HC : Entering into JDA cannot make vacant land 'business asset'; Upholds wealth-tax levy

Andhra Pradesh and Telangana HC upholds taxation of vacant land purchased by assessee-individual during AY 2009-10 for wealth tax purpose, rejects assessee’s stand that entering into JDA with developer immediately after the land-purchase proved his intention of carrying on business and therefore land should be treated as ‘stock in trade’; Clarifies that mere execution of a development agreement would not by itself mean that the land-owner also intended to carry on business, also observes that purchase of property was an isolated transaction and assessee had not carried on any business either before or after; Notes that assessee had filed return in ITR-2 [prescribed form for individuals/ HUFs not having business income] which also lent support to Revenue’s contention that he intended to treat the subject land only as an investment, also notes that land was not disclosed as stock in trade in balance sheet; With respect to assessee being not subjected to capital gains tax u/s. 45 of the Income Tax Act, HC clarifies that “whether execution of a JDA had resulted in the transfer of the asset liable to tax as capital gains under..the Income Tax Act, is wholly extraneous to the present proceedings under the Wealth Tax Act.”;:HC 

ITAT : Rejects taxpayer’s LTCG exemption claim citing dubious trading in ‘penny stocks’

Bangalore ITAT rejects assessee-individual’s claim of ‘exempt’ long term capital gains (‘LTCG’) of Rs. 42 lakh arising on sale of ‘penny stocks’ during AY 2015-16, upholds AO’s stand that the LTCG booked by assessee were bogus and the gains were assessable as ‘business income’; Rejects assessee’s stand that the genuineness of LTCG claim cannot be doubted since the contract notes were placed on record and the payment were made through cheques identifying the company whose shares were transacted; Upon examining the financials of the company, ITAT observes that the financial worth of the company was very meager and not worth to be invested in, remarks that “With such financials, we are unable to understand how there can be manifold increase in the shares.”; Further observes that taking cognizance of BSE websites, money control website, investigation wing, SEBI reports, AO had noted that the price of these shares saw phenomenal rise and were constantly traded near the circuit limit (of 5%) so as to avail maximum price rise without hitting and triggering the circuit limit, and thereby avoid surveillance by the Stock Exchange Regulator; ITAT concludes that Revenue has brought sufficient material on record to demonstrate that unaccounted money was introduced in the books through LTCG by circuitous means.:ITAT 

ITAT : Sec. 194C TDS applicable on ‘advances’ made for carrying works, rejects ‘pass-through’ entity plea

Delhi ITAT holds assessee-society (formed for organizing South Asian Federation Winter Games, 2009) liable to deduct TDS u/s. 194C on amount tendered as ‘advance’ to various PSUs (Public Sector Undertakings) w.r.t. various works relating to construction of the infrastructure for winter games for AYs 2009-10 & 2010-11; Rejects assessee’s stand that it was merely a pass through entity that has been granted sum for organizing the winter games and it did not enter into any contract with the parties to whom payments were made; ITAT acknowledges that grants / sponsorship received by the assessee, are in turn, disbursed to various recipients (i.e. PSUs) who got the work done through contractors and deducted TDS on payments made to such contractors; However, ITAT remarks that “Though the contractor may be identified and engaged by the other organization, however, the implementation and utilization is the sole responsibility of the assessee. Otherwise, there is no other reason for the formation of the assessee society”; Observes that as required u/s. 194C, assessee is the person responsible for payments of sums to the PSUs, which infact was paid by the assessee; Clarifies that “Merely because the assessee is provided grant for onward distribution to these parties does not exclude the assessee from the liability for deduction of tax at source u/s 194C”; W.r.t. assessee’s alternative argument that all the recipients have already received the grant and if tax is recovered from the assessee it ought to be refundable in the hands of the recipients, ITAT directs the AO to verify as to whether due taxes have been paid by the recipients in terms of the proviso to Sec. 201(1); Lastly, ITAT deletes penalty levied u/s. 271C absent contemptuous conduct on assessee’s part for non-deduction of TDS; Separately in context of payments made to non-resident parties for equipment supply, ITAT rules that Sec. 195 TDS shall not apply as no income has accrued to those parties in India, in terms of Sections 5 & 9 of the Act and title of the goods has passed outside India.:ITAT