Gist of 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

SECTION 2(24)

INCOME - DEFINITION OF

Value of benefit or perquisites : Where assessee was director of a company and said company had undertaken work of procuring land for 'DLF' and in this process assessee also acquired certain land in his individual capacity, it could not be said that assessee had derived any benefit from above company so as to attract provisions of section 2(24)(iv) - S. Narayan Reddy v. Deputy Commissioner of Income-tax, Central Circle -6, Hyderabad (2014) 42 taxmann.com 127 (Hyderabad - Trib.)     SECTION 5 INCOME - ACCRUAL OF Post dated cheque : Where assessee as per memorandum of understanding entered into with one 'S' on 27-6-2007 had invested an amount of Rs. 2 crores in real estate business of 'S' and on completion of venture he would be eligible for a profit of Rs. 5 crores and as a security he received from 'S' post dated cheques for Rs. 7 crores, Assessing Officer was wrong in taxing profit of Rs. 5 crores in hands of assessee - S. Narayan Reddy v. Deputy Commissioner of Income-tax, Central Circle -6, Hyderabad (2014) 42 taxmann.com 127 (Hyderabad - Trib.)       SECTION 69B UNDISCLOSED INVESTMENTS Immovable property : Where Assessing Officer on basis of a letter seized from premises of one 'C' made certain addition in income of assessee, since 'C' clarified position that said letter had no relation whatsoever with assessee, there was no scope for making any addition in hands of assessee - S. Narayan Reddy v. Deputy Commissioner of Income-tax, Central Circle -6, Hyderabad (2014) 42 taxmann.com 127 (Hyderabad - Trib.)     SECTION 158BB BLOCK ASSESSMENT IN SEARCH CASES - UNDISCLOSED INCOME, COMPUTATION OF Material collected prior to search : In course of block assessment proceedings, Assessing Officer could not make addition to assessee's taxable income on basis of material collected during a survey conducted prior to search proceedings - Deputy Commissioner of Income-tax, Lucknow v. Dr. Lalit Verma (2014) 42 taxmann.com 136 (Allahabad)       CUSTOMS ACT SECTION 114A PENALTY - FOR EVASION OF DUTY/TAX Interest and penalty can be levied even if assessee has paid duty prior to issuance of show-cause notice - Commissioner of Customs v. American Power Conversion (India) (P.) Ltd. (2014) 42 taxmann.com 238 (Karnataka)

Gist of recent important tax caselaws and 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 10(22)

EDUCATIONAL INSTITUTIONS

Misutilization of funds by trustee : Where genuineness of trust and objects of trust being charitable had not been disputed even if trustees had mismanaged or misutilised funds, exemption under section10(22) could not be denied - Anil Kumar Tantia v. Income-tax Officer (2013) 40 taxmann.com 333 (Jodhpur - Trib.)     SECTION 143 ASSESSMENT Natural justice : Where pursuant to search proceedings, assessee filed an application seeking copy of impounded documents so as to file revised return of income and Assessing Officer passed assessment order on basis of original return without supplying said copies, order so passed by Assessing Officer was not sustainable - Purvesh Mansukhbhai Shah v. Additional Commissioner of Income-tax (2013) 40 taxmann.com 425 (Gujarat)       SECTION 158BFA BLOCK ASSESSMENT - INTEREST/PENALTIES, LEVY OF Penalty order passed on deceased person : Where Assessing Officer passed penalty order under section 158BFA(2) in name of deceased assessee and son of deceased was never impleaded as a legal heir of his father, said penalty order was null and void - Chandrakant A. Gandhi v. Assistant Commissioner of Income-tax (2013) 40 taxmann.com 432 (Ahmedabad - Trib.) SECTION 158BG BLOCK ASSESSMENT IN SEARCH CASES - AUTHORITY COMPETENT TO MAKE Previous approval : Where Assessing Officer as a result of search conducted under section 132 upon one 'D' on 6-2-1996 passed block assessment order on one 'S', who was related to 'D', and Joint Commissioner had previously approved said order, as per proviso to section 158BG it was Commissioner who should have previously approved order of assessment - Commissioner of Income-tax v. Sri D.S. Srinivasa Rao & Brothers (2014) 41 taxmann.com 194 (Karnataka) SECTION 272A PENALTY - FOR FAILURE TO ANSWER QUESTION, SIGN STATEMENTS ETC. Failure to issue Form 16A to deductees : Where assessee was prevented by sufficient cause in not issuing Form 16A within prescribed time to persons from whom tax was deducted as PANs of deductees were not available with him, penalty order passed under section 272A(2)(g) in respect of default committed under section 203 was to be set aside - Commissioner of Income-tax (TDS) v. Collector, Land Acquisition, Department of Industrial & Commerce (2013) 40 taxmann.com 483 (Punjab & Haryana)       CENTRAL EXCISE ACT SECTION 11A RECOVERY - OF DUTY OR TAX NOT LEVIED/PAID OR SHORT-LEVIED/PAID OR ERRONEOUSLY REFUNDED Where CESTAT had directed pre-deposit without considering judgment of Commissioner (Appeals) in favour of assessee on merits, matter was remanded back to Tribunal to consider matter afresh in light of judgment of Commissioner (Appeals) - Chopra Steel Strips v. Commissioner of Central Excise and Service Tax (2014) 41 taxmann.com 131 (Punjab & Haryana)

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

Sec. 153A/ 153C: ITAT Explains Important Principles Of Search Assessments

V. K. Fiscal Services Pvt. Ltd vs. DCIT (ITAT Delhi)

S. 153A/ 153C: Important principles of law relating to search assessments explained

Pursuant to a search u/s 132 conducted on the premises of another person, the AO issued a notice u/s 153C upon the assessee and thereafter passed an assessment order. The assessee claimed that the said assessment was not valid on the ground that (a) no books of account of the assessee were found in the premises of the other person, (b) though the AO of the searched person & the assessee was the same it was not shown that the satisfaction was recorded in the course of the assessment of the searched party and not of the assessee, (c) as no assessment was pending on the date of search, the assessment could be made only for the incriminating material found in the search & (d) as the satisfaction was recorded on 23.7.2010 and the relevant AY was 2011-12, the AO could issue a notice u/s 153C only for six preceding AYs relevant to this AY (i.e. AY 2005-06 to 2010-11) and the notice issued for AY 2004-05 was barred by limitation. HELD by the Tribunal:
(a) & (b) the satisfaction u/s 153C has to be recorded by the AO of the searched person and not by the AO of the assessee. Even if the AO of both parties is the same, he has to go through the formality of separately recording satisfaction and the record has to show that satisfaction was recorded in the assessment of the searched party. Also s. 153C proceedings can be initiated only if books of account etc which are seized from the searched party belong to the assessee. A mere confirmation of account or a copy of the audited accounts or a copy of the return of income does not constitute “books of account” for purposes of s. 153C (DSL Properties (Del) & Therapeutic India (Del) followed);
(c) the scope of assessment u/s 153A & 153C depends on whether the original assessment proceedings are pending or concluded. If a s. 143(1) intimation is passed and the time limit for issue of a s. 143(2) notice has lapsed, the assessment is concluded. In such cases, the s. 153A/ 153C assessment has to be based only on incriminating material found in the search (All Cargo Global 137 ITD 287 (Mum)(SB), Pratibha Industries 141 ITD 151 (Mum) & Gurinder Singh Bawa followed);
(d) S. 153A/ 153C permits the AO to issue a notice for six AYs preceding the AY in which the search took place. As the satisfaction was recorded on 23.7.2010, the relevant AY was 2011-12 and the AO could issue a notice u/s 153C only for six preceding AYs relevant to this AY (i.e. AY 2005-06 to 2010-11). The notice issued for AY 2004-05 is barred by limitation.