Gist of latest important caselaws

Below are the recent important tax caselaws related to Income tax, Service tax in brief. The citation is made available for your benefit :

 INCOME TAX

SECTION 2(42A)

CAPITAL GAINS – SHORT-TERM CAPITAL ASSETS/GAINS

Period of holding as de facto owner should be considered for computing holding period of capital asset u/s 2(42A) - Commissioner of Income-tax v. A. Suresh Rao (2014) 41 taxmann.com 475 (Karnataka)     SECTION 10(23C) EDUCATIONAL INSTITUTIONS Where assessee, running a college for Arabic language affiliated to Madras University, claimed exemption under section 10(23C)(iiiad), said claim could not be rejected merely on ground that its students had to pray daily along with religious leader and they had specific dress code accordingly to Islamic specifications - Deputy Director of Income-tax (Exemptions)-III v. Madarasa E-Bakhiyath-Us- Salihath Arabic College (2014) 41 taxmann.com 8 (Chennai - Trib.)       SECTION 28(v) BUSINESS INCOME - NON-COMPETE FEE Position prior to 1-4-2003 : Since amendment in Finance Act, 2002 was not clarificatory but amendatory in nature, non-competition fee received under a negative covenant is taxable only with effect from 1-4-2003, and not retrospectively - Commissioner of Income-tax v. Prakash Ladhani (2014) 41 taxmann.com 22 (Karnataka) SECTION 32 DEPRECIATION - ALLOWANCE/RATE OF Foreign exchange rate difference : Assessee was entitled to depreciation in respect of an amount representing addition to cost of plant and machinery on account of foreign exchange rate difference - Additional Commissioner of Income-tax v. Gujarat Narmada Valley Fertilizers Co. Ltd. (2013) 40 taxmann.com 481 (Gujarat)       SECTION 54F CAPITAL GAINS - EXEMPTION OF, IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE Owning more than one residential house : Where an assessee on date of transfer of original asset, owns more than one residential house, he is not eligible for deduction under section 54F, even if other residential house is owned by assessee wholly or partially - Income-tax Officerv.Apsara Bhavana Sai (2013) 40 taxmann.com 528 (Hyderabad - Trib.)       SECTION 237 REFUNDS TDS : In pursuance of order passed by Supreme Court that shares allotted to employees under Employees Stock Option Scheme did not amount to perquisite and, thus, there was no liability to deduct tax at source in respect of same, amount so deducted in case of assessee-employee on aforesaid ground was to be refunded along with interest - K. Parthasarathy v. Commissioner of Income-tax (2014) 41 taxmann.com 16 (Madras)       SERVICE TAX SECTION 65(75) ON-LINE INFORMATION AND DATABASE ACCESS OR RETRIEVAL SERVICES Where assessee had only hired out infrastructure of broadband for use of customer and had not provided any data or information to customer, said activity did not amount to 'online information and data base access and/or retrievable services' - Gujarat State Petroleum Corpn. Ltd. v. Commissioner of Central Excise (2014) 41 taxmann.com 291 (Ahmedabad - CESTAT)

Recent Important Income tax caselaws / judgements

SECTION 2(22)

Loans or advances to share holders : Where assessee-company received share application money from another company, in view of fact that assessee was not a registered shareholder of said company, amount in question could not be taxed as deemed dividend in its hands - Commissioner of Income-tax, Jaipur v. Suram Holding (P.) Ltd (2014) 41 taxmann.com 32 (Rajasthan)

SECTION 12AA

Cancellation of registration : Where assessee cricket board arranged international matches and received share in broadcasting right and advertisement sales from its apex body BCCI, under section 12AA(3) Commissioner could not cancel its registration by invoking first proviso to section 2(15) - Saurashtra Cricket Association v. Commissioner of Income-tax (2013) 40 taxmann.com 527 (Rajkot - Trib.)

 

 

SECTION 32

User of assets : Where relevant lease agreements, bills for purchase of assets, inspection reports, insurance papers, etc., were produced, sale and lease back transactions could not be treated as sham so as to deny depreciation thereon - Development Credit Bank Ltd. v. Deputy Commissioner of Income-tax (2013) 40 taxmann.com 532 (Mumbai - Trib.)

 

 

SECTION 37(1)

Corporate membership : Fees for corporate membership of club is revenue expenditure - Development Credit Bank Ltd. v. Deputy Commissioner of Income-tax (2013) 40 taxmann.com 532 (Mumbai - Trib.)

 

 

SECTION 143

Land dealings : Where shops sold by assessee were registered with Sub-Registrar and sale deeds were executed for them, Assessing Officer without examining those sale deeds or even making inquiries about circle rates fixed by Sub-Registrar for purpose of stamp duty valuation, could not make addition to assessee's income by merely taking a view that shops were sold below their cost of construction in terms of square feet area - Commissioner of Income-tax v. Shanti Enterprise (2013) 40 taxmann.com 484 (Gujarat)

 

 

SECTION 158BD

BLOCK ASSESSMENT IN SEARCH CASES - UNDISCLOSED INCOME OF ANY OTHER PERSON

Scope of provision : Assessment of a person, other than searched person, based on materials recovered during search is authorised only under section 158BD and not under section 158BC - Commissioner of Income-taxv.Ram Singh* (2013) 40 taxmann.com 479 (Punjab & Haryana)

  

 

 

 

 

 

 

 

Sec. 32(1): ITAT Explains Law On Depreciation Of BOT Assets Where Assessee Is Not Owner

DCIT vs. Swarna Tollway Pvt. Ltd (ITAT Hyderabad)

S. 32: Road constructed on Build-Operate-Transfer (“BOT”) terms is eligible for depreciation even though assessee is not the legal owner of the road


The assessee, a SPV, was awarded a contract by the NHAI for widening, rehabilitation and maintenance of an existing two lane highway into a four lane one on the Tada-Nellore section of NH-5 on BOT basis. The entire cost of construction of Rs. 714 crore was borne by the assessee. The construction was completed during the FY 2004-05 after which the highway was opened to traffic for use and the assessee started claiming depreciation from AY 2005-06 onwards. The AO rejected the claim on the ground that the assessee had no ownership, leasehold or tenancy rights for the asset in question, i.e., the roads. On appeal, the CIT(A) reversed the AO. On appeal by the department to the Tribunal HELD dismissing the appeal:

Though the NHAI remains legal owner of the site with full powers to hold, dispose of and deal with the site consistent with the provisions of the agreement, the assessee had been granted not merely possession but also right to enjoyment of the site and NHAI was obliged to defend this right and the assessee has the power to exclude others. The very concept of depreciation suggests that the tax benefit on account of depreciation belongs to one who has invested in the capital asset, is utilizing the capital asset and thereby loosing gradually investment cost by wear and tear and would need to replace the same by having lost its value fully over a period of time. The term “owned” as occurring in s. 32 (1) of the Act must be assigned a wider meaning. Anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded there from and having the right to use and occupy the property and/or to enjoy its usufruct in his own right would be the owner of the buildings, though a formal deed of title may not have been executed and registered (Mysore Minerals 239 ITR 775 (SC), Noida Toll Bridge 213 Taxman 333 etc referred)