S. 45 : Capital gains–Long term capital gains from penny stocks-Tribunal held that, 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. [S. 10(38), 68, 115BBE]

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)]

S. 45 : Capital gains-Transfer-Conversion of Cumulative preference shares( CCPS) into equity shares does not constitutes a “transfer” – Not laible to capital gais tax. [S. 2(47), 41(2), 45(4), 48, 55(2)(b)(v)(e)]

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]

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)]

S. 45 : Capital gains- Cash credits – Share transactions- Bogus capital gains-Penny stocks-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. [S. 10(38), 68]

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)]

S. 40(a)(ia) : Amounts not deductible-Deduction at source –Payment to web hosting charges to Amazon Web Services LLC (USA) (AWS) is not laible to deduct tax at sourcr- Web hosting chrgescanot constitutes “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]

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.

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]