the assessee the Tribunal held that; commission paid to foreign agents abroad for rendering services in their respective countries is not taxable in India hence not liable to deduct tax at source. (AY. 2012-13)
Bengal Tea & Fabrics Ltd. v. DCIT (2018) 169 ITD 665 (Kol) (Trib.)

S. 40(a)(ia) : Amounts not deductible-Deduction at source – Transaction charges paid by stock broker cannot be held to be fees for technical services hence not liable to deduct tax at source. No disallowance can be made. [S. 194J]
Tribunal held that, transaction charges’ paid by stock broker to stock exchange were not for ‘technical services’ provided by stock exchange, but for facilities provided by stock exchange to its members, therefore, no tax on such payments was required to be deducted at source as fees for technical services hence no disallowance can be made for failure to deduct tax at source u/s. 194J. (AY. 2009-10)
DCIT v. Vibrant Securities (P.) Ltd. (2018) 168 ITD 47 (Mum.) (Trib.)

S. 40(a)(ii) : Amounts not deductible-Rates or tax-Education cess is not part of tax. Accordingly, the same is allowable as a deduction and disallowance cannot be made. CBDT Circular referred.
Court held that ; education cess is not part of tax. Accordingly, the same is allowable as a deduction and disallowance cannot be made. CBDT Circular referred.(ITA No. 52/2018, dt. 31.07.2018) (AY.2004-05)
Chambal Fertilisers and Chemicals Ltd. v. JCIT (Raj)(HC),www.itatonline.org

S. 40(a)(ii) : Amounts not deductible-Rates or tax-Education Cess was held to be not allowable as business expenditure. [S. 37(1)]
Tribunal held that the education cess was a disallowable expenditure under S. 40(a)(ii) and not allowable expenditure under S. 37(1) of the Act .(AY. 2009-10)
ACIT v. Chambal Fertilisers And Chemicals Limited. (2018) 61 ITR 33 (Jaipur) (Trib.)

S. 40(a)(iib) : Amounts not deductible-Gallonage fee, licence fee, shop rental and surcharge on sales tax-Issue being debatable matter was remanded to CIT (A).
Court held where deductions claimed by assessee towards gallonage fee, licence fee, shop rental and surcharge on sales tax were allowed in all earlier year, however, in relevant assessment year same was disallowed in view of introduction of new provision in section 40(a)(iib), since same was a debatable issue, matter was to be remanded to CIT(A). (AY.2015-16)
Kerala State Beverages. v. ACIT (2018) 257 Taxman 216 (Ker)(HC)

S. 40(b)(i) : Amounts not deductible – Partner – Book profit-Once cash advances was assessed as business income the same has to be taken in to consideration for the purpose of book profit .[S. 28(i), 133A.]
Allowing the appeal of the assessee the Court held that; Once cash advances was assessed as business income the same has to be taken in to consideration for the purpose of book profit.It was not open to the Department to contend that the amount of RS. 1,55,289 was part of business income while computing the tax payable but not so for the purposes of section 40(b) of the Act. The character of the income would not change depending upon the section to be applied.
National Sales Corporation v. ITO(2018) 400 ITR 463 (Bom.) (HC)

S. 40(b)(i) : Amounts not deductible-Working partner – Remuneration –Supplementary artnership deed mentioning that amended provisions of S .40(b) is applicable-Deduction is available.
Allowing the appeal the Tribunal held that,the assessee in its supplementary partnership deed mentioned that the amended provisions of S. 40(b) would be applied as applicable for the year 2013-14. Remuneration paid to partners is held to be allowable.(AY.2013-14)
S. K. Diamonds v. DCIT(2018) 65 ITR 80 (SN)(Ahd) (Trib.)

S. 40(ba) : Amounts not deductible-Association of persons – Amount paid to member as reimbursement-In order to invoke provisions payments should constitute share income from AOP in hands of recipient member. [S. 67A]
In the instant case, the employees of ‘I’ Ltd. were deputed to the assessee-AOP. The ‘I’ Ltd. has directly paid salaries and other related expenses to its employees and since the assessee has used the services of those employees, it has recovered the same from the assessee. Hence, in the hands of the assessee, what was paid to ‘I’ Ltd. was reimbursement of expenses. Allowing the appeal of the assessee the Tribunal held that ;there is considerable force in the arguments of the assessee. A combined reading of sections 40(ba) and 67A would make it very clear that the payments contemplated in section 40(ba) should constitute “Share income from AOP in the hands of the recipient member. In the instant case, the payments made by the assessee to ‘I’ Ltd. did not constitute ‘Share income’ in the hands of ‘I’ Ltd., but it merely offsets the expenditure incurred by it, i.e., the money had been received by ‘I’ Ltd. towards reimbursement of expenses incurred by it on its employees on behalf of the assessee. (AY.2008-09)
ITD Cem India JV v. ACIT (2018) 172 ITD 313 (Mum.) (Trib.)

S. 40(b)(v) : Amounts not deductible – Partner – Remuneration-Interest earned on investment of surplus money is not part of business income for computing the remuneration to partners – Disallowance was held to be justified. [S. 56]
Allowing the appeal of the revenue the Court held that; interest earned on investment of surplus money is not part of business income for computing the remuneration to partners. Disallowance was held to be justified.
CIT v. Allen Career Institute. (2018) 403 ITR 375/ 161 DTR 321 (Raj) (HC)

S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable – Rent-No written agreement- Both are paying same rate of taxes -Revenue neutral-No disallowance can be made – Rent paid to sister concern – Matter remanded for verification .
Assessee made payments to Bank and rental payments made to Customer Assets India P Ltd. AO held that these two entities did not have any written agreement for sharing of facilities and since Bank was related to assessee, AO disallowed 50% of said expenses by invoking provisions 40A(2)(a) of the Act which was confirmed by CIT (A). Tribunal held that both are paying same rate of taxes hence no disallowances can be made. Referred Indo Saudi Services (Travel) P Ltd. AO should also consider claim of assessee that amount disallowed would be eligible for deduction u/S. 10A, if he was not satisfied with original claim. AO also disallowed 20% of rent paid to sister concern which was confirmed by CIT(A).Tribunal held that, If AO was satisfied that there was no excess payment, then no disallowance out of rental expenditure was called for. Matter remanded. Followed CIT v. Indo Saudi Services (Travel) P. Ltd (2009 ) 310 ITR 306 (Bom.) (HC) (AY. 2004-05, 2005-06)
Firstsource Solutions Ltd v. Dy. CIT (2018) 168 DTR 161 /(2019) 197 TTJ 486 (Mum.)(Trib.)

S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable – Commission-Disallowance of 30% of commission- Without placing on record any material to prove that payments made by assessee were excessive or unreasonable considering fair market value of services-No disallowance can be made.
Allowing the appeal of the assessee the Tribunal held that; AO is not justified in disallowing 30% of commission, without placing on record any material to prove that payments made by assessee were excessive or unreasonable considering fair market value of services. (AY.2009-10)
Nat Steel Equipment (P.) Ltd. v. DCIT (2018) 171 ITD 482/ 171 DTR 49 / 195 TTJ 796 (Mum.) (Trib.)

S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable-Onus on assessing officer to bring on record comparable cases Assessee as well as holding company assessed to Income-tax at maximum marginal rate — Disallowance is not justified.

Tribunal held that, the onus was on the Assessing Officer to bring on record comparable cases to prove that the payment made by the assessee was in excess of the fair market value and that the payment in his opinion was excessive or unreasonable. The provisions of section 40A(2) are not automatic and can be called into play only if the Assessing Officer establishes that the expenditure incurred is in fact in excess of the fair market value. The Assessing Officer had not doubted the payment made by the assessee to the holding company on account of services rendered by it or brought any comparable case to demonstrate that the payment made by the assessee was excessive. Therefore no disallowance could be made especially in the light of the fact that both the companies were assessed to Income-tax at the maxiMum. marginal rate. The disallowance made by the Assessing Officer was not proper.(AY.2009 10 to 2013-14)
Manipal Health Systems P. Ltd. v. ACIT (2018) 65 ITR 51 (SN)(Bang.) (Trib.)

S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable-Payment of interest on unsecured loans at rates between 15 % an 18% can not be held to be excessive.
Tribunal held that, payment of interest on unsecured loans at rates between 15 % an 18% can not be held to be excessive, hence no disallowance can be made.(AY.2010-11, 2011-12)
CIT v. Ahmedabad Strips P. Ltd. (2018) 64 ITR 683 (Ahd) (Trib.)

S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable-Salaries paid to Doctors who were reputed professionals in their fields could not be held to be excessive and unreasonable hence disallowance of 15% of salaries was deleted.
Allowing the appeal of the assessee the Tribunal held that ; Salaries paid to Doctors who were reputed professionals in their fields could not be held to be excessive and unreasonable hence disallowance of 15% of salaries was deleted.(AY.2012-13)
Hemato Oncology Clinic (Ahmedabad) (P.) Ltd. (2018) 170 ITD 621/ 169 DTR 315/ 194 TTJ 885 (Ahd) (Trib.)

S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable – Firm-Partner-When partners of the firm contribute land as stock in trade though provision of S. 45(3) would not be applicable, AO can examine reasonableness of payment to partners.[S. 45(3)]
On appeal by the revenue the Tribunal held that when the partners of assessee-firm made capital contribution in form of land which was treated as stock-in-trade, provisions S. 45(3) would not apply rather case would be governed by provisions of S 28 to 43A and, thus, AO was entitled to examine reasonableness of payments made to partners for their contribution of land in terms of S 40A(2)(a) accordingly the matter was set aside to examine the issue in terms of S. 40A(2)(a) of the Act. (AY. 2007-08)
ACIT v. Karuna Estates & DeveloperS. (2018) 170 ITD 249 (Vishakha) (Trib.)

S. 40A(2) : Expenses or payments not deductible – Excessive or unreasonable – Rent paid to guest house – Payment being comparable no disallowance can be made.
Tribunal held that the department had not brought on record any material evidence to suggest that the rent paid was excessive vis-a-vis an accommodation of the same size and facility in the same locality. Therefore the rent payment as incurred for the purposes of the assessee’s business and was allowable. (AY. 2009-10)
ACIT v. Chambal Fertilisers And Chemicals Limited. (2018) 61 ITR 33 (Jaipur) (Trib.)

S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits – Where the income is computed applying the gross profit rate, no disallowances can be made by applying provisions of S. 40A(3).[S. 36, R.6DD(j)]
Dismissing appeal of the revenue the Court held that, where the income is computed applying the gross profit rate, no disallowances can be made by applying provisions of S. 40A(3).
CIT v. Jadau Jewellers And Manufactures (P) Ltd. (2018) 409 ITR 85 (Raj)(HC)
Editorial : SLP is granted to the revenue,CIT v. Jadau Jewellers And Manufactures (P) Ltd. (2016) 406 ITR 4 (St.)

S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits-Payment made to notified dealer-District Supply Officer’s order did not mandate any mode of payment either in cash or by cheque, and, moreover, there were banking channels available even when supplies had been effected, impugned disallowance was rightly made by authorities. [S. 260A, R.6DD.]
Dismissing the appeal of the assessee the Court held that, District Supply Officer’s order did not mandate any mode of payment either in cash or by cheque, and, moreover, there were banking channels available even when supplies had been effected, accordingly order passed by Tribunal confirming disallowance of cash payments did not require any interference.(AY.2009-10)
Madhav Govind Dhulshete. v. ITO (2018) 259 Taxman 149 (Bom.) (HC)

S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits-Factory was situated in backward area and payments to transporters had to be made in cash because such persons were not having banking facility around factory area Freight and cartage payments to drivers-Held to be allowable as deduction.[R.6DD]
Dismissing the appeal of the revenue the Court held that ; Cash payments exceeding prescribed limits in respect of freight and cartage to drivers is held to be allowable as deduction as the factory is situated in backward area and payments to transporters had to be made in cash because such persons were not having banking facility around factory area.
PCIT v. Lord Chloro Alkali Ltd. (2018) 97 taxmann.com 513/ 258 Taxman 131 (Raj) (HC)
Editorial : SLP of revenue is dismissed. PCIT v. Lord Chloro Alkali Ltd. (2018) 258 Taxman 130 (SC)

S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits-Deletion of addition by Tribunal on ground that expenditure negligible considering turnover of assessee-Matter Remitted to AO to redo assessment on consideration of related documents.
Allowing the appeal of the revenue the Court held that ; deletion of addition by Tribunal on ground that expenditure negligible considering turnover of assessee is not justified.Matter remitted to AO to redo assessment on consideration of related documents.(AY.2012-13)
CIT v. Vasantha Subramanian Hospitals Pvt. Ltd (2018) 408 ITR 176 / 258 Taxman 396/ 172 DTR 423/(2019) 307 CTR 569(Mad) (HC)

S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits-Payments to farmers is covered by exception-No disallowance can be made.[R.6DD (e) (i)]
Dismissing the appeal of the revenue, the Court held that, cash payments exceeding prescribed limits to farmers is covered by exception hence no disallowance can be made.(AY.2008-09)
PCIT v. Keshvalal Mangaldas (2018) 257 Taxman 133 (Guj)(HC)
S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits-Agricultural produce-Paddy from farmers-No disallowance can be made.[R.6DD]
Dismissing the appeal of the revenue the Court held that ;Agricultural produce ie. Paddy purchased from the famers by making cash payments exceeding prescribed limits, no disallowance can be made. S. 40A(3) is a deeming provision and rule 6DD exempts agricultural produce.(AY. 2001-02)
CIT v Keerthi Agro Mills (P.) Ltd. (2017) 405 ITR 192/ 87 taxmann.com 31 (Ker) (HC)
Editorial : SLP of revenue is dismissed ;PCIT v. Keerthi Agro Mills (P.) Ltd. (2018) 257 Taxman 1 (SC)

S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits of Rs 20,000-Inflated purchase expenditure by raising bogus claims – Only profit element embedded there in should be brought to tax and not the entire expenditure.[S. 37(1), 145]
Dismissing the appeal of the revenue the Court held that ;when Assessing Officer had doubted genuineness of expenditure, he would require bringing to tax profit element so avoided by assessee and not the entire expenditure.(AY.2009-10)
PCIT v. Juned B. Memon (2018) 256 Taxman 380 (Guj) (HC)

S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits – Evidence in the form of bills etc. was not produced. Disallowance was confirmed. [R. 6DD(h),(j)]
Dismissing the appeal of the assessee the Court held that the assessee was not able to satisfy the Assessing Officer with regard to the genuineness of the payment made to the transporters, contractors etc. inasmuch as the evidence in the form of bills etc. was not produced. Accordingly disallowance was confirmed. (AY. 1991-92)

Ellora Paper Mills Ltd. v CIT (2018) 163 DTR 42 / 301 CTR 252 (Bom.)(HC)

S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits-20% expenditure-Purchase of land as stock in trade-Villagers paid the amount in cash in the absence of banking facilities deletion of addition was held to be justified .[R. 6DD(h)]
Dismissing the appeal of the revenue the Court held that the payment of cash was made to villagers for purchase of land as stock in trade. Villagers were paid the amount in cash in the absence of banking facilities deletion of addition was held to be justified .
CIT v. Ace India Abodes Ltd. (2018) 162 DTR 118 (Raj)(HC)

S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits – Exporter of frozen buffalo meat-Payment made to producer of meat in cash in excess of Rs 20000/ disallowance cannot be made-Circular No 8 of 2016 dt 6-10-2016 issued by CBDT cannot impose additional condition in the Act or Rules adverse to an assessee. [R. 6DD(e)]
Dismissing the appeal of the revenue the Court held that, Assessee exporter of frozen buffalo meat. Payment made to producer of meat in cash in excess of Rs 20000/ disallowance cannot be made. Circular No 8 of 2016 dt 6-10-2016 issued by CBDT cannot impose additional condition in the Act or Rules adverse to an assessee. Relied UCO Bank v. CIT (1999) 237 ITR 889 (SC) (AY. 2009-10)
PCIT v. Gee Square Exports (2018) 100 taxmann.com 461 /(2019) 411 ITR 661 (Bom.)(HC)
Editorial : SLP of revenue is dismissed, PCIT v. Gee Square Exports (2018) 100 taxmann.com 462/(2019) 260 Taxman 175 (SC)
S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits-Amount being small and genuineness of payment was not doubted no disallowance can be made.
Dismissing the appeal of the revenue the Court held that; amount being small and genuineness of payment was not doubted no disallowance can be made. (AY. 2009-10)
ITO v. Samwon Precision Mould Mfg. India Pvt. Ltd. (2018) 401 ITR 486 (Delhi) (HC)

S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits –Logistic solutions- Airline companies- Identity of payee and genuineness of transaction is not doubted – Disallowance was deleted.
Tribunal held that for business expediency in line of business of assessee, sometimes cash payments were made to complete work on behalf of Principal. Assessee, under such compelling reasons, had to make payments in cash on account of urgent need. As the identity and genuineness of transaction is not in doubt, disallowance was deleted.
KGL Network (P) Ltd. v. ACIT (2018) 195 TTJ 265/(2019) 176 DTR 102 (Delhi) (Trib.)

S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits –Survey-cash purchases reported in the financial statements, i. e., notional entries made for the purpose of matching the unaccounted sales discovered during the search actions –No disallowance can be made by applying the provision of S. 40A(3).[S. 133A]
Tribunal held that only notional entries were made for purpose of matching unaccounted sales discovered during search.Disallowance is held to be not justified. (AY. 2005-06, 2006-07)
Floorings v. ITO (2018) 64 ITR 34 (SN) (Pune) (Trib.)
Bhikshu Granimart v. Dy.CIT (2018) 64 ITR 34 (SN)(Pune)(Trib.)
S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits – payment exceeding Rs. 20000 – payment to truck driver who generally insist payment in cash – Held, AO did not doubt genuineness of the payment – Disallowance cannot be made.
Assessee had made payment to truck drivers who generally insist payment in cash. Cash payment was above Rs. 20,000/-only on three occasions and that the amount was nominally above the threshold limit. The AO did not doubt the genuineness of the payment. The Tribunal held that, no disallowance can be made as laid down in Circular No. 220 dt. 31.5.1977(1977) 108 ITR 8 (St).
Royal Wood Industries v. Jt. CIT (2018) 62 ITR 321 (Amritsar)(Trib.)

S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits-Purchase of land-Capital expenditure is not charged to profit and loss account-Disallowance cannot be made.
The assessee trust had paid certain amount in cash for purchase of land for development. The AO disallowed 20 per cent of the said sum u/s. 40A(3) of the Act. The Tribunal held that, the payment was towards purchase of land, capital expenditure is not charged to profit & loss account hence disallowance was held to be not justified. (AY. 2007 – 08, 2009-2010)
Shalom Charitable Ministries of India v. ACIT (2018) 171 ITD 338 / 195 TTJ 340 (Cochin) (Trib.)

S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits-No disallowance can be made for cash payments if the transaction is genuine and the identity of the payee is known. Rule 6DD is not exhaustive. The fact that the transaction does not fall with Rule 6DD does not mean that a disallowance has to be per force made. [R. 6DD]
Allowing the appeal of the assessee the Tribunal held that,no disallowance can be made for cash payments if the transaction is genuine and the identity of the payee is known. Rule 6DD is not exhaustive. The fact that the transaction does not fall with Rule 6DD does not mean that a disallowance has to be per force made. (AY. 2013-14)
A Daga Royal Arts v. ITO (2018) 196 TTJ 541 /64 ITR 55 (SN)(Jaipur)(Trib.), www.itatonline.org

S. 40A(3) : Expenses or payments not deductible-Cash payments exceeding prescribed limits-Repayment of debt to group concern and expenditure was not debited in profit and loss account, addition cannot be made.
Allowing the appeal of the assessee the Tribunal held that; transactions between assessee and its group concerns for repayment of debt to group concern and not for any expenditure incurred and same had not been debited in profit and loss account therefore addition was held to be not justified. (AY. 2008-09)
Saamag Developers (P.) Ltd. v. ACIT (2018) 168 ITD 649 (Delhi) (Trib.)

S. 40A(3) : Amounts not deductible-Hotel and restaurant bills – Each payment is less than Rs 20,000/ hence disallowance was held to be not valid.
Dismissing the appeal of the revenue the Tribunal held that, each payment was less than Rs. 20000 hence no disallowances can be made.
ACIT v. Kiwifx Solutions. (2018) 61 ITR 780 (Ahd) (Trib.)

S. 40A(7) : Expenses or payments not deductible – Gratuity-Delay in granting approval-As the condition was satisfied, no disallowances can be made.
Dismissing the appeal of the revenue the Court held that where conditions of approval as seen from clause (3) of Part-C of Schedule IV had been satisfied, its claim for deduction would be allowable though there was delay in granting approval. (AY. 2010-11)
PCIT v. English Indian Clays Ltd. (2018) 253 Taxman 208 (Ker)(HC)

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability – Deferral sales tax Scheme-Premature payment in terms of net present value (NPV) of same cannot be assessed as remission or cessation of liability.[S. 43B]
Dismissing the appeal of the revenue the Court held that; Premature payment in terms of net present value (NPV) of same cannot be assessed as remission or cessation of liability .What assessee was required to pay after 12 years in 6 equal instalments was paid by assessee prematurely in terms of net present value (NPV) of same. (AY. 2003-04)
CIT v. Balkrishna Industries Ltd. (2018) 252 Taxman 375 / 300 CTR 209/ 161 DTR 185 (SC)
Editorial : CIT v. Sulzer India Ltd (2014) 369 ITR 717/ (2015) 229 Taxman 264 (Bom.) (HC) is affirmed.

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability – Banking business-Amount transferred to statutory reserve out of carried forward account of provision for expenses was treated as taxable.[S. 80P(2)]
Assessee was an apex co-operative bank of Rajasthan deriving income from banking business. Income of assessee co-operative bank was exempt under section 80P(2) in all earlier year(s). However, from assessment year in question i.e. 2007-08, entire income from banking business of assessee became taxable on withdrawal of exemption by insertion of section 80P(4) by Finance Act, 2006 with effect from 1-4-2007. AO treated the amount transferred to statutory reserve out of carried forward account of provision for expenses was treated as taxable under section 41(1).Tribunal and High Court up held the order of the AO. (AY. 2007-08)
Rajasthan State Co-Operative Bank Ltd. v. ACIT (2018) 100 taxmann.com 152/ 259 taxman 512 (Raj) (HC)
Editorial : SLP is granted to the assessee and stay of operation of the impugned judgement and order of the High Court, Rajasthan State Co-Operative Bank Ltd. v. ACIT (2018) 259 Taxman 511 (SC).

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability-Liability continued to be shown in balance-sheet — Addition cannot be made as deemed income.
Dismissing the appeal of the revenue the Court held that ; when the liability qua the amount which was still standing in the balance-sheet of the assessee, which fact had not been disputed by the Assessing Officer, the liability could not be said to have ceased in terms of S. 41(1) of the Act.(AY.2005-06)
CIT v. Eco Auto Components Pvt. Ltd. (2018) 409 ITR 202 (P&H) (HC)

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability – Provision for doubtful debt-Burden is revenue to prove that excess provision for bad and doubtful debt written back in profit and loss account was allowed as deduction in previous years-Deletion of addition is held to be justified. [S. 36(1)(viia)]
Dismissing the appeal of the revenue the Court held that, burden is revenue to prove that excess provision for bad and doubtful debt written back in profit and loss account was allowed as deduction in previous years. Accordingly the-deletion of addition is held to be justified.(AY.2008-09)
CIT v. Pragathi Gramina Bank (2018) 91 taxmann.com 343 (Karn) (HC)
Editorial : SLP of revenue is dismissed, CIT v. Pragathi Gramina Bank (2018) 259 Taxman 219 (SC)

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability-Non-payment of outstanding liability which is admitted and acknowledged as due and payable cannot be assessed as remission or cessation of liability.
Dismissing the appeal of the revenue, the Court held that ; non-payment of outstanding liability which is admitted and acknowledged as due and payable cannot be assessed as remission or cessation of liability.
PCIT v. New World Synthetics Ltd. (2018) 258 Taxman 189 (Delhi)(HC)

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability-The mere fact that the assessee has made an entry of transfer in his accounts unilaterally will not enable the Department to say that section 41 would apply and the amount should be included in the total income of the assessee-Deletion of addition was held to be justified.
Dismissing the appeal of the revenue the Court held that ;Section 41 of the Income-tax Act, 1961 contemplates the obtaining by the assessee of an amount either in cash or in any other manner whatsoever or a benefit by way of remission or cessation and it should be of a particular amount obtained by him. Thus, the obtaining by the assessee of a benefit by virtue of remission or cessation is sine qua non for the application of this section. The mere fact that the assessee has made an entry of transfer in his accounts unilaterally will not enable the Department to say that section 41 would apply and the amount should be included in the total income of the assessee. Accordingly the Tribunal was justified in deleting the addition of Rs. 1,27,76,000 and Rs. 2,28,08,000, being liabilities in respect of interest on sugar and cane price difference respectively, written back by the assessee.
CIT v. Kanoria Sugar And General Manufacturing Co. Ltd. (2018) 407 ITR 737 (Raj) (HC)
Editorial : SLP of revenue is dismissed; CIT v. Kanoria Sugar And General Manufacturing Co. Ltd. (2018) 405 ITR 1 (St)

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability-Amounts remaining unrecoverable as creditors untraceable cannot be the ground to conclude that there was cessation of liability.
Dismissing the appeal of the revenue the Court held that ; amounts remaining unrecoverable as creditors untraceable cannot be the ground to conclude that there was cessation of liability.(AY.2007-08)
CIT v. Vishal Transformers And Switchgears Pvt. Ltd. (2018) 405 ITR 266 (All) (HC)

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability-Liability is not written of in books of account – Addition cannot be made as cessation of liability.
Court held that as the assessee had not written of liability in books of account with respect to debtors and had carried forward and continued same liability addition cannot be made as cessation of liability (AY.2009 10)
PCIT v. Babul Products (P.) Ltd. (2018) 257 Taxman 100 (Guj.)(HC)
Editorial : Order in Babul Products (P.) Ltd v. ACIT (2017) 167 ITD 402 (Ahd) (Trib.) is affirmed.

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability – Assets and liabilities were transferred to special purpose vehicle-Tribunal failed to give independent finding, accordingly the matter was remanded to Tribunal.
Allowing the appeal of the assessee the Court held that, Tribunal held finding of CIT (A) was not proper but it did not render an independent finding; rather it was guided by finding rendered by it in its earlier order. Accordingly the matter was to be remanded back to Tribunal.
India Cements Capital & Finance Ltd. v. ACIT (2018) 254 Taxman 180 (Mad.)(HC)

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability – Share application money from holding company which was adjusted against goods sold by assessee cannot be assessed as cessation or remission of liability.
Dismissing the appeal of the revenue the Court held that; Share application money from holding company which was adjusted against goods sold by assessee cannot be assessed as cessation or remission of liability.(AY. 2007-08)
CIT v. Indo Widecom International Ltd. (2018) 409 ITR 144/ 253 Taxman 117 / 300 CTR 437 /161 DTR 345 (All)(HC)

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability – Creditors were paid in subsequent years hence addition was held to be not justified.
Dismissing the appeal of the revenue, the Court held that, Creditors were paid in subsequent years hence addition was held to be not justified. (AY. 1996-97)
CIT v. Banaras House Ltd. (2018) 402 ITR 88 (Delhi) (HC)

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability – Students who could not pass the examination would get 50 percent of fees as refund within two months from the declaration of results of examination – Contract between parties clear and Tribunal is right is holding that the unclaimed amounts were assessable to tax as deposit changed its character into income.
On appeal, the High Court upheld the decision of Tribunal on the ground that contract between the parties are clear that refund must be claimed within two months of declaration of results and any refund application there-after would not be granted. In view of the clear finding of fact, the parties would be governed by the contract and the principle laid down in T. V. Sundaram Iyengar and Sons Ltd (1999) 222 ITR 344 (SC) would be relevant in the present case. (AY. 1989-90)
E. K. Thakur (Deceased) Through LR Gautam E Thakur. v. CIT (2018) 163 DTR 380 (Bom.)(HC)

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability-Sundry creditors-Produced details of court cases at Kuwait and correspondences with its overseas buyers/agents its efforts for making recovery to justify that these payments were still due from customers albeit same was produced before Tribunal for first time—No justification in confirming additions.
It was incumbent on the learned AO as well learned CIT(A) to have gone into greater scrutiny and examination to disprove the contentions of the assessee and merely making bald statement is not sufficient. The assessee has also produced details of court cases at Kuwait and correspondences with its overseas buyers/agents w.r.t. its efforts for making recovery etc to justify that these payments are still due from the customers albeit the same was produced before the Tribunal for the first time. The Revenue has not brought on record any incriminating material to support its stand despite having sufficient opportunity to had made necessary enquiries and verification at level of AO as well learned CIT(A) whose powers are coterminous with that of the AO which unfortunately the Revenue did not do so while the assessee placed all the facts before the authorities below. Accordingly the addition was deleted.(AY.2011-12)
Pyramid Consulting Engineers Pvt. Ltd. v. DCIT(2018) 195 TTJ 229/ (2019) 176 DTR 302 (Mum.) (Trib.)

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability-Sundry creditors were paid in subsequent year-Deletion of addition is held to be justified.
Tribunal held that CIT(A) had recorded a categorical finding that assessee had paid all sundry creditors in subsequent financial year and proof for such payment had been furnished. AO had made addition towards sundry creditors without bringing on record any evidence to prove that there was cessation of liability in impugned financial year and also, assessee had derived benefit out of such cessation of liability.(AY.2011-12)
Scrabble Entertainment Ltd. v. ACIT (2018) 169 DTR 51 /193 TTJ 418 (Mum.) (Trib.)

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability-Outstanding sundry creditors for several years-Failure to produce correct address, PAN Numbers, or confirmations-Merely because liabilities were shown in books of account and not written back, could not be held to be subsisting liability.[S. 133(6)]
Allowing the appeal of the revenue the Tribunal held that; outstanding sundry creditors for several years assesses failure to produce correct address, PAN Numbers, or confirmationS. Merely because liabilities were shown in books of account and not written back, could not be held to be subsisting liability.(AY.2010-11)
ACIT v. Dattatray Poultry Breeding Farm (P.) Ltd. (2018) 171 ITD 615 (Ahd) (Trib.)
S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability –Amount not written back sundry creditors in his profit and loss account and had shown balance outstanding towards those creditors cannot be added as income.
Allowing the appeal of the assessee the Tribunal held that; Amount not written back sundry creditors in his profit and loss account and had shown balance outstanding towards those creditors cannot be added as income,since assessee had duly acknowledged his debt by accepting creditors liability to be discharged in future, there could not be any cessation of liability.(AY.2012-13)
Jashojit Mukherjee. v. ACIT (2018) 170 ITD 701 / 195 TTJ 697 (Kol) (Trib.)

S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability-Benefit from Pre-payment of deferred Sales Tax Liability cannot be assessed u/s 41(1).
Dismissing the appeal of the revenue the Tribunal held that; Benefit from Pre-payment of deferred Sales Tax Liability cannot be assesses u/s 41(1). Board Circular No. 496 dated September 25, 1987 stated that statutory liability was to be treated as paid in case the State Government made an amendment that sales tax deferred under the scheme was to be treated as actually paid, therefore the order of the Commissioner (Appeals) for the assessment year 2009-10 was upheld. (AY. 2009-10)
ACIT v. Chambal Fertilisers And Chemicals Ltd. (2018) 61 ITR 33 (Jaipur) (Trib.)

S. 43(1) : Actual cost –Depreciation-Grants towards capital fund-conTrib.ution in the form of grants could not be considered as a payment directly or indirectly to meet any portion of the actual cost and, thus, did not fall within the ambit of Explanation 10 to section 43(1).[S. 32.]
Tribunal held that ;where three Governments coming together and doing business by themselves by constituting a society. Its main objects related to providing technical, advisory and consultancy services for small and medium scale industries across the State of Gujarat, besides for improving skills and knowledge of the personnel of the tool room. To achieve these objects, the promoters provided funds in the form of grants towards capital fund. Such conTrib.ution in the form of grants could not be considered as a payment directly or indirectly to meet any portion of the actual cost and, thus, did not fall within the ambit of Explanation 10 to section 43(1).(AY. 2013-14)
ITO v. Indo German Tool Room(2018) 64 ITR 58(SN)(Ahd) (Trib.)

S. 43(5) : Speculative transaction –Hedging-High sea sales –Not speculative-Allowable as business loss.[S. 28(i).]
The assessee entered into contracts for purchase of raw materials, mainly crude oil, which was the raw material for refined oil on “high seas sale” basis and many times, looking to the market trend, the assessee had to cancel such contracts for sale of raw materials (crude oil). In the present assessment year it had resulted in a loss which the assessee claimed as a business losS. The Assessing Officer and the Commissioner (Appeals) rejected the claim of the assessee in its entirety, but the Tribunal recorded findings with respect of 32 transactions in favour of the assessee. On appeal dismissing the appeal of the revenue the Court held that the Tribunal was correct in allowing the claim of the assessee in respect of 32 transactions. (AY. 2009-10)
ACIT v. Surya International (P.) Ltd. (2018) 406 ITR 274/ 258 Taxman 172 (All) (HC)

S. 43(5) : Speculative transaction – Derivatives-Losses -Set off from one source against income from other source under same head of income-Loss incurred on account of derivatives would be deemed business loss under proviso to S. 43(5) and not speculation loss, Explanation to S. 73 would not be applicable-Interpretation-Two non jurisdictional High Court taking different view-View favourable to the assessee is followed.[S. 70, 73(4)]
Dismissing the appeal of the revenue the Tribunal held that ;loss incurred on account of derivatives would be deemed business loss under proviso to S. 43(5) and not speculation loss and, accordingly Explanation to S. 73 could not be applied and as such, loss would be set off against income from businesS. When two non jurisdictional High Courts have taken different view, view in favour of the assessee may be followed. (Referred,Taj International (P) Ltd v. Dy. CIT (2011) 118 Taxman 59 (Mag) (Delhi)(HC), Asian Financial Services Ltd v. CIT (2016) 240 Taxman 192 (Cal) (HC)) favour, CIT v. DLF Commercial Developers Ltd (2013) 218 Taxman 45 (Delhi) (HC) against)(AY.2011-12)
ITO v. Upkar Retail (P.) Ltd. (2018) 171 ITD 626/ 170 DTR 233/ 195 TTJ 743 (Ahd) (Trib.)

S. 43(5) : Speculative transaction-Derivative-Both delivery based transaction and derivative transactions are non-speculative as far as S. 43(5) is concerned and, thus, they will have same treatment as regards application of Explanation to S. 73 of the Act, matter was remanded back to Assessing Officer to bifurcate speculative loss and normal business loss .[S. 43(5) (d), 73]
Tribunal held that both delivery based transaction and derivative transactions are non-speculative as far as S. 43(5) is concerned and, thus, they will have same treatment as regards application of Explanation to S. 73 of the Act, matter was remanded back to Assessing Officer to bifurcate speculative loss and normal business loss. (AY. 2007-08)
Dewa Projects (P.) Ltd. v. ACIT (2018) 170 ITD 326//166 DTR 105/ 193 TTJ 755(Cochin) (Trib.)

S. 43(5) : Speculative transaction – Currency derivatives-Transactions through a recognised stock broker on recognised stock exchange, could not be termed as speculative transaction. [S. 73]
Allowing the appeal of the assessee the Tribunal held that; transactions of currency derivatives were conducted through a recognised stock broker, on a recognised stock exchange and which were duly supported by time stamped contract notes, same could not be termed as speculative transaction(AY. 2013-14, 2014-15)
Nand Nandan Agrawal v. DCIT (2018) 169 ITD 161 (Agra) (Trib.)

S. 43(6) : Written down value-For computing WDV depreciation allowed under the State enactment cannot be reduced. [S. 32. Kerala Agricultural Income-tax Act, 1991]
HELD by the High Court that the depreciation allowed with respect to the income assessed to tax under any other enactments (Kerala Agricultural Income-tax Act, 1991) having not been specifically excluded from S. 43(6) of Act, there is no reason to reduce the amount of depreciation claimed under the State Act, while computing WDV as per the IT Act as if the Government wanted to ensure that no double benefit is conferred on assessee, then it ought to have brought such specific provision on depreciation to prevent double benefit to assessee. (AY. 2002-2003)
Rehabilitation Plantations Ltd v. CIT (2018) 253 Taxman 522 /166 DTR 433 (Ker)(HC).

S. 43A : Rate of exchange-Actual cost-Depreciation-Notional fluctuation-Imported assets acquired in foreign currency — Fluctuation in rate of exchange — Adjustment can be made at each date of balance-sheet pending actual payment. [S. 32]
Dismissing the appeal of the revenue the Court held that, the Tribunal was justified in allowing the claim of depreciation on foreign exchange fluctuation which showed notional fluctuation.Adjustment can be made at each date of balance-sheet pending actual payment.(AY.1993-94)
CIT v. Phonex Lamps India Ltd. (2018) 406 ITR 550 (All) (HC)

S. 43A : Rate of exchange-Foreign currency – Foreign exchange fluctuation on loan liability on fixed asset being notional and no actual payment was made would not require any adjustment in the cost of the fixed assets on accrual basis, as the S. 43A is amended w.e.f 1 st April, 2003.[S. 37(1)]
Dismissing the appeal of the revenue the Court held Foreign exchange fluctuation on loan liability on fixed asset being notional and no actual payment was made would not require any adjustment in the cost of the fixed assets on accrual basis as the S. 43A is amended w.e.f 1 st April, 2003. Referred CIT v. Woodward Governor India P. Ltd (2009) 312 ITR 254 (SC) (AY. 2003-04) (ITA NO.1129 of 2015 dt. 18-04-2018)
PCIT v. Spicer India Ltd (Bom.) (HC) www.itatonline.org

S. 43A : Rate of exchange-Foreign currency – Capital advance made to subsidiary-Notional Loss — Restatement of foreign currency loan is capital in nature and not allowable as deduction. [Accounting Standard, Para 11.]
Tribunal held that capital advance made to subsidiary,restatement of foreign currency loan is capital in nature and not allowable as deduction in view of Accounting Standard, Para 11. (AY.2009 10 to 2013-14)
Manipal Health Systems P. Ltd. v. ACIT (2018) 65 ITR 51 (SN) (Bang.) (Trib.)

S. 43B : Deductions on actual payment– Service tax payable-Since services were rendered, liability to pay service tax in respect of consideration would arise only upon assessee receiving funds and not otherwise-liability claimed by assessee could not be disallowed.
Dismissing the appeal of the revenue the Court held that ; since services were rendered, liability to pay service tax in respect of consideration would arise only upon assessee receiving funds and not otherwise, thus, liability claimed by assessee could not be disallowed. (AY. 2006-07)
PCIT v. Tops Security Ltd. (2018) 258 Taxman 161 (Bom.)(HC)
Editorial: SLP of revenue is dismissed , PCIT v. Tops Security Ltd( 2019) 262 Taxman 355 (SC)

S. 43B : Deductions on actual payment-Excise duty — Unutilised modvat credit of earlier years, which is adjusted in current Assessment Year, cannot be treated as actual payment. Customs duty and sales tax of earlier years is allowable as deductions. [S. 145A]
Court held that (i) that the Tribunal was not right in holding that the unutilised Modvat credit amounts of earlier years adjusted in the assessment year 1999-2000, could be treated as actual payment of excise duty under section 43B.(ii) That the sales tax paid on raw material in the preceding assessment year was rightly allowed as a deduction in the current assessment year under section 43B.(iii) That the customs duty paid on imports, claimed as a deduction under section 43B, was directly paid by the assessee to the customs authorities during the assessment year in question. The Tribunal had rightly allowed the deduction. (AY.1999-2000)
CIT v. Maruti Udyog Ltd. (2018) 407 ITR 159/(2019) 308 CTR 682 (Delhi) (HC)

S. 43B : Deductions on actual payment-Unutilised MODVAT credit representing excise duty paid of raw material/input at the end of year cannot be allowable as deduction .
Dismissing the appeal of the assessee the,High Court held that S. 43B shall appy only in cases of ‘statutory liability’. In the present case primary liability to pay excise duty is essentially on the manufacturers of the raw materials and inputs. As far as the Assessee is concerned, the liability to pay the said amount is only contractual. Therefore High Court held that the assessee would not be allowed to claim deduction of unutilized MODVAT credit u/s 43B of the Act. However, High Court agreed with the ITAT’s acceptance of the assessee’s alternate contention that unutilized MODVAT credit of the earlier year is allowable as a deduction in the relevant assessment year, to the extent that it has been adjusted by treating as actual payment of the credit for the assessment year in question. (AY. 1999-00)
Maruti Udyog Ltd v. CIT (2018) 406 ITR 562/ 253 taxman 60 /161 DTR 1(Delhi) (HC)

S. 43B : Deductions on actual payment – Employees provident fund-No disallowance can be made, if deposited prior to due date of filing of return.[S. 139(1)]
Allowing the appeal of the assessee the Court held that; no disallowance can be made if employees provident fund is deposited prior to due date of filing of return. Followed, CIT v. Alom Extrusions Ltd. (2009) 319 ITR 306 (SC). (AY. 2001-02)
Kashmir Tubes v. ITO (2017) 85 taxmann. com 299(2018) 300 CTR 541 (J&K) (HC)

S. 43B : Deductions on actual payment-Provision for leave encashment-Not allowable unless the amount is actually paid.
Deduction cannot be allowed under section 43B on the making of a mere provision for leave encashment unless the amount is actually paid. (AY. 2004-05 to 2009-10)
Delhi Tourism & Transport Development Corp. Ltd. v. Dy. CIT (2018) 194 TTJ 305 (Delhi)(Trib.)

S.43B : Dedcutions on actual payment – Contribution to provident fund and employees’ state insurance – Contribution deposited beyond prescribed time limit provided in respective Acts but before due date of filing return under income tax Act is allowable.
Dismissing the Department’s appeal, the Tribunal held that the payment or contribution made to the provident fund authority any time before the due date of filing of the return for the year in which the liability to pay accrued was an allowable expenditure. Admittedly, the employees’ contribution to the provident fund was deposited by the assessee before the due date of filing of return. There was no any error or illegality in the order of the CIT(A).
DCIT v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd.(2018) 63 ITR 685 / 52 CCH 520 (Jaipur)(Trib.)

S. 43B : Deductions on actual payment – Service tax – Not deposited with Government before due date of filing of return – Disallowance was held to be justified.[S. 139(1)]
Tribunal held that since the assessee has not deposited with Government before due date of filing of return,disallowance was held to be justified. (AY.2013-14)
Hemkunt Infratech (P.) Ltd. v. DCIT (2018) 170 ITD 419/ 170 DTR 1 / 195 TTJ 598 (Delhi) (Trib.)

S. 43B : Deductions on actual payment-Payment of Leave encashment made before due date of filling of return of income is allowable as deduction. [S. 139(1)]
The AO disallowed the payment of leave encashment made before due date of filling of return of income, on the ground that, no evidence was filed. Tribunal held that the requirement of furnishing evidence of details of payment of leave encashment is only a directory and not mandatory, therefore no disallowance can be made. (AY. 2006 – 2007 to 2008-2009)
Dy. CIT v. Mcnally Bharat Engineering Co. Ltd. (2018) 191 TTJ 822 (Kol.)(Trib.)
S. 43B : Deductions on actual payment-Employees’ conTrib.ution to provident fund and employees’ state insurance, deposited before due date for filing of return is allowable as deduction. [S. 139(1)]
Payment made to employees’ contribution to provident fund and employees’ state insurance, deposited before due date for filing of return is allowable as deduction.(AY. 2012-13)
Powerware India P. Ltd. v. ITO (2018) 61 ITR 746 (SMC) (Cuttack)(Trib.)

S. 43CA : Transfer of assets-other than capital assets-Full value of consideration-stock in trade-Agreement value – Stamp valuation- Provision of S. 43CA have been inserted with effect from 1-4-2014 to relevant assessment year 2014-15-Agreement to sell was entered much prior to that date , i.e. in the year 2007-Provision of S. 43CA(4) cannot be applied-Matter remanded to CIT(A) to determine valuation as on 9-4-2007 and if it is higher than the sale consideration, same can be brought to tax in the year under consideration. [S. 50C]
Allowing the appeal of the assesseee the Tribunal held that,provision of S. 43CA have been inserted with effect from 1-4-2014 to relevant assessment year 2014-15.Agreement to sell was entered much prior to that date , i.e. in the year 2007 in the instant case agreement to sell was entered in to much prior to that date i.e. in 2007 .Accordingly the provision of S. 43CA(4) cannot be applied. Matter remanded to CIT(A) to determine valuation as on 9-4-2007 and if it is higher than the sale consideration, same can be brought to tax in the year under consideration. (AY.2014-15)
Indexone Tradecone (P) Ltd v. Dy.CIT (2018) 172 ITD 396 (Jaipur) (Trib.)

S. 43D : Public financial institutions-Real income-Co-Operative Bank – Interest on non-performing assets-Shown in books as per RBI guidelines – Interest not accrued-Not assessable. [S. 4, 5, 145, RBI Act, 1934, S. 45Q]
Dismissing the appeal of the revenue the Court held that,interest on non-performing assets though shown in books as per RBI guidelines, interest which has not accrued is held to be not assessable.(AY.2009-10)
PCIT v. Ludhiana Central Co-Op. Bank Ltd (2018) 305 CTR 868/ 172 DTR 1 (2019) 410 ITR 72 (P&H)(HC)

S. 43D : Public financial institutions – Interest income on loans categorised as NPA/sticky loans – Taxable on receipt basis and not on accrual basis.[S. 145]
The Tribunal relying on the decision of co-ordinate in case of Ludhiana Central Co-op Bank Ltd. (ITA No. 526/Chd/2013) dt. 3 January 2017 wherein the Tribunal considering the decisions of High Court and Supreme Court and taking account of RBI guidelines and AS-9 and following the real income theory, held that the interest on NPA loans are to be taxed on receipt basis. (AY. 2012-13,2013-14).
DCIT v. Kangra Central Co-operative Bank Ltd.(2018) 63 ITR 231) (Chd) (Trib.)

S. 44 : Insurance business-Sale of investments— Held to be taxable[S. 14A]
AO also made a disallowance u/s 14A. On appeal, CIT(A) deleted addition on ground that provisions of S..14A were not applicable to insurance company. Allowing the appeal of the revenue the Tribunal held due to deletion of rule 5(b) of first Schedule by Finance Act,1988, there was no provision for any adjustment for profit on sale of investment by Insurance company. Accordingly the AO has rightly taken the view that sale of investments as taxable income of assessee. (AY. 2003-04 to 2007-08)
Cholamandalam Ms General Insurance Company Ltd v. ACIT. (2018) 170 DTR 22 / 195 TTJ 166 (Chennai) (Trib.)

S. 44 : Insurance business – The profit disclosed in the shareholder’s profit and loss account (Form A-PL) is the profit derived from life Insurance business for computing the insurance business income and also on the principle of consistency. [S. 115JB]
The Tribunal held that The profit disclosed in the shareholder’s profit and loss account (Form A-PL) is the profit derived from life Insurance business for computing the insurance business income and also on the principle of consistency. (AY. 2010 – 2011)
Max New York Life Insurance Co. Ltd. v. Dy. CIT (2018) 191 TTJ 897 / 171 DTR 209 (Delhi)(Trib.)

S. 44 : Insurance business-Bonus declared for policy holders, it became a part of ascertained liability and, thus, same could not be treated as a part of actuarial surplus being liable to tax.
During assessment, the AO made enhancement to the taxable income by treating the amount declared and allocated as bonus for policyholders as part of the actuarial surplus being liable to tax u/S. 44 read with rule 2 of the First Schedule of the Act. On appeal Tribunal held that the assessee, declared bonus for policy holders, it became a part of ascertained liability and same could not be treated as a part of actuarial surplus being liable to tax u/S. 44 r. w. rule 2 of First Schedule to Act. (AY. 2010 – 2011)
Max New York Life Insurance Co. Ltd. v. Dy. CIT (2018) 191 TTJ 897 / 171 DTR 209 (Delhi)(Trib.)

S. 44 : Insurance business-Funds for Future Appropriation (FFA) represents provision of definite and ascertained liability, same cannot be considered as part of actuarial surplus being liable to tax
During assessment, AO made addition to by considering the amount appropriated as Funds for Future Appropriation (‘FFA’) as part of the actuarial surplus being liable to tax u/S. 44, read with rule 2 of the First Schedule of the Act. Tribunal held that in case of insurance business, Funds for Future Appropriation (FFA) represents provision of definite and ascertained liability and therefore same cannot be considered as part of actuarial surplus being liable to tax u/S. 44, read with rule 2 of First Schedule of Act. (AY. 2010 – 2011)
Max New York Life Insurance Co. Ltd. v. Dy. CIT (2018) 191 TTJ 897/ 171 DTR 209 (Delhi)(Trib.)

S. 44 : Insurance business-While computing profit and gains from an insurance company enhancement made by revenue in respect of provision for doubtful debts in shareholders profit and loss account, is to be deleted.
The AO made addition to assessee’s income for the provision for doubtful debts in shareholders’ profit and loss account. Tribunal held that S. 44 debars department to apply provisions of S. 28 to 43B while computing profit and gains from an insurance company therefore enhancement made in respect of provision for doubtful debts in shareholders profit and loss account is deleted. (AY. 2010 – 2011)
Max New York Life Insurance Co. Ltd. v. Dy. CIT (2018) 191 TTJ 897/ 171 DTR 209 (Delhi)(Trib.)

S. 44 : Insurance business – Insurance company is entitle o exemption u/s 10(34), however S. 14A cannot be invoked to disallow the expenditure. [S. 10(34), 14A]
A specific exception to applicability of S. 28 to S. 43B in insurance business, purpose therefore though insurance company is entitle to exemption u/s 10(34), however S. 14A cannot be invoked to disallow the expenditure. (AY. 2010 – 2011)
Max New York Life Insurance Co. Ltd. v. Dy. CIT (2018) 191 TTJ 897/ 171 DTR 209 (Delhi)(Trib.)

S. 44AD : Civil construction – Computation –Even while passing order u/s 144 the AO cannot go beyond the provision- Addition on account of interest and VAT payable is held to be not valid.[S. 144 154]
Tribunal held that once the return is computed on presumptive basis no further additions are called for in accordance to the provisions of S. 28 to 43C of the Act. Accordingly addition made on account of interest and VAT was deleted.(AY.2011-12)
Simranpal Singh v. ITO (218)167 DTR 337 / 194 TTJ 380 (Chd) (Trib.)

S. 44B : Shipping business-Non-residents – Inland Haulage Charges (IHC)- Income derived from operation of ship in international traffic-Not taxable in India-DTAA-India-France [Art.9]
Allowing the appeal of the assessee the Tribunal held that ; Inland Haulage Charges (IHC) being part of income derived from operation of ship in international traffic is exempt under article 9 of India-France DTAA; hence, not taxable in India.(AY.2013-14)
Delmas S. A.S. v. DCIT (2018) 171 ITD 373 /(2019) 197 TTJ 1 (UO)/ 67 ITR 44 (SN)(Mum.) (Trib.)

S. 44BB : Mineral oils – Computation-Non-residents—The activity of hiring Ships by the user for transporting men/machines to locations where it was doing exploration/production of mineral oil is directly and closely related with ‘services ‘rendered by plant and machinery and the income arising out of such activities has to be assessed u/S. section 44BB and not u/s. 44B of the Act-Amount of service tax being in nature of statutory payment could not be included in gross receipts for the purpose of computing presumptive income of asseessee u/s. 44BB .[S. 44B]
Dismissing the appeal of the assee the Tribunal held thatThe activity of hiring Ships by the user for transporting men/machines to locations where it was doing exploration/production of mineral oil is directly and closely related with ‘services’ rendered by plant and machinery and the income arising out of such activities has to be assessed u/s. section 44BB and not u/s. 44B of the Act. Amount of service tax being in nature of statutory payment could not be included in gross receipts for the purpose of computing presumptive income of asseessee u/s 44BB.(AY.2008-09, 2009-10, 2010-11)
Swiwar Offshore Pte. Ltd. v. Add. CIT (IT) (2018) 167 DTR 341/ 193 TTJ 951 (Mum.) (Trib.)

S. 44BB : Mineral oils – Computation-imparting any services in relation to exploration of mineral oil then royalties/FTS would be taxable under S. 44BB of the Act-Specific provision prevail over other provisions dealing with royalties and FTS.[S. 9(1)(vi), 9(1) (vii), 44DA, 115A]
Dismissing the appeal of the revenue the Tribunal held that ;where assessee is imparting any services in relation to exploration of mineral oil then royalties/FTS would be taxable under S 44BB. S 44BB being specific provisions in relation to specific services, it would prevail over other provisions dealing with royalties/FTS. (AY.2011-12)
DIT v. RPS Energy Pty Ltd. (2018) 170 ITD 468 (Delhi) (Trib.)

S. 44BB : Mineral oils – Computation – Income deemed to accrue or arise in India-Royalties and fees for technical services-Specific provision is applicable and provision of S. 44DA is not applicable-Article 12 of OECD Model Convention. [S.9(1)(vii), 44DA]
Allowing the appeal of the assesee, the Tribunal held that; consideration for provision of comprehensive cementing services in respect of explonatory and development wells planned to be drilled through equipment, material and personnel will qualify for exclusion from fee for technical services under Explanation 2 to section 9(1)(vii), and, in such a case, provisions of section 44BB being more specific, shall be applicable and provisions of section 44DA are not applicable. (AY. 2012-13)
National Oil Well Maintenance Company. v. DCIT IT (2018) 168 ITD 385(Jaipur) (Trib.)

S. 44BB : Mineral oils – Computation-Consideration received under contract is not fees for technical fees or royalty-Consideration received was held to be taxable as business income – DTAA-India United Arab Emirates-Duration of operation of less than 120 days is not material. [S.9(1) (vi), 9(1)(vii), Art.5(1),12.]
AAR held that; Consideration received under contract is not fees for technical fees or royalty. Consideration received was held to be taxable as business income. Duration of operation of less than 120 days is not material. The income arising from the permanent establishment shall be subject to tax in India as business income of the applicant. That the income derived by the applicant from its permanent establishment would be computed in accordance with the provisions of S. 44BB of the Act. (AAR No. 1295 of 2012 dt. 28-03-2018)
Seabird Exploration Fz Llc, In Re (2018) 403 ITR 82/302 CTR 19 / 165 DTR 33 (AAR)

S. 44BBB : Foreign companies-Civil construction – Presumptive taxation-Percentage completion method-Rejection of books account and assessment at presumptive rate of tax was held to be not justified [S. 44AA(2)]
Dismissing the appeal of the revenue the Court held that; Rejection of books account and assessment at presumptive rate of tax was held to be not justified.
CIT v. Shandong Tiejun Electric Power Engineering Co. Ltd. (2018) 400 ITR 371 (Guj) (HC)

S. 44BBB : Foreign companies-Civil construction-Turnkey power projects-Books of account maintained – Applicability of presumptive taxation cannot be thrust upon the assessee.[S. 44AA, 44AB, 44BBB,145 (3).]
Dismissing the appeal of the revenue the Tribunal held that when assessee maintained proper books of accounts audited u/s. 44AA and 44AB, tax isto be levied in conformity of harmonious reading
of S. 2(45), 4, 5 rwss 28 to 43A by way of regular assessment like any other Indian company.AO cannot thrust upon the assessee applicability of presumptive taxation. (AY.2009-10)
ADIT(IT) v. Shandong Tiejun Electric Power Engineering Co. Ltd. (2018) 193 TTJ 483 (Ahd) (Trib.)

S. 44C : Non-residents-Head office expenditure – salary paid to expatriates who were stationed in India working exclusively for the business operations of the Indian PE of the assessee – Held allowance and that provision of S. 44C is not applicable.
The Tribunal held that salary paid to expatriates who were stationed in India working exclusively for the business operations of the Indian PE of the assessee, was allowable as business expenditure Bang. incurred wholly and exclusively for the Indian branch. It also held that no part of these expenses could be allocated to other branches. Accordingly, it was held that section 44C was not applicable.
Dy. DIT (IT) v. Bank of Tokyo-Mitsubishi, UFG Ltd. (2018) 61 ITR 272 (Delhi)(Trib.)

S. 44C : Non-residents-Head office expenditure-A non-resident assessee is entitled to claim deduction of an amount equal to 5% of the adjusted total income as expenditure in the nature of Head Office (HO) Expenses. The fact that the expenses are not debited in the Profit & loss account or the books of account is irrelevant. The entries in the books of account are not conclusive.[S. 145]
Allowing the appeal of the assessee the Tribunal held that anon-resident assessee is entitled to claim deduction of an amount equal to 5% of the adjusted total income as expenditure in the nature of Head Office (HO) ExpenseS. The fact that the expenses are not debited in the Profit & loss account or the books of account is irrelevant. The entries in the books of account are not conclusive. (ITA Nos. 6561 & 6562/Del/2016, dt. 31. 05. 2018)(AY. 2012-12, 2013-14)
Ernst & Young Ltd. v. ACIT (IT)(2018) 94 taxmann.com 227 (Mum.) (Trib.)www.itatonline.org

S.44C : Non-residents-Head office expenditure-Salary paid to expatriates stationed in India working exclusively for business operations In India, provision was held to be not applicable.
Allowing the appeal of the assessee the Tribunal held that ;salary paid to expatriates stationed in India working exclusively for business operations In India and Indian tax was paid by head office expenses being wholly and exclusively by Indian Branch, S. 44C was held to be not applicable That the Dispute Resolution Panel allowed deduction on account of head office expenditure under section 44C. Since the facts were identical to that the Department could not deviate from its own stand in subsequent years. (AY. 2005-06)
Bank of Tokyo-Mitsubishi, UFJ Ltd. v. DCIT (2018) 61 ITR 272 (Delhi) (Trib.)

S. 45 : Capital gains –Long term capital gains-Firm-Retirement-Amount received by retiring partner as good will is held to be not taxable as capital gains.
Dismissing the appeal of the revenue the Court held that the amount received by retiring partner on account of good will is held to be not taxable . Followed CIT v. Riyaz A. Sheik (2014) 221 Taxman 118 (Bom.) (HC) .(AY.2009-10)
PCIT v. R.F. Nangrani (HUF)(2018) 167 DTR 28 / 304 CTR 12 (Bom.)(HC)

S. 45 : Capital gains – Business income-Merely holding shares for a short period will not convert capital gain into business income.This would be contrary to be legislative mandate which itself provides that investment held for less than 12 months is to be termed as short term capital gain-If the assessee has two portfolios, one for “Investment” and other for “Trading” and if the investments are out of own funds and not borrowed funds, the gains have to be assessed as short term capital gains.[S. 28 (i)]
Dismissing the appeal of the revenue the Court held that, merely holding shares for a short period will not convert capital gain into business income. This would be contrary to be legislative mandate which itself provides that investment held for less than 12 months is to be termed as short term capital gain. If the assessee has two portfolios, one for “Investment” and other for “Trading” and if the investments are out of own funds and not borrowed funds, the gains have to be assessed as short term capital gains. (CBDT Circular No.4 of 2007 dt. 15-06-2007 (2007) 291 ITR 384 (St) CIT v. Gopal Purohit (2011) 336 ITR 287 (Bom.) SLP of department rejected (2011) 334 ITR 308 (St) ) (AY.2008 -09) (ITA No. 485 of 2016, dt. 26.11.2018)
CIT v. Viksit Engineering Ltd(2018) 100 taxmann.com 436(Bom.)(HC), www.itatonline.org

S. 45 : Capital gains-Transfer- Possession was handed over –Subsequent termination of contract by mutual consent and returned back the sale consideration received-Liable to capital gains tax in the year of handing over of possession of property .[S. 2(47)(v), Transfer of Property Act,1929, S. 53A,Registation Act 1908, 17(1A)]
Assessee had entered into an agreement to sell a property to MAPL. Though the possession was handed over the Capital gain was not offered for taxation on the ground that, subsequent termination of contract by mutual consent and returned back the sale consideration received. Tribunal deleted the addition. On appeal by the Revenue the Tribunal held that assessee is Liable to capital gains tax in the year of handing over of possession of property. (Referred Balbir Singh Maini (2017) 398 ITR 531 (SC)).(AY. 1999-2000)
CIT v. Harbour View (2018) 409 ITR 599 / (2019) 261 Taxman 330 (Ker.)(HC)

S. 45 : Capital gains-Business income-Sale of shares-Only 10 scripts-Assessable as capital gains.[S. 28(i)]
Dismissing the appeal of the revenue the Court held that ; Tribunal gave finding that only ten scrips were traded and it was not a case of frequent buying and selling to make quick money. Accordingly the income is assessable as capital gains and not as business income. (AY.2008-09)
CIT v. Hiren Dand v. CIT (2018)259 Taxman 82/ 98 taxmann.com 427 (Bom.)(HC)
Editorial : SLP of revenue is dismissed ;CIT v. Hiren Dand (2018] 259 Taxman 81 (SC)

S. 45 : Capital gains – Transfer-Vendor in possession till total consideration is paid-Transfer is not complete though the agreement is registered.[S. 2(47)]
Dismissing the appeal of the revenue the Court held that the sale or transfer was not complete on the date of the execution of the agreement. Merely because it was registered, it did not partake of the character of a conveyance or a sale deed automatically. Possession was not handed over but was to be handed over on compliance with certain obligations by the vendor. The total consideration was received on June 16, 2011 and the vendor was in possession of the premises from February to June 2011 and carried on its business from those premises up to April 2011. Accordingly not liable to capital gains tax during the relevant year. (AY.2011-12)
PCIT v. Talwalkars Fitness Club. (2018) 409 ITR 37 (Bom.)(HC)

S. 45 : Capital gains – Dissolution of firm-Land was introduced as capital in one of the partner –Revaluation-Land was sold before dissolution-Capital gains is assessable in the hands of firm. [S. 45(4)]
Dismissing the appeal of the assessee the Court held that ; the contention that it was only a family arrangement and the land and building were offered on licence for the business of the firm, could not be accepted. The clear terms in the partnership deed spoke otherwise. The sale effected was of the land and building. The partnership was dissolved only on December 31, 2006, that too by volition of the partners and not evidenced by any deed. The sale deed of December 20, 2006 was of a sale of the land and building to a third party. Hence, the sale was prior to the dissolution of the partnership, as claimed by the parties. Hence, the property having been brought into the common stock of the firm, short-term capital gains were assessable on its sale, when the partnership was subsisting. Even if the partner had been allotted the share, prior to dissolution, as was revealed from the facts, capital gains would arise to the firm. The firm was assessable on the capital gains.
Ahammedkutty v. ITO (2018) 405 ITR 239 (Ker)(HC)

S. 45 : Capital gains-Transfer-Development agreement not registered-General Power of attorney-Possession of property was given to the developer for specific purposes to develop the property-The development agreement clearly provides that nothing contained in the agreement shall be construed as grant of possession in part performance of the agreement under S. 2(47)(v), and 2(47)(vi) of the Act. Accordingly addition of Rs 55 crores as full value of consideration for computing the capital gains is rightly deleted by the Tribunal – Taxability will be examined in the year in which the transfer of land as stock in trade has taken place and also value at that point of time will be examined independently.[S. 2(47)(v), 2(47)(vi) 45(2)]
Dismissing the appeal of the revenue the Court held that, possession of property was given to the developer for specific purposes to develop the property. The amount received by the Godrej Properties Ltd shown as deposit.As per the agreement makes it clear that Godrej Properties Ltd has been granted license to enter the upon and develop the property and the possession of the land continued with the assessee. Further the development agreement clearly provides that nothing contained in the agreement shall be construed as grant of possession in part performance of the agreement under S. 2(47)(v), and 2(47)(vi) of the Act. Accordingly addition of Rs 55 crores as full value of consideration for computing the capital gains is rightly deleted by the Tribunal. However taxability will be examined in the year in which the transfer of land as stock in trade has taken place and also value at that point of time will be examined independently.(AY.2008-09) (Note.Fardeen Khan L/H Late Firoz Khan v ACIT(2015) 169 TTJ 398 (Mum.) (Trib.) is affirmed. Chaturbhuj Kapadia v.CIT (2003) 260 ITR 491 (Bom.) (HC) is dintigushed. Ratio in CIT v. Balbir Singh maini (2017) 398 ITR 531 (SC) is followed.)
PCIT v. Fardeen Khan L/H Late Firoz Khan (2018) 169 DTR 209/ 304 CTR 299 /258 Taxman 348 /(2019) 411 ITR 533 (Bom.)(HC)
Editorial : ?

S. 45 : Capital gains-Individual or HUF-Sale deed was executed in individual capacity and PAN of the individual-Sale consideration was also not deposited in the HUF’ Bank account-Assessing the capital gains in the assessment of the assessee is held to be justified.[S. 4]
Dismissing the appeal of the assessee the Court held that ; Tribunal held that sale deed was executed by assessee in his individual capacity and not as ‘karta’ of HUF. Moreover, in sale deed, PAN of assessee in his individual capacity had been given and not PAN of HUF. It was also found that in earlier years, property in question had not been shown as owned by HUF and even sale consideration had also not been deposited in HUF’s bank account. Accordingly the order of Tribunal is affirmed. (AY. 2009-10)
Janak Kanakbhai Trivedi v. ITO (2018) 257 Taxman 367 (Guj.)(HC)

S. 45 : Capital gains –Business income – Investment in shares-Intention of assessee at time of purchase of shares is paramount-Gain arising on sale of shares which was held as investment is assessable as capital gain and not as business income.[S. 28(i)]
Dismissing the appeal of the revenue the Court held that ; intention of assessee at time of purchase of shares is paramount; if assessee had clear intention of being an investor and held shares by way of investment, assessee is investor and, any gain arising out of transfer of shares should be treated as ‘capital gains’ and not ‘business income’.(AY.2005-06)
PCIT v. Bhanuprasad D. Trivedi (HUF)(2017) 87 Taxmann.com 137 (Guj) (HC)
Editorial : SLP of revenue is dismissed,PCIT v. Bhanuprasad D. Trivedi (HUF) (2018) 256 Taxman 66 / 256 Taxman 292 (SC)

S. 45 : Capital gains —Sale of agricultural Land — Land should be agricultural at the time of sale — Purchase of agricultural land for building factory and subsequent sale as residential plots — Profits is not exempt from capital gains tax .[S. 2(14)(iii)]
Dismissing the appeal of the assessee the Court held that ; though the property was once an agricultural land, its acquisition was for non-agricultural purposes, the assessee did not carry on any agricultural activity in the land and at the relevant date, viz., the date of sale, the land had ceased to be agricultural. The assessee did not have a case that the land was not treated as stock-in-trade. Its business also included real estate development. Therefore, the Tribunal was justified in its conclusion that there was transfer of the asset. The gains from the transfer were not exempt from capital gains tax. (AY. 2007-08 to 2010-11)
Synthite Industries Ltd. v. CIT (2018) 404 ITR 605 (Ker) (HC)

S. 45 : Capital gains-Business – Income earned on sale of floor of building was held to be assessable as capital gains and not as business income-The assessee was not a property dealer but a member of the Indian revenue Service, working with the department itself. Only a portion of the property was sold. Profit on sale of land is held to be assessable as capital gains .[S. 2(13)]

Dismissing the appeal of the revenue the Court held that; Income earned on sale of floor of building was held to be assessable as capital gains and not as business income.Major portion of the developed building was to remain with the assessee after construction. Sale of one unit therefrom per se would not have constituted an adventure in the nature of trade. There is substantial gap in time between the day of acquisition of the asset and its development and part-sale. The assessee was not a property dealer but a member of the Indian revenue Service, working with the department itself. Only a portion of the property was sold. Ratio in G. Venkataswami Naidu & Co. v. CIT [1959] 35 ITR 549 (SC) has followed. (AY. 2003-04)
CIT v. Surjeet Kaur (2018) 254 Taxman 214/ 166 DTR 350 / ( 2019) 308 CTR 847 (Cal.)(HC)

S. 45 : Capital gains — Shares purchased was pledged with bank-Actual date of transfer is when shares were delivered by bank to entity in subsequent assessment year. [S. 48]

Held that the Tribunal was correct in holding that the shares owned by the assessee were not transferred in the assessment year 1998-99, but were transferred on May 5, 1998, in the assessment year 1999-2000, when the shares were delivered by the bank to the purchasers. (AY. 1998-99, 1999-2000)
Arjun Malhotra v. CIT (2018) 403 ITR 354 /166 DTR 235 / 255 Taxman 399/ 304 CTR 454 (Delhi) (HC)

S. 45 : Capital gains – Agricultural land-Mere categorization of land as Nilam (Paddy land) in revenue records is not sufficient to treat land as agricultural land-Land not being used for agricultural purposes assessable as capital gains. [S. 2(14)(iii)]
On appeal, the High Court, upheld Tribunal’s finding that Assessee is not an agriculturist but a proprietor of Management Institute and there is no evidence to indicate that the land has been put to agricultural use and hence gains on sale of agricultural land treated as taxable gainS. Mere categorization of land as Nilam (Paddy land) in revenue records is not sufficient to treat land as agricultural land. (AY. 2008-2009)

Sreedhar Asok Kumar. v. CIT (2018) 253 Taxman 204 (Ker)(HC).

S. 45 : Capital gains — Business income – Profit on sale of shares was held to be assessable as capital gains and not as business income.[S. 28(i)]
Dismissing the appeal of the revenue the Court held that; Profit on sale of shares was held to be assessable as capital gains and not as business income (AY. 2008-09)
CIT v. Tejas J. Amin (2018) 402 ITR 431 (Guj) (HC)

S. 45 : Capital gains-Business income – Profit earned on sale of Shares or Units of Mutual Funds was held to be assessable as capital gains. [S. 28(i)]

Dismissing the appeal of the revenue the Court held that; The five tests whether the income bears the character of business income or capital gains are : (1) whether the company or concern is authorised in its memorandum of constituting documents to deal with shares; (2) whether the entity had shown the shares under the head “investment”; (3) whether the assessee utilised its own funds and had not shown borrowed funds for the purpose of acquiring shares; (4) the nature of infrastructure, whether it is small represents investment activity rather than the trading activity that would require larger infrastructure; (5) whether the behaviour of the assessee is such as to disclose income/earning has objective, i. e., “obtaining dividend” rather than trading. Applying the above tests the Court held that; Profit earned on sale of Shares or Units of Mutual Funds was held to be assessable as capital gains. (AY. 2005-06)
CIT v. Pavitra Commercial Ltd. (2018) 402 ITR 66 (Delhi) (HC)

S. 45 : Capital gains-Search – Additions cannot be made on the basis of statement of third parties, when no incriminating documents were found in the course of search action on the assesse. [S. 132(4), 158BA]

Dismissing the appeal of the revenue the Court held that; the Tribunal held that the search action had not resulted in recovery of incriminating evidence or undisclosed investment in any form including deposits in bank accounts and that an unsigned agreement which was disowned by both parties, not supported by any evidence could not be relied upon to make addition. It further held that an addition could not be made solely on the basis of surrender made during the course of search or survey in the absence of corroborative evidence in support and deleted the addition.
CIT v. Prabhati Lal Saini. (2018) 401 ITR 228 (Raj) (HC)

S. 45 : Capital gains — Transfer — Power of attorney was executed in the year 1993-94 but actual possession was given in the year AY. 2003-04, capital gain was held to be taxable in the year of handing over of possession. [S. 27(v), Transfer of Property Act, 1882, S. 53A]
Dismissing the appeal of the assesse the Court held that; the agreement dated April 30, 2001 referred to some oral agreement and powers of attorney executed between the assessees and the developer, but the fact remained that the agreement dated April 30, 2001 recorded that the assessees were the owners and in possession of the property. The power of attorney of the year 1993-94 did not disclose that possession was given to the developer in pursuance of the power of attorney. Moreover, the assessees in their reply to the notice stated that the assessees had not given possession to the developer but had given only access to enable him to do certain jobs on their behalf. It had also been stated in the reply that the assessees continued to be full owner of the property and there was no transfer. Therefore, the transfer within the meaning of section 2(47)(v) had taken place only in the assessment year 2002-03, since, by agreement dated April 30, 2001, actual possession was given to the developer and it was not given on the basis of the powers of attorney and oral agreements entered into between the assessees and the developer in the year 1993-94. (AY. 2002-03)

Dr. Joao Souza Proenca. v. ITO (2018) 401 ITR 105/ 253 Taxman 275 / 301 CTR 653 /164 DTR 80 (Bom.) (HC)
Sara Proenca (Mrs) v. ITO (2018) 401 ITR 105/ 253 Taxman 275/ 301 CTR 653 /164 DTR 80 (Bom.) (HC)

S. 45 : Capital gains-Penny stocks-Merely because of , appreciation in value the capital gains cannot be assessed as income from undisclosed sources.[S. 69]
Dismissing the appeal of the revenue the Court held that; the fact that the appreciation in the value of the shares is high does not justify the transactions being treated as fictitious and the capital gains being assessed as undisclosed income if (a) the shares are traded on the Stock Exchange, (b) the payments and receipts are routed through the bank, (c) there is no evidence to indicate it is a closely held company and (d) the trading on the Stock Exchange was manipulated in any manner. (AY. 2008-09)
PCIT v. Prem Pal Gandhi (2018) 401 ITR 253 / 94 taxmann.com 156 (P & H) (HC)
S. 45 : Capital gains-Suspicious transaction in shares-Penny stocks-Chain of transactions have been proved by evidence such as contract notes, DEMAT account, and payments through banking channel-Addition cannot be made as cash credits.[S. 68]
Dismissing the appeal of the revenue the Court held that,it was found that Chain of transactions have been proved by evidence such as contract notes, DEMAT account, and payments through banking channel. Order of the Tribunal is affirmed.(ITA No. 22 of 2009 dt. 29-04 2009)
CIT v. Bhagwati Prasad Agarwal(Cal) (HC) (www.itatonline.org)

S. 45 : Capital gains-Share of sale consideration of agricultural land-Relinquishment of shares –Family arrangement- Matter remanded to verification of shares of each members and decide in accordance with law.

AO assessed capital gain arising from sale of agricultural land in hands of Smt. Dapu Devi and income on account of deposits made in bank accounts of sons and daughter-in-law of Smt. Dapu Devi .CIT(A) confirmed order of AO. On appeal the Tribunal held that the AO and CIT (A) have not properly appreciate the fact accordingly Matter remanded to verification of shares of each members and decide accordance with law.(AY2006-07)
Sushila Devi Meena v. ITO (2018) 194TTJ 68 (UO) (Jaipur) (Trib.)

S. 45 : Capital gains—Transfer—Development agreement-Under a development agreement, assessee authorizes developer for construction of apartments, it can be said that assessee has handed over possession of its plot to developer and, thus, the same constitutes transfer and same is taxable as capital gain in year in which agreement was entered into-Reassessment is held to be valid – Matter remanded .[S. 2(47), 54F 147, 148]
Assessee did hand over possession, therefore, stand of AO that capital gains did arise during year under consideration as agreement was entered on 12-05-2008 was justified. Accordingly, issue of bringing to tax capital gains during the year was to be upheld. Whether land was short term capital asset or long term capital asset and value for considering capital gains computation was restored to file of AO for fresh examination. In case property was held to be long term capital asset, assessee may be eligible for consequent benefit u/s 54/54F, which should be considered on facts of case.Matter remanded.(AY.2009-10)
K. Vijaya Lakshmi v. ACIT (2018) 167 DTR 270/ 169 ITD 597/ 195 TTJ 114 (SMC) (Hyd) (Trib.)
Sireesha N. (Smt) v ACIT (208) 167 DTR 270/169 ITD 597/195 TTJ 114 (Hyd) (Trib.)

S. 45 : Capital gains- Gift -Notional addition- Transfer of equity shares to sister concern-Genuineness and validity of transaction-Matter remanded. [S. 2(47), 56(2) (viia)]
Assessee transferred major equity share of JSPL without any consideration to its sister concern, namely, Giebe.AO held that by transferring shares of JSPL without any consideration, assessee only avoided payment of taxes and, in fact, it was a sham transaction arranged by assessee to avoid taxes and transfer of shares to Giebe was a transfer within meaning of section 2(47) and, taxed it under section 45. Tribunal held that though the AO A had rightly raised question regarding reality and genuineness of transaction, in addition to its validity, since assessee had not demonstrated by way of documentary evidence genuineness and validity of transaction, assessee was directed to provide all necessary and relevant information/details to assist Assessing Officer, in determining correct nature of alleged transaction as per law. (AY. 2014-15)
Gagan Infraenergy Ltd. v. Dy. CIT (2018) 65 ITR 514 (Delhi)(Trib.)www.itatonline.org

S. 45 : Capital gains — Business income – Investment in shares-Consistently valuing investment at cost-Profits on sale of sale of investment is assessable as capital gains.[S. 28(i)]
Allowing the appeal of the assessee the Tribunal held that, whether income is to be assessed under the head “ capital gains ” or “income from business” the assessee should demonstrate the intention and treatment in that books of account, whether he holds these shares and securities as an “investment” or as a “stock-in-trade”. The intention can be judged by the entries made by the assessee in his books of account, i. e., the treatment in his books of account of the assessee. The motive of the assessee was to earn the dividend not to trade in shares and the motive was reflected with the intention of the assessee. The board of directors of the assessee had passed the resolution stating that the motive of the assessee was to keep the shares as an investment not as stock-in-trade. The income of the assessee should be assessed under the head “capital gains” instead of “business income”.(AY. 2010-11)
DPJ Viniyog P. Ltd. v. DCIT (2018) 65 ITR 74 (SN)(Kol.) (Trib.)
S. 45 : Capital gains-Business income – Investment in shares-Earlier years the transactions of sale of shares were accepted as capital gains- Current year short-term capital gains arising from share transaction could not be assessed as business income. [S. 28(i)]
Tribunal held that volume of transactions in current year matched with earlier years, and earlier years the transactions of sale of shares were accepted as capital gains. Current year short-term capital gains arising from share transaction could not be assessed as business income. (AY.2008-09)
Satish Madanlal Gupta v. ACIT (2018) 173 ITD 169 (Pune) (Trib.)
S. 45 : Capital gains-Transfer of development right-Handing over possession of Land-Unregistered agreement-No valid transfer – Not liable to capital gains tax .[S. 2(47(v)]
Following the decision in assesses own case own case for assessment year 2008-09, i.e., Saamag Developers (P.) Ltd. v. ACIT(2018) 168 ITD 649 (Delhi) (Trib.) wherein the Tribunal held that when an agreement entered into between assessee and its group company was not registered, there was no valid transfer in terms of section 2(47)(v) and, accordingly, no liability of tax could be fastened upon assessee merely on basis that possession of land was handed over by assessee to Sare Saamag Reality Pvt. Ltd (SSRPL).(AY.2010-11)
Saamag Developers (P.) Ltd. v. ACIT (2018) 173 ITD 350 (Delhi) (Trib.)

S. 45 : Capital gains — Business income — Sale of shares-Principle of consistency-Preceding and subsequent years department, accepting income on account of sale of investments as short term capital gains-Sale consideration is assessable as capital gains.[S. 28(i)]
Dismissing the appeal of the revenue the Tribunal held that,preceding and subsequent years department, accepting income on account of sale of investments as short term capital gainS. Sale consideration is assessable as capital gains.Circular No. 6 of 2016 dt.29-03-206 (2016) 382 ITR 14 (St) FollowedRadhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) (AY.2010-11)
ITO v. Divyam TIE-UP Pvt. Ltd. (2018) 65 ITR 75(SN) (Kol.) (Trib.)
S. 45 : Capital gains — Business income —Shares and securities-Conversion of stock-in-trade into investment – Held to be valid-Gains assessable as capital gains.[S. 28(i)]
Allowing the appeal the Tribunal held that, AO has not brought any justifiable reason to reject the claim of the assessee except assuming that it was a colourable device. After the conversion of stock-in-trade into investment no share was held as stock-in-trade. Therefore the claim of the assessee could not be rejected. Followed CIT v. Express Securities P.Ltd (2014) 364 ITR 488 (Delhi) (HC) (AY.2005-06)
M. P. Mehrotra (HUF) v. DCIT (2018) 65 ITR 71 (SN) (Delhi) (Trib.)

S. 45 : Capital gains-transfer Accrual-Development agreement-As per terms of development agreement with builder the assessee would not be paid any monetary consideration but would receive built-up residential area on completion of project-Capital gains cannot be taxed on accrual basis in the year of agreement.[S. 2(47) (v), 48]
Allowing the appeal of the assessee the Tribunal held that ; As per terms of development agreement with builder the assessee would not be paid any monetary consideration but would receive built-up residential area on completion of project.Capital gains cannot be taxed on accrual basis in the year of agreement.(AY. 2014-15)
Aarti Sanjay Kadam (Mrs.)v. ITO (2018) 172 ITD 362 (Mum.) (Trib.)

S. 45 : Capial gains-Penny Stocks-Assuming brokers may have done manipulation, assessee cannot be held liable when the entire transaction is done through banking channels duly recorded in Demat accounts with Govt depository and traded on stock exchange-Nothing on record to suggest assessee gave cash and purchased cheque from broker-(Sanjay Bimalchand Jain ITA No 18 of 2017) dt. 10-4-2017 (Bom.) HC) is distinguished). [S. 10(38).]
Dismissing the appeal of the revenue the Tribunal held that, Assuming brokers may have done manipulation, assessee cannot be held liable when the entire transaction is done through banking channels duly recorded in Demat accounts with Govt depository and traded on stock exchange Nothing on record to suggest assessee gave cash and purchased cheque from broker. (Sanjay Bimalchand Jain ITA No 18 of 2017) dt. 10-4-2017 (Bom.) HC) distinguished).(ITA. Nos. 93 to 99/RPR/2014, dt. 16.04.2018)(AY. 2004-05)

DCIT v. Rakesh Saraogi & Sons (HUF) (Raipur) (Trib), www.itatonline.org .
S. 45 : Capital gains-Cash credits-Share transaction-Bogus capital gains-Penny stocks-If the holding of shares is Demat account cannot be disputed then the transaction cannot be held as bogus.[S. 10(38), 68]

If the holding of shares is D-mat account cannot be disputed then the transaction cannot be held as bogus. The AO has also not disputed the sale of shares from the D-mat account of the assessee and the sale consideration was directly credited to the bank account of the assessee. Once the assessee produced all relevant evidence to substantiate the transaction of purchase, dematerialization and sale of shares then, in the absence of any contrary material brought on record the same cannot be held as bogus transaction merely on the basis of statement of one Anil Agrawal recorded by the Investigation Wing, Kolkata, wherein there is a general statement of providing bogus long term capital gain transaction to the clients without stating anything about the transaction of allotment of shares by the company to the assessee.(AY. 2013-14, 2014-15)
Ramprasad Agarwal v. ITO(2019) 174 ITD 286/ 68 ITR 74 (SN) (Mum.)(Trib.),www.itatonline.org
S. 45 : Capital gains-Salaries-Perquisite-Gains arising to an employee from sale of shares allotted under ESOP (Employees Stock Option Plan) by foreign parent company cannot be assessed as “salaries”- It is assessable as “capital gains”-. Fact that employer has shown the gains as “perquisite” in Form 16 is irrelevant.[S. 15, 17(2)(v)]
Allowing the appeal of the assessee the Tribunal held that ; Gains arising to an employee from sale of shares allotted under ESOP (Employees Stock Option Plan) by foreign parent company cannot be assessed as “salaries”. It is assessable as “capital gains”. Fact that employer has shown the gains as “perquisite” in Form 16 is irrelevant.(AY. 2011-12)
Dr. Muthian Sivthanu v. ACIT (2018) 173 ITD 585(Chennai)(Trib.),www,itatonline.org
S. 45 : Capital gains – Capital asset- ESOP options provide valuable right to the assessee to exercise and have allotment of shares-They are thus ‘capital asset’ held by the assessee from the date of grant- If the assessee transfers the option itself, the capital gains will have to be assessed as long-term capital gains,if the options have been held for more than three years.[S. (2(14),2(42A),45, 48]
Allowing the appeal of the assessee the Tribunal held that; ESOP options provide valuable right to the assessee to exercise and have allotment of shareS. They are thus ‘capital asset’ held by the assessee from the date of grant. If the assessee transfers the option itself, the capital gains will have to be assessed as long-term capital gains if the options have been held for more than three years .(AY. 2007-08)
N. R. Ravikrishnan v. ACIT (2018) 68 ITR 457/ (2019) 175 ITD 355/ 177 DTR 289(Bang.)(Trib.),www.itatonline.org
S. 45 : Capital gains- Transfer- Conversion of Cumulative preference shares(CCPS) into equity shares does not constitutes a “transfer” -Not laible to capital gains tax. [S. 2(47), 41(2), 45(4),48,55(2)(b)(v) (e)]

Tribunal held that conversion of Cumulative preference shares(CCPS) into equity shares does not constitutes a “transfer” hence not laible to capital gais tax . Referred ,Circular dated 12.05.1964., ITO v. Vijay M. Merchant (1986) 19 ITD 510 (Mum.) (Trib.) CIT v. Motors & General Stores Pvt. Ltd (1967) 66 ITR 692(SC), CIT v. Santosh L.Chowgule and ors (1993) 234 ITR 787 (Bom.) (HC), CIT v. Trustees of H.E.H. Nizam’s Second Supplimentary Family Trust (1976) 102 ITR 248 (AP) (HC).(AY. 2012-13)
Periar Trading Company Private Ltd. v. ITO(2018) 196 TTJ 989/(2019) 174 ITD 137/ 173 DTR 108(Mum.)(Trib.),www.itatonline.org
S. 45 : Capital gains-Long term capital gains on shares-Natural justice-Reliance by the AO on statements of third parties without giving the assessee an opportunity of cross-examination is a gross failure of the principles of natural justice and renders the assessment order a nullity [S. 10 (38),131, 143(3)]
Allowing the appeal of the assessee the Tribunal held that ; reliance by the AO on statements of third parties without giving the assessee an opportunity of cross-examination is a gross failure of the principles of natural justice and renders the assessment order a nullity.(ITA No. 4565/DEL/2018, dt. 26.11.2018) (AY. 2014-15)
Anubhav Jain v. ITO (Delhi)(Trib.),www.itatonline.org
Ashis Hain v. ITO (Delhi)(Trib.),www.itatonline.org
S. 45 : Capital gains –Long term capital gains from penny stocks-Tribunal held thatit cannot be inferred that the assessee has manipulated the share price merely because it moved up sharply-The AO has to produce material/evidence to show that the assessee/ brokers did price rigging/manipulation of shares-The AO must also show that the relevant evidence produced by the assessee in the form of bills, contract notes, demat statement, bank account etc to prove the genuineness of the transactions are false or fictitious or bogus.[S. 10(38), 68, 115BBE]

Allowing the appeal of the assessee the Tribunal held that long term capotal gains on pennay stocks cannot be assessed as cash credits or undisloced income. it cannot be inferred that the assessee has manipulated the share price merely because it moved up sharply-The AO has to produce material/evidence to show that the assessee/ brokers did price rigging/manipulation of shares-The AO must also show that the relevant evidence produced by the assessee in the form of bills, contract notes, demat statement, bank account etc to prove the genuineness of the transactions are false or fictitious or bogus. (ITA No. 457/Del/2018, dt. 05.11.2018)(AY. 2014-15)

Arun Kumar v. ACIT (Delhi)(Trib.),www.itatonline.org
Manoj Kumar v. ACIT (Delhi)(Trib.),www.itatonline.org
Nitasha Gupta v . ACIT (Delhi)(Trib.),www.itatonline.org

S. 45 : Capital gains – Business income-Trading in shares – Held, in earlier years the same was assessed as capital gains in scrutiny assessments – Held, period of holding and receipt of dividend were not decisive factors – Held, to be assessed as capital gains. [S. 28(i)]

It was held that the income from dealing in shares was assessed consistently as capital gains in scrutiny assessment. Further, the CIT(A) had given finding of fact on the frequency of the transactions. It was also held that period of holding and receipt of dividend were not decisive factorS. Accordingly, the income was held to be taxable as capital gains. (AY. 2008-09)
Eastman Industries Ltd. v. ACIT (2018) 63 ITR 181 (Delhi) (Trib.)

S. 45 : Capital gains-Land-On acquisition of land on which there was a hotel, part of compensation related to land would be subject to Long term capital gains and that on hotel building assessable as short term capital gains. [S. 54]
Allowing the appeal of the assessee the Tribunal held that, compensation received on acquisition of land is assessable as long term capital gains and on Hotel building as short term capital gains. (AY. 2008-09)
Het Ram Sharma. v. ITO (2018) 172 ITD 324 (Chd) (Trib.)

S. 45 : Capital gains-Business income-Co-owner –land as investment-One of the Co-0wner showing the land as stock in trade-Profit on sale of share is assessable as capital gains and not as business income.[S. 28(i),54F]
Dismissing the appeal of the revenue ; the Tribunal held that ; profit on sale of share is assessable as capital gains and not as business income, though the other Co-Owener showing the land as stock in trade in their books of account. Entitle to deduction u/s 54F of the Act.(AY.2006-07)
DCIT v. Arjun Puri. (2018) 66 ITR 33 / 172 ITD 29 (Delhi) (Trib.)

S. 45 : Capital gains- Suspicious transaction in shares-Penny stocks-Purchases of earlier years were not doubted – Shares were sold through DEMAT account-Addition cannot be made as cash credits-Burden is on revenue.[S. 68]
Dismissing the appeal of the revenue the Tribunal held that ; purchases of shares in earlier years were not doubted.Shares were sold through DEMAT account. Accordingly the addition cannot be made as cash creditS. Burden is on revenue to prove that the transaction is not genuine.(ITA No 4077/ Mum./2013 dt.22-03-2016 (AY.2006 07 & 2009-10))
DCIT v. Anil Kaniya (Mum.) (Trib.)www.itatonline.org
S. 45 : Capital gains- Suspicious transaction in shares-Penny stocks-Sale through Ahmedabad Stock exchange – Statement of Mukesh Choksi relied without furnishing the same to the assessee-Addition is held to be not valid.
Allowing the appeal of the assessee the Tribunal held that, sale of shares through Ahmedabad Stock exchange was not doubted. Addition based on the statement of Mr Mukesh Choksi without giving copy and opportunity of cross examination addition cannot be made as cash credits. (ITA No. 5185 /Mum./ 2012 dt 05.10.2016,AY. 2004-05)
Sudhanshu Suresh Pandhare v. ITO (Mum.)(Trib.) (www.itatonline.org)
S. 45 : Capital gains-Suspicious transaction in shares-Penny stocks
-Copies of the physical share certificates DEMAT account statement confirmation of the transactions of buying and selling of the said shares by the respective stock brokers, receipt of sale proceeds through banking channels, etc-Addition cannot be made as cash credits.[S. 68]
Allowing the appeal of the assessee the Tribunal held that considering the evidences produces such as, Copies of the physical share certificates DEMAT account statement confirmation of the transactions of buying and selling of the said shares by the respective stock brokers, receipt of sale proceeds through banking channels, etc-Addition cannot be made as cash credits.(ITA No. 3803/Mum./2011 dt. 27-04 2016 )
Late Roshan Raja Through Legal v ITO (Mum.) (Trib.) www.itatonline.org
S. 45 : Capital gains-Suspicious transaction in shares-Penny stocks-No defect in the papers support of the transactions, the suspension of the broker by SEBI will not hold the transaction invalid-Addition as cash credits is held to be not valid.[S. 68]
Allowing the appeal of the assessee the Tribunal held that,when no defect in the papers support of the transactions, the suspension of the broker by SEBI will not hold the transaction invalid. Addition as cash credits is held to be not valid (ITA No. 935/Kol/2012 dt. 12/08/2016)
Pavillion Commercial Pvt Ltd. v. ITO (Kol) (Trib.) www.itatonline.org

S. 45 : Capital gains-Business income-Share investment-All transactions were delivery based, income arising from such investment was to be treated as capital gain when all earlier years revenue assessed the gains as capital gains.[S. 28(i)]
Allowing the appeal of the assessee the Tribunal held that ; All transactions were delivery based, income arising from such investment was to be treated as capital gains.Tribunal also held that when all earlier years revenue assessed the gains as capital gains for the relevant year the AO cannot take different view without showing reason for doing the same.(AY.2007-08)
Second Leasing (P.) Ltd. v. ACIT (2018) 171 ITD 508 / 171 DTR 97 /196 TTJ 117(Delhi) (Trib.)

S. 45 : Capital gains-Business income-Investment in shares-Just because assessee has purchased and sold number of shares does not by itself make it business income when the AO accepted the scripts as investment in the balance sheet and books of account are accepted. [S. 28(i)]

Tribunal held that mere fact that dividend received being nominal, cannot be the deciding factor as to whether income from sale of investment is to be assessed as business income or capital gain, particularly when long term capital gain is accepted by the AO. In respect of sale of shares of LML Ltd and Oswal Chemicals, it was observed that sale was made on various dates as the sale order sometimes took days to be fully executed. It is not the case that on some days sales are being purchased and sold. It was held that just because assessee has purchased and sold number of shares does not by itself make it business income when the AO accepted the scripts as investment in the balance sheet and books of account are accepted. (AY. 2005-06, 2006-07)
ACIT v. Bulls and Bears Portfolios Ltd. (2018) 62 ITR 685 (Delhi)(Trib.)

S. 45 : Capital gains-For the purpose of computation of capital gains, AO could not substitute full value of sales consideration with any notional or hypothetical value.[S. 48]
On appeal to Tribunal, it was held that the provisions of u/S. 45 of the Act make reference to the full value of consideration and it is not open to the AO to substitute the value of consideration by any hypothetical or notional value unless there is a case of understatement and non-disclosure of full value of consideration. Thus, Tribunal upheld the order of CIT(A) in deleting the additions made to the total income of the assessee under head Capital Gains.(AY. 2007-08)

DLF Limited v. Addl. CIT (2018) 63 ITR 22 (Delhi) (Trib.)

S. 45 : Capital gains-Allotment letter-Period of holdings- The law laid down in CIT v Suraj Lamps & Industries Pvt Ltd (2012 ) 340 ITR 1 (SC) that transfer of immovable property is effective only on registration of conveyance deed is not applicable for computing the holding period of property. Holding period should be computed from the date of issue of the allotment letter and not from the date of the conveyance deed, ratio in Rasiklal M. Parikh v. ACIT (2017) 393 ITR 536 (Bom.)(HC) is explained .[S. 2(42A), 2(47) 54]

Allowing the appeal of the assessee the Tribunal held that, The law laid down in Suraj Lamps & Industries (2012 ) 340 ITR 1 (SC) that transfer of immovable property is effective only on registration of conveyance deed is not applicable for computing the holding period of property. Holding period should be computed from the date of issue of the allotment letter and not from the date of the conveyance deed, ratio in Rasiklal M. Parikh v. ACIT (2017)393 ITR 536 (Bom.)(HC) is explained.(ITA No.4853/Mum./2016, dt. 14.08.2018)(AY. 2012-13)
Sanjaykumar Footermal Jain, v. ITO (Mum.)(Trib.), www.itatonline.org

S. 45 : Capital gains-Bogus long-term gains from penny stocks-The transaction cannot be treated as bogus until and unless a finding is given that the shares were acquired by the assessee from the person other than the broker claimed by the assessee. The enquiry conducted by the Investigation Indore is not a conclusive finding of fact in view of the fact that the shares were duly materialized & held in the d-mat account. Merely supplying of statement to the assessee at the fag end of the assessment proceedings is not sufficient to meet the requirement of giving an opportunity to cross examine. The AO cannot proceed on suspicion without any material evidence to controvert or disprove the evidence produced by the assessee. [S. 10(38)]
Allowing the appeal of the assessee the Tribunal held that ; the transaction cannot be treated as bogus until and unless a finding is given that the shares were acquired by the assessee from the person other than the broker claimed by the assessee. The enquiry conducted by the Investigation Indore is not a conclusive finding of fact in view of the fact that the shares were duly materialized & held in the d-mat account. Merely supplying of statement to the assessee at the fag end of the assessment proceedings is not sufficient to meet the requirement of giving an opportunity to cross examine. The AO cannot proceed on suspicion without any material evidence to controvert or disprove the evidence produced by the assessee. Accordingly the appeal of the assessee is allowed.(AY. 2010-11)
Pramod Kumar Lodha v. ITO (2018) 195 TTJ 20 (UO)/ 66 ITR 4 (SN)(2019) 174 ITD 186 (Jaipur)(Trib.), www.itatonline.org

S. 45 : Capital gains-Bogus capital gains from penny stocks-In order to treat the capital gains from penny stocks as bogus, the Dept has to show that there is a scam and that the assessee is part of the scam. The chain of events and the live link of the assesee’s action giving her involvement in the scam should be established. The Dept cannot rely on alleged modus operandi & human behavior and disregard the evidence produced by the assessee.[S. 48]
Allowing the appeal of the assessee the Tribunal held that, In order to treat the capital gains from penny stocks as bogus, the Dept has to show that there is a scam and that the assessee is part of the scam. The chain of events and the live link of the assesee’s action giving her involvement in the scam should be established. The Dept cannot rely on alleged modus operandi & human behavior and disregard the evidence produced by the assessee.In the result, the appeal of the assessee is allowed.(I.T.A No. 2281/Kol/2017, dt. 20.07.2018)(AY. 2014-15)
Navneet Agarwal v. ITO(Kol)(Trib.), www.itatonline.org

S. 45 : Capital gains-Capital asset-Report of Tehsildar about exact location of land – Certificate from Gram Panchayat could not take precedence over the report of the Tehsildar who was the appropriate land revenue authority to assess the nature of and location of land-Tehsildar is a Govt official, assessee cannot complain that he was not given an opportunity of cross examination-Land is held to be assessable as capital asset .[S. 2(14)]

The Tribunal held that the only grievance of the assessee was that he had not been granted a right to cross examine the Tehsildar who had given the report about exact location of the land.The Tehsildar is a government Official and where he had given report and a copy of such report was made available to the assessee, the assessee had the right to examine such report and challenge the contents thereof. Where the assessee had such a report and did not point out any defect in such a report, he could say that his rights had been violated as he had got a right to cross-examine the Tehsildar. Further the certificate of Gram Panchayat could not take precedence over the report of the Tehsildar who was the appropriate land revenue authority to assessee the nature of and location of land.Accordingly the Land is held to be assessable as capital asset .(AY. 2006-07, 2008-09)
Jagdish Narayan Sharma v ITO (2018) 65 ITR 194 / 194 TTJ 825 /( 2019) 174 DTR 25 (Jaipur) (Trib.)

S. 45 : Capital gains-Exchange-Slump sale-A transaction by which an undertaking is transferred in consideration of the allottment of shares is an “exchange” and not a “sale”. The fact that the agreement refers to the parties as “seller” and “purchaser” is irrelevant. S. 2(42C) and S. 50B apply only to “sale” and not to “exchange”. As there is no estoppel against a statute, an assessee is entitled to raise the claim regarding non-taxability at any stage of the proceedings.[S. 2(42C), 50B]

Allowing the appeal of the assessee the Tribunal held that,a transaction by which an undertaking is transferred in consideration of the allotment of shares is an “exchange” and not a “sale”. The fact that the agreement refers to the parties as “seller” and “purchaser” is irrelevant. S. 2(42C) and S. 50B apply only to “sale” and not to “exchange”. As there is no estoppel against a statute, an assessee is entitled to raise the claim regarding non-taxability at any stage of the proceedings.(AY. 2007-08)
Oricon Enterprises Limited v. ACIT(2018) 171 ITD 231/ 67 ITR 433 (Mum.)(Trib.), www.itatonline.org

S. 45 : Capital gains- Penny Stocks-31000% increase in value of shares over 2 years is highly suspicious but cannot take the place of evidence. The addition cannot be made based on generalizations. Evidence collected from third parties cannot be used against the assessee without giving him a copy and an opportunity to rebut the same.[S. 68]
Allowing the appeal of the assessee the Tribunal held that, merely because 31000% increase in value of shares over 2 years is highly suspicious but cannot take the place of evidence. The addition cannot be made based on generalizations. Evidence collected from third parties cannot be used against the assessee without giving him a copy and an opportunity to rebut the same.(ITA No. 2394/kol/2017, dt. 27.06.2018)(AY. 2014-15)
Prakash Chand Bhutoria v. ITO (Kol)(Trib.), www.itatonline.org

S. 45 : Capital gains-Alleged bogus Long-term capital gains-As neither the statement of Mr Mukhesh Choksi was provided to the assessee nor cross-examination was allowed and it was not even placed on record, the action of the AO in treating the LTCG and STCG as income from other sources was not warranted. [S. 69]
Dismissing the appeal of the revenue the Tribunal held that, as neither the statement of Mr Mukhesh Choksi was provided to the assessee nor cross-examination was allowed and it was not even placed on record, the action of the AO in treating the LTCG and STCG as income from other sources was not warranted. Tribunal also held that view taken was peculiar to the facts of the case and the revenue is always at liberty to in other cases, to challenge the alleged bogus purchases (based on the statement of Mr Mukhesh Choksi).(ITA No. 1614/hyd/2017, dt. 29.05.2018)(AY.2007-08)
ITO v. K. Ramakrishna Reddy(Hyd)(Trib.),www.itatonline.org

S. 45 : Capital gains-Amount received on transfer of rights to carry on any business is taxable as capital gain and not as business income .[S. 28(va),54EC]
Allowing the appeal of the assessee the Tribunal held that, the amount received on account of transfer of business is taxable as capital gains and not as business income, consequently deduction u/s 54EC is available in respect of investment made in Govt Bonds.(ITA No 5209/Mum./ 2017 dt 5-2-2018 (AY.2006-07)
Suklendu A.Baji v.DCIT (Mum.) (Trib.).www.itatonline.org

S. 45 : Capital gains-Argument that the allotment of shares by the assessee’s holding co to foreign investors at huge valuation results in a “transfer”/ “indirect transfer” of the assessee’s assets to the foreign investors is not correct. Argument that a multi layered holding structure was deliberately created to avoid taxes in India and to conceal the information about the ultimate beneficiaries is also not correct .[S. 2 (47), 48]
Allowing the appeal of the assessee the Tribunal held that; the endeavor of the departmental officers to tax the transaction in question as capital gains was not supported by the any legal base. First and foremost there was no transfer of capital asset,which is the basis for invoking the provisions of S. 45 of the Act, in the case under consideration. The AO and FAA have tried to build a house without laying down foundation. Without the existence of capital assets they have tried to tax capital gain. They have nowhere mentioned as to which capital asset was transferred by the assessee, during the year under consideration. Secondly,it is also not known as to whom the assets were transferred. As per the balance sheet of the assessee it had sold some vehicles during the year and no other asset was sold. If no asset other than vehicles was sold,then how the capital gain would arise about shares,is beyond our comprehension. In spite of reading the orders of the AO and FAA many a times carefully,we are not clear as to how the acquisition of shares of SOHM by Actis can be used for determining the alleged taxability of the assessee under the head short term capital gainS. Both the entitiesi. e. Actis and SOHM are not located in India. They are fifth generation holding companies and any transaction between them cannot be imported to tax alleged capital gains of the assessee. As stated earlier,the assessee had acquired businesses two Indian entities,namely,RCC and VMPL. By linking purchasing of shares of SOHM by Actis with the shares issued by the 6107/M/16. Supermax Personal Care Pvt. Ltd. Assessee to the Singapore entity, the AO and FAA have taxed the alleged capital gainS. But, the basic fact of transfer of capital asset/(s)by the assessee to a transferee was never proved. Tribunal also observed that the FAA has mentioned in his order that the assessee had transferred the Interest/(stake)in itself outside India to SSPL. We find that the concept of ‘creating of interest in any assets in any manner’ and transferring’interest/stake’was not part of the word ‘transfer’ for the year under consideration and nor it was applicable to that year. (AY. 2011-12)
Supermax Personal Care Private Ltd v. ACIT (2018) 65 ITR 42 (SN)/ 169 DTR 41/ 194 TTJ 815 (Mum.)(Trib.), www.itatonline.org

S. 45 : Capital gains – Business income-Sale of shares – Following the rule of consistency, the income from sale of shares is assessable as capital gains and not as business income. [S. 28(i)]
The Tribunal held that the CIT (A) has followed later years on this issue and following the rule of consistency, the income from sale of shares is assessable as capital gains and not as business income. (AY. 1999-2000,2002-03,2003-04)
Dy. CIT v. Central Bank of India (2018) 191 TTJ 265 / 161 DTR 1 (Mum.)(Trib.)

S. 45 : Capital gains-Index cost-Family arrangement-Family settlements entered into bona fide to maintain peace and harmony in the family are valid and binding on the authorities-Consideration received as part of family arrangement cannot be assessed as income from other sources.[S. 48, 49,54,56]
Allowing the appeal of the assessee the Tribunal held that; It is not necessary for the validity of a family arrangement that there must be existing legal claims & disputes between the family members. The possibility of future disputes is sufficient. Family settlements entered into bona fide to maintain peace and harmony in the family are valid and binding on the authoritieS. Consideration received as part of family arrangement cannot be assessed as income from other sourceS. Indexation was held to be allowable and exemption u/s 54 of the income-tax Act. (ITA No. 5768/Mum./2017. Dt. 28. 02. 2018)(AY. 2012-13)

Kunal R. Gupta v. ITO (SMC) (Mum.)(Trib.), www.itatonline.org

S. 45 : Capital gains-Set off of capital loss-Sham transaction”/ “Colourable device”-Sale of shares to son cannot be held to held to be colourable device if the transaction is with in the four corners of law and valid.
Allowing the appeal of the assesee the Tribunal held that; the sale of shares in a Pvt Ltd company by the assessee to a relative (son) in order to book losses so as to set-off the capital gains from on sale of property cannot be rejected as a sham transaction / colourable device if the transaction is within the four corners of law and valid. The transactions carried by assessee are valid in law, cannot be treated as non-est merely on the basis of some economic detriment or it may be prejudicial to the interest of revenue. Further, if the period co-existed or permitted the assessee to set off her capital loss against the capital gain earned, would itself not give rise to the presumption that the transaction was in the nature of colourable device. We notice that the assessee has taken indexed case of acquisition of share at RS. 30,40,400/-. We notice that the Assessing Officer has not examined the same and accordingly direct him to verify the computation given by the assessee and allow set off of correct amount of Long term capital Loss against Long term capital gain. (ITA No. 7410/Mum./2012, dt. 09. 03. 2018)(AY. 2006-07)
Madhu Sarda v. ITO (Mum.)(Trib.), www.itatonline.org
S. 45 : Capital gains-Family settlement – As per the will the assessee was not entitled to receive any property. As the assessee had no right title in the property accordingly the sum received towards one time settlement cannot be assessed as capital gains. However the amount received by the assessee requires verification hence the matter was remanded. [S. 2(47)]
Tribunal held that,as per the will the assessee was not entitle to receive any property. As the assessee had no right title in the property accordingly the some received towards one time settlement cannot be assessed as capital gainS. However the amount received by the assessee requires verification hence the matter was remanded. (AY. 2006-07)
Tarlochan Singh v. ACIT (2018) 170 ITD 171 (Delhi) (Trib.)

S. 45 : Capital gains-Cash credits-Share capital-Shares were issued at premium-Identity and PAN was furnished addition cannot be made as undisclosed income. [S. 68, 133(6)]
Dismissing the appeal of the revenue the Tribunal held that; the fact that a Pvt. Ltd co issued shares at an exorbitant premium is irrelevant if the assessee has proved the genuineness of the transaction. If the assessee has furnished necessary evidence to prove the identity of the share applicants and their PAN details, the department is free to proceed to reopen the individual assessments of the share applicants but it cannot be regarded as undisclosed income of the assessee.(AY. 2010-11)
DCIT v. Alcon Biosciences P. Ltd(2018) 164 DTR 193/193 TTJ 1 (Mum.)(Trib.), www.itatonline.org

S. 45 : Capital gains-Cash credits-Penny stocks – When the identity and genuineness of transaction is established, merely becausethe investigation department has alleged that there is a modus operandi of bogus Long term capital gains scheme is not relevant, if the same is not substantiated .[S. 10(38), 68]
Allowing the appeal of the assessee the Tribunal held that; Capital gains from penny stocks cannot be assessed as unexplained cash credit u/s 68 if the assessee has produced documentary evidence to prove the source, identity and genuineness of the transaction and the AO has not found any fault with it. The fact that the investigation dept has alleged that there is a modus operandi of bogus LTCG scheme is not relevant if the same is not substantiated. (ITA No. 6235/Del/2017, dt. 19. 03. 2018)(AY. 2014-15)
Meenu Goel v. ITO(SMC) (Delhi)(Trib.), www.itatonline.org

S. 45 : Capital gains-Business income-Sale of land in small plots as required by end users is assessable as capital gainS. [S. 28(i)]
Dismissing the appeal of the revenue, the Tribunal held that; Sale of land in small plots as required by end users is assessable as capital gains as the land was held as investment for more than 60 years. (AY. 2008-09)
ACIT v. Narendra J. Bhimani (2018) 169 ITD 245 (Rajkot) (Trib.)

S. 45 : Capital gains – Stock in trade-Transfer of land to developer for construction of commercial complex and letting the flats which it got from developer and offering the income as rental income, subsequent sale of flats was held to be assessable as capital gains and cannot be assessed as business income by applying the provision of S. 45(2) of the Act. [28(i), 45(2)]
Allowing the appeal of the assessee the Tribunal held that; Transfer of land to developer for construction of commercial complex and letting the flats which it got from developer and offering the income as rental income, subsequent sale of flats was held to be assessable as capital gains and cannot be assessed as business income by applying the provision of S. 45(2) of the Act. (AY. 2006-07 to 2010-11)
Vikas Solvextracts (P.) Ltd. v. DCIT (2018) 168 ITD 692/192 TTJ 591 / 164 DTR 161 (Kol) (Trib.)

S. 45 : Capital gains — Transfer — Development agreement-Capital gains is taxable in the year in which possession was handed over and not in the year in which the project was completed.[S. 54, 54F]
Allowing the appeal of the revenue, the Tribunal held that, in respect of joint development agreement, Capital gains is taxable in the year in which possession was handed over and not in the year in which the project was completed. As regards the applicability of S. 54F the matter was remanded to CIT(A). (AY. 2009 10, 2010-11)
ITO v. Dr. Arvind Goverdhan. (2018) 61 ITR 159 (Bang.) (Trib.)
ITO v. Monica Goverdhan (Mrs) (2018) 61 ITR 159 (Bang.) (Trib.)
ITO v Margrift Goverdhan(Mrs) (2018) 61 ITR 159 (Bang.) (Trib.)
ITO v. Anitha Goverdhn (Mrs) (2018) 61 ITR 159 (Bang.) (Trib.)

S. 45 : Capital gains –Long term capital loss-Shares sold to a group concern in off market transaction at same price as was quoted on stock exchange on relevant date, loss incurred from said sale transactions was to be allowed as long term capital loss.[S. 2(29B]
Dismissing the appeal of the revenue the Tribunal held that ; the delivery instructions were issued by assesse to depository participant on date of sale itself. Relevant share transactions were effected at same price as was quoted on stock exchange on said date, therefore loss incurred from said sale transactions was to be allowed as long term capital loss to the assesse. (AY. 2009 – 2010)
Dy. CIT v. UMIL Share & Stock Broking Services Ltd. (2018) 171 ITD 713/ 170 DTR 441 (Kol)(Trib.)

S. 45 : Capital gains-Business income-Short term gains on sale of shares and mutual funds – Rule of consistency is directed to be followed -Assessed as capital gains.[S. 28(i), 111A]
Tribunal held that assessee was treated as an investor since AY 1998-99 and even in the year under consideration the department has not disturbed the head of Long Term Capital Gains (‘LTCG’) claimed as ‘exempt’ by the assessee. Tribunal acknowledged that the profit on sale of investments was only 2% of total revenues generated by the assessee. Further the ratio of average investment (except investment in group concerns) to average total assets was less than 2% and more than 92% of assessee’s total assets were deployed in the business of financing. Further, Tribunal noted that in all earlier years, STCG was assessed to tax as capital gains only.
Tribunal relied on the decision of Gopal Purohit v. JCIT (2009) 29 SOT 117 (Mum.) (Trib.) as confirmed by Hon’ble Bom.bay High Court in CIT v.Gopal Purohit (2011)336 ITR 287 (Bom.) (HC). Further the SLP of the department against the same has been dismissed by Hon’ble Apex Court vide order dt. 15/11/2010. Tribunal held that in the said case, the court directed to follow the rule of consistency if facts are not changed. The said decision was on similar issue as in the present case. Accordingly, Tribunal directed to tax the STCG as income from capital gains. (AY.2005-06 to 2007-08)
L&T Finance Ltd (2018) 62 ITR 298 /192 TTJ 9 (UO)(Mum.)(Trib.)

S. 45 : Capital loss-Transfer-The reduction of share capital of a company by way of reducing the face value of each share from RS. 1,000 to RS. 500 amounts to “extinguishment of rights” and is a “transfer” u/s 2(47) of the Act-The assessee is eligible to claim a capital loss therefrom, followed Kartikeya v. Sarabhai v. CIT (1998) 228 ITR 163 (SC) . [S. 2(47)]
Allowing the appeal of the assessee the Tribunal held that ; The reduction of share capital of a company by way of reducing the face value of each share from RS. 1,000 to RS. 500 amounts to “extinguishment of rights” and is a “transfer” u/s 2(47) of the Act. The assessee is eligible to claim a capital loss therefrom followed (Kartikeya V. Sarabhai v. CIT (1998) 228 ITR 163 (SC) (ITA No.445/Bang./2018, dt. 29.11.2018)(AY. 2014-15)
Jupiter Capital Pvt. Ltd. v. ACIT (Bang.)(Trib.),www.itatonline.org

S. 45(2) : Capital gains-Conversion of a capital asset in to stock-in-trade-Capital gains to be computed on sale up to date of conversion of Land into stock-in-trade and profit on sale of stock in trade to be assessed as business income or loss. Capital gains to be set off against business loss.[S. 28(i)]
Dismissing the appeal of the revenue the Court held that when a capital asset is converted in to stock in trade, capital gains to be computed on sale up to date of conversion of Land into stock-in-trade and profit on sale of stock in trade to be assessed as business income or losS. Capital gains to be set off against business losS. (AY.2009-10)
CIT v. Essorpe Mills Ltd. (2018) 404 ITR 323 (Mad.) (HC)

S. 45(4) : Capital gains-Distribution of capital asset-Dissolution of firm-Change in constitution of firm-Retirement of some partners and induction of new partners — No revaluation of assets — Businesses continued — Firm reconstituted and not dissolved-Not liable to pay capital gains tax.[S. 45,187(2)]
Allowing the appeal of the assessee the Court held that,retirement of some partners and induction of new partners and there was no revaluation of assetS. Businesses continued accordingly the Court held that the firm reconstituted and not dissolved. Firm is not liable to pay capital gains tax. Order of Tribunal is reversed and order of CIT(A) is affirmed.(AY.2002-03)
G. H. Reddy And Associates v. ACIT (2018) 409 ITR 514 (Mad) (HC)

S. 45(4) : Capital gains-Distribution of capital asset – Revaluation of assets on retirement-On retirement the accounts are settled of retiring partners without distribution of capital assets, provisions of S. 45(4) cannot be invoked. Capital gains cannot be levied on the firm .[S. 2(47),45]
Allowing the appeal of the assesse the Tribunal held that; on retirement accounts of retiring partners are settled by revaluing the assets without disTrib.ution of capital assets and firm continued to the business, provision of S. 45(4) cannot be invoked. Capital gains cannot be levied on the firm. (AY. 2009-10)
Mahul Construction Corporation. v. ITO (2018) 168 ITD 120/ 164 DTR 217 / 193 TTJ 8(Mum.) (Trib.)

S. 47(iv) : Capital gains-Transaction not regarded as transfer – Subsidiary – A subsidiary of a subsidiary (step-down subsidiary) is also a subsidiary of the parent. Consequently, transfers between the holding company and the step-down subsidiary are not “transfers” which can give rise to capital gains or loss. [S. 45, 48, Companies Act, S. 4(1)(c), 108]
The Tribunal held that; The term ‘subsidiary company’ is not defined under the Income-tax Act and so will have to be given the meaning in S. 4(1)(c) of the Companies Act. A subsidiary of a subsidiary (step-down subsidiary) is also a subsidiary of the parent. Consequently, transfers between the holding company and the step-down subsidiary are not “transfers” which can give rise to capital gains or losS. Accordingly the Tribunal held that ;that the transaction of sale of shares of Zandu Realty by the assessee to M/S. Emami Rainbow Niketan Ltd is not regarded as a transfer in view of S. 47(iv) of the Act. Hence, the question of computing either capital loss or capital gain does not arise. Thus, the assessee is not entitled to carry forward the capital loss of Rs. 25 crores as claimed. (AY. 2010-11)
Emami Infrastructure Ltd. v. ITO (Kol)(Trib.), www.itatonline.org

S. 47(xiii) : Capital gains-Transaction not regarded as transfer-Conversion of firm in to company –Allotment of shares to erstwhile partners of the firm after three and half years-Not entitled to exemption .[S. 45, 47A]
Allowing the appeal of the revenue the Court held that ; the reason assigned by the assessee was that the authorised share capital of the company was not increased suitably to make the allotment of these shares to the partners and the consideration for their intended allotment of shares in proportion to their share capital was credited in the “shareholders’ fund account” in the books of account maintained by the company. This was not a sufficient reason or excuse to delay the process of allotment of shares in the company in favour of the erstwhile partners to an unreasonably long period of about three and half years. The conditions laid down in section 47A were not complied with during the previous year 1999-2000 relevant to assessment year 2000-01. Accordingly the imposition of tax on capital gains on the assessee was valid. (AY.2000-01)
CIT v. Prakash Electric Company. (2018) 407 ITR 340/ 172 DTR 377/ 305 CTR 954 (Karn) (HC)

S. 47(xiiib) : Capital gains-Transaction not regarded as transfer-Conversion of firm in to LLP– Transfer-On cumulative satisfaction of conditions (a) to (f) of proviso to section 47(xiiib) would not be chargeable to capital gains .[S. 45]
Transaction involving conversion of a private limited company or unlisted public company to a LLP as contemplated in section 47(xiiib) would though be a transfer on cumulative satisfaction of conditions (a) to (f) of proviso to section 47(xiiib) would not be chargeable to ‘capital gains. (AY.2010-11)
ACIT v. Celerity Power LLP (2019) 174 ITD 433/197 TTJ 45/ 174 DTR 68 (Mum) (Trib.),www.itatonline.org

S. 47A : Capital gains-Withdrawal of exemption – Conversion of proprietary concern in to company -Only licence to use Brand name – When exemption from capital gain was not claimed-Deletion of addition was held to be justified .[S. 47]
Dismissing the appeal of the revenue the Court held that, when proprietary concern was converted in to company only, only licence to use Brand name was allowed and the consideration was received was for use of brand name hence provision of S. 47A was held to be not applicable. Accordingly the order of Tribunal was affirmed.(AY. 2009-10)
PCIT v. Mobisoft Tele Solutions (P) LTD. (P) Ltd . (2018) 404 ITR 203 / 163 DTR 289 / 301 CTR 582/90 taxmann. com 383 (P&H) (HC)

S. 47A : Capital gains-Withdrawal of exemption – Conversion of firm in to LLP-Provision will apply only for purpose of withdrawing an exemption earlier availed by an assessee and not for determination of exemption under section 47(xiiib) of the Act.[S. 45 47A(4)]
Provision of S. 47A(4) will apply only for purpose of withdrawing an exemption earlier availed by an assessee and could not have been applied for determining whether the assessee is not eligible for claim of exemption under section 47(xiiib) in year of raising of such claim itself. (AY.2010-11)
ACIT v. Celerity Power LLP (2019) 174 ITD 433 /197 TTJ 45 / 174 DTR 68 (Mum.) (Trib.)www.itatonline.org

S. 48 : Capital gains –Computation-Property inherited under Will — Amount paid for discharge of encumbrances —Allowable as deduction.[S. 45, 55]
Dismissing the appeal of the revenue the Court held that when the property is inherited under Will, amount paid for discharge of encumbrances is allowable as deduction while computing capital gains.
CIT v. Aditya Kumar Jajodia. (2018) 407 ITR 107 (Cal) (HC)

S. 48 : Capital gains – Computation-Payment of liquidated damages in discharge of liability under earlier agreement to sell is held to be allowable expenditure-The expression “expenditure” used in clause (i) in S 48 should be given the same meaning as used in S. 37(1), except that the expenditure may also be capital in nature. Settlement of a claim and payment made can amount to expenditure .[S. 37(1),45]
Allowing the appeal of the assessee the Court held that; payment of liquidated damages in discharge of liability under earlier agreement to sell is held to be allowable expenditure-The expression “expenditure” used in clause (i) in S 48 should be given the same meaning as used in S. 37(1), except that the expenditure may also be capital in nature. Settlement of a claim and payment made can amount to expenditure. (AY. 1994-95)
Kaushalya Devi (Dec) Through LR v. CIT (2018) 404 ITR 136 / 166 DTR 258 / 255 Taxman 417 / 304 CTR 961 (Delhi) (HC)

S. 48 : Capital gains – Computation-Indexed cost-Since property was acquired by father of assessee in year 1945, indexed cost of acquisition was required to be computed by considering cost of acquisition for year beginning on 1-4-1981.[S. 45, 49(1)(iii)]
Dismissing the appeal of the revenue, the Court held that ;since property was acquired by father of assessee in year 1945, indexed cost of acquisition was required to be computed by considering cost of acquisition for year beginning on 1-4-1981, though the assessee acquired the property on 8-3-2004, under a will, cost of acquisition was deemed to be cost for which previous owner, namely assessee’s father, acquired it. (Followed CIT v. Manjula J. Shah (2016) 355 ITR 474 (Bom.) (HC))
PCIT v. Prakash Krishnalal Bhagwati (2018) 254 Taxman 132 (Guj.)(HC)

S. 48 : Capital gains– Computation-Difference between market value and consideration declared, burden is on the revenue to prove-Addition was deleted. [S. 45,52(1)]
Held that the addition cannot be made in respect of difference between market value and consideration declared. Burden is on the revenue to prove that the assessee has received more consideration than the actual consideration received. Addition was deleted. (AY. 1998-99, 1999-2000)
Arjun Malhotra v. CIT (2018) 403 ITR 354/ 166 DTR 235 / 255 Taxman 399 / 304 CTR 454 (Delhi) (HC)

S. 48 : Capital gains – Computation – Long term capital gains-Indexation – Once factum of construction was accepted then claim of cost of construction could not be rejected outrightly without examining correctness of amount of claim.[S. 45]
The Appellate Tribunal has held that before CIT(A), assessee supported its claim by valuation report as well as sale deed. Assessee had also supported his claim with site plan sanctioned by U.P. Avas Avam Vikas Parishad, Bareily. CIT(A) called for a remand report, where AO accepted fact of construction carried out by assessee at first floor in 1994-95, however in absence of documentary evidence of expenditure, claim was not accepted by AO. CIT(A) also confirmed rejection of claim on similar reasoning. Once factum of construction of first floor and a multi at second floor was accepted then claim of cost of construction could not be rejected out rightly without examining correctness of amount of claim. (AY. 2009-10)
Ghanshyam Das Thakawani v. ITO (2018) 68 ITR 61 (SN)(Jaipur)(Trib.)

S. 48 : Capital gains – Computation-Full value of consideration-Conversion of a private limited company into assessee-LLP-Book value-Book value was to be regarded as full value of consideration for purpose of computation of capital gains.[S. 45, 47]
Upon conversion of a private limited company into assessee-LLP entire undertaking of erstwhile company got vested into assessee LLP, no separate cost other than ‘book value’ would be atTrib.utable to individual assets and liabilities, hence such ‘book value’ could only be regarded as full value of consideration for purpose of computation of capital gain.(AY.2010-11)
ACIT v. Celerity Power LLP (2019) 174 ITD 433/197 TTJ 45 / 174 DTR 68 (Mum.) (Trib.)www.itatonline.org

S.48: Capital gains – Computation-Indexed cost of improvement-Documentary evidence to prove quantum of expenditure incurred on improvement was not furnished-Disallowance is held to be justified.[S. 45, 54]
Tribunal held that since assessee had not produced any documentary evidence to prove quantum of expenditure on improvement incurred by him, Assessing Officer was justified in disallowing claim of assessee. (AY.2011-12)
Jagdish Wadhwani. v. ITO (2018) 173 ITD 559 (Jaipur) (Trib.)

S. 48 : Capital gains – Computation-Short term capital gain-Performance linked fees and portfolio management fees paid to portfolio manager is not allowable as deduction.[S. 45]
Allowing the appeal of the revenue, the Tribunal held that, the Portfolio Management Fees and Performance Linked Fees were paid by the assessee to his portfolio manager towards service charges for making investments of his funds and managing the portfolio of securities, therefore, the same not being an expenditure incurred wholly and exclusively in connection with the transfer of the shares out of which STCG had arisen to the assessee, is not allowable as a deduction. (Referred, Devendra Motilal Kothari v. Dy. CIT [2011] 132 ITD 173 (Mum.) (Trib.), Dy. CIT v. KRA Holdings and Trading (P.) Ltd. [2012] 54 SOT 493 (Mum.) (Trib.) CIT v. Shakuntla Kantilal (Smt.) [1991]190 ITR 56 (Bom.) (HC) Pradeep Kumar Harlalka v. A CIT [2011] 47 SOT 204 (URO) (Mum.), (Trib.,CIT v. Roshanbabu Mohammed Hussein Merchant [2005]275 ITR 231(Bom).(HC) Homi K. Bhabha v. ITO (IT) [2011] 48 SOT 102 (Mum.) (Trib.))(AY.2007-08)
ACIT v. Apurva Mahesh Shah. (2018) 172 ITD 127 (Mum.) (Trib.)

S. 48 : Capital gains –Computation-Indexation-Asset acquired under a gift, indexed cost of acquisition of such capital asset has to be computed with reference to year in which previous owner first held asset. [S. 45]
Dismissing the appeal of the revenue the Tribunal held that ;asset acquired under a gift, indexed cost of acquisition of such capital asset has to be computed with reference to year in which previous owner first held asset. (AY.2011-12)
ITO v. Nita Narendra Mulani. (Smt.) (2018) 172 ITD 169 (Mum.) (Trib.)
S. 48 : Capital gains – Computation -Property inherited on death of husband – cost of acquisition to be applied from the year when the previous owner first held asset and not when the assessee inherited the property. [S. 55A]
Appellate Tribunal held that while computing the capital gains arising on transfer of a capital asset inherited by the assessee on the death of her husband, the indexed cost of acquisition had to be computed with reference to the year in which the previous owner first held the asset and not the year in which the assessee became the owner of the asset. (AY. 2007-08)
Bhoote Meenakshi (Smt.) v. ACIT (2018) 62 ITR 754 (Bang.)(Trib.)

S. 48 : Capital gains –Computation-Portfolio Management Scheme (PMS) – Deduction of PMS fee is not allowable as it is not a transfer fee, nor cost of acquisition/improvement.[S. 45]
Tribunal held that, PMS fees paid by assessee neither fell under category of transfer fees, nor cost of acquisition/improvement, therefore, same is not allowed for deduction while computing capital gain on sale of shares kept under Portfolio Management Scheme. (AY. 2010 – 2011)
Mateen Pyarali Dholkia v. DCIT (2018) 171 ITD 294 (Mum.) (Trib.).www.itatonline.org

S. 48 : Capital gains-Computation -Shares held as investment-brokerage is held to be allowable as deduction- Demat charges is held to be not allowable as deduction while computing capital gains.[S. 45]
The Tribunal held that brokerage was paid in connection with shares, the same has to be allowed as deduction in the computation of the capital gain in terms of S. 48 of the Act.The payment of demat charges cannot be allowed as deduction as the investment activity in shares carried on by the assessee is not of the trading nature. (AY. 2008-09)
DLF Commercial Developers Ltd. v. Dy. CIT (2018) 192 TTJ 769 (Delhi.)(Trib.)

S. 48 : Capital gains – Computation -While computing the capital gains the benefit of indexation should be given on basis of date of acquisition of asset and not on basis of actual payment.[S. 45,55(2)]
Allowing the appeal of the assessee the Tribunal held that, while computing the capital gains the benefit of indexation should be given on basis of date of acquisition of asset and not on basis of actual payment. Relied on Lata G.Rohra v DCIT (2008) 21 SOT 541 (Mum.) (Trib.), Charanbir Singh Jolly v ITO (2006) 5 SOT 89(Mum.) (Trib.) (ITA No.1244 /Mum./2016 dt 27-02-2018 (AY. 2011-12)
Shishir Gorle v.DCIT (Mum.) (Trib.) www.itatonline.org

S. 48 : Capital gains–Computation-Tenancy rights – Value of tenancy rights to be considered for determination of cost of acquisition.[S. 45, 49,50C]
Dismissing the appeal of the revenue the Tribunal held that, value of tenancy rights to be considered for determination of cost of acquisition. The builder has given alternative flat to the assessee only by way of surrender of tenancy rightS. Had there been no tenancy rights the builder would not have offered any flat to the assessee on ownership basiS. Thus it is valuable right on which cost of acquisition has to be determined. Followed CIT v. Abrar Alvi (2001) 247 ITR 312 (Bom.) (HC). (ITA No 3947/Mum./2016 dt 19-04-2018 “H”)(AY. 2007-08)
ACIT v. Shree Krishna Pharmacy (Mum.) (Trib.) (UR)

S. 48 : Capital gains-Computation-Expenses incurred towards fees for computerization of share certificates in order to transfer them to escrow account is allowable as deduction. [S. 45, 112]
AAR held that, expenses incurred towards fees for computerization of share certificates in order to transfer them to escrow account is allowable as deduction.
Honda Motors Co. Ltd., In re (2018) 401 ITR 382/ 253 Taxman 402/ 301 CTR 159 / 163 DTR 113 (AAR)

S. 49 : Capital gains-Previous owner-Cost of acquisition-Conversion of Private Limited Company to LLP-Capital assets become property of assessee by succession, inheritance or devolution, cost of acquisition of assets shall be deemed to be cost for which previous owner of property had acquired same. [S. 2(42A)45, 49(1)(iii)]
Conversion of Private Limited Company to LLP, capital assets become property of assessee by succession, inheritance or devolution, cost of acquisition of assets shall be deemed to be cost for which previous owner of property had acquired same. (AY.2010-11)
ACIT v. Celerity Power LLP (2019) 174 ITD 433/197 TTJ 45 / 174 DTR 68 (Mum.) (Trib.),www.itatonline.org

S. 49 : Capital gains-Previous owner – Firm – Partner-Period of holding-Dissolution of firmwith effect from 1-4-1988.S. 49(1)(iii)(b), period of holding of an asset by an erstwhile partner of a dissolved firm was not to include period of holding of such asset by firm – Period to be reckoned from date of distribution to partner-Asset held was only for one year and two months-Not entitle to exemption in respect of investment in certain bonds. [S. 29A), 2(31),2(42A),45, 50, 54EC]
Tribunal held that up to AY. 1986-87, S. 2(42A), Explanation 1(b) read with S. 49(1)(iii)(b) provided that where a capital asset had became a property of assessee on any disTrib.ution of assets on dissolution of a firm, before 1st day of April, 1987, period for which asset was held by previous owner would be included for working out period of holding of asset by assessee and after amendment vide Finance Act, 1987, with effect from 1-4-1988 to S. 49(1)(iii)(b), period of holding of an asset by an erstwhile partner of a dissolved firm was not to include period of holding of such asset by firm. Accordingly period to be reckoned from date of disTrib.ution to partner. On facts the assessee had taken over assets from the partnership firm on 15-05 2003 and sold the same on 4-07-2004 ie one year two months, the same could not be held to be a long term capital asset and not entitle exemption on investment in certain bonds. (AY.2005-06)
Amar Kanayalal Nagpal v. ITO (2018) 171 ITD 518/ 195 TTJ 523 (2019) 174 DTR 403 (Mum.) (Trib.)

S. 50 : Capital gains-Depreciable assets-Block of assets-Sale of land with building — Demolition of building — Land alone subject to development — Consideration is only for land S. 50 is not applicable.[S. 45]
Allowing the appeal of the assessee the Court held that ;building was demolished and land alone was subject to development was transferred.Accordingly the provision of S. 50 cannot be applied. (CIT v. Union Co.(Motors) Ltd.(2006)283 ITR 445 (Mad) (HC) followed. Meena v. Pamnani (Smt.) v. CIT (2018) 404 ITR 548(Bom.)(HC) is distinguished.)( AY.2004-05)
Jaidayal Prannath Kapur v. CIT (2018) 408 ITR 315 / 172 DTR 103/(2019) 307 CTR 757 (Mad)(HC)

S. 50 : Capital gains-Depreciable assets-Block of assets-Land on which staff quarters were situated – Staff quarters depreciation was claimed-No depreciation was claimed on land-Profit on sale of land is assessable as long term capital gains.[S. 2(11),45]
Tribunal held that, asset transferred was land and not staff quarters, land is not a depreciable asset and it was not a part of block of assets. In absence of a rate of depreciation having been prescribed, provisions of S. 50 could not be invoked. Therefore profit on sale of land is assessable as long term capital gains.(AY.2009-10, 2011-12)
ACIT v. Seth Industries (P.) Ltd. (2018) 171 ITD 326 (Mum.)(Trib.)

S. 50B : Capital gains – Slump sale – Sale of hotel premises along with licences is held to be slump sale [S. 45]
Dismissing the appeal of the revenue the Tribunal held that,Sale of hotel premises along with licences for boarding,lodging bar etc as a going concern is held to be slump sale.(AY.2013-14)
ACIT v. Ooty Gate Hotel (2018) 67 ITR 322/ (2019) 174 ITD 513 (Cochin) (Trib.)
S. 50B : Capital gains – Slump sale – Full value of consideration-Conditional sale-Part consideration would be paid on obtaining waiver of MiniMum. Guarantee Throughput (MGT) from Port Trust till transfer of terminal undertaking by assessee to KCPL-Amount retained by KCPL was never paid to the assessee as the assessee was not able to get waiver of MiniMum. Guarantee Throughput (MGT) from Port Trust. Consideration which was not received cannot be assessed as consideration received for sale-AO was directed to verify and decide in accordance with law.[S. 45, 48]
Tribunal held that part consideration was to be paid, on obtaining waiver of MiniMum. Guarantee Throughput (MGT) from Port Trust till transfer of terminal undertaking by assessee to KCPL. Part consideration retained by KCPL was never paid to the assessee as the assessee was not able to get waiver of MiniMum. Guarantee Throughput (MGT) from Port Trust-Consideration which was not received cannot be assessed as consideration received for sale.AO was directed to verify and decide in accordance with law.(AY.2007-08)
Konkan Storage Systems (P.) Ltd. v. ACIT (2018) 173 ITD 248 (Bang.) (Trib.)

S. 50B : Capital gains – Slump sale-Part consideration was kept in Escrow account which was received in subsequent year-segregation of consideration in to two parts is held to be not justified-Depositing a part of the consideration in an escrow account will not be, equivalent to a deferred consideration-.Entire consideration is taxable in the year of sale.[S. 45]
Assessee computed capital gains excluding the amount kept in Escrow account and contended that unless and until escrow amount was released by escrow agent,amount lying in escrow account could not be considered for computing capital gainS. AO considered entire consideration as per agreement is liable to capital gains which was affirmed by the CIT(A). On appeal Tribunal held that since consideration was mentioned in slump sale agreement, segregating such consideration into two parts cannot be done and entire consideration was to be considered as capital gain arose during year.(AY.2012-13)
T.A. Taylor (P.) Ltd. ACIT (2018) 173 ITD 237/66 ITR 146 (Chennai) (Trib.)

S. 50B : Capital gains – Slump sale-Transfer of Hospital business — No Transfer of Land and building of Hospital — Not slump sale — Receipt on account of transfer of Hospital business taxable.[S. 2(42C)]
Tribunal held that though the Hospital business was transferred as a going concern, land and building of Hospital was not transferred accordingly the Transfer of business could not be called slump sale as envisaged under S. 2(42C) of the Act. Thus the capital gains could not be computed in terms of S. 50B. The receipt of Rs 10 Lakhs was to be taxed in accordance with law.(AY.2009 10 to 2013-14)
Manipal Health Systems P. Ltd. v. ACIT (2018) 65 ITR 51 (SN)) (Bang.) (Trib.)

S. 50B : Capital gains – Slump sale – Cost of acquisition-Transfer of its business division to its subsidiary against shares and debentures is not a slump sale but exchange hence provision would not be applied. [S. 2(42C), 45]
Allowing the appeal of the assessee the Tribunal held that, transfer of its business division to its subsidiary against shares and debentures is not a slump sale but exchange hence provision would not be applied, as the Transfer of undertaking was not for money. (AY. 2008-09)
Bennett Coleman & Co. Ltd. v. ACIT (2017) 168 ITD 631(2018) / 192 TTJ 377/ 164 DTR 145(Mum.) (Trib.)

S. 50B : Capital gains – Slump sale – Transfer of individual assets to sister concern without transfer of undertaking or business activity as a whole cannot be considered as slump sale [S. 2(19AA), 2(42C)]
Allowing the appeal of the assesse, the Tribunal held that; since assessee had neither transferred an undertaking or any part of an undertaking, or a unit or division of undertaking or a business activity taken as a whole, but what had been transferred was an individual asset, viz. business leads, which did not constitute a business activity on its own, view taken by Assessing Officer that amount received by assessee was liable to be characterized as a consideration received pursuant to a slump sale as per provisions of S. 50B, could not be upheld. (AY. 2003-04)
L & T Finance Ltd. v. DCIT (2018) 168 ITD 52 (Mum.) (Trib.)

S. 50C : Capital gains – Full value of consideration – Stamp valuation – Lease hold rights-Transfer of capital asset for a consideration – Provision is applicable – Order of Tribunal is affirmed. [S. 2(14) 45, 48]
Assessee sold lease sold land under a registered sale deed. The property was leasehold land and ownership vested with the state government. AO made addition under the head capital gains and invoked S. 50C. CIT(A) and Tribunal confirmed the addition. High Court held that if analogy is taken from referring to the decision of CIT v. Greenfield Hotels & Estates Pvt Ltd (2016) 389 ITR 68)(Bom.) (HC) section 50C would not be applicable in majority of cases. The High Court cannot re-write the provision. Accordingly the view of the Tribunal is affirmed.
Ram Ji Lal Meena v. ITO (2018) 168 DTR 245 / 303 CTR 821 / 102 CCH 316 (Raj.)(HC)

S. 50C : Capital gains-Full value of consideration-Stamp valuation-The valuation of the stamp authority cannot be adopted for the purpose of collecting capital gain tax in the hands of the assessee, if there is a long gap between the date of execution of the MOU and the execution of a formal development agreement.[S. 45, 269UL(3)]
Question raised by the revenue is as under,
“Whether on the facts and circumstances of the case and in law, the Tribunal was justified in dismissing the appeal filed by the Revenue by accepting the sale consideration at RS. 2,51,00,000/, accepted by the Revenue in order u/s 269 UL(3) in place of RS. 4,63,73,500/considered by the Assessing Officer on the basis of valuation made by the Stamp Duty Authority?”
Dismissing the appeal of the revenue the Court held that,the valuation of the stamp authority cannot be adopted for the purpose of collecting capital gain tax in the hands of the assessee if there is a long gap between the date of execution of the MOU and the execution of a formal development agreement. The appropriate authority (Income Tax Department) gave no objection to grant of development rights at the agreed consideration of RS. 2,51,00,000/u/ s 269UL(3) dated 12.06.2001. The said MOU was converted into a formal development agreement in September, 2004 on the same terms and conditionS. The stamp duty authorities stamped / assessed the value at Rs. 4,63,73,500/.(ITA No. 859 of 2016,dt. 11.12.2018) (AY.2005-06)
PCIT v. The Executor of Estate of Late Smt. Manjula A. Shah (Bom.)(HC),www.itatonline.org

S. 50C : Capital gains-Full value of consideration-Stamp valuation Property not freehold property but occupied by tenants and court cases to get premises vacated pending — Kanpur Development Authority issuing letters to assessee proposing to take over certain portion of his property in connection with road widening — Addition on account of difference in stamp duty and sale deed is not justified.[S. 45]
Allowing the appeal of the assessee the Tribunal held that ;the property was not freehold property but was occupied by tenants and there were court cases going on to get the premises vacated. The assessee objected that the Kanpur Development Authority had issued letters to him to take over a certain portion of his property in connection with road widening. The property deed mentioned that it was occupied by tenants and it was proved since court cases were going on against them. The Valuation Officer had not dealt with the issue as to why benefit should not be given to the assessee when the Kanpur Development Authority took away some portion of the property for road widening. The Valuation Officer had also not dealt with the impact on the valuation of the property already being occupied by tenants and court cases going on. The Valuation Officer had simply applied the circle rate available and made the report. As the case wherein the sale deed value was declared and independent valuation done by the authorised valuer but the subordinate authorities had not categorically dealt with the submissions of the assessee nor had brought out any material on record to support why the Valuation Officer’s report should be taken into consideration. Accordingly the addition is deleted. (AY.2008 – 2009)
Atul Kumar Garg, HUF v. ITO (2018) 64 ITR 72(SN) (Luck)(Trib.)
Pawn Kumar Garg HUF v. ITO (2018) 64 ITR 72(SN) (Luck)(Trib.)
Rakesh Kumar Garg HUF v. ITO (2018) 64 ITR 72(SN) (Luck)(Trib.)

S. 50C : Capital gains-Full value of consideration-Stamp valuation-When a specific request is made by the assessee to refer the matter to valuation officer,it was statutory duty laid down upon the Assessing Officer to obtain the valuation report by referring the matter to the District Valuation Officer-Reference to the District Valuation Officer is mandatory and the Assessing Officer having failed to follow the provisions of the Act, he could not be given one more chance to refer the matter to the District Valuation Officer-no addition could me made on the basis of value of property at circle rate of State Government.[S. 45]
Allowing the appeal of the assessee the Tribunal held that, it was statutory duty laid down upon the Assessing Officer to obtain the valuation report by referring the matter to the District Valuation Officer. Reference to the District Valuation Officer is mandatory and the Assessing Officer having failed to follow the provisions of the Act, he could not be given one more chance to refer the matter to the District Valuation Officer. The authorities passed the order in a summary manner without going into the merits of the case and analysing the legal issue involved, the applicability of section 50C(2)(a) in particular. The Assessing Officer had not found any adverse material evidence to indicate that the assessee had received any excess money over and above the sale consideration, in the return. Accordingly the addition was deleted.(AY.2013-14)
Dr. Sanjay Chobey (HUF) v. ACIT (2018) 65 ITR 68 (SN) / 194 TTJ 891 (Agra) (Trib.)
S. 50C : Capital gains-Full value of consideration-Stamp valuation -An agreement to sell was executed by assessee on 8-2-2010 and Sale deed was executed and registered on 5-6-2012-In view of proviso to S. 50C capital gain was to be computed on basis of stamp duty valuation rate prevailing on date of agreement to sell-Matter was to be remanded to Assessing officer to determine sale value of property on basis of circle rate applicable on property on 8-2-2010, and thereafter compute long-term capital gain assessable in assessment year 2013-14.[S. 45]
Tribunal held that, an agreement to sell was executed by assessee on 8-2-2010 and Sale deed was executed and registered on 5-6-2012.In view of proviso to S. 50C capital gain was to be computed on basis of stamp duty valuation rate prevailing on date of agreement to sell-Matter was to be remanded to Assessing officer to determine sale value of property on basis of circle rate applicable on property on 8-2-2010, and thereafter compute long-term capital gain assessable in assessment year 2013-14.(AY. 2013-14)
Rahul G. Patel. v. DCIT (2018) 173 ITD 1/ 171 DTR 1/ 195 TTJ 1027 / 67 ITR 280 (Ahd) (Trib.)

S. 50C : Capital gains-Full value of consideration-Stamp valuation -Stamp valuation was disputed before the AO-It is the duty of AO to refer the matter to Valuation Officer-The department cannot be allowed a second inning, by sending the matter back to Assessing Officer, enabling it to fill the lacunae and shortcomings and putting the assessee virtually to face a re-trial for no fault of him and to again prove before the Assessing Officer that the sale consideration was the fair market value of the property sold by him.[S. 45]
Dismissing the appeal of the revenue the Tribunal held that, when the Assessee objected the valuation adopted by the stamp authority, the AO ought to have referred the matter to the Valuation Officer. The department cannot be allowed a second inning, by sending the matter back to Assessing Officer, enabling it to fill the lacunae and shortcomings and putting the assessee virtually to face a re-trial for no fault of him and to again prove before the Assessing Officer that the sale consideration was the fair market value of the property sold by him. This would amount to giving a lease of life to an order which on the basis of facts on records is unsustainable in law. Therefore, in the light of these facts and the failure of the Assessing Officer to follow the procedure as prescribed under section 50C(2) in particular, there is no find infirmity in the order of the CIT (A) in quashing the addition made by the AO. (AY. 2013-14)
ACIT v. Tarun Agarwal. (2018) 173 ITD 107/ (2019) 175 DTR 299 /198 TTJ 484 (Agra) (Trib.)

S. 50C : Capital gains-Full value of consideration-Stamp valuation –Property sold for Rs 50 lakhs – Stamp valuation was Rs 90.20 lakhs-DVO estimated at Rs 81.68 lakhs- location of property, potential development in near future, availability and accessibility to infrastructure facility such as road, airport, educational institutions, etc. were not properly considered either by Approved Valuer or by Departmental Valuation Officer, while valuing property sold by assessee-Tribunal estimated the value at RS. 69 lakhs.[S. 45]
Property sold for Rs 50 lakhS. Stamp valuation was Rs 90.20 lakhS. DVO estimated at Rs 81.68 lakhs Tribunal held that location of property, potential development in near future, availability and accessibility to infrastructure facility such as road, airport, educational institutions, etc. were not properly considered either by Approved Valuer or by Departmental Valuation Officer, while valuing property sold by assessee. Accordingly the Tribunal estimated the value at RS. 69 lakhs. (AY.2011-12)
Kalavathy Sundaram. (Smt.) v. ITO (2018) 172 ITD 597 (Chennai) (Trib.)
S. 50C : Capital gains-Full value of consideration-Stamp valuation – Disputed valuation adopted by stamp duty authorities before AO – AO is required to refer the matter of valuation to Valuation Officer.[S. 45]
Tribunal held that in terms of section 50C(2)(a) of the Act, where the Assessee has objected that the stamp duty valuation exceeds the FMV of the property on date of transfer, AO is required to refer the matter to Valuation Officer. Accordingly, the Tribunal remanded the matter to AO for referring the matter to Valuation Officer and recomputes the capital gains. (AY. 2008-09)
Harphool Jat v. ITO (2018) 66 ITR 7(SN)(Jaipur)(Trib.)

S. 50C : Capital gains-Full value of consideration-Stamp Duty Valuation – Where the assessee explained the reasons for fetching a lesser rate on sale of immovable property as compared to the Stamp Duty Valuation, the. AO should have remitted the matter to the DVO for determination of the FMV of the immovable property.[S. 45]
On Revenue’s appeal, the Tribunal held that the assessee brought on record the complexities involved in the sale of property and the reasons for getting a lesser rate and therefore, the Ld. AO should have referred the valuation of the property to the DVO as per section 50C(2) of the Act. Since proper procedure has not been followed, the Tribunal remitted the matter back to the Ld. AO to make a reference to the DVO for determination of FMV of the property. (AY. 2012-13)
ACIT v. Kishore Kumar (2018) 66 ITR 158 (Vishakha) (Trib.)

S. 50C : Capital gains-Full value of consideration-Stamp valuation –Charitable Trust- Price approved by Charity Commissioner has to be followed, where the Assessee is a public charitable trust[S. 45]
Tribunal held that the consideration for sale of land has been approved by the Charity Commissioner which has passed order as per Bom.bay Trust Act and assessee being a public trust has to follow the same and include the same in sale’s deed and it does not require any interference on account of understatement of consideration.
Dy.CIT v. Saifee Jubiee High School and Madressa Yusufiyan Society (2018) 63 ITR 89 (SN) (Ahd)(Trib.)

S.50C: Capital gains-Full value of consideration-Stamp valuation-Form v/s Substance-Security deposit was rightly apportioned between short term and long term capital gains- Interest-free security deposit cannot be treated as ‘full value of consideration-The amendment to include assessable value as full value consideration was inserted w.e.f. 01/10/2009 and, thus, the value assessable as per stamp value authority cannot be applied for taking full value consideration of the property for the year under consideration. Accordingly the question of referring the matter to the Valuation Officer in terms of section 50C(2) also does not arise.[S. 2(14, 45]
Tribunal held that S. 45 and 48 unlike the provisions of wealth-tax, do not make provision, providing for any deemed profit or gain to be taxable as a capital gain the mere fact that the Assessing Officer was of the view that the prevalent market interest rate was 18 per cent, or was at any amount above 9 per cent, could not render the assessee liable for being taxed on the difference amount as capital gain. According to Assessing Officer, the amount of security deposit received of Rs. 35 crore is sale consideration received and he apportioned the sale consideration for computation of short-term capital gain and long-term capital gain. In case of Siliguri land, the Assessing Officer computed long-term capital gain of RS. 78,81,841/-and short-term capital gains of Rs. 13,67,67,379/-. In case of Darjiling land, the short-term capital gain of RS. 18,60,30,515/-was computed by the Assessing Officer. Tribunal held that during the relevant period, section 50C of the Act could be invoked only, if the property was registered before the Stamp Duty Authorities and in that case amount adopted by the Stamp Valuation Authority could be treated as full value consideration received. The amendment to include assessable value as full value consideration was inserted w.e.f. 01/10/2009 and, thus, the value assessable as per stamp value authority cannot be applied for taking full value consideration of the property. Once, we have held that provisions of section 50C are not applicable in the instant case, the question of referring the matter to the Valuation Officer in terms of section 50C(2) also does not arise. In the instant case, the assessee has received so-called security deposits as interest-free amount for the properties leased. This is the amount, which is actually received by the assessee for transfer of rights in the property. In our opinion, in the given circumstances of the case, for the purpose of computation of the capital gain as laid down in section 48 of the Act, the security deposit received has been rightly treated by the Assessing Officer as full value consideration received as a result of transfer of the capital asset. (ITA No.4038/Del/2013, dt. 12.10.2018)(AY. 2006-07)
DCIT v. Moni Kumar Subha (Delhi)(Trib.),www.itatoline.org

S. 50C : Capital gains-Full value of consideration-Stamp valuation – Conversion of agricultural land into residential plots – AO applied S. 50C – CIT(A) held that income in the nature of business income therefore, S. 50C not applicable – Held, S. 45(2) not taken into consideration and therefore, matter remanded back to CIT(A). [S. 45(2)]
Assessee developed agricultural land into 23 plots and sold them to different persons for residential purposeS. AO estimated capital gains by applying S. 50C. CIT(A) held that the income was in the nature of business income as the activity came under the ambit of ‘adventure in the nature of trade’. Tribunal held that conclusion of taxation as business income was justified however, the CIT(A) did not take into consideration the provision of S. 50C. Accordingly, the matter was remanded back to CIT(A). (AY. 2007-08)
Ramswaroop Saudagar v. ITO (2018) 63 ITR 262 (Jaipur)(Trib.)

S. 50C : Capital gains-Full value of consideration-Stamp valuation-Agricultural land– Land situated within 8 km. of local Municipal limits-Addition under head capital gain applying the provision of S. 50C is justified.[S. 2(14)(iii), 45]
Tribunal held that as the agricultural land was situated within 8 km. of local municipal limits, addition under head Capital gain applying the provision of S. 50C is justified.
Girdhari Lal v. ITO (2018) 171 ITD 176 (Delhi) (Trib.)

S. 50C : Capital gains-Full value of consideration-Stamp valuation-If the assessee has invested the entire sale consideration in new house property, the capital gains are exempt u/s 54F. The AO cannot apply S. 50C and treat the stamp duty valuation as the consideration and assess the difference between the stamp duty valuation and the actual valuation to capital gains. [S. 54F]
Dismissing the appeal of the revenue the Tribunal held that ; If the assessee has invested the entire sale consideration in new house property, the capital gains are exempt u/s 54F. The AO cannot apply S. 50C and treat the stamp duty valuation as the consideration and assess the difference between the stamp duty valuation and the actual valuation to capital gains. (AY.2011-12)
ITO v. Raj Kumar Parashar (2018) 195 TTJ 212/ 169 DTR 142 (Jaipur)(Trib.),www.itatonline.org

S. 50C : Capital gains-Full value of consideration-Stamp valuation – Assessee neither objected to value determined by Sub-Registrar nor requested the AO for referring to Valuation Officer – AO was justified in bringing to tax deemed sale consideration as per the Stamp duty authority instead of the actual sale consideration claimed by assessee-AO can not invoke provisions of S. 50C(2) suo motu.[S. 45, 50C(2)]
Tribunal held that, assessee neither objected to value determined by Sub-Registrar nor requested the AO for referring to Valuation Officer. Accordingly the AO was justified in bringing to tax deemed sale consideration as per the Stamp duty authority instead of the actual sale consideration claimed by assessee.Tribunal also held that AO can not invoke provisions of S. 50C(2) suo motu. (AY. 2006-07, 2008-09)
Jagdish Narayan Sharma v ITO (2018) 65 ITR 194/ 194 TTJ 825 /( 2019) 174 DTR 25 (Jaipur) (Trib.)

S. 50C : Capital gains-Full value of consideration-stamp valuation-Provision being a deeming provision and applies only to the transfer of land or building. It does not apply to the transfer of “booking rights” and to right to purchase flats in a building.[S. 45]
Allowing the appeal of the assessee the Tribunal held that,S. 50C being a deeming provision and applies only to the transfer of land or building. It does not apply to the transfer of “booking rights” and to right to purchase flats in a building.(ITA No.635/Kol/2018, dt. 04.07.2018)(AY. 2013-14)
Baniara Engineers Pvt. Ltd. v. ITO (SMC) (Kol)(Trib.),www.itatonline.org

S.50C : Capital gains-Full value of consideration-Stamp valuation-Even after applying provisions of S. 50C, difference in capital gain declared by assessee and figure adopted by AO did not even exceed 10 per cent of stamp duty valuation, addition was deleted. [S. 45].
Tribunal held that even after applying provisions of S. 50C, difference in capital gain declared by assessee and figure adopted by Assessing Officer did not even exceed 10 per cent of stamp duty valuation, accordingly the addition was deleted. (AY.2010-11)
Surendra S. Gupta. v. ACIT (2018) 170 ITD 732(Mum.) (Trib.)

S.50C: Capital gains-Full value of consideration-Stamp valuation-Property was tenanted and Court cases were pending, certain portion to be taken over by authority for road widening -Objections of the assessee was not dealt with authorities – Addition on account of difference in stamp valuation and sale deed is held to be not valid.[S. 45]
Tribunal held that the authorities have not dealt with the objections of the assessee, such as property was tenanted and Court cases were pending, certain portion to be taken over by authority for road widening. Accordingly addition on account of difference in stamp valuation and sale deed is held to be not valid.(AY.2008-09)
Atul Kumar Garg HUF and ors (2018) 64 ITR 72 (SN) (Luck.) (Trib.)

S. 50C : Capital gains-Full value of consideration-Stamp valuation-When the assessee is protesting the valuation by Stamp authority and requesting to refer to Department valuation Officer, the AO is bound to make the reference to Department Valuation Officer , accordingly the deletion of addition was held to be justified.[S. 45]
Dismissing the appeal of the revenue the Tribunal held that, When the assessee is protesting the valuation by Stamp authority and requesting the refer to Department volition Officer, the AO is bound to make the reference to Department Valuation Officer.Deletion of addition was held to be justified.(AY. 2011-12)
ITO v. Estate of Maharaja Karni Singh Bikaner (2018) 64 ITR 21 / 166 DTR 29 / 193 TTJ 751 (Jodhpur) (Trib.)

S. 50C : Capital gains-Full value of consideration-Stamp valuation – Assessee could raise objection to valuation through his return of income, only in the assessment proceedings. No universal principle with regard to being heard in the matter can be laid down and it all depends upon the language of provision and object and purpose of it .[S. 45]
The Commissioner (Appeals) upheld the addition of RS. 1,00,000 made by Assessing Officer by invoking S. 50C, by substituting apparent consideration of RS. 11 lakhs by that of RS. 12 lakhs adopted for stamp duty. On appeal by the assessee, dismissing the appeal the Tribunal held that; Assessee could raise objection to valuation through his return of income, only in the assessment proceedingS. No universal principle with regard to being heard in the matter can be laid down and it all depends upon the language of provision and object and purpose of it. (AY. 2006-07)
Jasvinder Hans. v. ACIT (2018) 170 ITD 241 / 164 DTR 249 (Asr) (Trib.)

S. 50C : Capital gains-Full value of consideration-Stamp valuation-Agreement to sell for property was entered on September 1966 though registered on 29-11-2010, stamp valuation on the date of registration cannot be applied as the provision of S. 50C was not in the statute when the agreement to sell for property was entered. [S. 45, 48]
Assessee entered in to an agreement to sell between assessee-HUF and purchaser in September, 1966, whereby, purchaser agreed to purchase property for RS. 1 lakh and paid earnest money of RS. 5000 but due to litigation in Civil Court, sale deed was executed later on 29-11-2010. AO applied the stamp duty valuation. Tribunal held that when the sale deed of September 1966 for calculating long-term capital gains would have to be considered and, thus, provisions of S. 50C which were not applicable in that year could not be invoked. (AY. 2011-12)
Hari Mohan Das Tandon (HUF) v. PCIT (2018) 169 ITD 639(All) (Trib.)

S. 50C : Capital gains-Full value of consideration-Stamp valuation-Assessee was not a real owner of property and he transferred same on representative basis, provisions of section 50C could not be applied to assessee’s case in order to compute capital gain arising from sale of said property.[S. 45]
Dismissing the appeal of the revenue the Tribunal held that ;since, the assessee was not a real owner of the said property and transferred the property on the representative basis and transfer took place between co-owners and NDL, it can be concluded that there is no transfer made by the assessee. The Assessing Officer has not considered the subsequent developmentS. Further, S. 50C cannot be applied in the given case. (AY. 2007-08)
JCIT v. D. Sesha Giri Rao. (2018) 168 ITD 287 (Hyd) (Trib.)

S.50C : Capital gains-Full value of consideration-Stamp valuation – Distress sale-Transactions between Government entities, provision cannot be applied. [S. 45]
Dismissing the appeal of the revenue the Tribunal held that; when the sale was distress sale and transactions between Government entities S. 50C provision cannot be applied. (AY. 2012-13)
ITO v. Southern Steel Ltd. (2018) 61 ITR 126 (Hyd) (Trib.)

S. 54 : Capital gains-Profit on sale of property used for residence- Consideration that arose in hands of HUF on sale of capital asset had been invested for purchase of new residential house in name of some of its members instead of assessee (HUF)-Entitle to exemption.[S. 45]
Dismissing the appeal of the revenue the Court held that, the materials on record would suggest that there was no dispute at the hands of the revenue that the sale consideration arising out of the sale of the capital asset was used for acquisition of a new asset and that such newly acquired asset was also shown in the accounts of the HUF. Revenue’s sole objection is that the sale deed was not executed in the name of the HUF but was in the name of two of the members of the HUF. The Tribunal was right in coming to the conclusion that this was substantial compliance with the requirement of section 54F when neither the source of acquisition of the new capital asset nor the account of such new asset in the name of the HUF are doubted. Mere technicality that the sale deed was executed in the name of member of the HUF rather not HUF, would not be sufficient to defeat the claim of deduction. By mere names of the purchasers in the sale deed, the rights of the HUF and other members of the HUF do not get defeated. If at all, the persons’ named in the sale deed hold the property of the trust for and on behalf of HUF and the other members of the HUF. In the present case, the capital asset was sold by the HUF and purchased by the HUF as reflected in the accountS. The names of two members of the HUF shown in the sale deed was only a cosmetic in nature. (AY. 2009-10)
PCIT v. Vaidya Panalalmanilal (HUF) (2018) 259 Taxman 19 (Guj.)(HC)

S. 54 : Capital gains-Profit on sale of property used for residence-Construction of residential house-Cost of land is also form cost of residential house –Not necessary that same money from sale of residential asset must be used.[S. 45]
Allowing the appeal of the assessee the Court held that, cost of land is also form cost of residential house and it is not necessary that same money from sale of residential asset must be used for claiming exemption. (AY.2010-11)
C. Aryama Sundaram. v. CIT (2018) 407 ITR 1/ 258 Taxman 10/ 171 DTR 295 / 305 CTR 567 (Mad) (HC)

S. 54 : Capital gains-Profit on sale of property used for residence-More than one house-Amendment brought in S. 54 to limit the exemption to one Residential unit is applicable from AY.2015-16 onwards.[S. 45]
In this case the Appellate Tribunal held that the assessee is holding more than one property which was not disputed by either of the party. The Tribunal in case of Laxman Singh Rawat ITA nos. 1668 & 2256/Del/2013 held that the expression “a residential house” would mean more than one residential house after taking into account the amendment to S. 54 which is apt in the present case. Further, the amendment has been brought in S. 54 to limit the exemption u/s 54 to one Residential unit, which is applicable from AY. 2015-16. (AY. 2012-13)
Harbinder Singh Chimni v. Dy. CIT (2018) 68 ITR 73 (SN) (Delhi)(Trib.)

S. 54 : Capital gains-Profit on sale of property used for residence – Purchase new house property within stipulated period of two years from date of transfer of original asset-Exemption cannot be denied on the ground that housing loan was utilised for purchase of new house property.[S. 45]
Allowing the appeal of the assessee the Tribunal held that if the assessee had purchased new house property within stipulated period of two years from date of transfer of original asset.Exemption cannot be denied on the ground that housing loan was utilised for purchase of new house property.(AY.2011-12)
Hansa Shah. v. ITO (2018) 173 ITD 260 /(2019) 69 ITR 334 / 175 DTR 212 (SMC)(Mum.) (Trib.)

S. 54 : Capital gains-Profit on sale of property used for residence-An advance given to a developer for booking of a flat in a residential project to be developed-booked flat prior to sale of existing immovable property- Neither on date of payment of advance nor till expiry of time period prescribed under S.54 alleged new flat was in existence-Denial of exemption is held to be justified.[S. 45]
Assessee had sold an immovable property in February 2010 and claimed deduction under S. 54 on account of an advance given to OSPL for booking of a flat.AO had conducted enquiry and found that builder had presented plans for approval only in month of october, 2013 and plans were expected to be approved only by month of may, 2014. Accordingly, AO denied claim of deduction by holding that payment to OSPL was made prior to date of sale of property and, further, assessee had failed to acquire allotment of new flat within a period of 2 years from transfer of original asset.Tribunal held that project in which assessee had booked flat was neither on site nor plan was in existence. Builder had also expressed possibility of refunding of amount due to delay in launching of project.Tribunal held that neither on date of payment of advance nor till expiry of time period prescribed under S. 54 alleged new flat was in existence and at most assessee acquired a right to purchase a flat, in upcoming project to be developed in future.Accordingly on facts, investment made by assessee was not in accordance with scheme of provisions of S. 54 hence not eligible for deduction.(AY.2011-12)
Jagdish Wadhwani. v. ITO (2018) 173 ITD 559 (Jaipur) (Trib.)

S.54 : Capital gains-Profit on sale of property used for residence-Purchased new residential house before sale of another residential house owned-Investment is made within the stipulated period and the investment was more than the capital gains earned-Entitle to exemption.[S. 45,54F]
Allowing the appeal of the assessee the Tribunal held that ; the assessee has made investment within the stipulated period and the investment was more than the capital gains earned. Accordingly the assessee is entitle to exemption though the assessee has purchased a new residential house before sale of another residential house owned by him.(AY.2012-13)
Yatin Prakash Telang v. ITO (2018) 171 ITD 705 / 170 DTR 329/195 TTJ 892 (Mum.)(Trib.)

S. 54 : Capital gains-Profit on sale of property used for residence –Unregistered document-Though an unregistered agreement to sell does not entitle the parties to seek part performance u/S. 53A of the Transfer of Property Act, 1882, it can be a basis for a suit for specific performance in view of S. 49 of the Registration Act. Consequently, even an unregistered agreement creates a right in favour of the buyer and constitutes a “transfer” of the old property u/s 2(47) for purposes of determining whether the purchase of the new property is within one year of the date of “transfer” of the old property.[S. 2(47),45, Transfer of Property Act, 1882,S,53A, Registration Act,1908,17(1)(a), 49]
Allowing the appeal of the assessee the Tribunal held that, though an unregistered agreement to sell does not entitle the parties to seek part performance u/S. 53A of the Transfer of Property Act, 1882, it can be a basis for a suit for specific performance in view of S. 49 of the Registration Act. Consequently, even an unregistered agreement creates a right in favour of the buyer and constitutes a “transfer” of the old property u/s 2(47) for purposes of determining whether the purchase of the new property is within one year of the date of “transfer” of the old property. (Followed K.B.Saha and Sons Pvt Ltd v.Development Consultant Ltd (2008) 8 SCC 564)(AY. 2012-13)
Gautam Jhunjhunwala v. ITO (2018) 173 ITD 93 / 170 DTR 153 / 195 TTJ 753 (Kol)(Trib.),www.itatonline.org

S. 54 : Capital gains-Profit on sale of property used for residence-Where the construction of new house was commenced before sale of the original asset the Assessee was eligible to claim deduction in respect of payments made before such sale – Assessee was eligible to claim deduction in respect of amount deposited in capital gain scheme beyond due date of filing return u/s 139(1) but before time limit allowed u/s 139(4).[S. 45, 139(1), 139(4)]
Referring to the decision of Hon’ble Delhi HC in CIT v.Bharti Mishra (2014) 98 DTR 1 (Delhi) (HC)) the ITAT observed that for the satisfaction of condition u/s 54, it was not necessary that the construction of new house must begin after the date of sale of the original/old asset and that there was no condition or reason for ambiguity and confusion which would require moderation or reading the words of the said section in a different manner. Further reference was also made in this regards by the Tribunal to the decision of Allahabad HC in CIT v. H.K. Kapoor (1998) 234 ITR 753 (All) (HC)). Relying on the decision of Hon’ble SC in CCE v. Favourite Industries (2012)7 SCC 153 the Tribunal noted that the beneficial provisions must be liberally interpreted. Accordingly, the Tribunal allowed the claim of deduction u/s 54 in respect of payments made before the date of sale of original house.
Further, in regard to the deposit made in the capital gain scheme beyond the due date of filing return u/s 139(1), relying on the decision of P&H HC in CIT v. Jagrati Aggarwal (Ms) (2011)339 ITR 610 (P& H) (HC) the Tribunal held that the assessee, having deposited the amount in the capital gain scheme within the extended period allowed by section 139(4) was eligible to claim deduction u/s 54. In result appeal of the assessee was allowed by the Tribunal.
Paramjit Kaur (Mrs) v. ITO (2017) 190 TTJ 772/ (2018) 162 DTR 1 (Chd) (Trib.)

S.54 : Capital gains-Profit on sale of property used for residence-Entire capital gains paid to developer of Flat — Assessee is entitled to exemption .[S. 45]
Dismissing the appeal of the revenue the Tribunal held that ; The entire capital gains were paid to the developer of the flat. In other words, the assessee had utilised the entire capital gains by way of making payment to the developer of the flat. The requirement of section 54 is that the capital gain shall be utilised or appropriated as specified in S. 54(2). The assessee had complied with the conditions stipulated in S. 54(2). Therefore the assessee was entitled to exemption under S. 54 of the Act .(AY.2013-14)
DCIT v. M. Raghuraman. (2018) 169 ITD 315 / 65 ITR 17(SN) (Chennai) (Trib.)

S. 54 : Capital gains-Profit on sale of property used for residence-Return-There is no bar / restriction that an assessee cannot file a revised return of income after issuance of notice u/s 143(2). A revised return of income can be filed even in course of the assessment proceedings provided the time limit prescribed u/s 139(5) is available. The Departmental Authorities are not expected to deny assessee’s legitimate claim of deduction by raising technical objection-Exemption claimed in revised return was directed to be allowed.[S. 139(5) 143(2)]
Assessee filed the revised return u/s 139(5), offering the capital gain and claiming exemption u/ S. 54 of the Act.AO held that the revised return being invalid the assessee is not entitle to exemption u/s 54 of the Act which was confirmed by the CIT(A). On appeal allowing the appeal the Tribunal held that ; there is no bar / restriction that an assessee cannot file a revised return of income after issuance of notice u/s 143(2). A revised return of income can be filed even in course of the assessment proceedings provided the time limit prescribed u/s 139(5) is available. The Departmental Authorities are not expected to deny assessee’s legitimate claim by raising technical objection. (AY. 2011-12)
Mahesh H. Hinduja v. ITO(2018) 171 ITD 471/ 171 DTR 12 /195 TTJ 1068 (Mum.)(Trib.), www.itatonline.org

S. 54 : Capital gains-Profit on sale of property used for residence – Basement was used as part and parcel of residential house hence capital gains invested in two residential house properties would be entitle to exemption. [S. 45]
Dismissing the appeal of the revenue the Tribunal held that; Basement was used as part and parcel of residential house hence capital gains invested in two residential house properties would be entitle to exemption. (AY. 2009-10)
ACITv.Shrey Sharma Guleri Prime Channel Software Communications (P.) Ltd. (2018) 170 ITD 295 / 64 ITR 67 (SN)/ 169 DTR 121/ 195 TTJ 196 (Mum.) (Trib.)

S. 54 : Capital gains-Profit on sale of property used for residence-Purchase of four flats merged in to one residential house – Entitle to exemption. [S. 45]
Dismissing the appeal of the revenue, the Tribunal held that, though the assessee has purchased four flats, merged in to one unit the exemption is held to be available. The Inspector carried out spot verification and reported that though there are four flats but the same has been merged in to one composite flat having a common entrance door, and was used as a residence. Followed CIT v Devdas Naik (2014) 366 ITR 12 (Bom.) (HC), ITO v. Sushila M. Jhaveri (2007) 107 ITD 327 (SB)(Mum.)(Trib.) (ITA NO. 6884/Mum./2014 dt. 11-04 2018 (AY. 2009-10)
ITO v. Kavita Gupta (Mum.) (Trib.) www.itat. nic

S. 54 : Capital gains-Profit on sale of property used for residence-Garage is also part of the house and eligible for exemption [S. 45]
The Tribunal held that, garage is also part of the house and entitle to exemption. Tribunal also observed that it is an universally accepted fact that car parking in a society cannot be separately purchased..Therefore, when any flat in the society is purchased along with car parking, then the investment in the flat and car parking will be considered as investment in the residential house. (ITA No. 4258/M/2011 dt. 13-06-2012) (AY. 2008-09)(ITA No 7928/Mum./2010 “C” dt. 6-09-2013 (AY. 2006-07) (ITA No. 8797/Mum./2010 “F” dt. 27-02 2015) (AY. 2007-08)
ACIT v. Usha B. Madan (Smt)(Mum.) (Trib.) www. iaat. nic
Penelope AnnDos v. ITO (Mum.) (Trib.)www.itat. nic
Vilma Marry Pereira v. ITO (Mum.) (Trib.) www.itat.nic

S.54 : Capital gains-Profit on sale of property used for residence-Mere availment of house building loan by assessee from bank for purchasing a new residential unit could not act as a disqualification for claim of exemption. [S. 45]
Allowing the appeal of the assessee the Tribunal held that; Mere availment of house building loan by assessee from bank for purchasing a new residential unit could not act as a disqualification for claim of exemption, when all other conditions are satisfied. (AY. 2010-11)
Amit Parekh. v. ITO (2018) 170 ITD 213 (Kol) (Trib.)

S. 54 : Capital gains-Profit on sale of property used for residence – If entire consideration was paid with in three years the assessee is entitle to exemption .[S. 45, 54F]
Allowing the appeal of the assessee the Tribunal held that; If agreement for purchase of new residential house is made and entire purchase price is paid within three years from the date of transfer of the old asset, exemption u/s 54 is available. It is not required that the house must be completed within 3 years. The requirement in S. 54(2) that the capital gains should be deposited in the CGAS scheme is merely an enabling provision. If the assessee shows during assessment proceedings that the capital gains have been reinvested in the new residential house, exemption cannot be denied merely the amount was not deposited in the Capital gains scheme. (AY. 2013-14)
Seema Sabharwal v. ITO (2018) 169 ITD 319/ 193 TTJ 128// 163 DTR 253 (Chd)(Trib.), www.itatonline.org

S. 54 : Capital gains-Profit on sale of property used for residence-When entire capital gain is invested in a flat under construction, exemption cannot be denied on the ground that possession was not given.[S. 45]
Dismissing the appeal of the revenue, the Tribunal held that; When entire capital gain is invested in a flat under construction exemption cannot be denied on the ground that possession was not given. S. 54(2) does not specify any such condition . (AY. 2013-14)
ACIT v. M. Raghuraman (2018) 169 ITD 315 (Chennai) (Trib.)

S. 54 : Capital gains-Profit on sale of property used for residence – Cost included furniture and fixtures – Exemption cannot be denied only on the ground that no claim was made in the return, if he is otherwise entitle to it. [S. 45]
Allowing the appeal of the assessee the Tribunal held that; The expression “cost of the residential house so purchased” in S. 54 is not confined to the cost of civil construction but includes furniture and fixtures if they are an integral part of the purchase. The fact that the assessee did not make the claim is no reason to deny the claim if he is otherwise entitled to it. (AY. 2011-12)
Rajat B. Mehta v. ITO (2018)169 DTR 178/ 163 DTR 49/ 192 TTJ 307/ 62 ITR 334 (Ahd)(Trib.)

S. 54 : Capital gains-Profit on sale of property used for residence – Investment in residential house outside India was held eligible for exemption (Prior to amendment with effect from 1-4-2015 by Finance (No. 2) ACT, 2014). [S. 45, 54F]
Allowing the application AAR held that, Investment in residential house outside India was held eligible for exemption (Prior to amendment with effect from 1-4-2015 by Finance (No. 2) ACT, 2014). Amendment is not retrospective. As regards the period og holding would be determined from the period from which property was held by the applicant’s father, indexation was to be allowed on 1-04-1981.
Dipankar Mohan Ghosh, In Re (2018) 401 ITR 129/ 301 CTR 42 /163 DTR 21 (AAR)

S. 54B : Capital gains-Land used for agricultural purposes-Sale deed for purchase and sale of land, found that assessee sold this land within two years from date of its purchase and not used land for agricultural purposes for a minimum. period of two years before its sale-Not entitle to exemption-Moreover, from expenses incurred, it could be proved that said land was never used for agricultural purposes after it was purchased by assessee as assessee was concentrating on its improvement rather than cultivation. [S. 45]
Dismissing the appeal of the assessee the Court held that ; the assessee had not used land for agricultural purposes for a miniMum. period of two years before its sale. Moreover, from expenses incurred, it could be proved that said land was never used for agricultural purposes after it was purchased by assessee as assessee was concentrating on its improvement rather than cultivation. As the assessee had not used this property for agricultural purposes accordingly the assessee was not entitled to benefit of deduction under S.-54B (BP.2005-06 to 2009-10)
Gopal S. Pandit. v. CIT (2018) 408 ITR 346/ 257 Taxman 50 / 172 DTR 23/ (2019) 307 CTR 112(Karn) (HC)

S. 54B : Capital gains-Land used for agricultural purposes-Investment in the name of wife was held to be entitle to exemption. The word used are the assessee has to invest, it is not specified that it is to be in the name of assessee. Expenditure on bore wells and stamp duty to be taken in to consideration while considering the exemption.[S. 45, 263]
Allowing the appeal of the assessee the Court held that; investment in the name of wife was held to be entitle to exemption. The word used are the assessee has to invest, it is not specified that it is to be in the name of assessee. Expenditure on bore wells and stamp duty to be taken in to consideration while considering the exemption.(AY. 2008-09)
Laxmi Narayan v. CIT (2018) 402 ITR 117 /(2019) 306 CTR 361 (Raj) (HC)
Shravan lal Meena L/H of Late Bhagwanta Meena v. ITO (2018) 402 ITR 117/(2019) 306 CTR 361 (Raj) (HC)
Mahadev Balaji v. ITO (2018) 402 ITR 117 /(2019) 306 CTR 361 (Raj) (HC)

S. 54B : Capital gains-Land used for agricultural purposes-Capital gain utilized towards purchase of new asset before furnishing of return of income belatedly under section 139(4) would be entitle to deduction.[S. 45, 139(4)]
Allowing the appeal of the assessee, the Tribunal held that, Capital gain utilized towards purchase of new asset before furnishing of return of income belatedly under section 139(4) would be entitle to deduction .(AY. 2012-13)
Manilal Dasbhai Makwana v. ITO (2018) 172 ITD 1 (Ahd) (Trib.)

S. 54EC : Capital gains-Investment in bonds-Investment made from advance received on sale of capital asset before date of transfer of asset will qualify for exemption.[S. 45]
Tribunal held that, investment made from advance received on sale of capital asset before date of transfer of asset will qualify for exemption.(AY. 2013-14)
Rahul G. Patel. v. DCIT (2018) 173 ITD 1/ 171 DTR 1/ 195 TTJ 1027 (Ahd) (Trib.)

S. 54F : Capital gains-Investment in a residential house – Construction of house-Deduction available only if construction is completed within a period of three years after date of transfer-Even within extended definition of S. 2(47) of the Act no transfer takes place on mere execution of agreement to sale.[S. 2(47), 45]
Court held that, (1)there can be a wide gap between an agreement to sale and an actual instance of sale being evidenced under a sale deed. Hence, upon mere execution of an agreement to sale, it cannot be said that such immovable property gets transferred to the purchaser even within the extended definition of Section 2(47) of the Act.(ii) Provisions of S. 54F of the Act clearly provide that construction of the residential unit should be done after the date of transfer but within three years from transfer date and hence if construction is prior to the date of transfer, the case of the assessee would not fall within the parameters of these provisions. (AY. 2009-2010)

Ushaben Jayantilal Sodhan.v. CIT (2018) 407 ITR 276/255 Taxman 454/169 DTR 31/ 304 CTR 201 (Guj)(HC).

S. 54F : Capital gains-Investment in a residential house-Relief is available if unutilized sale consideration in capital gain account scheme within due date of filing belated tax return under S. 139(4) .[S. 45, 54B]
For claiming exemption under S. 54B and 54F it is not necessary that investment should have been made within original due date of filing return under S. 139(1), even belated return u/s 139(4) is also eligible for exemption.
PCIT v. Shankar Lal Saini. (2018) 253 Taxman 308/ 168 DTR 226 (Raj)(HC)

S. 54F : Capital gains-Investment in a residential house-Assessee owning a house on date of transfer is not entitle to benefit under S. 54F.[S. 45]
Held that the assessee was owning house on date of transfer is not entitle to benefit under S. 54F. (AY. 1998-99, 1999-2000)
Arjun Malhotra v. CIT (2018) 403 ITR 354 / 166 DTR 235/ 255 Taxman 399 / 304 CTR 454 (Delhi) (HC)

S. 54F : Capital gains-Investment in a residential house – Property purchased in the name of wife –Loan was sanctioned in the name of wife – Not entitle to exemption .[S. 45]
Property purchased in the name of wife.Loan was sanctioned in the name of wife. Not entitle to exemption.(AY.2009-10)
Kaushal Kishore Maheshwari v. ACIT (2017) 190 TTJ 811/ (2018) 162 DTR 41 (Delhi) (Trib.)

S. 54F : Capital gains-Investment in a residential house-Capital gains arising from sale of basement of a building which was used for habitable purposes was within purview of a residential flat-Entitle to exemption.[S. 45 54]
Dismissing the appeal of the revenue, The Tribunal held that the evidence on record was sufficient to show that the basement was a habitable unit and the expression used in S. 54F is “a residential unit”. It was further held that, there was nothing in the section which requires that residential house should be built in a particular manner, a person may construct a house according to his plans and requirements. Most of the houses were constructed according to the needs and requirements and even compulsions. The assessee was entitled to exemption u/S. 54 and 54F of the Act. (AY. 2009-10)
ACIT v. Shri Shrey Sharma Guleri Prime Chhanel Software Communciations P. Ltd. (2018) 64 ITR 67 (SN)(Mum.)(Trib.)

S. 54F : Capital gains-Investment in a residential house- two residential units purchased at two different localities. Exemption was restricted to only investment in one residential house property. [S. 45]
Tribunal held that,exemption was restricted to only investment in one house property. Assessee was not entitled to exemption with regard to two residential units purchased at two different localities. (AY. 2013-14)
ACIT v. N. S. Viswanathan (2018) 67 ITR 307 (Cochin) (Trib.)

S. 54F : Capital gains-Investment in a residential house-Investment in new asset is greater than capital gains-Partly out of sale proceeds and partly with bank Loan —Exemption is available [S. 45]
Investment in new asset is greater than capital gains-Partly out of sale proceeds and partly with bank Loan.Exemption is available.(AY.2012-13)
Kayvanbhai Surendrabhai Huttheesingh v. ITO(2018) 63 ITR 17 (SN) (SMC)(Ahd) (Trib.)

S. 54F : Capital gains-Investment in a residential house – Commercial property – Held more than thirty six months-Depreciation was claimed – Purchase of residential flat – Eligible deduction.[S. 45, 50]
Dismissing the appeal of the revenue the Tribunal held that, sale of commercial property which was held for more than thirty six months on which depreciation was claimed and consideration was invested in a residential flat is eligible for deduction.(AY.2012-13)
DCIT v. Hrishikesh D. Pai (2018) 173 ITD 272/( 2019) 197 TTJ 583 (Mum.)(Trib.)

S. 54F : Capital gains-Investment in a residential house-Purchase of three different properties-Exemption was allowed only in respect of one constructed house – Prior to 1-4-2015.[S. 45]
Tribunal held that, n absence of any material to show that three different properties were purchased to meet residential requirement of family of assessee the deduction was allowed only in respect of one constructed house.Position prior to 1-4-2015.(AY.2011-12)
Rakesh Garg. v. ITO (2018) 173 ITD 302/(2019) 197 TTJ 632 (Jaipur) (Trib.)

S. 54F : Capital gains-Investment in a residential house – Capital gains account scheme-Part of sale consideration received in cash was taken over by department before due date of filing of return-Exemption cannot be denied on the ground that capital gain was not deposited in capital gains account with in prescribed time-S. 54, 54F being beneficial provision,non-reference about specific section under which assessee is making claim exemption cannot be denied. [S. 45, 54]
AO rejected assessee’s claim for deduction on ground that amount was not deposited in Capital gains account.Tribunal held that as the amount received in cash was taken over by department before due date of filing return of income and, thus, assessee was prevented from depositing said money in Capital gains account. On facts it was found that remaining amount of capital gain had been duly deposited in Capital gain account. Accordingly the assessee is eligible for deduction. Tribunal also held that,S. 54, 54F being beneficial provision,non-reference about specific section under which assessee is making claim exemption cannot be denied. (AY.2012-13)
ACIT v. Dr. S. Sankaralingam. (2018) 173 ITD 413 / (2019) 174 DTR 438 /197 TTJ 749 (Chennai) (Trib.)

S. 54F : Capital gains-Investment in a residential house-Depreciable asset-Exemption is available even on short-term capital gains calculated on sale of depreciable assets held for more than 36 months. [S. 2, 42A),45 50]
Tribunal held that the period of holding of factory shed was exceeding more than 36 months, therefore, even if sale of factory shed is subject to short-term capital gain on basis of deeming provision as specified under S. 50, inherently factory shed being long-term capital asset, exemption is available. (AY.2011-12)
Shrawankumar G. Jain. v. ITO (2018) 173 ITD 417 (Ahd) (Trib.)

S. 54F : Capital gains-Investment in a residential house-Purchase of new residential house within due date specified under S. 139(4) from date of transfer of original asset-Entitle to exemption.[S. 45, 54F(4),139(4)]
Tribunal held that, purchase of new residential house within due date specified under S. 139(4) from date of transfer of original asset is entitle to exemption. (AY.2011-12)
Shrawankumar G. Jain. v. ITO (2018) 173 ITD 417 (Ahd) (Trib.)
S. 54F : Capital gains-Investment in a residential house – Entire net consideration had been invested-Entitle to exemption in respect of whole of capital gains- Valuation determined by stamp authority is relevant for determination u/s 50C however it cannot be considered as consideration received or accrued to the assessee for the purpose of S. 54F of the Act.[S. 45, 48, 50C]
Tribunal held that for purpose of S. 54F, what is relevant is investment of net consideration. Valuation determined by Stamp authority is relevant for the purpose of S. 50C, however the said valuation, is not a consideration which has been received by or has accrued to assessee. Accordingly when an assessee invested entire net consideration had been invested is entitle to exemption in respect of whole of capital gains.
Anant Chetan Agarwal. v. DCIT (2018) 172 ITD 525 (Luck) (Trib.)

S. 54F : Capital gains-Investment in a residential house – Invested in reconstruction of house another house property belong to husband where she was residing – Entitle to exemption-Development expenditure was not allowed on facts. [S. 45]
Tribunal held that part of sale consideration which is invested re construction of house belong to husband where she is residing is held to be entitle to exemption. However development expenditure of RS. 3.20 lakhs, it is not in dispute that the property was sold on 22-01-2010 but, the quotation for so-called development was obtained from TC only on 20-03-2010 therefore, after the sale of property. Accordingly,the assessee would not have incurred the expenditure. (AY.2011-12 )
Kalavathy Sundaram (Smt.). v. ITO (2018) 172 ITD 597 (Chennai) (Trib.)

S. 54F : Capital gains-Investment in a residential house – Exemption cannot be denied on the ground that residential building was used for business purpose .[S. 54]
AO and CIT(A) restricted the claim of deduction u/s 54F of the Act by excluding the portion of the residential building which was used for business purpose. It was held by Hon’ble Tribunal that, there was no bar on the assessee on the usage of the new residential property for business purpose. Section 54F of the Act only stipulates that the assessee should have constructed / purchased a residential house within the stipulated time in order to claim the benefit of deduction. It is not necessary that a person should reside in the house to call it a residential house. (AY. 2013-14)
Dy. CIT v. Subramanian (A. M.) (2018) 63 ITR 24 (SN.) (Chennai)(Trib.)

S. 54F : Capital gains – Capital gains on sale of house properties can be invested in construction of house property more than once for same new property, if cost of property is within capital gains that arose to the assessee. [S. 45]
On appeal before the Tribunal, it was held that the new asset was under construction and cannot be said residential house owned by the assessee. The Tribunal also held that, there was no bar in the u/S. 54F of the Act for claiming deduction more than once for the same house property (new property), if the cost of the new property is within the capital gain that arose to the assessee. (AY. 2011-12)
ACIT v. Mohinder Kumar Jain (2017) 62 ITR 176 (Delhi) (Trib.)

S. 54F : Capital gains-Investment in a residential house – Sale is not concluded or agreement of sale is not certain to be honoured, assessee cannot claim deduction in respect of purchase or construction of property.[S. 45, 54F(4)]
Dismissing the appeal of the assessee the Tribunal held that, when the sale is not concluded or agreement of sale is not certain to be honoured, assessee cannot claim deduction in respect of purchase or construction of property within one year before or within two years after sale of original asset or to have constructed property within three years after sale of property for purposes of claiming deduction. (AY. 2014-15)
Mahesh Malneedi. v. ITO (2018) 169 ITD 154 (Hyd) (Trib.)

S. 55 : Capital gains-Cost of improvement-Cost of acquisition-Tenancy rights-Acquired tenancy rights by inheritance i.e. from his father before 1-4-1981, in view of provisions of section 49(1)(iii), benefit of indexation of cost of acquisition could not be granted while computing capital gain arising from sale of said rights-Cost to be taken as nil, as the assessee has not paid any purchase price for acquisition of the same.[S. 48,49(1)(iii), 55 (2)(b), 55(3)]
Dismissing the appeal of the assessee Court held that ;held though the assessee has acquired tenancy rights by inheritance i.e. from his father before 1-4-1981 as the assessee had acquired tenancy rights by inheritance, cost of acquisition would be computed in terms of section 49(1)(iii)(a) of the Act. In view of fact that S. 49(1)(iii)(a) provides that cost of acquisition of capital asset would deemed to be cost incurred by previous owner of property, benefit of indexation of cost of acquisition is not eligible.Cost to be taken as nil, as the assessee has not paid any purchase price for acquisition of the same.(AY.2007-08)
Dharmakumar C. Kapadia v. ACIT (2018) 257 Taxman 239 (Bom.)(HC)
Editorial : Order in Dharmakumar C. Kapadia v. ACIT (2016) 65 taxmann.com 61 (Mum.) (Trib.) is affirmed

S. 55 : Capital gains-Cost of improvement-Cost of acquisition – Approved valuer’s report itself is a piece of evidence and Act does not require that opinion of approved valuer should have been supported with further evidence in shape of circle rate or exemplar sale deeds etc, value as on 1-4-1981 on the basis of approved valuer was held to be valid.[S. 45, 55(2)(b)(ii)]
Dismissing the appeal of the revenue the Court held that; Approved valuer’s report itself is a piece of evidence and Act does not require that opinion of approved valuer should have been supported with further evidence in shape of circle rate or exemplar sale deeds etc, value as on 1-4-1981 on the basis of approved valuer was held to be valid. (AY. 2009-10)
PCIT v. Vidhi Agarwal (Smt.) (2018) 252 Taxman 395 (All.)(HC)

S. 56 : Income from other sources –Gifts from relatives-Maternal aunt-Gift need not be on a particular occasion-Addition cannot be made as income from other sources .[S. 56 (2)(v),68]
Allowing the appeal of the assessee Court held that ;S. 56(2)(v) of the Income-tax Act, 1961 was inserted by the Finance (No. 2) Act, 2004 with effect from April 1, 2005. As could be seen from the language of sub-clauses (a) and (b) of clause (v) of sub-section (2) of section 56, while under clause (a) which deals with a gift from any relative no occasion is envisaged, clause (b) dealing with money received from any other person, specifies the occasion of marriage. Accordingly the gift received form maternal aunt cannot be assessed as income from other sources or as cash creditsfor the reason that the assessee had offered an explanation supported by uncontroverted material showing transfer of the amount. (AY.2005-06 to 2008—09).
Pendurthi Chandrasekhar v. DCIT(2018) 407 ITR 179/ (2019) 175 DTR 73 / 307 CTR 249 (T&AP) (HC)

S. 56 : Income from other sources — Business income —Setting up business — Interest on fixed deposits -Assessable as income from other sources .[S. 28(i)]
Allowing the appeal of the revenue the court held that ; interest on fixed deposits earned before commencement of the business on sums borrowed for setting up the business and placed in fixed deposit pending their utilisation in the project, is an “income from other sources”. (AY. 2011-12, 2012-13)
CIT v. Sangam Power Generation Co. Ltd. (2018) 405 ITR 390 (All) (HC)

S. 56 : Income from other sources – Fair market value – Shares price was determined as per R.11UA Book value of assets and liabilities declared by company at Rs 5 per share-AO determined at Rs 45.72 per share and made addition of Rs 40.72 per share as income from other sources-Tribunal held that addition made by the AO was held to be not justified. [S. 56(2)(viia), R.11UA]
Shares price was determined as per R.11UA Book value of assets and liabilities declared by company at Rs 5 per share. AO determined fair market value at Rs 45.72 per share and made addition of Rs 40.72 per share as income from other sources. Allowing the appeal of the assessee the Tribunal held that,there is nothing under the provision of rule 11UA to refer to fair market value of the land as taken by the Assessing Officer as applicable to the year 2014-15. Therefore, the share price calculated by the assessee for Rs. 5 per share had been directed to be accepted. (AY.2014-15)
Minda S M Technocast P. Ltd. v. ACIT (2018) 65 ITR 84(SN) (Delhi) (Trib.)

S. 56 : Income from other sources-S.56(2)(vii),is a counter evasion mechanism to prevent money laundering of unaccounted income & does not apply to bona fide business transaction done out of business exigency. The difference between alleged fair market value of share and the subscribed value of shares cannot be assessed as income u/s 56(2)(vii)(c).[S. 56 (2) (vii) (c)]
Department has raised following grounds before the Tribunal
“On the facts and in the circumstances of the case, and in law, the Learned CJT (A) erred in deleting the addition made u/s 56(2)(vii)(c) of the Act of RS. 3,01,25,58,196/-being the difference between alleged fair market value of share (RS. 1538.64 per share) of Dorf Ketal Chemicals India Pvt. Ltd. and the subscribed value of shares (RS. 100 per share) without appreciating the fact that the valuation of shares is to be done prior to allotment of shares. ”
Dismissing the appeal of the revenue the Tribunal held that ;S. 56(2)(vii),is a counter evasion mechanism to prevent money laundering of unaccounted income & does not apply to bona fide business transaction done out of business exigency. The difference between alleged fair market value of share and the subscribed value of shares cannot be assessed as income u/s 56(2)(vii)(c).(AY. 2010-11)
ACIT v. Subhodh Menon(2019) 174 DTR 417 / 175 ITD 449/198 TTJ 79 (Mum.)(Trib.),www.itatonline.org
ACIT v. P.N.Ramaswamy (2019) 174 DTR 417/198 TTJ 79(Mum.) (Trib.) www.itatonline. Org

S. 56 : Income from other sources- Interest is received under S. 28 of Land Acquisition Act, then same is not taxable in hands of assessee and in case interest is received under section 34 of Land Acquisition Act, same is taxable in hands of assessee-Matter remanded. [S. 56 (2) (vii), 57,Land Acquisition Act, 1894 S. 28, 34]]
Tribunal held that,interest is received under S. 28 of Land Acquisition Act, is not taxable however, interest is received under S. 34 of Land Acquisition Act, is taxable.Matter remanded. (AY.2012-13)
Jyoti Jayantrao Indurkar v. ITO (2018) 172 ITD 439 /68 ITR 39 (SN)(Pune) (Trib.)

S. 56 : Income from other sources-Fair market value (FMV) of shares issued at premium-Discount cash flow method (DCF) – Net valuation method – Option to choose the method of valuation is with assesses-Determined Fair Market Value of shares issued at premium on basis of Discount Cash Flow method as per guidelines given by ICAI-Assessing Officer cannot change the method of valuation of shares at premium to Net Asset Value method.(NAV) [S. 56(2)(Viib), R.11UA(2) (b)]
Tribunal held that,when law had given an option to assessee to choose any of method of valuation of his choice and assessee exercised an option by choosing a particular method (DCF), changing method or adopting a different method would be beyond powers of revenue authoritieS. Accordingly determined Fair Market Value of shares issued at premium on basis of Discount Cash Flow method as per guidelines given by ICAI, Assessing Officer cannot change the method of valuation of shares at premium to Net Asset Value method.(NAV) (AY.2013-14)
Rameshwaram Strong Glass (P.) Ltd. v. ITO (2018) 172 ITD 571 / 170 DTR 415/ 195 TTJ 465(Jaipur) (Trib.)

S. 56 : Income from other sources- Only two share holders husband and wife – lifting corporate veil-On demises of husband shares devolved on daughter-Unrealistic premium paid by mother for allotment of shares-Benefit only passed on to daughter-Provisions of S. 56(2)(viib) cannot be invoked in the hands of the company when cash or asset is transferred by a mother to her daughter. [S. 56(2) (vi),56(2)(viib), 56 (2) (x)]
The assessee company had only two share holders husband and wife On demises of husband shares devolved on daughter. Unrealistic premium paid by mother for allotment of shares.Tribunal held that, here was no possibility of generation and use of unaccounted money resulting from transaction as investor’s source of investment was genuine Lifting corporate veil could not be invoked in case of assessee-company because by virtue of said transaction benefit had only passed on to her daughter and said transaction would not benefit any further shareholder in future benefit only passed on to daughter. Accordingly the provisions of S. 56(2)(viib) cannot be invoked in the hands of the company when cash or asset is transferred by a mother to her daughter.
Vaani Estates (P.) Ltd. v. ITO (2018) 172 ITD 629 (Chennai) (Trib.)

S. 56 : Income from other sources-No addition should be made where satisfactory explanation with necessary evidences is provided in case of sums received from relatives. [S. 56 (2)(v)]
The Tribunal noted that the assessee had explained in detail different amount received from different persons and all the entries were verified by the Department from the bank statementS. Therefore the Tribunal held that since the assessee had provided satisfactory explanation for each and every amount received along with necessary evidences and also the fact that the assessee has returned the money to the persons in subsequent years, there was no logic in the addition made by the AO under section 56(2)(v) of the Act and the same was unwarranted. Accordingly the Tribunal deleted the addition.
Dy.CIT v. Rohit Kumar (2018)66 ITR 666 (Chd)(Trib.)

S. 56 : Income from other sources –Fair market value of shares-Direct Cash Flow Method (DCF)-No evidence was produced for verifying the correctness of data supplied by the assessee.AO was justified in rejecting DCF method and adopting Net Asset value method.[R.11UA]
Assesee valued the equity value of shares of Rs 10 each at premium of Rs 40 per share, accordingly the fair value was determined by a Merchant banker only on basis of Direct Cash Flow Method (DCF), only depending on data supplied by assessee. AO rejected valuation report and independently determined FMV of shares at RS. 9.60 each on basis of NAV method. FMV of shares over RS. 9.60 i.e. RS. 40.40 was disallowed by AO. under S. 56(2)(vii) of the Act and added to assessee’s income. On appeal by the assessee the Tribunal held that as no evidence was produced for verifying correctness of data supplied by assessee, AO was justified in rejecting DCF method and adopting Net Asset Value method. (AY.2014-15)
Agro Portfolio (P.) Ltd (2018) 171 ITD 74 (Delhi) (Trib.)

S. 56 : Income from other sources-Share premium-Addition cannot be made in respect of share premium received by assessee from its holding companies as said share premium was on account of capital transaction and was not an income within charging sections of Act.S 56(2)(viib) read with section 2(24)(xvi) are not made applicable to shares issued to non-residents mainly to encourage foreign investments. [S. 2(24)(xvi), 56(1),56 (2)(viib), 68, Companies Act, 2013,S,52, Companies Act, 1956 S. 78 ]
Dismissing the appeal of the revenue,Tribunal held that, addition cannot be made in respect of share premium received by assessee from its holding companies as said share premium was on account of capital transaction and was not an income within charging sections of Act.Assessee also supported the fair value of equity shares with a certificate issued by a chartered accountant using DCF method which was approved method as prescribed by RBI and assessee had filed its bank statements as well as FIRC issued by its bankers as evidence and thus, no fault lay with assessee in issuing equity shares. Therefore, no addition was warranted towards share premium received by assessee from its holding companies as said share premium was on account of capital transaction and was not an income within charging sections of Act. S 56(2)(viib) read with S. 2(24)(xvi) are not made applicable to shares issued to non-residents mainly to encourage foreign investmentS. Addition also cannot be u/s 68 of the Act as the assessee has filed bank statements as well as FIRC issued by its bankers as evidence.The Tribunal also held that the,assessee did utilize proceeds of funds raised towards share premium for setting up manufacturing unit for manufacturing soles for footwear for which business purposes funds were stated to be entrusted by shareholders, therefore addition can not be made as income from other sources. (AY.2012-13)
DCIT v. Finproject India (P.) Ltd. (2018) 171 ITD 82 / 194 TTJ 277 / 170 DTR 52/ 64 ITR 27 (SN)(Mum.) (Trib.)

S. 56 : Income from other sources-Gift-Provisions of section 56(2)(vii)(b) are applicable to only those transactions which are entered into after 1-10-2009 .[S. 56(2)(vii)(b)]
AO held that the assessee had received a property worth RS. 48.57 lakhs without any consideration.Accordingly he added said amount to assessee’s income under section 56(2)(vii)(b) of the Act. Tribunal held that, since the impugned transaction was entered into on 6-6-2009, as per registered sale deed, same would not be hit by provisions of section 56(2)(vii)(b).Accordingly the addition was deleted.(AY.2010-11)
Shailendra Kamalkishore Jaiswal. v. ACIT (2018) 171 ITD 6 (Nag.) (Trib.)

S. 56 : Income from other sources-buy back of shares–S. 56(2)(viia) is a counter evasion mechanism to prevent laundering of unaccounted income under the garb of gifts The primary condition for invoking S. 56(2)(viia) is that the asset gifted should become a “capital asset” and property in the hands of recipient. If the assessee-company has purchased shares under a buyback scheme and the said shares are extinguished by writing down the share capital, the shares do not become capital asset of the assessee-company and hence S. 56(2)(viia) cannot be invoked in the hands of the assessee company .[S. 56(2)(viia)]
Allowing the appeal of the assessee the Tribunal held that,S. 56(2)(viia) is a counter evasion mechanism to prevent laundering of unaccounted income under the garb of gifts. The primary condition for invoking S. 56(2)(viia) is that the asset gifted should become a “capital asset” and property in the hands of recipient. If the assessee-company has purchased shares under a buyback scheme and the said shares are extinguished by writing down the share capital, the shares do not become capital asset of the assessee-company and hence S. 56(2)(viia) cannot be invoked in the hands of the assessee company.(AY. 2014-15)
Vora Financial Service P. Ltd. v. ACIT(2018) 171 ITD 646/ 194 TTJ 746/ 65 ITR 77 (SN)/( 2019) 178 DTR 58(Mum.)(Trib.), www.itatonline.org

S. 56 : Income from other sources-Receipt of shares without adequate consideration or for inadequate consideration — Assessee Filing Reply Before Assessing Officer supported by documentary evidence with certificate of Chartered Accountant and report of registered Valuer — AO was directed to decide issue a fresh.[S. 56(2) viib)]
Assessee issued 50,000 shares of the face value of RS. 100 at share premium of RS. 150. The book value of the shares fair market value was RS. 240.89 as per the computation furnished by the assessee, whereas the shares were issued at RS. 250. The AO made an addition RS. 4,55,500 which was confirmed by the CIT(A). On appeal the Trib.uanl held that income of the assessee. The Commissioner (Appeals) confirmed the addition. On appeal the Tribunal held that Assessee has filed certificate of Chartered Accountant and report of registered valuer. The Explanation to section 56(2)(viib) of the Income-tax Act, 1961 had not been considered by the authoritieS. Therefore the matter was restored to the Assessing Officer with a direction to redecide this issue in the light of the reply and the material filed by the assessee on record in the light of the Explanation to section 56(2)(viib).(AY.2013-14)
Meenu Paper Mills P. Ltd. v. ACIT (2018) 64 ITR 709 (Delhi) (Trib.)

S. 56 : Income from other sources-Interest from GIDA on cancellation of auction plots under direction of Supreme Court, since interest was emanating from amount paid by assessee and not directly from its business activities, it could not be considered as business income. [S. 28(i)]
Dismissing the appeal of the assessee the Tribunal held that; since interest was emanating from amount paid by assessee and not directly from its business activities, it could not be considered as business income of assessee. (AY. 2007-08)
Dewa Projects (P.) Ltd. v. ACIT (2018) 170 ITD 326 /166 DTR 105 / 193 TTJ 755(Cochin) (Trib.)

S. 56 : Income from other sources-Interest received by assessee from deposits given for obtaining bank guarantee was to be assessed as income from other sources. [S. 28(i)]
Tribunal held that; nterest received by assessee from deposits given for obtaining bank guarantee was to be assessed as income from other sources. (AY. 2007-08)
Dewa Projects (P.) Ltd. v. ACIT (2018) 170 ITD 326/166 DTR 105 / 193 TTJ 755(Cochin) (Trib.)

S. 56 : Income from other sources-Fair Market value of shares sold-Choice of method of valuation is with the assessee – AO has no jurisdiction to insist that the assessee should adopt only a particular method for determining the value of shares – Rule of consistency must be followed. [S. 56(2)(viib), [R. 11UA]
Dismissing the appeal of the revenue the Tribunal held that; for determining the fair market value of shares sold, choice of method of valuation is with the assessee. Rule 11UA allows the assessee the right to adopt the method of his choice for valuing shares (DCF, NAV etc). The AO has no jurisdiction to insist that the assessee should adopt only a particular method for determining the value of the shareS. Until and unless the legislature amends the provision of the Act and prescribes only one method for valuation of shares, the assessees are free to adopt any one method of their choice. AO should not deviate from earlier years’ decisions without assigning any concrete and justifiable reasonS. Tax determination cannot be left to whims and fancies of a person. It is a serious task and has to be accomplished in a disciplined manner. If an assessee has been allowed a certain concession in earlier year/(s) it cannot be withdrawn in subsequent years without plausible reasons. (AY. 2013-14)
DCIT v. Ozoneland Agro Pvt. Ltd(2018) (2018)53 CCH 427 / 64 ITR 6 (SN).(Mum.)(Trib.), www.itatonline.org

S. 56 : Income from other sources-Under valuation of shares-The “fair market value” of shares acquired has to be determined by the taking the book values of the underlying assets and not their market values. [S. 56(2)(viia), R. 11UA]
Allowing the appeal of the assesse the Tribunal held that; on the plain reading of above Rule, it is revealed that while valuing the shares the book value of the assets and liabilities declared by the TEPL should be taken into consideration. There is no whisper under the provision of 11UA of the Rules to refer the fair market value of the land as taken by the Assessing Officer as applicable to the year under consideration. Therefore, we are of the view that the share price calculated by the assessee of TEPL for RS. 5 per shares has been determined in accordance with the provision of Rule 11UA. (AY. 2014-15)
Minda SM Tecnocast Pvt. Ltd. v. ACIT(2018) 170 ITD 12 (Delhi)(Trib.), www.itatonline.org

S. 56 : Income from other sources – Unquoted equity shares-Discounted cash flow method – Net asset value method – Option to adopt the method of valuation is with assessee-When no defect is found in valuation of shares arrived on basis of discounted cash flow method addition made by the AO on basis of net asset value method was to be set aside. [S. 56(2)(vii)(b), R. 11UA]
The assessee submitted valuation per equity share computed on the discounted cash flow method as per the certificate of Chartered Accountants wherein the value per shares was arrived at RS. 54. 98 per share. The AO did not accept said valuation and applied Net Asset Value method as per which value of share came to RS. 26. 69 per share. Applying the said value, the Assessing Officer made addition under S. 56(2)(vii)(b) of the Act. Tribunal held that the provisions of S. 56(2)(vii)(b) gives an options to assessee to adopt any of methods which can be compared with Net Asset Value Method and Assessing Officer shall adopt value whichever is higher. Accordingly the since discounted cash flow method is one of prescribed method and, moreover, Assessing Officer had not found any serious defect in facts and details used in determining fair market value under said method, impugned addition made by him was deleted. (AY. 2014-15)
ACIT v. Safe Decore (P.) Ltd. (2018) 169 ITD 328//165 DTR 339 /193 TTJ 898(Jaipur) (Trib.)

S. 56 : Income from other sources-Business income-Business discontinued-Interest earned on inter-corporate deposit was held to be assessable as income from other sources and not as business income .[S. 28(i)]
Dismissing the appeal of the assessee the Tribunal held that, when the manufacturing business was discontinued, interest earned on inter-corporate deposit was held to be assessable as income from other sources and not as business income. (AY. 2008-09, 2010-11)
Sai Fragrance & Flavours (P.) Ltd. v. ACIT (2018) 169 ITD 235 (Mum.) (Trib.)

S. 56 : Income from other sources – Relative-Hindu Undivided Family (HUF)-Gift by the mother of the Karta of the HUF, to the HUF is liable to be taxed as the mother can not be considered as member of HUF – Revision was held to be justified – Assessee was directed to produce valuation report as per rule 11UA .[S. 2(31), 56(2)(vii),263]
Dismissing the appeal of the assesse the Tribunal held that; Proviso to section 56 (2) (vii) provides definition of “relatives‟ in case of individual and HUF separately. It provides that above clause for taxability shall not apply to any sum of money or property received from any “relative‟. The “relative‟ have been mentioned separately with respect to an individual, and with respect to a Hindu undivided family. Therefore, in case of Hindu undivided family, if the gift is not received from member of such HUF then such sum is chargeable to tax. The “relatives‟ mentioned with respect to an individual cannot be considered when the recipient of the property is an HUF. Further, it substitutes the earlier definition of the “relative‟ when there was no reference about what constitutes “relatives‟ with respect to the HUF. It only talks about “relatives‟ with respect to an individual. Therefore, earlier the issue was that if the gift is received by an HUF from its members, probably it was taxable. To remove that lacuna and to give benefit to the HUF, the above amendment was made. The amendment also speaks through “notes on clauses‟ that now the definition of „relative‟ shall also include any sum or property received by an Hindu undivided family from its members apart from the persons referred to in the explanation with respect to an individual. It does not provide that if gift is made to an HUF by any of the „relatives‟ of those individuals comprising the HUF, who is not the member of the HUF, then such gift is not chargeable to tax. If such a view were accepted, then gift to HUF would never be chargeable to tax if it were received from the “relatives” of the members of such HUF. We are afraid that is not the language as well as the intention of the legislature. Even otherwise, When the language of the law is clear, support of the “notes on clauses‟ to the amendment does not help the assessee. Revision was held to be justified, however the assessee was directed to produce valuation report as per rule 11UA. (AY. 2013-14)
Subodh Gupta (HUF) v. PCIT(2018) 169 ITD 60/ 166 DTR 153/ 193 TTJ 442 (Delhi)(Trib.) www.itatonline.org

S. 56 : Income from other sources-Agricultural income – Consideration was not shown to avoid payment of stamp duty-Consideration was held to be assessable as income from other sources and not as agricultural income, however levy of concealment penalty was held to be not justified.[S. 271(1) (c)]
Tribunal held that; an assessee who understates the consideration received for sale of agricultural land to avoid payment of stamp duty is defrauding the exchequer. He cannot take advantage of his own wrong and is estopped from contending that the amount received from the purchaser is a higher amount than was stated in the agreement. The incremental amount is assessable as ‘income from other sources’ and not as ‘agricultural income’. However, penalty u/s 271(1)(c) cannot be levied for the said wrong claim. (ITA No. 665/Chd/2016 dt. 18-1-2018 (AY. 2013-14)
ACIT v. Mohinder Singh (Chd.)(Trib.)www.itatonline.org
Malkit Singh v. ITO (Chd.)(Trib.)www.itatonline.org

S. 56 : Income from other sources-Purchase of property from a company wherein the assessee is also director can not be assessed as income from other sources, as the amendment to assess difference arising out of stamp duty value and actual sale consideration as income in case of sale of property for a consideration less than stamp duty value of property was incorporated into statute by Finance Act, 2013 with effect from 1-4-2014.[S. 56(2)(vii)]
Allowing the appeal of the assessee the Tribunal held that, Purchase of property from a company wherein the assessee is also director can not be assessed as income from other sources, as the amendment to assess difference arising out of stamp duty value and actual sale consideration as income in case of sale of property for a consideration less than stamp duty value of property was incorporated into statute by Finance Act, 2013 with effect from 1-4-2014. (AY. 2010-11, 2012-13)
Keshavji Bhuralal Gala v. ACIT (2018) 169 ITD 23/ 165 DTR 8/ 193 TTJ 227 / 63 ITR 67 (SN)(Mum.) (Trib.)

S. 56 : Income from other sources-Redeemable non-cumulative preference shares (RNCPS) cannot be excluded from ambit of section 56(2)(viib)-In case of issue of redeemable non-cumulative preference shares (RNCPS) at premium, conclusion of valuer that 10 per cent discount factor was appropriate, was to be upheld as it was based on proper comparable for bench marking [S. 56(2)(viib),Rule 11UA(c)(c)]
Tribunal held that, S. 56(2)(viib) shares that all types of shares are covered by this section. The argument of the assessee that RNCPS is a quasi-debt and that it was not the intention of the legislature to bring such instruments within the ambit of this section, is devoid of merit. There is no dispute on the method of valuation of these RNCPS. The valuer has adopted “discounted cash flow” method of valuation and the Assessing Officer has accepted the same. Considering the valuation report where the Valuer has considered 10% as discount factor where as the CIT(A) has considered at 12. 5% rate of discount. The valuation adopted by the valuer was based on proper comparable and bench mark, the addition made under section 56(2)(viib), by the AO to the extent sustained by the CIT(A) was deleted. (AY. 2013-14)
Microfirm Capital (P.) Ltd. v. DCIT (2018) 168 ITD 301/62 ITR109/192 TTJ 431 / 164 DTR 35 (Kol) (Trib.)

S. 56 : Income from other sources-Interest income on fixed deposit is held to be assessable as income from other sources.[S. 28(i)]
Dismissing the appeal of the assesse the Tribunal held that; since interest on FD was not generated from core business activity of assessee, Assessing Officer was right in treating interest on fixed deposit under head Income from other sources.
Nilesh Janardan Thakur v. ITO (2018) 168 ITD 143 /192 TTJ 786 (Mum.) (Trib.)

S. 56 : Income from other sources-Amount received at the time of retirement from partnership firm after surrendering her right, title and interest, same was said to be received for consideration and, thus, same could not be taxable in hands of the assessee, as capital gains or income from other sources.[S. 2(47)(i), 2(47)(ii), 4,45, 56(2)(vi)]
Allowing the appeal of the assesse the Tribunal held that; Amount received at the time of retirement from partnership firm after surrendering her right, title and interest, same was said to be received for consideration and, thus, same could not be taxable in hands of the assessee,as capital gains or income from other sources. (AY. 2008-09)
Vasumati Prafullachand Sanghavi (Smt.)v. DCIT (2018) 168 ITD 585 / 193 TTJ 101/ 169 DTR 227(Pune) (Trib.)

S. 57 : Income from other sources-Deductions – Interest from fixed deposits-D-mat charges, legal expenses and medical relief expenses – Not allowable as deduction as the expenditure is not incurred for earing interest from fixed deposit.[S. 56, 57(iii)]
Tribunal held that since assessee failed to establish that expenditures under several heads claimed against said interest income were incurred wholly and exclusively for purpose of earning of interest income accordingly the D-mat charges, legal expenses and medical relief expenses is not allowable as deduction against income from other sources.(AY. 2012-13)
Bank of India Retired Employees Medical Assistance Trust v. ITO (2018) 172 ITD 78/ 172 DTR 140/ 196 TTJ 706 (Mum.) (Trib.)

S. 57 : Income from other sources-Where assesse received membership fee from various members which were kept in FDRs and interest earned thereon was brought to tax under section 56, in view of fact that assessee failed to establish nexus between expenditure incurred under various heads and earning of said interest income, its claim for deduction under S. 57 was to be rejected. [S. 56,57(iii)]
Tribunal held that, Where assesse received membership fee from various members which were kept in FDRs and interest earned thereon was brought to tax under section 56, in view of fact that assessee failed to establish nexus between expenditure incurred under various heads and earning of said interest income, its claim for deduction under S. 57 was to be rejected.
Poona Club Ltd. v. ACIT (2018) 63 ITR 3 (SN) (Pune ) (Trib.)

S. 57 : Income from other sources-Deductions-Dividend income-taxable under head ‘Income from other sources’-Any expenditure incurred to earn dividend income including finance charges allowable as deduction.[S. 57(iii)]
Where dividend income earned by assessee was taxable under head ‘Income from other sources’, any expenditure incurred to earn dividend income including finance charges was to be allowable under S. 57(iii) of the Act. (AY. 2003-04)
Asia Investments P. Ltd. v. ACIT (2018) 63 ITR 535 /193 TTJ 214 (Mum.) (Trib.)

S. 57 : Income from other sources-Deductions-Failure to establish the nexus between interest earned on fixed deposits and the expenditure incurred, claim of deduction was held to be not allowable.[S. 56, 57(iii)]
Dismissing the appeal of the assessee, the Tribunal held that, Failure to establish the nexus between interest earned on fixed deposits and the expenditure incurred, claim of deduction was held to be not allowable. (AY. 2008-09, 2009-10)
Poona Club Ltd. v. ACIT (2018) 169 ITD 557 / 63 ITR 3 (SN) (Pune) (Trib.)

S. 68 : Cash credits – Share capital- Most of the address of share holders are identical-They could not be traced despite issue of notice u/s 131 of the Act –Affidavits are similarly worded-Addition is held to be justified.[S. 131]
Dismissing the appeal of the revenue the Court held that,The balance-sheets or the accounts of the applicants for shares were not furnished by the assessee. On the contrary, the assessee purported to rely on similarly-worded affidavits apparently produced from the persons whose existence was doubted at every stage by the authoritieS. It is curious that 21 share applicants would write identical letters to the two proprietorship concerns of the principal person in control of the assessee and his wife on the same date and such persons would require the amounts standing to their credit in the proprietorship concern to be made over as share application money to the assessee company and all such 21 applicants would leave Calcutta within a few years of applying for such shares. The lower authorities drew the appropriate conclusions from the facts.
DRB Exports Pvt. Ltd. v. CIT (2018) 169 DTR 193 / 305 CTR 95 (Cal)(HC)

S. 68 : Cash credits-Share Capital—Survey-Bogus accommodation bills to various concerns including assessee and its sister companies—PAN no – Affidavit of investors-Acknowledgement of filing of return-Deletion of addition by the Tribunal is held to be justified.
Dismissing the appeal of the revenue the Court held that the assessee has filed PAN no, Affidavit of investors, Acknowledgement of filing of return. Entire basis of revenue’s case was based on surmise that assessee was taking bogus purchase bills and cash was introduced in form of share capital without any evidence in support. Accordingly the deletion of addition by Tribunal is held to be justified. (AY. 2005-06 to 2011-12)
PCIT v. Acquatic Remedies Pvt. Ltd. (2018) 171 DTR 426 (Bom.)(HC)

S. 68 : Cash credits-Variation in closing balance in bank statement and debit balance in books Income—Advance received-Not proved satisfactorily – Addition is held to be justified.
Dismissing the appeal of the assessee the Court held that genuineness and capacity of the parties who have given advance was not proved.Accordingly the addition by Tribunal is held to be justified.(AY.2003-04)
R. Natvarlal Parekh v. ITO. (2018) 172 DTR 397 (Bom.)(HC)

S. 68 : Cash credits – Trade advances-Adjusted against sales made in subsequent years-Deletion of addition is held to be justified.
Dismissing the appeal of the revenue the Court held that the Tribunal is justified in deleting trade advances received by assessee were adjusted against sales made in subsequent years.
PCIT v. Montage Enterprises (P.) Ltd. (2018) 100 taxmann.com 99 / 259 Taxman 418 (Delhi)) (HC)
Editorial : SLP of revenue is dismissed ;PCIT v. Montage Enterprises (P.) Ltd. (2018) 259 Taxman 417 (SC)

S. 68 : Cash credits – Unexplained cash sales of Rs.3.12 crores only one month – Not explained satisfactorily – Addition is held to be justified.
Dismissing the appeal the Court held that the assessee could not explain satisfactorily cash sales of Rs 3.12 crores only one month. Court applied the ratio inRoshan Di Hatti v. CIT [1977] 2 SCC 378, the Apex Court has held that “The burden of accounting for the receipt of these assets was clearly on the assessee and if the assessee failed to prove satisfactorily the nature and source of these assets, the revenue could legitimately hold that these assets represented the undisclosed income of the assessee”, which in the instant case the assessee not to have explained to the satisfaction of the Assessing Officer. Court also held that,it is not the case of the assessee that the product was manufactured or sold for seasonal consumption or that such sales could have been affected only in the particular months of the respective years. The satisfaction of the officer no doubt has to be based on the material so placed by the parties, which in the instant case is there. Formation of opinion has to be after accounting for all the factors and that too on objective consideration of which we have no doubt. As such, the questions of law answered accordingly and there is no merit in the present appeals which are disposed of in the aforesaid terms. (AY. 2007-08,2008-09)
J.M.J. Essential Oil Company v. CIT (2018) 259 Taxman 546 /( 2019) 307 CTR 88 (HP)(HC)

S. 68 : Cash credits – Share application money – AO has not conducted any enquiry – Addition on surmises is held to be not justified.

Dismissing the appeal of the revenue the Court held that identity of share holders were established, however the AO has made addition merely on surmises and without making any enquiry. Accordingly, addition made by Assessing Officer was deleted.
PCIT v. Himachal Fibers Ltd (2018) 98 taxmann.com 172 / 259 Taxman 4 (Delhi) (HC)
Editorial : SLP of revenue is dismissed. PCIT v. Himachal Fibers Ltd. (2018) 259 Taxman 3 (SC)

S. 68 : Cash credits-Share capital – Documents were not produced – Addition is held to be justified.
Assessee received the amount as share capital. Documents pertaining to share applicants produced by assessee did not demonstrate that such alleged applicants had invested in share capital of assessee. Addition was confirmed by the Tribunal. High Court also affirmed the order of Tribunal.
J.J. Development (P.) Ltd. v. CIT (2018) 100 taxmann.com 101/ 259 Taxman 415 (Cal) (HC)
Editorial : SLP of assessee is dismissed,J.J. Development (P.) Ltd. v. CIT (2018) 259 Taxman 414 (SC)

S. 68 : Cash credits – Amount received from various depositors – Necessary enquiry relating to identity and creditworthiness of depositors not done by AO – Addition deleted – Confirmed by High Court .
AO made an addition to the income of the assessee in respect of unconfirmed trade creditors and expenses. On appeal, CIT(A) noticed that AO in his order did not refer to or elucidate whether assessee had produced invoices, bills, manner and mode of payment to trade creditors. CIT(A) deleted the addition as details and nature of expenses were not elucidated. Tribunal confirmed the order of the CIT(A). The High Court did not interfere with the findings recorded by the lower authorities being finding of facts and dismissed the revenue appeal. (AY. 2010-11)
PCIT v. Rajesh Kumar (2018) 260 Taxman 216 (Delhi)(HC)

S. 68 : Cash credits – Identity of the depositor, genuineness of the transaction-Onus discharged – Deletion of addition is held to be justified.
Dismissing the appeal of the revenue the Court held that the assesee established the identity of the depositor, genuineness of the transaction and submitted sufficient material. Accordingly affirmed the order of the Tribunal. (AY. 2010-11)
PCIT v. Reliable Express (2018) 168 DTR 337 / 101 CCH 402 (MP.)(HC)

S. 68 : Cash credits – Advance received back-Source of money was sufficiently explained-Addition is held to be not justified.
Cash was advanced to certain agriculturists for purchase of their land. Since the agreement did not fructify, the advances were received back. The AO considered such receipt as not explained and added the same as cash credits. The CIT(A) allowed the appeal of the assessee by considering the evidence on record, including the confirmations of the agriculturists and holding that the entire sum of money was explained. ITAT held that only a part of the sum was explained and confirmed the addition of the balance portion of the sum. On appeal, the High Court held that when the CIT(A) had considered the detailed evidence on record to come to the conclusion that the entire sum was explained, the Tribunal, if it was not agreeable with the same, should have brought sufficient material on record. Having not done so, the order of the CIT(A) was confirmed and the entire addition was deleted. (AY. 2010-11)
Shubha Devi. G. v. ITO (2018) 171 DTR 51/(2019) 307 CTR 536 (Karn.)(HC)

S. 68 : Cash credits — Credit entries in bank account is not explained satisfactorily – Genuineness of transaction is not proved-Order of Tribunal confirming the addition is held to be justified.[S. 69A]
Dismissing the appeal of the assessee the Court held that, the Credit entries in bank account is not explained satisfactorily. Genuineness of transaction is not proved-Order of Tribunal confirming the addition is held to be justified.
Kailash Swaroop Agarwal. v. CIT (2018) 409 ITR 210 (Raj) (HC)

S. 68 : Cash credits-Bank details and other particulars were furnished – Merely on the basis of report addition cannot be made-Deletion of addition is held to be justified.[S. 260A]
Dismissing the appeal of the revenue the Court held that,the assessee has filed Bank details and other particulars were furnished. Merely on the basis of report addition cannot be made. Deletion of addition is held to be justified.
PCIT v. Adamine Construction (P.) Ltd. (2018) 99 taxmann.com 44 259 Taxman 132(Delhi)(HC)
Editorial : SLP of revenue is dismissed,PCIT v. Adamine Construction (P.) Ltd. (2018) 259 Taxman 131 (SC)

S. 68 : Cash credits – Share capital-Identity of the share applicant was established – Additions cannot be made on surmises without conducting any further inquiry.
Dismissing the appeal of the revenue the Court held that, when identity of the share applicant was established, additions cannot be made on surmises without conducting any further inquiry.(AY.2007-08)
PCIT v. Himachal Fibers Ltd. (2018) 259 Taxman 4 (Delhi) (HC)
Editorial : SLP of revenue is dismissed ;PCIT v. Himachal Fibers Ltd. (2018) 259 Taxman 3 (SC)

S. 68 : Cash credits —Share application and share premium-Identity of creditors, creditworthiness and genuineness of transactions established — Addition cannot be made.
Dismissing the appeal of the revenue the Court held that, the assessee has established, identity of creditors, creditworthiness and genuineness of transactions. Accordingly the deletion of addition by the Tribunal is held to be justified.(AY. 2012-13 to 2013-14)
PCIT v. Chain House International (P.) Ltd. (2018) 408 ITR 561/(2019) 307 CTR 19/ 174 DTR 97 (MP) (HC)
PCIT v. Rohtak Chain Co (P) Ltd (2018) 408 ITR 561 /(2019) 307 CTR 19 /174 DTR 97 (MP) (HC)
PCIT v. Bhrat Securities Ltd (2018) 408 ITR 561/(2019) 307 CTR 19/ 174 DTR 97 (MP) (HC)

S. 68 : Cash credits — Share capital- Books of account, bank accounts etc were not produced-Dummies or stooges of directors of the assessee company-Failure to offer reasonable explanation — Addition is held to be justified.
Dismissing the appeal of the assessee the Court held that ; the assessee had failed to discharge its initial burden to prove that the money of Rs. 48,58,000 was collected through share capital.Books of account, bank accounts etc were not produced.Dummies or stooges of directors of the assessee company. Therefore, the Assessing Officer was wholly justified in rejecting the stand of the assessee and treating the sum of Rs. 48,58,000 as the income from undisclosed sources and accordingly charging it to tax. (AY. 1996-97)
Sriman Sai Securities Inv. Fin. Ltd. v. DCIT (2018) 408 ITR 397 (T&AP) (HC)

S. 68 : Cash credits — Share capital-The assessee being a private limited company the burden of proof was on a higher pedestal even though the assessee had furnished the particulars of the bank accounts, passport, permanent account number card, addresses and earnings by the shareholder-cum-director and the money had been invested through banking channels-the share subscribers did not have their own profit making apparatus and were not involved in business activity-Money was routed through –Profit motive normal in the case of investment was entirely absent-No profit or dividend was declared-Genuineness of transactions were doubted –Addition was held to be justified-No question of law arose.[S. 260A]
Dismissing the appeal of the aassessee the Court held,that the assessee being a private limited company the burden of proof was on a higher pedestal even though the assessee had furnished the particulars of the bank accounts, passport, permanent account number card, addresses and earnings by the shareholder-cum-director and the money had been invested through banking channels. On facts it was found that the share subscribers did not have their own profit making apparatus and were not involved in business activity. Money was routed through.Profit motive normal in the case of investment was entirely absent.No profit or dividend was declared. Accordingly the genuineness of transactions were doubted.Appeal was dismissed holding that no substantial question of law .(AY.2011-12)
Shreenath Heritage Liquor Pvt. Ltd. v. CIT (2018) 408 ITR 198 (Raj) (HC)

S. 68 : Cash credits-Loan-Produced details like copies of permanent account number cards, returns, balance-sheets with all the annexure and bank accounts before the Assessing Officer, that two of the creditors not only appeared before the Assessing Officer, but had also admitted giving loan and that there was nothing suspicious or doubtful in the version of those persons-Deletion of addition was held to be justified-Transportation charges-tax deducted at source, payments through account payee cheques, proper addresses and confirmation of account with permanent account numbers and gross receipts from the Municipal Corporation of Greater Mumbai on account of supply of vehicles in the financial year-Merely because the parties were not physically present before the Assessing Officer, such an addition could not have been made – Deletion of addition was held to be justified.[S. 133(6), 260A]
Dismissing the appeal of the revenue the Court held that ; the assesee has produced details like copies of permanent account number cards, returns, balance-sheets with all the annexure and bank accounts before the Assessing Officer, that two of the creditors not only appeared before the Assessing Officer, but had also admitted giving loan and that there was nothing suspicious or doubtful in the version of those persons. Accordingly the deletion of addition was held to be justified. As regards transportation charges paid to various parties, the tax was deducted at source, payments through account payee cheques, proper addresses and confirmation of account with permanent account numbers and gross receipts from the Municipal Corporation of Greater Mum.bai on account of supply of vehicles in the financial year was furnished, therefore merely because the parties were not physically present before the Assessing Officer, such an addition could not have been made. Accordingly the deletion of addition was held to be justified.(AY. 2007-08)
CIT v. Haresh D. Mehta. (2018) 407 ITR 492 (Bom.) (HC)
Editorial : SLP of revenue is dismissed ; CIT v. Haresh D. Mehta (2018) 406 ITR 494 (SC)

S. 68 : Cash credits – Interest- Deletion of addition is held to be justified – Provision for forward contract-Question of fact.[S. 37(1),260A.]
Dismissing the appeal of the revenue the Court held that ; deletion of cash credits and interest thereon is a question of fact. Similarly deletion of the disallowances of provision of forward contract payable is also question of fact and no question of law arise.
CIT v. Veer Gems. (2018) 407 ITR 639 (Guj) (HC)
Editorial : SLP of revenue is dismissed ; CIT v. Veer Gems (2018) 406 ITR 37 (St)

S. 68 : Cash credits — Share capital — Genuineness of investors in shares were not satisfactorily explained — Order of Tribunal is affirmed.[S. 260A]
Dismissing the appeal of the assessee the Court held that ; the entire issue was based on appreciation of evidence and material on record. The Assessing Officer after giving reasonable opportunity to the assessee and on the basis of materials collected came to the conclusion that the investors were not genuine and gave detailed reasons for making the addition of the sum under section 68 as unexplained credits in the form of share capital and this was confirmed by the Tribunal being the final fact finding authority. No question of law arose. (AY.1996-97)
Gopal Iron And Steel Co. (Guj) Ltd. v. ITO (2018) 407 ITR 533 (Guj) (HC)
Editorial : SLP is granted to the assessee; Gopal Iron And Steel Co. (Guj) Ltd. v. ITO (2018) 402 ITR 29 (St)

S. 68 : Cash credits-Shares-Unsecured loans-Assessee had discharged its onus of establishing identity, genuineness and creditworthiness of both investors as well as lenders-Deletion of addition is held to be justified.
Dismissing the appeal of the revenue the Court held that, assessee had discharged its onus of establishing identity, genuineness and creditworthiness of both investors as well as lenderS. Deletion of addition is held to be justified.(AY. 2009-10)
PCIT v. Hi-Tech Residency (P.) Ltd. (2018) 257 Taxman 390 (Delhi)(HC)
Editorial : SLP of revenue is dismissed, PCIT v. Hi-Tech Residency (P.) Ltd. (2018) 257 Taxman 335 (SC)

S. 68 : Cash credits-Deposit from dealers and agents – Merely because there was a permission granted under Companies Act to accept deposits from public, it did not necessarily follow that deposits shown by assessee were really those received from members of public or from agents-Matter remanded.
Allowing the appeal of the revenue the Court held that ; the Tribunal acted erroneously and in a perverse manner insofar as directing deletion of the addition not proved before the Assessing Officer; applying the rule of probability, which is alien to the Act. There is absolutely no proof offered with respect to the additions made. However, before the first appellate authority, the assessee had produced proof of four depositors and four agents for the year 1999-2000 and six depositors and four agents for the year 2001-02, the same shall be produced before the Assessing Officer, who shall consider its veracity and enter a finding on the same. The remand is confined to that aspect, and with respect to the other, the assessee would have to satisfy the tax due. The Income-tax appeals are allowed with the limited remand. (AY. 1999 – 2000 2001-02)
CIT v. Mathrubhumi Printing & Publishing Co. Ltd. (2018) 409 ITR 624/ 257 Taxman 566 (Ker.)(HC)

S. 68 : Cash credits —Evidence of loan and creditworthiness of lenders were furnished –Amount not assessable as cash credits.
Allowing the appeal pf the assessee the Court held that the assessee has established the lender’s identity and capacity. Accordingly addition cannot be made as cash credits (AY.2005-06 to 2008—09).
Pendurthi Chandrasekhar v. DCIT(2018) 407 ITR 179/(2019) 175 DTR 73 (T&AP) (HC)

S. 68 : Cash credits-Accommodation entries-Peak credit-In order to avail of the theory of “peak credit”, the assessee has to make a clean breast of all facts. He has to explain each of the sources of the deposits and the corresponding destination of the payment without squaring them off. The ITAT cannot proceed merely on the basis of accountancy and overlook the settled legal position-Addition of peak credit under S. 68 is held to be justified.[S. 145]
Allowing the appeal of the revenue the Court held that ; in order to avail of the theory of “peak credit”, the assessee has to make a clean breast of all factS. He has to explain each of the sources of the deposits and the corresponding destination of the payment without squaring them off. The ITAT cannot proceed merely on the basis of accountancy and overlook the settled legal position. Accordingly the addition of Peak credit under S. 68 is held to be justified. Appeal of revenue is allowed partly.
CIT v. JRD Stock Brokers Pvt. Ltd.(2018) 409 ITR 346/ 173 DTR 118/ 307 CTR 292 (Delhi)(HC),www,itatonline.org

S. 68 : Cash credits- Capital gains-Penny stocks-Share transaction is supported by contract notes, bills, were carried out through recognized stockbroker of the Stock Exchange and all payments made to, and received from, the stockbroker, were through account payee instruments-A transaction fully supported by documentary evidences cannot be brushed aside on suspicion and surmises-Statement given earlier was retracted in cross examination-Brokers statement was recorded –Deletion of addition by the Tribunal is held to be justified.[S. 45,132(4)]
Dismissing the appeal of the revenue the Court held that,Share transaction is supported by contract notes, bills, were carried out through recognized stockbroker of the Stock Exchange and all payments made to, and received from, the stockbroker, were through account payee instrumentS. A transaction fully supported by documentary evidences cannot be brushed aside on suspicion and surmises. Statement given by the partner earlier was retracted in cross examination. The stockbrokers asserted that these transactions were genuine.Deletion of addition by the Tribunal is held to be justified.(ITA No. 620 of 2008 GA No.2589 of 2008, dt. 26.08.2008)
CIT v. Alpine Investment (Cal)(HC),www.itatonline.org

S. 68 : Cash credits-Capital gains-Penny Stocks-If the transaction is supported by documents like contract notes, demat statements etc and is routed through the stock exchange and if the payments are by account-payee cheques and there is no evidence that the cash has gone back to the assessee’s account, it has to be treated as a genuine transaction and cannot be assessed as unexplained credit, simply because in the sham transactions bank a/c were opened with HDFC bank and the appellant has also received short term capital gain in his account with HDFC bank does not establish that the transaction made by the appellant were non genuine. [S. 45]
Dismissing the appeal of the revenue the Court held that ;if the transaction is supported by documents like contract notes, demat statements etc and is routed through the stock exchange and if the payments are by account-payee cheques and there is no evidence that the cash has gone back to the assessee’s account, it has to be treated as a genuine transaction and cannot be assessed as unexplained credit,simply because in the sham transactions bank a/c were opened with HDFC bank and the appellant has also received short term capital gain in his account with HDFC bank does not establish that the transaction made by the appellant were non genuine. Considering all these facts the share transactions made through Shri P.K. Agarwal cannot be held as non-genuine. Consequently denying the claim of short term capital gain made by the appellant before the AO is not approved. (ITA No. 385/2011,& 603 of 2011 dt. 11.09.2017) (AY.
CIT v. Pooja Agarwal (Smt) (Raj)(HC),www.itatonline.org
CIT v. Jitendra Kumar Agarwal (Raj)(HC),www.itatonline.org

S. 68 : Cash credits – Share application money-Persons of insignificant means —Neither the creditworthiness of the creditors nor the genuineness of the transaction stood explained-Order of Tribunal upholding addition is confirmed.
Dismissing the appeal of the assessee the Court held that ;neither the creditworthiness nor the genuineness of the parties had been established by the assessee. The detailed investigations carried out by the Assessing Officer established the position that the conTrib.utors to share capital were persons of insignificant means and their creditworthiness to have made the conTrib.utions had not been established. The assessing authority had put the result of his enquiries to the assessee and had granted opportunity to offer its explanations. The assessee, however, failed to establish the genuineness of the cash conTrib.utions as well as the capacity of the persons to have made such contributions . (AY.2001-02)
B. R. Petrochem Pvt. Ltd. v. ITO (2018) 407 ITR 87/ (2019) 306 CTR 668 (Mad) (HC)

S. 68 : Cash credits-Receipt towards payment for Contract cannot be assessed as unexplained cash-simply because notices could not be served upon the sub-contractor, the transactions could not be held non-genuine.
Dismissing the appeal of the revenue the Court held that simply because notices could not be served upon the sub-contractor, the transactions could not be held non-genuine. If the Assessing Officer had disbelieved that the sub-contractor had executed the contract, he could have disbelieved the payment made to it and held that it was the assessee, who had executed the contract and worked out the profit accordingly. But when the entire amount received by the assessee was towards the payment for the contract, there was no question of considering any part thereof as unexplained cash credit.(AY.2007-08)
PCIT v. Swastik Construction. (2018) 407 ITR 42 / 254 Taxman 163 (Guj) (HC)

S. 68 : Cash credits-Share capital-If no cash is involved in the transaction of allotment of shares and it is a case of book adjustment, provisions of S. 68 treating it as unexplained cash credit are not attracted. Even if it were to be assumed that the subscribers to the increased share capital are not genuine, the amount of share capital would in no circumstances be regard as undisclosed income of the company.
Allowing the appeal of the assessee the Court held that ; If no cash is involved in the transaction of allotment of shares and it is a case of book adjustment, provisions of S. 68 treating it as unexplained cash credit are not attracted. Even if it were to be assumed that the subscribers to the increased share capital are not genuine, the amount of share capital would in no circumstances be regard as undisclosed income of the company.(AY.2012-13)
V. R. Global Energy Pvt. Ltd. v. ITO(2018) 407 ITR 145/ 170 DTR 412 / 305 CTR 228/ 258 Taxman 5(Mad)(HC), www.itatonline.org

S. 68 : Cash credits – Share application-Inability to produce share application-Addition cannot be made as cash credits.
Dismissing the appeal of the revenue the Court held that; inability to produce share application, addition cannot be made as cash credits.
CIT v. Jalan Hard Coke Ltd. (2018) 95 taxmann.com 330 (Raj) (HC)
Editorial : SLP of revenue is dismissed ;CIT v. Jalan Hard Coke Ltd. (2018) 257 Taxman 91 (SC)

S. 68 : Cash credits — Authorities entitled to look into surrounding circumstances to find out reality — Unable to state exact purpose for which loan of Rs. 1 Crore taken and stating her husband looked after all finances —No personal or business relationship of assessee with that party — Transaction squared in next financial year would not establish genuineness of transaction — Addition is held to be justified (Relied,CIT v.Durga Prasad More (1971) 82 ITR 540 (SC) / Sumati Dayal v.CIT (1995) 214 ITR 801 (SC) )[S. 131]
Dismissing the appeal, that on the facts, the Tribunal was justified in relying on the judgments of the Supreme Court (CIT v.Durga Prasad More (1971) 82 ITR 540 (SC) / Sumati Dayal v.CIT (1995) 214 ITR 801 (SC) to reject mere paper work and look at the reality. The assessee in her statement under section 131, could not give the exact purpose for which the loan was taken. She replied that the finances were managed by her husband and she had no idea about them. On being questioned whether she operated her bank account or had any ATM card or debit card and credit card, she had replied in the negative. Therefore, the assessee had no idea of any loan taken from PTPL, one of the 24 parties that appeared in her balance-sheet from whom loans were taken. The loan of Rs. 1 crore was allegedly repaid after nearly one year without any interest. It was not the case of the assessee that she had a personal or business relationship with PTPL or its directors. Merely because the transaction was squared in the next financial year that would not establish that the transaction was genuine and not bogus. The addition made under S. 68 was proper. (AY.2014-15)
Seema Jain v. ACIT(2018) 406 ITR 411/ 257 Taxman 380/ 169 DTR 257/ 304 CTR 472 (Delhi) (HC)

S. 68 : Cash credits-Loan from relative-Cash deposit in to Bank account-Cash deposited from sale of property – Failure to produce sale deed-Cash was deposited even before date of alleged sale agreement-Addition is held to be justified.
Dismissing the appeal of the assessee the Court held that; failure of assessee to produce sale deed and cash was deposited in to Bank account even before date of alleged sale agreement.Addition is held to be justified (AY.2009-10)
J. Stephen v. ITO (2018) 256 Taxman 172 (Mad) (HC)

S. 68 : Cash credits-Only on the ground that loan was not found to be reflected in balance sheet of donor-Addition cannot be made as cash credit. Assessee had demonstrated genuineness of transaction as well as reliability and creditworthiness of donor, said addition was unjustified.
Dismissing the appeal of the revenue the Court held that ; when the assessee had demonstrated genuineness of transaction as well as reliability and creditworthiness of donor, therefore merely on the ground that loan was not found to be reflected in balance sheet of donor addition cannot be made as cash credit. (AY.2005-06)
PCIT v. Bhanuprasad D. Trivedi (HUF)(2017) 87 Taxmann.com 137 (Guj) (HC)
Editorial : SLP of revenue is dismissed,PCIT v. Bhanuprasad D. Trivedi (HUF) (2018) 256 Taxman 66/ 256 Taxman 292 (SC)

S. 68 : Cash credits-Survey-Addition of undisclosed income cannot be made on the basis of (a) entries in dairy found during survey & (b) admission of director in S. 133A survey if assessee has filed a retraction and alleged that the entries/ statement were recorded under pressure. Statement u/s 133A is merely information simplicitor and not evidence per se. Addition cannot be sustained if the Dept has not investigated the matter and found material to support the addition. [S. 133A]
Dismissing the appeal of the revenue the Court held that ; Addition of undisclosed income cannot be made on the basis of (a) entries in dairy found during survey & (b) admission of director in S. 133A survey if assessee has filed a retraction and alleged that the entries/ statement were recorded under pressure. Statement u/s 133A is merely information simplicitor and not evidence per se. Addition cannot be sustained if the Dept has not investigated the matter and find material to support the addition.(TA No. 612/2018, dt. 12.06.2018) (AY.2011-12)
PCIT v. Texraj Realty P. Ltd ( 2018) 95 taxmann.com 102. (Guj)(HC), www.itatonline.org

S. 68 : Cash credits — Burden of proof — Mere confirmation is not sufficient, identity, creditworthiness and genuineness was not proved -Addition was held to be justified.
Dismissing the appeal of the assessee the Court held that Mere confirmation is not sufficient, identity, creditworthiness and genuineness was not proved. Addition was held to be justified. (AY.2007-08)
Ram Baboo Agrawal v. CIT(2018) 404 ITR 198 (All) (HC)

S. 68 : Cash credits — Source of cash deposit was not explained satisfactorily-Addition was held to be justified.
Dismissing the appeal of the assessee the Court held that; source of cash deposit was not explained satisfactorily. Accordingly the addition was held to be justified.(AY.2009-10)
Ravi Mallick, prop. of Sunkraft designs v. DCIT (2018) 404 ITR 250 (P&H) (HC)

S. 68 : Cash credits – Cash withdrawn from Bank was redeposited after seven months, addition cannot be made as cash credits.
Allowing the appeal of the assessee the Court held that; Cash withdrawn from Bank was redeposited after seven months, addition cannot be made as cash creditS. Explanation given by assessee that deposit was made out of sum withdrawn earlier was not fanciful and sham story and it was perfectly plausible. (AY. 1998-99)
Jaya Aggarwal v. ITO (2018) 254 Taxman 398/ 165 DTR 97 / 302 CTR 241 (Delhi)(HC)

S. 68 : Cash credits-Share capital-Builder and developer-Failed to prove identity and creditworthiness of shareholders-Summons served were retuned back with remark the addressees were not available – Addition was held to be justified. [S. 131]
Dismissing the appeal of the assessee the Court held that the assessee failed to prove identity and creditworthiness of share holders. Summons served were retuned back with remark the addressees were not available. It was also found that shareholders were first time assessees and were not earning enough income to make deposits in question. Accordingly the addition was confirmed. (AY. 2007-08)
Konark Structural Engineering (P.) Ltd. v. Dy. CIT (2018) 254 Taxman 184 (Bom.)(HC)
Editorial : SLP of assessee is dismissed, Konark Structural Engineering (P.) Ltd. v. Dy. CIT (2018) 257 Taxman 262 (SC)

S. 68 : Cash credits-Firm-Partner-Capital introduced by the partner was duly reflected in in the books of account maintained by him, addition cannot be made in the assessment of the firm.
Dismissing the appeal of the revenue the Court held that; Capital introduced by the partner was duly reflected in in the books of account maintained by him, addition cannot be made in the assessment of the firm. (AY. 2010-11)
PCIT v. Vaishnodevi Refoils & Solvex (2018) 253 Taxman 135 (Guj) (HC)

S. 68 : Cash credits — Deposit in Bank-— Failure to explain the source satisfactorily addition was held to be justified.
Dismissing the appeal of the assessee the Court held that; Failure to explain the source satisfactorily addition was held to be justified.(AY. 2005-06)
Krishan Kumar Sethi v. CIT(2018) 403 ITR 189 / 255 Taxman 193 (Delhi) (HC)

S. 68 : Cash credits – Not required to explain source of source-Confirmation letters, affidavits, PAN no was filed, deletion of addition was held to be justified – There was no obligation to explain the source of source prior to April 1 2013, assessment year 2013-14.
Dismissing the appeal of the revenue the Court held that; the assessee is not required to explain the “source of source” prior to insertion of the proviso to S. 68. If the assessee has discharged the primary onus placed upon it u/s 68 by filing confirmation letters, the Affidavits, the full address and pan numbers of the creditors, the Revenue has to proceed against the persons whose source of funds are alleged to be not genuine. There was no obligation to explain the source of source prior to April 1 2013, assessment year 2013-14. (AY. 2010-11)
PCIT v. Veedhata Tower Pvt. Ltd(2018) 403 ITR 415/ 166 DTR 218 / 302 CTR 490 (Bom.)(HC), www.itatonline.org

S. 68 : Cash credits-Share application – The assessees has filed balance sheet, confirmation etc, addition cannot be made merely on suspicion, if AO has any doubt he should make enquiry with lenders bank etc.
Dismissing the appeal of the revenue the Court held that,the assessees has filed balance sheet confirmation etc, it could not be expected to prove the negative that the monies received by it were suspicious or not genuine infusion of capital etc. The assessee had discharged its burden of proof in terms of the settled dicta. It was only logical to expect that if the AO was not convinced about the genuineness of the said documents, he would have inquired into their veracity from the bank(s) to ascertain the truth of the assessee’s claimS. Having not done so, he was not justified in disregarding the assessee’s contentions that the infusion of monies into its accounts was legitimate. The AO was not justified in making additions of the various sums u/s 68 of the Act. (AY. 2002-03, 2003-04, 2005-06, 2007-08)
CIT v Russian Technology Centre Pvt. Ltd. (2018) 300 CTR 501 (Delhi)(HC)
PCIT v. Claridges Hotels (P) Ltd (2018) 300 CTR 501 (Delhi) (HC)

S. 68 : Cash credits — Gift — Failure to produce evidence of credit worthiness and genuineness of gifts -Addition as unexplained deposits was held to be justified.
Dismissing the appeal of the assesse the Court held that; Failure to produce evidence of credit worthiness and genuineness of gifts addition as unexplained deposits was held to be justified .(AY. 2001-02)
Pandit Vijay Kant Sharma v. CIT (2018) 402 ITR 358/ 169 DTR 108 / 304 CTR 102 (All) (HC)

S. 68 : Cash credits — Gifts – Creditworthiness of donors was proved – Deletion of addition was held to be justified – Finding of fact.[S. 69A]
Dismissing the appeal of the revenue the Court held that; Tribunal had arrived at the factual finding that the assessee had sufficiently been able to explain that the sums of cash credits were received by her by way of gifts from her mother and her husband. The materials on record revealed that the gift from her mother was to fund for the admission of her grandson to a private medical college. No question of law ariseS. Deletion of addition u/s 69A was held to be justified. (AY. 2011-12)
CIT v. Latha Rajee Mathew. (2018) 402 ITR 78 (Mad)(HC)

S. 68 : Cash credits — Cash deposits were supported by registered sale deeds of flats sold and materials purchased was supported by duly signed Vouchers hence deletion was held to be justified. [S. 69]
Dismissing the appeal of the revenue the Court held that; Cash deposits were supported by registered sale deeds of flats sold and materials purchased was supported by duly signed Vouchers hence deletion was held to be justified. (AY. 2005-06)
CIT v. Mohd. Sahid Prop. M/S. Azim Builders (2018) 402 ITR 110 (All) (HC)

S. 68 : Cash credits — Share application money — Merely on the basis of statement given by Directors of investing companies additions cannot be made when the assesse has provided all necessary evidences – Burden is on revenue to prove otherwise.
Dismissing the appeal of the revenue the Court held that; the lone circumstance of a director disowning the document itself could not have constituted fresh material to reject the documentary evidence. The existence of the company as an Income-tax assessee and that it had furnished audited accounts was not in dispute. Furthermore, its bank details too were furnished to the Assessing Officer. If the Assessing Officer were to conduct his task diligently, he ought to have at least sought the material by way of bank statements, etc., to discern whether in fact the amounts were infused into the shareholder’s account in cash at any point of time or that the amount were such as to be beyond their meanS. The Assessing Officer failed to do so. The Tribunal rightly set aside the addition made under section 68 of the Act.
CIT v. Oriental International Co. P. Ltd. (2018) 401 ITR 83 / 301 CTR 145 / 162 DTR 170(Delhi) (HC)
S. 68 : Cash credits – Shell companies – Failure to produce lenders-Addition was held to be justified-Transaction was held to be non genuine.
Dismissing the appeal of the assesse the Court held that; The Tribunal held that the assessee has not been able to produce the alleged lenders for verification and could not rebut the allegation of revenue authorities that the said lenders are shell entities, the loans cannot be accepted as genuine transactions and therefore the addition under S. 68 is upheld and consequently, deduction of interest on alleged borrowings is disallowed. (AY. 2007-08)
Pavankumar M. Sanghvi v. ITO (2018)404 ITR 601/ 301 CTR 265 / 163 DTR 209(Guj) (HC)
Editorial : Order in Pavankumar M. Sanghvi v. ITO (2017) 165 ITD 260/ 187 TTJ 32 /152 DTR 201 / 59 ITR 189 (SMC)(Ahd.)(Trib.)is affirmed
Editorial : SLP of assessee is dismissed Pavankumar M. Sanghvi v. ITO (2018) 258 taxman 160 (SC)

S. 68 : Cash credits — Gift – Credit worthiness of the donor was not established hence addition was held to be justified.
Dismissing the appeal of the revenue the Court held that, the assesse has not established the creditworthiness of the donor hence addition was held to be justified. (AY. 2000-01)
Sheela Ahuja Alias Lata Ahuja (Smt.)v. CIT (2018) 400 ITR 56 (All) (HC)

S. 68 : Cash credits – Firm or AOP – Entry pertaining to first day of business – No scope for assuming that income was generated-No addition can be made-Provided PAN/GIR and income tax return of members sufficient to establish the creditworthiness and also discharge the onus.

Dismissing the appeal of the revenue the Court held that; since it was first year of business of AOP and no business activity having been shown to have been conducted by it that could lead to generation of unaccounted income on first day of relevant accounting period itself, Tribunal had not committed any error in deleting impugned addition. Provided PAN/GIR and income tax return of members sufficient to establish the creditworthiness and also discharge the onus.(AY. 2001-02)
CIT v. Lal Mohar (2017) 252 Taxman 401/ (2018) 409 ITR 95 (All.)(HC)
CIT v. Rajendra Kumar ((2017) 252 Taxman 401/ (2018) 409 ITR 95 (All.)(HC)
Editorial : SLP of revenue is dismissed, CIT v. Lal Mohar (2018) 409 ITR 2(St), CIT v. Rajendra Kumar (2018) 409 ITR 2 (St)

S. 68 : Cash credits-Long term capital gains-Evidence of contract and payment through Banks-Addition cannot be made solely on the basis that late recording in Demat Pass book-Order of Tribunal set aside .[S. 45]
Allowing the appeal of the assessee the Court held that, evidence of contract and payment through Banks hence addition cannot be made solely on the basis that late recording in Demat Pass book.-Order of Tribunal set aside as it has considered only part of evidence and not entire evidence. (AY. 2005-06)
Amita Bansal (MS. ) v. CIT(2018) 400 ITR 324 (All) (HC)

S. 68 : Cash credits- Bogus share capital-If the alleged share applicants do not appear before the AO pursuant to the S. 131 summons and the documentation is inadequate, it is a “completely bogus claim”. The assessee cannot argue that the AO should have made inquiries from the AO of the share applicants as to their credit-worthiness.[S. 131]
Dismissing the appeal of the assessee the Court held that ; If the alleged share applicants do not appear before the AO pursuant to the S. 131 summons and the documentation is inadequate, it is a “completely bogus claim”. The assessee cannot argue that the AO should have made inquiries from the AO of the share applicants as to their credit-worthiness.(ITA No. 329 of 2016, dt. 27.06.2018)
J. J. Development Pvt. Ltd. v. CIT (Cal)(HC), www.itatonline.org

S. 68 : Cash credits-Share Application amount-Pvt company – Burden is not discharged – Additions held to be justified.
Dismissing the appeal of the assesee the Tribunal held that burden of proof was clearly on higher pedestal as compared to public limited companies which it had failed to discharge in instant case in terms of creditworthiness and genuineness of transaction and till such time, initial burden was not satisfied, burden could not be said to have been shifted on Revenue to conduct further enquiries. Addition is held to be justified. (AY.2012-13)
Shreenath Heritage Liquor (P) Ltd. v. ACIT (2018) 162 DTR 265 /191 TTJ 706 (Jaipur) (Trib.)

S. 68 : Cash credits-Share application money –Natural justice violated-Examining persons in Kolkata at back of assessee would be clear violation of principles of natural justice—Matter remanded.[S. 131]
Tribunal held that AO was not barred from obtaining any adverse evidence that might come into his procession in course of reassessment. However, if he proposes to use such adverse evidences, if any, against assessee, he should give assessee adequate opportunity to rebut same Balance sheet showed no fixed assets.None of cases PAN of directors were available. Financial statement as filed with ROC also did not show any share application money having been given nor received. Bank accounts shows that in all cases, transactions were with identical companies, from where, money was coming and it was received either on same day or immediately previous day to date of transfer of funds through RTGS. Evidences had been produced before AO had sent to Kolkata for examination as share applicants were based in Kolkata. Examining such persons in Kolkata at back of assessee would be clear violation of principles of natural justice.(AY.2013-14)
PNN Steel (P) Ltd. v. ITO (2018)166 DTR 217/ 193 TTJ 515 (Chennai) (Trib.)

S. 68 : Cash credits-Share capital and premium-issue of share premium is not relevant for cash credits-Identity, genuineness of transaction and creditworthiness of parties established-Deletion of addition is held to be justified.
Tribunal held that there was no reason for AO to doubt genuineness of transaction only on basis of issue of shares at a premium when issue of shares at a premium was not at all relevant for purpose of addition made u/s 68 of Act. What needs to be considered for purpose of unexplained cash credit was, identity, genuineness of transaction and creditworthiness of parties. In this case, assessee had proved all 3 ingredients by filing necessary evidences and hence, re was no reason for AO to make addition towards share premium when share premium cannot be considered as unexplained credit.(AY.2011-12)
Scrabble Entertainment Ltd. v. ACIT (2018) 169 DTR 51 /193 TTJ 418 (Mum.) (Trib.)

S. 68 : Cash credits – Share application –Non –resident – Having meagre income – Credit worthiness not proved – Addition is held to be justified.
Allowing the appeal of the revenue the Tribunal held that,the assessee has not furnished the bank statement of the person who has invested in shares. Reluctance on the part of the assessee and the said person to give proper evidence of the creditworthiness and also the failure to submit the copy of the bank statement clearly proves that the assessee has not discharged the onus of proving the creditworthinesS. It is clear that the said MS. Rashna Fali Press has not given proper details to justify the creditworthiness to grant the said advance of Rs. 6.64 crores. On facts the assessee has not discharged onus of proving creditworthiness and NRI had not given proper details to justify creditworthiness to grant advance on Share application money then addition made u/s 68 towards share application money should be sustained. (AY.2010-11)
ITO v. Spartacus Farms (P) Ltd (2018) 166 DTR 49/ 193 TTJ 409 (Mum.) (Trib.)

S. 68 : Cash credits- No return was filed by the lenders-Matter is remanded to prove creditworthiness of lender.
Allowing the appeal of the revenue the Tribunal held that the Assessee has not proved the creditworthiness of the creditors. Accordingly the matter is remanded to the AO for further verification. (AY.2008-09)
JCIT. v. Sardar Patel Institute Of Management Society (2017) 51 CCH 727/(2018) 191 TTJ 41 (UO) (Delhi) (Trib.)

S. 68 : Cash credits – Amount transferred from Pakistan – Source properly explained – Deletion of addition is held to be justified.
Tribunal held thatthe assessee has explained the source and very clearly establishes its case of having transferred the properties in the name of persons to whom it claims to have sold the same and it cannot be the case of Revenue that the said transfers in the name of purchasers was made without taking consideration due for the said transferS. Accordingly the order of CIT (A) deletion of addition is held to be justified. (AY.2010-11)
ITO v. Sangeeta Kotoomal Esrani (2017) 51 CCH 782/ (2018) 196 TTJ 1002 (Pune(Trib.)

S. 68 : Cash credits –Loan-Received by account payee cheque-Repaid by account payee cheque – Established genuineness of the transaction and creditworthiness of the lenders-Additions can not be made.
Dismissing the appeal of the revenue the Tribunal held that ; Loan was received by account payee cheque.Repaid by account payee cheque. The assessee has established genuineness of the transaction and creditworthiness of the lenders. Deletion of addition is held to be justified.(AY. 2008-09)
ACIT v. Shree Ganesh Developers (2018) 68 ITR 47 (SN)(Mum.) (Trib.)

S. 68 : Cash credits — Deposit in bank account-Not maintaining books of account – Presumptive taxation – Return was accepted-Addition as cash credit is held to be not valid.[S. 44AF]
Tribunal held that since the assessee has not maintained the books of account and return filed under presumptive taxation has been accepted For mismatch in the gross receipt and net income, amount deposited in the bank account, addition cannot be made as cash credits. (AY.2010-11 to 2012-13)
Babbal Bhatia (Smt.) v. ITO(2018) 65 ITR 532 (Delhi) (Trib.)

S. 68 : Cash credits –Sale of car-Resale of car-Purchase was not doubted –On resale to from whom the car was purchased-Addition is held to be not justified.[S. 32]
Tribunal held that since the AO had not challenged the veracity of the documents during the remand proceedings, there was a full disclosure of income and cash amounting to Rs 2.30 was deleted. The assessee had purchased a car and when it sought to register the car in its favour with the appropriate authority, the registration was refused as the seller had violated custom duties and the Government imposed a blanket ban on transfer of all cars imported by the seller. To avoid any legal complications, the assessee resold the car to the seller for Rs 25,00,000 which was held by the AO to be unexplained cash credit. The ITAT observed that since the AO had accepted the purchase of the car and granted depreciation during preceding years, the deletion of the same by CIT(A) had to be confirmed. (AY. 2009-10)
ACIT v. Crayons Advertising Ltd. (2018) 68 ITR 77 (SN) (Delhi)(Trib.)

S. 68 : Cash credits — Interest-free loan —Confirmation, return, balance-sheet and bank statement —Identity,creditworthiness and genuineness of transaction is proved — Deletion of addition is held to be justified.
Dismissing the appeal of the revenue the Tribunal held that; the assesee has filed, confirmation, return, balance-sheet and bank statement.Identity,creditworthiness and genuineness of transaction is proved — Deletion of addition is held to be justified.(AY.2012-13)
ITO v. Jaidka Woolen and Hosiery Mills P.Ltd. (2018) 68 ITR 216 (Delhi) (Trib.)

S. 68 : Cash credits-Share premium -Equity shares and preference shares stand on different footing and, thus, net asset value method could not be used in case of preference shares to compute excess share premium charged on those shares so as to make addition as cash credits
The assessee issued non-convertible redeemable preference shares to its holding company. at rate of Rs. 500 per preference share against the face value of Rs. 10 per share. The shares so issued were redeemable at the price of Rs. 750 per share after a period of five years. Assessing Officer worked out value of shares at Rs. 38 per share. Accordingly, the Assessing Officer added differential share premium to assessee’s taxable income.CIT(A) deleted the addition. On appeal by the revenue the Tribunal held that, equity shares and preference shares stand on different footing and, thus, net asset value method could not be used in case of preference shares to compute excess share premium charged on those shares so as to make addition as cash credits .(AY.2011-12)
ACIT v. Golden Line Studio (P.) Ltd. (2018) 173 ITD 200 (Mum.) (Trib.)

S. 68 : Cash cr