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Tuesday, July 21, 2015

Judgments and Infomration [3 Attachments]


 
[Attachment(s) from Dipak Shah djshah1944@yahoo.com [SolapurCAs] included below]




CIT vs. SMCC Construction India Ltd (Delhi High Court)

by editor
Although the payment is spread over a period of 10 years, it does not make the Assessee the owner of the technical knowhow. The very nature of the license agreement is that it is not of a permanent nature. The benefit to the Assessee as a result of payment of royalty for technical knowhow was not of an enduring nature, and therefore cannot be construed to be a capital expenditure

CIT vs. SMCC Construction India Ltd (Delhi High Court)

COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS: ,
COUNSEL:
DATE: July 3, 2015 (Date of pronouncement)
DATE: July 15, 2015 (Date of publication)
AY: 2008-09, 2009-10, 2010-11
FILE: Click here to download the file in pdf format
CITATION:
S. 37(1): The very nature of a license agreement is that it is not of a permanent nature. The fact that the payment is spread over a period of 10 yearst does not make the assessee the owner of the technical knowhow. The payment is not of an enduring nature
The department argued before the High Court that the reliance placed by the ITAT on the decisions in Premier Automobiles Ltd. vs. CIT, (1984) 150 ITR 28 (Bom) and Travancore Sugars and Chemicals Ltd. vs. CIT (1966) 62 ITR 566 (SC), to hold that the payment of technical knowhow fees is revenue in nature is misplaced because in those cases the assessees were manufacturing units and therefore different considerations would apply. It was urged that inasmuch as the essential business of the Assessee was entirely dependent on the technical knowhow provided by SMCL, the benefit to the Assessee was of an enduring nature and the expenditure incurred should be treated as capital expenditure. HELD by the High Court dismissing the appeal:
A perusal of the TCA shows that the payment by the Assessee to SMCL is for the technical knowhow given to the Assessee as a Licensee. Although the payment is spread over a period of 10 years, it does not make the Assessee the owner of the technical knowhow. The very nature of the license agreement is that it is not of a permanent nature. The view taken by the CIT (Appeals), and concurred with by the ITAT, cannot in the circumstances be said to be improbable or contrary to the settled legal position. The Court, therefore, concurs with the view of the CIT (A) and the ITAT that the benefit to the Assessee as a result of payment of royalty for technical knowhow was not of an enduring nature, and therefore cannot be construed to be a capital expenditure.

Related Judgements

  1. Amway India vs. DCIT (ITAT Delhi Special Bench) 
    (i) The question whether expenditure is on capital or revenue account should be decided from the practical and business view point and in accordance with sound accountancy principles. The three tests applied to decide the nature of expenditure are the…Read more ›
  2. CIT vs. Asahi India Safety Glass Ltd (Delhi High Court) 
    The test of enduring benefit is not a certain or a conclusive test which the courts can apply almost by rote. What is required to be seen is the real intent and purpose of the expenditure and whether the expenditure results in creation of fixed capital for the assessee….
  3. Airport Authority of India vs. CIT (Delhi High Court – Full Bench) 
    The question that has to be considered is whether the expenditure is incurred for initiating the business or for removing an obstruction to facilitate an existing business. Expenditure incurred for running the business or working it, with a view to produce profits is in the nature of revenue expenditure….
  4. Pitney Bowes India Pvt Ltd vs. CIT (Delhi High Court) 
    In the books, the assessee treated the non-compete expenditure as capital in nature. Warding off competition in business even to a rival dealer will constitute capital expenditure. It is not necessary that the non-compete fee has to be paid to create monopoly rights. The non-compete agreement was to last…
  5. CIT vs. Eicher Ltd (Delhi High Court) 
    Non-compete compensation paid to an employee for an indefinite period is business expenditure and not capital expenditure as no capital asset or benefit of enduring benefit came into existence. While the lenght of the period of the covenant is important, it is not decisive. What is more important is…

Deccan Education Society vs. ACIT (ITAT Pune)

by editor
None of the persons who have deposed against the assessee by stating that they had given donation for the purpose of getting admission has complained to the Government for any such violation by the society. It is also to be noted that those persons have filled up the requisite proforma stating that they have given donation to the assessee voluntarily and not for seeking admission. Even some of them claimed deduction u/s.80G, a fact stated by the assessee and not controverted by the Departmental Representative. Therefore, changing the stands after their wards completed their education from the institutions run by the assessee trust are contradictory

Deccan Education Society vs. ACIT (ITAT Pune)

COURT:
CORAM: ,
SECTION(S):
GENRE:
CATCH WORDS: , , ,
COUNSEL:
DATE: July 13, 2015 (Date of pronouncement)
DATE: July 15, 2015 (Date of publication)
AY: 2008-09
FILE: Click here to download the file in pdf format
CITATION:
S. 10(23C) (iiiab): Law on treating an educational institution as running with a profit motive and treating the donations received by it as "capitation fee" on the basis of the allegation of the persons who have made the said donation explained
(i) The exemption u/s 10(23C) (iiiab) is available to the society as a whole which has been formed for the sole purpose of establishing, running, managing or assisting schools and colleges in different fields. It is the trust or the society that has to apply for registration and claim exemption. Had it been the intention of the legislature to grant exemption only to the institutions individually or independently and not to the society as a whole, the language would have been different. The society or trust may run more than one institutions. Therefore, the argument of the Revenue that it should be institution specific and not the Society as a whole in our opinion is not correct.
(ii) As regards the question whether the trust is for profit motive, it is the allegation of the Revenue that the assessee trust was collecting the capitation fee in the garb of donation and was therefore running with a profit motive. We find the Assessing Officer has not reported the violation, if any, by the assessee trust to the Government of Maharashtra for taking any action for violation of The Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. None of the persons who have deposed against the assessee by stating that they had given donation for the purpose of getting admission has complained to the Government for any such violation by the society. It is also to be noted that those persons have filled up the requisite proforma stating that they have given donation to the assessee voluntarily and not for seeking admission. Even some of them claimed deduction u/s.80G, a fact stated by the assessee and not controverted by the Departmental Representative. Therefore, changing the stands after their wards completed their education from the institutions run by the assessee trust are contradictory. Further, it is also a fact that all donations received by the assessee trust are recorded in the books of account. There is no allegation by the Revenue that any part of such donation has been siphoned off for the benefit of any of the trustees or related persons. Nothing has been brought on record that any student has been denied admission for not giving donation. Merely because some of the donors stated that they have given the donation for admission the same in our opinion will not disentitle the society from getting exemption which is existing solely for educational purposes and which is otherwise entitled to the exemption (Chief CIT Vs. Geetanjali University Trust 352 ITR 433, Shikshana Prasaraka Mandali Vs. CIT Central Pune vide ITA Nos.1348 and 1349/PN/2010 order dated 27-03-2014, Sadvidya Educational Institution Vs. Add.CIT, Padanilam Welfare Trust Vs. Dy.CIT 10 ITR 479, Queen's Educational Society vs. CIT Civil Appeal No.5167/2008 order dated 16-03-2015, Pine Grove International Charitable Trust Vs. Union of India 327 ITR 73 followed)

Related Judgements

  1. Sinhgad Technical Education Society vs. ACIT (ITAT Pune) 
    Though s. 153C confers jurisdiction if the AO is "satisfied" that "documents" seized belong to a person other than the person referred to in s. 153A so as to be able to assess that other person, the document must have prima facie incriminating information. The document seized must not…
  2. Queens Educational Society vs. CIT (Supreme Court) 
    The 13th proviso to Section 10(23C) is of great importance in that assessing authorities must continuously monitor from assessment year to assessment year whether such institutions continue to apply their income and invest or deposit their funds in accordance with the law laid down. Further, it is of great…
  3. St. Lawrence Educational Society vs. CIT (Delhi High Court) 
    To decide whether the institution exists solely for education and not to earn profit the test of predominant object of the activity has to be seen to decide. The purpose does not lose its character merely because some profit arises from the activity. It is not possible to carry…
  4. Ashoka Education Foundation vs. CIT (ITAT Pune) 
    While granting the exemption or renewal of exemption under section 80G(5) of the Act, the role of CIT is limited to look into the nature of activities being carried on by the institution or fund and the violation if any, of the provisions of section 13 of the Act…
  5. CIT vs. Raunaq Education Foundation (Supreme Court) 
    Though the assessee trust issued a receipt in March 2002 when it received the cheque dated 22.4.2002, it was clearly stated in its record that the amount of donation was receivable in future and it was shown as donation receivable in the balance sheet as on 31.3.2002. Also Apollo…

ITO vs. Late Som Nath Malhotra (ITAT Delhi)

COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS: ,
COUNSEL:
DATE: July 2, 2015 (Date of pronouncement)
DATE: July 15, 2015 (Date of publication)
AY: 2003-04
FILE: Click here to download the file in pdf format
CITATION:
S. 148/ 292BB: Issue of notice in the name of the deceased person renders the assessment order null and void even if the order is passed in the name of the legal heir. The fact that the legal heir attended the proceedings does not make it a curable defect u/s 292BB
The AO recorded the reasons for issuing the notice u/s 148 of the Act in the name of the deceased assessee and got the approval of the Addl. CIT also in the same name. The AO issued notice dated 31.03.2010 u/s 148 of the Act in the name of the deceased assessee and also mentioned in the body of the assessment order that the notice u/s 148 of the Act was issued and served upon the assessee by Post within the statutory time period prescribed. Though the legal heir of the deceased assessee informed the AO that the assessee had expired and the return in the name of deceased assessee was filed by the legal heir, the AO did not issue any notice u/s 148 of the Act or 143(2) of the Act in the name of the legal heir. Therefore, the assessment framed by the AO on the basis of the notice issued u/s 148 of the Act in the name of the deceased assessee was invalid and void ab initio ( CIT Vs Suresh Chand Jaiswal 325 ITR 563 (All.) followed)

Related Judgements

  1. UKT Software Technologies vs. ITO (ITAT Delhi) 
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  2. Computer Engineering Services India (P) Ltd vs. ACIT (ITAT Delhi) 
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  3. Bharat Sewa Sansthan vs. DCIT (ITAT Lucknow) 
    In the instant case, undisputedly the return was not filed under section 139(1) of the Act, it was rather a belated return as it was filed on 19.1.1995 and due date for filing of return was 31.10.1993. The return of…Read more ›
  4. CWT vs. Estate of Late HMM Vikramsinghji of Gondal (Supreme Court) 
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    The Act makes a clear distinction between "issue of notice" and "service of notice". S. 149 which prescribes the period of limitation provides that no notice u/s 148 shall be "issued" after the expiry of the limitation period. The "service" of the notice is necessary u/s 148 only to…

ITO vs. Late Som Nath Malhotra (ITAT Delhi)

by editor
The AO issued notice dated 31.03.2010 u/s 148 of the Act in the name of the deceased assessee and also mentioned in the body of the assessment order that the notice u/s 148 of the Act was issued and served upon the assessee by Post within the statutory time period prescribed. Though the legal heir of the deceased assessee informed the AO that the assessee had expired and the return in the name of deceased assessee was filed by the legal heir, the AO did not issue any notice u/s 148 of the Act or 143(2) of the Act in the name of the legal heir. Therefore, the assessment framed by the AO on the basis of the notice issued u/s 148 of the Act in the name of the deceased assessee was invalid and void ab initio

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Attachment(s) from Dipak Shah djshah1944@yahoo.com [SolapurCAs] | View attachments on the web

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Posted by: Dipak Shah <djshah1944@yahoo.com>

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