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

Sec. 147: Failure To Compute Capital Gains U/s 50C Does Not Lead To Escapement Of Income

ITO vs. Haresh Chand Agarwal HUF (ITAT Agra)

S. 147: Failure to compute capital gains u/s 50C does not lead to escapement of income


The assessee sold property for Rs.6 lakh and offered capital gains on that basis. The AO accepted the claim without examining the applicability of s. 50C. He later (within 4 years from the end of the AY) reopened the assessment on the basis that the stamp duty valuation was Rs. 25 lakhs and the capital gains had to computed on that basis u/s 50C. The assessee challenged the reopening inter alia on the ground that the failure to apply s. 50C did not mean income had escaped assessment. The CIT(A) accepted the plea. On appeal by the department to the Tribunal HELD dismissing the appeal:

S. 50C is not a final determination to prove that it is a case of escapement of income. The report of the approved valuer may give estimated figure on the basis of facts of each case. Therefore, mere applicability of s. 50C would not disclose any escapement of income in the facts and circumstances of the case. The AO at the original assessment stage considered all the documents and material produced before him and has accepted the cost of property as was declared by the assessee. The reassessment is on change of opinion which is not justified

Note: On the question whether failure to voluntarily apply s. 50C attracts s. 271(1)(c) penalty see Madan Theatres (Cal HC), Renu Hingorani (ITAT Mum) & Chimanlal Manilal Patel (ITAT Ahd)