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)

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