Recent Controversies in Income Tax

1
Recent Controversies in Income Tax

• By CA. Kapil Goel FCA LLB
• Advocate (Delhi High Court)
• 9910272806
• advocatekapilgoel_at_gmail.com

2
What is contained for discussion in next slides!

• Search and Seizure related controversies
• Reopening related developments
• Section 14A developments
• Karnataka High Court orders! Charity taxation!
• Section 195/ Section 40(a)(i) Sec. 9(1)(vii)
• Section 37 36(1)(iii) Section 40(a)(ia) 41(1)
• Section 68 Section 271D/269SS penalty
• Section 263 law in D.G.Housing case
• Section 271(1)(c) Guj HC gift addition

3
Search and seizure Assessment etc
4
Search Assessment section 292C Presumption
Gujarat High Court

• BABULAL JIVANLAL PATEL Whether on the facts and
  in the circumstances of the case, the Appellate
  Tribunal was justified in law in not taking
  cognizance of provisions of section 292C of the
  Income Tax Act, 1961, in correct perspective as
  the said document was seized from the premises of
  the assessee?
• The facts emerging from the record indicate that
  during the course of search a loose paper file
  annexure A-1 showed calculation of net profit of
  some trading activity. Such entries were made on
  the letter head of Doctor Shri Maganbhai Patel
  who had visited the family on 1.7.1999 when
  someone in the family was sick. The assessee had
  explained that the entries were not in his
  handwriting or in the handwriting of any of his
  family members. HELD
• However, in the facts of the present case, what
  is found is a loose paper on the letter head of a
  Doctor on which entries were made regarding some
  trading activity. The assessee has denied the
  handwriting to be his or that of any of his
  family members

5
Search Assessment section 292C Presumption

• . Considering the nature of the document, viz., a
  prescription of a doctor, on which certain
  entries were made on the reverse side, along with
  the fact that the assessee had explained that the
  handwriting, was not his or that of any of his
  family members, the presumption that the same
  belonged to the assessee stood rebutted. Besides
  as recorded by the Commissioner (Appeals) though
  search had been carried out in the entire group,
  no evidence whatsoever had been found during the
  search operations which could show that the
  assessee did carry out any business in his
  individual capacity to earn such income.
  Moreover, the assessee was not found to be in
  possession of unaccounted assets etc. which could
  be said to have been made out of such alleged
  unaccounted income. Thus, in the absence of any
  corroborative evidence to support the case of the
  revenue that the assessee had actually earned
  such huge income, the Tribunal was justified in
  upholding the deletion of the addition of
  Rs.21,25,000/-

6
Search Assessment section 292C Presumption

• UMANG H THAKKAR - Opponent(s) GUJ. HIGH COURT
  SEC. 292C/132(4A) etc.
• From the office of father of assessee file
  containing loose paper (176 pages) was impounded
  and on the basis of the notings made in this
  file, Assessing Officer added the sum of Rs . 2.8
  crores as the assessee's unaccounted investment
  in land. . At the outset, it is required to be
  noted that though there are four questions raised
  for consideration the issue hinges on one aspect
  and i.e. Whether addition made by Assessing
  Officer to the tune of Rs. 2.8 crores by way of
  unaccounted investment can be sustained or not ?
  10. It can be seen from the findings of the
  Tribunal noted above that addition made by the
  Assessing Officer has been rightly deleted by the
  Tribunal upholding the version of CIT(A) .

7
Search Assessment section 292C Presumption

• .Firstly on the settled law that no addition
  could be made on the basis of statement of the
  3rd party, this deletion is made. Even if the
  person concerned was the father of assessee.
  Tribunal had noted that alleged loose
  papers/documents where the rough jottings were
  made on the papers, they were not handwriting of
  either assessee or any of his employees neither
  was there were any dates nor the figures
  indicative of anything (UMANG H THAKKAR )

8
DHIRAJLAL DURLABHBHAI PATEL - HUF

• Admittedly, except for the unsigned document,
  there is no other corroborating evidence to
  establish any transaction having been taken
  place, more particularly in relation to the
  amount stated in the said document. There is no
  evidence, nor any finding by any authority, that
  the possession of land was handed over by the
  assessee as contended by the learned counsel. In
  this factual matrix in absence of any cogent
  evidence to treat the amount stated in the
  unsigned document as the value of the transaction
  resulting in taxable income the Tribunal was
  justified in deleting the addition

9
Section 132 Search Validity

• High Court of Bombay (Nagpur Bench) in Spacewood
  Furnishers (P) Ltd. Ors. v. Director General of
  Income Tax (Investigation) Ors., (2012) 246 CTR
  Reports 313

10
Section 132 Search Validity

• The note of IT (Investigation) authorising the
  search was considered and it was held that same
  did not show any date, time or place, when the
  discreet enquiries were made and did not name the
  person from whom it was made. The market
  information did not find place in the
  satisfaction note and no details of the discreet
  enquiry were disclosed. It was held that
  satisfaction note must be based upon
  contemporaneous material, information becoming
  available to the competent authority. Loose
  satisfaction notes placed by authorities before
  each other cannot meet the requirement of the
  provisions and thus the authorisation in that
  case was found to be bad and unsustainable.

11
Orissa High Court search sec. 132 updates

• Maa Vaishnavi Sponge Ltd. vs Director General of
  Income Tax and Ors 339 ITR 413
• 10. The intention of legislature is certainly
  not to give unbridled power to the authorized
  officer to seize or issue prohibitory order in
  respect of any asset/bank account etc. found in
  the course of search without application of his
  mind for forming of an opinion/a belief on the
  basis of any material available on record that
  the asset/deposit in bank account represents
  wholly or partly the undisclosed income of the
  assessee. Therefore, order under s. 132(3
  cannot be issued indiscriminately or it is not
  automatic in a search and seizure proceeding as
  contended by learned senior standing counsel Mr.
  A.K. Mohapatra.

12
Orissa High Court search sec. 132 updates

• Visa Comtrade Ltd. vs UOI and Ors. 338 ITR 343
• Top most care should be taken before taking
  seizure action in respect of a bank account
  already disclosed to the Income Tax Department
  The Act has not given unbridled and arbitrary
  power to the I.T. Authorities to invoke power
  under Section 132 of the Act. Needless to say
  that subjective satisfaction must have some
  objective foundation. It cannot be ipse dixit of
  the Authorized Officer. On those untested
  allegations and in absence of any findings that
  source of any deposit in the current bank account
  has not been explained or not disclosed in the
  regular books of account, no seizure is
  sustainable. As noted above, the correctness of
  allegation has to be assessed in assessment.

13
Visa Comtrade Ltd. vs UOI and Ors. 338 ITR 343

• It is a settled legal proposition that if an
  order is bad in its inception, it does not get
  sanctified at a later stage. A subsequent
  action/development cannot validate an action
  which was not lawful at its inception, for the
  reason that the illegality strikes at the root of
  the order.

14
M.D. Overseas Ltd. vs Director General of Income
Tax and Ors 333 ITR 407 . All. High Court

• 70. Let's consider the question, whether the
  relevancy of information leading to reasons to
  believe for authorising the search is to be
  adjudged after disclosing and hearing the
  aggrieved person or not. 75. A man's home is his
  castle, is a proverbial expression of personal
  privacy and security. It means, there is nothing
  more sacred more strongly guarded than one's own
  home a man's home is his castle where he can be
  in perfect safety from intrusion.  76. More than
  400 hundred years ago, Sir Edward Coke, an
  English judge, in Semayne's Case (1604) 77 Eng.
  Rep. 194 gave it legal recognition by observing,
  'The house of every one is to him as his castle
  and fortress, as well for his defence against
  injury and violence as for his repose.'

15
M.D. Overseas Ltd Contd

• Since then it is not only part of English
  jurisprudence but of all democratic nations of
  the world so is the case with us the
  Constitution guarantees fundamental rights and
  protects our privacy under article 21 of the
  Constitution.
• 77. We are not only exercising writ
  jurisdiction, but are also sentinel on the qui
  view for protections of the rights we are on
  alert on any encroachment on any freedom. Should
  we decide a point relevant to intrusion of
  privacy without affording reasonable opportunity
  to the petitioners should we adopt a procedure
  that might not be fairthe ultimate aim of all
  jurisprudence the yardstick on which all
  procedure should be tested.
•  

16
M.D. Overseas Ltd Contd.

• The procedure of indicating information and
  reason to believe (except the source) to the
  petitioner, then taking a decision on relevancy
  of the information after hearing the parties,
  ensures fairness. Had their disclosure barred by
  any enactment or were they privileged under the
  Evidence Act, then it would have been otherwise.

17
Siksha "O" Anusandhan vs CIT 336 ITR 112
HC (Orissa)

• (i) Whether in absence of warrant in the name of
  an assessee the search conducted in its premises
  is a valid search as contemplated under Section
  132 of the I.T. Act, 1961?
• (ii) Whether initiation of a valid search as
  contemplated under Section 132 of the I.T. Act,
  1961 in case of a person is a pre-requisite to
  issue notice for making assessment/reassessment
  under Section 153 A of the I.T. Act, 1961 in
  respect of such person ?
• (iii) Whether on the facts and circumstances of
  the case, the I.T.A.T. is justified in remanding
  the matter to the Commissioner of Income Tax
  (Appeal) to adjudicate on a question of law
  raised before it instead of deciding the issue
  itself?

18
Siksha "O" Anusandhan

• In order to assume jurisdiction to assess a
  person under Section 153A, there must be
  initiation of a valid search in respect of such
  person under Section 132 of the I.T. Act, 1961.
  The word 'person' appearing in Section 132 and in
  Section 153 A of the I.T. Act, 1961 is one and
  the same person. Thus the person, in respect of
  whom search under Section 132 is initiated, is
  the same person against whom notice under Section
  153A is to be issued for making
  assessment/reassessment under that Section.

19
Siksha "O" Anusandhan

• In view of the above, we are not inclined to
  accept the contention of Mr A. Mohapatra that
  even if there is any illegality in the search
  warrant, the same will not invalidate the search
  assessment proceeding initiated under Section
  153A of the I.T. Act, 1961 Therefore, we are of
  the view that initiation of a valid search as
  contemplated under Section 132 of the I.T. Act,
  1961 in case of a person is a prerequisite to
  issue notice for making assessment/reassessment
  under Section 153A of the I.T. Act, 1961 in
  respect of such person.
• Law is well settled that once the materials are
  available on record, the appellate Court should
  have disposed of the case on merit taking those
  materials into consideration and there is no need
  to direct remand. (apex Court in Indian Bank vs.
  K.S.Govindan Nair and Ors., (2004) 13 SCC 697 )

20
ACIT vs Amit Pande ITAT, Indore 28 July 2011

• Prima facie the Assessing Officer of the searched
  person should form an opinion with regard to any
  document, valuables, etc., as found during the
  course of search, and that such document, which
  are declined by the searched person, actually
  belongs to some other person against whom
  proceedings u/s 153C are required to be put into
  operation. After recording of such satisfaction,
  the document so seized should be handed over to
  the Assessing Officer having jurisdiction over
  such other person, therefore, the requirement of
  recording of such satisfaction cannot be
  substituted by an appraisal note which is
  prepared by the search party after completion of
  search. Appraisal note is a secret internal
  document of the department for its internal use
  and the contents of the same are not conveyed to
  the assessee nor its copy supplied to the
  assessee even on making a written request,
  therefore, it cannot be treated at par with the
  recording of satisfaction as stipulated u/s 153C
  of the Act which is a mandatory requirement

21
CIT vs Late J. Chandrasekar (HUF) 338 ITR 61
HC (Chennai)

• In the light of the fact that the Revenue did not
  produce any material to show that the materials
  were available at the hands of the Assessing
  Officer at the time of issuing notice, rightly
  the Tribunal came to the conclusion that the
  assumption of jurisdiction goes against the very
  tenor of section 153C of the Act. Consequently,
  the appeal had to fail. Even though the learned
  standing counsel for the appellant strenuously
  contended that the files were available in the
  office of the Assessing Officer, yet, there is
  hardly any material to show that the contention
  taken by the learned standing counsel before this
  court can be substantiated or was substantiated
  before the Tribunal.

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(No Transcript)
23
(No Transcript)
24
(No Transcript)
25
Section 153A/C Search Asst.

• Ahd bench in Dr Manshukh Shah Mahipat Raichand
  Khemani Distilleries Shri Babubhai H. Parikh
  also states similar views
• Calcutta High Court Dinanath HUF All. High Court
  Shaila Aggarwal 246 CTR 266 (abatement meaning
  u/s 153A)
• Mumbai Bench ITAT in Vama Apparels 22/07/2011
• It was not open to the Assessing Officer to
  re-agitate the issues which has already
  crystallized in the original assessment under
  section 143(3) of the Act, without there being
  incriminating material found as a result of
  search.

26
Section 15 3A/153C

• Gujarat High Court in Gambhir Silk Mills
  (approving AHd Bench ITAT order)
• Bang Bench ITAT in United Spirits case 13/01/2012
• However, in the present appellants case, no
  books of account nor any incriminate documents
  pertaining to the appellant were seized when a
  search was conducted in the residential premises
  of Sri Miglani and that no books of account or
  documents or assets seized or requisitioned were
  handed over to the assessing officer having
  jurisdiction over the appellant, but, only (Para
  3 of Asst. order) 3.A satisfaction note for
  initiation of action u/s 153C/148 in the case of
  CBDL was also received from the DCIT, CC-19, New
  Delhi. Thus, the AO, in our considered view,
  was not within his realm for initiation of
  proceedings u/s 153A r.w.s 153C of the Act in the
  case of the present appellant

27
Guj High Court in case of MHASKAR GENERAL
HOSPITAL 09/08/2011

• A) Whether on the facts and circumstances of the
  case and in law, the Appellate Tribunal is right
  in quashing the order u/s.263 of the I.T.Act
  without considering the decision of this Hon'ble
  Court in the case of Fakir Mohmed Haji Hasan v.
  CIT 247 ITR 290? Refer Deputy CIT v. Radhe
  Developers India Ltd., (2010) 329 ITR 1(Guj.)
  With respect to second question, we may notice
  that the assessee's stand is that its sole
  business was that of running a hospital. It had
  no other source of income and that therefore,
  treating such undisclosed income from other
  source was not justified

28
Reopening u/s 148 of the Act
29
Gujarat High Court

• 1) Bakulbhai Ramanlal Patel v. Income Tax Officer
  reported in (2011) 56 DTR(Guj.) 212, wherein
  Division Bench of this Court observed that the
  assessment cannot be reopened to verify whether
  any income chargeable to tax has escaped
  assessment and further that reopening of
  assessment cannot be permitted on vague and
  nonexistent reasons for a mere fishing inquiry.
• 2) Hotel Oasis(Surat) (P) LTD. v. Deputy
  Commissioner of Income Tax reported in (2011) 57
  DTR (Guj) 378, wherein Division Bench of this
  Court observed that assessment cannot be reopened
  merely to make inquiries.

30
Voltas Limited WRIT PETITION NO.312 OF 2012 IN
THE HIGH COURT OF JUDICATURE AT BOMBAY 15
February 2012

• While a subsequent decision of a Court or a
  legislative amendment enforced after the order of
  assessment may legitimately give rise to an
  inference of an escapement of income, before the
  Assessing Officer  proceeds to reopen an
  assessment after the expiry of four years of the
  end of the relevant Assessment Year, he must
  nonetheless apply his mind to the fundamental
  question as to whether there has been a failure
  to disclose on the part of the assessee. In the
  present case, ex facie there is no such
  allegation (referDIL Limited v. Assistant
  Commissioner of Income Tax (Writ Petition (Lodg.)
  No.2786 of 2011)Commissioner of Income Tax v.
  M/s. K. Mohan Co. (Exports) (Income Tax Appeal
  (Lodg.) 2347 of 2010 and 1263 of 2011 decided on
  1 July 2011), Sesa Goa Ltd. v. Joint Commissioner
  of Income Tax)

31
NYK Line (India) Ltd.. WRIT PETITION NO.159 OF
2012 HIGH COURT OF JUDICATURE AT BOMBAY 10
FEBRUARY 2012

• 14 Now, undoubtedly an order of assessment which
  has been passed for a subsequent assessment year
  may furnish a foundation to reopen an assessment
  for an earlier assessment year. However, there
  must be some new facts which come to light in the
  course of assessment for the subsequent
  assessment year which emerge in the order of
  assessment. Otherwise, a mere change of opinion
  on the part of the Assessing Officer in the
  course of assessment for a subsequent assessment
  year would not by itself legitimise the reopening
  of an assessment for an earlier year. The point
  to be emphasized is, therefore, that where in the
  case of assessment proceedings for a subsequent
  year certain additional information is obtained
  by the Revenue which was not available to it in
  the course of an assessment for an earlier year,
  that may legitimately be utilized as a ground for
  reopening an assessment of the earlier year

32
NYK Line (India) Ltd.. WRIT PETITION NO.159 OF
2012 HIGH COURT OF JUDICATURE AT BOMBAY 10
FEBRUARY 2012

• The new information which has come to the
  knowledge of the Revenue would, therefore,
  constitute tangible material. Consequently and in
  this background the mere fact that the Assessing
  Officer for Assessment Year 200708 had come to a
  different conclusion would not justify the
  reopening of the assessment for Assessment Year
  200607. In order to establish that the reopening
  of the assessment for Assessment Year 200607 is
  not a mere change of opinion, the Revenue must
  demonstrate before the Court that during the
  course of the assessment proceedings for the
  subsequent year i.e. Assessment Year 200708 some
  new information or material had been brought on
  record which was not available when the
  assessment order was passed for Assessment Year
  2006-07.

33
IN THE HIGH COURT OF JUDICATURE AT BOMBAY INCOME
TAX APPEAL NO.6375 OF 2010 ICICI Bank Ltd

• 7. This aspect of the matter has been considered
  in a judgment of a Division Bench of this Court
  in Ashoka Buildcon Ltd. Vs. Assistant
  Commissioner of Income Tax 2010 325 ITR 574
  (Bombay)2. Explanation 3 enables the Assessing
  Officer to assess or reassess income chargeable
  to tax which he has reason to believe had escaped
  assessment and other income which has escaped
  assessment and which comes to his notice
  subsequently in the course of the proceedings
  under the section. There is nothing on the record
  of the present case to indicate that there was
  any other income which had come to the notice of
  the Assessing Officer as having escaped
   assessment in the course of the proceedings
  under Section 147 and when he passed the order of
  reassessment.

34
Gujarat High Court in case of PRASAD KOCH TECHNIK
TECH PVT LTD reopening not for roving enquiries
and scope of sec. 40(a)(i) vis a vis Foreign
supplier raw material payment

• The Assessing Officer supplied reasons he had
  recorded for reopening the assessment, which read
  as under- The assessee company filed its return
  of income on 22.12.2006, declaring total income
  of Rs.1,00,86,370/-. The assessment u/s.143(3)
  was finalized on 18.06.2008 determining the
  taxable income of Rs.1,00,86,370/-. It is seen
  that the assessee company had made payment of
  Rs.21,60,399/- in Foreign Company for  purchase
  of raw materials. However, neither did the
  company deduct TDS on this amount nor any
  certificate obtain from the concerned Assessing
  Officer for non-deduction of TDS. Thus, in view
  of the provisions of section 40a(i) and judgment
  of Karnataka High Court, entire amount was
  required to be disallowed and added back to the
  total income.  As discussed above, the disallow
  expenditure of Rs.21,60,399/- resulted in under
  assessment of same income. In view of the facts
  discussed above, I have reason to believe that
  income of Rs.21,60,399/- being the amount of
  disallowable u/s.40a(i) chargeable to tax has
  escaped assessment for A.Y.2006-07 and
  accordingly it is the fit case for reopening the
  assessment u/s. 147 for the A.Y.2006-07.

35
Gujarat High Court in case of PRASAD KOCH TECHNIK
TECH PVT LTD reopening not for roving enquiries
and scope of sec. 40(a)(i) vis a vis Foreign
supplier raw material payment

• 22. In the reasons recorded, there is not even a
  prima facie belief or disclosure that on what
  basis, the Assessing Officer has formed his
  reason to believe that such payment to the
  foreign supplier attracted tax in India. In
  absence of any live link with the reasons
  recorded and the belief formed, we are of the
  opinion that the notice was wholly invalid. 23.
  If, as suggested by the counsel for the Revenue,
  we permit the Assessing Officer to ascertain full
  facts and bring them on record, and then decide
  whether income chargeable to tax had escaped
  assessment or not, we would permit the Assessing
  Officer to reopen the assessment only for fishing
  enquiry.

36
Section 14A Exempt Income
37
M/s Siva Projects Engineering IN THE INCOME TAX
APPELLATE TRIBUNAL A BENCH, CHENNAI 17.02.2012

• 3. At the outset, we would like to state here
  that the ld. CIT(A) in the appeal of the assessee
  has confirmed the disallowance of expenditure of
  Rs. 37,87,800/- and has deleted the disallowance
  of interest of Rs. 27,447/-made u/s 14Aof the
  Act. Therefore, the grievance of the assessee
  which remains to be adjudicated by us is with
  regard to disallowance of expenditure of Rs.
  37,87,800/-. 10. Before us, the ld. A.R. of the
  assessee submitted that no exempt income was
  earned during the year and no expenditure was
  incurred in relation to earning exempt income and
  therefore disallowance by invoking Rule 8D was
  not warranted. She also submitted that the claim
  of the assessee that no expenditure was incurred
  in relation to investment of Rs. 101,56,27,000/-
  was not found to be incorrect by the ld. CIT(A).
  Therefore, disallowance of Rs. 37,87,800/- should
  have been deleted by the ld. CIT(A).

38

• Chennai bench ITAT Contd (Siva Projects )
• However, we find that in the instant case, the
  Assessing Officer has not brought no material on
  record to show that the claim of the assessee
  that no actual expenditure was incurred in making
  investments in question was not correct. The
  Assessing Officer, without disputing the
  correctness of the claim of the assessee has
  invoked the provisions of Rule 8D. . 14. Thus it
  is observed that for determining the amount
  disallowable as per provisions of Rule 8D(2) the
  condition precedent is that the Assessing Officer
  must come to a conclusion having regard to the
  accounts of the assessee that claim of the
  assessee that no expenditure was incurred in
  relation to exempt income is not correct. We find
  that in the instant case, no such satisfaction
  has been arrived at. Therefore, computation of
  disallowable amount as per Rule 8D(2) cannot be
  sustained

39
Gujarat High Court

• SUBMERSIBLES LTD TAX APPEAL No. 868 of 2010
  Section 14A Whether the Appellate Tribunal is
  right in law and on facts in confirming the order
  passed by CIT (A) in deleting the disallowance of
  Rs. 13,82,778/ made under Section 14A of the Act
  ?
• Thus, from the entire gamut of facts, the
  Tribunal held that there was sufficient surplus
  funds available with the assessee to invest and
  there was no nexus that could be established with
  the expenditure incurred by the assessee for
  earning the dividend income. (ITAT order upheld)

40
Delhi bench I.T.A. No.3571(Del)/2011 M/s Mohan
Exports Pvt. Ltd 2/3/2012

• The ld. CIT(Appeals) has given a very specific
  finding that the examination of the bank account
  shows that such investments are out of
  interest-free funds available with the
  assessee-company. Rule 8D(2)(ii) deals with a
  case where the assessee has incurred expenditure
  by way of interest during the previous year which
  is not directly attributable to any particular
  income or receipt in terms of the decision in the
  case of Maxopp Investments Ltd. (supra). The
  lower authorities were expected to examine
  whether the interest paid in this year is or is
  not directly attributable to any particular
  income or receipt. There is a finding that the
  interest is not directly related to receipts by
  way of dividends.Therefore, In view of the
  finding of the ld. CIT(Appeals), no interest
  expenditure had been incurred for earning
  tax-free income. Therefore, the provision
  contained in Rule 8D(2)(ii) cannot be invoked.

41
Delhi bench

• ITA No. 2061/Del/2011 Seaview Developers Ltd.,
  Law do not permits to assume hypothetically some
  expenses are there (where there is none in
  assessees PL account) and then apply estimated
  rate to dividend income for disallowing notional
  expenses relatable to tax free income.
• U/s 115JB whether rule 8D can apply? Apparently No

42
Other developments

• Ahd ITAT in case of G M M Pfaulder Ltd, B ITA
  No.1241/Ahd/2006 Section 14A section 36(1)(iii)
  disallowance of expenses on AD-HOC basis
  exhaustive analysis
• SC in Wallfort 326 ITR PAGE 1
• Delhi High Court Maxopp (18.11.2011) 203 Taxman
  364

43
Karnataka High Court orders!
44
Karnataka High Court orders Subandam Uday Kumar
case

• Section 54F is a beneficial provision promoting
  the construction of a residential house,
  therefore the same should receive liberal play in
  light of purpose for which sec. 54F is
  incorporated in statute, which aims to encourage
  investments in acquisition of residential house
  and completion of construction or occupation of
  house is not the requirement of law. B) If after
  making the entire payment merely because a
  registered sale deed has not been executed and
  registered in favor of assessee before the period
  stipulated, he cannot be denied the benefit of
  section 54F deduction. C) Similarly in case
  assessee has invested the relevant sale
  consideration in construction of the house and
  merely because the construction was not complete
  in all respects and it was not in a fit condition
  to be occupied within the period stipulated, can
  be no bar for availing section 54F deduction.

45
PH High COurt on Section 54/54F  LONG TERM
CAPITAL ASSET PERIOD OF HOLDING HOW TO BE COUNTED

• Vinod Kumar Jain Date of Decision 24.9.2010
  held 16. In view of the above, it is concluded
  that the provisions of Sections 2(14), 2(29A) and
  2(42A) encompasses within its ambit those cases
  of capital asset which are held by an assessee.
  Once that is so,adverting to the facts of the
  present case, the assessee was allotted flat on
  27.2.1982 on payment of instalments by issuance
  of an allotment letter and he had been making
  payment in terms thereof but the specific number
  of the flat was allocated to the assessee and
  possession delivered on 15.5.1986. The right of
  the assessee prior to 15.5.1986 was a right in
  the property. In such a situation, it cannot be
  held that prior to the said date, the assessee
  was not holding the flat. 
•  

46
PH High COurt on Section 54/54F  LONG TERM
CAPITAL ASSET PERIOD OF HOLDING HOW TO BE COUNTED

• Whether on the facts and circumstances of the
  present case and the provisions of Section 2(29A)
  and Section 2(42A) read with section 54 of the
  Income Tax Act, the flat allotted to the
  appellant vide allotment letter dated 27.2.1982
  is a long term capital gain and further the
  investing of that amount for the purchase of
  another house is exempted under the provisions of
  Income Tax Act, 1961?
•   

47
Karnataka High Court orders K Satish Kumar Singh

• Section 249 Admitted tax payment a) When once
  CIT-A dismiss the appeal in limine on limited
  ground of non payment of admitted tax as per
  ROI/ITR in terms of section 249(4), in case
  subsequently assessee comes up with relevant tax
  challans, CIT-A has power/duty to recall the
  earlier dismissal order for fresh decision on
  merits of the case b) Likewise, ITAT can look
  into the request of assessee where CIT-A do not
  entertain suggested recall application on
  subsequent payment of admitted tax

48
Karnataka High Court Rama Krishna Sewa Ashram
ITA 248/2010

• The parliament intended to pass on the benefit
  of exemption of income tax to charitable and
  religious institutions. We are really surprised
  at the attitude of these authorities who are over
  technical in denying the benefit to deserving
  institutions, which are rendering laudable
  services to rural masses. By not granting the tax
  exemption benefit which they deserve  the
  authorities have hampered said social activities
   of the trust and they are made to waste their
  precious time, energy and money in fighting this
  litigation.unfortunately  the person who took
  decision to file this appeal before this court
  are wasting precious time of the trust which
  could have been used in the social service.this
  attitude on the part of the department cannot be
  countenanced. National Litigation policy 2011 to
  be kept in mind before filing appealsRs 1 lac
  costs imposed on department

49
Karnataka High Court In case of Karuna Health
care society ITA 77/2011

• The order of DIT(E) gives us an impression that
  he was not concerned about the charitable
  activity carried on by the trust as such. He had
  no doubt in his mind that they were carrying on
  charitable activity. In the absence of any
  finding of siphoning of funds on part of trust
  for non charitable activity/personal activity, no
  adverse view should be taken at registration
  stage.  Both the DIT(E) and ITAT missed the
  object with which the parliament has enacted
  these provisions to offer an incentive to persons
  who are well placed in life to take up charitable
  activities. Cost Rs 25000 imposed on Department

50
IN THE HIGH COURT OF JUDICATURE AT MADRAS Tax
Case (Appeal)No.641 of 2011 Sarvodaya Ilakkiya
Pannai

• (i) Whether, on the facts and in the
  circumstances of the case, the Income Tax
  Appellate Tribunal was right in law in holding
  that the registration granted to the assessee
  under section 12A(a) would hold good, even though
  the assessee's main object in publication,
  purchase and sale of books which are not
  definitely charitable activity and the activities
  are purely a commercial venture with profit
  motive is valid ?

51
Sarvodaya Ilakkiya Pannai Mad. HC case contd.

• 6. In order to apply the above provision, there
  must be a specific finding by the Commissioner
  that the activities of the trust or institution
  are not genuine or not being carried out in
  accordance with the objects of the trust or
  institution as the case may be. The question is,
  whether the order of the Commissioner of Income
  Tax could fall under the powers conferred on him
  under section 12AA(3) of the Act. The only reason
  given by the Commissioner of Income Tax to cancel
  the registration is that the activities of the
  trust were not charitable and therefore, the
  trust is not entitled to exemption under section
  11 and consequently, cancelled the registration
  granted under section 12AA.

52
Sarvodaya Ilakkiya Pannai Mad. HC case contd.

• 10. The Tribunal had allowed the case of the
  assessee with the finding that none of the
  conditions under section 12AA(3) were violated
  and therefore, the satisfaction which was arrived
  at by the Commissioner of Income Tax was not
  justified (On a challenge to the said order
  cancelling registration, the Appellate Tribunal
  has found that the order of the Commissioner was
  not justified as the power to cancel could be
  only traced out to section 12AA(3) and in the
  absence of any activity carried on by the trust
  contrary to the objects, the registration cannot
  be revoked )

53
The Chartered Accountant Study Circle Tax Case
(Appeal) No.593 of 2011 13.2.2012 (Madras High
Court)

• 2. The assessee-trust is a Society known as "The
  Chartered Accountants Study Circle".  The aims
  and objects of the Society among other things are
  as follows
•             "a. To conduct periodical meetings on
  professional subjects
•              b. To publish books, booklets, etc.
  on professional subjects
•              c. To organise Seminars,
  Conventions, Conferences, etc., as may be deemed
  fit from time to time

54
The Chartered Accountant Study Circle Tax Case
(Appeal) No.593 of 2011 13.2.2012 (Madras High
Court)

• Madras High Court Order on aforesaid factual
  background
•  
•             6. We have considered the above
  submission. The question, therefore, is whether
  the publication of books of professional interest
  to be used as a reference material by the general
  public including the professionals in respect of
  Bank Audit, Tax Audit, etc. would be construed to
  be a charitable purpose.
• Therefore, it cannot be held that the activities
  of the assessee-trust in publishing and selling
  books of professional interest, which are meant
  to be used as a reference material even by the
  general public as well as the professionals in
  respect of Bank Audit, Tax Audit, etc., cannot be
  construed to be one of commerce in nature.  The
  finding of the Tribunal in this regard requires
  no interference. 

55
ITA.No. 183 of 2011 ( ) 16TH DAY OF FEBRUARY 2012
                     ST.MARY'S MALANKARA
SEMINARY,                           IN THE HIGH
COURT OF KERALA AT ERNAKULAM 

• The first question raised is whether a seminary
  coaching and training students for priesthood is
  an educational institution as referred to in the
  above provision of the I.T. Act. Educational
  institution is not defined under the I.T.Act

56
ITA.No. 183 of 2011 ( ) 16TH DAY OF FEBRUARY 2012
                     ST.MARY'S MALANKARA
SEMINARY,                           IN THE HIGH
COURT OF KERALA AT ERNAKULAM 

• Freedom to practice and propagate religion is a
  right conferred under Article 25 of the
  Constitution. Propagation of religion necessarily
  involves education and training of young
  generation on religious matters and unless the
  same is systematically done religious beliefs and
  practices cannot be carried to future
  generations. Therefore religious teaching is a
  right recognized under the Constitution. A person
  admitted to seminary takes as much as about 10
  years to become a qualified priest and the long
  duration by itself reveals the extensive coaching
  and training required to become a priest who is a
  religious practitioner. So much so, there cannot
  be any controversy that religious teaching is
  also education within the meaning of the term
  contained in S.10 (23C)(iiiad) of the I.T.Act.

57
ITA.No. 183 of 2011 ( ) 16TH DAY OF FEBRUARY 2012
                     ST.MARY'S MALANKARA
SEMINARY,                           IN THE HIGH
COURT OF KERALA AT ERNAKULAM 

• There is nothing to indicate that
  S.10(23C)(iiiad), requires the educational
  institutions referred to therein to impart
  education in any particular subject or in any
  manner whatsoever.        So much so, the term
  'education' should enjoy a wide connotation
  covering all kinds of coaching and training
  carried on in a systematic manner   leading to
  personality development of an individual.
• So much so, we hold that religious teaching in
  the seminary is also education and seminary is
  therefore an "educational institution" entitled
  for exemption u/s 10 (23C)(iiiad) of the I.T.Act.

58
Sec. 12AA Sec. 80G Charity JITO CHENNAI
CHAPTERR  Tax Case Appeal Nos.337 338 of  2011
 IN THE HIGH COURT OF JUDICATURE AT MADRAS

• 2.  A reference to the order of the Director of
  Income Tax (Exemptions) shows that the
  application filed by the assessee  under Section
  12AA of the Income Tax Act for registration of
  the Society, has been rejected at the threshold
  holding that in the object clause of the  deed,
  particularly, in clause 3(a) and 3(f), there is a
  provision for domestic and overseas markets and
  also settlement of disputes by arbitration and
  therefore, the Director of Income Tax(Exemptions)
  has come to a conclusion that the object is not
  charitable in accordance with Section 2(15) of
  the Act and is commercial in nature.

59
Sec. 12AA Sec. 80G Charity JITO CHENNAI
CHAPTERR  Tax Case Appeal Nos.337 338 of  2011
 IN THE HIGH COURT OF JUDICATURE AT MADRAS

• 6. We have gone through the object clauses,
  namely, 3(a) and 3(f), referred to by the
  Director of Income Tax(Exemptions), which are as
  follows . (f) To provide for arbitration in
  respect of settlement of disputes arising in the
  course of trade, services, vacations, industry or
  other business matters of the community and to
  secure the services of experts if found necessary
  or desirable."        
• 7. We have also gone through the other clauses of
  the deed and it is very clear that the object of
  the Society is to propagate Non-violence and
  Tenets of Truth and to encourage universal
  spiritual uplifment as preached by the Tirthankar
  Bhagwants.  What is stated about the settlement
  of dispute is only incidental thereto and cannot
  be stated to be commercial in  nature. 

60
Bombay High Court in  The Chembur Gymkhana INCOME
TAX APPEAL NO.5568 OF 2010 February 13, 2012

• There is a finding of fact that the assessee is
  providing sports facilities as a part of its
  activities consisting of badminton, table tennis,
  billiards, cricket and skating among others. On
  these facts, the primary issue which has been
  decided by the Tribunal must be answered by
  holding that the assessee for Assessment Year
  199697 fulfilled the definition of the expression
  charitable organization in Section 2(15). The
  first question of law would, accordingly, have to
  be answered in the affirmative. ((1) Whether in
  the facts and circumstances of the case and in
  law, the Tribunal was right in holding that the
  assessee performs a charitable purpose within the
  meaning of Section 2(15) of the Income Tax Act,
  1961)

61
BHC in Gymkhana case

• Supreme Court in CIT vs. Surat Art Silk Cloth
  Manufacturers Association,5 it is a settled
  principle of law that the primary or dominant
  purpose of the institution must be charitable.
  The test to be applied is whether the object
  which is pursued is of the main or primary object
  or whether it is ancillary to a dominant object

62
Delhi High Court orders!
63
Samora case (271D/269SS)

• ITA No.313/2006 Judgment delivered on 23.02.2012
  Whether on the facts and circumstances of the
  case, the Income Tax Appellate Tribunal was right
  in law in concluding that no penalty was leviable
  on the assessee under the provisions of section
  271D of the Income Tax Act, 1961?

64
Samora case (271D/269SS)

• 20. The Supreme Court in Asst. Director of
  Inspection (Investigation) v. Kum. A.B. Shanthi
  255 ITR 258 (SC) observed that (1) if there was
  a genuine and bona fide transaction and (2) if
  for any reason the taxpayer could not get a loan
  or deposit by account-payee cheque or demand
  draft for some bona fide reasons, the authority
  vested with the power to impose penalty has got
  discretionary power. The existence of a genuine
  or bona fide transaction is not sufficient to
  attract the relief under section 273B of the said
  Act. It must also be established that for some
  bona fide reasons the assessee could not get a
  loan or deposit by an account payee cheque or
  account payee bank draft.

65
Samora case (271D/269SS)

• In the present case, the Tribunal has not
  returned any finding as to the second aspect.
  Without a clear finding on both the aspects
  referred to in the said Supreme Court decision,
  the Tribunal, in law, could not have concluded
  that the assessee had reasonable cause for its
  failure to accept the said amounts in compliance
  with section 269SS of the said Act.
• There is nothing on record to show that there
  were bona fide reasons for not accepting the said
  amounts through account payee cheques or account
  payee bank drafts. And, unless that is
  established, the shelter of section 273B is not
  available

66
Kamdhenu case (Section 68)

• We may repeat what is often said, that a
  delicate balance has to be maintained while
  walking on the tight rope of Sections 68 and 69
  of the Act. On the on hand, no doubt, such kind
  of dubious practices are rampant, on the other
  hand, merely because there is an acknowledgement
  of such practices would not mean that in any of
  such cases coming before the Court, the Court has
  to presume that the assessee in questions as
  indulged in that practice. To make the assessee
  responsible, there has to be proper evidence. It
  is equally important that an innocent person
  cannot be fastened with liability without cogent
  evidence.

67
Kamdhenu case (Section 68)

• 7) Even the Tribunal acts purely as an appellate
  authority. In that capacity, the Tribunal has to
  see whether the assessment framed by the AO, all
  for that matter, orders of the CIT(A) were
  according to law and purportedly framed on facts
  and whether there was sufficient material to
  support it. It is not for the Tribunal to start
  investigation. The Tribunal is only to see as to
  whether the additions are sustainable and there
  is adequate material to support the same if not
  the addition has to be deleted. At that stage,
  the tribunal would not order further inquiry. It
  is to be kept in mind that the AO is prosecutor
  as well as adjudicator and it is for the AO to
  collect sufficient material to make addition

68
Calcutta High Court in HIND CONTAINERS PVT. LTD.
Versus COMMISSIONER I.TAX, W.B.-IV, KOLKATA ITA
No. 315 of 2004  

• i Whether a particular expenditure could be
  questioned by the Assessing Officer on the ground
  of justification and be disbelieved without any
  enquiry in order to hold the genuineness of a
  transaction as suspicious without holding any
  enquiry and giving opportunity to the assessee
  ?ii If the answer to the above is in favour of
  assessee then whether the Tribunal was justified
  in law in upholding the disallowance of the
  payment of Rs.2,84,362/- made by the appellant to
  M/s. Aditya Associates towards labour charges for
  the purposes of the appellants business and its
  purported findings in that behalf are arbitrary,
  unreasonable and perverse ?

69
Calcutta High Court in HIND CONTAINERS PVT. LTD.
Versus COMMISSIONER I.TAX, W.B.-IV, KOLKATA ITA
No. 315 of 2004  

• In this case no attempt has been made to dispute
  the case made out by the appellant. Moreover,
  without examining the details with regard to the
  payment made in a year to the said Aditya
  Associates and looking at the aggregate figure,
  the cash transaction should not have been
  disbelieved or should not have been declared
  unacceptable under the proviso of sub-Section 3
  of Section 40A. In view of the aforesaid reason,
  we think that all the authorities below did not
  render justice and this needs reconsideration

70
Calcutta High Court in HIND CONTAINERS PVT. LTD.
Versus COMMISSIONER I.TAX, W.B.-IV, KOLKATA ITA
No. 315 of 2004  

• We see force in the submission of Mr. Khaitan
  that the finding of all the authorities below
  that the said Aditya Associates, the sister
  concern of the company, is based on no evidence.
  We noticed that apparently there has been a
  document to show separate and distinct entity of
  the said Aditya Associates and in order to
  establish the same being unreal, it is something
  more which is required to be done by the Revenue
  as it has been ruled by the Supreme Court in the
  case of Commissioner of Income-tax (Central)
  Commissioner of Income-Tax (Central), Calcutta
  supra. At the bottom of page 360 continued at
  page 361 of the said decision, the Supreme Court
  made the statement the statement of law in this
  regard as follows  
• The onus to prove that the apparent is not the
  real is on the party who claims it to be so. As
  it was the department which claimed that the
  amount of fixed deposit receipt belonged to the
  respondent firm even though the receipt
  .., the burden lay on the department
  to prove that the respondent was the owner of the
  amount...
•  

71
Calcutta High Court in HIND CONTAINERS PVT. LTD.
Versus COMMISSIONER I.TAX, W.B.-IV, KOLKATA ITA
No. 315 of 2004  

• Apart from the statement of law made by the
  Supreme Court, we quote the provision of Section
  103 of the Indian Evidence Act, which is as
  follows
•  
• 103. Burden of proof as to particular fact.
  The burden of proof as to any particular fact
  lies on that person who wishes the Court to
  believe in its existence, unless it is provided
  by any law that the proof of that fact shall lie
  on any particular person.
•  
• Here, the assessee thought it best to engage
  outsider in order to meet the contractual
  obligation with various government companies for
  supplying drums. Their existing labour force,
  perhaps, would not be adequate to meet the demand
  of the customers. Having regard to the expediency
  and necessity, the company decided to engage an
  outsider, namely M/s. Aditya Associates. How
  M/s.Aditya Associates has rendered services to
  the company could have been examined by the
  authorities concerned and this could have been
  done only by calling the said Aditya Associates
  or examining the other documents regarding the
  payment made to the said Aditya Associates. This
  exercise was not undertaken by the Assessing
  Officer

72
Allahabad High Court in Case - INCOME TAX APPEAL
No. - 359 of 2011 Petitioner - Commissioner Of
Income Tax Respondent - M/S Standard Surfactants
Ltd. ITAT order section 36(1)(iii)

• In the present case, it is noticed that the
  assessee utilixed land belonging to M/s Standard
  Sulphonators Ltd. as a security against loan
  raised from the bank, this fax is also clear from
  page 17 of the assessee's compilation, which is a
  copy of certificate issued by the State Bank of
  India, Civil Lines, Kanpur wherein it is
  certified that the property owned by M/s Standard
  Sulphonators Ltd. Was pledged with the bank as
  security against lona provided to the assessee.
  The value of the said property as per valuation
  report dated 20.9.2007 was Rs.2.25 cores.  

73
Allahabad High Court in Case - INCOME TAX APPEAL
No. - 359 of 2011 Petitioner - Commissioner Of
Income Tax Respondent - M/S Standard Surfactants
Ltd. ITAT order section 36(1)(iii)

• Since the company, M/s Standard Sulphonators
  Ltd. Had provided its land as security to the
  bank against loan taken by the assessee and in
  lieu of that the assessee deposited a sum of
  Rs.50 lakhs with the said company i.e. M/s
  Standard Sulphonators Lted., so it cannot be said
  that the said amount of Rs.50 lakhs was an
  interest free advance or loan. Therefore, the
  Assessing Officer was not justified in making the
  disallowance on account of notional interest on
  the said depositThe Tribunal has allowed the
  assessee's claim regarding disallowances of
  interest paid on borrowed funds vis a vis
  advances/deposits made to M/s Standard
  Sulphonators Ltd. on the ground that the said
  company had given its property papers to the
  assessee for securing loan/advances from the
  State Bank of India. Property papers given by M/s
  Sulphonators Ltd. Was necessary as the bank was
  not willing to advance/ loan in the absence of
  any collateral security.

74
Allahabad High Court in Case - INCOME TAX APPEAL
No. - 359 of 2011 Petitioner - Commissioner Of
Income Tax Respondent - M/S Standard Surfactants
Ltd. ITAT order section 36(1)(iii)

• That being the position, we are of the considered
  opinion that it is in the course of business
  transactions, and, therefore, the Tribunal was
  justified in deleting disallowance of the
  interest on assumed interest free advance S

75
M/s.UPS SCS (Asia) Limited IN THE INCOME TAX
APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI
22nd day of February, 2012. ITA No.2426/Mum/2010

• 4. We have heard the rival submissions and
  perused the relevant material on record in the
  light of precedents cited. The entire dispute
  centers around the taxability of the amount
  received by the assessee from Menlo India in
  respect of services performed outside India on
  the export consignments of Menlo India
  originating from India. There is no quarrel over
  the nature of services for which the above
  referred amount has been paid to the assessee
  being, freight and logistics services such as
  transport, procurement, customs clearance,
  sorting, delivery, warehousing and pick up
  services. Now the primary question which arises
  for our consideration is as to whether the
  payment in respect of these services can be held
  as fees for technical services within the
  meaning of section 9(1)(vii).

76
M/s.UPS SCS (Asia) Limited IN THE INCOME TAX
APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI
22nd day of February, 2012. ITA No.2426/Mum/2010

• In the absence of any specific definition of the
  phrase managerial services as used in section
  9(1)(vii) defining the fees for technical
  services, it needs to be considered in a
  commercial sense. It cannot be interpreted in a
  narrow sense to mean simply executing the
  directions of the other for doing a specific
  task. For instance, if goods are to be loaded and
  some worker is instructed to place the goods on a
  carrier in a particular manner, the act of the
  worker in placing the goods in the prescribed
  manner, cannot be described as managing the
  goods. It is a simple direction given to the
  worker who has to execute it in the way
  prescribed. It is quite

77
M/s.UPS SCS (Asia) Limited IN THE INCOME TAX
APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI
22nd day of February, 2012. ITA No.2426/Mum/2010

• natural that some sort of application of mind is
  required in each and every aspect of the work
  done. As in the above example when the worker
  will lift the goods, he is expected to be
  vigilant in picking up the goods moving towards
  the carrier and then placing them. This act of
  the worker cannot be described as managing the
  goods because he simply followed the direction
  given to him. On the other hand, managing
  encompasses not only the simple execution of a
  work, but also certain other aspects, such as
  planning for the way in which the execution is to
  be done coupled with the overall responsibility
  in a larger sense. Thus it is manifest that the
  word managing is wider in scope than the word
  executing. Rather the later is embedded in the
  former and not vice versa
• It is only when some consideration is given for
  rendering some advice or opinion etc., that the
  same falls within the scope of consultancy
  services. The word consultancy excludes actual
  execution. The nature of services, being
  freight and logistics services provided by the
  assessee to Menlo India has not been disputed by
  the authorities below. There is nothing like
  giving any consultation worth the name.

78
M/s.UPS SCS (Asia) Limited IN THE INCOME TAX
APPELLATE TRIBUNAL MUMBAI BENCHES L, MUMBAI
22nd day of February, 2012. ITA No.2426/Mum/2010

• . Where simply an equipment or a standard
  facility albeit developed or manufactured with
  the use of technology is used, such a user cannot
  be characterized as using technical services.
  The essence of theconsideration for the payment
  is rendering of services and not the use of
  computer. If incidentally computer is used at any
  stage, which is otherwise not necessary for
  rendering such services, the payment for freight
  and logistics will not partake of the character
  of fees of technical services. We, therefore,
  repel this contention raised on behalf of the
  Revenue.

79
Jaipur bench ITAT in Modern Insulator case 56
DTR 362 Delhi bench in HAVELLs case 140 TTJ 283

• Further, as held by Jaipur bench of ITAT in
  Modern Insulator case 56 DTR 362 (also refer
  Delhi High Court in EON technology 203 Taxman
  266) that commission related services rendered by
  foreign agent do not attract tax withholding u/s
  195 of the Act as same are not in nature of
  technical /managerial services, same conclusion
  is available in number of Mumbai bench ITAT
  orders.
• Further, as pointed in HAVELLs case that
  certification services provided by foreign agency
  to Indian party in connection with export sales,
  is something which stands utilized for the
  purpose of earning the income from a source
  outside India (here export orders from foreign
  buyers) and on that count itself there is no
  requirement of tax withholding u/s 195 read with
  section 9(1)(vii) of the Act on stated
  certification payments.

80
ACIT Vs. Merchant Shipping Services (P) Ltd. and
Others, 135 TTJ (Mum)

• 589 Where no technical services are provided as
  such, but the payment is made for the use of some
  machinery or equipment or standard facility which
  may have been created or brought into existence
  with the input of technical services along with
  man, machine and material, such payment would not
  partake of the character of fees for technical
  services. Take for example a person going to a
  cinema and purchasing ticket for watching a
  movie. When he purchases ticket, he pays for
  watching the movie and not for availing any
  technical service. It is a different matter that
  the move is exhibited on screen by way of some
  technical input)

81
(Pune bench in Glaxo case)

• To be more precise, any payment for technical
  services in order to be covered u/s. 194J, should
  be a consideration for acquiring or using
  technical knowhow simplicitor provided or made
  available by human element. There should be
  direct and live link between payment and
  receipt/use of technical services/information.

82
Guj H.C Concealment penalty

• KOKILABEN A SHAH Concealment penalty and GIFT
  addition u/s 68 Guj High Court Having perused the
  orders on record with the assistance of learned
  counsel for the Revenue, we see no reason to
  interfere. Tribunal observed that gift was
  received through normal banking channel. Identity
  of donor was disclosed and established. Assessee
  had furnished complete details of the gift.
  Tribunal noted that none of the departmental
  authorities made any attempt to find out whether
  the explanation of the assessee was false.
  Tribunal relied on decision of Division Bench of
  this Court in case of National Textiles v.
  Commissioner of Income Tax reported in 249 ITR 125

83
Guj H.C Concealment penalty

• , wherein Bench observed that if the assessee
  gives an explanation which is unproved but not
  disproved, it would not lead to inference that
  assessee's case is false. We are also in broad
  agreement with the same. Relying on the decision
  of Nashaben H. Jariwala, wherein it was observed
  that merely because assessee failed to prove the
  gift in the manner required by the department, it
  is not possible to conclude that assessee
  concealed her income, tribunal in the present
  case deleted penalty.

84
Delhi High Court order in case of ORALCE INDIA
  MARCH 30, 2011 243 CTR 103

• It is well-settled that it is not open to the
  Department to adopt a subjective standard of
  reasonableness and disallow a part of business
  expenditure as being unreasonably large, or
  decide what type of expenditure the assessee
  should incur and in what circumstances.  Thus,
  the jurisdiction of the AO is only confined to
  deicide Profits and gains of business or
  profession, i.e., whether the expenditure
  claimed was actually and factually expended or
  not and whether it was wholly and exclusive for
  the purposes of business. Reasonableness of the
  expenditure can be considered only from this
  limited angle for the purpose of determining
  whether in fact amount was spent or not. REFER
  Atherton Vs. British Insulated Helsby Cables
  Ltd. reported as 10 TC 155, 191 (HL) Supreme
  Court in the case of Commissioner of Income Tax
  Vs. Walchand, 65 ITR 381

85
CIT vs Vardhman Overseas Ltd. 204 Taxman 524
Delhi H.C.

• If, as contended before us by the learned
  standing counsel for the revenue, the alleged
  benefit enjoyed by the assessee by utilizing the
  amounts payable to the sundry creditors in its
  own business for a period of four years or more
  is to be brought to tax under Section 28(iv),
  notwithstanding that the conditions of Section
  41(1), which govern the factual situation, are
  not satisfied, then it would render the latter
  section otiose or a dead letter

86
HOTLINE ELECTRONICS LTD  ITA NO.1073/2011 Delhi
H.C.

• The Tribunal is also right in its view that
  unless notices were issued to the creditors and
  they had stated that they have given up the
  claims against the assessee, no decision can be
  taken by the income tax authorities, merely on
  the ground that the debts remained unpaid in the
  assessees books for a number of years, that the
  liability has ceased or has been remitted. In the
  present case the Assessing Officer has not issued
  any notice to the creditors to confirm from them
  whether they have given up their dues from the
  assessee

87
HOTLINE ELECTRONICS LTD  ITA NO.1