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STUDY GROUP MEETING

THE RECENT DIRECT TAXES JUDGMENTS

PLACE: BABUBHAI CHINAI COMMITTEE: DATE: 22/04/013

2ND FLOOR, CHURCHGATE

(1) SECTION 1 TO 27 : Section 14A applicable only where expenses were incurred

CIT V/s Glen Mark Pharmaceutical Ltd. (2013) 351 ITR 359 (Bom): section 14A

would not allow expenses relating to exempt income but, it can not be applied to

disallow proportionate expenses as between taxable and tax free investments,

where no expenses are found to have been incurred for investment in tax free

bonds.

(2) Income from House Property: - or Income from Business (?)

Azim ganj Estate (Pvt) Ltd V/s CIT

(2013) 352 ITR 82 (Calcutta) High Court

Construction Business - Rental Income from unsold flats Assessable as Income

from house property – SS.14 & 22.

(3) Principle of Mutuality.

Dy. Director of I.T (International Taxation) V/s.

Solictic International De Telecommunication.

(2013) 84 DTR (Mumbai) Tribunal 219 (56) 229

In case of a non- mutual organization a few transactions with the members do not

convert its non- mutual status to mutual; in the like manner, the otherwise status

of mutuality of an organization cannot be destroyed because of a few

transactions with the non-members, Profits from transactions with non-members

is always taxable.

(4) Capital Assets Agricultural land:-

Income tax Officer V/s. Amrutlal B. Shah

(2013) 22 ITR (Tribunal) 668 Mumbai (5)

Agricultural land situated beyond 8 kms from Municipal limits and beyond 19 kms

from Centre of City- not a Capital asset- Land shown in revenue records as

agricultural- No incriminating material found that land is Capital asset- No

interference. Se.2 (14) (Note There was no notification issued by the Central

Govt. regarding the same being a capital asset. Therefore the land held by the

assessee was agricultural land. It was borne out of from the records of the

revenue. Department that the land was described by the District collector.

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Jamnagar, as agricultural lands. There was no material in the possession of the

A.O to hold that the land was a Capital asset within the meaning of Section 2 (14)

of the Act

(5) SECTION 28 TO 44

Undisclosed purchases-How dealt with (?)

CIT V/s Sathyamarayan P. Rathi

(2013) 351 ITR 150 (Gujarat)

Where it was noticed that the assessee was not able to prove the purchases to

the extent of Rs. 61=40 lakhs. The AO disallowed the entire amount, but in first

appeal it was felt that the profit element there from alone could be assessed so

that only 30 percent of such purchases amounting to Rs. 18=42 lakhs were

taxed. The Tribunal reduced the percentage of possible overstatement of

purchases to 12=50 percent. The Revenue came in appeal to the High Court on

the plea that the entire amount should have been treated as BOGUS

PURCHASE. The High Court pointed out that the assessee could not have made

the sale, which were accounted in the books without acquiring a corresponding

(goods) stock, it was therefore not a case of Bogus Purchase, but the inference

can only be that it is an unproved purchase. In such a case, the approach of the

Tribunal that a reasonable disallowance for possible inflation could be warranted

has to be upheld.

(6) Remuneration to partners whether could be treated as excessive (?)

CIT V/s Great City Manufacturing Co.

(2013) 351 ITR 156 (All) High Court

Section 40 (b) provides for deduction of salary to working partners on the basis of

the stipulation in the partnership deed for the relevant year. It has been held by

the Tribunal in Chhajed Steel Corp. V/s Asst. CIT (2001) 77 ITD 419 (Ahmedabad

Tribunal) that there is no scope for disallowance of any part of the payment so

stipulated in the deed purportedly under section 40A (2) in the view that the

payment is unreasonable or excessive.

(7) Business Expenditure – Capital or Revenue Expenditure

CIT V/s Glenmark Pharmaceutical Ltd

(2013) 85 DTR (Bombay H.C) 169 (67)

Expenditure for acquisition of marketing know-how-examination of the marketing

know-how agreement shows that it would lead to improvement in assessee’s

existing business resulting in higher sales and consequently higher profitability

the knowledge acquired by the assessee would assist in improving the marketing

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strategy. Therefore, expenses incurred for acquiring know-how were revenue

expenditure.

(8) Income Capital or Revenue Receipt

Khana and Annadhanam V/s CIT

(2013) 85 DTR (Delhi HC) 164 (66)

Section 4, Income: Capital or Revenue Receipt compensation for release of

income earning source-Assessee firm of a chartered Accountants, under

agreement with a Calcutta firm, receiving work through Calcutta firm for over a

period of 13 years compensation received for release of such arrangement was

capital receipt not liable to tax. Release amounted to the impairment of the profit

making structure or apparatus of the assessee firm and the compensation was a

substitute for the source it is immaterial that the assessee continued as a firm of

Chartered Accountants.

(9) Business expenditure Fines and Penalties

CIT V/s Regalia Apparels (P) Ltd

(2013) 352 ITR 71 (Bombay H.C)

Assessee taking business decision not to honour its commitment of fulfilling

export entitlement in view of losses – encashment of Bank guarantee by export

promotion council – payment recorded as penalty in assessee’s books and

claimed as deduction- No contravention of any provision of law – compensatory in

nature – Allowable – IT Act 1961 Se. 37 (1)

(10) Liquidated damages paid for delay in delivery of goods supplied under contract

revenue, Expenditure. Huber to Suhnor Electronics (P) Ltd. V/s. Dy. CIT (2013)

22 ITR (Tribunal) 596 (Delhi H.C) (5)

The Assessee claimed an amount of Rs.29,97,209./- on account of liquidity

damage expenses. The goods were not according to the Indian Railway

Standard (1 Rs.) i.e. the contractor failed to delivery Railway stores (goods)

within the period fixed in the agreement.

The Tribunal held.

Therefore whenever any statutory impost paid by an assessee by way of

damages or penalty or Interest is claimed as an allowable Expenditure u/s 37 (1)

of I.T Act. The assessing authority is required to examine the scheme of the

provisions of the provisions of the relevant statute providing of such impost

notwithstanding the nomenclature of the impost as given by the statute to find

whether it is compensatory or penal in nature. The authority has to allow

deduction u/s 37 (1) of I.T Act 1961. Wherever such examination reveals the

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concerned impost to be purely compensatory in nature. Wherever such impost is

found to be of a composite nature that is partly of compensatory nature and partly

of penal nature that is, partly of compensatory nature the authorities are obliged

to bifurcate the two components of the impost and give deduction to that

component which is compensatory in nature and refused to give deduction to that

component which is penal in nature.

(11) Capital or Revenue Expenditure

SKOL Breweries Ltd. V/sw. Asst. CIT (2013) 84 DTR ( Mumbai) 271. Club

Membership fees. Details filed by the assessee show that the expenditure was

incurred towards entrance fee, subscription and other services of the clubs- A.O

has not doubted the payment of entrance fee and service charges for the club

membership similar disallowance made by the A.O for A.Y. 2004-05 to 2006-07

has been deleted by the CIT (A) and the Revenue has accepted the order of CIT

(A). Through the principle of resjudicata is not applicable in Income tax matters-

rule of consistency has to be followed as the facts are identical. Therefore claim

of deduction cannot be disallowed in the relevant year.

(12) SKL Breweries Ltd. V/s. Asst. CIT

(2013) 84 DTR Mumbai (Tribunal) 271/275 (57)

Depreciation is a mandatory deduction in respect of an asset owned by the

assessee. Which is used for the purpose of business and not for incurring any

expenditure, Which is subject to TDS and therefore, provisions of Section 40 (a)

(i) are not attracted to deduction of depreciation.

(13) Allowability of- Brand building Expenditure

Fine Jewellery (India) Ltd V/s. Asst. CIT

(2013) 56 SOT 226 (2)

A.Y. 2006-07. Assessee was engaged in business of manufacturing and Export

of Jewellery in course of assessment, A.O allowed assessee’s claim in respect of

Brand Creation Expenses being in nature of differed revenue Expenditure. CIT

passed a revisional order holding that brand creation expenditure was a Capital

in nature and thus assessee’s claim in respect of said Expenditure was wrongly

allowed. Whether Since Expenditure incurred on creation of brand did not create

any tangible or intangible asset of enduring nature, and moreover. A.O had

allowed assessee’s claim after taking into account all relevant facts impugned

revisional order passed by CIT was to be set aside Held YES.

(14) Section 14A read with rule 8D

Rainy Investments (P) Ltd. V/s. Ass. CIT

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(2013) 56 SOT 61 (Mumbai) (URO)

Section 14A of the I.T Act 1961 read with rule 8D of the Income tax Rules 1961.

Expenditure incurred in relation to Income not includible in total Income. Share

Application money A.Y. 2008 – 09. Whether share application money being

incapable of yielding any tax free . Income same would have to excluded in

working out disallowance under rule 8D Held ‘YES’.

(15) Non- Complete Fees- Scope of provision Se.28 (va)

Anurag Toshniwal V/s. Dy. CIT 1 (3)

(2013) 56 SOT 62 Mumbai.

Scope of Provision- A.Y. 2009 – 2010. Whether non- complete fees is liable to be

taxed under head “Profits and Gain of business or profession. Held Yes.

Assessee- director of Company sold one of its units to a company and entered

into an agreement with the said company for not carrying out any similar

business for a period of four years. It received sum as non- compete fee and

treated same as long term Capital gain- whether, post amendment in Section 28

(va) said receipt was under head “Profits from business” Held Yes.

(16) Income from undisclosed sources. Addition

CIT V/s. Digambar Kumar Jain (HUF) (M.P. High Court)

(2013) 84 DTR (MP) 365 (56)

Addition on the basis of statement recorded during survey. During Survey under

Section 133A, the Karta of the assessee- HUF surrendered an amount of Rs.40

lakhs to cover possible discrepancies in the impounded documents. A.O made

addition merely on the basis of the Statement recorded during Survey- Not

justified merely on the basis of statement under Section133A. Which was

recorded during the survey; such addition could not have been made. To make

such addition some corroborating evidence against undisclosed Income was

required which could not be found by the A.O. There was no error in the order

passed by the CIT (A) and the Tribunal deleting the addition.

(17) Royalty Payment V/s. Business Income.

P.T. Mc Kinsey Indonesia V/s Dy CIT (IT) 4 (1) Mumbai.

Section 9 of I.T Act 1961 read with ‘Article 7 & 12 of DTAA between India and

Indonesia. Income Deemed to accrue or arise in India (Business profits/

Royalty).

Assessee – Indonesian company was part of a group providing strategic

consultancy services for clients- It provided various information to its. Indian

group company. Information supplied was in nature of data and did not arise out

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of exploitation of know- how generated by skills and innovation of persons who

possessed such talent. Whether amount received by assessee from Indian

group company did not full in category of royalty rather it had to be assessed as

business Income Held ‘YES’.

(18) CIT Patialal V/s Groz Beckert Asia Ltd V/s LD/61/70 Reported in. The

Chartered Accountant t Journal. April 2013 (Page 1530) Date of Judgement

24/01/2013. Corporate Member ship fee paid to Golf Club is allowable as

revenue expenditure.

(19) Confederation of Indian Pharmaceutical Industry SSI V/s CBDT.

Section 37 (1) of the I.T Act 1961. Business Expenditure. Allowable as Circular

No. 5/2012 dated 01/8/2012 issued by the CBDT Providing that claim of any

expenses incurred in providing freebees in violation of the provisions of Indian

Medical (professional Conduct Etiquette and Ethic) Regulations 2002 shall be

in admissible under Se.37 (1) is valid reported in C.A Journal April 2013 Page

No.1534.

(20) Club Membership Capital or Revenue Expenditure.

CIT V/s. Groz Becken Asia Ltd. (P*& H) FB. (2013) 84 DTR (1) (46)

Corporate Membership fee of a club- Expenditure on Corporate Membership of a

club does not bring into existence an asset or an advantage for the enduring

benefit of the business and same is deductible as revenue Expenditure.

(21) (Allahbad H.C) Noida Bridge qualifies as building Depreciation allowable

through land not owned.

CIT V/s. Noida Toll bridge Co. Ltd. CTS-837-HC. 2012 All)

Depreciation allowable on Noida Toll bridge and adjoining road as building

construction of roads/ bridge on leased land not relevant. Assessee is owner of

roads/ bridge during lease period exercised exclusive right to collect toll regulated

used of Bridge.

HC held “The present case stands on a better footing, in which the land is held

on lease and the road as capital asset has been built on it with exclusive

ownership of the road, and the bridge in the assessee company for the

concession period, and which also includes the right to collect tolls and to

regulate use of the bridge Se.32 would therefore, apply for the purpose of

providing depreciation. For removal of doubts the legislature has provided that

the building includes roads in Note. (1) to Appendix 1 Providing for the table of

rates at which the depreciation is admissible.

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(22) Income from undisclosed Sources.

Shree Ganesh Trading Co. V/s CIT

(2013) 84 DTR (Jharkhand) 94

Addition- Addition on the basis of Statement under Section 132 (4). during

Search of premises of the firm, its partner surrendered Rs.20 lacs. However, in

the return filed after search, the Income of Rs.20 lacs was not declared by the

assessee- firm- No specific reason has been given for rejection of the assessee’s

contention by which the assessee has retracted from his admission- Addition

thereof was not sustainable on the facts of the case- This fact also has not been

taken care of and considered by any of the authorities that in a case where there

was search operation, no assets or cash was recovered from the assessee, in

that situation what had prompted the assessee to make declaration of

undisclosed income of Rs.20 lacs.

(23) Chargeability : Unclaimed liability.

Lintas India (P) ltd V/s Asst CIT Mumbai K Branch

(2013) 83 DTR Tribunal Page No 263 Mumbai Tribunal Assessee having

consistently followed a method of accounting whereby it is maintaining provision

for unclaimed liabilities and offering the unclaimed amounts to tax after the end of

three year limitation period, entire credit in the said account cannot be brought to

tax as Income of the relevant year.

(24) CAPITAL GAIN

Capital gains: Capital Assets – Personal Effects

Faiz Murtaza Ali V/s CIT A.Y. 2002-2003

(2013) 85 DTR (Delhi HC) 33 (62)

Articles such as carpets, paintings, collector items, house hold items, including

crystal items, antique furniture, etc. inherited and or received as gift by assessee

form his father aunt etc – Fact that these articles were held by him for personal

use has been indicated in the affidavit filed by assessee before the AO. No

material has been brought out by the AO or the Revenue to indicate that the

affidavit is false – Therefore, on the basis of evidence on record, the articles in

question ought to have been held to be personal effects of the assessee Capital

gains – were not chargeable on sale of these items.

(25) Capital Gains Exemption Under Section 54.

CIT V/s. Gita Duggal (2013) 84 DTR (Del) 346 (55)

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Capital Gains:- Exemption under Section 54: Construction of two or more units

or floors Section 54/54F. uses the “Expression ” a residential house” Expression

used is not ‘a residential unit’ So long as the assessee acquires a building, which

may be constructed, for the sake of convenience, in such a manner as to consist

several units which can if the need arises, be conveniently and independently

used as an independent residence, the requirement of the section should be

taken to have been satisfied- Fact that the residential house consists of several

Independent units can not be permitted to act as an impediment to the allowance

of the exemption under Section 54/54F. It is neither expressly nor by necessary

implication prohibited. .

(26) Capital Gains. Exemption U/S 54F. Residence acquired out of India.

Vinay Mishra V/s. Ass.CIT

(2013) 141 ITD 301 (Bangalore)

Se.54F of the I.T Act 1961. Capital Gains. Exemption of, in case of Investment

in residential house, Condition precedent A.Y. 2009-10. whether provisions of

section 54F does not suggest that new residential house acquired should be

situated in India. Held ‘YES’ . whether, therefore exemption under Section 54F

cannot be denied on ground that residential house acquired was situated outside

India. Held ‘YES’.

(27) Assistant Commissioner of Income Tax V/s. IFE India Ltd.

(2013) 22 ITR (Trib) 365 (Mumbai)

(a) Capital gains- Computation of capital gains- Assessee owning flat in co-

operative housing society- Co-operative society allotted additional floor space-

Transfer of development rights to builder by all flat owners- Transfer of capital

asset – Gains not taxable as there was no cost of acquisition- Income- Tax Act,

1961, ss 45,48.

(b) Company- dividend- Income- Mutual concern- assessee owning flat in co-

operative Housing Society- Co-operative Society allotted additional floor space

– Portion of floor space index allotted to assessee- Value not assessable as

dividend- Principle of mutuality applicable- Value not assessable in hands of

assessee- Income –tax Act, 1961.

(28) Exemption of, in case of Investment in residential House.

Raj Babbar V/s Income tax Officer 11 (1) (3) Mumbai.

(2013) 56 SOT 1 (Mumbai)

Section 54 F read with Se.48 and 50C of I.T Act 1961.

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Capital gains Exemption of, in case of Investment in residential house, Effect of

deeming fiction of Section 50C. A.Y. 2008-09. Whether where investment in new

asset was more than net consideration received as well as full value of

consideration computed as per Se.50C. Assessee would not be chargeable to

Capital gain Held yes. Whether Construction of additional floors would be part of

existing house, not a separate unit Held ‘YES.

(I) Sale Price of plot of Land Rs.8,00,000/-

(II) The Market value of Plot as per Stamp duty authorities Rs. 16,87,000/- [ i.e.

50C Value].

The Assessee spent and claimed exemption u/s 54F for construction of

two additional floors on existing house amounting to Rs.17,65,752/-

(29) DEDUCITION INCENTIVES

Deduction under Se. 80P (2) (a) (i) Allowability- Failure to File return.

Kadachira Service Co.op. Bank Ltd. V/s. ITO

(2013) 84 DTR (Cochin) (Tribunal) 177.

In view of the mandatory provisions of Se.139 (1) read with Se.80A (5) it is

mandatory for Co. operative Society for claiming deduction under Section 80P to

file return and to make the claim of deduction Under Se.80P to file return and to

make the claim of deduction in the return if return is not filed either under section

139 (1) or Se.139 (4) or in pursuance of notice issued under Section 142(1) or

under section 148: assessee is not entitled for deduction under Section 80P.

(30) Losses/ Deductions.

EDAC Engineering Ltd V/s Dy. CIT Chennai

(2013) 141 ITD 231 (Chennai)

Se.28 (1) of the I.T Act 1961 Business loss/deduction.

Allowable an expected Loss- A.Y. 2004-05. Whether booking of expected loss

when circumstances are adverse might be warranted in terms of Accounting

Standards as a matter of conservatism, but, for tax purposes it is a cardinal

principle that only expenses incurred or losses suffered could be allowed. Held

Yes. Assessee, a contractor, was recognizing revenue based expected loss on

grounds that contracts had no escalation clause and price of steel and cost of

wages and spares had increased manifold whether since there was no legal right

on any person for claiming a cost which was still to be incurred, said loss could

not have been allowed Held ‘YES’.

(31) Section 68/50 etc.

Income from undisclosed Sources Addition under Se.69B.

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Dy CIT 83 DTR (JP) Tribunal 346 (40)

In the absence of any positive material on record to prove that the bold figure

found noted on a seized paper actually represents the cost/ purchase price of

land addition under Section 63B can not be made simply by rejecting assessee’s

explanation, supporting evidence i.e. statements of original land owners admitting

additional considerable which was neither taken into consideration by the A.O nor

filed by the Department before the CIT (A) cannot be accepted by the Tribunal,

Same being totally new evidence, more so when these statements were neither

confronted to the assessee nor any cross examination was allowed.

(32) ASSESSMENT REASSESSMENT APPEAL

Re-assessment Notice is not valid

Pardesi Developers and infrastructure (P) Ltd V/s CIT

(2013) 351 ITR 8 Delhi H.C.

Merely because there was information received form investigation wing that the

assessee is one of the beneficiary of accommodation entries, the receipt of share

Application money received by the assessee could not be a basis for issue of re-

assessment notice without application of mind on the part of the AO the

information received and the facts of the case. In the original assessment the

assessee had been questioned on the receipt by the AO, when the assessee had

furnished a reply along with confirmations of the parites of survey had also been

conducted when the confirmations of the parties. A survey had also been

conducted, when the confirmations were reaffirmed. it was only after such

enquiry the assessment had been completed under section 143 (3) it was in this

context that writ petition against issue of re-assessment notice, was entertained

by the High Court the matter had been remitted for enabling the assessee to

lodge his objections to jurisdiction before coming to the High court when the

assessee’s objection were not accepted, the assessee came up on the second

round and its objection to jurisdiction was successful.

(33) Revision erroneous an prejudicial order:

Jeewan Ram Chodhary V/s CIT ITAT Jodhpur Bench

(2013) 84 DTR (Jd) (Tribunal) 317

AO having rejected assessee’s books of account after discovering certain defects

and determined the income by applying net profit rate of 9=5 percent having

regard to the past history of the case as against 8=5 percent declared by the

assessee, it can not be said that the AO did not apply his mind while framing the

assessment and therefore the order passed by the AO cannot be held to be

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erroneous or prejudicial to the interests of the Revenue, order under S. 263

passed by the CIT on the ground that AO ought to have applied profit rate of 10

percent instead of 9=5 percent and made separate additions for the said defect is

not sustainable.

(34) Appeal to High Court competency of Appeal

CIT V/s Ranka & Ranka (2013) 352 ITR 121 (Karnataka)

Effect of section 268A monetary limits – instruction No. 3 of 2011. Raising

monetary limits – scope of National Litigation policy 2011 – instruction No. 3 of

2011.

It is applicable to pending proceedings – CBDT instruction No. 3 of 2011.

Dated February 3 2011 IT Act 1961 Sec. 260A ,268A

Sr.

No

Appeal in Income tax Matters Instruction 5 of

2008

Instruction 3 of

2011

(i) Appeal before ITAT Rs. 2,00,000 Rs. 3,00,000

(ii) Appeal before High Court Rs. 4,00,000 Rs. 10,00,000

(iii) Appeal before the Supreme Court Rs. 10,00,000 Rs. 25,00,000

(35) (i) Re assessment: Income Escaping Assessment .

Qmac Test Equipments (P) Ltd V/s. Ass.CIT

(2013) 22 ITR (Tribunal) 690 (Chennai) (6)

Notice after four years- A.O must apply mind. No failure to disclose material

facts necessary for assessment Reassessment not valid. I.T Act 1961

SS147/148.

(ii)That the order had been passed by the CIT (A) in a non-judicious and arbitrary

manner. The order of the CIT (A) was not only against the law laid down by the

High Court (CIT V/s DSL Software Ltd. (2013) 351 ITR 385 (Karnataka) but

smacked of mala fide on the part of the CIT (A). the Department had to

compensate the assessee for causing the latter unnecessary mental and

financial harassment. Therefore the appeal of the assessee was allowed with

cost of Rs.25,000/-.

(36) Revision- Erroneous and prejudicial order:-

CIT V/s. Jain Construction Co.

(2013) 84 DTR. (Rajsthan H.C) 369 (57)

Once the A.O rejected the books of account of the assessee on those very

defects pointed out by CIT and passed the best Judgement assessment on the

basis of G.P rate of 12.5 percent and made additions in the declared total

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Income, there was no occasion of revising the assessment order on the ground

that the Assessing Authority did not verify the closing stock of assessee a fact

which the assessee himself admitted and the Assessing Authority noticing the

same and rejecting the books of accounts, passed the best judgement

assessment.

(37) CIT V/s. (A.P) Hyderabad V/s. Bake Food Products (P) Ltd.

August 21, 2012 (AP0 A.Y. 1986-87

Section 144 read with Se.139 of the I.T Act 1961.

Best Judgement Assessment.

Prior to 1/4/1989 where various discrepancies had been pointed out by the A.O in

the return filed, but assessee did not rectify same. A.O should proceed as if

assessee had failed to furnish returns and he should issue notice under Section

139 (2) he should not make ex-parte assessment under Section 144. (C.A

Journal April 2013 Page 1540)

(38) E- Return where ignorance of usage of latest technology, A.O to examine

positive. Interest to be added to taxable Income.

Suman Chandra G. Mehta V/s. ITO

(21013) 22 ITR (Tribunal) 270 (Mumbai)

Return of Income- E-Return- assessee showing Interest Income earned as well

as Interest paid under “Income from Other Sources” Errors in E- Return- Not

ignorance of law but ignorance of usage of latest Technology Direction to A.O to

examine interest paid and if satisfied, positive interest to be added to taxable

Income I.T Act 1961.

(39) (i) Appeal:- Tribunal has no power to declare retrospective effect of

amendment as un constitutional

(ii)Tribunal can Suo motu require additional Evidence even after conclusion of

hearing.

L.G. Electronics India (P) Ltd. V/s. ACIT.

(2013) 22 ITR (Tribunal) 1 Delhi S.B.

(40) Book Profits. Under Section 115JB.

Forever Diamonds (P) Ltd. V/s. Dy. CIT

(2013)83 DTR (Mumbai Tribunal) 411. (45)

Company- Book Profit under Se.115JB. Profit from sale of rights in immovable

property- Assessee earned profit from sale of its rights in the immovable

property- Which was not shown in the P & L A/c but was taken directly to the

balance sheet- A.O reworked the book profit and made addition on account of

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profit on sale of Investment- Not justified- Once accounts are prepared under

the companies Act and have been certified by the authorities the A,.O cannot

tinker with the accounts and make any changes while computing book profit

except making adjustments as provided in explanation to Section 115JB (2).

(41) Search and Seizure- Release of Seized Jewellery.

Smt. Bhawna Lodha V/s. Director of General of I.T & Others

(2013) 85 DTR (Rajsthan H.C) 10 (46)

Tendency of penalty appeal- There is no demand for tax interest and penalty

outstanding against the assessee for the period in question, for which the

assessment orders were passed on the contrary, the assessee is claiming refund

of excess tax paid in pursuance of appeal effect given by respondent authority-

Mere pendency of appeal before the Tribunal on the issue of penalty of

Rs.72,300/- which is already deposited by her, can only result in further relief to

assessee to the extent. Which may be allowed by the Tribunal if such appeal is

allowed by the Tribunal – Impugned order dt. 16th April 2012 is quashed-

Respondent are directed to release the gold ornament and Jewellery of the

assessee.

(42) Cash Credit under Se.68

ABT Ltd V/s ACIT (2013) 83 DTR (Chennai Tribunal) 178.

Repayment of deposits through banking channels, confirmation of bank showing

the cheques issued encashed by parties identity of person with complete address

was also furnished. Addition under Section 68 is invalid. A.Y. 2008-09.

(43) Deduction- Section 80HHC.

Surrender of Income during Survey on Excess valuation of Stock. Assessee

entitled to deduction under Section 80HHC CIT V/s. Haswani Arts (2013) 83

DTR (Rajsthan H.C) 81.

(44) Re-assessment- Notice after four years.

Ranbaxy Laboratories Ltd. V/s Dy CIT

(2013) 351 ITR 23 Delhi (1)

Incorrect allowance of deduction in respect of Royalty received from foreign

Enterprise- Incorrect allowance of deduction in respect of Export Profit Incorrect

allowance of deduction in respect of profits and gains from newly established

under takings. A.O raising specific queries and considering material before him

club membership specifically mentioned in Tax Audit Report. A.O duly bound to

go through before completing Assessment. Notice not valid Se.147/148.

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(45) TAX RECOVERY/TDS/SECTION 195

Recovery of tax: stay of demand

(a) Deloitte consulting India (P) Ltd V/s Asst. CIT

(2013) 351 ITR 160 Bombay H.C.

The court observed that stay is a matter of discretion which has to be

exercised after consideration of all the relevant facts, mere rejection of

stay petition on the ground that no case has been made out for stay does

not indicate application of mind. A stay order must indicate the reasons

on the basis of which stay has been refused in a speaking order after

considering the claim fairly. Fairness requires objectivity, guided no doubt,

by the deed to protect the revenue, while, at the same time, taking into

consideration the facts of eh case pending in the statutory appeal where it

has not been done, it was held that the order of refusal can not be

sustained.

(b) Society the Franciscan (Hospitallor) Sisters V/s Dy Director of IT

(Exemption) 2013 351 ITR 302 (Bombay)

(c) Sri Lakshmi Brick Industries V/s Tax Recovery Officer

(2013) 351 ITR 345 (madras)

(d) Mohan Wahi V/s CIT (2001) 248 ITR 799 (SC)

(e) Bombay HC lays down guide lines for demand recovery comes down

heavily on Revenue.

UTI Mutual Fund V/s ITO (TS-171-HC-2012(Bombay)

(f) KFC International (2001) 251 ITR 158 (SC)

and the ruling in Coca Cola (2006) 285 ITR 419 (HC)

Ruled that no recovery of tax should be made pending expiry of the time

limit for filing an appeal.

(46) Tax deducted at source: Scope of certificate under Section 197

CIT V/s Parle Biscuits (P) Ltd (2013) 351 ITR 138 (P & H)

The assessee had two units with separate Tax deduction Account Number (TAN)

because they were at two different places. it had obtained a certificate for one

unit for deduction at a lower rate. The AO found that same rate was adopted by

the assessee for deduction for both and he, therefore, took action for alleged

short-deduction in respect of the unit for which separate certificate u/s 197 was

not applied for since the nature of payment was the same, the order passed for

one unit, it was held, could be applicable for the other unit since another

application would have been merely a matter of redundancy. It is under these

15

circumstances, it was held that short deduction could not have inferred affirming

concurrent decisions in first appeal and the order of the Tribunal.

Where on identical facts, the AO himself had inferred a lower rate, there is no

justification whatsoever for the AO to infer short deduction in respect of similar

payments not covered by the certificates.

(47) Service Tax:

Search and Seizure: Release of seized money :-

Chitra Builders (P) Ltd V/s Addln CIT

(2013) 85 DTR (Madras HC) 122 (64)

Absence of tax liability collection of Rs. 2 Crores by the Department from the

assessee company during the search conducted at its premises can not be held

to be valid in the eye of law-it has not been shown by the respondent that the

assessee was liable to pay service tax to the Department in relation to the work

being carried on by it during the course of its business-it is well settled that no tax

can be collected from the assessee without an appropriate assessment order

being passed by the authority concerned by following the procedures established

by law-Therefore, respondent is directed to return the said amount collected from

the assessee during the search.

(48) Interest under se. 220(2) waiver or reduction u/s 220(2A)

K.C. Mohanan V/s Chief CIT & Others

(2013) 85 DTR (Kerala HC) 125 (64)

Genuine hard ship – Assessee could not establish that payment of interest would

cause genuine hard ship to him and that circumstances were beyond his control

and therefore application for waiver of interest was rightly rejected.

Applicability of Board’s instruction F No.400/29/2002 IT (B) dated 26th June 2006

None of the reasons mentioned in Boards instructions are applicable and

therefore the assessee can not seek waiver of interest levied under Sec. 234A,

234B.

(49) Recovery – Stay Se. 220(6) & 222

Saipem Tribune Engineering (P) Ltd V/s Ass CIT

(2013) 84 DTR Delhi HC 417 (59)

Prima Facie Case – out of the figure of Rs. 15=82 Crores an amount of 13 = 36

Crores is the result of tax of Rs. 10 = 24 Crs. and interest thereon of Rs. 3 = 12

Crs. in respect of enhancement of Rs. 30 = 44 Crs. made by the CIT(A) with

regard to the purported disallowance under se. 40A(2) relating to the intangible

assets purchased in the slump sale. A sum of Rs. 50 Lacs has already been paid

16

by 5th February 2013, which leaves a balance of Rs. 13 = 69 Crs. and as against

this an amount of Rs. 13=36 Crs. is only on account of enhancement made of Rs.

30 = 44 Crs. which, Prima Facie, does not appear to be backed by law Assessee

has an excellent prima facie case and Tribunal ought to have granted stay of the

demand raised by the Revenue – impugned order passed by the Tribunal is set

aside to the extent of balance payments other than the payment of Rs. 50 laces

already made by the assessee Rest of the demand is stayed till the Tribunal

disposes of the appeal.

(50) TDS Fees for Technical Services

Siemens Ltd V/s CIT (Appeals)

(2013) 23 ITR (Tribunal) 86 Mumbai Se. 9 (1) (vii) expln.

Technical Services rendered in foreign country Services not involving much

human interface – Services not technical Services under explanation 2 to Se. 9 (i)

(vii) not liable for tax deduction at source IT Act 1961 Se. 9 (i) (vii) explanation 2.

CIT V/s Bharti Cellular Ltd (2009) 319 ITR 139 Delhi Follow.

(51) Deduction of TDS under section 195 of IT Act 1961

Asst. CIT V/s YESH RAJ Films (P) Ltd

(2013) 23 ITR (Tribunal) 125 Mumbai

Non Resident – Payment for services in connection with shooting of films for

arranging for shooting locations, obtaining necessary permits arrangement for

shipping and custom clearance, arranging for “ Extras” shooting equipments,

meals, transport, obtaining visas arranging for make-up of casts, and

coordinating necessary licenses, services, commercial and logistic, not technical

services – payments therefore business profits not chargeable to tax in India in

absence of permanent establishment in India – Assessee not liable to deduct tax

at source IT Act 1961 Se. 9(i) (vi) explanation 2. 195 (2) 201 (1A)

(52) Deduction of tax at source. Payments to for Services of modeling.

Kodak India (P) Ltd. V/s. Dy. CIT

(2013) 22 ITR (Tribunal) 721 (Mumbai ) (6)

Words and phases Modeling and acting.

Professional Services- Payments for Modeling- Modeling not connected with

Cinematographic film- Section 194J not applicable.

Allowing the appeal, that the Payments were made for the services of modeling

which were unconnected with the production of cinematographic films- While

modeling was aimed at display of merchandise, the ‘acting’ wa defined as to act

in play of film. i.e. to portray a role authored by a story- writer with different

17

purposes and objects and certainly not to displace merchandise to boost the

sales of a manufacturers or a traders of the product or services. Therefore, the

payments made by the assessee to M on behalf of K did not attract the provision

of section194J of the Act.

(Note. P the professions notified for the purpose of Section 44AA of the Act hold

goods for Section 194J too]. (i.e. Se.44AA referred to an explanation the rules

are notified Rule 6F explains the means of film artist.

(53) Advance tax Interest- Notice of demand:-

CIT V/s. Dehradun Club Ltd.

(2013) 351 ITR 396 Uttarkhand (5)

No direction in Assessment order for charging interest . Notice of demand can

not be issued levying interest under Section 234B- I.T Act 1961 Se. 143 (3)

156/234B.

(54) Recovery of Tax:-

Society of the Franciscan (Hospitaller) Sisters

V/s. Dy. Director of IT (Exemptions) and Others.

(2013) 351 ITR 302 (Bombay)

Recovery of Tax- Notice of Demand- Stay- Appeals before CIT (A) Pending-

withdrawal of huge money in pursuance of notice under Section 220 (6)

enforcement of recovery of demand without disposing of application for stay Not

justified I.T Act 1961 Se.220 (6)

(55) Bombay H.C Lays down guideline for demand recovery comes down heavily on

Revenue.

UTI Mutual Fund V/s ITO [TS-171-HC 2012 (Bombay) Court or Tribunal coming

down heavily on the Revenue for over Zealousness is nothing new Despite that

this High court ruling is stinging rebuke to the aggressive recovery tactics of the

Income tax Department. Justice Chandrachud made it clear that there would be

zero tolerance shown by courts where the tax officers did not follow the due

process of law and instead acted in a manner so as to only achieve Revenue

targets. The judgement is in line with the ‘non adversial regime” promised by

Chidambaram.

The Court held Consistent with parameters laid down in KEC International (2001)

251 ITR 158 (S.C) and ruling in Coca Cola (2006) 285 ITR 419 He ruled that no

recovery of tax should be made pending expiry of the time limit for filing an

appeal, or disposal of a stay application moved by the assessee. A reasonable

period should also be allowed thereafter to enable the assessee to move a higher

18

forum, He further held that if the A.O takes a contrary view to what has been held

in previous years without material change in facts or law, that is a relevant

consideration in deciding the application. H.C laid down that when a bank

account is attached before withdrawing the amount, reasonable prior notice

should be furnished to the assessee to enable to make a representation or seek

recourse to a remedy in law lastly. He concluded, the ITO should not act as a

mere tax gatherer but as a quasi judicial authority vested with the Public duty of

protecting the revenue’s Interest as well as balancing the need to mitigate

hardship to the assessee. The A.O must objectively decide the considering that

an appeal lies against his order.

(56) Refund Entitlement TDS Deposited with Govt. by mistake.

FAG Bearing India Ltd. V/s, chief CIT (Gujarat H.C)

(2013) 83 DTR Page No 136 Gujarat High Court.

Tax deducted at source under mistake and deposited with Government was liable

to be refunded without reference to any circular- Further, the case of the

petitioner was covered under clause (i) ( c ) of Para (1) of Circular No 769 dt. 6th

August 1998 and not under Subsequent Circular No.790 dt. 290th April 2000.

Refund directed with Interest.

(57) CHARITIES

Where should form 10 be filed

Associated of corp. and Apex Societies of Handlooms V/s Asst. Director of

Income tax (2013) 351 ITR 287 (Delhi)

Where an assessee is unable to apply the prescribed percentage of 75 percent

/85 percent of its income during the year, it has to file an application to the AO for

carrying forward the amount required to be applied for being for specified

purposes in a later year. Though the time limit for such application is prescribed,

the delay in application filed before AO or in first appeal can be considered in

genuine cases vide Board circular No. 273 dt. 3/06/1980 (1981) 126 ITR 1st 27

since such delayed application before the Tribunal would not be eligible, the High

Court dismissed the appeal of the assessee. The law that it could have Form No.

10 if reassessment action had been initiated makes no difference.

(58) Section 80G Deduction

Shiv Mandir Devsattan Panch Committee Sanstan V/s CIT I Nagpur

(2013) 56 SOT 456 Nagpur (ITAT)

Se. 80G read with section 2 (15) of the Income tax Act 1961. Deduction –

Donation to certain funds, charitable institutions etc (Approval under section 80G

19

(5) (vi) whether lord Shiva, Hanumanji, Goddess Durga does not represent any

particular religion, they are merely regarded to be super power of universe. Held

‘YES’ whether, therefore, worshipping of Lord Shiva, Hanumanji, Goddess Durga

and maintaining of temple cannot be regarded for advancement, support or

propagation a particular religion. Held ‘YES’. whether, expenses incurred for

worshipping of Lord Shiva, Hanumanji, Goddess Durga and maintaince of temple

cannot be regarded to be for religious purpose, Held ‘YES’. Whether

Commissioner is not correct in law in not allowing approval to assessee trust

under section 80G Held ‘YES’.

(59) Charitable purpose Registration of Society cancellation Tamil Nadu Cricket

Association V/s. Director of IT (Exempt )

(2013) 22 ITR (Tribunal) 673 (Chennai)

Law Applicable Assessee formed for promotion of Cricket carrying activities of

commercial nature and generating huge Revenue. Cancellation justified

Se.12AA.

Held, dismissing the appeal, that the case of the assessee was covered by both

limbs stated in section 12AA(3) of the Act. The entire income of the assessee

was generated out of activities of commercial nature towards earning hyper

profits. The genuineness of the activities carried on by the assessee stopped

with the physical aspects of the game. The object of the assessee was to carry

on an activity for advancement of an object of general public utility by promoting

the cricket game. But, it had deviated from the stated objective by carrying out

the game as an entertainment industry, generating huge revenue. Therefore, the

Director of Income-tax (Exemptions) had rightly cancelled the registration under

section 12AA of the Act.

(60) Section 11 of I.T Act 1961. Charitable or religious Trust.

Ass. CIT V/s. Sri Sri Radha Damodar Charitable trust

Exemption of Income from house property- held under trust. A.Y. 2008-09.

Assessee was a charitable trust and its principal objects included promotion of

vegetarianism and distribution of Prasad. Assessee claimed exemption u/s 11.

A.O finding that assessee was in a business of running an eating house/

restaurant, took a view that entire. Charater of and focus of assessee had

become totally commercial he thus, rejected assesseee’s claim. Whether since

promotion of vegetarianism is undoubtly a charitable activity- because of

preparing vegetarian food items and selling same was very much incidental to

object of assessee trust and such business could be conducted by a charitable

20

trust as per provision of section 11 (4A). Held Yes. Whether, therefore,

assessee’s claim for exemption under Section 11 was to be allowed. Held ‘YES’.

(61) Charitable Trust. Charitable Purpose:-

CIT V/s. Bhhola Bhandari Charitable Trust.

(2013) 351 ITR 469 ( P & H) (5)

Donation for Charitable purposes Exemption- Renewal of exemption- Exemption

once granted shall continue in perpetually- Exemption can not be withdrawn

without issuing notice C.B.D.T Circular No 5 of 2010 Dated 3/6/2010 and 7 of

2010 dated 27/10/2010. IT Act 1961. Se. 80G. (29010) 324 ITR (St) 293.

(2010) 328 ITR (St) 43.

(62) Charitable Trust: Registration Under Section 12A Cancellation under Section

12AA (3)

Mumbai Cricket Association V/s Director of IT (Exemptions)

(2013) 84 DTR (Mumbai) Tribunal 162 (54)

Charitable trust: Registration under Section 12A- Cancellation under Section

12AA (3) Agreement entered between assessee engaged in the activity of

promoting and regulating the game of cricket in Mumbai and SI for development

of world class facilities on plot belonging to assessee- Facilities as developed

which include a club, bar, banquets etc. Cannot but be called as commercial and

profit sharing ventures at times commercial activities were undertaken on the

unutilized land- But in view of the prospective, insertion of sub S. (3) in S. 12AA,

cancellation of registration granted to MCA shall not date back to the date of

signing of the concessionaire agreement i.e. 12th December 2005, but shall be

effective from 1st June 2010 i.e. the date when the amendment was insertered in

the statute.

(63) Section 12AA of the Income tax Act 1961.

Charitable or religious trust Registration procedure Cancellation of registration:-

Agra Development Authority V/s CIT

(2013) 31 Taxman.com 40 [Agra. Tribunal]

Power to cancel registration under section 12AA (3) having been brought on

statute with effect from 1/6/2010 prospectively, cancellation made with effect from

assessment year 2009-190 would be invalid.

(64) Amendment of Section 2 (15) barring exemption where receipts exceeds Rs.10

lakhs not for cancellation u/s 12 (a) Madras Motors Sports Club V/s Director of

I.T (Exemption() (2013) 22 ITR (Tribunal) 175 (Chennai) A.Y. 2009-10. or 141

ITD (1).

21

Charitable Purpose- Registration of Trust- Cancellation.

Amendment of Section 2 (15) barring exemption where receipts exceeds Rs.10

lakhs- Not sufficient reason for cancellation of Registration under Section 12A (a)

I.T Act 1961. SS 2 (15) 12A (a)

A harmonious reading of the provisos to Section 2 (15) of I.T Act 1961. Shows

that in the years in which the receipts of nature mentioned in the first proviso

exceeds Rs. 10 lakhs, the assessee will not be eligible for exemption under

Se.11 & 12 of the Act. It does not mean that an otherwise charitable object of

general utility will become a non-charitable one only for a reason that the

aggregate receipts exceeds Rs.10 lakhs.

(65) Rejection of application for registration of Charitable Institution based on

assumption set aside.

Social Pedia Knowledge foundation V/s Director of I.T (Exemption)

(2013) 22 ITR (Tribunal) 238 (Chennai)

The object of the assessee- company were providing education and facilitating

social and economic empowerment, economic development programs, literacy

programs, training programs for villagers and down trodden people. It applied

for registration under Se.12AA of I.T Act 1961. The Director of I.T (Exemption)

rejected the application on the ground that the objects and activities of the

assessee were not inconformity with the definition of Charitable purpose u/s 2

(15) and hence did not qualify for registration u/s 12AA on appeal.

Held that rejection of registration by DIT (Exemption) was based on assumption.

The fact that the assessee had been incorporated u/s 25 of the companies Act

1956 showed that it had been formed for promoting charity or any other useful

object and intended to apply its profits if any or other Income in promoting its

objects. In other words it was a non-profit earning organization. Therefore, the

order of the DIT (Exemptions) was to be set aside with a direction to grant

registration to the assessee under Section 12AA.

(66) Accumulation of Income

(2013) 351 ITR 287 (Delhi)

Re-assessment- Charitable Trust- Exemption- Accumulation of Income-

Assessee can file Form 10 during reassessment proceedings- Assessee could

not file form 10 only before Tribunal I.T Act 1961. Se.11 and IT Rule 1962 rule 17

form 10.

(67) VISHAV NAMDHARI SANGAT V/S. COMMISSIONER OF INCOME TAX.

[2013] 22 ITR (TRIB) 468 (CHANDIGARH)

22

Donations to charitable institutions- Special deduction- Approval of institution-

Renewal- Circular clarifying that existing approvals deemed to have been

extended in perpetuity unless specifically withdrawn – Circular binding- Approval

to continue- Income Tax Act, 1961, s. 80G (5) – Circular No. 5 dated 3-6-2010.

(68) PENALITIES

Penalty under section 271 (1) (C) No exigible

CIT V/s Jaswinder Singh Ahuja (2013) 351 ITR 262 (Delhi HC)

Where the issue related to assessment of income from sale of shares received on

stock option with the assessee claiming it as a long term capital gains, but it was

actually found that it has to be treated as short term capital gains the question

was, whether penalty was exigible (liable) in such a case.

it was found that the law was not clear at the time the assessment was made for

the A.Y. 2002-2003 in view of lack of clarity, the issue has to be treated as

debatable so that penalty was not liable the High Court confirmed this view.

(69) Penalty under section 271 (1) (C)

(2013) CIT V/s Amit Jain (Delhi HC) 175 (67)

Income assessed under another head-income having been correctly returned by

assessee as capital gains assessment under the head of business income would

not attract penalty under se. 271 (1) (C)

(70) Penalty under section 271(1) (C) : Concealment

Asst CIT V/s Grand Organics (P) Ltd

(2013) 85 DTR (Panaji Tribunal Bench) 142 (65)

Withdrawal of claim for deduction – penalty u/s 271 (1) (C)

can be levied either in case of concealment of particulars of income or furnishing

of inaccurate particulars of Income-Assessee, being allowed deduction u/s 80IB-

in the past, claimed deduction furnishing full particulars but on legal advice

withdrew the claim and paid tax-AO without recording whether assessee

concealed particulars of income or furnished inaccurate particulars levied penalty

under se. 271(1) (C) observing that it was mandatory and automatic-Not

Justified- Assessee has disclosed all the necessary particulars in the return-

Bonafides of making the claim for deduction under section 80IB and withdrawals

thereof is duly proved- A mere making claim, which is not sustainable in law, by

itself, will not amount to furnishing inaccurate particulars regarding income of

assessee, more particularly in present case of assessee where in the claim of

deduction under se. 80IB was withdrawn and tax duly paid on the same.

23

(71) Penalty under section 271(1) (C)

CIT V/s Celetronix power Indian (P) Ltd (2013) 352 ITR 70 (Bom)

Penalty – Concealment of income – failure to furnish accurate particulars –

Disallowance of claim and imposition of penalty on basis of subsequent Supreme

Court decision – not furnishing of inaccurate particulars – penalty levied not

justified.

IT 1961 Se. 271 (1) (C)

(72) Penalty: Concealment of Income wrong claim

Dy CIT V/s Apollo Hospitals Enterprises Ltd

(2013) 23 ITR (Tribunal) 49 (Chennai)

Claim to depreciation on entire medical equipment as life saving device – NO

concealment of any fact – penalty not leviable for wrong claim.

(73) Penalty under SS 271D and 271E Contravention of SS.269SS and 269T.

Dy CIT V/s. Forging Ltd. (2013) 84 DTR (Del) Tribunal 153 (53)

Contravention of Section 269SS and 269T Current account transactions vis-à-vis

journal entries- Assessee entered into a development agreement with one DD

under which land was to be provided by assessee and development was to be

undertaken by DD. DD purchased land on behalf of assessee through it

representative K- payments made by DD on behalf of assessee were credited

assessee by journal entries to DD’s account. Assessee having not accepted any

deposit from DD in cash, there was no violation of Se.269SS, hence no penalty

under Section 271D was attracted Transactions are in nature of business

transaction recorded through the current account- There is no finding that the

transactions were under taken to avoid payment of tax. For the same reason

payment by assessee to DD through the said account also did not attract penalty

u/s 271E for violation of Se.,269T.

(74) Penalty under Section 271 (1) (c ) of I.T Act 1961.

(i) Claim of excess depreciation amounting Rs.32,51,161

(ii) Wrong claim of Loss on sale of garment unit amounting to Rs.21,68,597/-.

CIT V/s. Somany Evergree Knits Ltd.

(ITA No 1332 of 2011) Bombay High Court dt. 21/3/2013.

Relief upheld on the basis of the ITAT Tribunal holding that excess depreciation

originally claimed was on account of bona fide and inadvertent mistake on the

part of the respondent assessee. In any case during the course of the

assessment proceedings. The assessee realized its mistake and pointed out the

same. The Tribunal held that mistake should not be visited penalty the court held

24

that since the order of the Tribunal on the above issue is based on a finding of

fact, we see no reason to entertain question.

As per the I.T Department: (1) The assessee did not filed a revised return of

Income,. However the tribunal noted that the time to file revised return had

expired. In any event the revenue does not dispute that it was a bona fide

mistake on the part of the assessee in the above imposition of penalty upon the

assessee is not warranted.

(75) CIT V/s. Sania Mirza (A.Y. 2004 – 05)

Section 271 (1) ( c) of the I.T Act 1961. Penalty for Concealment of Income.

Where assessee player disclosed the details of awards received from the

government and other Institutions but did not offer them to tax and subsequent to

re-opening of assessment voluntarily offered same to tax. Penalty could not be

levied.

(76) Penalties.

Penalty under Section 271D. Limitation under Section 275. applicability of

clause (a) or Clause (c ) of Se.275 (1)

CIT V/s. Jitendra Singh Rathore.

(2012) 83 DTR Rajsthan 227 ( 40)

When the show-cause notice was served by the A.O on the assessee on 27th

March 2003. Penalty under Section 271D levied by Joint CIT on 28th May 2004

was clearly barred by limitation, notwithstanding issue of show-cause notice by

Joint CIT after matter was referred to him on 22nd March 2004.

(77) Penalty for Concealment of Income.

Dy CIT V/s. Hifanda Ltd.

(2013) 22 ITR (Tribunal) 488 (Kolkata)

Penalty- concealment of Income- Claim to depreciation on cost of development

of Portal and E-commerce site not a fixed asset under Section 2(ii) (b) Penalty

not leviable for wrong claim Deletion of Penalty Justified I.T Act 1961 Se.271(1)

(c).

(78) Penalty under Se. 271 (1) (c ) of I.T Act 1961.

Dy CIT V/s. VRB Investment (P) ltd.

(2013) 56 SOT 12 (Kolkata) URO

Section 271 (1) ( c), read with section 36 (1) (vii), of the Income-tax Act, 1961-

Penalty- For concealment of income-Bona fide claims- Assessment year 2005-

06- Assessee wrote off certain amount as provision for bad debts and claimed

deduction for same under section 36 (1) (vii)- Assessing Officer took a view that a

25

provision for bad debts would not amount to its write off and, thus, there was no

basis for claim raised under section 36 (1) (vii)- Assessing Officer also passed a

penalty order for raising a false claim of bad debts- It was apparent that

assessee made a provision against its dues under a bona fide belief that same

was allowable and, there was no attempt to conceal said fact- Whether in view of

above, impugned penalty order was to be set aside and, matter was to be

remanded back with a direction to allow assessee an opportunity to prove that

deduction claimed under section 36 (1) (vii) did not suffer from lack of any bona

fides or did not fall within either under Explanation 1 (A) or 1(B) of Section 271 (1)

( c ) – Held, yes [Para 4.7] [Matter remanded].

(79) Penalty u/s 269 SS read with Se.271D.

Dy CIT V/s. Firozabad V/s. Akhilesh Kumar Yadav.

(2013) 56 SOT 2 [Agra (unreported) ]

Section 269 SS, read with section271D, of the Income-tax Act, 1961- Deposits-

Mode of taking/accepting- Reasonable cause- Assessment year 2006-07-

Assessee accepted cash loan beyond exempted limit from Samajwadi Party, of

which he was member, for making payment to Nazul Department in order to meet

part cost of converting leasehold rights over Nazul land into free hold- according

to Assessing Officer, said cash loan transaction violated section 269SS because

assessee’s case neither fell in any exceptional clause of section 269SS nor he

could prove urgency of accepting cash directly avoiding banking channel; and

therefore, penalty under section 271D was attracted- However, it was found that

Assessing Officer did not dispute genuineness of said transaction and made no

addition in this regard- Further, cash loan deposited by Samajwadi Party in

assessee’s joint account was withdrawn on same day for making payment to

Nazul authority and assessee had also filed confirmation of Samajwadi Party- In

addition- Assessing Officer had not made out any case that assessee had used

unaccounted or black money- Whether when assessee had entered into

genuine transaction for bona fide reasons, and said loan was also repaid through

banking channel, assessee had been able to establish that he had ‘reasonable

cause’ for not complying with section 269SS- Held, yes- Whether, therefore, it

was not a fit case for levy of penalty- Held, yes [Para 8.12][ In favour of assessee]

(80) Penalty under Section 271D- Contravention of Se.269 SS Reasonable cause.

CIT V/s. Sahara India Financial Corp. Ltd.

(2013) 83 DTR Del, 171 (38)

26

Held Reasonable cause CIT (A) and the Tribunal having arrived at current

findings that there was reasonable cause within the meaning of Se.273B for

violation of Se,.269SS after taking note of the entire facts and circumstances in

which the assessee was place, it cannot be held that the view taken by the

Tribunal is either perverse or absolutely irrational, and the findings recorded by

the Tribunal being essentially findings of facts no substantial question of law

arises.

(81) Penalty under Section 271 (1) ( c) / Short term Capital gain V/s,. Business

Income.

CIT V/s. Amit Jain

(2013) 351 ITR 74 (Delhi H.C)

Penalty- Furnishing in accurate particulars- short-term Capital Gains- A.O

treating amount as Income from Business amount reported in return treating

Income under some other head not inaccurate particulars- Tribunal rightly deleted

penalty.

(82) Right to Information.

Girish Ramchandra Desphande V/s,. Central Information Commissioner and

others.

(2013) 351 ITR 472 (S.C)

Right to Information Exemption from disclosure. Invasion of Privacy of Individual-

return of Income. Information found in Income tax return- Personal and exempt-

No case of Public Interest in disclosure made out Information not to be disclosed.

(83) The following case law

Vinod V. Chhapia V/s ITO 21 (2) (3) Mumbai

(2013) 31 Taxman.com 415 (Mumbai-TribunaL)

Ref: Se. 2(47) Read with Se. 45 & 56 of IT Act 1961

Capital gains- Transfer (Surrender of tenancy Rights) A.Y. 2006-2007

Assessee land lord old tenant transferred tenancy rights in favour of new tenant-

Assessee (the Land lord gave consent to such transfer –New tenant made

payment to old tenant as well as assessee-Assessee claimed said amount to be

capital receipt and claimed exemption u/s 54EC by investing it in NABARD

BONDS-whether consent given by assessee (Land Lord) for transfer of tenancy

rights would result in transfer of any capital asset Held ‘NO’ whether amount

received was taxable as income from other source and not as capital gains Held

‘YES’