BULLETIN(Issue No.122)DT.03-09-2020
Compiled by Vinod Kumar Goel, Advocate
CASE LAWS
Cooner Institute of Health Care & Research Centre (P.) Ltd., [2020] 118 taxmann.com 69 (Delhi)
Section 241A, read with section 143, of the Income-tax Act, 1961 - Refund - Power to withhold, in certain cases (Conditions precedent) - Assessment year 2018-19 - Whether exercise of withholding of refund under section 241A, pursuant to notice under section 143(2), without recording justifiable reasons, was not in consonance with legislative intent and mandate of aforesaid provision, hence, had to be set aside - Held, yes [Para 8] [In favour of assessee]
Genpact India (P.) Ltd. Vs. Deputy Commissioner of Income-tax, Circle-10(1) [2020] 118 taxmann.com 40 (Delhi-Trib.)
Section 170, read with section 292B, of the Income-tax Act, 1961 - Succession to business otherwise than on death (Validity of assessment) - Assessment year 2014-15 - Whether once it is found that assessment is framed in name of non-existing entity, it does not remain a procedural irregularity of nature which could be cured under section 292B, hence, Assessment proceedings as well as Assessment order itself are void ab initio - Held, yes - Where thus, where pursuant to scheme of amalgamation as approved by High Court, a company was merged with assessee company and amalgamating company was not in existence at time of conduct of assessment proceedings as well as on date of passing Assessment Order, Assessment Order passed in name of amalgamating company was to be set aside - Held, yes [Para 7][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 in favour 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]
Section 260A of the Income-tax Act, 1961 - High Court - Appeal to (Procedure of)- Assessment year 1995-96 - Whether High court shall formulate question and may then pronounce judgment either by answering question in affirmative or negative or by stating that case at hand does not involve any such question; if High Court wishes to hear appeal on any other substantial question of law not formulated by it, it may, for reasons to be recorded, formulate and hear such questions if it is satisfied that case involves such question - Held, yes [Para 14][In favour of assessee]
Commissioner of Income-tax Vs. Smt. Umayal Annamalai [2020] 118 taxmann.com 80 (Madras)
Section 54F of the Income-tax Act, 1961 - Capital gains - Exemption of, in case of investment in residential house (Condition precedent) - Assessment year 2005-06 - Assessee sold property and invested sale proceeds in new property before due date of filing belated return and took possession within three years from date of transfer/sale of original asset - Assessee, however, had not invested sale proceeds in Capital Gain Account Scheme before due date filing of return under section 139(1) - Whether since assessee had complied with conditions under section 54F(1), she was entitled for availing benefit of exemption under section 54F - Held, yes [Para 6] [In favour of assessee]
Dalbir Singh Vs. Satish Chand [2020] 118 taxmann.com 36 (Delhi)
Section 260A of the Income-tax Act, 1961 - High Court - Appeals to (Pronouncement of orders) - Petitioner, had filed a suit for mandatory and permanent injunction against his sons in respect of property - In said suit, petitioner had moved an application under Order XII, Rule 6 of CPC, which was heard on 18-2-2020 and thereafter was reserved for orders - Petitioner submitted that despite matter being reserved for orders, no orders were pronounced in Order XII, Rule 6 application - Accordingly, petitioner filed instant petition seeking directions to be given for early disposal of said application - Whether as per settled law, orders which are reserved have to be pronounced within two months and if they are not pronounced for three months, litigant is entitled to approach High Court - Held, yes - Whether national lockdown could not have acted as an impediment in pronouncement of orders because once matter is heard and orders are reserved, no further hearing would be required, only pronouncement of order/ judgment needs to take place- Held, yes - Whether therefore, repeated adjournments for orders or for pronouncement of judgment would not be permissible even during lockdown - Held, yes [Paras 4, 5 and 7]
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]
Income Tax Officer Vs. Smt. Rekha Shetty [2020] 118 taxmann.com 10 (Chennai – Trib.)
Section 54 of the Income-tax Act, 1961 - Capital gains - Profit on sale of property used for residence (Delay in depositing amount in CGAS) - Assessment year 2016-17 - Assessee received her share from sale of an immovable property on 19-10-2015 - In return of income, assessee claimed deduction under section 54, being amount utilized towards purchase of new house on 26-08-2016 - Assessing Officer found that assessee had not deposited amount in Capital Gain Account Scheme within due date of filing return under section 139(1) - He thus rejected assessee's claim for deduction - Whether in view of fact that assessee had substantially complied with provisions of section 54(1) by purchasing new house property within prescribed time period, a mere non-compliance of procedural requirement under section 54(2) i.e. some delay in depositing amount in CGAS, could not stand in way of assessee in getting benefit under section 54 - Held, yes - Whether, therefore, impugned order was to be set aside and, assessee's claim for deduction was to be allowed - Held, yes [Para 5] [In favour of assessee]
Pandian Hotels Ltd. Vs. Deputy Commissioner of Income-tax [2020] 118 taxmann.com 76 (Madras)
Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Renovation expenses) - Assessment year 2012-13 - Assessee was running a hotel - During relevant year assessee incurred certain expenditure on renovation and repairs of hotel rooms - Asseessing Officer rejected assessee's claim for deduction under section 37(1) on ground that expenditure incurred by assessee was capital in nature - Tribunal upheld order passed by Assessing Officer - It was noted that number of rooms remained same in hotel - Moreover, granite and marble used on floors of room would not last long and become obsolete in a couple of years - Whether on facts, expenditure incurred by assessee was revenue expenditure and, thus, deduction claimed in respect of same was to be allowed - Held, yes [Para ] [In favour of assessee]
Commissioner of Income-tax Vs. Neyveli Lignite Corporation Ltd. [2020] 117 taxmann.com 847 (Madras)
Section 32, read with section 147 of the Income-tax Act, 1961 - Depreciation - Allowance/rate of (Reopening of assessment) - Assessment year 2008-09 - For relevant year, assessment in case of assessee was completed under section 143(3) wherein assessee's claim for depreciation was allowed - Subsequently, Assessing Officer initiated reassessment proceedings on ground that assessee had claimed depreciation at rate of 15 percent on water supply and drainage instead of treating same under block 'Building' on which depreciation was allowable at rate of 10 percent - Thus, according to Assessing Officer, assessee had raised excess claim of depreciation - It was noted that while completing assessment under section143(3), Assessing Officer had raised an identical query and thereupon he had accepted assessee's explanation and, claim of excess rate of depreciation was restricted to non-productive assets only - It was also found that for very same reason, Commissioner had issued notice under section 263 but, after considering assessee's reply, said proceedings were dropped - Whether, on facts, when reasons for reopening of assessment were subject matter of proceedings under section 143(3) or proceedings under section 263, once again, for very same reasons, power under section 147 could not be invoked - Held, yes - Whether, therefore, impugned reassessment proceedings were deserved to be set aside - Held, yes [Paras 24 and 29] [In favour of assessee]
Supreme Build Cap (P.) Ltd. Vs. Assistant Commissioner of Income-tax [2020] 117 taxmann.com 848 (Delhi-Trib.)
I. Section 5 of the Income-tax Act, 1961 - Income - Accrual of (Sale of property) - Assessment year 2014-15 - Assessee was a company engaged in business of real estate - During relevant year assessee filed its return declaring certain taxable income - In course of assessment, Assessing Officer found that assessee had not credited certain amount to its profit and loss account towards sale of a property - He thus added said amount to assessee's taxable income - Assessee filed appeal raising a plea that said amount represented outstanding receivable from buyer in respect of property sold in earlier assessment year - Assessee also brought on record its books of account which established that assessee had duly offered entire sale consideration to tax in earlier assessment year and, thus, bringing amount in question to tax in relevant assessment year as well, would amount to double taxation - Whether, in view of aforesaid, impugned addition was to be deleted - Held, yes [Para 11] [In favour of assessee]
II. Section 32 of the Income-tax Act, 1961 - Depriciation - Allowance/Rate of (Business assets) - Assessment year 2014-15 - During relevant year assessee claimed depreciation on routine business assets such as computers, air conditioners, cars etc. - Assessing Officer rejected assessee's claim on ground that assessee had not carried out any business activity - Whether, on facts, merely because assessee had not undertaken any project during relevant year as it was trying to complete formalities of sale of huge project sold last year, it could not be concluded that assessee had not used its business assets in assessment year in question - Held, yes - Whether, therefore, impugned order was to be set aside and, assessee's claim for depreciation was to be allowed - Held, yes [Para 15] [In favour of assessee]
III. Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Alloability of (Prior period expenses) - Assessment year 2014-15 - During relevant year assessee incurred certain legal and professional charges in respect of a housing project sold in earlier assessment year - Assessing Officer rejected assessee's claim holding that said expenses were in nature of prior period expenses - Whether since a huge project was sold in earlier year, a part of expenses incurred was bound to spill over to next year - Held, yes - Whether, therefore, even though expenses in question were technically considered as prior period expenses, it was basically a continuous flow of expenditure - Held, yes - Whether, therefore, impugned disallowance was to be deleted - Held, yes [Para 19] [In favour of assessee]
Commissioner of Income-tax Vs. Accel Limited [2020] 118 taxmann.com 103 (Madras)
Section 2(22) of the Income-tax Act, 1961 - Deemed dividend (Advance received from subsidiary company) - Assessment year 2002-03 - During assessment proceedings, Assessing Officer found that assessee had received certain amount as loan from its subsidiary company - He took a view that amount so received fell within meaning of deemed dividend under section 2(22)(e) - In appellate proceedings, assessee explained that amount received from subsidiary company was only an advance towards security for providing corporate guarantee - Moreover, assessee had paid interest on said amount at rate one per cent higher than normal banking rate - Tribunal having accepted assessee's explanation, deleted addition made by Assessing Officer - Held, yes - Whether since finding recorded by Tribunal was a finding of fact, no substantial question of law arose therfrom - Held, yes [Paras 11 and 12] [In favour of assessee]
Commissioner of Income-tax Vs. Naman Associates [2020] 118 taxmann.com 165 (Gujarat)
Section 158BD, read with section 158BC, of the Income-tax Act, 1961 - Block assessment in search cases - Undisclosed income of any other person (Scope of ) - Block period 01-04-1995 to 27-09-2001 - In course of block assessment proceedings, Assessing Officer disallowed contrived loss suffered by assessee - Tribunal opined that in assessment under block period only undisclosed income, which was found from seized material could only be considered for addition in total income of assessee - Tribunal further held that assessee had already disclosed loss by making necessary entries in books of account and, thus, Assessing Officer was not justified in disallowing contrived loss claimed by assessee - Tribunal thus allowed assessee's claim - Whether since finding recorded by Tribunal was based on material on record, same did not require any interference - Held, yes [Para 17] [In favour of assessee]
Mantola Co-operative Thrift & Credit Society Ltd. Vs. Income Tax Officer [2020] 118 taxmann.com 276 (Delhi – Trib.)
Section 80P of the Income-tax Act, 1961 - Deductions - Income of co-operative societies (Interest) - Assessment years 2012-13 to 2014-15 - During relevant year assessee earned interest income on FDRs and deposits kept with non-member co-operative banks and commercial banks - Assessee claimed deduction under section 80P in respect of said income - Assessing Officer opined that interest earned from fixed deposits out of surplus funds was not eligible for deduction under section 80P(2)(a)(i) - He thus rejected assessee's claim - Whether, on facts, order passed by Assessing order did not require any interference - Held, yes - Whether, however, so far as section 80P(2)(d) is concerned, since said provision does not make any distinction in regard to source of investment, revenue is not required to look to nature of investment whether it is from surplus funds or otherwise - Held, yes- Whether, therefore, assessee is eligible for deduction under section 80P(2)(d) - Held, yes [Paras 10, 18 and 20] [In favour of assessee]
Ramesh Govindbhai Patel Vs. Income Tax Officer, [2020] 118 taxmann.com 201 (Ahmedabad – Trib.)
Section 50C of the Income-tax Act, 1961 - Capital gains - Special provision for computation of full value consideration (Reference to DVO) - Assessment year 2011-12 - Assessee sold an immovable property and declared certain amount as capital gain - In course of assessment, Assessing Officer made valuation of said property on basis of stamp duty valuation as on date of registration - Accordingly, certain addition was made to assessee's income - Whether when date of agreement of sale fixing amount of consideration and date of registration of property are different, matter has to be referred to DVO for determination of valuation as on date of agreement in terms of provisions of section 50C - Held, yes - Whether, since in instant case, valuation of property on basis of stamp duty valuation as on date of registration had been determined without referring matter to DVO, impugned addition made by Assessing Officer was to be deleted - Held, yes [Para 11] [In favour of assessee]
Kamaraj Educational Trust Vs. Chief Commissioner of Income Tax, [2020] 118 taxmann.com 273 (Madras)
Section 10(23C) of the Income-tax Act, 1961 - Educational institutions (Availability of exemption) - Assessment year 2014-15 - Assessee-trust was established with an object of running an educational institution - During relevant year assessee incurred certain expenses for awareness on agriculture, scientific research, blood donation camp etc. - Assessee filed its return claiming exemption of income under section 10(23C)(vi) - Chief Commissioner rejected assessee's claim by taking a view that assessee trust was not only for education but also for other activities - Tribunal confirmed order passed by Chief Commissioner - Whether expenditure incurred for awareness on agriculture, medical camps and eye camp activity could very well be treated as part of activities carried out in school itself and, thus, view taken by Chief Commissioner that said expenses were not related to educational activities, could not be accepted - Held, yes - Whether in view of aforesaid, impugned order passed by authorities below was to be set aside - Held, yes [Para 10] [In favour of assessee]
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