Recent Important Tax caselaws / judgements

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 ACT

SECTION 12A

CHARITABLE OR RELIGIOUS TRUST - REGISTRATION OF

Trust established under State Act : Provisions of section 12A (1)(b) are mandatory and, therefore, even if a trust is incorporated under a State Act, it is bound to get its accounts audited in case its total income without giving effect to provisions of sections 11 and 12 exceeds maximum amount not chargeable to tax - Vice Chancellor, Vishweshwaraiah Technological University v. Commissioner of Income-tax, Belgaum (2014) 42 taxmann.com 205 (Panaji - Trib.)     SECTION 32 DEPRECIATION - ADDITIONAL DEPRECIATION Wind Electric Generator : Additional depreciation was to be allowed on setting up of wind electric generator to an assessee who was engaged in manufacture and sale of chemicals - Commissioner of Income-tax-I v. Diamines & Chemicals Ltd. (2014) 42 taxmann.com 193 (Gujarat)       SECTION 35 SCIENTIFIC RESEARCH EXPENDITURE Applicability of : Where assessee, engaged in business of development of vaccines and bio-pharmaceuticals, claimed product development expenditure being interest on loan and cost of consumable, in view of fact that said expenditure had nothing to do with scientific research, provisions of section 35(1) (i) or (iv) had no application to assessee's case and, thus, its claim for deduction was to be rejected - Deputy Commissioner of Income-tax, Circle -1(3), Hyderabad v. Bharat Biotech International Ltd. (2014) 42 taxmann.com 204 (Hyderabad - Trib.)       SECTION 92C TRANSFER PRICING - COMPUTATION OF ARM’S LENGTH PRICE Comparables and adjustments : Where in transfer pricing proceedings, TPO made adjustment in respect of import of raw material from AE located abroad, in view of fact that assessee had imported raw material of superior quality and, moreover, it had also obtained comparative rate of sale, in similar product manufactured by independent parties which showed that assessee was importing even at a higher rate, impugned adjustment made by authorities below was to be set aside - Merck Ltd. v. Assistant Commissioner of Income-tax, Circle -6(3) (2014) 42 taxmann.com 275 (Mumbai - Trib.) Comparables and adjustments : Where in course of transfer pricing proceedings, Assessing Officer made addition to assessee's ALP on account of notional interest charged on loan granted to AE, in absence of any independent uncontrolled transaction available on record in that regard, impugned addition was not sustainable - Crest Animation Studios Ltd. v. Assistant Commissioner of Income-tax, 11(1) (2014) 42 taxmann.com 222 (Mumbai - Trib.)       SECTION 145 METHOD OF ACCOUNTING - SYSTEM OF ACCOUNTING Project completion method v. Percentage completion method : In construction business of one concern of assessee, income may be declared by following project completion method, while in other, percentage completion method is followed - Commissioner of Income-tax –V v. Umang Hiralal Thakkar (2014) 42 taxmann.com 194 (Gujarat)       SERVICE TAX SECTION 65(19) TAXABLE SERVICES - BUSINESS AUXILIARY SERVICES Merely provision of space (with furniture) as accommodation to banks/financial institutions in premises of an automobile dealer may not amount to Business Auxiliary Services (BAS) and may constitute renting; however, some promotion activity falling under section 65(19) is done, it would amounts to BAS - Pagariya Auto Center v. Commissioner of Central Excise, Aurangabad (2014) 42 taxmann.com 371 (Mumbai - CESTAT) (LB)       RULE 2(l) CENVAT CREDIT - INPUT SERVICE Where, during relevant time, revenue demanded Service Tax under reverse charge and assessee paid service tax, then, Cenvat credit thereof cannot be denied for reason that later it was decided that service tax itself was not payable - Aksh Technologies Ltd. v. Commissioner of Central Excise, Jaipur-I (2014) 42 taxmann.com 396 (New Delhi - CESTAT)

Gist of Important latest tax caselaws

INCOME TAX ACT

SECTION 6

RESIDENTIAL STATUS

For the purpose of determining the residential status in India under Sec. 6, the term 'Going abroad for the purpose of employment' means going abroad to take up any employment or for any business carried outside India. It is not necessary to establish employer-employee relationship to prove travelling abroad; for employment it may be for other avocation including self-employment - K. Sambasiva Rao v. Income-tax Officer (2014) 42 taxmann.com 115 (Hyderabad - Trib.)

SECTION 12AA

CHARITABLE OR RELIGIOUS TRUST - REGISTRATION PROCEDURE

Conditions precedent : Where Memorandum of Association (MoA) of trust does not provide for allocation of functions and duties of office bearers, it can not be a ground to refuse registration because it is an internal regulation and does not in anyway affect objects of trust - Shriram Education Foundation v. Director of Income-tax (Exemption) (2014) 41 taxmann.com 117 (Delhi - Trib.)

SECTION 40(a)(ia)

BUSINESS DISALLOWANCE - INTEREST, ETC., PAID TO A RESIDENT WITHOUT DEDUCTION OF TAX AT SOURCE

Deposit of tax : Where assessee deducted tax at source while making payments to contractors and deposited same with Government before due date of filing return of income under section 139(1), no disallowance under section 40(a)(ia) could be made in respect of said payments - Income-tax Officer, v. Sun Enterprises (2014) 41 taxmann.com 431 (Gujarat)

SECTION 43B

BUSINESS DISALLOWANCE - CERTAIN DEDUCTIONS TO BE ALLOWED ONLY ON ACTUAL PAYMENT

ESI, PF contribution : Where assessee deposited employer's contribution of provident fund within extended grace period under PF Act, he will be eligible for deduction for same under section 43B - Commissioner of Income-tax v. Amoli Organics (P.) Ltd. (2014) 41 taxmann.com 149 (Gujarat)

SECTION 47

CAPITAL GAINS - TRANSACTIONS NOT REGARDED AS TRANSFER

Conversion of partnership firm into company : Where prior to conversion of partnership firm into company, land belonging to partnership firm was revalued as per market value and realization was credited to partners' current account maintained with partnership firm as per their profit sharing ratio and value of land was treated as loan in hands of company, such transaction would be subjected to capital gains tax - K.T.C. Automobiles (P.) Ltd. v. Deputy Commissioner of Income-tax (2014) 41 taxmann.com 160 (Cochin - Trib.)

SECTION 68

CASH CREDITS

Amount received prior to commencement of business : Statutory requirement for treating any amount as income of assessee under section 68 is where assessee fails to justify and establish genuineness of entry in its books of account and, therefore, question as to whether said amount is introduced prior to commencement of business of company or afterwards is of no significance - Commissioner of Income-tax (Central), Ludhianav.Sri Baba Rupadas Spinning Mills (P.) Ltd. (2014) 41 taxmann.com 143 (Punjab & Haryana)

SECTION 69C

UNEXPLAINED EXPENDITURE

Enquiry notice served to wrong address : Where assessee pointed out that notice for verification of a payment was issued to a wrong address, matter be remanded back - Mohmed Kurshid Alam Khan v. Additional Commissioner of Income-tax (2014) 41 taxmann.com 135 (Gujarat)

Cash payments : Addition should be made to assessee's income where assessee failed to show why payments were made in cash, whether they were actually received by parties and if so for what purpose - Mohmed Kurshid Alam Khan v. Additional Commissioner of Income-tax (2014) 41 taxmann.com 135 (Gujarat)

SECTION 80-IB

DEDUCTIONS - PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS OTHER THAN INFRASTRUCTURE DEVELOPMENT UNDERTAKINGS

Housing project : To claim deduction under section 80-IB(10), open terrace area cannot form part of built up area - Commissioner of Income-tax, Chennai v. Mahalakshmi Housing (2014) 41 taxmann.com 146 (Madras)

SERVICE TAX

SECTION 65(25B)

COMMERCIAL OR INDUSTRIAL CONSTRUCTION SERVICES

Construction of road, by itself, is not liable to service tax under Commercial or Industrial Construction Services; liability may arise only where construction of road is a part of composite contract - Palimar Infracon (P.) Ltd. v. Commissioner of Central Excise, Mangalore (2014) 41 taxmann.com 369 (Bangalore - CESTAT)

SECTION 65(105)(zo)

AUTHORISED SERVICE STATION SERVICES

Position prior to 1-5-2011 : If bill/invoices issued clearly show payment of sales tax/VAT on spare parts used in motor vehicle servicing, then value of such spare parts would not be includable in gross consideration received for rendering of service - Jaika Motors Ltd.v.Commissioner of Central Excise & Service Tax (2014) 41 taxmann.com 254 (Mumbai - CESTAT)

CENVAT CREDIT RULES

RULE 6

CENVAT CREDIT - OBLIGATION OF A MANUFACTURER OR PRODUCER OF FINAL PRODUCTS AND A PROVIDER OF OUTPUT SERVICE

CBEC Circulars are binding upon revenue, except in case they are inconsistent with provisions of law or judgments of Appellate Tribunal, High Court or Supreme Court - Idea Cellular Ltd. v. Commissioner of Central Excise (2014) 41 taxmann.com 399 (Mumbai - CESTAT)

Source : Taxmann