HAPPY NEW YEAR

HC : Upholds CIT’s probe u/s. 263 into Singaporean co.’s Rs. 100 cr. contract revenue from Cairn India

Uttarakhand HC upholds invocation of CIT’s revisionary jurisdiction u/s. 263 in case of assessee (a Singaporean co. engaged in rendering offshore geophysical services), dismisses assessee’s writ; Assessee had claimed that since the duration of its contract with Cairn India (for providing seismic vessel in connection with oil exploration) was only for 102 days, the gross revenue of Rs. 100.33 cr. earned therefrom during FY 2014-15 was not taxable in India in view of Article 5(5) of India-Singapore DTAA (which provides 183 days threshold); Finds force in CIT’s view that the seismic vessel itself constituted fixed place PE under Article 5(1) of DTAA, also AO was wrong in accepting assessee’s resort to Article 5(5) and that no effort was made by AO to study relevant provision of DTAA; Further, HC states that instead of assessee giving explanation to CIT, it has filed the present writ petition before this Court, accordingly upholds the show cause notice issued u/s. 263; Noting the necessary conditions of Sec. 263 that the CIT must come to the conclusion that the order is both erroneous and prejudicial to the interest of Revenue, HC opines that there is definitely application of mind by CIT on both these aspects:HC

ITAT : No PE trigger for UAE Co. undertaking ‘grouting’ masonry work in India

Delhi ITAT rules that there is no PE of assessee (a UAE co. engaged in providing solutions for subsea off-shore construction industry) on account of the grouting activities carried out in India during AY 2007-08; Accepts assessee’s stand that the grouting activities fall within the construction activity as contemplated in specific provision of Article 5(2)(h), and since the number of days spent in India was less than the stipulated period of 9 months, there was no PE trigger for the assessee in India; Revenue had argued that Article 5(1) squarely applies to the assessee, further Revenue had argued that the assessee has equipment PE in India, lastly it was also contended that even movables place of business may constitute a PE despite they are temporary in location; Firstly, ITAT applies the maxim, “generalia specialibus non deroganf' i.e, a general provision would not be applicable when specific provision is there, next ITAT clarifies that merely because grouting is not a simple masonry work and involves complex aspects, it does not take it out of the construction activities as mentioned in Article 5(2)(h), “…and any further classification [as done by the Revenue] would amount to rewriting DTAA.”; Lastly, rejects Revenue’s stand that since the assessee indulged in on-going projects, 9 months stipulation cannot be applied, states that PE determination has to be made for each AY and with reference to DTAA provision.:ITAT

Imp Case laws on Tax Recovery

Nu-Tech Corporate Services Ltd vs. ITO (Bombay High Court)

Severe strictures issued against DCIT for illegal tax recovery. DCIT directed to pay costs of Rs. 1.50 lakh from salary to the assessee. Dept directed to make entry of lapse & error in the Annual Confidential Report of the AO. Strictures also passed against DCIT for overreaching authority & power by not allowing Dept's Counsel to argue. Such conduct of DCIT does not enhance the image and reputation of Dept

If we allow such oral routine explanation to be tendered and accepted, we do not think that the state of affairs will ever improve. The superiors in the hierarchy have never bothered as to whether the discipline demanded from these officers is indeed in place. Though there is lack of discipline and there is gross insubordination, still, the acts of omission and commission are overlooked

Etiam Emedia Limited vs. ITO (Madhya Pradesh High Court)

S. 147 Reopening to assess Bogus share capital: Law explained whether allegation that assessee is a dummy concern used to route unaccounted money by way of bogus share application money is sufficient to reopen assessment (all imp judgements referred)

The respondents have stated that there are large number of dummy/bogus/shell/briefcase/paper entities including the petitioner/company in the group, which is being managed and controlled by Shri Anand Bangur for the purposes of routing unaccounted money and the department with great difficulties and after examining huge evidence, has arrived at a conclusion to initiate the proceedings against the petitioner and it is not a case where some unilateral action has been taken against the petitioner, it is a case where petitioner will receive every opportunity to defend himself and the entire mechanism has been provided under the Income Tax Act, 1961 and the respondents have prayed for dismissal of the writ petition.

CBDT releases Explanatory Notes to provisions of the Finance Act, 2018

The Central Board of Direct Taxes (CBDT) has released the explanatory notes to the provisions of the Finance Act, 2018. These explanatory notes describe the substance of the provisions/amendments made by the Finance Act, 2018 relating to Income-tax.

read more

CBDT notifies India-Hong Kong DTAA

The Central Board of Direct Taxes (CBDT) has notified all the provisions of the agreement entered into between India and Hong Kong for he avoidance of the double taxation and the prevention of fiscal evasion with respect to taxes on Income. The agreement was signed on 19-03-2018.




https://ilt.taxmann.com/topstories/222330000000017400/cbdt-notifies-india-hong-kong-dtaa.aspx

ITAT : Disallows Law-firm’s sponsorships towards media event ; No ‘triumph’ for celebrating Achievements

Delhi ITAT upholds CIT(A)’s order disallowing a portion of the conference expenses relating to amount spent on party and dinner, media event, purchase of expensive watches, jackets, T-shirts, etc. by assessee (a Law firm) during AY 2010-11; Regarding expenses on distribution of T-shirts, caps and jackets having assessee firm’s logo on annual day celebration, ITAT remarks that“nothing is brought on record as how the distribution of the merchandise among the counsels has served the business purpose of the assessee firm, which is firm of the Advocates.”, further notes no evidence of distribution was submitted; Likewise, for dinner / video coverage expenses in relation to a party hosted to celebrate assessee-firm’s achievements in which all clients and counsels of the firm along with various dignitaries were invited, ITAT states that, “The assessee has not brought on record anything to support that the dinner hosted was for furtherance of the business interest.”; Also, ITAT disallows sponsorship fee paid by assessee for the event “PEI India Forum” for enhancing its visibility and recognition, holds the same was in violation of the Bar Council rules [whereby Indian Law firms are not allowed to advertise their practice in the market] , thereby triggering Explanation 1 to Sec. 37; With respect to the expensive watches distributed as rewards to two employees for their exceptional work, ITAT observes that assessee did not provide any rationale of watches distribution to only two such employees:ITAT 

Appellate authority upholds GST advance ruling in case of Columbia Asia - Cost of employees at head office to be cross charged to other branches

This is to update you with a recent ruling of the Karnataka Appellate Authority for Advance Ruling (‘AAAR’), in which advance ruling pronounced by Karnataka Authority for Advance Ruling (‘AAR’), in the matter of M/s Columbia Asia Hospitals Pvt. Ltd (‘Company/ Appellant’) has been upheld by the AAAR.

The AAR had held that the services of the employees at the corporate office, which benefit the other units of the Company, will be treated as a deemed supply of service in terms of entry 2 of Schedule I of the Central Goods and Service tax Act, 2017 (‘CGST Act’).   

ITAT Special Bench: Formulates guidelines for expeditious hearing of cases referred to Special Benches & Third

Ahmedabad ITAT Special Bench formulates guidelines for expeditious hearing of cases referred to Special Benches and Third Members, setting out 120 days threshold for commencing the hearing and 30 days outer limit in general for adjournments; Notes that a Special Bench was constituted in 2016 to decide on - whether or not the provisions of Sec. 92 can be invoked in a situation in which income of the assessee is eligible for tax exemption or tax holiday, or in a situation in which there cannot be any motive in manipulating the prices at which international transactions have been entered into; Further notes that despite the constitution of a special bench and the stay having been granted to assessee, the appeals have not even been listed for hearing for almost two years; Expressing anguish on the inordinate delay in the special bench case being taken up and emphasizing on priority disposal of such cases, ITAT SB now lays down guidelines; Lists the matter for February 13, 2018 and grants further stay on collection / recovery of outstanding demand of tax & interest to assessee till 180 days from the date of this order or till the disposal of these appeals- whichever is earlier.:ITAT 

Imp Verdicts

PCIT vs. The Executor of Estate of Late Smt. Manjula A. Shah (Bombay High Court)

S. 50C Capital Gains: 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 assessee can be taxed only on the gain which is oozing out from the sale consideration, thus, no adverse inference can be drawn while invoking the provision of section 50C of the Act. No evidence has been produced by the Revenue at any stage that the assessee actually received the value which was adopted by the stamp valuation authority

Kerala State Co-op Agricultural And Rural Development Bank Ltd vs. ITO (Kerala High Court)

S. 220(6) Stay of demand: If the assessee has exercised on time its statutory remedy of filing an appeal and also filed a stay petition, procedural fairness demands that the authorities may wait, before taking further steps, until the appellate authority decides on the stay petition

I reckon the petitioner has exercised on time its statutory remedy of filing an appeal. It appears that it has also filed a stay petition. Procedural fairness demands that the authorities may wait, before taking further steps, until the appellate authority decides on the stay petition

HC : Debars AO from undertaking ‘full fledged’ re-assessment to work out ‘indexed cost

Bombay HC sets-aside re-assessment notice for AY 2013-14 in case of individual-assessee, upholds assessee’s computation of capital gain arising out of a sale of residential property; Notes that assessee’s original return was accepted without scrutiny, based on the  details submitted during the course of assessment proceedings for subsequent year, AO reopened assessee’s case and held that assessee had wrongly claimed benefit of indexed cost of acquisition from the date of sale agreement (1992-93) which could not be executed;  Though HC acknowledges that the AO would enjoy a greater latitude in reopening where return was accepted u/s. 143(1), HC clarifies that, “If the issue is legally concluded, there would be no point in allowing the AO to resort to full fledged reassessment since the reopening of assessment would suffer from the fundamental defect of the AO in having the material to form a reasonable belief that income chargeable to tax had escaped assessment.”; HC rejects Revenue’s  stand that the indexation benefit should be granted only from the date of HC order (2007-08) allowing execution of sale deed in favour of assessee, states that in view of SC ruling in Sanjeev Lal, the execution of sale deed by virtue of the HC judgment would relate back to the original agreement to sale; Accordingly, HC opines that, “the entire basis of the department in the reasons recorded in order to dispute the petitioner's computation of the capital gain, therefore, is rendered invalid.”  :HC 

HC : Directs CBDT to consider return-filing extension / interest waiver applications u/s 119 by assessees in Kerala

Kerala HC directs CBDT to consider applications u/s 119(2)(a)/(b) by assessees in Kerala towards claim of deductions/exemptions/refunds or waiver of interest/penalty, taking note of the flood situation that affected the State of Kerala; While CBDT had suo-motu extended the return filing due-date in the State of Kerala to October 31st taking note of floods, petitioners have argued that the mere extension by one month would not suffice; Though HC rejects assessees’ petition to issue a blanket order extending the due date u/s 139(1) till December 31, 2018 as that would be contrary to scheme of the Act, it states that “specific grievances of the assessees in individual cases can be dealt by CBDT …in terms of Sec. 119(2)(a)/(b)..”; In respect of assessees who have not been able to file a return making a claim for deductions, exemptions or refunds, HC directs them to make an application u/s. 119(2)(b) seeking extension for filing return, which shall be considered by CBDT within 2 months taking note of flood situation; Likewise, in case of assessees aggrieved by interest accrued on delayed payment of tax and who have already filed their returns either before Oct 31st or belatedly thereafter, HC directs them to make an application u/s. 119(2)(a) seeking waiver of interest / penalty which again shall be considered by CBDT within 2 months:HC 

ITAT : Reckons land-stock conversion date from building plan application date, not IOD issuance date

Mumbai ITAT accepts Revenue’s claim that the date of conversion of capital asset (plot of land) into stock-in-trade as envisaged u/s 45(2) shall be reckoned from the date when assessee-builder filed an application for building plan sanction before the Municipal Corporation (i.e. in 1994), and not when IOD was actually issued (i.e. in 1997); Assessee had decided to use portion of his land holdings for developing a housing project, rules that “what is relevant to determine the date of conversion is the intention of the assessee to commercially exploit the property which is on 02-02-1994.”; On year of taxability, ITAT upholds assessee’s stand that the capital gains shall be taxable in the year in which the project was completed and flats were ultimately sold, rejects Revenue’s stand that the LTCG shall be chargeable to tax proportionately on the basis of advance received from customers; Separately, ITAT allows assessee’s claim u/s. 80-IB(10) despite no OC issued by Municipal Corporation; Lastly, ITAT rejects assessee’s stand that interest earned on FDR was a business receipt as it had parked surplus funds generated from business in banks in order to earn interest income and reduce construction expenses, upholds AO’s action of assessing it as ‘income from other sources’.:ITAT 

HC: Explains 'substantial interest' u/s 40A(2)(b) for SDT constitution; Relies upon ICAI Guidance Note

HC allows HDFC Bank’s writ petition, quashes AO’s order and subsequent reference to TPO alleging that certain related party transactions [purchase of loans from HDFC ltd, payment for rendering services to HBL Global and interest payment to HDB Welfare Trust] were Specified Domestic Transactions (SDTs) u/s 92BA; Holds that loans purchased by assessee/ petitioner from its promoter (HDFC Ltd) does not fall within the meaning of SDT u/s 92BA(i) as HDFC Ltd does not have ‘substantial interest’ in assessee & is therefore not a ‘person’ as contemplated in Sec 40A(2)(b)(iv); Explains that 2 conditions have to be fulfilled for a person to have ‘substantial interest’ as contemplated in Explanation to Sec 40A(2)(b) – the person has to be the beneficial owner of the shares and those very shares have to carry not less than 20% of the voting power; Rejects Revenue’s clubbing of HDFC Ltd’s direct shareholding of 16.39% with indirect shareholding of 6.25% in assessee (through its wholly owned subsidiary HDFC Investments Ltd) to establish ‘substantial interest’; Holds that “….This would be contrary to all canons of Company Law….It is well settled that a shareholder of a company can never be construed either the legal or beneficial owner of the properties and assets of the company”, relies on SC rulings in Bacha F. Guzdar and Vodafone International Holdings BV; Further, noting that the transaction was a purchase of ‘asset’ reflected in the Balance Sheet and not in the P&L account, HC opines that “Acquisition of an asset…cannot be said to be in the nature of an expenditure so as to come within the ambit of section 92BA (i)"; HC also holds that assessee’s payment to HBL Global for rendering services does not qualify as SDT absent assessee holding ‘substantial interest’ in HBL Global, rejects consideration of indirect shareholding in HBL Global; Also rejects Revenue’s reliance on CBDT Circular dated July 6, 1968 and relies on ICAI Guidance Note u/s 92E; HC also holds that assessee’s interest payment to HDB Welfare would not fall within Sec 40A(2)(b) read with Explanation (b) as the Trust was exclusively set up for the welfare of its employees and there was no question of assessee being entitled to 20% of the profits of such Trust, rejects Revenue’s reliance on Karnataka HC ruling in Amco Power Systems and SC ruling in Podar Cement as ‘wholly misplaced’:HC 

Roll out of CBIC-GST Application December 2018:

Directorate General of Systems & Data Management

Central Board of Indirect Taxes & Customs

Department of Revenue, Ministry of Finance

Three Imp Verdicts On Core Issues

HDFC Bank Ltd vs. ACIT (Bombay High Court)

S. 92BA(i)/ 40A(2)(b) Domestic Transfer Pricing: Entire law on what constitutes "Specified Domestic Transactions” explained. The Dept's contention that a shareholder has beneficial interest in the assets of the company is contrary to all canons of Company law    

EY GST Update | Recommendations of 31st GST Council Meeting

This is to update you on the 31^st GST Council meeting held in New Delhi today. We have summarized some of the key points that emerged based on the press brief by the Finance Minister and the press release issued by the Ministry of Finance. It may be noted that some of the changes may warrant Amendment in Acts / issuance of relevant notifications / circulars which shall be issued in due course. Some of the key changes have been enumerated here under for ready reference:   

►   The new return filing system shall be introduced on a trial basis from April 01, 2019 and on mandatory basis from July 01, 2019;

►   There would be a single cash ledger for each tax head;

►   A scheme of single authority for disbursement of refund amount sanctioned by either the Centre or the State tax authorities would be implemented on pilot basis;

►   The due date for furnishing the annual returns in FORM GSTR-9, FORM GSTR-9A and reconciliation statement in FORM GSTR-9C for the FY 2017-18 shall be further extended till June 30, 2019. Further, clarificatory changes shall be carried out in the formats/instructions of the annual return / reconciliation statement;

►   The due date for furnishing FORM GSTR-8 by e-commerce operators for the months of October, November and December, 2018 shall be extended till January 31, 2019;

►   The due date for submitting FORM GST ITC-04 for the period July 2017 to December 2018 shall be extended till March 31, 2019;

►   Input Tax Credit in relation to invoices issued by the supplier during FY 2017-18 may be availed by the recipient till the due date for furnishing of FORM GSTR-3B for the month of March, 2019, subject to specified conditions;

►   Late fee shall be waived for all taxpayers in case FORM GSTR-1, FORM GSTR-3B and FORM GSTR-4 for the months / quarters July 2017 to September 2018 are furnished after December 22, 2018 but on or before March 31, 2019;

►   Taxpayers who have not filed the returns for two consecutive tax periods shall be restricted from generating e-way bills;

►   Clarifications shall be issued on certain refund related matters like refund of ITC accumulated on account of inverted duty structure, disbursal of refunds within the stipulated time, time allowed for availment of ITC on invoices, refund of accumulated ITC of compensation cess etc;

►   Changes made by GST Amendment Acts would be notified w.e.f. February 01, 2019;

►   Further, the GST Council has given in principle approval to the following amendments in the GST Acts:

-          Creation of a Centralised Appellate Authority for Advance Ruling (AAAR) to deal with cases of conflicting decisions by two or more State Appellate Advance Ruling Authorities on the same issue;

-          Amendment of section 50 of the CGST Act to provide that interest should be charged only on the net tax liability of the taxpayer, after taking into account the admissible input tax credit, i.e. interest would be leviable only on the amount payable through the electronic cash ledger.

The above recommendations of the Council will be made effective only after the necessary amendments in the GST Acts are carried out.

►   The rate of GST on certain goods attracting 28% has been reduced to 18% and 5% respectively. Also, the rate of GST on certain other goods and services has been reduced / rationalised. The attached press release provides a complete list of such changes in rates of goods / services;

►   The council has decided to refer the following issues to Committees / Group of Ministers:

-       Extending the Composition scheme to small service providers. The rate of tax and threshold limit to be proposed - Law Committee and Fitment Committee;

-       Tax rate on lotteries – Committee of States;

-       Taxation of residential property in real estate sector – Law Committee and Fitment Committee;

-       Threshold limit of exemption under GST regime – GoM on MSMEs.

The GST council in its next meeting in January 2019 would take a view on the above issues.

Update on 31st GST Council meeting held on 22nd December 2018 at New Delhi

to read the update please click the link below.

https://yoursucessstory.wordpress.com/2018/12/23/update-on-31st-gst-council-meeting-held-on-22nd-december-2018-at-new-delhi/

ITAT : Expenditure on establishing new restaurants by Olive Bar, deductible despite no commercial operations

Mumbai ITAT allows deduction for pre-operative expenses (salaries and wages, travelling expenses, repairs and maintenance, staff room expenses and other general administrative expenses) incurred by Olive Bar & Kitchen P. Ltd. (assessee, engaged in running restaurants) during AY 2013-14; During relevant AY, assessee has expanded its existing business by opening three more restaurants at different places, assessee has treated expenditure incurred in connection therewith under the head ‘capital work in progress’ in its books of account, but claimed it as revenue expenditure for income-tax purposes; Firstly, ITAT notes that though the commercial operations have not taken place in respect of the new restaurants, the commencement of the assessee’s business activities is not in doubt; Next, ITAT notes that the pre-operative expenses claimed were in the nature of revenue expenses, further clarifies that different treatment for expenditure in the books of account is irrelevant; Cites Bombay HC rulings in Reliance Supply Chain Solutions Ltd. and Evergrowth Telecom Ltd and Madras HC ruling in Shakti Sugars Ltd., to hold that expenditure on setting up of new unit by way of expansion of existing business is revenue expenditure:ITAT 

HC : Quashes re-assessment on legal representative sans prior proceedings against deceased

Delhi HC quashes re-assessment on legal representative of a deceased assessee, observes that the reassessment notice was issued in the name of the deceased and no notice was issued to the legal representative; Rejects Revenue’s argument that the ‘defect’ was curable u/s. 292BB, remarks that “If the original assessee had lived and later participated in the proceedings, then, by reason of Sec. 292BB, she would have been precluded from saying that no notice was factually served upon her.”, observes that here is a case of issuing notice on deceased assessee; Referring to Sec. 159, rules that “to fasten revenue liability upon a deceased individual, in the absence of pending or previously instituted proceeding …, renders fatal the effort of the revenue to impose the tax burden upon a legal representative.”; Relies on co-ordinate bench ruling in Vipin Walia, SC ruling in Hotel Blue Moon:HC 

Imp SC Verdict On Condonation Of Delay

Anil Kumar Nehru vs. ACIT (Supreme Court)

S. 260A Condonation of delay of 1662 days: The High Court should not take a technical approach and refuse to condone the delay when appeals for earlier years with identical issues are already pending before it 

It is a matter of record that on the identical issue raised by the appellant in respect of earlier assessment, the appeal is pending before the High Court. In these circumstances, the High Court should not have taken such a technical view of dismissing the appeal in the instant case on the ground of delay, when it has to decide the question of law between the parties in any case in respect of earlier assessment year

Purviben Snehalbhai Panchhigar vs. ACIT (Gujarat High Court)

S. 147 Reopening of s. 143(1) assessment: Law on whether reopening to assess alleged Bogus Capital gains from penny stocks is permissible explained in the context of Rajesh Jhaveri 291 ITR 500 (SC) & Zuari Estate 373 ITR 661 (SC)

In the present case the Assessing Officer has heard the material on record which would prima facie suggest that the assessee had sold number of shares of a company which was found to be indulging in providing bogus claim of long term and short term capital gain. The company was prima facie found to be a shell company. The assessee had claimed exempt of long term capital gain of Rs.1.33 crores by way of sale of share of such company

CBDT- Permits belated submission of income accumulation statements by Trusts for AY 2016-17

CBDT authorizes CITs to admit belated applications by Trusts in Forms 10 / 9A [Statement regarding accumulation or setting apart of an amount as required u/s. 11(2) / application for deemed income application for charitable / religious purposes] in respect of AY 2016-17; Takes note of representations received that Forms 10 / 9A could not be filed in specified time for AY 2016-17 which was the first year for e-filing these forms; With a view to expedite the disposal of applications filed by Trusts for condoning the delay and in exercise of powers conferred u/s. 119(2)(b), CBDT accedes to the request of condoning the delay and directs CITs to admit belated application; However, CBDT clarifies that the CITs, while entertaining such belated applications, shall satisfy themselves that the assessee was prevented by reasonable cause from filing of applications within stipulated time; Further, in respect of Form 10, CBDT further directs CITs to also satisfy themselves that the amount accumulated or set apart has been invested or deposited in any one of the modes specified in Sec. 11(5). 

HC: No Sec. 40A(3) disallowance for payment by non-crossed drafts, once payee’s account credited

Karnataka HC reverses ITAT order, deletes disallowance u/s. 40A(3) for payments made by assessee (a manufacturing company) to vendors by non-crossed bank drafts during AY 2005-06; Notes that Revenue had disallowed the expenses only on the grounds that the drafts were not crossed as mandated by Sec.40A(3) read with Rule 6DD, but had not disbelieved the genuineness of purchases; Further notes that the documents such as registered dealer invoices, transit documents, freight charges paid, vendors’ sales tax returns, letters from bank indicated that the purchases were genuine and payments made to vendors were credited to their respective bank accounts; Cites the main objective of crossing a demand draft is to ensure that the payment is deposited in whose favour the draft is drawn (i.e. the payee receives the payment) and it is routed through banking channels, noting that both the conditions were met in the present case, ITAT holds that the spirit for which Sec.40A(3) was promulgated is satisfied; Moreover, acknowledges assessee’s contention that normally suppliers require drafts for quick realization, and hence non-crossed drafts were issued, relies on SC judgment in Attar Singh Gurmukh Singh.:HC

DIPP : Acts on news reports about angel investors' notices, takes up matter with DoR

Department of Industrial Policy and Promotion (DIPP) issues clarification on IT Notice to Angel Investors/Start-ups; States that DIPP has put in place a mechanism since April 2018 to grant exemption from the provisions of Section 56(2)(viib) to genuine investors in recognized start-ups; Clarifies that it has taken up matter of issue of income-tax notices with the Department of Revenue (DoR) to avoid harassment of Angel Investors or Start-ups; Re-iterates that Government is committed to protecting bona fide investments into start-ups. 

Govt. orders restructuring of IT Dept. for enhancing effectiveness, forms Committee

Government orders cadre review exercise for restructuring of IT Department, forms a 15-member Cadre Review & Restructuring Committee chaired by Pr. DGIT (Sys) S. K. Das; The Terms of reference for the Committee include - organizing IT Dept. in a manner which will further promote compliance with Direct Tax laws, rationalizing the organizational structure for enhancing effectiveness of Dept., proposing appropriate modifications in extant organizational structure; Committee to submit its report to the CBDT within 3 months from date of this order 

Development of new GST return filing system by GSTN

GSTN will focus on the development of new return filing, further improving the user interface, and Business Intelligence and Analytics. While the new return is yet to be notified, GSTN has started development of the components in which major changes are not expected.

Improvement in User Interface on the basis of feedback is a continuous process.

HC : Discharges taxpayer from ‘hurriedly’ launched prosecution as tax-demand agitated before various fora

Madras HC discharges assessee-individual from the prosecution launched u/s. 276C(2) for non-payment of determined tax; Notes that since the assessee was agitating his case before various fora [CIT(A) / ITAT], he did not pay the income-tax demand raised of Rs. 14.84 lakh and thereby prosecution was launched against him, however upon being successful in appeal, the demand itself was reduced substantially; HC remarks that, “the very edifice on which the prosecution was launched against the accused, has crumbled like a pack of cards,”, holds that, “it cannot be stated that the accused was willfully evading the payment of tax.”; Rejects Revenue’s stand that assessee cannot be discharged from the prosecution as tax was due from him when the prosecution was launched, also remarks that, “There was no supine indifference on the part of the accused in not paying the demanded tax, but, on the contrary, he had agitated before various fora and ….”; HC opines that there was no necessity for the IT Dept. to have launched the prosecution hurriedly, “since the law of limitation u/s. 468 Cr.P.C. for criminal prosecution has been excluded by the Economic Offences (Inapplicability of Limitation) Act, 1974.”:HC 

ITAT : Eligible projects’ income, not overall business loss, relevant for Builder’s Sec. 80IB(10) claim

Pune ITAT rejects Revenue’s action of invoking Sec. 80AB to deny assessee-builder’s Sec. 80IB(10) claim for AY 2009-10; During relevant AY, assessee had earned profits from eligible projects and incurred loss in non-eligible projects, thereby resulting in overall loss under the head `Profits and gains of business or profession’, accordingly AO had invoked Sec. 80AB and denied assessee’s claim of deduction u/s. 80IB(10); Rejects Revenue’s action of considering loss from non-eligible projects and eventually total business loss for making assessee ineligible for deduction u/s.80IB(10); Referring to Sections 80AB & 80B(5), ITAT opines that, “it is the income of the eligible projects alone which should be considered on standalone basis, rather than the income under the head `Profits and gains of business or profession’, for the purposes of granting deduction, albeit with the overall ceiling of the gross total income.”; ITAT states that since the amount of eligible income, as claimed by the assessee, is less than the amount of gross total income, the provisions of Sec. 80AB do not apply adversely to such a situation.:ITAT 

HC : Rejects stamp-duty valuation u/s. 50C for computing capital-gains on assignment of development rights

Bombay HC upholds ITAT order, rules that capital gains arising to assessee during AY 2005-06 on assignment of development rights, in respect of the immovable property, to a builder is to be computed based on the amount actually received by assessee, rejects adoption of stamp duty valuation u/s. 50C; The assessee had entered into a MOU with the Builder providing them with development rights in respect of property for a consideration of Rs. 2.51 cr; Firstly, HC notes that there was a gap of nearly 3 years between the date of execution of the MOU and the execution of a formal development agreement and the stamp duty authority had assessed the value of the property on the date of the execution of development agreement; Next, HC notes that the stamp valuation was for a larger area whereas the assessee had assigned the development rights only with respect to a smaller area; In light of these two significant factors, HC notes that ITAT had not adopted the stamp duty valuation, remarks that, “we do not find that the Tribunal has committed any error.”:HC 

HC : Upholds Sec. 263-order ; Condemns AO’s 'slipshod' acceptance of books despite huge surrender in survey

Punjab & Haryana HC reverses ITAT order, upholds CIT’s revisionary order u/s. 263 resulting in enhancement of assessee’s income for AY 2008-09; Takes note of CIT’s observations that AO had failed to reject books of accounts despite assessee’s own admission that there were discrepancies in the books, as well as a huge surrender of additional income of Rs. 2.15 cr. had been made during the survey; Further, taking note of the drastic fall in the GP rate as well as the net profit rate as compared to earlier years, CIT had remarked that ,“This further indicates that the assessee has adopted a method to offset the amount surrendered,” and that AO had simply accepted assessee’s explanations without independent application of mind; In light of above, HC upholds CIT’s order u/s. 263 and forthwith directs Registry to forward this ruling copy to CBDT to issue necessary instructions to all AOs in cases of survey / search and seizure operations especially where surrender or concealment has been detected, to ensure proper scrutiny of such cases; States that CBDT directive should require AO “to discuss reasons for rejecting or accepting the books of account of the assessee and not to merely record in slipshod or cursory manner that ‘the books of account produced and test checked’ as done by the AO in the present case.”:HC 

SC : Dismisses SLP against re-assessment initiation based on special audit report

SC dismisses assessee-company’s SLP challenging Bombay HC order upholding re-assessment initiation (beyond 4 yrs period) based on a special audit report; HC had held that the special audit report constituted fresh tangible material with AO to reach the reasonable belief of income escapement; HC had rejected assessee’s stand that since the special audit report was prepared for Forward Market Commission, it could not be relied upon as its purpose was not to detect tax evasion; HC had opined that “the power of the AO to reopen an assessment...is not fettered or circumscribed, to be formed only on material found during a tax audit or with material found during examining a case of tax evasion.”:SC 

ITAT : Rejects taxability u/s. 56(2)(vii)(c) for share allotment under 'rights issue' in family owned company

Visakhapatnam ITAT rejects taxability u/s. 56(2)(vii)(c) in the hands of assessee-individual for share allotment under 'rights issue' in a family owned company at less than fair market value during AY 2013-14; The entire shareholding in a closely held company was held by assessee alongwith 7 of his close relatives [as defined under explanation to 56(2)(vii)(c)], during subject AY, the company issued the equity shares on rights basis for which only the assessee had applied and the other relatives did not choose to subscribe for the rights issue; Rejects Revenue’s stand that since there is no relation between the company and the assessee there is no case for invoking the explanation of ‘relative’ to exempt the assessee from taxing the excess fair market value; ITAT observes that though the assessee had received the excess shares, renouncement was from the close relatives, ITAT rules that “surrender of the rights of the close relatives in favour of another close relative is covered for exemption u/s 56(2)(vii)(c) of the Act,”; ITAT concludes that the transactions between close relatives are outside the scope of application of 56(2)(vii)(c) and should not be seen as introducing black money or evasion of the tax, cites Chennai ITAT ruling in Vaani Estates Pvt. Ltd., Karnataka HC ruling in R. Nagaraja Rao, Madras HC ruling in Kay Arr Enterprises.:ITAT 

Grievance Redressal Portal and other Pre login Features in GST portal

For education and guidance of taxpayers, a webinar scheduled on the topic Grievance Redressal Portal and other Pre login Features in GST portal on 18^th December at 2.30pm in Hindi Language

Topic of webinar: Grievance Redressal Portal and other Pre login Features in GST portal

Content Coverage

1.      GST portal home page , overview

2.      Pre-login Features-Registration, payment, Refund & User Services

3.      Overview of downloads, Search Taxpayer facility

4.      How to lodge a complaint using Grievance Redressal Portal

5.      Help Module

6.      Q&A

Duration: 30 Mins

Speaker for the Webinar: Shri Pankaj Arora SM OCB

Click here for the webinar registration link : https://negd.zoom.us/webinar/register/f0c02ee797288acf4ac87b605f06faf5

The webinar is provisioned as first come first serve basis. If you are unable to access the webinar you may watch it at:

https://lms.negd.in/

https://goo.gl/G8Ny9f

After the day of live streaming, the webinar recording will also be available at You Tube Channel of Goods and Services Tax Network. For viewing all previous webinars recordings and other useful application videos, Youtube channel of GSTN may be accessed either by clicking at the You Tube icon given at the homepage of GST website or through the link given below.

https://www.youtube.com/channel/UCFYpOk92qurlO5t-Z_y-bOQ

Thanking You,
Team GSTN

To explain cash deposits if assessee claims that same was withdrawn in the past and later deposited in bank account, Revenue is not right in rejecting it on ground that it is highly improbable: ITAT

THE issue is - Whether while explaining cash deposits if the assessee claims that the cash was withdrawn in the past and the same was deposited later, Revenue is right in rejecting the theory on the ground that it is highly improbable. NO is the answer.

Simply because assessee is residing in same property where deceased one was living before his death, is no reason to conclude as if assessee is one of legal heirs of deceased u/s 2(41) for tax purposes: HC

THE ISSUE is - Whether assessee is residing in same property where the deceased one was living before his death, will render him as legal heirs/relative of deceased u/s 2(41) for tax purposes. NO IS THE VERDICT.

'Sportsman' can claim exemption on One-Time receipt (OTB) amount received from sports governing body: ITAT

The issue at hand before the bench is whether a 'sportsman' is eligible to claim exemption on One Time receipt (OTB) amount as provided under CBDT Circular No.447. YES is the answer. The Tribunal also held that issue of grounds for re-opening of assessment being invalid, cannot be contested for the first time before the Tribunal itself, if the assessee simply accepted such reasons for re-opening assessment & did not contest them before the AO.

HC : Upholds special audit initiation on Patanjali citing complexities in accounts

Delhi HC dismisses Patanjali Ayurveda’s writ, upholds initiation of special audit u/s 142(2A) for AY 2010-11 citing complexity in the accounts; Rejects assessee’s stand that once its accounts were audited, tax audit report was filed, all the necessary information was submitted in response to scrutiny notices, AO’s inability to exert himself to inquire diligently cannot result in a special audit; Though HC acknowledges that AO cannot fall back upon special audit in all routine cases, it observes that “AO has carefully outlined what were the salient aspects in the accounts and returns of the assessee that needed to be looked into and made the impugned order directing special audit.”; Opines that AO correctly ordered special audit having regard to - maintenance of large number of imprest accounts involving sizeable amount for which expenditure details not furnished, revision of returns whereby income offered was reduced substantially, assessee’s ‘first-time’ claim of deduction u/s. 80-IC needed inquiry; Further notes that AO had referred to the three segments or sources of revenue of the assessee and had held that it is required to identify the method and the relevant accounting standard applicable for recognition of income from these revenues and also to ascertain the correctness of the income recognized.:HC 

Subsequent amendments can’t re-open concluded proceedings; 16 yrs re-assessment time-limit, prospective

Delhi HC quashes re-assessment initiation for AY 1998-99 on assessee-individual (who was non-resident for subject AY), as it was barred by limitation u/s. 149; Relying on assessee’s statement during search that he had settled an offshore trust, AO had issued notice u/s 148 in March, 2015 thereby proposing to tax the amount of US $ 2-3 million contributed by assessee for settling a trust in foreign country; Notes that assessment for subject AY could not be reopened beyond March 31, 2005 in terms of provisions of Sec 149 as applicable at the relevant time; Clarifies that the subsequent amendment by Finance Act, 2012, which extended the limitation to sixteen years, could not be resorted for reopening concluded proceedings (in respect of which limitation had already expired/ lapsed before the date the amendment became effective), further holds the amendment to be prospective in nature; With respect to Revenue’s contention that amendment in Sec. 149 is retrospective as its procedural in nature, HC remarks that “the interpretation proposed by the revenue has the potential of arming its authorities to re-open settled matters, in respect of issues where the citizen could genuinely be sanguine and had no obligation of the kind which the Revenue seeks to impose by the present amendment.”, cites SC rulings in K.M. Sharma and S.S. Gadgil:HC 

SC : Dismisses SLP against penalty deletion for accepting/repaying loans through ‘journal entries’

SC dismisses Revenue’s SLP challenging Bombay HC order in case of assessee (belonging to Lodha group of companies engaged in real estate business) for AY 2009-10; HC had dismissed Revenue’s appeal against ITAT order deleting penalties u/s. 271D / 271E for violating provisions of Sec 269SS / 269T by accepting/repaying loans/advances through “journal entries” (i.e otherwise than by account payee cheques/drafts); ITAT had held that transactions by way of journal entries aimed at extinguishment of mutual liabilities constitutes “reasonable cause” u/s 273B; Stating that the issue of reasonable cause is a question of fact, HC had held that “the view taken by the Tribunal on the facts before it, is a possible view and does not give rise to any substantial question of law.”; SC holds that “We do not find any good ground to entertain this Special Leave Petition, which is, accordingly, dismissed.”:SC 

ITAT : Tax includes surcharge & education cess for purposes of calculating MAT credit

Mumbai ITAT rules on quantum of carried forward MAT credit, holds that tax includes surcharge and education cess for the purposes of computing the MAT credit for AY 2008-09, follows Jaipur ITAT ruling in Eastern Jewels Pvt. Ltd.; AO had held that only tax is to be allowed to be carried forward as MAT credit and not surcharge and education cess, AO had accordingly restricted the MAT credit claim; Rejecting Revenue’s action, ITAT cites SC ruling in K. Srinivasan wherein it was held that surcharge is part of income-tax; Further takes note of Explanation 2 to Sec. 115JB which provides that the amount of income tax shall include surcharge and education cess  :ITAT 

ITAT : Sec. 194-IA TDS on property purchases applicable qua each transferee, not sale-deed value

Delhi ITAT holds assessee-individual (transferee) not liable to deduct TDS u/s. 194-IA as the property purchase consideration qua assessee was only Rs. 37.50 lakhs being less than Rs. 50 lakhs threshold prescribed u/s. 194-IA(2), quashes TDS default proceedings u/s. 201(1)/(1A) for AY 2014-15; Assessee had jointly purchased an immovable property with other family members vide single registered sale deed, noting that the total consideration as per sale deed was Rs. 1.5 Cr. (of which assessee’s share was Rs. 37.50 lakhs, being 1/4th un-divided equal share of the property), AO had held assessee in default u/s. 201(1) for not deducting TDS @ 1% as per Sec. 194IA; ITAT holds that Sec. 194-IA (as introduced by Finance Act, 2013) is applicable only with respect to the amount related to each transferee and not with reference to the amount as per sale deed, cites Memorandum explaining Finance Bill, 2013 provisions; States that each transferee is a separate income tax entity therefore, the law has to be applied with reference to each transferee; Since the sale consideration w.r.t. each transferee is less than Rs. 50 lakh, ITAT concludes that Sec. 194-IA was not applicable.:ITAT 

ITAT : Rules on deemed dividend taxability for Mauritian Co. ; ICD not 'loan or advance'

Mumbai ITAT rejects deemed dividend taxation u/s. 2(22)(e) in hands of assessee (a Mauritian Co.) with respect to the transaction relating to the Inter Corporate Deposits (ICDs) between its two wholly owned Indian subsidiaries during AYs 2009-10 & 2010-11; Noting the common ‘substantial’ shareholding of assessee in the two concerns (Portescap & Videojet), AO had invoked Sec. 2(22)(e) and had initiated re-assessment proceedings; ITAT rejects invocation of Sec. 2(22)(e) under the Income-tax Act, but rules that 'deemed dividend' constitutes 'dividend' under India-Mauritius DTAA and tax rate @ 5% as per DTAA shall apply; Rejects assessee’s stand that the said sum is not taxable under the India-Mauritius DTAA since ‘deemed dividend’ is not covered within the definition of ‘dividend’ under Article 10(4) of DTAA, observes that deemed dividend is covered under the third facet of ‘dividend’ definition under treaty [i.e. income from corporate rights which is subjected to same taxation treatment as income from shares by the laws of contracting state of which the company making the distribution is a resident]; Rules that "so long as the Indian tax laws consider ‘deemed dividend’ also as ‘dividend’, then the same is also to be understood as ‘dividend’ for the purpose of the Treaty."; On Sec. 2(22)(e) invocation aspect, ITAT accepts assessee’s contention that the amount advanced by Portescap to Videojet was not in the nature of a loan or advance as contemplated in Sec. 2(22)(e) but was an Inter-Corporate Deposit (ICD), cites Bombay HC rulings in Durga Prasad Mandelia and Pennwalt India Ltd. , Ahmedabad ITAT SB ruling in Gujarat Gas Financial Services Ltd. to canvass that a loan and deposit are distinct transactions; Further rejects Revenue’s stand having regard to the Deposit agreement, it was the recipient, i.e. Videojet which was in need of funds and, therefore, the instant transaction has to be understood as a loan transaction and not a deposit of money by Portescap for interest; ITAT refers to the Board Resolution and Financial statements of Portescap which notes the availability of surplus funds, refers to various clauses of the Deposit agreement and concludes the transaction to be in the nature of ICD; On reopening aspect, ITAT holds that since on the date of recording reasons, the ICDs were already subjected to assessment u/s. 2(22)(e) on a substantive as well as on protective basis in the hands of the two subsidiaries, it could not be said that the said income had escaped assessment in hands of assessee, cites Bangalore ITAT ruling in Bullion Investments & Financial Services (P.) Ltd.; Separately, ITAT rejects deemed dividend invocation in relation to amount advanced to GVR (a third entity wherein assessee holds 99.99% shareholding) by Portescap, however, upholds taxability in another transaction involving amount advanced by Portescap to DHR (yet another entity where assessee holds 100% shareholding).:ITAT 

ITAT : ‘Net’ commission receipts, not ‘gross’ qualifies for Sec. 80P deduction

Pune ITAT denies deduction u/s. 80P(2)(a)(i) to assessee (a Co-operative society engaged in banking business) in respect of ‘gross’ commission receipts (arising on account of collecting electricity charges for & on behalf of MSEB) for AY 2012-13; ITAT holds that since the amount of gross receipt from MSEB commission is less than the amount of expenses incurred for earning such commission, there can be no distinct deduction u/s. 80P because of the negative income earned by assessee from this activity; Referring to Sec. 80AB, ITAT rules that where deduction is required to be made u/s. 80P (which is covered under Chapter-VI-A), it is ‘the amount of income of that nature as computed in accordance with the provisions of the Act’, which shall be considered as eligible for deduction; Thus, ITAT holds that the eligible amount for deduction can be the `income’ and not the `gross receipts’ from the specified source; Relies on SC ruling in Motilal Pesticides (I) (P) Ltd and Bombay HC ruling in Asian Cable Corporation Ltd. rendered in context of Sec. 80HH / Sec. 80-O deductions.:

ITAT : Speed-boat utilised for professional work commutation, akin to ‘business asset’; Allows expenses

Mumbai ITAT allows Akshaye Khanna’s claim for expenditure (depreciation, insurance expenses) on account of speed boat owned by him for AY 2012-13, rejects Revenue’s stand that the entire speed boat expenses were personal in nature; Notes that assessee has been utilizing the speed boat for commuting from his house in Mumbai to his farm house in Alibaug ,where professional activities such as reading, evaluating stories and scripts, acting practice, speech improvements, story sessions etc. were being carried out; ITAT equates the speed boat with a business asset, being utilized by assessee for commutation for professional work and allows the expenditure thereto “like any other travelling mode like motor-car etc.”; Also observes that the speed-boat forms part of the 15% block of Fixed Assets, thereby constituting business asset; Furthermore, ITAT observes that the assessee had suo-moto disallowed 25% of the expenditure on estimated basis to account for personal element / usage.:ITAT 

Imp Verdicts On Accrual Of Income And GAAR Tax Avoidance

CIT vs. Shyam Telelink Ltd (Delhi High Court)

S. 4/ 145: Law on accrual on income, matching concept & principles of Revenue Recognition as per Accounting Standards (AS-9, AS-22) explained in the context of sale of prepaid mobile cards (All important judgements referred)

Matching Concept is based on the accounting period concept. The paramount object of running a business is to earn profit. In order to ascertain the profit made by the business during a period, it is necessary that “revenues” of the period should be matched with the costs (expenses) of that period. In other words, income made by the business during a period can be measured only with the revenue earned during a period is compared with the expenditure incurred for earning that revenue. However, in cases of mergers and acquisitions, companies sometimes undertake to defer revenue expenditure over future years which brings in the concept of Deferred Tax Accounting. Therefore, today it cannot be said that the concept of accrual is limited to one year. It is a principle of recognizing costs (expenses) against revenues or against the relevant time period in order to determine the periodic income. This principle is an important component of accrual basis of accounting. As stated above, the object of AS 22 is to reconcile the matching principle with the Fair Valuation Principles. It may be noted that recognition, measurement and disclosure of various items of income, expenses, assets and liabilities is done only by Accounting Standards and not by provisions of the Companies Act

HC : Upholds wealth tax on urban land; Development permission requirement only a restriction, not prohibition

Bombay HC confirms ITAT order, upholds wealth tax liability on urban land, construction on which requires permission from Competent Authority under Tamil Nadu Town Planning Act; Rejects assessee's contention that relevant land was covered under exclusion for urban land on which construction of a building is not permissible under any law in force; HC distinguishes between a case where the construction of a building is not permissible under any law for the time in force and where construction though permissible, must be preceded by permission, approval or sanction from the prescribed authority, holds that requirement of permission for construction would not make construction impermissible; Observes that restriction and prohibition are two different concepts and building regulations may amount to restriction on land development but not prohibition, thus holds that if assessee's contention is to be accepted, it would paramount to adding a requirement in the exclusion clause, which the legislature has not yet prescribed.:HC 

HC : Approves Telecom Co.'s 'actual usage' based revenue recognition method for prepaid cards

Delhi HC confirms ITAT order holding that the amount received by assessee (engaged in providing basic telecom services) on sale of prepaid cards to the extent of unutilized talk time did not accrue as income in the year of sale i.e. AYs 2003-04, 2004-05 & 2009-10; Approves assessee’s mode of recognizing revenue on prepaid cards on the basis of actual usage and carrying forward unutilized amount outstanding on the prepaid cards to the next year in view of the matching principles for revenue recognition as enshrined in the Accounting Standards, rejects Revenue’s stand that assessee must account for the entire amount; However, HC states that Revenue’s contention that the prepaid amount once paid and received by assessee was forgone by the subscriber and accordingly appropriated by assessee is substantially correct; At the same time, HC clarifies that “the payment was an advance and was subject to the respondent-assessee providing basic telecom service as promised, failing which the unutilized amount was required to be refunded to the pre-paid subscribers” under the ordinary law of contract or special enactments like the Consumer Protection Act; Lastly, HC rules that “unutilized amount when the prepaid card lapses has to be treated as income or receipt of the respondent-assessee on the date when the card had lapsed.”:HC 

CBDT- Clarifies scope of Departmental appeal on merits notwithstanding low tax effect

CBDT issues clarification with respect to Para 10 of Circular no. 3/2018 revising appeal filing limits for Departmental appeals; Para 10 of the circular outlines the issues that can be contested on merits notwithstanding low tax effect; CBDT clarifies that the direction that the appeals be ‘contested on merits’ in itself implies that there should not be any mechanical filing of appeals in these cases; Reiterates that “the import and intent of Para 10 of the circular is that even on issues mentioned in the said para, appeals against the adverse judgements should only be filed on merits.”   

ITAT : Industrial promotion subsidy, though granted after commencement of production, a capital receipt

Mumbai ITAT rules that the Industrial Promotion Subsidy (IPS) received by assessee (a subsidiary of Mahindra & Mahindra Ltd.) during AY 2012-13 constitutes a non-taxable capital receipt; Noting that assessee had started commercial production in January, 2010, AO had held that the subsidy received was on revenue account as the object of the subsidy received after the commencement of production was to enable assessee to run the business more profitably in lieu of the industry/unit set up by it in a particular area; Rejecting Revenue's stand, ITAT refers to the object of the scheme under which assessee was granted subsidy, notes that the incentive was granted not for carrying on day-to-day business of the unit more profitably but to provide impetus to the process of dispersal of industries to backward areas; Furthermore clarifies that the sales tax payment is only a yardstick to determine the quantum of incentive and cannot be construed as to mitigate the operational cost of the business; Distinguishes Revenue’s reliance on SC ruling in Sahney Steel & Press Works Ltd. and Delhi HC ruling in Bhushan Steels & Strips Ltd. On facts, relies on SC ruling in Ponni Sugars & Chemicals Ltd.:ITAT 

Bank A/c attachment quashed under Benami law, cash receipts during demonetisation not benami property

Tribunal for Prohibition of Benami Property Transactions Act (PBPT) quashes the provisional attachment of bank accounts of appellants (lecturers in a  College run by an Educational Trust) under the Benami law;  Pursuant to search action u/s. 132 of the Income-tax Act  on the Trust, it was found that the appellants had received certain cash as advance salary on November 14, 2016 (i.e during the demonetization period), Revenue had held the Trust’s Chairman as the beneficial owner and appellant-employees as benamidars thereafter attaching their salary bank accounts up to the value of the alleged “benami” property; Firstly, Tribunal holds that the advance-salary received by appellants would have to be treated as earned money and disclosed income, observes that there is no material on record to show that the lecturers owned the money illegitimately; Further Tribunal holds that disclosure of receipt in cash in the sworn statements by the lecturer-appellants is insufficient to construe the existence of a “benami” transaction, rules that the existence of the “benami” transaction has to be proved by the authorities; Further remarks that once the money has already been returned or adjusted against their salaries, “the question of Appellant depositing any amount out of it in his bank account did not arise.” 

ITAT recent rulings

FIS Global Business Solutions India Pvt. Ltd vs. PCIT (Delhi High Court)

S. 147/ 148: A report of the Revenue audit party is merely information and opinion. It is not new or fresh or tangible material. If the reassessment notice is solely based on an audit opinion, it means it is issued on change of opinion which is not permissible

We find that the arguments on behalf of the petitioner are well founded and it must succeed. The audit report merely gives an opinion with regard to the non-availability of the deduction both under section 80-IA was not deducted from the profits of the business while computing deduction under section 80HHC. Clearly, therefore, there was no new or fresh material before the Assessing Officer except the opinion of the Revenue audit party. Since it is settled law that mere change of opinion cannot form the basis for issuing of a notice under section 147/148 of the Act, therefore, we do not propose to burden out judgment with the said judgments

Ramprasad Agarwal vs. ITO (ITAT Mumbai)

S. 10(38) Bogus capital gains from 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

The assessee has produced the D-mat account and therefore, as on 18.06.2012 the assessee was holding 3,50,000 equity shares of M/s Rutron International Ltd. in D-mat account. This fact of holding the shares in the D-mat account as on 18.06.2012 cannot be disputed. Further, the Assessing Officer has not even disputed the existence of the D-mat account and shares credited in the D-mat account of the assessee. Therefore, once, the holding of shares is D-mat account cannot be disputed then the transaction cannot be held as bogus. The AO has 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

Jupiter Capital Pvt. Ltd vs. ACIT (ITAT Bangalore)

S. 2(47) 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 (Kartikeya V. Sarabhai vs. CIT 228 ITR 163 (SC) & other judgements followed) 

Sec. 2(47) which is an inclusive definition, inter alia, provides that relinquishment of an asset or extinguishment of any right there in amounts to a transfer of a capital asset. While, it is no doubt true that the appellant continues to remain a shareholder of the company even with the reduction of a share capital but it is not possible to accept the contention that there has been no extinguishment of any part of his right as a shareholder qua the company. It is not necessary that for a capital gain to arise that there must be a sale of a capital asset. Sale is only one of the modes of transfer envisaged by s. 2(47) of the Act. Relinquishment of the asset or the extinguishment of any right in it, which may not amount to sale, can also be considered as a transfer and any profit or gain which arises from the transfer of a capital asset is liable to be taxed under s. 45 of the Act