BULLETIN(Issue No.121)DT.24-08-2020
Compiled by Vinod Kumar Goel, Advocate
CASE LAWS
Vineeta Sharma Vs. Rakesh Sharma & ORS vide Civil Appeal No. Diary No.32601 of 2018 (SC)
The expression used in Explanation to Section 6(5) ‘partition effected by a decree of a court’ would mean giving of final effect to actual partition by passing the final decree, only then it can be said that a decree of a court effects partition. A preliminary decree declares share but does not effect the actual partition, that is effected by passing of a final decree; thus, statutory provisions are to be given full effect, whether partition is actually carried out as per the intendment of the Act is to be found out by Court. Even if partition is supported by a registered document it is necessary to prove it had been given effect to and acted upon and is not otherwise sham or invalid or carried out by a final decree of a court. In case partition, in fact, had been worked out finally in toto as if it would have been carried out in the same manner as if affected by a decree of a court, it can be recognized, not otherwise. A partition made by execution of deed duly registered under the Registration Act, 1908, also refers to completed event of partition not merely intendment to separate, is to be borne in mind while dealing with the special provisions of Section 6(5) conferring rights on a daughter. There is a clear legislative departure with respect to proof of partition which prevailed earlier; thus, the Court may recognise the other mode of partition in exceptional cases based upon continuous evidence for a long time in the shape of public document not mere stray entries then only it would not be in consonance with the spirit of the provisions of Section 6(5) and its Explanation.
Resultantly, we answer the reference as under:
(i) The provisions contained in substituted Section 6 of the Hindu Succession Act, 1956 confer status of coparcener on the daughter born before or after amendment in the same manner as son with same rights and liabilities.
(ii) The rights can be claimed by the daughter born earlier with effect from 9.9.2005 with savings as provided in Section 6(1) as to the disposition or alienation, partition or testamentary disposition which had taken place before 20th day of December, 2004.
(iii) Since the right in coparcenary is by birth, it is not necessary that father coparcener should be living as on 9.9.2005.
(iv) The statutory fiction of partition created by proviso to Section 6 of the Hindu Succession Act, 1956 as originally enacted did not bring about the actual partition or disruption of coparcenary. The fiction was only for the purpose of ascertaining share of deceased coparcener when he was survived by a female heir, of Class as specified in the
Schedule to the Act of 1956 or male relative of such female. The provisions of the substituted Section 6 are required to be given full effect. Notwithstanding that a preliminary decree has been passed the daughters are to be given share in coparcenary equal to that of a son in pending proceedings for final decree or in an appeal.
(v) In view of the rigor of provisions of Explanation to Section 6(5) of the Act of 1956, a plea of oral partition cannot be accepted as the statutory recognised mode of partition effected by a deed of partition duly registered under the provisions of the Registration Act, 1908 or effected by a decree of a court. However, in exceptional cases where plea of oral partition is supported by public documents and partition is finally evinced in the same manner as if it had been affected by a decree of a court, it may be accepted. A plea of partition based on oral evidence alone cannot be accepted and to be rejected outrightly.
We understand that on this question, suits/appeals are pending before different High Courts and subordinate courts. The matters have already been delayed due to legal imbroglio caused by conflicting decisions. The daughters cannot be deprived of their right of equality conferred upon them by Section 6. Hence, we request that the pending matters be decided, as far as possible, within six months.
In view of the aforesaid discussion and answer, we overrule the views to the contrary expressed in Prakash v. Phulavati and Mangammal v. T.B. Raju & Ors. The opinion expressed in Danamma @ Suman Surpur & Anr. v. Amar is partly overruled to the extent it is 121 contrary to this decision. Let the matters be placed before appropriate Bench for decision on merits.
M/s Exotica Housing and Infrastructure Company Pvt. Ltd. Vs. ITO [ITA No. 5188/Del/2019] – ITAT Delhi
SECTION 2(22)(e) - CURRENT ACCOUNT IS MAINTAINED BETWEEN THE PARTIES - - CONTAINING BOTH TYPES OF ENTRIES I.E. GIVING AND TAKING THE AMOUNT - - MONEY HAVE BEEN USED IN THE ORDINARY COURSE OF BUSINESS - - CANNOT BE CONSIDERED AS LOANS AND ADVANCES AS CONTEMPLATED U/S 2(22)(e) OF THE IT ACT
Transactions carried out through current account for business purposes would not fall within the definition of “Deemed Dividend”. Considering the facts of the case in the light of above decisions, we examined the ledger account of the subsidiary company in the books of the assessee company, copy of which is filed at page-7 of the PB, which reveals that initially the assessee company has taken amount from the subsidiary company which was repaid and thereafter, it is the assessee company which has given the amount to the subsidiary company on most of the occasions and later on the subsidiary company has returned the amount to the assessee on most of the occasions the assessee company has advanced the amount to the subsidiary company and ultimately the balance is squared-up at the end of the year. Assessee company and its subsidiary company are in the same business of real estate and money have been used in the ordinary course of business of the assessee company. Therefore, it being the current account maintained between the assessee company and its subsidiary company, deeming fiction should not have been applied against the assessee.
Jindal Realty Pvt. Ltd. Vs. ACIT [ITA No. 1408/Del/2011] – ITAT Delhi
THERE IS A CLEAR DISTINCTION BETWEEN A PERSON COMMENCING A BUSINESS AND A PERSON SETTING UP A BUSINESS AND FOR THE PURPOSE OF THE INDIAN INCOME TAX ACT, THE SETTING UP OF THE BUSINESS AND NOT THE COMMENCEMENT OF THE BUSINESS, IS TO BE CONSIDERED - - SETTING UP OF BUSINESS TAKES PLACE WHEN THE BUSINESS IS READY AND THE FIRST STEPS ARE TAKEN, WHICH IN THE CASE OF REAL ESTATE BUSINESS WERE WHEN THE ASSESSEE LOOKS AROUND AND NEGOTIATE WITH PARTY
Where substantial activities were carried out by the assessee, since the date of incorporation which had culminated in raising loans, making investment in purchase of land, which was reflected as stock in trade and also advancing loans to associate concerns for purchasing different pieces of land, in order to fulfil the condition of Land Bank of 100 Acres or more, to develop the township in Haryana and where the assessee is entered into development agreement at the close of the present year/beginning of the next year, then assessee can be said to have set up and commenced its business.
The assessee had also parked certain funds temporarily in the bank FDRs, on which it had earned interest which is to include also as business income in the hands of the assessee.
Harvansh Chawla Vs. ACIT [ITA No. 300/Del/2020] – ITAT Delhi
NOTIONAL INTEREST – RECEIVED SECURITY DEPOSIT FOR LEASING A PREMISES – RENTAL INCOME NOT OFFERED – SECURITY DEPOSIT NOT REFUNDED – DEPOSIT SHOWN AS LIABILITY – LOCK-IN-PERIOD OF 9 YEARS – NOTIONAL INTEREST ON SECURITY DEPOSIT CANNOT BE ADDED.
The issue of as to how to treat the security deposit after the completion of the lock-in-period is not the issue before us. The Assessing Officer has not brought anything about earning of the interest by the assessee which has not been offered to tax. The addition was on the sole premise, that the assessee having the security deposit must have earned the interest. In order to tax any amount, the revenue has to prove that the amount as indeed been earned by the assessee. Only the incomes fall under the deemed provisions which have been explicitly mentioned in the Income Tax Act can only be brought to tax under the deeming provision but not any other notional or hypothetical income not envisaged by the Act. Hence, we hereby direct that the addition made by the Assessing Officer on account of notional income on the security deposit cannot be held to be legally valid.
Shri. Suresh Kumar Agarwal Vs. ACIT [ITA No. 8703/Del/2019] – ITAT Delhi
SECTION 68 r.w.s 10(38) –BOGUS LTCG -REOPENING U/S 147 – WHEN THE DETAILS FURNISHED BY THE ASSESSEE WERE NOT AT ALL CONTROVERTED BY BRINGING COGENT MATERIAL AND INVESTIGATION MADE THEREON BY THE LD AO - ADDITION IN THE HANDS OF THE ASSESSEE IS NOT SUSTAINABLE
All these information could have been obtained by the assessing officer by issue of 133 (6) notice to the depository as well as to the stock exchange and the respective broker. However, despite having the basic information available with the assessing officer he has chosen tosit and becomea mute spectator. When the assessee has provided the complete information, which would have been available with the assessee in the documentary format, the role of the assessing officer starts as an investigator of the information furnished by the assessee, when he recorded the reason, he formed a prima faciereason to believe that there is an escapement of income. He should have converted his reason into the fact by making an investigation on the information provided by the assessee. For the reasons best known to the assessing officer, he did not do anything on the information provided by the assessee. He merely made the addition holding that assessee has not shown justification for purchase of shares at a very high price. The assessee has submitted a complete month -wise chart of highs and lows of the share of the company.
In these circumstances, the addition in the hands of the assessee is not sustainable when the details furnished by the assessee were not at all controverted by bringing cogent material and investigation made thereon by the ld AO.
Suvipra Shiksha Sansthan Vs. ITO [ITA No. 2036/Del/2018] – ITAT Delhi
SECTION 11(1)(a) – TRUST DEED - AT THE TIME OF WINDING UP OF TRUST – IMMOVABLE PROPERTY TRANSFERRED TO OTHER CHARITABLE TRUST - THE ASSESSEE AT NO POINT OF TIME DIVERTED ANY FUNDS BEYOND THE SCOPE OF ITS TRUST DEED – ENTITLED TO CLAIM BENEFIT U/S 11(1)(a)
Trust Deed explains the process of winding up of the trust wherein it has been provided that at any point of time, the whole of corpus fund and other funds of movable and immovable properties belonging to the trust or the institution run by the trust shall only be transferred to any other public charitable trust or institution having the same aims and object for the public charitable purposes. The assessee at no point of time diverted any funds beyond the scope of its Trust Deed. In fact, the immovable property was sold and the amount of the sale proceeds were donated to the corpus of the other charitable society/trust. Section 11(1)(a) clearly sets out that the assessee is entitled to claim the benefit as the sale proceeds of property cannot be included in the total income of the assessee. The assessee has donated the sale proceeds to the corpus of another charitable society/trust. The Ld. AR relied upon the decision of the Hon’ble Delhi High Court in case of Bagri Foundations (supra) which is also apt in the present case.
Hamdard National Foundation (India) Vs. ACIT [1641/Del/2019] – ITAT Delhi
SECTION 11 R.W.S. 13(2)(b) AND 13(3) – DENIAL OF EXEMPTION WITHOUT VOUCHSAFING THE CORRECTNESS OF THE INFORMATION RELIED UPON BY THE AO AND WITHOUT REBUTTING THE EXPLANATION OF THE ASSESSEE
AO relied upon the information available on the internet and the replies of the summons issued to the brokers that the assessee is charging less interest from Hamdard Wakf as compared to the market rate and denied the exemption.
The actual rent received by the assessee from HLI far exceeds the valuation adopted by the MCD for the purpose of levying house tax as could be seen from the information furnished by the assessee and also that unless and until the learned Assessing Officer brings on record some credible information, the burden to rebut does not shift to the assessee.
Without vouchsafing the correctness of the information received from the website and without correlating the information furnished by the property dealers without realities on ground with a specific reference to the property in dispute, it is not open for the Assessing Officer to proceed to make addition, that disturbing the accepted position for about more than two decades.
SECTION 11(ID) – CORPUS DONATIONS – DENIAL OF BENEFIT TREATING THE ASSESSEE AS AOP
In the absence of any allegation or proof as to the assessee undertaking any activities in the nature of trade, commerce or business, donations received by the assessee forms part of the corpus of trust and thus capital receipt are not liable to tax.
ACB India Power Ltd. Vs. DCIT [82/Del/2016] – ITAT Delhi
SECTION 36(1)(iii) – BORROWED FUNDS UTILIZED FOR INVESTMENT IN SHARES OF SUBSIDIARY - ENGAGED IN SIMILAR LINE OF BUSINESS – INVESTMENT IN FURTHERANCE OF MAIN OBJECT OF THE BUSINESS OF THE ASSESSEE – ENTITLED TO CLAIM INTEREST
The assessee has successfully demonstrated that the investment in shares to subsidiary company was in furtherance of main objects of its business and, therefore, in our considered view, the assessee is very much entitled for claim of interest paid on borrowed capital.
Michelin India Pvt. Ltd. Vs. JCIT [2415/Del/2014] – ITAT Delhi
DISALLOWANCE OF MANAGEMENT FEE PAID TO ASSOCIATED ENTERPRISES ON THE GROUND THAT IT WAS CLEAR DIVERSION OF PAYMENT IN THE NAME OF MANAGEMET FEE
It is forthe businessman to decide its course of carrying on the business and in such course, for availing management services from its AE.The Assessing Officer cannot sit in judgment, with such decision of businesssman to hold that the group companies were being paid in the name of management fee, though there were sufficient management personnel available.Such observation cannot be the basis for benchmarking the allowability of the expenditure in the case of the assessee.The benefit, if any, arising to the assessee against the availment of such support services is not necessary to be proved by the assessee.The assessee in its wisdom to carry on its business, where the business has worldwide presence, needs to keep its standards high and to maintain similar terms and conditions, not only for running business but for providing services to customers, has to avail such management advices and services from its AE.In the present scenario where the assessee is dealing in items, which were available in international market also, then same practice has to be adopted worldwide and hence the necessity of availment of management services.Merely because the assessee was increasing expenditure on its personnel and other expenses, cannot be the yardstick for deciding whether assessee had any need to avail the services.It is outside the domain of Assessing Officer to traverse in such direction.
C.S. Datamation Research Services Pvt. Ltd. Vs. ITO [3915/Del/2016] – ITAT Delhi
SECTION 271(1)(c) - PENALTY U/S 271(1)(C) IS NOT VALID IN LAW IN VIEW OF NON-STRIKING OF THE INAPPROPRIATE WORDS IN THE PENALTY NOTICE.
We, are of the opinion that the levy of penalty u/s 271(1)(c) is not valid in law in view of non-striking of the inappropriate words in the penalty notice.
Even on merits also we find, the Hon’ble Delhi High Court in the case of Noble & Hewitt (I) (P) Ltd. (supra) has held that where the assessee did not debit the amount to the P&L Account as an expenditure nor did the assessee claim any deduction in respect of the amount where the assessee was following mercantile system of accounting, the question of disallowing the deduction not claimed would not arise.
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