BULLETIN(Issue No.129)DT.10-03-2021
Compiled by Vinod Kumar Goel, Advocate
CASE LAWS
Intas Pharmaceuticals Ltd. Vs. ACIT, TDS Circle, Ahmedabad [2021] 123 taxmann.com 300 (Allahabad- Trib.)
Section 194H of the Income-tax Act, 1961 - Deduction of tax at source - Commission or brokerage etc. (Commission, Connotation of) - Assessment years 2011-12 to 2013-14 - Assessee company was engaged in business of manufacturing and trading of pharmaceuticals - It incurred expenses for providing facilities/services such as travel, accommodation and equipment to persons associated with it such as stockist, field staff, distributors and doctors - It also incurred expenses towards distribution of various articles/gifts/other facilities to these persons - Assessing Officer was of view that these expenses were in nature of commission and assessee was liable to tax at source at rate of 10 per cent under section 194H on same - It was noted that doctors were not acting as agent of assessee - Thus, existence of agency relationship between assessee and doctor was missing which was compulsory to invoke provisions of section 194H - Further, Assessing Officer had not brought anything on record suggesting that there existed any agency relationship between assessee and other persons i.e. stockist, dealers and field staff - These expenses were incurred exclusively for purposes of business and product promotion - By no means these could be classified as commission as envisaged under section 194H - Whether, therefore, provisions of section 194H could not be applied to case of assessee - Held, yes [Paras 37 to 39] [In favour of assessee]
Chokkalingam Sudhakar Vs. Deputy Commissioner of Income Tax, Non-Corporate Ward-18(1), Chennai [202] 122 taxmann.com 298 (Madras)
Section 4 of the Direct Tax Vivad Se Vishwas Act, 2020 - Filing of declaration and particulars to be furnished - Assessment year 2012-13 - Appeal against assessee was admitted questioning its entitlement to benefits under section 54F - However subsequently, Government of India enacted Direct Tax Vivad Se Vishwas Act, 2020 by way of which assessee had been given an option to put an end to tax disputes which may be pending at different levels - Assessee submitted that it intended to avail benefit of Vivad Se Vishwas Scheme and in this regard was taking steps to file declaration under section 4, in Form No. 1 - Whether thus, assessee was to be permitted to File Form No. 1 and competent authority shall process application/declaration in accordance with Act and pass appropriate orders as expeditiously as possible - Held, yes - Whether assessee was also given liberty to restore this appeal in event ultimate decision to be taken on declaration filed by assessee under section 4 was not in favour of assessee - Held, yes [Para 7][In favour of assessee]
Principal Commissioner of Income Tax, (Central) 1 Vs. Andaleeb Sehgal [2021] 124 taxmann.com 247 (SC)
Section 69A, read with section 147, of the Income-tax Act, 1961 - Unexplained moneys (Reopening of assessment) - Assessment year 2001-02 - Assessing Officer sought to reopen assessment in case of assessee on ground that assessee had paid bribe to Iraqi officials and therefore same was required to be added to income of assessee - However, it was found that Assessing Officer had simply borrowed conclusions drawn by Enforcement Directorate without making any independent inquiry himself into matter - Even before Tribunal, revenue was unable to show precise documents or material on basis of which Assessing Officer formed reason to believe that bribe had been paid to Iraqi officials and therefore was required to be added to income of assessee - Tribunal allowed appeal filed by assessee, holding that reopening of assessment was not justified as entire case was based upon borrowed investigation stated to have been conducted by Enforcement Directorate and no evidence had been brought on record to connect assessee with bribe paid, rather it was case of zero investigation - High Court by impugned order held that there was no perversity in order of Tribunal allowing appeal filed by assessee - Whether Special Leave Petition against said impugned order was to be dismissed - Held, yes [Para 2] [In favour of assessee]
JRD Tata Trust Vs. Deputy Commissioner of Income Tax, Exemption, Circle-2(1), Mumbai [2020] 122 taxmann.com 275 (Mumbai – Trib.)
ITAT held that if none of the persons specified under section 13(3) had any substantial interest in Tata Sons Ltd, and when there is nothing on record to even suggest incorrectness of this averment of the assessee, the question of direct or indirect benefit under section 13(1)(c) read with section 13(2)(h) does not arise. It further held that provisions under section 263 cannot put into service to make some roving and fishing inquiries.
B. Fouress (P.) Ltd. Vs. Deputy Commissioner of Income Tax, Circle 11(2), Bangalore [2021] 123 taxmann.com 431 (Karnataka)
Where Tribunal had upheld disallowance under section 37(1) of commission payment made by Assessing Officer on basis of order for preceding year, since material had been produced by assessee which was not considered by Tribunal and Tribunal had upheld disallowance under section 37 merely on basis of order passed in respect of preceding year, order passed by Tribunal was cryptic and suffered from vice of non- application of mind
Maria Fernades Cheryl Vs. Income Tax Officer, (International Taxation), 2(3)(1), Mumbai [2021] 123 taxmann.com 252 (Mumbai-Trib.)
Amendment in scheme of section 50C(1), by inserting third proviso thereto and by enhancing tolerance band for variations between stated sale consideration vis-à-vis stamp duty valuation from 5 per cent to 10 per cent, are curative in nature, and, therefore, these provisions, even though stated to be prospective, must be held to relate back to date when related statutory provision of section 50C, i.e. 1-4-2003
Dell India (P.) Ltd. Vs. Joint Commissioner of Income Tax, Bangalore [2021] 123 taxmann.com 468 (Karnataka)
Oversight, inadvertence or mistake of Assessing Officer or error discovered by him on reconsideration of same material is mere change of opinion and does not give him power to reopen a concluded assessment.
Jhansi Development Authority Vs. Deputy Commissioner of Income Tax, Circle-4, Agra [2021] 123 taxmann.com 247 (Agra – Trib.)
Where assessee Jhansi Development Authority was an extended arm of the UP State and discharging its statutory functions under the authority of the UP Act under which it was created; it couldn't be said that assessee was engaged in commercial activities by virtue of Section 2(15) of the Income-tax Act, 1961.
ACE Infracity Developers P. Ltd. Vs. DCIT, Central Circle, Noida, ITA No. 1087/Del/2018 (Del)
We have heard both the parties and perused the material available on record. The submission made by the Ld. AR related to CBDT Circular No. 11/2019 dated 19/06/2019 are very much relevant in the present appeal before us. Before that Section 115BBE has to be taken into account. The extract of Section 115BBE is as follows: "115BBE. (1) Where the total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, the income- tax payable shall be the aggregate of— (a) the amount of income-tax calculated on income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, at the rate of thirty per cent; and (b) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (a). (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) of sub-section (1)." From perusal of Section 115BBE, it is very clear that any expense or allowance shall not be allowed from the income assessed u/s 69 but, this Section does not indicate that set off of brought forward business losses shall not be allowed from income assessed u/s 69 for the purpose of calculating tax u/s 115BBE. This is further confirmed by the amendment made under the Finance Act, 2016, which is applicable from AY 2017-18. Relevant extract of the amended provision is reproduced as under: “115BBE. (2) Notwithstanding anything contained in this Act, no deduction in respect of any expenditure or allowance or setoff of any loss shall be allowed to the assessee under any provision of this Act in computing his income referred to in clause (a) of sub-section (1].” As per the Finance Act, 2016, amendment for disallowance of set off of brought forward losses against the income assessed u/s 68 has been inserted w.e.f. 01/04/2017, i.e., from AY 2017-18. This issue has already been clarified by the CBDT itself vide circular no. 11/2019 dt. 19/06/2019. Relevant extracts of the circular are as under: “2 The matter has been referred to the Board so that a consistent approach is adopted by the Assessing Officers while applying provision of section 115BBE in assessments for period prior to the assessment year 2017-18.
3. The Board has examined the matter. The Circular No. 3/2017 of the Board dated 20th January, 2017 which contains Explanatory notes to the provisions of the Finance Act, 2016, at para 46.2, regarding amendment made in section 115BBEJ2] of the Act mentions that currently there is uncertainty on the issue of set-off of losses against income referred to in section 115BBE.” It also further mentions that the pre-amended provision of Section 115BBE of the Act did not convey the intention that losses shall not be allowed to be set-off against income referred to in Section 115BBE of the Act and hence, the amendment was made vide the Finance Act, 2016. Thus keeping the legislative intent behind amendment in Section 115BBE(2) vide the Finance Act, 2016 to remove any ambiguity of interpretation, the Board is of the view that since the term 'or set off of any loss' was specifically inserted only vide the Finance Act 2016, w.e.f. 01.04.2017, an assessee is entitled to claim set-off of loss against income determined under Section 115BBE of the Act till the assessment year 2016-17. Since, CBDT Circular No. 11/2019 dated 19.06.2019 was issued after the order of the CIT(A), the CIT(A) did not have the benefit of the circular. Therefore, we are of the view that the Circular applies in the present assessee’s case as the Assessment Year before us is that of A.Y. 2015-16 and till A.Y. 2016-17, the assessee is entitled to claim se-off of loss against income determined under Section 115BBE of the Act. The appeal of the assessee is allowed. 7. In result, the appeal of the assessee is allowed.
M/s. Boutique International Pvt. Ltd. Vs. ITO, Ward-5(1), New Delhi, ITA No. 831/Del/2017.
We have heard both the parties and perused the records, especially the orders of the revenue authorities and the case laws cited before us. On the anvil of decision of the Hon’ble Supreme Court of India in the case of NTPC Limited 229 ITR 455, we admit the additional grounds being legal in nature and which goes to the root of the matter for which necessary facts are available on record and hence, we are deciding the same first.
We find that assessee filed its return of income u/s. 139(1) of the Act on 29.8.2013 and the AO i.e. DCIT, Circle 3(1), New Delhi issued notice u/s. 143(2) of the Act on 04.9.2014. Thereafter by transfer memo, AO stated the reason for transfer the case from DCIT, Circle 3(1) to ITO, Ward 5(1), New Delhi is returned income before Rs. 30 lacs which correlates to CBDT Instruction NO. 1/2011 dated 31.1.2011. The correct AO i.e. ITO, Ward 5(1), New Delhi has issued noticed u/s. 143(2) of the Act dated 08.9.2015 which is time barred, hence, the assessment order dated 27.1.2016 passed by the ITO, Ward 5(1), New Delhi is without jurisdiction and void ab initio. Therefore, in our view the impugned order passed by the Ld. CIT(A) deserve to be cancelled, because it is based upon the illegal assessment order. We find that similar issue has been dealt and adjudicated by the ITAT, SMC Bench, Delhi in the case of Manish Kumar & Sons HUF vs. ITO Ward 1(5), New Delhi dated 22.1.2018 in ITA No. 1563/Del/2018 (AY 2015-16) and decided the similar issue in favour of the assessee, wherein the Tribunal has decided as under:- “9. I have heard both the parties and perused the records, especially the Paper Book filed by the Assessee’s counsel and all the case laws cited by him. I note that assessee filed his return of income on 12.3.2016 of Rs.4,15,280/- Page No. 4 of the Paper Book with address mentioned as “ A- 48 Omaxe RPS Green Valley Sector 41-42 Faridabad Haryana 121001”. This case was selected for scrutiny u/s 143(2) of the Act vide notice dated 26.07.2016 issued by DCIT Circle II Hazaribagh (Page No. 6 of the Paper Book). Since assessee was regularly filing return from AY 2012-2013 onwards at Faridabad same Address so he requested that case should be transferred to Faridabad as jurisdiction lies with Faridabad only due to which case was transferred to Faridabad AO as admitted in first para of AO order, vide order u/s 127 dated 28.03.2017 passed by PCIT Hazaribagh. For the sake of convenience, para first of the assessment order is reproduced below:- “Return declaring income of Rs. 415280/- was e-filed by the assessee on 12.3.2016.The case was selected for scrutiny under CASS (Computer Assisted Selection Scrutiny). After taking the case into scrutiny notice under section 143(2) of the Income Tax Act (in short “Act”) dated 26.07.2016 issued by the DCIT, Circle-II, Hazaribagh Faridabad to the assessee through speed post vide dispatch No. 2551 dated 26.7.2016 fixing the case for hearing on 17.8.2016. On the fixed date, assessee attended the proceeding and filed written reply wherein stated that the assessee is regularly filing the income tax return at Faridabad address only and requested to transfer his case to the Faridabad AO. After passing order u/s. 127 of the Act by the Pr. CIT, Hazaribagh vide its order Fine.CIT/HZB/Tech/ u/s. 127/2016- 17/3081-87 dated 28.3.2017, the case of the assessee was transferred to this office on 30.9.2017. On receipts of case on transfer, notice u/s. 142(1) read with section 129 of the Act was issued on 14.10.2017 fixing the case for hearing on 20.7.2017. In response to the notice issued, Sh. Dinesh Kumar Aggarwal, FCA attended the proceedings and filed written reply. Asked to furnish the rest of the information as asked for vide u/s. 142(1) of the Act. Request for adjournment. On his request, case was adjourned to 21.8.2017.”….. 9.1 After perusing the aforesaid contents of the assessment order mentioned in para first of the said order, it is crystal clear that without any valid notice issued u/s 143(2) of the Act by Faridabad AO, impugned assessment is framed by ITO Ward 1(5) Faridabad, simply in extension to proceedings initiated by Hazaribagh DCIT Circle 2 who is admittedly not AO of assessee within meaning of section 2(7A) of the Act on date of issue of notice u/s 143(2) of the Act. So on this short count itself impugned proceedings deserves to be quashed being unsustainable in the eyes of law. I further note that the case laws cited by the ld. counsel for the assessee are applicable in the present case. However, the most direct decision of the ITAT, Delhi (E-Bench)l was decided in case of Al Faheem Meatex Pvt. Ltd. vs. ACIT in ITA Nos. 6122 & 6123/Del/2015 (Ayrs. 2010-11 & 2011-12) vide order dated 09.6.2017 which is directly applicable in the present case. The Tribunal in the case of Al Faheem Meatex Exports Pvt Ltd (supra) vide para No. 6 has held as under:- We have carefully consider the rival contentions and perused the copies of the return filed before us by the assessee. The first paragraph of the assessment order speaks that notice under section 143(2) was first issued by the DCIT, Circle, Ghaziabad on 29.8.2011. Admittedly, the notice should have been issued on or before 30th September, 2011 and it was issue don 29.8.2011. However, the question is whether the notice was issued by the correct jurisdictional officer or not. In the present case as mentioned by the AO himself that the case was subsequently transferred to the Assessing Officer as per the actual jurisdiction on 07/09/2012 and subsequently he issued notice under section 143(2) on 20.9.2012. From the above facts, it is apparent that first notice was issued by the DCIT, Ghaziabad on 29/08/2011, who was not having jurisdiction over the assessee. It is the legality of this notice that is required to be tested. According to the provisions of section 143 (2) of the act the notice for verifying the return of income is required to be issued by the ‘assessing officer’. The assessing officer has been defined under section 2 (7A) of the act, which means the assistant Commissioner or the deputy Commissioner or assistant director or Deputy Director or the income tax officer who is vested with the relevant jurisdiction by the virtue of directions order issued under subsection (1) or subsection (2) of section 120 or any other provisions of the act and additional Commissioner or additional director or joint Commissioner or joint director who is directed under clause (b) of subsection (4) of that section to exercise or perform all or any of the powers and functions carried on or assigned to an assessing officer under this act. Before us, no such directions issued under section 120 (1) or (2) issued in favour of DCIT, Ghaziabad was produced. In view of this, we are unable to hold that at that relevant time he was holding jurisdiction over the assessee. As the original jurisdiction over the assessee by the DCIT, Ghaziabad could not be established the provisions of section 127 of the act are not applicable. Further, the provisions of section 124 (3) also does not come to the rescue of the revenue because in the present case the assessee is filed return of income showing the address of Meerut and subsequently according to the assessing officer actual jurisdiction lies with him, but the impugned notice issued under section 143 (2) was issued on 29/08/2011 by DCIT, circle Ghaziabad. Therefore, it is apparent that notice under section 143 (2) which should have been issued by 30/09/2011 by the correct jurisdictional officer was not issued.” 9.2 I further note that the aforesaid Division Bench decision was duly followed by the SMC Bench, in the case of Sh. Yogesh Yadav vs. ITO passed in ITA No. 1757/Del/2016 (AY 2011-12) vide order dated 09.10.2017 being the identical facts / reasoning with the aforesaid case of Al Faheem Meatex Exports Pvt. Ltd. (Supra) and accordingly assessment framed as declared as void-ab-initio. 10. Keeping in view of the facts and circumstances of the case and respectfully following the aforesaid precedents being the identical facts of the present case, I hold the present assessment is void ab inito, hence, the same is quashed and accordingly, the additional legal ground raised by the assessee is allowed. Since I have quashed the assessment on the legal ground itself, the other grounds on merit became academic, hence, need not be adjudicated.
In the result, the appeal of the assessee is allowed.” 6. Keeping in view of the facts and circumstances of the case and respectfully following the aforesaid precedents being the identical facts of the present case, we hold the present assessment is void ab inito, hence, the same is quashed and accordingly, the additional legal grounds raised by the assessee are allowed. Since we have quashed the assessment on the legal grounds itself, the other grounds on merit became academic, hence, need not be adjudicated.
In the result, the appeal of the assessee is allowed.
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