The Tribunal held that electricity duty collected and paid was not covered by section 43B of the Act as it was not a primary liability by way of tax, duty, cess or fee more since the assessee did not account for the amount in its profit and loss account. ACIT v Maharasthra State Electricity – (2015) 44 CCH 0513 Mum Trib

The Apex Court held that Sec 54G gave a period of three years to purchase a new machinery or plant etc. hence there was no compulsion on the assessee to purchase machinery, plant etc. within the same AY in which the transfer took place. It further held that advances paid for the purpose of purchase and/or acquisition of assets would amount to utilization of capital gains earned by the assessee. Fibre Boards (P) Ltd. Vs. CIT [CIVIL APPEAL NOS. 5525-5526 OF 2005] – TS-454-SC-2015

The Tribunal granted benefit under section 54F of the Act on the entire amount of investment in new house including the amount paid to the builders for amenities like car parking. It dismissed the revenue’s action of restricting the benefit to the value disclosed in the registered sale deed and held that disclosure of a lower value of property (excluding amount paid for amenities like car parking) for stamp duty was an issue alien to the question of allowing deduction under section 54 of the Act. S Tejraj Ranka v ACIT (ITA No.82/Bang/2014) – TS-512-ITAT-2015 (Bang)

The Tribunal held that the surrender of tenancy right was a “transfer” as defined under the Act and that the consideration received on such transfer was assessable to tax under section 45 of the Act and not under the head ‘Income from Other Sources’. It further allowed deduction under section 48 of the Act for expenses incurred on dismantling factory constructed on lease-hold land while computing capital gains upon surrender of lease hold rights on the ground that it was wholly and exclusively in connection with the transfer irrespective of the fact that the expenses were incurred by a person other than the assessee. Sri Laxmidas Bapudas Darbar v ITO [ITA No 731 / Bang / 2014] – TS-498-ITAT-2015 (Bang)

The Apex Court upheld the order of the High Court wherein it was held that the condition precedent for issuing a notice under section 148 read with section 149(1)(c) of the Act invoking the extended period of limitation of sixteen years is that income which has escaped assessment must have relation to any asset outside India which was not satisfied as the Revenue did not bring anything on record to prove that there was an asset located outside India. ITO and Ors v Deccan Digital Networks Pvt Ltd [SPL No 9577/2015] – TS-510-SC-2015

The Tribunal held that where the assessee surrendered additional income pursuant to search proceedings, which related to sundry creditors, repairs to building, advances and stock which related to business carried on by it, it was to be included in income from business and not deemed income under section 69A of the Act. Dev Raj Hi-Tech Mechines Ltd v DCIT – (2015) 45 CCH 0106 Asr Trib

The Court held that the assessee was entitled to TDS credit without offering corresponding income to tax as per section 199 of the Act read with Rule 37BA since the corresponding income was assesseable in the sister concern’s hand who had not availed of such TDS CIT v Relcom (ITA 26/2015) – TS-618-HC-2015 (Del)

The Tribunal held that lease premium paid by the assessee was capital expenditure to acquire land with substantial right to construct and could not be considered as rent under section 194I and therefore no TDS was deductible. ITO(TDS) v Progressive Civil Engineers Pvt Ltd – (2015) 45 CCH 0137 Mum Trib

The Tribunal held that the provision of roaming services do not require any human intervention and accordingly could not be construed as technical services under section 194J of the Act. Further, 194C of the Act was also not applicable as the said section is applicable only where works contracts are being carried out requiring the presence of manpower which was not the case. Further, it was held that the payment was not covered by section 194I of the Act as the assessee was a mere facilitator between its subscriber and the service provider providing the equipment and never used the equipment involved in providing roaming facility. Vodafone East Ltd v ACIT – (2015) 61 taxmann.com 263 (Kolkata – Trib)

The assessee, engaged in the business of purchase and sale of shares, earned dividend income of Rs. 43.48 lakhs which it offered to tax as “income from other sources”. The assessee set-off the dividend income against its brought forward business loss. The AO & CIT (A) rejected the set-off on the ground that u/s 72 business losses can only be set-off against business income and not “income from other sources”. Held that U/s 72(1)(i), the brought forward business loss can be set-off against “the profits and gains of any business or profession carried on” by the assessee. S. 72 (1)(i) does not use the word “assessable under the ‘head‘ profits & gains of business”. So, the question is whether the securities formed part of the trading assets of the business and the income there from was income from the business. The answer to this question has to be decided on commercial principles and not on the basis of the classification of ‘heads of income’ in s. 14. Though for the purpose of computation of the income, dividends are assessable under the head “Other Sources”, it does not cease to be part of the income from business if the securities are part of the trading assets. Accordingly, the assessee is eligible for set-off as claimed (Cocanada Radhaswmi Bank 57 ITR 306 (SC) & New India Investment 130 ITR 778 (Cal) followed). Gagan Trading Co (ITAT Mumbai) [2011]

The assessee received an amount of Rs.43 lakhs being remission of liability of ING Vysya Bank Ltd. The assessee has prepared its P&L A/c by including this amount as income. The assessee submitted before the AO that this remission of the liability was on account of principal amount of loan and therefore, the same is not in the nature of income which can be considered as part of the book profits u/s 115JB of the Act. Held that Even a non-taxable capital receipt credited to the P&L A/c cannot be excluded while computing the book profits. The fact that the notes to the A/cs state that the receipt is on capital account is irrelevant. B & B Infotech Ltd vs. ITO (ITAT Bangalore) 07-10-2015

Interest on TDS refund, interest from lessees, interest on FDRs and Tender fees are all “derived” from the undertaking and are eligible for deduction. If items of income are not eligible, it should be netted off against expenditure and only balance can be disallowed ITO vs. Hiranandani Builders (ITAT Mumbai) [28-10-2015]

Correctness of law laid down by Bombay High Court in Ace Builder 281 ITR 210 that deduction u/s 54EC is available to short-term capital gains computed u/s 50 doubted by Tribunal in Legal Heir of Shri Durgaprasad Agnihotri (ITAT Mumbai)

The term “before” specified date in section 44AB means “on or before” the specified date. Therefore, though audit report is signed on 30th September 2008 and the requirement of law is to be construed as tax audit report required to be obtained on or before 30th September 2008. Hence, the assessee has obtained tax audit report in time and there is no default u/s 271B. In Prem Chand Nathmal Kothari vs. Kishanlal Bachharaj Vyas & Ors dated 5th April 1975 reported in AIR 1976 Bombay 82 the Bombay High Court, relying on the Chambers Dictionary, held that word ‘before’ means ‘previous to the expiration of’. Therefore, before 30th September, 2008 means before the end of 30th September 2008 Chopra Properties vs. ACIT (ITAT Delhi)[20-11-15]

P&H High Court held that where loan taken subsequent to the purchase of the property cannot be said that the same was utilized for acquiring the property. In such circumstances, the Assessing Officer, the CIT(A) and the Tribunal were justified in declining the benefit of Section 24(b) of the Act. Equally, once it is held that the assessee had not borrowed any capital for the purchase of the property, the assessee was not entitled to any deduction under Section 80C(1) read with 80C(2)(xviii) of the Act.- Vijay Aggarwal 27-08-2015[P&H] [2016] 65 taxmann.com 16 (Punjab & Haryana)[Para 9]

P& H HC affirmed finding of ITAT that Invitation as placed in paper book is from son and daughter in law of the assessee. The A.O. has made whole of the addition in the hands of the assessee which is not justified. - Vijay Aggarwal 27-08-2015[P&H] [2016] 65 taxmann.com 16 (Punjab & Haryana)[Para 11]

Addition of Rs. 2,22,500/- on account of 89 liquor bottles. Punjab and Haryana High Court affirmed the finding of Tribunal that since the assessee was staying in a joint family consisting of his son and daughter-in-law and all the bottles cannot be said to have been purchased in one year and the existence of so many bottles can only point out to the fact that these must have been gathered over a period of time and, therefore, an addition of Rs. 1 lac would meet the ends of justice. –Vijay Aggarwal 27-08-2015[P&H] [2016] 65 taxmann.com 16 (Punjab & Haryana)[Para 13]

Delhi High Court in Tupperware India (P) Ltd [2016] 65 taxmann.com 17 (Delhi)[10-08-2015] held that in absence of any tangible material available with Assessing Officer to form requisite belief regarding escapement of income, reassessment of return u/s 143(1) can not be done . It followed Orient Craft Ltd. [2013] 354 ITR 536 (Del) which pronounced that Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500 (SC) does not give a carte blanche to the Assessing Officer to disturb the finality of the intimation under section 143(1) and reopening in absence of new material is bad in law. In present case, AO after having processed the return u/s 143(1) took note of audit report which stated that since no tax deducted on management fee, expesnse is not allowable u/s 40(a)(ia). This fact earlier went unnoticed in processing of return. Comments: Delhi High Court has however not taken note of another Supreme Court Judgement in Zuari Estate on 17-04-2015, which has stated that since as per Rajesh Jhaveri (supra) intimation is not assessment, hence no opinion is formed by accepting return u/s 143(1) and there fore reopening in the absence of new material does not entail change of opinion and hence reopening is valid.

Punjab and Haryana High Court in Himalaya Construction (P.) Ltd SEPTEMBER 3, 2015 [2015] 64 taxmann.com 373 (Punjab & Haryana) held that order passed without considering the overall material on record including the reply to the show-cause notice submitted by the petitioner and without detailed reasons on the issues regarding the jurisdiction of the adjudicating authority is against the principles of natural justice and there fore can be set aside in writ jurisdiction despite alternate appeal remedy

Allahabad High Court in U. P. Rajkiya Nirman Nigam Ltd on 04-07-2013 had held that where books of account are not closed and not signed by Board of Directors and not adopted by shareholders as per Companies Act, it is legally permissible to make adjustments before they are finally adopted , therefore, where accounts of assessee were open and subject to correction by auditors, bad debts could be written off even after closure of accounting period, as there is neither any condition nor any provision under section 36(1)(vii), that writing off of bad debt should be done in relevant previous year, i.e., before end of financial year. Supreme Court has admitted SLP of the revenue on this issue on 23-11-2015

Revision proceedings by CIT on the issue of purchase of new house partly from owned funds and partly from housing loan quashed by ITAT Hyd in Smt. Sumathi Gedupudi [2015] 64 taxmann.com 382 (Hyderabad - Trib.) holding that money has no colour and it is sufficient if requisite amount is invested in new house irresepective of whether it comes from direct sale proceeds or any other source including borrowed funds. ITAT further held that the issue of granting deduction/exemption under S.54F on the borrowed money is a debatable issue and revision proceedings can not be under taken where two views are possible

Pan Correction in TDS return beyond 4 characters comprising two alpha and two numeric characters is not currently allowed by CPC. Invalid PAN is treated as no PAN and demand of TDS u/s 206AA @ 20% is raised against assessee deductors invariably by CPC. Such conduct of CPC is against the natural justice because this harsh processing is not only affecting the deductor but also deductee as a deductee is not being allowed full credit on revision of returns. However, Held by ITAT Ahemdabad in ONGC Ltd 65taxmann.com 2 [23-11-2015] that as per scheme of TDS correction there is no such restriction imposed and any correction can be made by way of deleting the entry, adding of a deductee, change in details mentioned about the deductee including his PAN, adding of TDS challans etc. meaning thereby that deductor can rectify any kind of mistake which has been inadvertently made by it at the time of filing original return and also this correction statement can also be filed for multiple times. Further ITAT held that assessee be allowed opportunity to provide relevant details of deductees as envisaged under proviso to Section 201(1A) i.e. proof of furnishing of return under section 139 of the Act, proof of taking into account such sum for computing income in such return of income of the deductee, proof of tax paid by the deductee and certificate from the Chartered Accountant to this effect that the sum on which deductor was required to deduct TDS has duly been considered in the books of account for computing income of the deductee

Comprehensive Analysis of New Requirements of furnishing PAN and AIR Information w.e.f 01-01-2016

CBDT vide Notification dated 30-12-2015 has amended Rules for PAN and AIR Information. While the press release dated 15-12-2015, broadly discussed the likely changes in PAN requirements, the notification contains lot many creases required to ironed out as under:

Decades long Controversy over defining “Month “ whether Calender Month or Lunar Month

The word “month” has been mentioned in the Income tax law in number of provisions. However the term has not been defined in the Income tax law. Interpretation of the term poses number of issues especially in the interest calculation. However to understand the controversy around it, we shall have to start the journey from genesis as under:

No remand can be allowed by ITAT to improve upon the case of revenue Laxman Dass Makjija Agra Bench TM 313 ITR 123 AT; Amina ITAT Del TM 73 ITD 125; In SMC Share Brokers 109 TTJ 700 affirmed by DHC 288 ITR 345 Neema Sayal CHD ITAT 70 ITD 62; All ITAT TM 50 ITD 1;ZUARI LEASING ITAT TM 112 ITD 205

Decision of Co-ordinate Bench when no contrary decision of Bench itself is binding on ITAT Bench hearing the cases ITA 357/ASR/2010 ACIT Vs. S.S Embroiders.

On Embroidery machinery, 50% depreciation is allowable ITA 36837/2011/ASR dated 4-6-12 in Amit Emb.

Penalty for not quoting PAN in F.16A upheld by ITAT Amritsar ITA/ASR/2012 DATED 17-07-2012.

Punjab & Haryana High Court in Sudhir Nagpal and Bros. ITA 463/2009 explained that if individual co owners join their resources and acquire property in name of AOP, only then it could be assessed in hands of AOP.Mere accruing of income to more than one person shall not constitute AOP.

VDIS Cases on Sale of Jewellery for assesses : -Manoj Kumar Aggarwal (ITAT Spcl. Bench) on 25.07.08 ITA 404/2003 -Tejinder Singh HUF ITA 163/ASR/2003,However remanded by P&HHC on 08.02.2011 in 292 CTR352 to Special Bench for hearing on 04-04-11 -Kiran Deepak Kukreja 190 Taxmann 393(BOM HC) -Uttam Chand Jain 182 Taxmann 243(BOM HC) -Jagdish Mitter TA 268/2002 -Mohan Lal Aggarwal All HC ITA 136/2010 -Yogesh Chand Sharma ITA 131/Agra/2011 -Sanjay Mahipal ITA 452/DEC/2009 Note Transaction of Rishi Grover Prop Vishnu Jeweller held genuine by ITAT Amritsar. ITA 198 TO 202/ASR/2006 26.06.09. MA 55 TO 59/ASR/2010 of department dismissed by ITAT on 26.06.2012.

Capital gain on agriculture land with in 8 km from area not notified, not chargeable to taxable. Madhu Kumar N. HUF 78 DTR 391 (Kar HC)

Educational Institution providing advance to two organizations publishing magazine. Held that advance is incidental and ancillary to main objects. AP High Court quoted SC in Yogiraj Charity Trust 103 ITR 777 that if primary or dominant purpose is charitable , another object which may not be charitable but is incidental to primary object, would not prevent trust from being a valid trust Vijay Vani Education Trust (AP HC) 349 ITR 230

Assessee society providing citizen services to common people. Charging huge fees in addition to charges levied by State Government . Activities are not charitable. Sukhmani Society for Citizen Services (2012) 139 ITD 307 (ASR Trib.)

Marathon conducted in a commercial manner. Trust can not be said to be existing solely for charitable purpose. Hyderabad Runners Society (2012) 139 ITD 464 (HYD.)

Occupancy rights of company’s flat to shareholders of closely held company which occupancy rights could be transferred by shareholders, amounts to dividend u/s 2(22)(e) Shanti Kumar D. Majitha (Mum Trib.)

S. 2(22)(e) is not applicable to trade advance to sister concern in which shareholders of the company has substantial interest. Jay peem Granites (HYD.) 139 ITD 564.

Amount received for right to use network for 20 years shall be taxable over 20 years Reliance communication Infrastructure Ltd. 79 DTR 198 (BOM.)

Interest from Investment of surplus funds in bank not covered by character of mutuality and liable to tax. Societe De International 139 ITD 328 (Mum)

When mutual concern provides goods and services to non members also and profit flows from said transaction, it is chargeable to tax. Societe International De Telecommunication 139 ITD 328 (Mum Trib)

Compensation received from landlord for delay in actual delivery of leased premises. Pre-operative rent was credited to pre-operating expenses to be capitalized and post operative rent was credited to rent expenses. Held that no portion of compensation amount is taxable as revenue receipt. American Express (India) 79 DTR, 127 (Delhi Trib.)

Difference between purchase price and redemption price of debentures offered for taxation over a period of six years. Apex court upheld order of ITAT and reversed order of High court relying upon judgement of Bombay High Court in Taparia Tools Ltd. 260 ITR 102 (BOM)-Rakesh Shantilal Mardia (2012) 210 Taxmann 565(SC)

Guarantee commission to recognized when guarantee is issued and not over period of guarantee Shinhan Bank (2012)54 SOT 140 (Mum Trib)

Income from Deferred guarantee does not accrue or arise in the year in which agreement is entered but spread over the period to which commissions relates BNP Paribas (2012) 79 DTR 310 (Mum Trib.)

Singapore bank registered as FII, taking loan in foreign currency to invest in debentures and entered into forward contract to safeguard from foreign exchange fluctuation. Forward contract was terminated Held resulting gain is capital gain and exempt under Art 13 of DTAA Citi Corp Investment Bank (2012) 54 SOT 119 (Mum) (Trib)

Merely because educational institution has generated surplus income. it would not cease to exist for educational purposes Sanatan Dharam Shiksha Samiti (P&H) 253 ITR 518

A Trust predominantly engaged in ancilliary or incidental objects which are not related to any charitable purpose and does not carry on any activity relating to its main object of charitable nature (SCENTIFIC RESEARCH) is not entitled to exemption. Viswesvarya Indus R&D Centre (2012) 79 DTR387(BOM) HC

Capital gain applied for charitable purposes not by acquiring a new asset but for other charitable purpose Claim for exemption is allowed A1 Ameen Education Society (2012) 139 ITD 245 (Bang Trib)

Shares received towords corpus sold in compliance of cl (iia) of S.13(1)(a)(iii) requiring holding up to one year only. It is not violation of 11(1)(a) and assessee corpus donations can not be treated as general donations. Sera Foundation 79 DTR 210 (DEL Trib)

CIT/Director is not required to examine whether the trust has actually carried on charitable activities. Foundation of Ophthalmic and Optometry Research Education Centre [2012] 79 DTR 178 (DEL HC)

Objects altered without consent of department is not sufficient ground for invoking 12AA(3); Payment of commission for soliciting students for studying in Edu Institution can not be lead to conclusion that assessee was not imparting education Kirupanidhi Educational Trust (2012) 139ITR 228 (Bang Trib)