Case Laws in Income Tax - 12.12.2016

[P.D.RUNGTA]

Namaste


I am sharing with you few important Case Laws on Income Tax which
could be of use to you.

ASSESSMENT / REASSESSMENT / REVISION / SETTLEMENT COMMISSION / APPEAL

The Delhi High Court in Agson Global Pvt. Ltd vs. ITSC has held that
the Settlement Commission u/s 245F does not have the power to direct a
special audit u/s 142(2A) - [2016-ITRV-HC-DEL-105]
The Mumbai ITAT in Ideal Appliances Co. Pvt . Ltd vs. DCIT has
explained the law on whether an assessment made u/s 143(1) can be said
to have abated & whether an assessment u/s 153A can be made in the
absence of incriminating material - [2016-ITRV-ITAT-MUM-108]
The Pune ITAT in Span Overseas Ltd vs. CIT has held that an order of
revision u/s 263 which does not show independent application of mind
by the CIT is against the spirit of the Act and liable to be set aside
- [2016-ITRV-ITAT-PUNE-109]
The Delhi High Court in Sabharwal Properties Industries Pvt. Ltd vs.
ITO that the reopening u/s 147 of the assessment is not valid if the
reasons recorded are incoherent and do not indicate what the basis for
reopening is - [2016-ITRV-HC-DEL-123]
The Bombay High Court in Khubchandani Healthparks Pvt. Ltd vs. ITO has
held that law laid down in DCIT vs. Zuari Estate Development and
Investment Co 373 ITR 661 (SC) does not mean that in cases where no
assessment order is passed and assessment is completed by Intimation
u/s 143(1), the sine qua non to show that there is "reason to believe
that income chargeable to tax has escaped assessment" u/s 147 is not
required. It is open to the assessee to challenge a notice issued u/s
148 as being without jurisdiction for absence of reason to believe
even in case where the assessment has been completed earlier by
Intimation u/s 143(1) of the Act - [2016-ITRV-HC-BOM-126]

INTERNATIONAL TAXATION / TRANSFER PRICING

The Authority for Advance Ruling in In Re Dow AgroSciences
Agricultural Products Ltd it was held that transfer of shares of an
Indian Co by a Mauritius entity to a Singapore entity due to group
reorganization is not a scheme for avoidance of tax. The capital gains
are exempt under India-Mauritius DTAA. Treaty shopping is permissible.
A ROI u/s 139(1) need not be filed if income is exempt from tax -
[2016-ITRV-AAR-100]
The Authority for Advance Ruling in In Re Cummins Limited it was held
that managerial services rendered by a UK Co to an Indian Co, even if
technical in nature, is not assessable as “fees for technical
services” under Article 13 of India-UK DTAA if it does not “make
available” any skill, technical know-how etc - [2016-ITRV-AAR-101]
The Authority for Advance Ruling in In Re Aberdeen Claims
Administration Inc has held that amount received by a FII under a
settlement for giving up right to sue is not assessable as either
capital gains or as business profits. In principle, a FII is an
"investor" and not a "trader" in stocks. On facts, applying Circular
No. 4 of 2007, Aberdeen is an investor in shares - [2016-ITRV-AAR-102]
The Authority for Advance Ruling in In Re Tiong Woon Project &
Contracting (Pte) Limited it was held that an installation project
which does not last more than 183 days in a fiscal year is not a
"Permanent Establishment" and the business profits are taxable only in
Singapore under Article 7(1) of the India-Singapore DTAA -
[2016-ITRV-AAR-103]
The Delhi High Court in DIT vs. New Skies Satellite BV has held that
the retrospective amendment to s. 9(1)(vi) so as to supersede the law
laid down in Asia Satellite 332 ITR 340 (Del) and assess transmission
fees as “royalty” has no impact on assessees covered by DTAA because a
corresponding amendment has not been made to the definition of
“royalty” therein. Amendments to domestic law do not affect the DTAA -
[2016-ITRV-HC-DEL-111]
The Bombay High Court in CIT vs. Pentair Water India Pvt. Ltd has held
that companies with large turnover like Infosys & Wipro are not
comparable to companies with smaller turnover and should be excluded
from the list of comparables for transfer pricing purposes -
[2016-ITRV-HC-BOM-114]
The Delhi ITAT in Headstrong Services India Pvt. Ltd vs. DCIT has held
that argument that transfer pricing adjustment cannot be made if the
assessee's income is deductible u/s 10A/ 10B is not acceptable.
Contrary view in TCS cannot be followed as it is obiter dicta &
contrary to law laid down in Aztech Software 107 ITD 141 (SB) -
[2016-ITRV-ITAT-DEL-116]

HOUSE PROPERTY

The Mumbai ITAT in Radiant Premises Pvt. Ltd vs. ACIT has held that
brokerage paid to give out premises on rent and to earn lease rent is
not deductible u/s 23(1)(b) in computing the Income from house
property - [2016-ITRV-ITAT-MUM-110]

CHARITABLE

Honorable Supreme Court in CIT vs. Society For The Promotion Of
Education, Adventure Sport & Conservation Of Environment has held that
non disposal of an application for registration before the expiry of
six months as provided u/s 12AA (2) results in deemed grant of
registration - [2016-ITRV-SC-125]

BUY-BACK

The Mumbai ITAT in Goldman Sachs (India) Securities Pvt. Ltd vs. ITO
has held that a buyback of shares u/s 77A of the Companies Act 1956 is
not a reduction of capital u/s 100 - 104 of that Act. A buyback u/s
46A of Income Tax Act, 1961 cannot be regarded as a "colourable
transaction" and cannot be assessed as "deemed dividend" u/s 2(22)(d).
The capital gains on buy-back are exempt under the India-Mauritius
DTAA - [2016-ITRV-ITAT-MUM-115]

SECTION 37(1)

The Mumbai ITAT in DCIT vs. Syncom Formulations (I) Ltd has held that
while receiving of gifts by doctors is prohibited by MCI Guidelines,
the giving of such gifts by Pharma companies is not prohibited by any
law hence not disallowed u/s 37(1). CBDT Circular dated 01.08.2012 is
prospective - [2016-ITRV-ITAT-MUM-107]
The Mumbai ITAT in Mangal Keshav Securities Limited vs. ACIT has held
that penalties & fines paid to SEBI, BSE etc for breach of regulatory/
procedural requirements are "compensatory" in nature and not for any
purpose which is an ‘offense’ prohibited by the law to be covered in
Expl to s. 37(1) - [2016-ITRV-ITAT-MUM-118]
The Mumbai ITAT in Multi Act Realty Enterprises Pvt. Ltd vs. ACIT has
held that there is a distinction betwen "setting up" and
"commencement" of a business. A business is "set up" and expenditure
is deductible even if assessee has no customers and no income -
[2016-ITRV-ITAT-MUM-119]
The Bombay High Court in CIT vs. Manganese Ore India Limited has held
that expenditure in respect of a project which did not materialize has
to be treated as revenue expenditure u/s 37(1) as no capital asset
comes into existence - [2016-ITRV-HC-BOM-124]

SECTION 54EC

The Mumbai ITAT in Neela S. Karyakarte vs. ITO has held that the
period of "6 months" available for making investment u/s 54EC means 6
calendar months & not 180 days. Payment by cheque dates back to date
of presentation & not date of encashment - [2016-ITRV-ITAT-MUM-117]

SECTION 69A

The Punjab High Court (Full Bench) in CIT vs. Jawahar Lal Oswal has
explained the law on taxability of large gifts received from abroad
from donors who are total strangers to the assessee and not related by
relationship, business or friendship - [2016-ITRV-HC-P&H-122]

SUBSIDY

The Mumbai ITAT in UniDeritend Limited vs. ACIT has held that subsidy
granted to set up a wind project is a capital receipt. The subsidy
cannot be reduced under Explanation 10 to s. 43(1) from the cost of
the assets acquired though 100% depreciation is allowed on the cost of
the assets. The subsidy is also not assessable either u/s 41(1) or u/s
50 - [2016-ITRV-ITAT-MUM-106]

SECTION 80-IA

Honourable Supreme Court in ACIT vs. Micro Labs Ltd has referred the
controversy on whether s. 80-1A(9) mandates that the amount of profits
allowed as deduction u/s 80-1A(1) has to be reduced from the profits
of the business of the undertaking while computing deduction under any
another provisions under heading C in Chapter VI-A of the Income-tax
Act, 1961 to larger Bench - [2016-ITRV-SC-104]

SECTION 195

The Bombay High Court (Full Bench) in CIT vs. V. S. Dempo has held
that shipping companies assessed u/s 172 are not subject to TDS
obligations u/s 195 - [2016-ITRV-HC-BOM-113]

PENALTY

The Karnataka High Court in Safina Hotels Private Limited vs. CIT has
held that if the notice u/s 271 (1)(c) / 271(1B) is issued without
application of mind (by striking out the relevant part in the notice),
the penalty proceedings are invalid - [2016-ITRV-HC-KAR-112]

HINDU UNDIVIDED FAMILY (HUF)

The Delhi High Court in Sujata Sharma vs. Manu Gupta has held that
pursuant to the amendment to the Hindu Succession Act, 1956 by the
Hindu Succession (Amendment) Act, 2005 all rights which were available
to a Hindu male are now also available to a Hindu female. A daughter
is now recognised as a co-parcener by birth in her own right and has
the same rights in the co-parcenary property that are given to a son.
Consequently, the eldest daughter is entitled to be the Karta of the
HUF - [2016-ITRV-HC-DEL-120]
Honorable Supreme Court in Prakash vs. Phulvati has explained the law
on prospective vs. retrospective operation of legislation in case of
HUF. The Hindu Succession (Amendment Act), 2005 which came into effect
on 09.09.2015 and by which daughters in a joint Hindu family, governed
by Mitakshara law, were granted statutory right in the coparcenary
property (being property not partitioned or alienated) of their
fathers applies only if both the father and the daughter are alive on
the date of commencement of the Amendment Act - [2016-ITRV-SC-121]



Warm Regards

CA. Pramod Jain

B. Com (H), FCA, FCS, FCMA, LL.B, DISA (ICAI), MIMA Lunawat & Co. |
Chartered Accountants | www.lunawat.com | pramo...@lunawat.com | +91
9811073867



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*M.Com., LL.B., ACMA., DISA(ICAI)., FCA*
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