Bulletin No.A115 dated 28 December 2019

BULLETIN(Issue No.115)DT.28-12-2019

Compiled by Vinod Kumar Goel, Advocate


St. Michaels High School Vs. Commissioner of Income-tax-I, Patna [2019] 111 taxmann.com 242 (Patna)

Section 12AA, read with section 13, of the Income-tax Act, 1961 - Charitable or religious trust - Registration procedure (Cancellation of registration) - Commissioner, on being satisfied about memorandum of association as well as rules and regulations, had granted registration to assessee institution 26 years back - 95 per cent of students admitted in school were non-Christians - In some of recent governing body meetings some resolutions were passed for benefit of christian community emphasising that it was a catholic school, members of assessee were Christians and it had concern towards Christians of relevant area - Commissioner in view of these resolutions, cancelled registration without mandatory recording of satisfaction, either on issue that activities of school are not genuine or it is not being carried out in accordance with objects for which institution had been set up - Whether conclusion drawn by authorities cancelling registration of assessee was to be quashed - Held, yes [Paras 21 and 22] [In favour of assessee]

Principal Commissioner of Income-tax Vs. Tata AIG General Insurance Co. Ltd. [2019] 111 taxmann.com 92 (Bombay)

Section 37(1), read with section 32, of the Income-tax Act, 1961 - Business expenditure - Allowability of (Revenue v. Capital expenditure) - Assessment year 2005-06 - Revenue's case was that computer software acquired by assessee created enduring benefit and was a capital asset eligible for depreciation under section 32 - However, Tribunal held that expenditure on acquisition of computer software by assessee was not capital expenditure - In assessee's own case for another year, High Court did not entertain appeal against such an order of Tribunal - Whether following same, for current year no substantial question of law arose from order of Tribunal - Held, yes [Para 3(ii)] [In favour of assessee]

Principal Commissioner of Income-tax Vs. Manugraph India (P.) Ltd., [2019] 111 taxmann.com 145 (Bombay)

Where assessee merely reimbursed certain amount to its subsidiary company for marketing expenses, there did not exist any obligation to deduct tax at source and, consequently, aforesaid payment could not be disallowed by invoking provisions of section 40(a)(i)

Principal Commissioner of Income-tax, Delhi-21 Vs. Lalit Bagai [2019] 111 taxmann.com 71 (Delhi)

Section 40(a)(ia), read with section 147, of the Income-tax Act, 1961 - Business disallowance - Interest, etc., paid to a resident without deduction of tax at source (Reassessment) - Assessment year 2006-07 - Assessee filed its return of income which was processed under section 143(3) - After four years, reassessment notice under section 148 was issued against assessee so as to make disallowance under section 40(a)(ia) for reason that assessee had not deducted tax at source on payments made towards job work charges, labour charges and rent - It was noted that entire exercise of reopening of assessment was triggered on basis of objections raised by audit party about non-deduction of TDS on these payments - Assessing Officer had in fact applied his mind to audit party objection and formed a clear opinion that there was no justification for reopening of assessment and yet it was only on insistence of Addl. Commissioner (Audit) that Assessing Officer changed his opinion and decided to reopen assessment - Whether, on facts, impugned reopening was unjustified - Held, yes [Para 18][In favour of assessee]

Commissioner of Income-tax, Faridabad Vs. NHPC Ltd. [2019] 110 taxmann.com 461 (Punjab & Haryana)

Section 14A of the Income-tax Act, 1961, read with rule 8D of the Income-tax Rules, 1962 - Expenditure incurred in relation to income not includible in total income (Dividend) - Assessment year 2004-05 - During relevant year, assessee earned tax free dividend income by making investment in subsidiary companies - Assessing Officer having invoked provisions of rule 8D, made certain disallowance in earning tax free income - Tribunal finding that assessee had sufficient interest free funds available with it in making investment in tax free securities, deleted disallowance made by Assessing Officer - Whether since revenue failed to rebut presumption raised by Tribunal, impugned order was to be confirmed - Held, yes [Para 17] [In favour of assessee]

Darshan Buildcon Vs. Income-tax Officer [2019] 111 taxmann.com 12 (Gujarat)

Section 142A, read with section 147, of the Income-tax Act, 1961 - Valuation officer, estimation by officer in certain cases (Reopening of assessment) - Assessment year 2011-12 - Whether Assessing Officer, while framing assessment, may either accept cost of construction as given by assessee or reject same and make a best judgment assessment, but, there is no provision under Act which permits Assessing Officer to make a provisional assessment subject to report of District Valuation Officer - Held, yes - Whether, therefore, once Assessing Officer accepts books of account and frames assessment, reopening of assessment solely on basis of report of District Valuation Officer without any other material coming to his notice is not permissible - Held, yes [Paras 10 and 13] [In favour of assessee]

Commissioner of Income-tax, Kanpur Vs. Kesarwani Sheetalaya Alld., [2019] 110 taxmann.com 415 (Allahabad)

Section 68, read with section 69A, of the Income-tax Act, 1961 - Cash credit (Cash in hand) - Assessment year 2008-09 - Whether where cash in hand in books of account was found to be more than actual cash found during search, at most, Authorities could have presumed that assessee had spent difference of amount somewhere, but that would not be sufficient to make addition to assessee's income - Held, yes [Para 19] [In favour of assessee]

II. Section 69B of the Income-tax Act, 1961 - Undisclosed investment (Burden of proof) - Assessment year 2008-09 - Assessee was engaged in business of running of cold storage in strict compliance with license under State Cold Storage Act, violation of which would bring penal consequences - No violation of said Act was recorded by authorities during search - Further, assessee submitted all documents as well as entries of bhandaran and nikasan registers which tallied with stock - Whether revenue could not, without bringing any material on record contrary to above facts, presume that assessee was in same other business and make addition to assessee's income - Held, yes [Paras 23 to 25] [In favour of assessee]

Commissioner of Income-tax-2, Mumbai Vs. Hongkong and Shanghai Banking Corpn. Ltd., [2019] 111 taxmann.com 285(SC)

Section 268A, read with section 44C of the Income-tax Act, 1961 - Filing of appeal or application for reference by income-tax authorities (Monetary effect) - Assessment year 2000-01 - For relevant assessment year assessee bank claimed expenditure under head 'NRI Deposit Mobilization' - According to assessee, said amount was expended towards administrative and other related expenses and entire expenditure was for purposes of head office and, therefore, no restrictions in terms of section 44C could be imposed - Tribunal accepted assessee's claim - Revenue submitted in appellate proceedings that Tribunal had erred in not applying provisions of section 44C - High Court noted that in an identical situation for earlier assessment years, revenue had not carried matter due to low tax effect - High Court thus dismissed revenue's appeal in assessment year in question as well - Whether, on facts, SLP filed against High Court was to be dismissed on ground of low tax effect - Held, yes [Para 2] [In favour of assessee]

Commissioner of Income-tax Vs. H.P. Infrastructure Development Board, [2019] 111 taxmann.com 327 (SC)

Section 5 of the Income-tax Act, 1961 - Income - Accrual of (Interest) - In course of appellate proceedings, High Court opined that assessee-board, established under Infrastructure Development Board Act, 2001, was carrying on transaction on behalf of Government and as such, interest accrued on deposit and issue of accrual of taxability thereupon was a question of fact, which stood correctly and completely appreciated by authority below - Accordingly, High Court dismissed revenue's appeal - Whether, on facts, SLP filed against said order of High Court was to be dismissed - Held, yes [Para 2] [In favour of assessee]

Purshottam Khatri Vs. Commissioner of Income-tax, Bhopal [2019] 111 taxmann.com 270 (SC)

Section 69A, read with section 260A, of the Income-tax Act, 1961 - Unexplained money (Amount deposited in bank) - Assessee filed instant appeal challenging order passed by High Court restoring addition made to assessee's income in respect of amount deposited in bank as unexplained deposits - It was noted that High Court had made said addition basically on ground that assessee had been unable to present declaration forms that had been filled in by him at time of his visits to India from abroad - It was undisputed that those declaration forms were asked for long after such deposits had, in fact, been made and, thus, it could not possibly be held that Tribunal's order deleting said addition was perverse - Whether in view of aforesaid, impugned order passed by High Court exercising its appellate jurisdiction under section 260A was to be set aside - Held, yes [Para 3] [In favour of assessee]