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.)

Gist of recent important tax caselaws and judgements

INCOME TAX ACT

SECTION 11

CHARITABLE OR RELIGIOUS TRUST - EXEMPTION OF INCOME FROM PROPERTY HELD UNDER

Investment in specified securities : Where shares of co-operative banks were subscribed only for purposes of obtaining loan for furtherance of objects of trust, section 11/12 exemption could not be denied - Commissioner of Income-tax v. Dr. Vikhe Patil Foundation (2014) 42 taxmann.com 190 (Bombay)     SECTION 37(1) BUSINESS EXPENDITURE - ALLOWABILITY OF ESOP : Where in terms of Employees Stock Purchase Scheme (ESOP), assessee company offered shares of its parent company to employees, difference between fair market value of shares of parent company on date of issue of shares and price at which those shares were issued by assessee to its employees was to be regarded as expenditure incurred for business purpose allowable under section 37(1) - Novo Nordisk India (P.) Ltd. v. Deputy Commissioner of Income-tax (2014) 42 taxmann.com 168 (Bangalore - Trib.)       SECTION 54F CAPITAL GAINS - EXEMPTION OF, IN CASE OF INVESTMENT IN RESIDENTIAL HOUSE Construction : Where construction of residential house takes place prior to date of transfer of long term capital asset, assessee's claim for deduction under section 54F cannot be allowed - Smt. Ushaben Jayantilal Sodhan v. Income-tax Officer (2014) 42 taxmann.com 175 (Ahmedabad - Trib.)       SECTION 68 CASH CREDIT Gift : Gift from brother being not substantiated by any evidence, was to be assessed under section 68 - K. Sivakumar v. Assistant Commissioner of Income-tax (2014) 42 taxmann.com 202 (Madras)

Gist of latest caselaws

Lease expenses : Where assessee purchased a running hotel business and vendor had to secure lease rights of premises from owner, expenditure incurred towards such tenancy right should be allowable as revenue expenditure - S.M. Dayanand v .Deputy Commissioner of Income-tax (2013) 40 taxmann.com 420 (Karnataka)

 

 

 

Proceedings in pursuance to notice issued under section 158BD giving less than 15 clear days time to assessee to file return for block period would be void ab initio only in a case where prejudice is shown to have been caused to assessee or where notice has not been served at all to assessee.Notice giving less than 15 days time to file block return: Proceedings in pursuance to notice issued under section 158BD giving less than 15 clear days time to assessee to file return for block period would be void ab initio only in a case where prejudice is shown to have been caused to assessee or where notice has not been served at all to assessee - Commissioner of Income-tax v. Joginder Singh (2013) 40 taxmann.com 429 (Punjab & Haryana)

 

 

 

Fees for Technical services : Irrespective of insertion of Explanations 5 & 6, with retro effect from 1-6-1976, where entire services of providing technical design and drawings were rendered by foreign company to Indian assessee outside India, same would not be chargeable to tax in India - New Bombay Park Hotel (P.) Ltd.v.ncome-tax Officer (International Taxation) TDS-4 (2014) 41 taxmann.com 36 (Mumbai - Trib.)

 

 

 

Liaison Office of a foreign company is taxable when such foreign company is registered with ROC - Brown & Sharpe Inc. v. Assistant/Deputy Commissioner of Income-tax (2014) 41 taxmann.com 345 (Delhi - Trib.)

 

 

TDS on ECB : Interest on external commercial borrowings (ECB) loan being exempted by CBDT under section 10(15)(iv)(c), no TDS liability would arise - Deputy Commissioner of Income-taxv.Essar Steel Ltd. (2013) 40 taxmann.com 537 (Mumbai - Trib.)

 

 

Pre-commencement production cost that was shown as capital work-in-progress, could not be denied as revenue expenditure after production started - Deputy Commissioner of Income-tax v.Essar Steel Ltd. (2013) 40 taxmann.com 537 (Mumbai - Trib.)

 

 

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

Housing project : Where assessee engaged in business of construction, adopted project completion method which was one of recognized method of accounting, its claim for deduction under section 80-IB (10) could not be rejected merely on ground that it should have adopted percentage completion method of accounting - Commissioner of Income-tax v. Satadhar Enterprises (2013) 40 taxmann.com 327 (Gujarat) 

 

 

SEARCH AND SEIZURE

Validity of search : Where satisfaction with respect to search and seizure in assessee's case was entirely based on a document which neither bore assessee's name nor was it related to him, issue of warrant and subsequent search and seizure proceedings were liable to be quashed - Rajesh Rajora v. Union of India (2013) 40 taxmann.com 330 (Madhya Pradesh)

 

 

APPELLATE TRIBUNAL - APPEALABLE ORDERS

Condonation of delay : Where competent authority rejected assessee's application for grant of registration under section 12AA in absence of books of account and other details furnished by assessee and against impugned order assessee filed appeal before Tribunal late by 1804 days and sought condonation of delay, since assessee was not only negligent in filing appeal before Tribunal but also in pursuing its application before competent authority, there was no reasonable cause for delay - Hyderabad Urban Development Authority v. Assistant Commissioner of Income-tax (2013) 40 taxmann.com 354 (Hyderabad - Trib.) 

 

 

SERVICE TAX

CARGO HANDLING AGENCY SERVICES

Movement of goods in mining area cannot, prima facie, be regarded as Cargo Handling Services - Aravali Equip (P.) Ltd. v. Commissioner of Central Excise (2013) 40 taxmann.com 4 (New Delhi - CESTAT) 

 

 

PENALTY - NOT TO BE IMPOSED IN CERTAIN CASES

Though errors of omission/commission are clerical errors and they may not be deliberate, but, when they are huge, they must be picked up at time when tax return is signed and submitted; failure in that behalf would attract penalty, as such errors do not constitute 'reasonable excuse' - Powerscreen Equipment Ltd. v. Commissioners of Customs & Excise (2014) 41 taxmann.com 62 (UKV - DUTIES TRIBUNALS) 

 

 Source: Taxmann

 

 

  

 

 

 

 

 

 

 

Disbursement of cash to farmers through discounting of cheque doesn't violate sec. 269SS or sec. 269T

When it was not proved that by cheque discounting business assessee had taken any loan or deposit from agriculturists and/or he had repaid any loan to agriculturists, neither section 269SS nor section 269T were attracted

Facts of the case:

• Assessee, engaged in business of cheque discounting, received certain amount through post-dated crossed cheques from farmers who were selling their produce to traders.
• Assessee's case was that such traders made payment to farmers traditionally by way of post-dated crossed cheques and since farmers normally did not maintain any bank account, they used to take such cheques to assessee for discounting same for cash.
• Assessing Officer held that there was contravention of sections 269SS and 269T and, accordingly, levied penalty on assessee under sections 271D and 271E.
• Aggrieved by order of AO, assessee filed an appeal before CIT(A).
• CIT(A) quashed and set aside the orders of penalty imposed under Section 271D and Section 271E of the Act.
• On appeal by revenue to ITAT, ITAT rightly confirmed the order passed by the CIT(A).
• Revenue was in appeal before High Court against order of ITAT.

Gujarat High Court held and observed that:

• Revenue was not in a position to satisfy the Court how by the aforesaid transaction of cheque discounting it could be said that there was any loan or deposit taken by the Assessee.
• In any case, when it not proved and/or established that by cheque discounting business the assessee had taken any loan or deposit from the agriculturist and/or they have repaid any loan to the agriculturist, neither Section 269SS nor Section 269T of the Act was attracted
• Under the circumstances, no error and/or illegality has been committed by the ITAT in confirming the orders passed by the CIT quashing and setting aside orders of penalty passed under Section 271D and Section 271E of the Act.
• Appeal was accordingly dismissed.- CIT V. DINESHCHANDRA SHANTILAL SHAH (HUF) (2013) 37 TAXMANN.COM 307 (GUJARAT)