SLP admitted by supreme court against order of Karnatka High Court in Islamic Academy of Education[2015] 54 taxmann.com 255 (Karnataka) SEPTEMBER 9, 2014 where in it was held that where trust is genuine and activities are being carried out in accordance with objects, registration of the Trust can not be cancelled on the ground that funds are being misappropriated or that accounts are being falsified although exemption u/s 11 may be denied- Islamic Academy of Education [2015] 62 taxmann.com 218 (SC)

The Hon’ble Delhi High Court in its judgment dated 19.12.2011 in the case of CIT Vs. Mother dairy India Ltd. ITA No.1925/2010 and ITA 313/d011 held in para-12 to para 15 of it’s judgment…In the cases before us, the concessionaire becomes the owner of the milk and the products on taking delivery of the same from the Dairy. He thus purchased the milk and the products from the Dairy and sold them at the MRP. The difference between the MRP and the price which he pays to the Dairy is his income from business. It cannot be categorized as commission. The loss and gain is of the concessionaire. The Dairy may have fixed the MRP and the price at which they sell the products to the concessionaire but the products are sold and ownership vests and is transferred to the concessionaires. The sale is subject to conditions, and stipulations. This by itself does not show and establish principal and agent relationship. The supervision and control required in case of agency is missing Followed by ITAT Kolkata in M/S.Metro Diary Limited ITA Nos.852 & 853/Kol/2013 on the issue of TDS on Commission u/s 194H.

Penalty u/s 269SS held to be not leviable where , the assessee a reputed dealer in fast moving goods in order to get encashed the cheques issued to various companies, accepted the cash in his bank account from various persons also soon repaid the same . The assessee did not use the CC limit to save interest cost. – Amar Nath [05-10-2015] High Cour of Himachal Pradesh ITA 4014/2013 Case laws relied upon: Asstt. Director of Inspection Investigation v. A.B. Shanthi, (2002) 6 SCC 259 Hindustan Steel Ltd. V. State of Orissa, (1972) 83 ITR 26 (SC); CIT v. Kharaiti Lal and Co., (2004) 270 ITR445 (P&H); CIT v. Maheshwari Nirman Udyog, (2008) 302ITR 201 (Raj); CIT v. Lakshmi Trust Co., (2008) 303 ITR 99 (Mad); CIT v. Indore Plastics P. Ltd., (2003) 262 ITR 163(MP); CIT v. Idhayam Publications Ltd., (2006) 285 ITR 221 (Mad); CIT v. Bazpur Co-operative Sugar Factory Ltd.,(1988) 172 ITR 321 (SC); CIT v. Balaji Traders, (2008) 303 ITR 312 (Mad); CIT v. Kundrathur Finance and Chit Co.,(2006) 283 ITR 329 (Mad); and CIT v. Ratna Agencies,(2006) 284 ITR 609 (Mad

The presumption under section 44AE can not be applied in a case where income in books of accounts is reflected at higher figure than presumptive income. In present case, the assessee reflected higher income in books but lower income was reflected in the return . Calcutta High Court in Jasvinder Singh vs. CIT ITA 484/2005 [29-09-2015] held that higher income to be reflected by the assessee.

Cash found in the course of survey—Assessee stating that cash of their other concerns were also with the assessee at the time of search—There is no finding that the cash balance shown in the cash book was not with the assessee or the cash balances were used by those concerns for some other purpose—Such evidence cannot be rejected merely on the basis of presumption—Addition deleted-CHAWLA BROTHERS (P) LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX (2011) 43 SOT 0651

Survey party compared the physical stock found with figures of RG-1 register maintained by the assessee in which discrepancies with physical inventory were found—AO made the addition of Rs. 5,58,54,128 on account of unexplained investment in stock—Appraisal report prepared at the time of survey party is valuable information to reject books of account but same is not a final assessment but it is of assistance in making assessment—Merely on the basis that at the time of survey, some differences were found in stock that does not mean that there will be an automatic addition on account of differences—AO and CIT(A) both have failed to point out how the reconciliation submitted by the assessee was incorrect—Such differences are always subject to explanation and reconciliation—Assessee has reconciled the differences with reasons and the Revenue authorities did not point out anything contrary that how the reconciliation done by the assessee was incorrect—Addition cannot be made unless it is found that the stock was sold out of books of account, hence same can not be sustained-CHAWLA BROTHERS (P) LTD. vs. ASSISTANT COMMISSIONER OF INCOME TAX (2011) 43 SOT 0651

Where the jeweler during the course of survey in his statement explained about some jewellery regarding which bills was no received. However at the time of filing of return , some more jewellery was claimed to have been received at the time of survey against which the bills was not received. The ITAT held that had this story been true it would not have slipped while giving statement during the course of survey-Radhakrishna Gold Jewellary (P.) Ltd. MAY 26, 2015 [2015] 62 taxmann.com 182 (Ahmedabad - Trib.)

Law relating to deductibility of expenses in Contractual and Statutory liability disputes dealt at length by the Special Bench of ITAT

Special Bench presided by ITAT President Mr. DD Sud in the case of National Agriculture Co-operative ITA  1999 & 2000/Del/2008 pronounced on 16-10-2015 has touched and dealt at length the issues of deductibility of expenses in case of Contractual and Statutory liability disputes with the aide of Judicial pronouncements and adumbrated vital principals of law on the subject as under:

Every assessee has right to plan its affairs in such a manner which may result in payment of least tax possible, albeit, in conformity with the provisions of Act. It is also permissible to the assessee to take advantage of the gaping holes in the provisions of the Act and to see whether these provisions allow the assessee to arrange their affairs to ensure lesser payment of tax

Every assessee has right to plan its affairs in such a manner which may result in payment of least tax possible, albeit, in conformity with the provisions of Act. It is also permissible to the assessee to take advantage of the gaping holes in the provisions of the Act and to see whether these provisions allow the assessee to arrange their affairs to ensure lesser payment of tax. -Naresh Kumar Trehan ITA No. 3882/Del/2013 Dated: 10/01/2014

Porrits & Spencer (Asia) Ltd. Vs. Commissioner of Income Tax [(2010) 190 Taxman 174 to the effect that if the transaction was otherwise valid in law and a part of tax planning then merely because it has resulted in reduction of tax, it cannot be ignored on the ground that the underlying motive of entering into such a transaction by the assessee was to reduce its tax liability to the State.

Every assessee has right to plan its affairs in such a manner which may result in payment of least tax possible, albeit, in conformity with the provisions of Act. It is also permissible to the assessee to take advantage of the gaping holes in the provisions of the Act. The job of the Court is to simply look at the provisions of the Act and t see whether these provisions allow the assessee to arrange their affairs to ensure lesser payment of tax. If that is permissible, no further scrutiny is required and this would not amount to tax evasion.[Para 54]-Rajan Nanda(Delhi High Court)16-12-2011

In case of Key man Insuance policy surrender value at the time of assignment is taxable as salary in the hands of assignee [Para 48]. However if sum equal to surrender value is paid by asignee to assignor, nothing is taxable in the hands of assignee[para 49]- Rajan Nanda(Delhi High Court)16-12-2011 ITA 400/2008

Section 14A shall not apply to shares held as stock in trade-G. K. K. Capital Markets (P) Ltd. (ITAT Kolkata)

Where the assessee has been assessed at higher amount under sales tax law and demand has been raised against the assessee, notwithstanding that the assessee has not made any entry for liability in his books of accounts and has gone into appeal before higher authorities, the deduction in respect of sales tax demand shall be allowed- Kedar Nath Jute Mfg. Co. Ltd. 82 ITR 363(SC)

Foreign collaborator granted license to assessee to use its patents and designs—Assessee not acquiring capital asset—Amount paid to collaborator was only licence fee and constituted revenue expenditure-I.A.E.C. (PUMPS) LTD. 232 ITR 316

It is not a universally true proposition that what may be a capital receipt in the hands of the payee must necessarily be capital expenditure in relation to the payer. Therefore, the decision in CIT vs. Maheshwari Devi Jute Mills (1965) 57 ITR 36 (SC) wherein it was held that the sale of loom hours was in the nature of capital receipt and hence, not taxable, cannot be regarded as an authority for the proposition that payment made by an assessee for purchase of loom hours would be capital expenditure[Para 4]-Empire Jute Co. Ltd 124 ITR 1

The fact that expenditure is incurred over more than one year is not decisive of its being capital expenditure-Asahi India Safety Glass Ltd. 203 Taxman 277 (Del.)

The extent of the expenditure cannot be a decisive factor in determining its nature.-Asahi India Safety Glass Ltd. 203 Taxman 277 (Del.)

Test of Enduring benefit is not certain or conclusive test. What is important is not that advantage lasts forever but whether the expense incurred does away with a recurring expense(s) defrayed towards running a business as against an expense undertaken for the benefit of the business as a whole. In other words, the expenditure which is incurred, which enables the profit-making structure to work more efficiently leaving the source of the profit-making structure untouched, would be an expense in the nature of revenue expenditure. Fine tuning business operations to enable the management to run its business effectively, efficiently and profitably, leaving the fixed assets untouched would be an expenditure in the nature of revenue expenditure even though the advantage may last for an indefinite period. Test of enduring benefit or advantage would thus collapse in such like cases. It would be only truer in cases which deal with technology and software application, which do not in any manner supplant the source of income or add to the fixed capital of the assessee-Asahi India Safety Glass Ltd. 203 Taxman 277 (Del.)

Where due date of filing of return has been extended the assessee is entitled to get benefit of deposit in capital gain account scheme in such extended period- Smt. S. Uma Devi [2015] 62 taxmann.com 64 (Hyderabad - Trib.) JANUARY 30, 2015

Amount received towards society corpus fund, water and electricity connection charges, cost of solar water heating system, which was in turn to be defrayed to respective agencies is not sale consideration for the ssale of flats[Para 10.5] Smt. S. Uma Devi [2015] 62 taxmann.com 64 (Hyderabad - Trib.) JANUARY 30, 2015

The incomes of the properties owned by the minor daughters were clubbed in the hands of the assessee[u/s 64(1A)], but the investment for purchase of the said properties came from the independent sources of the daughters and hence, it cannot be presumed that assessee is the owner of the properties for calculating limit of owning one residential house on the date of transfer u/s 54F.[Para 4.7] Smt. S. Uma Devi [2015] 62 taxmann.com 64 (Hyderabad - Trib.) JANUARY 30, 2015

For purpose of S. 54F requiring ownership of not more than one residential house on the date of transfer , ownership of building let out for commercial purposes can not be included. Allahabad High Court in P.N. Shukla v. CIT [2005] 276 ITR 642/142 Taxman 624 (All. Quoted to signify the word “residential” used with house[Para 4.3] Smt. S. Uma Devi [2015] 62 taxmann.com 64 (Hyderabad - Trib.) JANUARY 30, 2015

The entire order of AO reads as follows :"The penalty proceedings initiated in this case under s. 271C r/w s. 274 of the IT Act, 1961 are hereby dropped."Held by High Court in Para 12 of its order that “the order passed by the AO is cryptic, to say the least, and it cannot be sustained” Toyota Motor Corporation 306 ITR 49. Order of High Court confirmed by supreme court in Toyota Motor Corporation 306 ITR 52 rejecting the plea of the assessee that when all relevant aspects were placed for consideration and if order did not record reasons, assessee can not be faulted followed in Smt. S. Uma Devi [2015] 62 taxmann.com 64 (Hyderabad - Trib.) JANUARY 30, 2015

Receipts against reimbursement of expenses were to be included in gross receipts for determining income under section 44BB(1) for calculating presumptive income- Ensco Maritime Ltd. [2015] 62 taxmann.com 83 (Delhi - Trib.)

Though law does not mention any specific mode of exercising option for setting apart income for charitable purpose in succeeding year , If such option is exercised when return is filed, that would be treated as in conformity and comply with provisions contained in section 112015] 61 taxmann.com 400 (SC)G. R. Govindarajulu & So 03-09-2015

Held by Nagpur Trib in Brijgopal Madhusudan Bhattad that interest cost incurred in personal books and used for oil mill business of the assessee to be allowed as deduction. ITA 52/2013-

Service tax not to be included in gross receipts for calculation of presumptive income. The decision is rendered in context of 4BB in case of mineral oil companies, however might apply for 44 AD also.[2015] 61 taxmann.com 170 (Delhi - Trib) Sundowner Offshore International follows another Delhi Trib Judgement in Ensco Maritime.

Payment made to retiring partner over and above amount standing to the credit of his account is for acquiring commercial rights depreciable u/s 32 as intangible asset-Swastik Industries [2015] 61 taxmann.com 296 (Ahmedabad - Trib.)/[2015] 41 ITR(T) 277 (Ahmedabad - Trib.)

Issue of parking fee of aircrafts settled by supreme court in Japan Airlines. Earlier Delhi High Court in Japan Airlines and United Airlines said that S. 194I is applicable while Madras High Court in case of Singapur Airlines said that S. 194I is not applicable. Apex Court, however differed in its opinion both from Madras High Court which said that since the “'any other agreement or arrangement for the use of any land or any building' have to be read ejusdem generis and it should take it colour from the earlier portion of the definition namely “lease, sub-lease and tenancy” and therefore limited meaning should be given to the words “ any other agreement or arrangement”. Also decision of Delhi High Court was dissented as it did not look into substance of the transaction as the fee was being paid for other facilities and use of land was incidental, Apex Court held that 194I is not applicable. Decision pronounced on 04-08-2014

Education Institution took certain vehicles on hire for carrying its students and staff from home to school and back . Since Expl III to S.194C (2) clearly provides that work includes carriage of passenger by any mode of Transport other than railways Tribunal is justified in invoking 194C -Lotus Valley Edu Soc. (All HC ) 12.09.13 [45 TMC 37]

State Tpt. Corporation took buses on hire and made payment on KM running basis without any responsibility for running cost, maintenance, cost of Driver. Covered by 194C and not 194-I ‘Rent’-Regional Manager UPSRTC (Del Trib) 22.12.14 57 TMC 138

Commission income of Indian company allowed to retained with U.S. client with RBI permission and to be utilized for purchase of capital goods. Due to devaluation of rupee cost of capital goods when realized resulted in profit on remittances .HC order that character of income changed on being reserved for capital goods hence profit is capital in nature-Tata Locomotive &Engg co.ltd.60 ITR405(SC)13.1.66

Profit on remittance of amount lying in Karachi as blocked or sterilized balance and not being used for internal banking operations in Pakistan is capital in nature Canara Bank 63 ITR 328 (SC)(1967)

Loss on amount remitted from Pakistan. Allowance depends upon whether amounts held in Pakistan as capital or revenue. The fact that loss is caused by act of state resulting devaluation of currency held makes no difference Sutlej Cotton Mills 116 ITR 1 (SC)

Assesssee purchased gas cylinders for mfg.unit but leased out them because unit has not started functioning. Assessse’s claim of depreciation against leased out cylinders to be allowed.KM Sugar Mills Ltd.(SC)25.3.2015 57TMC68

Making assessment in name of non exsistent entity could not be cured by resort to S.292 B -Intel Technology India P ltd (57 TMC 159) 3.3.2015 [Karnataka]

Block assessment made in name of amalgamating co is invalid as it ceased to exist after amalgamation. Here notice of the fact was also given to AO-Micra India (P) LTD 57 TMC 153 (Del H C)22-01-2015

Entries made by assessee in account s are not determinative of profit or lose earned by assessee .Assessee by making entries not as per accounting principal may conceal profit or loss and entries made by him cannot be regarded as conclusive one way or another -Sutlej Cotton Mills 116 ITR 1(SC)

No change in object of trust for decades.Rule of consistency to be applied -Shanti Devi Progressive Edu Soc. 340 ITR 320 (Del) -Excel Industries SC 2013 –TIOL-52 2013-tiol-52 -Indian International Centre (Del trib ) 11.5.15

Merely charging Fee resulting in surplus does not ipso facto mean that activities are commercial in nature

 ICAI 347 ITR 99(DEL)

CA Study Circle 347 ITR 321 (Mad)

Tolani Education Soc 259 CTR 26 [Bom ]

Beaureau of Indian Standards 358 ITR 78 (Del)

Sabarmate Ashram 362 ITR 539 (Guj)

Indian school certificate exam 2014 TIOL 855

Indian international  centre(Del Trib) 11-5-15 57 tmc 265 

Section 263 Orders has to be same as in SCN -Ashish Raj 320 ITR 674-Software Consultants 341 ITR 240(Del)

Section 263- AO taking possible view .Section 263 can not be invoked where AO takes one of possible view- Malabar Industrial Co.243 ITR 83 (SC) Green World Corn 181 Taxmann 111 (SC)

Section 263-Where AO issues questionnaire and makes specific querries it can not be said to be case of no enquiry -Malabar industrial CO.243 ITR 83(SC) -Green World Corn 181 Taxmann 111 (SC) -Sun beam Auto Ltd.332ITR 167 (DEL) -Anil Kumar Sharma 335 ITR 83 (DEL) -Gabrid India 203 ITR 108 (Bom) -Kanada Rice Mills 178 ITR 446 (P&H)

Purposive construction

a)In some cases it becomes necessary for courts to fill in gaps as parliament choses to leave in  enactments- Lord Doe Parco in Cutler vs Wandworth Stadium [1949] 1All ER544

b)In Guiseppi v Walling 60 Harvard Review 372 LJ Frank- ineptness of drafting impels the courts to fill in gaps -an activity which no matter one may interpret is in part legislative

c)SC in Director of Enforcement vs Deepak Mahajan & Another AIR  1994 SC 1775 approved above decision

d) Heydon’s Case explained by SC in Bengal Immunity Co.AIR 1955 SC 661

Monetary limits for appeal-Application of circular to pending cases also

Monetary limits for appeal – Circular 3/2011-Shyam biri works(All HC) 6.5.15 57 TMC 157-Application of circular to pending cases also. Other favorable cases  1)Ranka and Ranka(kar)352 ITR 121 2)Pithwa Engg. works (bom) 276 ITR  519 3)Camco color 254 ITR  565 4)Smt Vijay Kavekar 350 ITR 237 5)Madhokar  Inamdar 318 ITR 149 6)Vitesses tag co. 331 ITR 433 7)P.S .Jain and co. 335 ITR 591(del hc) 8)Ashok Kumar Manibhai Patel 317 ITR 386 Unfavorable Decisions Shambubhai Mahadev Ahir 363 ITR 572(Guj FB) Varinder construction co. 331 ITR 449 (FB)(P&H) Kodanand Tea Estate 275 ITR 244 (MAD) John  Chackola 337 ITR 385 (Ker) Navbharat Explosive 337 ITR (36) 515 Chatissgarh Held Circular has to be read with national litigation policy Whose purpose is to reduce litigation period from fifteen years to three years so that valuable time can be spared for contentious issues. -Full bench of Guj & P&H  HC have not considered national litigation policy and Hence high courts applied literal interpretation of circular. -CBDT Circular make no effort to review pending cases. - Since this is beneficial piece of legistation, pendulum is tilled more in favour of assessee and impels courts to interpret the provisions harmoniously with national litigation policy. - Hence circular held applicable to pending cases also.

No TDS sum paid to foreign agent for rendering services o/s India if did not have PE in India

Commission  is not FTS and hence not covered by expl to sec 9 applicable to (v)(vi)(vii) of 9(1)

Fluidtherm technology (P) ltd. 57 tmc 87(Mad)24.03.15

 faizan shoes 367 itr 155(mad)

Fanda shoes [ita 159/2013](itat mad)

Deita shoes [ita 909/2013](itat mad)

Supreme cout on commission to foreign agents on exports not taxable

1)Toshoku ltd 125 ITR 525 (sc)(1980)

2)R .D. Aggarwal & co. 56 ITR (20)(sc)1965

3)Carborandum co. 108 ITR 335(1977)

Tax Controversy Leaders (2015) in India declared by International Tax Review

1.   Rajiv Anand (Deloitte India)

2.   Manisha Gupta (Deloitte India

3.   Gagan Kumar (Krishnomics Legal)

4.   Rahul Mitra (KPMG)

5.   Sanjay Sanghavi (Khaitan & Co.)

6.   KR Sekar (Deloitte India)

7.   Rohan Shah (Economics Law Practice)

8.   SP Singh (Deloitte India)

9.   Naresh Thacker (Economics law Practice)

10.                Alok Yadav (Economics Law Practice)

11.                Sunil Badla (KPMG)

12.                ML Bhagta(Kanga)

13.                Soli Sohrab Dastur

14.                Arvind Datar

15.                Nitesh Desai

16.                Aliff Fazelbhoy

17.                Hitesh Gajaria

18.                Sujit Ghosh

19.                KR Girish

20.                Akhil Hirani

21.                Amit Jain (EY)

22.                Porus Kaka

23.                Dinesh Kanabar

24.                Kanchun Kaushal, PWC

25.                Pawan Kumar, PWC

26.                Ajoy Kumar Gupta, (Khaitan & Co.)

27.                Sunil Moti Lala (SML Tax Chamber)

28.                Himanshu Mandavia, KPMG

29.                Vinod Mangotra, KPMG

30.                Rakesh Nangia, (Nangia & Co.)

31.                Vikram Nankani

32.                Percy Pardiwalla

33.                Krishma Phaterphekar, KPMG

34.                Rohan Phataphekar, KPMG

35.                Alpana Saksena, KPMG

36.                Harish Salve, Black Stone Chambers

37.                Jayesh Sanghavi, EY

38.                Sriram Sheshadri, BMR

39.                Himanshu Sinha, Trilegal

40.                Sanjay Tolia, PWC

41.                Girish Vanvari, KPMG

42.                Vikas Vasal, KPMG

43.                Ajay Vohra

44.                Rajan Vohra, SRBC & Associates

Where search warrant was issued in name of person other than person searched and some incriminating documents were found at the premises of person searched. Search proceedings were however dropped suo motto by the department due to search warrant wrongly issued. There after proceedings u/s 153C were initiated on one of the promoters on the basis of documents found in his premises, but proceedings u/s 153C were also dropped because original proceedings got vitiated. However department initiated action u/s 148 in respect of documents found at the premises of person searched. Action of the department upheld by Allahabad High Court in SHIVAM GRAMODYOG SANSTAN Oct 14, 2015(2015) 94 CCH 0052 AllHC, relying upon Dr.Sarad B. Sahai 235 CTR 596 which said that although search is declared illegal but the post- search assessment has to take place

Where search warrant was issued in name of person other than person searched and some incriminating documents were found at the premises of person searched. Search proceedings were however dropped suo motto by the department due to search warrant wrongly issued. There after proceedings u/s 153C were initiated on one of the promoters on the basis of documents found in his premises, but proceedings u/s 153C were also dropped because original proceedings got vitiated. However department initiated action u/s 148 in respect of documents found at the premises of person searched. Action of the department upheld by Allahabad High Court in SHIVAM GRAMODYOG SANSTAN Oct 14, 2015(2015) 94 CCH 0052 AllHC, relying upon Dr.Sarad B. Sahai 235 CTR 596 which said that although search is declared illegal but the post- search assessment has to take place

Held by AP HC in Y. Brahmiah (5.814) 52 TMC 169 that CIT has power to enhance income but he can do so only after issuing show cause notice u/s 251 (2)

Held by Bombay HC in Ramesh Babu Lal Shah (23.07.14) 53 TMC 277, where assessee entered into agreement for purchase of land later sold by seller to some other person for development and amount received by assessee in consent degree of court is business receipt if disputed transaction was adventure in nature of trade.