Gist of recent important tax caselaws / judgements

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

INCOME TAX

SECTION 68

CASH CREDITS

Burden of proof : No addition on account of cash credits be made, where assessee had given PAN of creditors, their confirmation and their bank statement which established their creditability - Commissioner of Income-tax –I v. Dharamdev Finance (P.) Ltd. (2014) 43 taxmann.com 395 (Gujarat)     SECTION 80 LOSS RETURN Conditions precedent : Where original return filed was not a loss return but loss was determined in assessment proceeding, carry forward of loss on account of violation of section 80 could not be denied - Commissioner of Income-tax, Central Circle v. Srinivasa Builders (2014) 44 taxmann.com 35 (Karnataka)       SECTION 144C DISPUTE RESOLUTION PENAL, REFERENCE TO Where in course of transfer pricing proceedings, DRP merely directed Assessing Officer to verify figures of revised return filed by assessee, Assessing Officer was bound by said direction and, therefore, he could not on his own start scrutiny about merits of adjustments made in revised return of income - Nortel Networks India (P.) Ltd. v. Additional Commissioner of Income-tax, Range -13, New Delhi (2014) 44 taxmann.com 26 (Delhi - Trib.)       TELECOM REGULATORY AUTHORITY OF INDIA, SERVICE PROVIDERS (MAINTENANCE OF BOOKS OF ACCOUNTS AND OTHER DOCUMENTS) RULES, 2002 RULE 3 MAINTENANCE OF BOOKS OF ACCOUNTS AND OTHER DOCUMENTS When nation's wealth, like spectrum, is being dealt with either by the Union, State or its instrumentalities or even the private parties the CAG has the powers to conduct the revenue audit of all accounts drawn by the service providers in relation to revenue receipt - Association of Unified Tele Services Providers v. Union of India (2014) 44 taxmann.com 150 (SC)

Gist of latest Important tax caselaws

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

INCOME TAX ACT

SECTION 12AA

CHARITABLE TRUST - PROCEDURE FOR REGISTRATION

Where there was no material on record to show that assessee-trust had carried out activities outside country or had applied any fund to such activities outside country, denial of registration under section 12AA was not justified - International Bhaktivedanta Institute Trust v. Director of Income-tax (Exemptions), Hyderabad (2014) 42 taxmann.com 330 (Hyderabad - Trib.)     Share application money : Where in support of receipt of share application money, assessee produced names, addresses and PAN of depositors which were sufficient to prove their identity and creditworthiness, Assessing Officer was not justified in making addition under section 68 in respect of amount in question - Commissioner of Income-tax (Central) v. Som Tobacco India Ltd. (2014) 42 taxmann.com 310 (Allahabad)     SECTION 92C TRANSFER PRICING - COMPUTATION OF ARM’S LENGTH PRICE Comparables and adjustments/CUP method : Where assessee-company engaged in manufacturing and marketing of speciality chemicals and printed circuit board, entered into cost sharing agreement with AE located abroad in terms of which certain group management cost was paid, in absence of proper examination of material brought on record in support of assessee's claim, TPO merely referring to CUP method could not determine ALP of management fee at nil - Atotech India Ltd. v. Assistant Commissioner of Income-tax, Circle -2, Gurgaon (2014) 42 taxmann.com 468 (Delhi - Trib.)

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

Important Latest tax caselaws / judgements

SECTION 2(15)

CHARITABLE PURPOSE

Income from running hostel/guest house : Where assessee, a charitable trust, running orphanages, old age homes, centres for rehabilitation of mentally ill women etc., earned business income from running a women's hostel and guest house, said activity being in nature of 'carrying on an object of general public utility' was hit by proviso to section 2(15) - Young Women's Christian Association of Madras v. Joint Director of Income-tax (OSD)(Exemption) - II, Chennai (2014) 41 taxmann.com 142 (Chennai - Trib.)      SECTION 10(38) CAPITAL GAINS - EXEMPTION OF, ON TRANSFER OF SECURITIES Genuineness of transactions : Where assessee having purchased shares in physical form, converted them in D-Mat form and thereupon sale of those shares was carried out through recognized stock exchange after paying securities transaction tax, said transactions were to be regarded as genuine in nature and, therefore, assessee's claim for exemption under section 10(38) was to be allowed - Income-tax Officer v. Smt. Aarti Mittal (2014) 41 taxmann.com 118 (Hyderabad - Trib.)       SECTION 37(1) BUSINESS EXPENDITURE - ALLOWABILITY OF Sample distribution expenses : Free sample distribution expenses were allowable under section 37(1) even though there was no effective sale during year - Commissioner of Income-tax-II, Chandigarh v. Bazaar Decor (India) (P.) Ltd. (2014) 41 taxmann.com 236 (Punjab & Haryana) Commission : Disallowance upheld where expenditure on account of commission was found to be much higher as compared to earlier years and assessee could not justify its claim with relevant material - Krishna R. Bhat v. Assistant Commissioner of Income-tax (2014) 41 taxmann.com 74 (Mumbai - Trib.)       SECTION 68 CASH CREDITS Advance received for sale of property : Where due to cancellation of sale agreement of property, assessee returned amount of advance and in support of same he furnished copy of sale agreement, copy of cancellation of agreement, copy of PAN of intending purchaser and copy of acknowledgement of return of income of proposed purchaser, amount so returned could not be added to assessee's taxable income under section 68 - Commissioner of Income-tax v. Hitesh Somani (2014) 41 taxmann.com 152 (Gujarat)       SECTION 149 INCOME ESCAPING ASSESSMENT - TIME-LIMIT FOR ISSUANCE OF NOTICE Escaped income in excess of Rs. one lakh : Where it was apparent from records that escaped assessment was more than Rs. One lakh and notice under section 148 had been issued within a period of six years from end of relevant assessment years, in view of provisions of clause (b) of section 149(1), notice so issued could not be quashed on ground of limitation - Manglik Enterprises v. Income-tax Officer (2014) 41 taxmann.com 145 (Allahabad)       SECTION 271AAA PENALTY - WHERE SEARCH HAS BEEN INITIATED Conditions precedent : No penalty under section 271AAA where taxes and applicable interest were paid on undisclosed income and details of nature of undisclosed income and manner of earning was recorded - Commissioner of Income-tax v. Sudhir jain (2014) 41 taxmann.com 234 (Delhi)       SERVICE TAX SECTION 65(92) SCIENTIFIC OR TECHNICAL CONSULTANCY SERVICES Transfer of invention, design, idea, process, patent and other technical know-how in terms of sale and purchase agreement as a going concern is not liable to service tax under Scientific or Technical Consultancy Services or Intellectual Property Services - Gharda Chemicals Ltd. v. Commissioner of Central Excise & Service Tax, Surat (2014) 41 taxmann.com 347 (Ahmedabad - CESTAT)

Source : Taxmann