203623 61055 summary of case laws of dt 4 may nov 14 exams by ca siddharth jain

8/10/2019 203623 61055 Summary of Case Laws of Dt 4 May Nov 14 Exams by CA Siddharth Jain

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Summary of recent case laws relevant for

May & November, 2014CA Final Exams

Direct

Tax

Compiled & Presented By:

CA Siddharth JainEmail:[email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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Source: Compiler: Page 1 of 14

Recent case law Module of ICAI CA iddharth ainEmail: [email protected]

S

No

Issues Decision Case Law

(A) Basic Concepts1 Can power subsidy recd. by the assesse

from the state Govt., year after year, on thebasis of actual power consumption betreated as a capital receipt?

The high court held that the power subsidy recd.by the assesse from the SG. On the basis of actualpower consumption has to be treated as a tradingreceipt & not as a c/receipt.

CIT V. Rassi CementLtd.(2013) 351 ITR 169(A.P.)

2 Can the amount collected by an NBFC fromits customer on adhoc basis towards possiblesales tax liability which is disputed by it, be

treated as its income, if such sum is not keptin a separate interest bearing accounts?

The SC held that such amount collected is treatedas income, after applying the substance overform test. As such income was formed part of the

assessee turnover, & was collected from customertowards sales tax liability.

Sundaram finance LtdV. Asst. commission oI/tax (2012) 349 ITR

0356 (SC)

3 What is the nature of liquidated damagesreceived by a co. from the supplier of plantfor failure to supply M/C to the co. within thestipulated time - a capital receipt or arevenue receipt?

The Apex court affirmed the decision of High courtholding that the damages were directly &intimately linked with the procurement of a capitalasset. i.e. the cement plant which lead to delay incoming into existence of the profit makingapparatus. It was NOT a receipt in course of profitearning process. Therefore, the amt. received,NOT in the ordinary course of biz, is a capitalreceiptin the hands of the assesses.

(Already asked in CA Finals Nov.,2011 attempt)

CIT V. SaurashtraCement Ltd (2010) 325ITR 422 (SC)

4 In case the s/capital is raised in a foreigncountry & repatriated to India as Need basisfrom time to time for approved uses, can thegain arising on the b/sheet date due to

fluctuation in foreign exchange, in respect ofthat part of s/capital which is to be used asworking capital, be treated as a revenuereceipt?

The High court held that for determining thenature of receipt, due consideration shud be givento the source of fund & NOT to the ultimate use ofthe funds. Therefore, the entire gain has to be

treated as c/receiptas the source of fund in thiscase is capital in nature.

CIT V. JagatjiIndustries Ltd (2011337 ITR 21 (Del.)

5 Can subsidy received by the assesses fromGoWB under the scheme of industrialpromotion for expansion of its capacitiesmodernization & improving its marketingcapabilities be treated as a capital receipt?

The high court held that, in the present case, thesubsidy received has to be treated as a capitalreceipt& NOT as a revenue receipt.

CIT V. Rasoi Ltd (2011335 ITR 438 (Cal.)

6 What is the nature of incentives receivedunder the scheme formulated by the C/G forrecoupment of capital employed &repayment of loan taken for settingup/expansion of a sugar factory capital orrevenue?

The High court held that the main eligibility condt.For the scheme was that the incentive had to beutilized for the repayment of loans taken by theassesses to setup a new units or substantialexpansion of a existing unit. The subsidy receiptby the assesses was, therefore NOT in the course

of a trade & hence, was of capital nature.

CIT V. Kisan SahkarChini Mills Ltd. (2010328 ITR 27 (All.)

(B) Income which do not form part of Total Income7 Whether sec. 14A is applicable in respect of

deduction, which are permissible & allowedu/chapter VI A?

Therefore, the delhi high court held that NOdisallowance can be made u/s 14A in respectof income included in total income in respect ofwhich deduction is allowable u/s 80C to 80U.

CIT V. Kribhco (2012209 Taxman 52 (Delhi)

8 Can the assesses, being a charitable inst.Claim dep. u/s 32 in respect of an asset, whrthe cost of such asset has been treated asapplication of income for charitable purposeu/s 11(1)(a)?

The court held that once the exp. on acquisition ofasset has been treated as application of income,the full value of asset stand w/off. Therefore thetrust is NOT eligible to claim dep. on suchcapital exp.

Lissie Medical Inst. VCIT (2012) 348 ITR 344(Ker.)

9 Can explanation to sec. 11(2) be applied inrespect of the accumulation up to 15%referred to in sec. 11(1)(a), to treat thedonation made to another charitable trustfrom the permissible accumulation up to15% as income of the trust?

The court held that even if the donation by theassesses to another charitable trust were out ofpart accumulation u/s 11(1) (a) i.e. up to 15%,the same would NOT be liable to be included in thetotal income as assessed by the AO.

DIT (exemption) VBagri foundation(2012) 344 ITR 193(Delhi)

(C) Salary10 Can notional intt. on security deposit given

to the landlord in respect of residentialpremises taken on rent by the employer &provided to the employee, be included in theperquisites value of rent freeaccommodation given to the employee?

The Bombay high court held that the AO is notright in adding the notional intt. on thesecurity deposit given by the employer to thelandlord in valuing the perquisites of rent freeaccommodation, since the perquisite value has tobe computed as per rule 3 of the IT rules, 1962 &there is no concept of determination of fair rentalvalue for purpose of ascertaining the value ofperk.

CIT V. ShankaKrishnan(2012) 349 ITR 0685(Bom.)


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11 Is the limit of `1000/month per child to be

mandatorily deducted, while computing theperquisite value of the free or concessionaleducation facility provided to the employeeby the employer?

The P&H high court held that only in case of theperquisite value is less than ` 1000/month per

child, the perquisite value shall be NIL. Therefore,` 1000/month per child is NOT a std

deductionto be provided while calculating such aperquisite.

CIT (TDS) V. DirectorDelhi Public Schoo(2011) 202 Taxmann318 (P&H)

(D) House Property12 Can service charges recd. along with rent in

respect of a property, be brought to taxunder the head I/H/P, if the serviceagreement is dependent upon the rental

agreement?

The Bombay high court held the amount recd. asservice charges have to be considered as apart of the rent recd.& subjected to tax underthe head I/H/P.

CIT V. J. K. Investor(Bom.) Ltd.(2012) 211taxmann 383 (Bom.)

13 Can the benefit of self-occupation of H/P u/s23(2) be denied to a HUF on the ground thatit cannot occupy a H/P, being a fictionalentity?

The court held that the HUF is entitled to claimbenefit of self-occupation of H/P u/s 23(2).

CIT V. HariprasedBhojnagarwala (2012342 ITR 69 (Guj.) (fulbench)

14 Can the rental income from the unsold flat ofa builder be treated as its B/Income merelybcoz the assesses has, in its w/tax return,claimed that the unsold flats were SIT of itsBiz?

The Calcutta high court held that rental incomefrom the unsold flats of a builder shall be taxableas I/H/Pas provided u/s 22 & since it speciallyfalls under this head, it CANNOT be treated underthe PGBP.

Azimgnaj estate (P)Ltd. V. CIT (2012) 206Taxman 308 (cal.)

15 Can an assesses engaged in letting out ofrooms in a lodging house also treat theincome from renting of a business to bankon long term lease as business income?

On the issue, it was decided that while lodging is abusiness, however, letting out the building to thebank on long term lease could NOT be treated asbusiness income. Therefore, the rental incomefrom bank has to assessed as Income of house

property.

Joseph George & CoV. ITO (2010) 328 ITR161 (Kerala)

16 Can Notional intt. On interest free depositreceived by an assesses in respect of a shoplet out on rent be brought to tax as

Business Income or I/H/P?

The High court held that the Notional intt. Is NOTassessable either as Business Income orI/H/P

CIT V. Asian HotelsLtd.(2010) 323 ITR 490(Del.)

(E) Profit and Gains of Business or Profession17 Can depreciation on leased vehicle be denied

to the lessor on the ground that the vehiclesare registered in the name of the lessee &that the lessor is not the actual user of thevehicle?

The SC therefore held that assesse was entitledto claim depreciation in respect of vehicleleased out since it has satisfied both therequirement of section 32, namely ownership ofthe vehicle & its usage in the course of biz.

I.C.D.S. Ltd. V. CIT(2013) 350 ITR 527 (SC)

18 Can waiver of loan given to the assesse bythe GOI from steel development fund (SDF)to meet the capital cost of asset be reducedto arrive at the actual cost as per sec. 43(1)for computing depreciation u/s 32?

The high court; therefore held that by applying themain provision of sec. 43(1), the amount of loanwaived by the govt. is to be reduced from thecost of asset to arrive at the actual cost forcomputing depreciation.

Steel Authority ofIndia Ltd. (SAIL) V. CIT(2012) 348 ITR 150(Delhi)

19 Can the second prov. to sec. 32(1) beapplied to restrict the additional depreciationu/s 32(1) (iia) to 50%, if the new P&M wasput to use for less than 180 days during theP/Y?

The Madras high court held that the claim of theassesse made u/s 32(1) (iia) had to be necessarilyassessed by applying the second prov. to sec.32(1). Therefore depreciation allowable has tobe restricted to 50% of the amount computedu/s 32(1) (iia).

M. M. Forgings Ltd. VACIT (2012) 349 ITR0673 (Mad.)

20 Can biz. Contracts, biz. Info. etc, acquiredby the assesses as part of slump sale bedescribed as G/W, be classified as anintangible asset to be entitled for dep.32(1)(ii)?

The high court held that the specified intangibleasset under the slump sale agreement by theassesses are in the nature of intangible assetunder the category other biz. Or commercial rightof similar nature specified in sec. 32(1)(ii) & areaccordingly eligible for dep.u/s 32(1)(ii).

Areva T & D India LtdV. DCIT (2012) 345 ITR421 (Delhi)

21 Is the assesses entitled to dep. on the valueof G/w considering it as an asset within themeaning of explanation 3(b) to sec. 32(1)?

Therefore, it was held that G/W is an assetunderexplanation 3(b) to sec. 32(1)& Dep.thron is allowableunder the said section.

CIT V. Smifs SecuritiesLtd. (2012) 348 ITR 302(SC)

22 Is the assesses entitled to depreciation onthe value of Goodwill considering it as otherbusiness or commercial right or similarnature within the meaning of an intangibleasset?

It was held that G/w paid was for ensuringretention & continued business in the hospital, itwas for acquiring a business & commercial rightand it was comparable with trade mark, franchiseetc referred to in the first part of clause (ii) of sec.32(1) and so, G/w was covered by the aboveprovision of the Act entitling the assesses fordepreciation.

B. Raveendran PillaiVCIT (2011) 332 ITR 531(Kerala)


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23 Would the phrase used for the purpose ofbusiness in respect of discarded M/c includeuse of such asset in the earlier years forclaim of depreciation u/s 32?

On the issue, it was held that the discarded M/cmay NOT be actually used in the Relevant P/Y butdepreciation can be Claimed as long as it wasused for the purpose of business in the earlieryears provided the block continues to exist in theRelevant P/Y.

(Already asked in CA Finals May,2012 attempt)

Yamaha Motors IndiaPvt. Ltd. V. CIT (2010)328 ITR 297 (Delhi)

24 Would beneficial ownership of asset sufficefor claim of deprecation on such asset?

The High court observed that she is the beneficialowner; she is entitled to claim deprecationeven though she is NOT the legal owner of theasset.

CIT V. Smt. A Sivakam& Another (2010) 322ITR 64

25 Can EPABX & Mobile phones be treated ascomputers to be entitled to higherdepreciation at 60%?

On the issue, the High court held that the rate ofdepreciation of 60% is available to computers &there is no ground to treat the communicationequipment as computers. Hence EPABX & Mobilephones are NOT computers and therefore, areNOT entitled to higher depreciation of 60%.


Federal Bank Ltd. VACIT (2011) 332 ITR 319(Kerala)

26 Is abkari license covered u/s 32(1) (ii) &eligible for dep. @ 25% of WDV?

The court held that the abkari license squarelyfalls u/s 32(1) (ii); on which the assesses isentitledto dep. @ 25% of WDVas provided u/s32(1).

S. Ambika V. DCIT(2011) 203 Taxman 2(Ker.)

27 What is the nature of exp. incurred ondemolition & re-erection of a cell room &exp. incurred on purchase of pumping set,mono block pump & two transformers, whichwere parts of a bigger plant revenue or

capital?

It was held that purchase of pumping set, monoblock pump with HP motors & two transformerswere concerned, they were NOT standaloneequipment, but were part of the bigger plant.Therefore, it would be treated as replacement of

those parts & exp. would be eligible fordeduction u/s 37(1)-Revenue.

CIT V. Modi IndustriesLtd(2011) 339 ITR 467(Del.)

28 Can a co. engaged in the biz. Of owing,running & managing hotels claim intt. Onborrowed funds, used by it for investing inthe equity s/capital of a wholly owned Subsi.co., as deduction where the subsi. Co. wasformed for exercising effective control ofnew hotels acquired by the parent co. underits mgmt.?

The High court held that Exp. incurred was for Biz.Purpose & was thus allowable u/s 36(1)(iii).

CIT V. Tulip Star HotelsLtd.(2011) 338 ITR 482(Del.)

29 For claiming deduction of bad debt, is itnecessary for the assesses to establish thatthe debt had, in fact, become irrecoverable?

On this issue, the Apex court held that it is NOTnecessary for the assesses to establish that thedebt, in fact, has become irrecoverable. It isenough if the bad debt is w/off asirrecoverable in the account of the assesses for therelevant p/y.


T.R.F. Ltd. V. CIT(2010) 323 ITR 397 (SC)

30 What would be the nature of corporatemembership fee paid to the golf club,considering that the membership was for alimited period of six year Revenue orcapital exp.?

The high court held that by subscribing to themembership of a club for a limited period, nocapital asset is created or comes into existence &consequently, the corporate membership feeCANNOT be treated as capital in nature.

CIT v. Groz BeckertAsia Ltd. (2013) 351ITR 196 (P&H) (FB)

31 What would be the nature of exp. incurredby the assesses by way of severance costpaid to the employee in respect ofsuspension of one of the activities, in a casewhr he continues to carry on other biz.Activities capital or revenue?

The court held that said exp. will be allowed asrevenue exp. thought it was related tomanufacturing activity which was suspended.

CIT V. KJS India PvtLtd.(2012) 340 ITR 380(Delhi)

32 Is the exp. incurred on payment ofretrenchment compensation & intt. On

money borrowed for the payment ofretrenchment compensation on closure ofone of the textile manufacturing units of theassesses co. revenue in nature?

The High court concurred with these finding of thetribunal & accordingly, held that deduction was

allowable in respect of exp. on payment ofretrenchment compensation & intt. On moneyborrowed for payment of retrenchmentcompensation.

CIT V. DCM Ltd (2010320 ITR 307 (Del.)

33 Can the exp. incurred by the assesses on theeducation & traveling of an employee, foracquiring knowledge relating to assessesbiz., be disallowed merely on the groundthat the employee is the son of an ex-director of the assesses co.?

The MP high court held that exp. CANNOT bedisallowedmerely bcoz it was incurred in respectof an employee, who was son of ex-director of theassesses co.

CIT V. Naidunia news& networking (P) Ltd(2012) 210 taxman 73(MP)


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34 Can expenditure incurred by a Co. on higherstudies of the directors son abroad beclaimed as business exp. u/s 37 on thecontention that he was appointed as atrainee in the co. under apprentice trainingscheme, where there was no proof ofexistence of such scheme?

On this issue, it was observed that there was noevidence on records to show that any other personat any time was appointed as trainee or sentabroad for higher education. Further, there was Nonexus betw. the education exp. incurred in abroadfor directors son & business of assesses.Therefore, the aforesaid exp. was NOTdeductible.


Echjay forging Ltd. VACIT (2010) 328 ITR 286(Bom.)

35 Is the commission paid to doctors by adiagnostic centre for referring patients for

diagnosis be allowed as a biz exp. u/s 37 orwould it be treated as illegal & againstpublic policy to attract disallowance?

The demanding as well as paying of such comm. isbad in law. It is NOT a fair practice. Thus, the high

court held that comm. paid to doctor forreferring patient for diagnosis is NOT allowableas a biz exp.

CIT V. Kap scan &Diagnosis centre P

Ltd.(2012) 344 ITR 476(P&H)

36 What would be the nature of the repair &reconditioning exp. incurred on a machinewhich broke down years ago revenue orcapital?

The Delhi high court observed that it is in natureof capital exp.; on which dep. can be claimed.

Bharat Gears Ltd VCIT (2011) 337 ITR 370(Delhi)

37 Would the exp. incurred for issue &collection of convertible debenture betreated as revenue or capital Exp.?

The Karnataka High court held that the exp.incurred on the issue & collection of deb. Shall betreated as revenue exp. even in case ofconvertible debenture.

CIT V. ITC Hotels Ltd(2011) 334 ITR 109(Kar.)

38 Can the exp. incurred on the assesseslawyers heart surgery be allowed as biz.exp. u/s 31 by treating it as current repairsconsidering heart as P&M or u/s 37 bytreating it as exp. incurred wholly &

exclusively for the purpose of biz. Orprofession?

The High court held that the heart CANNOT besaid to be P&M for the biz. Or Prof. of theassesses. Therefore, the exp. on heart surgery isNOT allowable as repair to plant u/s 31.Accordingly to the prov. Of sec. 37 the claim for

allowing the said exp. u/s 37 is also NOT tenable.Hence, heart surgery exp. shall NOT beallowedas biz. Exp.


Shanti Bhushan V. CIT(2011) 336 ITR 26 (Del.)

39 Would expenditure incurred on feasibilitystudy conducted for examining proposals fortechnological advancement related to theexisting business be classified as revenueexpenditure, where the project wasabandoned without creating a new asset?

The High court observed that, in such cases,whether or not a new business/asset comes intoexistence would be a relevant factor. If there is nocreation of a new asset, then the expenditureincurred would be a revenue nature.


Priya VillageRoadshow Ltd. V. CIT(2011) 332 ITR 594(Delhi)

40 Can the exp. incurred for purchase of secondhand Medical equipment for the use as spareparts for existing equipment be claimed asrevenue expenditure?

The High Court held that since the second handMedical equipment was purchased for the use asspare parts for existing equipment. Therefore theassesses was eligible to claim deductionof exp.in the relevant p/y ended 31stMarch.

DR. Aswath N Rao VACIT (2010) 326 ITR 188(karn.)

41 Can exp. incurred on alteration of a dam toensure adequate supply of water for thesmelter plant owned by the assesses beallowed as revenue exp.?

The High court observed that the exp. incurred bythe assesses for commercial expediency relates tocarrying on of biz. The operational exp. incurredby the assesses solely intended for the enterprisecan by NO means be treatedas exp. of capitalnature.

CIT V. Hindustan ZincLtd(2010) 322 ITR 478(Raj.)

42 Is the amt. paid by a construction co. asregularization fee for violating building byelaws allowable as deduction?

The High court held that amt. paid to compoundan offence is obviously a penalty & hence, doesNOT qualify for deduction u/s 37.

Millennia Developers(P) Ltd. V. DCIT (2010322 ITR 401 (karn.)

43 Can an assesses, engaged in money lendingbiz, claim interest paid on money borrowedas biz exp.?

The Calcutta high court held that AO is NOT rightin his contention, the assesses is lawfullyentitled to deduct interest paid on the fundsborrowed as biz exp.

Rajendra krDabriwala V. CIT(2012) 347 ITR 353(Cal.)

44 Can adv. given to employees and securitydeposit paid to the landlord by theamalgamating co., which becomesirrecoverable, be allowed as a biz loss in thehand of the amalgamated co.?

The court held that such adv. Given to person whohad been employed by the assesses co. whichhave become irrecoverable would be treated as bizloss & as regards the allow ability of non-recoverable security deposit given to the landlordfor obtaining lease of premises for purpose of biz,the high court observed that the security depositwere refundable & therefore, were not in the formof rent. Therefore, it is NOT allowable asB/loss.

CIT V. Triveni Engg. &Industries Ltd. (2012343 ITR 245 (Delhi)


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45 Can remuneration paid to working partner asper the partnership deed be considered asunreasonable & excessive for attractingdisallowance u/s 40A (2) (a) even thoughthe same is within the statutory limitsprescribed u/s 40 (b) (v)?

The high court held that remuneration paid tow/partners within the limits specified u/s 40 (b)(v) CANNOT be disallowed by invoking theprovision of sec. 40A (2) (a).

CIT v. Great citymanufacturing co(2013) 351 ITR 156(All.)

46 Can the waiver of principal amount of loantaken for purchase of capital asset by thebank be treated as benefit arises out ofbusiness or a remission of trading liabilityfor taxability as business income of the Co.?

Since the loan was taken for purchase of capitalasset, waiver of a portion of principal would NOTamount to remission of trading liability toattract the provision of sec. 41(1). Further, suchwaiver CANNOT be treatedas a benefit arising

out of business & consqt. Sec. 28(iv) will NOTapply in respect of such loan tranx.

Iskraemees RegentLtd. V. CIT (2011) 331ITR 317 (Mad.)

47 Can the prov. Of sec. 41(1) be invoked bothin respect of waiver of working capital loanutilized for day to day biz. Operation & inrespect of waiver of term loan taken forpurchase a capital asset?

The high courtsheld that loan were for circulatingcapital & not for fixed capital. Therefore, the W/offof these loans on the cash credit account whichwas received for carrying out the day to dayoperation amts. to remission of a trading liability &hence, has to be treated as incomein the handsof the assesses by virtue of sec. 41(1).

Rollatainers Ltd.V. CIT(2011) 339 ITR 54 (Del.)

48 Can Money payable in respect of a buildingsold by the assesses (which has to bereduced from the opening WDV of the blockof asset for calculating depreciation) beconstrued as the FMV of asset instead ofactual sale price?

On the issue, the High court held that WDV ofasset falling within that block of asset at the begn.of P/Y has to be adjusted by the amount for whichthe asset is actually sold & NOT by its FMV.

Cable Corporation oIndia Ltd.V. CIT (2011336 ITR 56 (Bom.)

49 Can unpaid electricity charges be treated as

fees to attract disallowance u/s 43B?

The AP high court observed that the prov. of sec.

43B do not incorporate electricity charges.Therefore, non-payment of electricity chargeswould not attract disallowance u/s 43B since suchcharges CANNOT be treated as Fees. The courttherefore held that deduction is allowable inrespect of such electricity charges.

CIT v. Andhra ferro

Alloys (P) Ltd. (2012349 ITR 255 (AP)

50 Would the special provision for computingprofit u/s 44BB be applicable to a Non-resident carrying on business of seismic dataacquisition & processing under contract withIndian concern?

In this case, AAR ruledthat the said activities &services of applicant clearly fell within thedescription of sec. 44BB and the income derivedby the applicant under the contract with Indianconcern for seismic data acquisition & processingwere to be computed under the provision ofsec. 44BB.

Global GeophysicaService Ltd., In re(2011) 332 ITR 418(AAR)

51 Can the AO bring to tax the actual profit asper books of accounts, if the same is higher

than 10% of receipt which are deemed to bethe profit u/s 44BBB in case of a foreign co.engaged in turnkey project?

The Delhi High court held that if an assesses fulfillsall the condt. Mentioned in sec. 44BBB(1); then a

sum equal to 10% of amount paid or payable tosuch foreign co. would be deemed as its businessincome. Further u/s 44BBB (2) revenue CANNOTtake recourse of this sub-section to claimthat theprofit earned by the assesses were more than10%.

DSD Noel GmbhV. DIT(2011) 333 ITR 304

(Delhi)

52 Is the income or exp. of an AMC liable to beassessed on the basis of the maximum limitmentioned in the SEBI regulation or shudthe assessment be made on the basis of theactual income or exp. charged?

The court held that, the disallowance made bythe AO in the present case is NOT justifiedsincethe tranx was genuine in nature.

CIT V. TempletonAsset Mgmt (I) PvtLtd.(2012) 340 ITR 279(Bom.)

(F) Capital Gain53 What are the factors determining the nature

of income arising on sale of shares i.e.whether the income is taxable as c/gain orb/income?

The high court held that the facts that may beconsidered while determining the same are themagnitude & freq. of buying & selling of shares bythe assesses, the POH of shares, ratio of sales topurchase & the total holding, etc.

PVS Raju V. ACIT(2012) 340 ITR 75 (AP)

54 Would an asset which is sold the very nextday after the period of 12/36 month is over,be treated as LTCA by incl. both the date onwhich the asset is acquired & the date onwhich the asset is t/f for computing POH?

The court held that if an asset is sold the very nextday & proviso to sec. 2(42A) applies; it wouldbe treated as a LTCG.

Bharti Gupta RamolaV. CIT (2012) 207Taxman 178 (Delhi)

55 In determining the POH of c/asset receivedby a partner on dissolution of firm, can thePOH of the c/asset by the firm be taken intoaccount?

The High court held that POHof the asset by theassesses in this case has to be reckoned fromthe date of dissolution of the firm. Since theassesses sold the property within 3 days ofacquiring the same, the gain have to be treated as

P. P. Menon V. CIT(2010) 325 ITR 122(Ker.)


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STCG.56 What would be the POH to determine

whether the c/gain on renunciation of rightto subscribe for additional shares is shortterm (ST) or long term (LT)?

On this issue, the Apex court held that fordetermining whether the c/gain on renunciation ofright to subscribe for additional shares is ST or LT,the POHwould be fromthe date on which suchright to subscribe for additional shares come intoexistence up to the date of renunciation ofsuch right.

Navin Jindal V. ACIT(2010) 320 ITR 708 (SC)

57 Whether indexation benefit in respect of thegifted asset shall apply from the year inwhich the asset was first held by the

assesses or from the year the same was firstacquired by the previous owner?

The High court held that indexed COA in case ofgifted asset has to be computed with referenceto the year in which the previous owner first

held the asset & NOT from the year in which theassesses become the owner of the asset.

CIT V. Manjula J. Shah16 Taxmann 42 (Bom.)

58 Can non-cumulative P/shares carrying afixed rate of dividend with a fixed holdingperiod be said to be equated with bonds ordebenture so as to deny the indexationbenefit while computing c/gain on its t/f,applying the third proviso to sec. 48?

Therefore the court held that the indexationbenefit on the t/f of LTCA, being 4% non-cumulative p/shares CANNOT be deniedapplyingthe prov. Of the third prov. to sec. 48.

CIT V. Enam securitiesP. Ltd (2012) 345 ITR64 (Bom)

59 Would an assessee be entitled to exemptionu/s 54 in respect of purchase of two flats,adjacent to each other & having commonmeeting points?

The Andhra high court, on the basis of ruling ofKarnataka high court in case of CIT v. AnandaBasappa (2009) 309 ITR 329, held that in thiscase, the assesses was entitledto investment inboth the flats purchased by him, since they wereadjacent to each other & had a common meetingpoint.

CIT v. Syed Ali Adi(2013) 352 ITR 0418(AP)

60 Can exemption u/s 54 be claimed in respect

of more than 1 residential flat acquired bythe assessee under a joint developmentagreement with a builder, where in theproperty owned by the assesses wasdeveloped by the builder who constructed 8residential flat in the said Property, 4 ofwhich were given to the assesses?

The Karnataka High court, applying the decision of

Anand Basappa (2009) 309 ITR 329 (Kar.) to thepresent case, held that all the 4 flats are situatedin the same residential building & hence, willconstitute a residential house for the purpose ofsec. 54. Therefore, assesses would be entitled todeduction u/s 54in respect of all 4 flats.

Smt. K G

Rukminiamma V. CIT(2011) 331 ITR 211(Kar.)

61 Can exemption u/s 54B be denied solely onthe grounds that the new agricultural landpurchased is not wholly owned by theassesses, as the assessess son is a co-owner as per sale deed?

The High court concurred with the tribunals viewthat merely bcoz the assessess son was shown inthe sale deed as co-owner, it did NOT make anydifference. Therefore, the assesses was entitledto deduction u/s 54B.

CIT V. Gurnam Singh(2010) 327 ITR 278(P&H)

62 Can exemption u/s 54F be denied solely onthe ground that the new residential house ispurchased by the assesse exclusively in the

name of his wife?

The Delhi high court, having regards to the rule ofpurposive construction & the object of enactmentof sec. 54F, held that the assesse is entitled to

claim exemption u/s 54F in respect ofutilization of sale proceeds of c/asset forinvestment in residential H/property in the nameof his wife.

CIT v. Kamal waha(2013) 351 ITR 4 (Delhi)

63 In case of a house property registered injoint names, whether the exemption u/s 54Fcan be allowed fully to the co-owner whohas paid whole of the purchase considerationof the H/property or will it be restricted tohis share in the h/property?

The court held that the condt. Stipulated in sec.54F stand fulfilled & the entire exemptionclaimed in respect of the purchase price of thehouse property shall be allowedto the assesses.

CIT V. Ravindra krArora (2012) 342 ITR38 (Del.)

64 Can the exemption u/s 54F be denied to anassesses in respect of investment made inconstruction of a residential house, on theground that the construction was notcompleted within three years after the dateon which t/f took place, an account of

pendency of certain finishing work likeflooring, electrical fitting, fitting of doorshutter?

The court held that in this case the assesses wouldbe entitled to exemption u/s 54Fin respect ofthe amount invested in construction within theprescribed period.

CIT V. Sambandamudaykumar (2012) 345ITR 389 (Ker.)

65 Can the assesses claim exemption u/s 54F,on account of c/gain arising on t/f ofdepreciable asset held for more than 36months i.e a long term capital asset, thoughthe same is deemed as capital gain arisingon t/f of short term capital gain by virtue ofsec. 50?

The High court held that sec. 54F being anindependent section will NOT be bounded by theprov. Of sec. 50. Therefore, the exemption u/s54Fon t/f of depreciable asset held for more than36 month CANNOT be denied on account offiction created by sec. 50.

CIT V. Rajiv Shukla(2011) 334 ITR 138(Del.)


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66 Can an assesses be deprived of claimingexemption u/s 54EC, if bonds of assesseschoice are not available or available only fora broken period within the period of 6 monthafter the date of t/f of c/asset & the bondsare purchased shortly after it becomesavailable next time after the expiry of thesaid 6 month?

The high court held that since the assessesinvested in the bonds on 31.01.2007 i.e. within 9days of their being available once again from22.01.2007, he CANNOT be deprived ofexemption u/s 54EC. the time to invest in thebonds get automatically extended till the bondsare available in the mkt.

CIT V. Cello Plast(2012) 209 Taxman 617(Bom.)

67 Can exemption u/s 54EC be denied onaccount of the bonds being issued after 6month of the date of t/f even though the

payment for the bond was made by theassesses within the 6 month period?

The High court, therefore, held that if suchpayment is within a period of 6 month from thedate of t/f, the assesses would be eligible to

claim exemption u/s 54EC.

Hindustan UnileverLtd V. DCIT (2010) 325ITR 102 (Bom.)

(G) Other Source68 What can be the tests to determine

substantial part of business of lending Co.for the purpose of application of exclusionprovision under sec. 2(22)?

In this case, 42% of the assets of lending Co. weredeployed by it by way of loan & advance. Further ifinterest income is excluded, the other businesshad resulted in a Net loss. These factors wereconsidered in concluding that lending of moneywas a substantial part of business of the co. hencemoney given by way of loan & advance to theassesses could NOT be regarded as a divided,as it had to be excluded from the definition of

dividend by virtue of the specific exclusion insec. 2(22).

Parle Plastics Ltd. VCIT (2011) 332 ITR 63(Bom.)

69 Can the loan or adv. given to a shareholderby the co., in return of an advantageconferred on the co. by the shareholder, bedeemed as dividend u/s 2(22)(e) in thehands of the shareholder?

In present case, the adv. given to the assesses bythe co. was NOT in the nature of a gratuitousadvance given, instead it was given to protect theinterest of the co. therefore, the said adv.CANNOT be treated as deemed dividendin thehands of the shareholder u/s 2(22) (e).

Pradip kr. Malhotra VCIT (2011) 338 ITR 538(Cal.)

70 Would the prov. Of deemed dividend u/s2(22)(e) be attracted in respect of financialtranx entered into in the normal course of

biz?

The High court held that such financial tranxCANNOT under any circumstances be treated asloans or advances received by the assesses from

the concerns for the purpose of appl. Of sec.2(22) (e).


CIT V. AmbassadoTravels(P) Ltd (2010) 318 ITR

376 (Del.)

71 Can winning of prize money on unsoldlottery ticket held by the distributor oflottery be assessed as business income & besubj. to normal rates of tax instead of therates prescribed u/s 115BB?

The receipt of the prize Money is NOT in hiscapacity as a lottery ticket distributor but as aholder of the lottery ticket which won the prize.Therefore, the High court held that the rate of30% prescribed u/s 115BB is applicable in

respect of winnings from lottery received by thedistributor.

Manjoo & Co. V. CIT(2011) 335 ITR 527(Kerala)

(H) Set-off & carry forward of losses72 In order to determine whether explanation

to sec. 73 is applicable in a particular case,is it necessary to first determine the grosstotal income of the assesses computed asper normal prov. of the act?

On this issue, the Bombay high court observedthat, in order to apply the exemption, thegross total income (GTI) of a co. is to be firstcomputedas per the normal prov. of the act.

CIT V. Darshansecurities (P) Ltd(2012) 341 ITR 556(Bom.)

(I) Chapter VI A (Deductions)73 Can unabsorbed depreciation of a biz. of an

industrial undertaking eligible for deductionu/s 80IA be set off against income ofanother non eligible biz of the assesse?

The court therefore held that the assessee wasentitled to the benefit of set off of loss ofeligible biz against the profit of non-eligible biz.However, once set of is allowed u/s 70(1) againstincome from another source under the same head,a deduction to such extent is not possible in any

subsequent A/Y.

CIT v. Swarnagiri wireinsulation Pvt. Ltd(2012) 349 ITR 245(Kar.)

74 Can freight subsidy arising out of thescheme of CG be treated as a Profit derivedfrom the biz for the purpose of sec. 80IA?

The High court held that the freight subsidyCANNOT be treated as Profit derived from thebiz for the purpose of sec. 80IA.

CIT V. Kiran Enterprise(2010) 327 ITR 520 (HP)

75 Can an assesses, engaged in the biz ofdeveloping a housing project, be denieddeduction u/s 80-IB (10) on the ground thatthe ownership of land has NOT yet been t/fto the assesses & the approval to build theproject has been taken in the name of theland owner, though the assesses assumesthe entire risks & rewards of the project?

In the present case, as per prov. of sec. 80-IB(10), deduction shall be provided to theassesses engaged in the biz of developing &building housing project even though theownership of the land has NOT yet beentransferred to the assesses & the approval forsuch project is obtained in the name of the originalland owner.

CIT V. RadheDevelopers (2012) 341ITR 403 (Guj.)


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76 In a case whr an additional building wasconstructed on a plot of land & approval forthe same is obtained in the year 2002, candeduction u/s 80-IB (10) be denied inrespect of the said building on thecontention that it was an extension of anearlier project for construction of ourbuilding, in respect of which approval wasobtained before 01.10.98?

The high court observing the facts of case heldthat the assesses was entitled to deduction u/s80-IB(10) in respect of that building.

CIT V. VandanaProperties (2012) 206Taxman 584 (Bom.)

77 Can an industrial undertaking engaged inmanufacturing or producing articles or thing

treat the persons employed by it throughagency (incl. contractors) as workers toqualify for claim of deduction u/s 80IB?

The employment of 10 or more workers is what isrelevant & NOT the mode and the manner in which

the workers are employed by the assesses. TheHigh court, therefore, held that the tribunal wasjustified in holding that the condt. Of sec.80IB(2)(iv) had been fulfilled & thereforededuction u/s 80IB is allowed.

CIT V. Jyoti PlasticsWorks (P) Ltd (2011

339 ITR 491 (Bom.)

78 Can an assessee NOT claiming deduction u/s80-IB in the initial years claim the saiddeduction for the remaining years during theperiod of eligibility, if the condt. aresatisfied?

The Delhi High court held that the provision of sec.80-IB does NOT stipulate any condt. For claimingthe deduction. Therefore, the deduction u/s 80-IB shud. Be allowed to the assessee for theremaining years during the period of eligibility,provided condt. u/s 80-IB are fulfilled.

Praveen Soni V. CIT(2011) 333 ITR 324(Delhi)

79 Would the procurements of parts &assembling them to make wind Mill fallswithin the meaning of Manufacturing &

Production to be entitled for deduction u/s80-IB?

The Madras High court held that different partsprocured by assesses could NOT be treated as a

wind mill individually, but when assembled & gottransformed into an ultimate product which wascommercially known as wind mill. Thus, such

activity amounts to Manufacture as well asProduction to qualify for deduction u/s 80-IB.

Chiranjjeevi WindEnergy Ltd. V. CIT(2011) 333 ITR 192(Mad.)

80 Would grant of transport subsidy, interestsubsidy & refund of excise duty qualify fordeduction under sec. 80-IB?

The High court held that there shud. be a directnexus betw. The generation of profits & gains ANDsource of profit & gains, the latter being directlyrelatable to the business of the assesses. In thiscase, subsidy had NO direct nexuswith profitderived by assesses from its industrial activity, sothe subsides could NOT be taken into account forpurpose of deduction u/s 80-IB. But refund ofthe excise had a direct nexus withmanufacturing activity, being a profit linkedincentives. Therefore, the refund of excise dutyhad to be taken into account for purpose ofdeduction u/s 80-IB.

Meghalaya Steels LtdV. CIT (2011) 332 ITR91 (Gauhati)

81 Does income derived from sale of exportincentives qualify for deduction u/s 80-IB?

The High court held that income derived from saleof export incentives CANNOT be said to be income

derived from the industrial undertaking &

therefore, such income is NOT eligible fordeductionu/s 80-IB.

Jaswand Sons V. CIT(2010) 328 ITR 442(P&H)

82 Does the period of exemption u/s 80IBcommence from the year of trial productionor year of commercial production? Would itmake a diff. if sale was effected from out oftrial production?

Therefore, the condt. Stipulated in sec. 80IB werefulfilled with the commercial sale of the two itemsin that A/Y, & hence period of exemption u/s80IBhas to be reckonedfrom period when saletook place.

CIT V. Nestopharmaceuticals Ltd/Sidwal RefrigerationInd. LtdV. DCIT (2010322 ITR 631 (Del.)

83 Can the Duty entitlement passbook scheme(DEPB) benefit & Duty Drawback be treatedas profit derived from the biz. Of industrialundertaking to be eligible for deductionunder sec. 80IB?

The Apex court held that Duty Drawback receipt &DEPB benefit do NOT form part of the profitderived from the eligible biz for the purpose of thededuction u/s 80-IB.

Liberty India V. CIT(2009) 317 ITR 218 (SC)

84 Does standing charges paid by the client forfailure to purchase the minimum agreedQty, Qualify for deduction u/s 80-IC?

The delhi high court held that charges were paid tocompensate the assesses for failure to produce &mkt its product. Therefore, such standingcharges are NOT eligible for deduction u/s80-IC.

Pine Packaging (P)Ltd. V. CIT (2012) 209Taxman 74 (Del.)

(J) Assessment of Various Entities85 Under which head of income is rental income

from plinths inherited by individual co-owners from their ancestors taxable

income from H/P or income from O/S?

Further, would such income be assessable inthe hands of the individual co-owners or in

The court held that the co-owner had inherited theproperty from their ancestor & there was nothingto show that they had acted as an association ofpersons. Thus, the court held that the rental

income from the plinths has to be assessed inthe status of individual under the head of

Sudhir nagpal v. ITO(2012) 349 ITR 0636(P&H)


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the hands of the association of persons? income from O/S u/s 56.

86 Would interest earned on fixed deposit madeby a social club with its corporate memberssatisfy the principal of mutuality to escapetaxability?

The court held that social relationship & activitiesof the club have nothing to do with its deposit withcorporate members. Therefore, the said interestincome is NOT exempt on the principal ofmutuality.

CIT V. SecunderabadClub Picket(2012) 340ITR 121 (A.P.)

87 Would interest earned on surplus fund of aClub deposited with institutional memberssatisfy the Principle of Mutuality to escapetaxability?

The High court held that interest earned frominvestment of surplus funds does NOT satisfy thePrinciple of Mutuality & Hence CANNOT be claimedas exempt. Therefore taxable.

Madras GymkhanaClub V. DCIT (2010) 328ITR 348 (Mad.)

88 Can t/f fees received by a co-operative

housing society from its incoming & outgoingmembers be exempt on the ground ofprincipal of mutuality?

The High court held that t/f fee received is NOT

liable to tax on the ground of principal ofmutuality.

Sind co-operative

Housing SocietyV. ITO(2009) 317 ITR 47(Bom.)

89 Would nonresident match referees &umpires in the games played in India fallwithin the meaning of sportsmen to attracttaxability u/s 115BBA, and consequentlyattract the TDS u/s 194E in the hands of thepayer?

The High court held that the payment made to nonresident match referees & umpires are incomewhich has accrued & arises in India, the same areNOT taxable u/s 115BBA and thus, the assesses isNOT liable to deduct TDS u/s 194E. Further theyrender professional services but sec. 194J CANNOTbe imposed as on a non resident.Note:-It may be noted that since income has accrued &arisen in India to the non resident match referees& umpires, the TDS provisions u/s 195 wouldbe attracted and tax would be deductible at therate in force.


Indcom V. CIT (TDS(2011) 335 ITR 485(Calcutta)

90 In a case where the partnership deed doesnot specify the remuneration payable toeach individual working partner but laysdown the manner of fixing the remuneration,would the assesses firm be entitled todeduction in respect of remuneration paid topartner?

The High court held that method of remunerationhaving been laid down, the assesses firm isentitled to deduct the remuneration paid tothe partner u/s 40(b)(v) of Income tax Act.

CIT V. Anil HardwareStore (2010) 323 ITR368 (HP)

91 Can interest u/s 234B & 234C be leviedwhere a co. is assessed on the basis of bookprofits u/s 115JB (MAT)?

The Apex court observed that there is a specificprovision in sec.115JB (5) providing that all otherprovision of the IT Act, 1961 shall apply to everyassessee, being a Co. Therefore, interest u/s234B & 234C shall be payableon failure to payadvance tax in respect of tax payable u/s 115JB.

Rolta India Ltd.V. JCIT(2011) 330 ITR 470 (SC)

92 Can LTCG exempted by virtue of erstwhile

sec. 54E be included in the book profitcomputed under erstwhile sc. 115J?

The High court held that LTCG are part of the

profit incl. in the P&L a/c prepared in accordancewith the prov. Of Part II & III of schedule VI to co.Act, 1956, capital gain CANNOT be excludedunless provided under the explanation to sec. 115J(IA).


N. J. Jose & Co. (P)

Ltd V. ACIT (2010) 321ITR 132 (Ker.)

(K) Income Tax Authority93 Is the requirement to grant a reasonable

opportunity of being heard, stipulated u/s127(1), mandatory in nature?

The Bombay high court held that the word Mayused in this section should be read as shall &such I/tax authority has to mandatorily give areasonable opportunity of being heard to theassesee, whenever possible to do so, & thereforerecord the reasons for taking any action under thesaid section.

Sahara Hospitality Ltdv. CIT (2012) 211taxmann 15 (Bom.)

94 Does the CBDT have the power u/s119(2)(b) to condone the delay in filing ROI?

The High court held that the board has the

power to condonethe delay in case of a returnwhich was filed late & whr a claim for c/f of losseswas made.


Lodhi Property Co. Ltd

V. Under Secretary (ITAII), DOR (2010) 323 ITR441 (Del.)

(L) Assessment Procedure95 Can the unabsorbed depreciation be allowed

to be c/f in case the ROI is not filed withinthe due date?

The High court held that the unabsorbeddepreciation will be allowed to be c/f tosubsequent year even though the ROI of currentA/Y was NOT filled within the due date.

CIT V. Govind NagarSugar Ltd (2011) 334ITR 13 (Del.)


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96 Can an assessee revise the particular filledin the original ROI by filling a revisedstatement of income?

The high court relying on the judgment of Goetze(I) Pvt. Ltd., held that the AO has NO power toentertain a fresh claim made by the assessesafter filling of the original return except by way offilling a revised return.

Orissa Rural HousingDevelopment CorpLtd.V. ACIT (2012) 343ITR 316 (Orissa)

97 Is a person having income below taxablelimit, required to furnish his PAN to thedetector as per prov. of sec. 206AA eventhough he is not acquired to hold PAN as perprov. of sec. 139A?

In order to avoid undue hardship caused to suchperson, Karnataka high court , held that it is NOTnecessary for such person to obtain PAN& inview of specific prov. of sec. 139A, sec. 206AA isNOT applicable to such person.

Smt. A. Kowsalya BaV. UOI (2012) 346 ITR156 (Kar.)

98 Can the AO reopen an assessment on the

basis of merely a change of opinion?

The High court observed that the reason recorded

for reopening the assessment constituted a merechange of opinion. Therefore, the reassessmentwas NOT Valid.

Aventis Pharma LtdV

ACIT (2010) 323 ITR 570(Bom.)

99 Is it permissible u/s 147 to reopen theassessment of the assesses on the groundthat income has escaped assessment, aftera change of opinion as to a loss being aspeculation loss & not a normal biz loss,consequent to mere re-look of a/c whichwere earlier furnished by the assessesduring assessment u/s 143(3)?

The supreme court observed that re-opening ofthe assessment by the AO is clearly a change ofopinion & therefore, the order of re-opening theassessment is NOT valid.

ACIT V. ICICIsecurities PrimaryDealership Ltd. (2012348 ITR 299 (SC)

100 Can the AO reassess issue other than issuesin respect of which proceeding were initiatedu/s 147 when the original reasons tobelieve on basis of which the notice wasissued ceased to exist?

The High court held that if the income, theescapement of which was the basis of the reasonsto believe is NOT assessed or reassessed, itwould NOT be open to the AO toindependently assess only that incomewhich

comes to his notice subsq. if he intends to do so afresh notice u/s 148 would be necessary.

Ranbaxy Lab. Ltd. VCIT (2011) 336 ITR 136(Delhi)

101 In case of change of incumbent of an office,can the successor AO initiate reassessmentproceeding on the grounds of change ofopinion in relation to an issue which thepredecessor AO, who had framed theoriginal assessment, had already applied hismind & came to a conclusion?

The Guj. High court observed that thr was nothingon records to show that income had escapedassessment in respect of which the successor AOreceived info. Therefore, notice of re-assessmentwas, therefore NOT Valid.

H. K. Buildcon Ltd VITO (2011) 339 ITR 535(Guj.)

102 Would the word shall be issued used insec. 149 means mere signing of notice bythe AO or handing over of the said noticein hands of the proper officer for serving itto the assesses to constitute a valid noticeissued within the prescribed time limit?

The Guj. High court observed that the expressionshall be issued means the date of issue onwhich the same were handed overfor service tothe proper officer/post officer, NOT the dateon which such notice was signed by the AO.

Kanubhai M. Pate(HUF) V. Hiren Bhattor his Successors tooffice (2011) 334 ITR0025 (Guj.)

103 Can the AO issue notice u/s 154 to rectify amistake apparent from records in theintimation u/s 143(1), after issue of a validnotice u/s 143(2)?

On the issue, the P & H High court concluded thatproceeding u/s 154 for rectification ofintimation u/s 143(1) CANNOT be initiatedafterissuance of notice u/s 143(2) by the AO to theassesses.

Haryana StateHandloom &Handicraft Corpn. LtdV. CIT (2011) 336 ITR694 (P&H)

104 Would the doctrine of merger apply forcalculating the period of limitation u/s154(7)?

After merge, the order of the original authorityceases to exist & the order of the appellateauthority prevails. Thus, the period of limitationof 4 years for the purpose of sec. 154(7) has to becounted from the date of the order of theAppellate Authority.

CIT V. Tony ElectronicsLtd(2010) 320 ITR 378(Del.)

(M) Appeal & Revision105 Can an assessee file a revision petition u/s

264, if the revised return to correct aninadvertent error apparent from record inthe original return, is filed after the timelimit specified u/s 139(5) on account of theerror carrying to the notice of the assesseafter the specified time limit?

The high court further directed the AO to considerthe rectification application filed by the assesseu/s 154 as a fresh application recd. on the date ofservice of this order & dispose of the rectificationappl. on its own merits, without awaiting the resultof the revision proceeding before the comm. ofI/tax on remand, at the earliest.

Sanchit Software &Solution Pvt. Ltd. vCIT (2012) 349 ITR 404(Bom.)

106 Would the period of limitation for an orderpassed u/s 263 be reckoned from theoriginal order passed by the AO u/s 143(3)or from the order of re-assessment passedu/s 147, whr the subject matter of revisionis different from the subject matter ofreassessment u/s 147?

The court held that, period of limitation in respectof the order of comm. u/s 263 in respect of amatter which does NOT form the subject matter ofreassessment shall be reckoned from the dateof the original order u/s 143 (3)& NOT fromthe date of reassessment order u/s 147.

CIT V. ICICI Bank Ltd(2012) 343 ITR 74(Bom.)


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107 Can the CIT initiate revision proceeding u/s263 on the grounds that the AOs order NOTinitiating penal proceeding was erroneousand prejudicial to the interest of therevenue, in a case where non initiation ofpenal proceeding was a pre-condt. forsurrender of income by the assesses?

The High court observed that, as perusal of theoffice note issued by the AO, it was clear that theassesses had made surrender of income with aclear condt. that no penal action u/s 271(1) (c)would be initiated. Once that was so, the CITCANNOTtake a different view & levy penalty.

Subhash Kr. Jain VCIT (2011) 335 ITR 364(P&H)

108 Can an assesses make an additional/newclaim before an appellate authority whichwas not claimed by the assesses in the ROI(though he was legally entitled to),

otherwise then by way of filing a revisedROI?

The Bombay high court held that additional/newgrounds can be raised before the appellateauthority even otherwise than by way of filingROI.

CIT V. Pruthvi Brokers& Shareholders (2012208 Taxman 498 (Bom.)

109 Does the Appellate Tribunal have the powerto review or re-appreciate the correctness ofits earlier decision u/s 254(2)?

The High Court held that re-appreciation of thecorrectness of its earlier decision on merit, whichis beyond the scopeof the power conferred u/s254(2).

CIT V. Earnest ExportLtd(2010) 323 ITR 577(Bom.)

110 Can the Tribunal exercise its power ofrectification u/s 254(2) to recall its order inentirety?

The Tribunal does NOT have inherent power toreview its order on merit; it can recall its order forthe purpose of correcting a mistake apparent fromthe records. While applying the decision of Apexcourt in case of Honda Siel Power Products Ltd. inthis case the high court held that the tribunal,while exercising the power of rectification u/s254(2), can recall its order in entirety if it issatisfied that prejudice has resulted to the partywhich is attributable to the Tribunals mistake or

error and error committed is apparent.

Lachman Dass BhatiaHing Wala (P) Ltd. VACIT (2011) 330 ITR 243(Delhi) [FB]

111 Does the High court have on inherent powerunder the Income Tax act, 1961 to reviewan earlier order passed on merit?

The Power of re-admission/restoration of theappeal is always enjoyed by the High court.However, such power to restore the appealCANNOTbe treated to be a power to reviewtheearlier order passed on Merit.


Deepak Kumar GargVCIT (2010) 327 ITR 448(MP)

(N) Penalties112 Can the repayment of loan by passing mere

adjusting book entries by the assessee betaken to be in contravention of prov. of sec.269T to attract penalty u/s 271E?

Since the tranx is bonafide in nature being anormal biz. Tranx & has NOT been made with aview to avoid tax, it was held that assesses hasshown reasonable cause for the failure u/s 269T, &therefore, as per the prov. of sec. 273B, NOpenalty u/s 271E could be imposed on theassessee for contravening the prov. of sec. 29T.

CIT V. TriumphInternational Finance(I) Ltd.(2012) 345 ITR270 (Bom.)

113 Can penalty u/s 271(1) be imposed if anassessee had wrongly claimed deduction ofprov. made for payment of gratuity in itsROI, though the same was shown asdisallowed u/s 40A (7) in the statement ofparticulars filed along with tax audit reportu/s 44AB?

The apex court held that the assesse hadcommitted an inadvertent & bona fide error andhad not intended to or attempted to either concealits income or furnish inaccurate particulars.Therefore, the apex court held that imposition ofpenalty on the assesse was not justified & itreversed the decision of the high court.

Price waterhousecooper Pvt. Ltd. v. CIT(2012) 348 ITR 306 (SC)

114 Can reporting of income under a differenthead be considered as tantamount tofurnishing of inaccurate particular orsuppression of facts to attract penalty u/s271(1) ?

The high court in light of case of SC in CIT v.Reliance Petro Product Pvt. Ltd. (2010), held thatmere reporting of income under a different headwould not characterize the particular reported as

inaccurate to attract levy of penalty u/s 271(1).

CIT v.Amit Jain (2013351 ITR 74 (Delhi)

115 Can penalty u/s 271(1) be imposed onthe ground of disallowance of a certaindeduction under chapter VI-A owing to the

subsequent decision of the SC?

The Bombay high court affirmed the decision ofappellate tribunal deleting the penalty u/s 271(1) on the ground that the additions made on

account of disallowance were neither due to thefailure on the part of the assesse to furnishaccurate particulars nor on account of furnishinginaccurate particulars.

CIT v. CeletronixPower India Pvt. Ltd(2013) 352 ITR 70

(Bom.)

116 In the case of an assessee liable to payminimum alternate tax u/s 115JB, canpenalty u/s 271(1) be imposed onaccount of addition made in respect ofcertain c/expenditure, treated by theassessee as r/expenditure, if, even aftersuch addition to t/income, the assesse is stillassessable u/s 115JB?

The high court held that merely for the reason thatthe assesse co. had claimed the exp. to berevenue will not render it liable to penalproceeding, when there has been no concealmentof income.

CIT v.Amtek Auto Ltd(2013) 352 ITR 394


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117 Can penalty u/s 271(1) (c) for concealmentof income be imposed in a case where theassesses has raised a debatable issue?

On the issue, the high court observed that, mereraising of a debatable issue would NOT amount toconcealment of income or furnishing inaccurateparticulars and therefore, penalty u/s 271(1)(c) CANNOT be imposed.

Indersons Leather (P)Ltd. V. CIT (2010) 328ITR 167 (P&H)

118 Can the penalty u/s 271(1)(c) be imposedwhr the assessment is made by estimatingthe net profit at a higher % applying theprov. Of sec. 145?

The High court held that in order to imposepenalty thr has to be concealment of particular ofincome of assesses or the assesses must havefurnished inaccurate particulars of his income.Here assesses CANNOT be held guilty offurnishing particulars.

CIT V. Vijay KumarJain(2010) 325 ITR 378(Chhattisgarh)

119 Would making an incorrect claim in the ROIper se amt. to concealment of particular ofincome or furnished inaccurate particularsfor attracting the penal prov. u/s 271(1)(c),when no info. Given in ROI is found to beincorrect?

The Apex court held that a mere making of aclaim, which is NOT sustainable in law, by itself,will NOT amt. to furnishing inaccurateparticularsreg. the income of assesses.

CIT V. Reliance PetroProduct (P) Ltd(2010322 ITR 158 (SC)

(O) Offence & Prosecution120 Would prosecution proceeding u/s 276CC be

attracted whr the failure to furnish return intime was not willful?

In this case, it was observed that thr weresufficient grounds for delay in filling the ROI &such delay was NOT willful. Therefore, prosecutionproceeding u/s 276CC are NOT attracted insuch a case.

UOI V. BhavechaMachinery & others(2010) 320 ITR 263 (MP)

(P) TDS121 Do the tips collected by hotel & disbursed to

employee constitute salary to attract TDS

u/s 192?

The High court held that when tips were chargedto the bill & was subseq. Disbursed to the

employees, then tips would constitute incomewithin the meaning of sec. 2(24) & it wasobligatory upon the co. to deduct TDSfrom suchpayments u/s 192.


CIT (TDS) V. ITC Ltd(2011) 338 ITR 598

(Del.)

122 Can an assessee carrying on commissionagency biz. (i.e. biz. of arrangingtransportation of goods through lorriesowned by other transporters) be made liableto deduct tax u/s 194C, in respect of amountrecd. from clients & passed on to the lorryowner/transporter (after retaining hisbooking comm.)?

The high court, applying the rationale of the aboveruling to the case on hand, held that, in this casealso, the assesse mainly acted as an intermediaryor facilitator for which he recd. commission, &hence, he was not the person responsible formerely the payment in terms of sec. 194C.

CIT v. HardarshanSingh (2013) 350 ITR0427 (Delhi)

123 Can services rendered by a hotel to itscustomer in providing hotel room withvarious facilities/amenities (Like

housekeeping, bank counter, beauty salon,car rental, etc) amt. to carrying out anywork to attract TDS u/s 194C?

However, facilities or amenities made available bya hotel to its customer do NOT fall within themeaning of work u/s 194C & therefore TDS u/s

194C are NOT attracted.

East India Hotels LtdV. CBDT (2010) 320 ITR526 (Bom.)

124 Can discount given to stamp vendor onpurchase of stamp papers be treated as

commission or brokerage to attract theprov. for TDS u/s 194H?

The SC affirmed the above decision of the highcourt holding that the given tranx is a sale & thediscount given to stamp vendors for purchasingstamp in bulk qty is in the nature of cash discount& consequently sec. 194H has no applicationinthis case.

CIT v. Ahmedabadstamp vendorsassociation (2012) 348ITR 378 (SC)

125 Can discount given on supply of SIM cards &recharge coupons by a telecom co. to itsdistributors under a prepaid scheme betreated as commission to attract TDSprovision u/s 194H?

The High court held that the distributor only actedas a middleman on behalf of the assesses forprocuring & retaining customer. Therefore, thediscount given to him was within the meaning ofcommission u/s 194H on which TDS wasdeductible.

Vodafone Essarcellular Ltd. V. ACIT(TDS) (2011) 332 ITR255 (Kerala)

126 Can difference betw. Published Price &Minimum fixed commercial price be treatedas additional special commission in thehands of the agents of an airline co. toattract TDS provision u/s 194H?

The High court held that TDS was NOTdeductible on the difference betw. the actualsale price & the minimum fixed commercial price,even though the amount earned by the agent over& above minimum fixed commercial price would betaxable as income in his hand.


Qatar Airways V. CIT(2011) 332 ITR 253(Bom.)

127 Whether retention of a % of advertisingcharges by the advertising agencies for thepayment to Doordarshan for telecastingadvertisement, would attract TDS u/s 194H?

It was held when Agent pays 85% of advertisingcharges collected by them from customer, & agentsimultaneously get paid comm. Of 15%, which heis free to appropriate as his income. So TDS oncomm.. charges of 15% has to be paid to

CIT V. Director, PrasarBharti (2010) 325 ITR205 (Ker.)


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Recent case law Module of ICAI iddharth ain

income tax Dept.128 In respect of a co-owned property, would

the threshold limit mentioned in sec. 194Ifor non-deduction of tax at source apply foreach co-owner separately or it is to beconsidered for the complete amt. of rentpaid to attract liability to deduct TDS?

Since payment of rent is made to each co-ownerby way of separate cheque & their share isdefinite, the threshold limit mentioned, in sec.194I has to be seen separately for each co-owner. Hence, the assesses would NOT be liableto deduct tax on the same & NO interest u/s 201is leviable.

CIT V. Senior ManagerSBI (2012) 206 Taxman607 (All.)

129 What is the nature of landing & parkingcharges paid by an airline co. to AAI & isTDS required thereof?

The landing & parking charges were definitelyRent within the meaning of the prov. Of sec.194I, as they were payment for the use of the

airport & TDS was req. to deducted.(Already asked in CA Finals Nov.,2011 attempt)

CIT V. Japan AirlinesCo. Ltd (2010) 325 ITR298 (Del.)

130 Can the payment made to contractors forhiring dumpers by an assesses engaged intransportation of building material, betreated as Rent for M/C or equipment toattract TDS u/s 194I?

The High court observed that the assesses hadgiven contract to the parties for the transportationof goods & had NOT taken M/C & equipment onrent. Such payment could NOT be termed as rentpaid for the use of M/C & Prov. Of sec. 194Iwould, therefore, NOT be applicable.

CIT (TDS) V. ShreeMahalaxmi TransportCo.(2011) 339 ITR 484(Guj.)

131 Can the Intt. u/s 234B & C, be levied on thebasis of intt. Calculation given in thecomputation sheet annexed to theassessment order, though the direction tocharge such intt. is not mentioned in theassessment order?

The Court held that the levy of intt. & basisforarriving at the quantum thereof have beenexplicitly indicatedin the computation sheet&therefore, such intt. has to be paid.

CIT V. Assam MineraDevelopmentCorporation Ltd(2010320 ITR 149 (Gau.)

(Q) Wealth Tax132 Whether the Best judgment assessment

order passed without giving the assesses anopportunity of being heard is valid in a case

whr the notice u/s 16(4) has already beengiven?

It was held that second prov. to sec. 16(5) comesinto operation & NO further notice oropportunity to be heard is req. to be given to

the assesses.

CWT V. Motor GeneraFinance Ltd (2011) 332ITR 1 (Del.)

133 Is wealth tax leviable on the value of houseunder construction where the constructionwas still incomplete on the relevantvaluation date?

Incomplete building neither falls within thedefinition of a building, as contemplated u/s2(ea) of WT Act nor within the purview of urbanland as excluded by explanation 1(b). Hence, insuch a case, the value of house under constructionincl. investment on construction is NOT liable towealth tax. Therefore, land & incompletebuilding thereon is NOT an asset.


Smt. Neena JainV. CIT(2011) 330 ITR 157(P&H)

Note: - Refer to Module of ICAI for more clarity, its only meant for quick revision.Once counter check each case laws decision at your end too.

Tips:-

Section 54 & 80 are beneficial section permitting certain deduction to assessee tax payer, so suchsection should be construed liberally & any restriction placed should also be construed in areasonable & purposive manner to advance the objective of the provision.

To interpret a section in right sense/manner its important to understand the intention of lawmakerbehind its introduction.

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203623 61055 summary of case laws of dt 4 may nov 14 exams by ca siddharth jain

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