Where provision for debts was made in earlier years and then added back to computation of income , any claim of expenditure in the subsequent year is allowable as bad debt u/s 36(1)(vii) because the law does not require that debit towards write off be made in the year of deduction [Rallis India 190 taxman 1 (Bom)]

Reassessment with in four years from the end of relevant assessment year can also not be made for mere change of opinion in the absence of tangible material on the basis of which assessment could have been made [Rallis India 190 taxman 1 (Bom)]Para 12

Gujrat CM Relief Fund gave notice of accumulation u/s 11(2) in F.10 where in general objects of the trust were mentioned . Lower authorities disallowed the claimed of the assessee saying that notice has to be specific following SC in S.RM.M.CT.M. Tiruppani Trust(1998) 230 ITR 636 at p.640 (SC) However Ahemdabad Tribunal in GUJARAT CHIEF MINISTER RELIEF FUND (2015) 45 CCH 0205 04-11-2015, following Delhi High Court in Guru Nanak Vidya Bhandar Trust (2005) 272 ITR 379 (Del) held that where similar notice has been accepted by the department in preceeding and succeeding year, it can not challenge the notice for the year under consideration on the ground of being not specific. ITAT in Para 13 also mentioned that enquiry of AO was not aimed whether time limit for notice issued for earlier years was adhered.

Retrospective Amendment of law not operative on date of order u/s 263 or issue of notice u/s 148

ž  If retrospective amendment of law was not enforceable on the day, CIT exercised its powers u/s 263, order u/s 263 is bad in law[Supreme Court in Max India [295 ITR 282]]. In this case amendment in section 80HHC was brought retrospectively on the definition of profit in FA 2005 while order u/s 263 was passed 5-03-1997

ž  Similarly notice u/s 148 can also not be issued , held by Bombay HC in Rallis India [Para 18] 190 taxman 1. In this case notice u/s 148 was issued on 16-07-2008 and Finance Act 2009 amended the law on S.115JB requiring increase in book profits by provision on diminution in  value of assets w.e.f. 1-4-2001.[Consequent to SC Order in HCL Comet  292 ITR 299 that  provision for bad debts can not be equated with  amount set aside for meeting liabilities] 

Whether grievance mechanism for High Pitched assessments is sheathed to decide the fate of stay of demand applications and bolster recovery mechanism ? Instruction No. 17/2015 dated 09-11-2015

1. The CBDT has acknowledged that problem of high pitched and unreasonable assessments is persisting .
2. Committees from amongst Pr CIT, CIT(Judicial), CIT (DR), ITAT . AddllCIT(CCIT Hq) shall be member secy. Sr Most member shall be Chairman
3. A grievance made shall be immediately acknowledged
4. Separate record of grievances to be made
5. The Committee shall check grievance along
6. whether prima facie case of

a.       high pitched assessment

b.      non observance of natural justice

c.       Non application of mind

d.      Gross negligence

e.      Lack of Involvement

7. Whether addition is not backed by sound logic or reason , the provisions of law have grossly been misinterpreted, or obvious and well established facts have been ignored
8. If assessment is found to be unreasonable or high pitched, administrative action shall be taken and case shall be presented to appellate authorities .
9. Committee, however not to be treated as alternative /additional appellate channel
10. Committees to be formed till end of Nov 2015

1       11.   Disposal of grievance petition with in two months from the end of month in which grievance is made.

The appellants had collected certain amounts from their customers under the heading 'common area maintenance deposit', which was required to be utilized for maintenance of common area of the society, such as stairs, terrace, parking, water charges, municipal taxes, etc. Till the society is formed of the flat owners, the appellant would maintain a separate account of such collection and outgoings and transfer whatever balance amounts (with interest) available to the society. The amount was collected from the flat owners under the provisions of Maharashtra Ownership Flats (Regulation of the Promotion of Construction, sale, management and transfer) Act, 1963. Cestat Mumbai in Goel Nitron Constructions[2015] 62 taxmann.com 333 JULY 7, 2015 following Kumar Beheray Rathi Appeal Nos. ST/137, 138, 139 & 140/2008 - Mum, dated 18-11-2013 held that no service tax is leviable on such one time maintenance charges till housing society is formed

Trust not registered with in six months time limit u/s 12AA(2)

1. U/s 12AA(2), CIT has been required to grant registration with in a period of six months.
2. It has been held by Full Bench decision of Allahabad High Court in Muzaffarnagar Development Authority on 05-02-2015 reversing its own order in Society for the Promotion of Education, Adventure Sport & Conservation of Environment that Non disposal of an application for registration, by granting or refusing registration, before the expiry of six months as provided under Section 12AA (2) of the Income Tax Act 1961 would not result in a deemed grant of registration
3. Similar Judgements delivered by Madras High Court  in Karimangalam Onriya Pengal Semipu Amaipu Ltd. T.C.(A) No. 1183 of 2010 20.03.2013; Anjuman-E-Khyrkhah-E-Aam [2011] 11 taxmann.com 354; Salem v. Sheela Christian Charitable Trust, T.C.(A) No.315 of 2010 dated 27.2.2013;Orrisa High Court in Srikhetra, A.C. Bhakti-Vedanta Swami Charitable Trust v. Asstt. CIT 2006 (II) OLR
4. When public duty is to be performed by the public authorities, the time-limit which is granted by the Statue is normally not mandatory but is directory in the absence of any clear statutory intent to the contrary. See Montreal Street Railway Company v. Normandin AIR 1917 PC 142
5. Also held by ITAT Delhi in the case of Process cum product development centre ITA 5013/ITA /2010 on 17-01-2011that mere because order though passed in six moths is received a few days after 6 months shall not result in deemed registration with in six months

          6.   Now, CBDT vide Instruction No. 16/2015 dated 06-11-2015 has instructed the CIT(Exemption)        to follow the time limit of six months strictly failing which suitable administrative action shall             be taken

Sales tax payment is not substitute for service tax liability

ž  It also cannot be disputed that even if sales tax is wrongly remitted and paid that would not absolve them from the responsibility of payment of service tax, if otherwise there is a liability to pay the same.

ž  If the article is not susceptible to tax under the Sales Tax Act, the amount of tax paid by the assessee could be refunded as the case may be or, the assessee has to follow the law as may be applicable. But we cannot accept a position in law that even if tax is wrongly remitted that would absolve the parties from paying the service tax if the same is otherwise found payable and a liability accrues on the assessee.

ž  [Para 18 of Supreme Court Judgment in  Idea Mobile Communication Ltd [2011] 12 taxmann.com 307 (SC) AUGUST  4, 2011]

Where assessee, an advertising agency, made payments of hoarding charges to different parties, it was required to deduct tax at source under section 194C and not under section 194-I.Ogilvy & Mather (P.) Ltd. [2015] 62 taxmann.com 279 (Mumbai - Trib.) AUGUST 28, 2015 . Supreme Court in Japan Airlines followed where in resting the long drawn disputes ,paymnents for landing charges of aircrafts were held not covered by S. 194I i.e. TDS on rent

Service Tax/ Vat on SIM Cards

In this article an attempt has been made to consolidate the development of tax law on taxability of SIM card transactions

1.     Amount received for subscription of SIM card is exigible to service tax only

The charges paid by the subscribers for procuring a SIM Card are generally processing charges for activating the cellular phone and consequently the same would necessarily be included in the value of the SIM Card. [Para 18]

The position in law is therefore clear that the amount received by the cellular telephone company from its subscribers towards SIM Card will form part of the taxable value for levy of service tax, for the SIM Cards are never sold as goods independent from services provided. They are considered part and parcel of the services provided and the dominant position of the transaction is to provide services and not to sell the material i.e., SIM Cards which on its own but without the service would hardly have any value at all. Thus, it is established from the records and facts of this case that the value of SIM cards forms part of the activation charges as no activation is possible without a valid functioning of SIM card and the value of the taxable service is calculated on the gross total amount received by the operator from the subscribers. [Para 19]

Supreme Court Judgment in  Idea Mobile Communication Ltd [2011] 12 taxmann.com 307 (SC) AUGUST  4, 2011

2.     Taxable Value of service in case of SIM card

a)     Supreme Court on taxable Value of service in case of SIM card: In BPL Mobile Cellular Ltd 01-02-2008, it was held by Supreme Court in  [2012] 26 taxmann.com 216 (SC) that in case of subscription of SIM cards telecom service providers are liable to pay tax service tax on amount received from distributors and not on MRP

b)    Service tax imposed on MRP

With effect from 1-3-2007, an Explanation was inserted below rule 5(1) of the Service Tax (Determination of Value) Rules, 2006, providing that, the value of telecommunication service shall be the gross amount paid by the person to whom telecom service is provided by the telegraph authority.

Thus, the gross amount paid by the subscriber viz. the MRP of the SIM Cards shall be the basis of the valuation and the telecom service providers shall be liable to service tax thereon

3.        Liability of Selling agents/Distributers of SIM Cards

The selling agent/distributor does not provide any service to the customer. In some cases the distributor gets his consideration from customer at the time of sale of sim cards through the margin in price. In some cases the distributor gets their consideration from the telecom operator by way of commission on the transaction normally called as sale. In the case before us the second type of situation exists.[Para 13]

Though the correct procedure for discharge of the service tax liability by the two parties is that the distributors raise bills for commissions that is due to them along with service tax and BSNL takes Cenvat credit of tax paid by distributors for discharging liability on the telecommunication service provided by BSNL, such procedure does not result in extra realization of Revenue. [Para 26 of G.R.Movers (Del. Cestat)]

It was held by the Cestat  that Considering the special nature of the impugned activities and the fact that it can be easily verified that full taxable value of the service provided by BSNL to customers is subjected to tax, we are of the view that there is no case to undo decisions already taken by the Tribunal in this regard in

(i)		Chetan Traders v. CCE [2008] 17 STT 318 (New Delhi-CESTAT)
(ii)		Hindustan Associated Traders v. CCE [Final order Nos. 673 & 674 of 2007, dated 7-6-2007]
(iii)		South East Corpn. v. CCE& ST [2009] 22 STT 446 (Bang.-CESTAT)
(iv)		Karakattu Communications v. CCE [2009] 21 STT 384 (Bang.-CESTAT)

Madras High Court in Bharat Cell [2015] 62 taxmann.com 295 (Madras) JULY  3, 2015 has followed the Judgment of Delhi Cestat in G.R. Movers (supra)

 The services of selling agent or a distributor of SIM cards or recharge coupon vouchers have been exempted from service tax vide entry No. 29 in Notification 25/2012-S.T., dated 20.06.2012.w.e.f. 01-07-2012

Conclusion: The Concept of revenue neutrality discussed in G.R. Movers (supra) can not be followed as a precedent in other cases and the judgements delivered are in the light of special nature of transaction, valuation method under service tax law and future exemption to selling agents/ distributors.

No TDS on reimbursement of guarding and supervisory charges by assessee , rice mill, to bank for payment to NBHC (National Bulk Handling Corporation) against pledge of stock but tds required to be deducted by bank because there is contract between bank and NBHC. Hence 40(a) (ia) not attracted- Luxmi Rice Mills 29-10-2015 (2015) 45 CCH 0153 DelTrib. The Tribunal relied upon the decision of Gujrat High Court in Gujrat Narmada Valley Fertilizer Co. SLP against the decision of Gujrat High Court dismissed by Supreme Court on 17-01-2014 (in SLC CC No. 175 of 2014). Delhi High Court in the case of CIT Vs. DLF Commercial Project Corporation in ITA 627/2012 and 507/2013 vide order dated 15-7-2015 has also held that no TDS is liable to be deducted on reimbursement of expenses

Where branding of trade mark is obtained by restaurant under Trade Marks Act , then food served by that restaurant can not be treated as unbranded and has to be taxed accordingly under Vat law treating the same as branded- Tvl. Zaitoon Multi Cuisine Family Restaurant [2015] 62 taxmann.com 225 (Madras) AUGUST 4, 2015 Comments: Under Punjab Vat Act Branded and packaged food product under ScheduleE Sr.No. 15(6) are taxable @15.95% in the hands of importer/manufactrer (i.e. hotel/restaurant) and subsequent sale is tax free. The above decision might have bearing on the taxation under Punjab Vat Law also

Gift made by relatives of the assessee to his minor children amounting to Rs. 371000. Held by Allahabad High Court in Radhey Shyam Bhatia [2015] 62 taxmann.com 123 (Allahabad) “ All the donors are in relation of the assessee and the gifts were made out of love and affection. The details of each donor's return was produced before the Assessing Officer, as all the donors were the income-tax assessees. When it is so then the creditworthiness is proved. The amount was reflected in the books of account. Thus, in the instant case, the identity of the donors has been proved. The transfer of the amount was voluntarily and the amount was transferred by way of entries, so the genuineness of the transaction has been proved. Hence, in the peculiar facts and circumstances of the case, the gifts appears genuine. Also by looking to the amount involved, we accept the gift as genuine. All the ingredients of valid gifts have been proved in the instant case…..”

Where AO having jurisdiction over searched person and other than searched person is same In the case where the AO of the searched person as well as the other person is one and the same, the date on which such satisfaction is recorded would be the date on which the AO assumes possession of the seized assets/documents in his capacity as an AO of the person other than the one searched.[Para 18 2nd line] Allahabad High Court in the case of Commissioner of income Tax v. Gopi Apartments: [2014] 360 ITR 411 “26. Even in a case, where the Assessing Officer of both the persons is the same and assuming that no handing over of documents is required, the recording of 'satisfaction' is a must, as, that is the foundation, upon which the subsequent proceedings against the 'other person' are initiated. The handing over of documents etc. in such a case may or may not be of much relevance but the recording of satisfaction is still required and in fact it is mandatory." Madhya Pradesh High Court in Commissioner of Income Tax v. Mechmen: [2015] 60 taxmann.com 484 (Madhya Pradesh) also suggested the same Delhi High Court Judgement in RRJ Securities Ltd [2015] 62 taxmann.com 391 (Delhi) 30-10-2015

Delhi High Court Judgement in RRJ Securities Ltd [2015] 62 taxmann.com 391 (Delhi) 30-10-2015 on Treatment of Concluded Assessments u/s 153A said and quoted that Delhi High Court in Commissioner of Income Tax (Central)-IIIv. Kabul Chawla: ITA 707/2014, decided on 28th August, 2015 has held that completed assessments could only be interfered with by the AO on the basis of any incriminating material unearthed during the course of the search or requisition of the documents. In absence of any incriminating material, the AO does not have any jurisdiction to interfere in concluded assessments. [Para 21,22] Merely because valuable articles and/or documents belonging to the Assessee have been seized and handed over to the AO of the Assessee would not necessarily require the AO to reopen the concluded assessments and reassess the income of the Assessee [Para 36] The concluded assessments cannot be interfered with under Section 153A of the Act unless the incriminating material belonging to the Assessee has been seized.[Para 37]

Principles and Procedure of Assessment u/s 153C

1.    The AO of the searched person is not required to examine whether the assets or documents seized reflect undisclosed income. [Para 13]

2.   All that is required for him is to satisfy himself that the assets or documents do not belong to the searched person but to another person[Para 13]

3.   Thereafter, the AO has to transfer the seized assets/documents to the AO having jurisdiction of the Assessee to whom such assets/documents belong.[Para 13]

4.   The AO of the Assessee, on receiving the documents and the assets seized, would have jurisdiction to commence proceedings under Section 153C of the Act.[Para 13]

5.   Section 153C(1) of the Act clearly postulates that once the AO of a person, other than the one searched, has received the assets or the documents, he is to issue a notice to assess/re-assess the income of such person - that is, the Assessee other than the person searched - in accordance with provisions of Section 153A of the Act.

6.   The AO of the person other than the one searched also, is not, at the stage of issuing notice under Section 153C/153A of the Act, required to conclude that the assets/documents handed over to him by the AO of the searched person represent or indicate any undisclosed income of the Assessee under his jurisdiction.[Para35]

7.   As explained in SSP Aviation (supra), Section 153C only enables the AO of a person other than the one searched, to investigate into the documents seized and/or the assets seized and ascertain that the same do not reflect any undisclosed income of the Assessee (i.e a person other than the one searched) for the relevant assessment years.[Para 35]

8.   If the seized money, bullion, jewellery or other valuable article or thing seized as handed over to the AO of the Assessee, are duly disclosed and reflected in the returns filed by the Assessee, no further interference would be called for. Similarly, if the books of accounts/documents seized do not reflect any undisclosed income, the assessments already made cannot be interfered with [Para 35]

9.   Merely because valuable articles and/or documents belonging to the Assessee have been seized and handed over to the AO of the Assessee would not necessarily require the AO to reopen the concluded assessments and reassess the income of the Assessee [Para 35]

10 The question whether the documents/assets seized could possibly reflect any undisclosed income has to be considered by the AO after examining the seized assets/documents handed over to him. It is only in cases where the seized documents/assets could possibly reflect any undisclosed income of the Assessee for the relevant assessment years, that further enquiry would be warranted in respect of those years.[Para 36]
11 Whilst, it is not necessary for the AO to be satisfied that the                           assets/documents seized during search of another person reflect undisclosed     income of an Assessee before commencing an enquiry under Section 153C of     the Act, it would be impermissible for him to commence such enquiry if it is     apparent that the documents/assets in question have no bearing on the             income of the Assessee for the relevant assessment years.[Para 36]

12     The concluded assessments cannot be interfered with under Section 153A     of the Act unless the incriminating material belonging to the Assessee has         been seized.[Para 37]

Delhi High Court Judgement in RRJ Securities Ltd [2015] 62 taxmann.com 391 (Delhi) 30-10-2015

Working papers of the client stored in the hard disk of the CA can not be said to be belonging to the his assessee. They are property of Chartered Accountant and hence do not “belong to” his client, hence no proceedings against the client of the CA u/s 153C can be undertaken on the basis of such evidence. Delhi High Court Judgement in RRJ Securities Ltd [2015] 62 taxmann.com 391 (Delhi) 30-10-2015 .However this finding of the Court may not sustain post 01-06-2015, scenario , where the words “belong to” have been replaced by “pertain to” and “relates to” by Finance Act 2015.

No Vat is leviable on E-Commerce website. They are only facilitators to the transaction of sale and not acting as sellers themselves. The actual sellers have discharged their tax dues in full and therefore place of delivery has no relevance because as per Article 286 and Section 3 of CST Act, tax is payable in the state from where sales have occasioned- Held by Kerala High Court in Flipkart Internet Private Limited WPC 5348/2015 pronounced on 26-10-2015

Committee to simplify provisions of the Income Tax Act set up with tenure of one year under the Chairmanship of Justice R.V. Easwar(Retd). Two Chartered Accountants Mukesh Patel and Vinod Jain are also part of the committee. Committee aims to identify the provisions which are leading to litigation due to different interpretations, provisions which aim at ease of doing business, identify the areas of simplification in light of existing jurisprudence. To suggest alternatives to the areas to bring certainty in tax laws.Sub Groups can be formed by the committee. First batch of recommendations to be received till 31-01-2016.

As per section 44 of the Punjab Vat Act, every person required to keep and maintain account books or other records, shall retain them until the expiry of six years after the end of the year to which these relate or for such further period as may be required or until the assessment becomes final, which ever is later. Since every person is required to make self assessment of tax u/s 26(1) and since if no notice u/s 29(2) is issued for 2008-09 till 31-03-2015, then assessee can not be expected to retain books beyond 31-03-2015 under the provisions of the law. However at present assessment notices u/s 29(2) for assessment year 2008-09 are being issued in abundance by the excise and taxation department in the month of October for assessments getting time barred till 20-11-2015. In theses notices all enquiries relating to mismatches with regard to books and other evidences requiring substantiation with books are being called for. Such an action does not appear to be in harmony with the provision of the law inspite post amendmend the provisons of section 29(4) and is resulting genuine hardship to the Vat dealers

As per Rule 12(7) of CST Rules , F form is required to be furnished with in three months after the end of period to which declaration releates. However proviso to Rule 12(7) empowers the assessing authority to condone the delay in case the dealer was prevented by sufficient cause to file the declarations. Rule 40(2) of PVAT Rules requiring to furnish declaration forms under CST along with Vat 20 does not override proviso to Section 12(7). Hence the officer can not refuse to accept the Forms without assigning reasons . Supreme Court Judgement in Hyderabad Abestos Cemnent Production Ltd (1994) 4 PHT 440(SC) followed in Bajaj Consumer Care Limited 52 PHT 34(PVT) [18-05-2015]

Failure to furnish H forms shall result in return being incorrect or incomplete and shall invite interest from from the date tax was due or the return is incomplete or incorrect and not from the date of assessment- Zeon Life Sciences Ltd. 52 PHT 29 (2015)[15-07-2015]

Education is not business . Held by Supreme Court in AIR 1963 SC 1873 in University of Delhi vs Ram Nath.

Charging of nominal fee against pamphlets supplied to devotees by Sai Baba Trust of Shirdi was held to be not a business activity and hence not exigible to sales tax- Sai Baba Publication Fund 126 STC 288

Selling of unserviceable items was held not business by supreme Court in Port of Madras 114 STC 520.

Meals being supplied in a hostel to the scholars, visitors, guest faculty etc. can not be exigible to sales tax where main activity is academics- as per Allahabad High Court in IIT Kanpur 38 STC 428; Scholars home Senior Secondary School 42 VST 530; Swadeshi Cotton Mills 15 STC 505.

Held by Supreme Court in A.M. Ansari 38 STC 577 that where main activity is not business, the incidental activity can not be held to be business. [Para 4]– Lawrence School Sanawar (2015) 52 PHT 24 (HPTT)

To constitute the business , the words “carrying on”[carried on in section 2(c) of PVAT] requires something more than merely buying selling or buying. Whether a person carries on business in a particular commodity depends upon volume, frequency, continuity and regularity of transactions of sale and purchase and the transactions must ordinarily be entered into with profit motive. Where main activity of school is to impart education the incidental activity of providing uniform can not be held to be business [Para 4] – Lawrence School Sanawar (2015) 52 PHT 24 (HPTT)

Interest can not be levied in case of classification disputes regarding rate of tax and such dispute shall be resolved only in assessment. Following EID Parry (2005) 141 STC 12(SC) ; J.K. Synthetics (1994) 4 PHT 450 (SC) ; Hindustan Aluminium (2002) Vol. 127 – Kishan Chand & Bros 52 PHT 19 (HPTT) holding that Khair wood is not same as timber.

The assessee deposited the amount of tax in pursuance of demand raised by assessing authority. The appeal of the dealer was accepted by Vat Tribunal after gap of 12 years from the date of deposit of tax and matter remanded to decide the case afresh. The assessing authority decided the matter afresh. However interest was allowed only for 4 months. The assessee went in appeal before DETC and Tribunal but was unsuccessful. The High Court however adjudicating the matter in the favor of the assessee promulgated that interest to be allowed from the date of deposit of tax.- Haryana Vanaspati & General Mill (2015) 52 PHT 1 [07-08-2015] followed Sonu Rice Mills STI 2000 PB&HN 13; Sagar Moto Compnay 4PHT 753(P&H) distinguishing Khem Ram Devi Sahai 23 PHT 330 (P&H); Saurabh Kumar & Bros. 127 STC 556(P&H) , where in the petitioner restricted his right to claim interest on refund. SC decision in ITC Limited 2005 13 SCC 689, upholding allowance of interest on refund of predeposit as per draft circular without producing draft circular held not applicable. Rule 40 of PVAT Act allows interest @ 6% from date of application till date of grant of refund does not deal with refunds arising out of Court Orders

The assessee deposited the amount of tax in pursuance of demand raised by assessing authority. The appeal of the dealer was accepted by Vat Tribunal after gap of 12 years from the date of deposit of tax and matter remanded to decide the case afresh. The assessing authority decided the matter afresh. However interest was allowed only for 4 months. The assessee went in appeal before DETC and Tribunal but was unsuccessful. The High Court however adjudicating the matter in the favor of the assessee promulgated that interest to be allowed from the date of deposit of tax.- Haryana Vanaspati & General Mill (2015) 52 PHT 1 [07-08-2015] followed Sonu Rice Mills STI 2000 PB&HN 13; Sagar Moto Compnay 4PHT 753(P&H) distinguishing Khem Ram Devi Sahai 23 PHT 330 (P&H); Saurabh Kumar & Bros. 127 STC 556(P&H) , where in the petitioner restricted his right to claim interest on refund. SC decision in ITC Limited 2005 13 SCC 689, upholding allowance of interest on refund of predeposit as per draft circular without producing draft circular held not applicable. Rule 40 of PVAT Act allows interest @ 6% from date of application till date of grant of refund does not deal with refunds arising out of Court Orders

The assessee, a works conractor, filed an application for refund for the year 2014-15. Department proceeded to assess him for earlier years and issued assessment notices but did not respond to the refund application. The assessee filed a writ prtition. P&H High Court directed to process the refund application with in one month and grant refund with in next two weeks. – M/s. Lakhwinder Singh Tung Builders CWP No. 21828 of 2015 pronounced on 12-10-2015

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