Recent important income tax caselaws / judgements

SECTION 14A

EXPENDITURE INCURRED IN RELATION TO INCOME NOT INCLUDIBLE IN TOTAL INCOME

Dividend : Provisions of section 14A would apply to a case even where tax free dividend income is earned on shares held as stock-in-trade - Deputy Commissioner of Income-tax, Circle -3(1) v. Damani Estates & Finance (P.) Ltd. (2014) 41 taxmann.com 462 (Mumbai - Trib.)     SECTION 28(i) BUSINESS LOSS/DEDUCTION - ALLOWABLE AS Bad debts : Deposits/advances given in connection with business could not be allowed as bad debt but had to be considered as business loss - Smita Conductors Ltd. v. Deputy Commissioner of Income-tax, Range -3(3), Mumbai (2014) 41 taxmann.com 514 (Mumbai - Trib.)       SECTION 68 CASH CREDIT Creditworthiness and genuineness of transaction : Identity, creditworthiness and genuineness of transaction is not established merely by filing bank account details - Gayathri Associates v. Income-tax Officer, Hyderabad (2014) 41 taxmann.com 526 (Andhra Pradesh) Shares : Where Tribunal recorded a finding that Assessing Officer had treated short-term capital gain declared by assessee from sale of shares as unexplained cash credit merely on basis of doubts and suspicion, said finding being a finding of fact, no substantial question of law arose there from - Commissioner of Income-tax v. Jitendra Dalpatbhai Shah (2014) 41 taxmann.com 523 (Gujarat) Gift : Where Assessing Officer allowed assessee's claim of gift without examining creditworthiness of donor and without considering fact that there was no relationship between assessee and donor and, therefore, there did not exist any occasion for giving a gift, impugned order passed by Assessing Officer was erroneous and same was rightly set aside by Commissioner in exercise of his revisional power - Govind Prasad Agarwal v. Commissioner of Income-tax, Aligarh (2014) 41 taxmann.com 521 (Allahabad)       SECTION 254 APPELLATE TRIBUNAL - POWERS OF Power to grant stay : Where high tax demand was raised on assessee but assessee appeared to have a good prima facie case, demand be stayed - Vodafone India Services (P.) Ltd. v. Assistant Commissioner of Income-tax, Circle -3(3) (2014) 41 taxmann.com 554 (Mumbai - Trib.)   Source : Taxmann

SECTION 35

SCIENTIFIC RESEARCH EXPENDITURE

Where assessee-company, apart from rendering technical services to its clients, did research in field of development of wind power at its own, which was used for benefit of public, scientific research expenditure was to be allowed - Assistant Commissioner of Income-tax -1(1) v. Consolidated Energy Consultants Ltd. (2014) 41 taxmann.com 379 (Indore - Trib.)     SECTION 37(1) BUSINESS EXPENDITURE - ALLOWABILITY OF Software : Where assessee-company purchased application software, expenditure incurred towards purchase of software could not be treated as revenue expenditure - Srinivasa Resorts v. Assistant Commissioner of Income-tax (2014) 41 taxmann.com 350 (Hyderabad - Trib.)       SECTION 54F CAPITAL GAINS - EXEMPTION OF, IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE Construction : In terms of section 54F, when assessee invests sale consideration in purchase of a residential property within prescribed time period, he is entitled to claim deduction and, in such a case, extent of construction of residential building and facilities provided in such building are not relevant - Commissioner of Income-tax v. Dr. R. Balaji (2014) 41 taxmann.com 411 (Karnataka)     SECTION 158BG BLOCK ASSESSMENT IN SEARCH CASES Where Assessing Officer as a result of search conducted under section 132 upon assessee passed a block assessment order on him, no opportunity of hearing was required to be given to assessee by Commissioner while granting approval under section 158BG - Commissioner of Income-taxv.Dr. K.P. Singh (2014) 41 taxmann.com 406 (Allahabad)       SECTION 194C DEDUCTION OF TAX AT SOURCE - CONTRACTORS/SUB-CONTRACTORS PAYMENT TO Lounging and Catering service : Where consolidated payment was made towards lounging and catering services as a part of single arrangement, it was not permissible to artificially bifurcate payment so made towards two limbs or component services in view of two attracting differential tax and same would fall under generalized contractual category under section 194C - Assistant Commissioner of Income-tax (TDS) -2(2) v. Qantas Airways Ltd. (2014) 41 taxmann.com 383 (Mumbai - Trib.) Cargo handling charges : Where assessee was engaged in business of clearing and forwarding of cargo, etc. and it made payments towards cargo handling charges to two parties and work involved was mainly labour oriented work with help of various machineries and equipments, TDS provisions of section 194C would be applicable with respect to said payments - Commissioner of Income-tax (TDS)v.Aditya Marine Ltd. (2014) 41 taxmann.com 381 (Gujarat)       SECTION 254 APPELLATE TRIBUNAL - ORDER OF Duties of Tribunal : Whenever any decision has been relied upon and/or cited by assessee and/or any party, Tribunal is bound to consider and/or deal with same and opine whether in facts and circumstances of particular case, same will be applicable or not - Dattani And Co. v. Income Tax Officer (2014) 41 taxmann.com 360 (Gujarat)     DIRECT TAX LAWS 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 - Clarification on disallowance of expenses under section 14A in cases where corresponding exempt income has not been earned during the financial year - CIRCULAR NO.5/2014 (F.NO.225/182/2013-ITA.II), DATED 11-2-2014 Section 119, read with section 115R of the Income-tax Act, 1961 - Income-tax Authorities - Instructions to subordinate authorities - Tax on distributed income to unit holders - Clarification on scope of additional income-tax on distributed income under section 115R - CIRCULAR NO.6/2014 (F.NO.225/182/2013-ITA.II), DATED 11-2-2014       Source : Taxmann

Important latest income tax caselaws / judgements

SECTION 2(14)
CAPITAL GAINS - CAPITAL ASSETS

Agricultural land : If a land is adjacent to a municipality and is urban land covered under section 2(14), though municipality and land fall in different States, land will continue to be urban land - Commissioner of Income-tax v. Smt. Anjana Sehgal 40 taxmann.com 485 (Punjab & Haryana)

 

 

SECTION 12A

CHARITABLE OR RELIGIOUS TRUST - REGISTRATION OF

Founder trustee committed heinous crimes : Where assessee, a public religious trust, made applications seeking registration under sections 12A and 80G, registration could not be declined merely because once upon a time assessee's founder trustee had been accused of heinous crimes and he was awarded life imprisonment - Sri Premananda Trust v. Assistant Commissioner of Income-tax 40 taxmann.com 514 (Chennai - Trib.)

 

 

 

SECTION 36(1)(iii)

INTEREST ON BORROWED CAPITAL

Interest free loan to related parties : Unless nexus between interest free advance to related party and interest bearing borrowing is established, disallowance of interest would not be justified - Marudhar Hotels (P.) Ltd.v.Joint Commissioner of Income-tax 40 taxmann.com 475 (Jodhpur - Trib.)

  

 

 

SECTION 37(1)

BUSINESS EXPENDITURE - ALLOWABILITY OF 

Repair and renovation expenses : Where renovation expenses included both revenue and capital expenses and it was difficult to bifurcate same, disallowance of 50 per cent of such expenditure as capital expenditure was proper - SICOM Ltd. v. Joint Commissioner of Income-tax 40 taxmann.com 469 (Mumbai - Trib.)

 

 

SECTION 45

CAPITAL GAINS - CHARGEABLE AS 

Capital gains v. Business income : Where under a development agreement with a developer assessee merely realised sale proceeds of capital asset held for 30 years, same would give rise to 'capital gains', and not 'business income' - Marudhar Hotels (P.) Ltd.v.Joint Commissioner of Income-tax 40 taxmann.com 475 (Jodhpur - Trib.)

 

 

SECTION 194H

DEDUCTION OF TAX AT SOURCE - COMMISSION OR BROKERAGE, ETC.

Credit card collection charges : Payment to bank for collecting money paid through credit card is business expenditure - Marudhar Hotels (P.) Ltd.v.Joint Commissioner of Income-tax 40 taxmann.com 475 (Jodhpur - Trib.)

 

 

SECTION 254

APPELLATE TRIBUNAL - POWERS OF

Power to admit additional grounds : Where determination of correct status of assessee impacts ultimate tax liability, such an issue can be admitted for first time before Tribunal even if it was not raised before lower authorities - Income-tax Officer v. Sew Precision Joint Venture 40 taxmann.com 515 (Pune - Trib.)