Sec. 143(2) notice by non-jurisdictional AO, invalid despite within statutory time-line; Penalty to rehabilitation authorities for regularizing construction, allowable u/s. 37

ITAT: Sec. 143(2) notice by non-jurisdictional AO, invalid despite issued within statutory period

Delhi ITAT dismisses Revenue’s appeal and deletes addition u/s 68 on assessee-company during AY 2006-07, holds that the entire assessment proceedings are

vitiated because of non-service of notice u/s 143(2) within the period of limitation by the AO having jurisdiction over the case of the assessee; Assessee, who has been filing return of income at Delhi was issued notice u/s 143(2) by ITO, Faridabad who was having no jurisdiction over the case of the assessee, subsequently after transfer of case, ITO, New Delhi issued notice u/s 143(2) which was beyond the statutory period; ITAT states that, as AO having jurisdiction over the case of the assessee did not issue notice u/s 143(2) upon the assessee within the period of limitation, the first notice issued by ITO, Faridabad having no jurisdiction over assessee would not be valid and would not get any jurisdiction over the case of the assessee ;Rejects Revenue’s stand that ITO, Faridabad was empowered to issue notice as per PAN or as per Computerized System of the Department as it is against the provisions of Law ; Remarks that, “ …the issue would be in violation of the principles of law and as such the internal procedure provided by the department would not justify the illegality committed by the ITO, Ward-1(1), Faridabad.”

[TS-120-ITAT-2018(DEL)]

ITAT: Penalty for regularizing construction within byelaws of Slum Rehabilitation Authority allowable u/s 37(1)

Mumbai ITAT allows deduction u/s. 37 for penalty paid by assessee-company (engaged in the business of property development) to Slum Rehabilitation Authority (SRA) during AY 2010-11, rules that penalty was paid for regularization of certain construction work within the permissible byelaws of concerned authority and not for infringement or violation of any law ; During the relevant AY, assessee had commenced certain construction work before obtaining commencement certificate due to reasons beyond its control as there was an ambiguity in demarcation of the Coastal Regulation Zone, Revenue however disallowed penalty paid to SRA ; Notes that the ambiguity was later clarified by the Maharashtra Coastal Zone Management Authority from the National Institute of Oceanography and after due survey and demarcation, assessee was granted commencement certificate on payment of necessary fees , which shows that the said violation is not an offence under the Act

[TS-119-ITAT-2018(Mum)]

ITAT: Partnership firm having corporate entities as partners, a consortium eligible for deduction u/s 80IA(4)

Pune ITAT quashes CIT's order u/s. 263 denying deduction u/s 80IA(4) to assessee (a partnership firm having 3 corporate entities as its partners) for AY 2012-13, rejects Revenue’s stand that deduction u/s 80IA(4) is available only to a company or a consortium of companies and since the assessee is a partnership firm, it is not eligible for impugned deduction; ITAT refers to the provisions of Sec. 80IA(4)(i)(a) and observes that the section is applicable to an enterprise being a company registered in India or a consortium of companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; ITAT then observes that the word “consortium” is not defined in the Income Tax Act, hence, takes note of Merriam Webster dictionary, wherein it is defined as “an agreement, combination, or group (as of companies) formed to undertake an enterprise beyond the resources of any one member”; Cites Madhya Pradesh HC ruling in Org Informatics wherein it was observed that a consortium is akin to a partnership where each partner is liable for action of other partners

[TS-118-ITAT-2018(PUN)]

ITAT: Grants conditional stay to Thomson Reuters observing 'prima facie' case in favour

Mumbai ITAT grants conditional stay to Thomson Reuters International Services Private Limited against tax demand for AYs 2011-12 to 2013-14 subject to payment of Rs. 15 Cr. & payment of income-tax refund of Rs. 28 Cr. (due in the name of amalgamating company, as and when received by the assessee); With respect to AY 2011-12, assessee had argued that the issue in respect of deduction u/s 10A is covered in its favour by co-ordinate bench order in assessee’s own case; Further, ITAT notes that the primary issue involved for AYs 2012-13 & 2013-14 is selection of comparability’s in transfer pricing adjustment, takes note of assessee's submission that various courts have held that huge turnover comparables cannot be considered comparable with small turnover company; ITAT holds that assessee has a prima facie case in its favour and accordingly grants conditional stay.