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
We cannot, and the law does not
permit us, to hold that HDFC Ltd. is the beneficial owner of 22.64% of the
shares in the Petitioner by clubbing the share holding of HDFC Investments Ltd.
with the shareholding of HDFC Ltd. If we were to do this, we would be
effectively holding that HDFC Ltd., being a shareholder of HDFC Investments
Ltd., is the beneficial owner of the shares which HDFC Investments Ltd. holds
in the Petitioner. This, in law, is clearly impermissible because a shareholder
of a company can never have any beneficial interest in the assets (movable or
immovable) of that company. In the present case, if we were to accept the
contention of the Revenue, it would mean that HDFC Ltd. is the beneficial owner
of the shares which HDFC Investments Ltd. holds in the Petitioner. 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 in which it holds the shares. This being
the position in law, we find that the Revenue is incorrect in trying to club
the shareholding of HDFC Investments Ltd. in the Petitioner along with the
shareholding of HDFC Ltd. in the Petitioner, to cross the threshold of 20% as
required in explanation (a) to section 40A(2)(b). We are supported in the view
that we take by a decision of the Supreme Court in the case of Bacha F. Guzdar
Vs. Commissioner of Income Tax [(1955) 27 ITR 1].
S. Rajalakshmi vs. ITO (Bombay High Court)
S. 147 Reopening: If the assessee's
son contends in his assessment that certain investments belong to the assessee,
that gives "reason to believe" to the AO to reopen the assessment.
The subjective satisfaction of the AO has to seen and whether that satisfaction
suffers from any perversity (Maniben Valji Shah 283 ITR 354 (Bom)
distinguished)
The reopening of assessment u/s 147
on the basis of information in the form of observations of ITAT is on sound
footing and which constitutes a tangible material for the purpose of reopening
as the assessee did not file her return of income as required u/s 139(1) of the
Act explaining the source of investment. Therefore, we are of the considered
view that the reopening of assessment is on sound basis and there is no merits
in the arguments of the assessee that the AO has reopened the assessment
without any tangible material which suggests escapement of income within the
meaning of section 147 of the Act
ACIT vs. Karam Chand Rubber Industries (ITAT Delhi)
Bogus Purchases: The fact that the
vendors are not available at the given address is not sufficient to treat the
purchases as bogus if the assessee has discharged primary onus and
substantiated the purchases through documentary evidence and payment is made
through banking channels. None of these documents have been proved to be false
or untrue and thus the initial burden cast on the assessee was duly discharged
It is an admitted fact that during
the course of search nothing adverse was found from the premises of the
assessee regarding the purchases made from the four parties concerned. Only
during post search enquiry it was found that those four parties are not
available at the given address. However, it is a fact that the payments have
been made through banking channel and the assessee had substantiated the
purchases by providing documents such as purchase invoices, copy of the ledger
accounts, evidences for having made payments through banking channels, C Form
issued to the suppliers, copy of VAT return duly reflecting the said purchases,
etc
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