BULLETIN(Issue No.119)DT.31-07-2020
Compiled by Vinod Kumar Goel, Advocate
CASE LAWS
Wimco Seedings Ltd. Vs. Joint Commissioner of Income-tax, [2020] 117 taxmann.com 425 (Delhi – Trib.)
Section 148 of the Income-tax Act, 1961 - Income escaping assessment - Issue of notice for (Recording of reasons) - Assessment years 1989-90 to 1991-92 - Whether while initiating reassessment proceedings, Assessing Officer is supposed to provide complete details of reasons recorded and not merely few extracts of said reasons so that assessee can prepare its defence effectively against proposed reopening of assessment - Held, yes - Whether, therefore, where assessee filed writ petition challenging validity of reassessment proceedings on ground that Assessing Officer did not record detailed reasons for reopening of assessment, in view of fact that reasons supplied to assessee and reasons brought on record by revenue authorities were altogether different, validity of reassessment proceedings could not be upheld and, thus, said proceedings deserved to be quashed - Held, yes [Paras 27 and 30] [In favour of assessee]
Block Development Officer Vs. Assistant Commissioner of Income-tax, [2020] 117 taxmann.com 337 (Jaipur – Trib.)
Section 234E, read with section 200 of the Income-tax Act, 1961 - Fee - For default in furnishing statements ( Mandatory nature of ) - Assessment year 2016-17 and 2017-18 - Assessee, a Government Officer, was responsible for block and panchayat level development programs- Assessee made various payments in respect of carrying out those programs and deducted TDS on those payments - However, there was delay in submitting TDS statements as required under section 200(3) for each quarter - Assessee's case was that due to paucity of staff and technical knowledge, there was delay in submitting quarterly TDS statements- Assessing Officer having rejected assessee's explanation, levied late fee under section 234E- Whether levy of late fee under section 234E is mandatory in nature and AO has no discretion to take its own decision but he has to make adjustment on account of levy of late fee as provided under section 234E in case there is a delay in submitting TDS statement - Held, yes - Whether, therefore, impugned order passed by Assessing Officer did not require any interference - Held, yes [Para 6] [In favour of assessee]
Kemfin Service (P.) Ltd. Vs. Assistant Commissioner of Income-tax, [2020] 117 taxmann.com 365 (Karnataka)
Section 2(14), read with section 45 of the Income-tax Act, 1961 - Capital gains - Capital asset (Shares) - Assessment year 2006-07 - Whether Prior to introduction of Finance Bill, 2018 whereby provisions of section 45(2) were amended with effect from 1-4-2019, income arising on sale of shares held as capital asset after their conversion from stock in trade was to be treated as capital gains - Held, yes [Para 10] [In favour of assessee]
Commissioner of Income-tax Vs. C. Ramaiah Reddy, [2020] 117 taxmann.com 540 (Karnataka)
Section 45 of the Income-tax Act, 1961 - Capital gains - Chargeable as (Conversion of asset) - Assessment year 2006-07 - Assessee was engaged in real estate business - He filed his return declaring certain taxable income - In course of assessment, Assessing Officer noted that assessee had received certain land on partition of family properties - Assessing opined that once family partition took place, asset which came into share of assessee partook character of assets in hands of aseessee as capital gains and, therefore, conversion of capital asset into stock in trade attracted provisions of section 45(2) - He thus made addition to aseessee's income - Tribunal noted that land was held as stock in trade by joint family before it was allotted to assessee - It was thus concluded that there was no conversion of capital asset into stock in trade either by assessee or by joint family and, thus, provisions of section 45(2) were not attracted to assessee's case - Whether, since, character of asset did not change as land was received by assessee as stock in trade, provisions of section 45(2) did not apply - Held, yes - Whether, therefore, impugned addition was rightly deleted by Tribunal - Held, yes.(Para 11) ( In favour of assessee).
Assistant Commissioner of Income-tax Vs. Gurdeep Singh [2020] 117 taxmann.com 451 (Chandigarh – Trib.)
Section 2(22) of the Income-tax Act, 1961 - Deemed dividend - (Change in shareholding) - Assessment year 2013-14 - Assessee was a shareholder of two companies namely 'C' Ltd. and 'J' Ltd.- During relevant year 'C' Ltd. gave loans and advances to'J' Ltd. out if its surplus funds - Assessing Officer took a view that assessee was having shareholding in both companies in excess of ten percent of total shareholding - He thus added amount of loan to assessee's taxable income by invoking provisions of section 2(22) (e) - It was noted that as per annual return filed with Registrar of Companies that assessee was holder of only one share in 'C' Ltd. and other shares stood transferred to 'J' Ltd. - It was also found that even though return was filed belatedly with ROC i.e. on 08-05-2012,with late fee as applicable but same was accepted by ROC - Thus, for all intents and purposes, effective date of transfer was date as mentioned in return- Whether since revenue could not rebut aforesaid facts beyond reasonable doubt, deeming provisions of section 2(22)(e) could not be applied to assessee's case- Held, yes- Whether, therefore, impugned addition was to be deleted- Held, yes [Para 10] [In favour of assessee]
Anil Abhubhai Odedara Vs. Income Tax Officer [2020] 117 taxmann.com 490 (Rajkot – Trib.)
Section 143(1), read with section 271(1)(c) of the Income-tax Act, 1961 - Assessment - Additions to income ( Estimate basis) - Assessment year 2013-14 - In course of assessment, Assessing Officer found that vouchers of expenses kept by assessee were not maintained properly - He thus accepted assessee's proposal to make addition to taxable income at rate of 8 percent of contractual receipts - Assessing Officer also passed a penalty order under section 271(1)( c) for furnishing inaccurate particulars of income - Whether when income of assessee is determined on estimate basis then no penalty under section 271(1)( c) can be imposed for concealment and furnishing inaccurate particulars of income - Held, yes - Whether, even otherwise, since impugned penalty order was silent on issue as to how satisfaction of concealment/furnishing of inaccurate particulars was arrived at, same deserved to be set aside - Held, yes [Para 3] [In favour of assessee]
Sabre Asia Pacific (P.) Ltd. Vs. Deputy Commissioner of Income Tax (International Taxation) [2020] 117 taxmann.com 756 (Mumbai – Trib.)
Section 9 of the Income-tax Act, 1961, read with articles 5 and 8 of the DTAA between India and Singapore - Income - Deemed to accrue or arise in India (Permanent establishment - Prior PE, Place of Business) - Assessment year 2013-14 - Assessee, a Singapore based company, was engaged in business of promotion, development, marketing and maintenance of Computerized Reservation System (CRS) - Primary business of assessee was to make reservations for and on behalf of participating airlines using CRS - Assessee licensed rights to market CRS in India to its wholly owned subsidiary company 'A' Ltd.- Assessee claimed that since it did not have any PE in India ,fees received from providing airline reservations services to various airlines was not taxable in India - Asseessing Officer opined that 'A' Ltd. was functioning as a controlled subsidiary of assessee and was exclusively performing marketing and distribution of CRS for assessee - Assessing further opined that 'A' Ltd. was securing business for assessee by entering into subscription agreements with travel agents and as said activity was habitually, wholly and exclusively performed for assessee, 'A' Ltd. could be regarded as agency PE of assessee in India - It was noted that Co-ordinate Bench of Tribunal in assessee's own case in earlier assessment years had upheld findings recorded by Assessing Officer - Whether in absence of any change in circumstances, following aforesaid order of Tribunal, it could be concluded that assessee had its fixed PE in India and, thus, a part of income earned by assessee in India was to be attributed to said PE - Held, yes [Para 15] [In favour of assessee]
II. Section 92C of the Income-tax Act, 1961 - Transfer pricing - Computation of arm’s length price (Adjustments - Interest) - Assessment year 2013-14 - During relevant year assessee gave interest free ECB loan to its wholly subsidiary in India - Assessing Officer made addition to assessee's ALP in respect of notional interest on said loan - It was found that Co-ordinate Bench of Tribunal in assessee's own case in earlier assessment year had held that ALP of notional interest on interest free loan advanced by assessee was to be taken as LIBOR rate plus 2 percent - Whether in absence of any change in circumstances, following aforesaid order of Tribunal, impugned addition of notional interest was to be confirmed at LIBOR rate plus 2 percent in assessment year in question as well - Held, yes [Para 18] [In favour of assessee]
Sandeep Bhargava (HUF) Vs. Deputy Commissioner of Income Tax [2020] 117 taxmann.com 677 (Chandigarh – Trib.)
Section 54B, read with section 154, of the Income-tax Act, 1961 - Capital gains - Transfer of land used for agricultural purpose (Rectification proceedings) - Assessment year 2012-13 - Assessee-HUF claimed deduction under section 54B - Issue was duly examined by Assessing Officer in scrutiny assessment proceedings and claim of assessee was allowed while certain expenses were only disallowed - However, later on, Assessing Officer took view that an HUF was not entitled to deduction in relevant assessment year 2012-13 as same had been made available to an HUF by Finance Act, 2012 w.e.f. 1.4.2013 - He, therefore, held that a mistake apparent on record had occurred in assessment order and initiating rectification proceeding disallowed assessee's claim - Whether It was a highly debatable issue whether in pre-amended provisions of section 54B, word 'assessee' meant an individual only or it included an 'HUF' also, since in amended section 54B, as amended by Finance Act, 2012, it had been specifically mentioned that 'assessee being an individual or his parent or an HUF' but no such words were mentioned in section 54B prior to such amendment and wording prior to amendment was 'assessee or a parent of his' - Held, yes - Whether issue being highly debatable on which there might conceivably be two opinions, powers under section 154 could not be exercised as issue had already been examined by Assessing Officer in scrutiny assessment proceedings - Held, yes [Paras 9 and 11][In favour of assessee]
Deputy Commissioner of Income Tax (International Taxation] Vs. HSBC Bank (Mauritius) Ltd. [2020] 117 taxmann.com 750 (Mumbai – Trib.)
Section 9 of the Income-tax Act, 1961, read with article 11 of the Double Taxation Avoidance Agreement between India and Mauritius - Income - Deemed to accrue or arise in India (Interest - ECB loan) - Assessment year 2015-16 - Assessee, a Foreign Institutional Investor (FII) and tax resident of Mauritius had e-filed its return of income declaring its total income at Rs. Nil - Assessee submitted that interest income of Rs. 273 crore on foreign currency loans and Rs. 1225 crore on debt securities was exempt under Article 11(3)(c) - Claim of Revenue was that assessee had failed to substantiate materil aspect that it was beneficial owner of interest income and not a conduit company - Tribunal, while disposing off appeal for assessment year 2014-15 in ITA No.1319/Mum/2019, only after due consideration of aforesaid claim of revenue, held that beneficial provisions envisaged in Article 11(3)(c) would be applicable to interest income received by assessee rendering said receipts as not exigible to tax in India - Whether concurring with aforesaid view of Tribunal it was to be held that interest received by assessee pursuant to Article 11(3)(c) would not be exigible to tax in India - Held, yes [Para 9][In favour of assessee]
Commissioner of Income-tax Vs. Banjara Developers & Constructions (P.) Ltd. [2020] 117 taxmann.com 747 (Karnataka)
Section 145 of the Income-tax Act, 1961 - Method of accounting - System of accounting ( Completed contract method) - Assessment year 2004-05 - Whether where assessee, engaged in construction of flats, was consistently following completed contract method of accounting and said method had been accepted by revenue authorities in past, there was no justification on part of Assessing Officer to change same and to determine income of assessee on estimate basis in assessment year in question - Held, yes [Para 9] [In favour of assessee]
Advocate Welfare Fund Trustee Committee Vs. Commissioner of Income-tax (Exemption) [2020] 117 taxmann.com 701 (Delhi – Trib.)
Section 2(15), read with sections 12AA and 80G of the Income-tax Act, 1961 - Charitable purpose - (Bar association) - Whether assessee trustee committee established under Bar Council of Delhi being engaged in safeguarding rights, privileges and interest of advocates, its dominant purpose is advancement of general public utility within meaning of section 2(15) - Held, yes - Whether genuineness of its activities and object of charitable purpose being proved, it would be entitled for registration under section 12AA and consequent exemption under section 80G; it would be exempt from income-tax as provided under section 23 of Advocates Welfare Fund Act, 2001 - Held, yes - Whether it is not a requirement of law to furnish financials; registration cannot be rejected on ground that financials have not been furnished - Held, yes [Paras 11 and 12][In favour of assessee]
Principal Commissioner of Income-tax Vs. Vodafone Idea Ltd. [2020] 117 taxmann.com 879 (SC)
Section 245 of the Income-tax Act, 1961 - Refunds - Setting off against tax due (Future demand) - Assessment year 2014-15 - High Court by impugned order held that there is no power vested in revenue authorities to adjust admitted refund amount against tax dues which are not even adjudicated upon by respondent-authorities, hence, where revenue authorities had already invoked their powers under section 245 and order was passed, they could not have withheld admitted refundable amount on ground that respondents might have a future demand against assessee arising out of pending assessment orders - Whether special leave petition filed against said impugned order was to be dismissed - Held, yes [Para 1 ][In favour of assessee]
II. Section 241 of the Income-tax Act, 1961 - Refund - Power to withhold, in certain cases - Assessment year 2014-15 - High Court by impugned order held that section 241A granting power to Assessing Officer to withhold refund applies for assessment years after 1-4-2017 and not for earlier assessment years; accordingly, section 241A is not attracted to refund of current assessment year 2014-15 or any other assessment year prior to 2017-18 - Whether special leave petition filed against said impugned order was to be dismissed - Held, yes [Para 1] [In favour of assessee]
Shiv Raj Gupta Vs. Commissioner of Income-tax [2020] 117 taxmann.com 871 (SC)
Section 28(ii) of the Income-tax Act, 1961 - Business income - Compensation (Non-competition fee) - Assessment year 1995-96 - Assessee and his family members were registered holders of 57.29% of paid-up equity share of company CDBL - Controlling block of shares was sold at price of Rs. 30 per share - Separately, assessee gave a restrictive covenant to and infavour of SWC for consideration of a non-competition fee of Rs. 6.60 crores - Tribunal found that given personal expertise of assessee, perception of SWC group for entering in restrictive covenant was that assessee could either start a rival business or engage himself in a rival business, which would include manufacturing and marketing of IMFL and Beer at which assessee was an old hand, having experience of 35 years - Tribunal further found that withholding of Rs. 3 crores out of Rs. 6.60 crores for a period of two years by way of a public deposit with SWC group for purpose of deduction of any loss on account of any breach of MoU, was akin to a penalty clause, making it clear that there was no colourable device involved in having two separate agreements for two entirely separate and distinct purposes - Under Act, payment received as non-competition fee under a negative covenant was always treated as a capital receipt till assessment Year 2003-04 and only vide Finance Act, 2002 with effect from 1-4-2003, said capital receipt is made taxable - Whether Rs. 6.6 crores received by assessee from company SWC was not taxable under section 28(ii); it was exempt as capital receipt being non-competition fee received on execution of deed of covenant - Held, yes [Para 20][In favour of assessee]
Director of Income-tax (IT) Vs. Samsung Heavy Industries Co. Ltd. [2020] 117 taxmann.com 870 (SC)
Section 9 of the Income-tax Act, 1961, read with article 5 of the DTAA between India and Korea - Income - Deemed to accrue or arise in India (Permanent Establishment - Project Office/Branch Office) - Assessment year 2009-10 - Whether condition precedent for applicability of article 5(1) of DTAA and ascertainment of a PE is that it should be an establishment through which business of an enterprise is wholly or partly carried on and profits of foreign enterprise are taxable only where said enterprise carries on its 'core business' through PE - Held, yes - Assessee, a Korea based company, entered into a contract between ONGC on one hand and L&T on other hand as consortium partners - In pursuance to above contract assessee opened up a Project Office in Mumbai - A reading of Board Resolution referred to in letter addressed to RBI for opening Project Office would show that Project Office was established to co-ordinate and execute delivery documents in connection with construction of offshore platform modification of existing facilities for ONGC - Further, there were only two persons working in Mumbai office, neither of whom was qualified to perform any core activity of assessee - Whether therefore, it was clear that no permanent establishment had been set up within meaning of article 5(1) of DTAA, as Mumbai Project Office could not be said to be a fixed place of business through which core business of assessee was wholly or partly carried on - Held, yes - Whether on facts of present case, Mumbai Project Office would fall within article 5(4)(e) of DTAA, inasmuch as office was solely an auxiliary office, meant to act as a liaison office between assessee and ONGC - Held, yes [Paras 23, 27 and 28][In favour of assessee]
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