Saturday, September 27, 2014

Important Verdict Of The Supreme Court On Levy Of Surcharge U/s 113 Proviso In Search Cases

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The following important judgement is available for download at itatonline.org.


CIT vs. Vatika Township (Supreme Court – Full Bench)

S. 113 Proviso inserted by FA 2002 w.e.f. 01.06.2002 to impose surcharge in search assessments is not clarificatory or retrospective. Suresh Gupta 297 ITR 322 (SC) overruled

A search and seizure operation u/s 132 was conducted on 10.02.2001 pursuant to which an assessment order for the block period from 01.04.1989 to 10.02.2000 was passed on 28.02.2002 at a total undisclosed income of Rs.85 lakhs. Tax was charged at the rate prescribed in s. 113. Subsequently, a Proviso was inserted to s. 113 by the Finance Act 2002 w.e.f. 01.06.2002 to provide for the levy of surcharge at 10%. The AO took the view that the said amendment was clarificatory in nature and he levied surcharge by passing an order u/s 154. However, the Tribunal and High Court upheld the assessee's claim that the said amendment was prospective in nature and did not apply to block periods falling before 01.06.2002. However, the plea of the assessee was rejected by the Supreme Court in Suresh N. Gupta 297 ITR 322 (SC) (followed in (Rajiv Bhatara (SC)) and it was held that the said proviso is clarificatory in nature and applied to earlier block periods. When the present case reached the Supreme Court, the Bench was of the view that the issue ought to be referred to a larger Bench of 5 judges. HELD by the Full Bench of the Supreme Court:


(iv) There cannot be imposition of any tax without the authority of law. Such a law has to be unambiguous and should prescribe the liability to pay taxes in clear terms. If the concerned provision of the taxing statute is ambiguous and vague and is susceptible to two interpretations, the interpretation which favours the subjects, as against there the revenue, has to be preferred. This very principle is based on the "fairness" doctrine as it lays down that if it is not very clear from the provisions of the Act as to whether the particular tax is to be levied to a particular class of persons or not, the subject should not be fastened with any liability to pay tax.


(vi) Consequently, the conclusion in Suresh N. Gupta 297 ITR 322 (SC) treating the proviso to s. 113 as clarificatory and giving it retrospective effect is not correct and is overruled.


Regards,

 

Editor,

 

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Latest:

ACIT vs. M/s. Veena Developers (ITAT Mumbai)

S. 253: Filing appeals in disregard & wilful disobedience to the law laid down constitutes gross abuse of power and deserves to be punished for contempt of court and by award of exemplary costs. Action not pursued in view of written apology of concerned officials

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ITR (TRIB) Volume 34 : Part 4 (Issue dated : 15-9-2014)

 

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))--PRINT AND ONLINE EDITION

 

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Capital gains --Development agreement--Cost of construction of flat--Assessing Officer relying upon valuation report by District Valuation Officer of another building--Not acceptable--Matter remanded for ascertaining cost of construction--Cost of acquisition--Whether vacant site transferred along with building--Matter remanded--Income-tax Act, 1961, s. 45(2)-- ITOv. Dr. M. Varalakshmi (Hyd) . . . 232

----Exemption--Transfer--Transaction consisting of sale as well as gift--Gift cannot be considered as transfer for purpose of capital gains under section 47--Sale consideration alone liable for computation of capital gains--Income-tax Act, 1961, s. 47-- ITO v. V. Jayaraman (Chennai) . . . 243

Capital or revenue expenditure --Professional fees paid for amalgamation of companies--Deductible under section 37(1)--Income-tax Act, 1961, s. 37(1)-- Express Airotronics P. Ltd. v. Asst. CIT (Mumbai) . . . 219

Charitable purpose --Exemption--Disqualification--Construction of building on land belonging to trustee by using income of trust--Violation of provisions of section 13(1)(c)--Exemption not allowable--Income-tax Act, 1961, s. 13(1)(c)-- Asst. DIT (Exemptions) v. Natya Sankalpaa(Chennai) . . . 226

Penalty --Concealment of income--Best judgment assessment--Penalty not permissible in case of estimation of income--Income-tax Act, 1961, s. 271(1)(c)-- Raja Ram Contractor v. Asst. CIT (Chandigarh) . . . 239

----Failure to file return of tax deducted at source within specified time--Records including financial agreements, statements, challans impounded by Department during survey--Reasonable cause for failure--Penalty deleted--Income-tax Act, 1961, s. 272A(2)(k)-- Sri Sun City Developers v. Addl. CIT (Chennai) . . . 223

PRINT EDITION

Volume 34 : Part 4 (Issue dated : 15-9-2014)

SUBJECT INDEX TO CASES REPORTED

Accounting --Rejection of accounts--Duty of assessee to furnish correct details and accounts before Assessing Officer--Internal dispute between directors of company not ground for not furnishing proper accounts--Assessment on estimation basis in absence of accounts justified--Income-tax Act, 1961-- Deputy CIT v. Tesla Technologies and Oxidation P. Ltd. (Mumbai) . . . 452

----Rejection of accounts--Failure by Department to point out defects in account--Rejection of accounts without pointing out defects not justified--Income-tax Act, 1961-- Deputy CIT v. Tesla Technologies and Oxidation P. Ltd. (Mumbai) . . . 452

Appeal to Appellate Tribunal --Maintainability--Resident company--Appeal to be signed by managing director or director at time of filing of appeal--Appeal signed by unauthorised person not maintainable--Income-tax Act, 1961, s. 253-- Suvistas Software P. Ltd. v. ITO(Hyd) . . . 539

Appeal to Commissioner (Appeals) --Opportunity of hearing not given to Assessing Officer--Violation of natural justice--Order to be quashed--Matter remanded for grant of adequate opportunity of hearing--Income-tax Act, 1961, s. 250(2)(b)-- Asst. CIT v. Spice Jet Ltd.(Delhi) . . . 520

----Power to admit additional evidence--Assessing Officer giving time of five days to file evidence--Not sufficient--Assessing Officer completing assessment without giving sufficient opportunity--Additional evidence to be admitted--Income-tax Rules, 1962, r. 46A(1)(d)-- Asst. CIT v. Bahubali Dyes Ltd. (Delhi) . . . 487

Business expenditure --Business--Setting up of business and commencement of business--Distinction--Business involving production of sponge iron--Payments made for insurance, interest on working capital and upfront fees, for procurement of raw materials for commencement of production--Related to business--Revenue expenditure--Allowable--Income-tax Act, 1961-- Maithan Ispat Ltd. v. Deputy Commissioner of Income-tax (Kolkata) . . . 549

----Disallowance--Failure to deduct tax at source--Amendment in 2012 to effect assessee not to be deemed in default if recipient has filed return of income and paid taxes within stipulated time--Clarificatory--Matter remanded for verification whether payees had paid tax in time--Income-tax Act, 1961, s. 40(a)(ia)-- ITO v. Dr. Jaideep Kumar Sharma (Delhi) . . . 565

----Disallowance--Payments liable to deduction of tax at source-- Provision brought by Finance Act, 2012 that assessee not in default where income in question declared by recipient and tax paid thereon--Declaratory and curative in nature and has retrospective effect from April 1, 2005--Matter remanded--Income-tax Act, 1961, s. 40(a)(ia)-- Rajeev Kumar Agarwal v. Addl. CIT (Agra) . . . 479

----Disallowance--Payments liable to tax deduction at source--Amendment brought in 2010 retrospective--Payment cannot be disallowed if tax deducted at source paid before due date prescribed for filing return under section 139(1) of Act--Income-tax Act, 1961, ss. 40(a)(ia), 139(1)-- Indo Stosec P. Ltd. v. ITO (Mumbai) . . . 543

Capital gains --Conversion of shares held as “stock-in-trade†to “investment†on first day of accounting year and sale of shares immediately--Intention to avail of benefit of exemption and concessional rate of tax--Sale of shares to be assessed as business income--Income-tax Act, 1961, ss. 10(38), 111A-- Indo Stosec P. Ltd. v. ITO (Mumbai) . . . 543

Cash credits --Share capital--Evidence submitted by assessee establishing identity, genuineness and creditworthiness of shareholders--Failure by Department to rebut evidence--Share premium not to be treated as undisclosed income--Income-tax Act, 1961, s. 68-- Asst. CIT v. Bahubali Dyes Ltd. (Delhi) . . . 487

Charitable purpose --Charitable trust--Exemption--Remuneration paid to trustee at about one per cent. of total value of activities of trust--Not excessive or unreasonable--Remuneration allowed for similar services in earlier assessment year--Disallowance to be deleted--Income-tax Act, 1961, ss. 12AA, 13(1)(c), 13(3)(cc)-- PNR Society for Relief and Rehabilitation of the Disabled Trust v. Deputy DIT ( Exemption) (Ahd) . . . 465

----Exemption--Whether assessee society granting benefits to executive members instead of public at large--Matter remanded--Income-tax Act, 1961, ss. 11, 12A, 13(1)(c), (3)-- Deputy DIT (Exemptions) v. Nagarathu Vaisiyargal Sangam (Chennai) . . . 458

Co-operative society --Special deduction under section 80P(2)(a)(i)--Assessee not a credit co-operative bank--Exclusion clause not applicable--Entitled to deduction--Income-tax Act, 1961, s. 80P(2)(a)(i), (4)-- Shree Laxmananda Multipurpose Co-operative Society Ltd. v. ITO(Bangalore) . . . 472

Depreciation --Rate of depreciation--Components of windmill--Electrical cables, fittings and other electrical works connected with windmill single composite unit--Eligible for depreciation at rate of 80 per cent.--Income-tax Act, 1961-- Asst. CIT v. Kutti Spinners P. Ltd. (Chennai) . . . 470

Dispute Resolution Panel --Delegating power to Assessing Officer--Violation of section 144C--Irregular exercise of power--Matter remanded to Dispute Resolution Panel--Income-tax Act, 1961, s. 144C(8)-- Swiber Offshore Construction Pte. Ltd. v. Addl. DIT (International Taxation) (Mumbai) . . . 522

Exemption --Export oriented undertaking--Approved by Government--Tribunal granting exemption under section 10B in earlier years--Exemption allowable--Income-tax Act, 1961, s. 10B-- Asst. CIT v. Vision 2 K+Inc (Hyd) . . . 510

Export --Exemption--Assessee fulfilling all conditions necessary for purpose of claiming exemption under section 10A--Quoting wrong provision of law not reason to deny relief--Assessee entitled to exemption under section 10A--Income-tax Act, 1961, s. 10A-- ITO v. Accentia Technologies Ltd. (Mumbai) . . . 505

Income --Assessee receiving income for telecasting and broadcasting programmes--Assessee not holding licence in relevant year to telecast--Amount not income unless assessee carrying out specific purpose for which sum received--Assessing Officer to examine if amount received contained income element--Matter remanded--Income-tax Act, 1961, ss. 4, 5, 11-- A. Y. Broadcast Foundation v. ITO (Cochin) . . . 513

International transactions --Arm’s length price--Determination--Software development services--Selection of comparables--Companies having high turnover, companies not qualifying employee cost filter and functionally dissimilar cannot be treated as comparable--Income-tax Act, 1961, s. 92CA-- Axsys Healthtech Ltd. v. Deputy CIT (Hyd) . . . 583

----Arm’s length price--Determination--Transactional net margin method--Software development services--Determination of operating cost--Contention of assessee that expenditure incurred by it for developing future products should be excluded from operating cost--Failure by Department to consider or comment upon assessee’s contention--Matter remanded to Assessing Officer for examination afresh--Income-tax Act, 1961, s. 92CA--Axsys Healthtech Ltd. v. Deputy CIT (Hyd) . . . 583

Non-resident --Royalty--Fees for included services--Taxability in India--Assessing Officer taking view that assessee liable to pay “royalty†--Changing view in subsequent two years that assessee liable to pay “royalty†and “fee for included services†--Matter not examined in context of terms used in Double Taxation Avoidance Agreement--Matter remanded--Income-tax Act, 1961, s. 9(1)(vi)--Double Taxation Avoidance Agreement between India and the United States of America, art. 12-- AC Nielsen Corporation ORG Marg P. Ltd. v. Asst. CIT (International Taxation) (Mumbai) . . . 572

Revision --Commissioner--Powers--Commissioner cannot invoke jurisdiction on ground of improper enquiry by Assessing Officer or substitute his opinion for that of Assessing Officer--Order not erroneous and prejudicial to Revenue--Commissioner not justified in cancelling assessment--Income-tax Act, 1961, s. 263-- Gopal Narayan Singh v. Deputy CIT(Patna) . . . 461

Search and seizure --Assessment--Loss--Carry forward--Notice under section 153A to assessee--Effect--Pending assessments abate--Return filed pursuant to notice under section 153A--Carry forward of loss not to be disallowed for belated filing of return--Income-tax Act, 1961, ss. 153A(1), 139(1)-- Maithan Ispat Ltd. v. Deputy Commissioner of Income-tax (Kolkata) . . . 549

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between India and the United States of America

Art. 12 --Non-resident--Royalty--Fees for included services--Taxability in India--Assessing Officer taking view that assessee liable to pay “royalty†--Changing view in subsequent two years that assessee liable to pay “royalty†and “fee for included services†--Matter not examined in context of terms used in Double Taxation Avoidance Agreement--Matter remanded-- AC Nielsen Corporation ORG Marg P. Ltd. v. Asst. CIT (International Taxation) (Mumbai) . . . 572

Income-tax Act, 1961

S. 4 --Income--Assessee receiving income for telecasting and broadcasting programmes--Assessee not holding licence in relevant year to telecast--Amount not income unless assessee carrying out specific purpose for which sum received--Assessing Officer to examine if amount received contained income element--Matter remanded-- A. Y. Broadcast Foundation v. ITO (Cochin) . . . 513

S. 5 --Income--Assessee receiving income for telecasting and broadcasting programmes--Assessee not holding licence in relevant year to telecast--Amount not income unless assessee carrying out specific purpose for which sum received--Assessing Officer to examine if amount received contained income element--Matter remanded-- A. Y. Broadcast Foundation v. ITO (Cochin) . . . 513

S. 9(1)(vi) --Non-resident--Royalty--Fees for included services--Taxability in India--Assessing Officer taking view that assessee liable to pay “royalty†--Changing view in subsequent two years that assessee liable to pay “royalty†and “fee for included services†--Matter not examined in context of terms used in Double Taxation Avoidance Agreement--Matter remanded-- AC Nielsen Corporation ORG Marg P. Ltd. v. Asst. CIT (International Taxation) (Mumbai) . . . 572

S. 10(38) --Capital gains--Conversion of shares held as “stock-in-trade†to “investment†on first day of accounting year and sale of shares immediately--Intention to avail of benefit of exemption and concessional rate of tax--Sale of shares to be assessed as business income-- Indo Stosec P. Ltd. v. ITO (Mumbai) . . . 543

S. 10A --Export--Exemption--Assessee fulfilling all conditions necessary for purpose of claiming exemption under section 10A--Quoting wrong provision of law not reason to deny relief--Assessee entitled to exemption under section 10A-- ITO v. Accentia Technologies Ltd. (Mumbai) . . . 505

S. 10B --Exemption--Export oriented undertaking--Approved by Government--Tribunal granting exemption under section 10B in earlier years--Exemption allowable-- Asst. CIT v. Vision 2 K+Inc (Hyd) . . . 510

S. 11 --Charitable purpose--Exemption--Whether assessee society granting benefits to executive members instead of public at large--Matter remanded-- Deputy DIT (Exemptions) v. Nagarathu Vaisiyargal Sangam (Chennai) . . . 458

----Income--Assessee receiving income for telecasting and broadcasting programmes--Assessee not holding licence in relevant year to telecast--Amount not income unless assessee carrying out specific purpose for which sum received--Assessing Officer to examine if amount received contained income element--Matter remanded-- A. Y. Broadcast Foundation v. ITO (Cochin) . . . 513

S. 12A --Charitable purpose--Exemption--Whether assessee society granting benefits to executive members instead of public at large--Matter remanded-- Deputy DIT (Exemptions) v. Nagarathu Vaisiyargal Sangam (Chennai) . . . 458

S. 12AA --Charitable purpose--Charitable trust--Exemption--Remuneration paid to trustee at about one per cent. of total value of activities of trust--Not excessive or unreasonable--Remuneration allowed for similar services in earlier assessment year--Disallowance to be deleted-- PNR Society for Relief and Rehabilitation of the Disabled Trust v. Deputy DIT(Exemption) (Ahd) . . . 465

S. 13(1)(c) --Charitable purpose--Charitable trust--Exemption--Remuneration paid to trustee at about one per cent. of total value of activities of trust--Not excessive or unreasonable--Remuneration allowed for similar services in earlier assessment year--Disallowance to be deleted-- PNR Society for Relief and Rehabilitation of the Disabled Trust v. Deputy DIT(Exemption) (Ahd) . . . 465

----Charitable purpose--Exemption--Whether assessee society granting benefits to executive members instead of public at large--Matter remanded-- Deputy DIT (Exemptions) v. Nagarathu Vaisiyargal Sangam (Chennai) . . . 458

S. 13(3) --Charitable purpose--Exemption--Whether assessee society granting benefits to executive members instead of public at large--Matter remanded-- Deputy DIT (Exemptions) v. Nagarathu Vaisiyargal Sangam (Chennai) . . . 458

S. 13(3)(cc) --Charitable purpose--Charitable trust--Exemption--Remuneration paid to trustee at about one per cent. of total value of activities of trust--Not excessive or unreasonable--Remuneration allowed for similar services in earlier assessment year--Disallowance to be deleted-- PNR Society for Relief and Rehabilitation of the Disabled Trust v. Deputy DIT(Exemption) (Ahd) . . . 465

S. 40(a)(ia) --Business expenditure--Disallowance--Failure to deduct tax at source--Amendment in 2012 to effect assessee not to be deemed in default if recipient has filed return of income and paid taxes within stipulated time--Clarificatory--Matter remanded for verification whether payees had paid tax in time-- ITO v. Dr. Jaideep Kumar Sharma (Delhi) . . . 565

----Business expenditure--Disallowance--Payments liable to deduction of tax at source-- Provision brought by Finance Act, 2012 that assessee not in default where income in question declared by recipient and tax paid thereon--Declaratory and curative in nature and has retrospective effect from April 1, 2005--Matter remanded-- Rajeev Kumar Agarwal v. Addl. CIT (Agra) . . . 479

----Business expenditure--Disallowance--Payments liable to tax deduction at source--Amendment brought in 2010 retrospective--Payment cannot be disallowed if tax deducted at source paid before due date prescribed for filing return under section 139(1) of Act-- Indo Stosec P. Ltd. v. ITO (Mumbai) . . . 543

S. 68 --Cash credits--Share capital--Evidence submitted by assessee establishing identity, genuineness and creditworthiness of shareholders--Failure by Department to rebut evidence--Share premium not to be treated as undisclosed income-- Asst. CIT v. Bahubali Dyes Ltd. (Delhi) . . . 487

S. 80P(2)(a)(i) --Co-operative society--Special deduction under section 80P(2)(a)(i)--Assessee not a credit co-operative bank--Exclusion clause not applicable--Entitled to deduction-- Shree Laxmananda Multipurpose Co-operative Society Ltd. v. ITO (Bangalore) . . . 472

S. 80P(4) --Co-operative society--Special deduction under section 80P(2)(a)(i)--Assessee not a credit co-operative bank--Exclusion clause not applicable--Entitled to deduction-- Shree Laxmananda Multipurpose Co-operative Society Ltd. v. ITO (Bangalore) . . . 472

S. 92CA --International transactions--Arm’s length price--Determination--Software development services--Selection of comparables--Companies having high turnover, companies not qualifying employee cost filter and functionally dissimilar cannot be treated as comparable-- Axsys Healthtech Ltd. v. Deputy CIT (Hyd) . . . 583

----International transactions--Arm’s length price--Determination--Transactional net margin method--Software development services--Determination of operating cost--Contention of assessee that expenditure incurred by it for developing future products should be excluded from operating cost--Failure by Department to consider or comment upon assessee’s contention--Matter remanded to Assessing Officer for examination afresh--Axsys Healthtech Ltd. v. Deputy CIT (Hyd) . . . 583

S. 111A --Capital gains--Conversion of shares held as “stock-in-trade†to “investment†on first day of accounting year and sale of shares immediately--Intention to avail of benefit of exemption and concessional rate of tax--Sale of shares to be assessed as business income-- Indo Stosec P. Ltd. v. ITO (Mumbai) . . . 543

S. 139(1) --Business expenditure--Disallowance--Payments liable to tax deduction at source--Amendment brought in 2010 retrospective--Payment cannot be disallowed if tax deducted at source paid before due date prescribed for filing return under section 139(1) of Act-- Indo Stosec P. Ltd. v. ITO (Mumbai) . . . 543

----Search and seizure--Assessment--Loss--Carry forward--Notice under section 153A to assessee--Effect--Pending assessments abate--Return filed pursuant to notice under section 153A--Carry forward of loss not to be disallowed for belated filing of return--Maithan Ispat Ltd. v. Deputy Commissioner of Income-tax (Kolkata) . . . 549

S. 144C(8) --Dispute Resolution Panel--Delegating power to Assessing Officer--Violation of section 144C--Irregular exercise of power--Matter remanded to Dispute Resolution Panel--Swiber Offshore Construction Pte. Ltd. v. Addl. DIT (International Taxation) (Mumbai) . . . 522

S. 153A(1) --Search and seizure--Assessment--Loss--Carry forward--Notice under section 153A to assessee--Effect--Pending assessments abate--Return filed pursuant to notice under section 153A--Carry forward of loss not to be disallowed for belated filing of return--Maithan Ispat Ltd. v. Deputy Commissioner of Income-tax (Kolkata) . . . 549

S. 250(2)(b) --Appeal to Commissioner (Appeals)--Opportunity of hearing not given to Assessing Officer--Violation of natural justice--Order to be quashed--Matter remanded for grant of adequate opportunity of hearing-- Asst. CIT v. Spice Jet Ltd. (Delhi) . . . 520

S. 253 --Appeal to Appellate Tribunal--Maintainability--Resident company--Appeal to be signed by managing director or director at time of filing of appeal--Appeal signed by unauthorised person not maintainable-- Suvistas Software P. Ltd. v. ITO (Hyd) . . . 539

S. 263 --Revision--Commissioner--Powers--Commissioner cannot invoke jurisdiction on ground of improper enquiry by Assessing Officer or substitute his opinion for that of Assessing Officer--Order not erroneous and prejudicial to Revenue--Commissioner not justified in cancelling assessment-- Gopal Narayan Singh v. Deputy CIT (Patna) . . . 461

Income-tax Rules, 1962

R. 46A(1)(d) --Appeal to Commissioner (Appeals)--Power to admit additional evidence--Assessing Officer giving time of five days to file evidence--Not sufficient--Assessing Officer completing assessment without giving sufficient opportunity--Additional evidence to be admitted-- Asst. CIT v. Bahubali Dyes Ltd. (Delhi) . . . 487

 


High Court Irked By ITAT Remand + Dept Apologizes For Wilful Disobedience Of Law

Dear Subscriber,

 

The following important judgements are available for download at itatonline.org.


Coca-Cola India Private Limited vs. ITAT (Bombay High Court)

S. 254(1): Unnecessary remand by the ITAT causes prejudice and amounts to a failure to exercise jurisdiction

The Tribunal should not have refused to consider and decide the issue relating to service charges, more so, when an identical view taken by it earlier has not found favour of this Court. This Court repeatedly reminded the Tribunal of its duty as a last fact finding authority of dealing with all factual and legal issues. The Tribunal failed to take any note of the caution which has been administered by this Court and particularly of not remanding cases unnecessarily and without any proper direction. A blanket remand causes serious prejudice to parties. None benefits by non-adjudication or non-consideration of an issue of fact and law by an Appellate Authority and by wholesale remand of the case back to the original authority. This is a clear failure of duty which has to be performed by the Appellate Authority in law. Once the Appellate Authority fails to perform such duty and is corrected on one occasion by this Court, and in relation to the same assessee, then, the least that was expected from the Tribunal was to follow the order and direction of this Court and abide by it even for this later assessment year. If the same claim and which was dealt with by the Court earlier and for which the note of caution was issued, then, the Tribunal was bound in law to take due note of the same and follow the course for the later assessment years. We are of the view that the refusal of the Tribunal to follow the order of this Court and equally to correct its obvious and apparent mistake is vitiated as above. It is vitiated by a serious error of law apparent on the face of the record. The Tribunal has misdirected itself completely and in law in refusing to decide and consider the claim in relation to service charges.


ACIT vs. M/s. Veena Developers (ITAT Mumbai)

S. 253: Filing appeals in disregard & wilful disobedience to the law laid down constitutes gross abuse of power and deserves to be punished for contempt of court and by award of exemplary costs. Action not pursued in view of written apology of concerned officials

(i) This case is one of gross misuse of powers by the lower authorities. The AO in complete disregard and disobedience to the orders of the Tribunal as well as of the Hon'ble High Court again confirmed the disallowance while framing assessment u/s 153A without any incriminating material being found during the search. The act of negating the orders of the higher authorities in the very same case and thereby disallowing the claim of the assessee in the s. 153A proceedings without any new evidence or incriminating material being found amounts to the gross abuse of process of law in complete disregard and disobedience to the orders of the higher authorities and is an act which tends to lower down the authority of the higher courts. We may observe that if at all the issue will be decided by the Hon'ble Supreme Court in favour of the Revenue, then the orders of the lower authorities in that event would automatically merge in the order of the Supreme Court and implemented accordingly. However, the mere filing of appeal before the Hon'ble Supreme Court gives no authority to the AO to negate, disobey and disrespect to the orders of the higher authorities in the very same case. We may further notice that even after the decision of the CIT(A) in favour of assessee, the concerned CIT-Admin has given approval for filing the second round of appeal in the same case ignoring and in complete disregard and disobedience to the orders of the Tribunal as well as of the High Court vide which the issue in dispute has already been settled;


Regards,

 

Editor,

 

itatonline.org

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Latest

DCIT vs. SAP Labs India Pvt. Ltd (ITAT Bangalore)

AO's action of giving effect to a quashed s. 263 revision order termed "assault on rule of law" & "contempt of court"

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Flash - HC : Sec 234E fee prima facie 'penalty', not 'fee' for services; Grants interim stay


Madras HC grants stay on recovery proceedings u/s 234E and restrains Revenue from giving effect to provisions of Sec 234E; Discusses distinction between a fee and a penalty;​ Highlights that Sec 234E does not speak about services rendered to a class of assessees, neither regulatory nor compensatory, in the nature of a penalty and not fee for services rendered; Relies on SC decision in Ashwathanarayanan Setty vs. State of Karnataka, observes "fee" is distinct from "tax" or "penalty"; Contrasts Sec 271H (which provides for penalty not less than Rs 10,000 but which may extend to Rs 100,000 for failure to furnish statements) with Sec 234E (which provides for payment of fee of Rs 200 per day for the period assessee fails to deliver TDS statement) and expresses that Sec 234E prima facie appears to be "in the nature of penalty" for delay in delivering TDS statement​  : Madras HC

The ruling was delivered by a division bench of Justice R. Sudhakar and Justice G.M. Akbar Ali.

Senior Advocate A.L. Somayaji, Advocates R. Sivaraman, V. Perumal, R.Krishnamoorthy and A. Jenasenan argued on behalf of the assessee's. Revenue was represented by Standing Counsel T. Pramod Kumar Chopda.


Taxsutra Note:

Recently, Karnataka HC, Kerala HC, Bombay HC, Orissa HC and Madhya Pradesh HC have granted interim stay on recovery proceedings u/s 234E. 



[TS-574-HC-2014(MAD)]

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Section 80-IB(10)(d): Important Verdict Of The Bombay High Court

 

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The following important judgement is available for download at itatonline.org.


CIT vs. M/s Happy Home Enterprises (Bombay High Court)

S. 80-IB(10)(d): Limit on extent of commercial area of housing project inserted w.e.f. 1.4.2005 does not apply to projects approved before that date

S. 80-IB(10) was amended by the Finance (No.2) Act, 2004, w.e.f. 01.04.2005 by insertion of clause (d) to provide that the built up area of the shops and other commercial establishments included in the housing project should not exceed five percent of the aggregate built up area of the housing project or 2000 square feet, whichever is less. In one case, the assessee's housing project was approved before 31.03.2005 and completed before 01.04.2005 but the sale of some of the units in the said project took place after 01.04.2005 i.e. in A.Y. 2005-2006. In another case, the housing project was approved before 31.03.2005 but completed on or after 01.04.2005, but within the time-frame as laid down in s. 80-IB(10). The High Court had to consider whether the limitation inserted by the said clause (d) of s. 80-IB(10) applied to projects that were approved before 01.04.2005. HELD by the High Court:

(i) Clause (d) of s. 80-IB(10) is a condition that relates to and/or is linked with the approval and construction of the housing project and the Legislature did not intend to give any retrospectivity to it. At the time when the housing project is approved by the local authority, it decides, subject to its own rules and regulations, what quantum of commercial area is to be included in the said project. It is on this basis that building plans are approved by the local authority and construction is commenced and completed. It is very difficult, if not impossible to change the building plans and / or alter construction midway, in order to comply with clause (d) of s. 80-IB(10). It would be highly unfair to require an assessee to comply with s. 80-IB(10)(d) who has got his housing project approved by the local authority, before 31.03.2005 and has either completed the same before the said date or even shortly thereafter, merely because the assessee has offered its profits to tax in AY 2005-2006 or thereafter. It would be requiring the assessee to virtually do a humanly impossible task. This could never have been the intention of the Legislature and it would run counter to the very object for which these provisions were introduced, namely to tackle the shortage of housing in the country and encourage investment therein by private players. It is therefore clear that clause (d) of s. 80-IB (10) cannot have any application to housing projects that are approved before 31.03.2005.

(ii) The other reason for coming to the aforesaid conclusion is that if the revenue's contention is accepted, then an assessee following the project completion method of accounting, who has completed the housing project by complying with all the conditions as set out in s. 80-IB(10) as it stood prior to 01.04.2005 would be disentitled to claim the deduction merely because he offers his profits to tax in AY 2005-06 while an assessee following the work-in-progress method of accounting would be entitled to the deduction u/s 80-IB(10) upto AY 2004-05, and denied the same from AY 2005-06 and thereafter. It could never have been the intention of the Legislature that the deduction u/s 80-IB(10) available to a particular assessee would be determined on the basis of the accounting method followed. This would lead to startling results (Brahma Associates 333 ITR 289 (Bom), G.R. Developers 353 ITR 1 (Kar), Manan Corporation 356 ITR 44 (Guj) followed; Reliance Jute Industries 120 ITR 921, SEBI vs. Ajay Agarwal AIR 2010 SC 3466 distinguished).


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Non-Extension Of Due Date For Filing ROI Challenged In Bombay High Court


CAs/CSs Not Capable Of Arguing/ Deciding ‘Substantial Questions Of Law’: SC Full Bench

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The following important judgement is available for download at itatonline.org.


Madras Bar Association vs. UOI (Supreme Court – Full Bench)

The NTT Act "crosses the boundary" & is unconstitutional. CAs/CSs are specialists on accounts & facts and are not capable of arguing/ deciding 'Substantial Questions Of Law'

The Full Bench of the Supreme Court had to consider whether the National Tax Tribunals Act, 2005, which sought to take away the jurisdiction of the High Courts in tax matters was constitutional. The Full Bench has struck down the entire Act as being unconstitutional on the ground that though "tribunalization" has been allowed subject to safeguards, the NTT Act "crosses the boundary" and "encroaches the exclusive domain" of the High Courts. In the course of the judgement, the Supreme Court had to consider whether Chartered Accountants could be appointed Members of the NTT and whether s. 13(1) of the Act which permitted Chartered Accountants to represent a party to an appeal before the NTT was valid in law. It also had to consider the application by the Company Secretaries that they are equal in all respects to the CAs and should also be permitted to appear and plead before the NTT. HELD by the Full Bench:

A perusal of the reported judgements shows that while deciding tax related disputes, provisions of different laws on diverse subjects had to be taken into consideration. The Members of the NTT would most definitely be confronted with the legal issues emerging out of Family Law, Hindu Law, Mohammedan Law, Company Law, Law of Partnership, Law related to Territoriality, Law related to Trusts and Societies, Contract Law, Law relating to Transfer of Property, Law relating to Intellectual Property, Interpretation of Statutes, and other Miscellaneous Provisions of Law, from time to time. The NTT besides the aforesaid statutes, will not only have to interpret the provisions of the three statutes, out of which appeals will be heard by it, but will also have to examine a challenge to the vires of statutory amendments made in the said provisions, from time to time. They will also have to determine in some cases, whether the provisions relied upon had a prospective or retrospective applicability. Keeping in mind the fact, that in terms of s. 15 of the NTT Act, the NTT would hear appeals from the Income Tax Appellate Tribunal and the CESTAT only on "substantial questions of law", it is difficult for us to appreciate the propriety of representation, on behalf of a party to an appeal, through either Chartered Accountants or Company Secretaries, before the NTT. The determination at the hands of the NTT is shorn of factual disputes. It has to decide only "substantial questions of law". In our understanding, Chartered Accountants and Company Secretaries would at best be specialists in understanding and explaining issues pertaining to accounts. These issues would, fall purely within the realm of facts. We find it difficult to accept the prayer made by the Company Secretaries to allow them, to represent a party to an appeal before the NTT. Even insofar as the Chartered Accountants are concerned, we are constrained to hold that allowing them to appear on behalf of a party before the NTT, would be unacceptable in law. We accordingly reject the claim of Company Secretaries, to represent a party before the NTT. We simultaneously hold s. 13(1), insofar as it allows Chartered Accountants to represent a party to an appeal before the NTT, as unconstitutional and unsustainable in law.


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The Chamber of Tax Consultants vs. UOI (Bombay High Court)

Non-Extension Of due date for filing ROI will cause "substantial hardship". CBDT must look into practical difficulties & take "just and proper" decision before 30.09.2014


Non-Extension Of ROI Due Date Will Cause "Substantial Hardship": Bombay High Court

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The Chamber of Tax Consultants vs. UOI (Bombay High Court)

Non-Extension Of due date for filing ROI will cause "substantial hardship". CBDT must look into practical difficulties & take "just and proper" decision before 30.09.2014

The Petitioner filed a Writ Petition claiming that the action of the CBDT/ Government in issuing Notification dated 25.07.2014 to exercise the due date for filing the tax audit report u/s 44 AB but in not extending the due date for filing Income Tax Returns from 30.09.2014 to30.11.2014 was arbitrary. It was pointed out that great prejudice was being caused to the taxpayers by the said action of the CBDT. HELD by the High Court:

In view of the fact that the Madras High Court has already directed the CBDT to examine the representation of the assessees in general, before 30.09.2014, we feel it appropriate that the above representation of the Petitioners is also considered by the CBDT. Though we do not wish to express any view of the legalities of various issues involved, it does appear to us, from the arguments advanced, that there will be substantial hardship caused to the assessees, if the date of filing Return is not suitably extended. We hope and trust that CBDT will look into all these practical difficulties enumerated above and take a just and proper decision on the matter, before 30.09.2014, as already directed by the Madras High Court. In case the Petitioners are entitled to any further relief in view of the orders passed in various petitions filed in other High Courts, this order would not preclude the Petitioners from claiming the same.


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CBDT Orders On Transfers And Postings + DRP Constitution