Friday, 28 July 2017

HC larger bench to examine Sec. 244A interest entitlement on SA tax refund ; HCL’s reassessment quashed

SC: HC larger bench to decide on Sec. 244A interest entitlement on self-assessment tax refund
SC sets-aside Delhi HC judgement,  remands matter back to HC for  fresh decision by larger bench on the issue of grant of Sec. 244A interest on self-assessment tax  refund;  SC notes that HC had decided the issue against the assessee and had differed with the view expressed by its co-ordinate bench in Sutlej Industries Ltd. case for AY 1998-99 wherein it was held that assessee would be entitled to interest u/s. 244A on the refund of self-assessment tax; SC remarks that “In the circumstances, the appropriate course of action was to refer the matter to the larger Bench and we fail to understand why it was not done.”; Notes that the Delhi HC subsequently in later case of Sutlej Industries has referred the matter to a larger bench considering the contrary rulings; Accordingly, SC remands the appeal back to HC for its afresh decision along with Sutlej case by a larger Bench.   


HC: Wrong deduction claim cannot make earlier disclosure not ‘true’ to trigger re-assessment
Delhi HC quashes re-assessment for AY 2003-04 initiated beyond 4 years period on assessee (engaged in development and export of computer software and rendering ITES services), holds that the jurisdictional requirement under first proviso to Sec. 147 to show failure on assessee’s part to disclose  full and true material facts  not fulfilled; Rejects Revenue’s stand that as assessee wrongly excluded telecommunication charges from total turnover while computing Sec. 10A deduction, such wrong claim of deduction would make earlier disclosure as not ‘true’;  Notes that assessee’s Sec. 10A claim was examined by AO, remarks that “where the AO, after examining the return and the documents submitted along with it …, did not simply accept the version of the Assessee but issued a detailed questionnaire…, it can no longer be said that such a disclosure was not ‘true’ or ‘full’ only on the basis of the same material more than four years later.”; Further observes AO did not make effort of disclosing, in the reasons, what constituted the failure by assessee to make a full and true disclosure, holds that “A mere reproduction of the language of the provision will not suffice”, but the reasons should speak for themselves; Similarly, HC rejects other grounds of reopening like wrong claim for software license, depreciation on computer peripherals etc. in absence of assessee’s failure to make full and true disclosure.
HC : Rejects Revenue's re-assessment of HCL’s export tax-holiday on profits of foreign branches
Delhi HC allows DSL Software Ltd.’s (assessee, an ITES company and presently amalgamated with its parent i.e. HCL Technologies Limited) writ petition for AY 2004-05 and quashes reassessment initiated beyond four years period; AO had re-opened assessment u/s 148 on the ground that assessee wrongly claimed deduction u/s 10A on the profits of its overseas branches; Notes that there was a true and full disclosure of all material facts by assessee and as such there was no fresh tangible material for AO to conclude that income had escaped assessment; Rejects  Revenue’s contention that where there was a wrong claim for deduction, then it would amount to be not ‘true’ disclosure by assessee, holds that it was a mere review of earlier assessment order ; Remarks that, “it is not open to the AO to now claim, on the basis of the same assessment record, that only because a wrong deduction was allowed or claimed there was no “true disclosure of all material facts”.
HC: Linking seized-document with taxpayer’s undisclosed income ‘must’ for invoking Sec. 292C presumption
Calcutta HC upholds ITAT order, deletes unexplained expenditure/purchase addition u/s. 69C, Revenue had made such additions merely based on presumption u/s. 292C  that, the document (which only contained some scribbled figures with no date) found during search and seizure operation belonged to assessee; Sec. 292C provides that where any books of account, other documents, money, bullion, jewellery or thing are or is found in the possession or control of any person in the course of a search u/s. 132 or survey u/s. 133A, it may, be presumed  that such books of account, other documents, thing etc. belongs to such person;  HC opines that “when the mandate of law is that authorities may presume certain facts under Section 292C of the Act to come to a conclusion in favour of Revenue, the nature of information contained in or revealed by such document would have to be examined to link such document to undisclosed income of the assessee.”; HC observes that so far as the subject-document is concerned, both the Statutory Appellate Authorities found insufficient evidence to link the document with the assessee in the first place, hence, primary fact was not established from which presumption could be drawn, relies on SC ruling in P. R. Metrani.
HC: Upholds deduction u/s. 37 for legal expenses incurred to defend taxpayer’s mining lease
Karnataka HC upholds ITAT order for AYs 2008-09 and 2009-10, allows deduction u/s. 37 for legal expenditure incurred to protect the lease granted to assessee by Government, rejects  Revenue’s capital expenditure plea; Notes that assessee was engaged in the business of mining of iron-ore by taking lands on lease from the State Government, further notes that the grant of lease to assessee was challenged in a writ petition by  Jindal group company and to defend the same, assessee has incurred the said legal expenditure; Observes that the expenditure incurred towards legal fee and other litigation charges was to protect assessee’s business interests in relation to the mining lease, clarifies that “The expenditure was not incurred to acquire the mining lease or to get rid of a defect in the title.”, hence no capital asset was created or brought to existence; Cites plethora of SC rulings including Dalmia Jain, Mangalore Ganesh Beedi Works, Meenakshi Mills Ltd.
HC: Multiple establishments in same complex, not prerequisite for 'commercial complex'; Grants wealth-tax exemption
Delhi HC upholds ITAT’s order that the two properties held by assessee-company (one in Connaught Circus and other in Connaught Lane of Delhi) were in the nature of ‘Commercial Establishments or Complexes’ and therefore outside the purview of 'assets' u/s. 2(ea)(i)(5) of the Wealth Tax Act, 1957 (‘WTA’) for AYs 2004-05 to 2009-10; Notes that one of the properties was given on rent by assessee whereas other one was lying vacant, rejects Revenue’s stand that in order to fall outside the purview of 'assets' u/s. 2(ea)(i)(5), the commercial building had to be let out to several tenants and not just one and that the expression ‘commercial establishments or complexes’ should be understood only in the plural and not in the singular; Further rejects Revenue’s stand that a commercial establishment means a building comprising more than one establishment meant for commercial purpose and having the infrastructure and ancillary facilities and establishments such as banking, financial institution, supermarket, bar etc. ; HC observes that from reading of the entire Sec. 2(ea), the legislative intent was not to restrict the benefit of exemption to any particular type of commercial establishments or complexes; HC remarks that “By reading such a restrictions into the said clause, the Court would be writing into Section 2 (ea) WTA something which is not there.”, relies on Gujarat HC ruling in Vasumati Ben Chhaganlal Virani

No comments:

CBDT issues second round of frequently asked questions in relation to Direct Tax Vivad Se Vishwas Scheme, 2024

  This Tax Alert summarizes Circular No. 19/2024 dated 16 December 2024 (VSV 2- December Circular) issued by the Central Board of Direct Tax...