Allahabad high court on section 245 illegal retention & adjustment of taxpayer's money & jewellery etc with dues of firm/co. in which petitioner is partner etc; held arbitrary costs of 50k imposed on revenue (may be recovered from erring officials held); Pune ITAT on awarding of costs u/s 254(2b) ITAT power in context of wring withdrawal of registration u/s 12AA(3) law explained; Karnataka high court in Ingersoll Rand case on sec. 32 intangible asset depreciation detailed and exhaustive analysis on phrase ":similar business or commercial rights" u/s 32; Delhi high court on applicability of section 44AD to cases where turnover exceeds 40 lacs (now 1cr.) where AO has no material to make best judgment assessment;

[Kapil Goel]

 

HIGH COURT OF JUDICATURE AT ALLAHABAD

Court No. - 33

Case :- WRIT TAX No. - 295 of 2010

Petitioner :- Baljeet Singh Bakshi
Respondent :- Assistant Commissioner Of Income Tax And Others
Counsel for Petitioner :- Rakesh Ranjan Agarwal,Suyash Agrawal
Counsel for Respondent :- C.S.C. (It-Dept),Shambhoo Chopra
AND
Case :- WRIT TAX No. - 296 of 2010

Petitioner :- Smt. Arvinder Kaur
Respondent :- Assistant Commissioner Of Income Tax And OthersSection-245 of the Income-tax Act provides as under:-
245. Where under any of the provisions of this Act, a refund is found to be due to any person, the [Assessing] Officer, [Deputy Commissioner (Appeals)] [, Commissioner (Appeals)] or [Chief Commissioner or Commi], as the case may be, may, in lieu of payment of the refund, set off the amount to be refunded or any part of that amount, against the sum, if any, remaining payable under this Act by the person to whom the refund is due, after giving an intimation in writing to such person of the action proposed to be taken under this section.

A perusal of the aforesaid provision indicates that the authority is entitled to set off the refund against the dues of the same person.
In our opinion, dues of the firm or a company in which the petitioner is a partner could not be recovered/set off. Consequently, the action of the respondents in adjusting the dues of the petitioner against another firm namely M/s. Jeet Construction Company, in which the petitioner happens to be a partner, was wholly illegal and without jurisdiction. In any case, we find that the appeal of M/s. Jeet Construction Company has been allowed and the demand created against the said firm has been set-aside.
In view of the aforesaid, there is no justification for the Income-tax authority to retain this amount any further. The contention of the respondents that they have preferred an appeal which is pending consideration, has no value in as much as there is nothing on record to indicate that the order of the lower authority has been stayed in the appeal. Nothing has been brought on record to indicate that the department has filed an application for stay of the order by which the demand has been set-aside. Further, we of the view that once an order of demand has been set-aside by a superior authority, the department is duty bound to refund the amount under Section-245 and there is no justification to retain the same.
In M/S Usha Polytex Ltd. Vs. Chief Commissioner of Income Tax and others in Writ (Tax) No. 433 of 2007 decided on 04.03.2013, it was held that there is no provision which authorises the Income Tax authorities to set off the refund of a person against the dues of another person.
In Writ Petition No. 296 of 2010, the ornaments of the wife of the petitioner in Writ Petition No. 295 of 2010 was seized. In appeal, C.I.T. (A) has already set-aside the assessment order in part. The jewellry was retained on the ground that the tax is due agasint M/s. Jeet Construction Company where her husband is a partner. In these circumstances, we are of the view that the stand taken by the department in retaining the jewelry and not refunding the amount is patently illegal.
Consequently, for the reasons aforesaid, both the writ petitions are allowed. A writ of mandamus is issued directing the respondent no.1 to refund the amount as per law within a period of two weeks from the date of production of certified copy of the order. We further direct the same respondent to return the jewelry of the petitioner in Writ Petition No. 296 of 2010 within the same period from the date of production of certified copy of this order.
In the circumstances of the case, since the amount has been retained illegally, without any jurisdiction, we impose a cost of Rs. 50,000/- which shall be paid by the Income-Tax Department to the petitioners within the same period. It would be open to the department to recover the cost from the erring officials

 

                THE INCOME TAX APPELLATE TRIBUNAL

PUNE BENCH “B”, PUNE

Before Shri Shailendra Kumar Yadav, Judicial Member

and Shri R.K. Panda, Accountant Member

ITA Nos. 861 & 1423/PN/2012

Parkar Medical Foundation,

828 Parkar Hospital, Shivajinagar,

Ratnagiri-415639

PAN No.AAATP4632P .. Appellant

Vs.

Dy. Commissioner of Income Tax, Date of Pronouncement : 31-07-2014

10. In ground appeal No.7 the assessee has requested the Tribunal to

award cost u/s.254(2B) of the I.T. Act.

11. The Ld. Counsel for the assessee submitted that due to

cancellation of the assessee trust, huge tax demand running into lakhs of

rupees are raised against the trust. The bank accounts of the assessee

trust are under attachment and the department has made the working of

the assessee trust as an impossibility. He submitted that the assessee

trust was the only trust of its kind in the district of Ratnagiri giving

medical help to the poor patients. There is no other better equipped

hospital in the area. The illegal action of the department by abusing

judicial powers has caused serious prejudice and injustice to the

assessee trust as wrong signals are transmitted in the society that the

assessee trust is a big fraud. It has adversely affected the reputation of

the trust as well as the trustees who are eminent medical practitioners.

He submitted that there exists an unpleasant social environment in

Ratnagiri which is a small district place. Since the trustees are from the

minority community, the impugned orders of the department have

embarrassed the trustees and the trust. Referring to the decisions of the

Hon’ble Supreme Court in the case of Union of India Vs. Raja

Mohammed Amir Mohammad Khan (copy enclosed) and in the case of

Urban Improvement Trust, Bikaner Vs. Mohanlal reported in 2010

(001-SCC-0512 (SC) and the decision of the Hon’ble Rajasthan High

Court in the case of Charanjilal Tak Shyam Parwani & Party Vs. Union of India reported in 252 ITR 333 he requested that cost of the appeal

may please be awarded to the assessee trust which will act as deterrent for illegal and malafide orders passed by the authorities causing

irreparable loss to the assessee as well as to the society at large.

12. The Ld. Departmental Representative on the other hand strongly

opposed the argument of the Ld. Counsel for the assessee. He

submitted that the CIT-II, Kolhapur has passed a detailed speaking

order u/s.12AA(3) of the I.T. Act in the course of discharging of her

sovereign duty as CIT. He submitted that in this case there is no

element which distinguishes activities of commercial run hospital with

this foundation claimed to be medical relief at large. Referring to the

order of the CIT he reiterated that the assessee trust is a purely

commercial establishment with dominant object being charity of self

and therefore the CIT was justified in cancelling the registration granted

earlier. He further submitted that since the matter under consideration

is quasi-judicial and has not reached finality, therefore, calling the order

as arbitrary, perverse and malicious would amount to pre-judging the

outcome of the appeal. There is nothing on record to demonstrate any

malafide on the part of the CIT. Further, there is nothing on record that

the assessee trust or the trustees have been harassed because of

belonging to the minority community. He submitted that it is beyond

comprehension to give colour of religion to tax proceedings. Such

unsubstantiated and baseless allegations reflect bias on the part of the

assessee and such allegations deserve to be condemned and rejected.

He accordingly submitted that the ground raised by the assessee to

award cost should be dismissed with a warning to the assessee not to

raise such extraneous and baseless allegations in order to maintain

decorum of the proceedings before the Hon’ble Tribunal. 13. We have considered the rival arguments made by both the sides.

In our opinion the Ld.CIT has passed an order u/s.12AA(3) of the Act

during the course of discharge of her duty as CIT. While discharging

her duty, her action might have caused some hardship to the assessee

due to error of judgement but that in our opinion does not warrant levy

of cost on the department. The Hon’ble Supreme Court in the case of

Pooran Mal Vs. Director of Inspection (Investigation), Income Tax,

New Delhi and others reported in 93 ITR 505, while adjudicating relief

claimed in respect of action taken u/s.132 of the I.T. Act has observed

as under (at page 518 and 519) : 13.1 In that case, it was observed that it causes serious invasion of the

privacy of a person. Still the Hon’ble Court held that even though the

innocent is likely to be harassed by a raid for the purpose of search and

seizure that cannot be helped. In the instant case, there is no such

action of search and seizure which causes serious invasion in the

privacy of the person. The Commissioner was discharging her quasijudicial

duty. Further, there is nothing on record to suggest that the

action of the CIT was malafide. Therefore, we do not find any merit in

the submission of the Ld. Counsel for the assessee to award cost for the

action of the Commissioner cancelling the registration granted earlier

u/s.12AA of the Act

 

 

IN THE HIGH COURT OF DELHI AT NEW DELHI
  
  ITA 416/2014
 
  COMMISSIONER OF INCOMETAX-XIII
 versus
  
  
  
  LOVISH OBEROI
  

 

2. Learned counsel for the appellant-Revenue is correct that Section
  44AD was not applicable. However, we find that in the assessment order
  the Assessing Officer has computed gross profit @ 25% and had allowed
  expenses to the extent of 75% of the gross receipts, but without any
  justification and basis. The entire reasoning given in the assessment
  order on computation of gross profit reads as under:-
  
  ?As per income tax return filed, the assessee has shown gross receipt of
  Rs.2,86,70,7261- and net profit of Rs. 9,12,137-. As the assessee has not
  filed any details of expenses incurred, 75% of gross receipts are allowed
  as expenses and a balance 25% of gross receipt is treated as total income
  of the assessee. Deduction under chapter VI is not allowed in absence of
  supporting documents.?
  
  
  
  3. This cannot be the basis for calculating income even in case of
  best judgment assessment. Estimate made by the Assessing Officer has to
  be on some basis and determination of gross profit rate cannot be on mere
  ipsi dixit. The Assessing Officer unfortunately did not undertake the
  said exercise. The Assessing Officer could have enquired and examined
  gross profit of other assessee to ascertain and determine the gross
  profit rate or adopted and applied some basis or standard We note that as per the original return filed by the assessee, he had
  declared income of Rs.7,34,920/- and the assessed income @ 8% gross
  profit on gross receipt of Rs.2,86,70,726/- would be about Rs.22,93,658/-
  . Section 44AD prescribes a thumb rule and is applicable to small
  assesses, but while prescribing the thumb rule the Legislature, it is
  apparent, must have taken into account material and evidence to come to
  the figure of 8%. In case the Assessing Officer had conducted inquiry
  and referred to data or some basis to reach the figure of 25%, the
  position may have been different. In view of the aforesaid factual
  background, we do not think any substantial question of law arises for
  consideration and the appeal is dismissed.
  

 

                     Karnataka high court in case of CIT vs Ingersoll Rand vide order dated 30/6/2014 in ITA No 452/2013 after reviewing entire law on depreciation on intangible asset u/s 32 has held as under:

 

i)              It is necessary to notice that intangible assets enumerated in section 32 of the Act effectively confer a right upon an assessee for carrying on a business more efficiently by utilizing an available knowledge or by carrying on business to the exclusion of another assessee;

ii)            A non compete right encompasses a right under which one person is prohibited from competing in business with another for a stipulated period; Therefore the right acquired under a non compete agreement is a right for which valuable consideration is paid. The right  is acquired for carrying on the business therefore it is business right;

iii)          Finally ITAT order was approved where it was held that non compete payment constitute capital expenditure and is a commercial right eligible for deprecation u/s 32’;

iv)          Delhi high court in 331 ITR 192; Delhi High court in 345 ITR 421; Madras high court in 264 CTR 187; ITAT in 120 TTJ 983; Delhi high court in 254 CTR 233; Supreme court in 348 ITR 302

 

IN THE HIGH COURT OF JUDICATURE AT MADRAS

 

DATED: 14.7.2014

Akbar Ali Dhala

                8. In the present case, for more than 51 days REC Bonds were not available in the market and that fact is not in dispute.  A reading of Section 54EC of the Act and the fact that REC Bonds were not available for a period of 51 days would go to show that prejudice is caused to the assessee, as he will not be able to exercise the right any time during the entire period of six months.  In effect, when the bonds were not available from 1.4.2007 to 1.7.2007, it creates an artificial cut-off period contrary to Section 54EC of the Act.    The statutory benefit granted under Section 54EC of the Act is sought to be curtailed on the ground that the said option should have been exercised in a period earlier to six months, even though such right is available to the assessee for a period of six months as a whole.  The assessee will be entitled to exercise his option during the entire period.  The assessee can make his choice based on what is available or wait for a better option.  However, he  cannot be expected to visualize unforeseen eventualities and do the impossible.  In the present case, assessee chose to wait but by the meantime, the option ran out and hence had to wait till the next opportunity.

 

                9. The above said view is fortified by a decision of the Bombay High Court in Commissioner of Income Tax v. Cello Plast, (2012) 24  Taxmann.com 111 (Bom.), Though the learned Senior Standing Counsel appearing for the appellant states that the facts in the above said decision are slightly different from facts of the present case, the said plea does not hold water in view of the reasoning given by us interpreting Section 54EC of the Act.

 

Shri Raya R.Govindarajan

 In the High Court of Judicature at Madras

 Dated:  22.07.2014

 

. The issue involved in this Appeal is "in a case of dispute where the assessee's valuation was not accepted, whether the rates fixed by the State P.W.D. or the Central P.W.D. should be adopted?"

 

                10. Since we are considering on this short campus, we are not inclined to issue notice to the respondent/assessee.

 

                11. A perusal of the order of the Assessing Officer shows that the Assessing Officer was of the view that the State P.W.D rates should not be accepted, since the Central P.W.D. has scientifically arrived at the rates.  This finding of the Assessing Officer is not supported by any Departmental Notification or circular that only CPWD rates should be accepted.  We have also noticed that in the instant case, construction is in the  temple city of Kumbakonam, which is not a Metropolitan town.  Nevertheless, the State P.W.D was authorised to give valuation for all constructions in the State of Tamil Nadu.  Admittedly, the assessee's property, which is a subject matter of consideration, is in the State of Tamil Nadu.  There cannot be a different yardstick adopted for valuation within the State.  This will result in incongruous results, as one Officer is taking the rates fixed by the CPWD and another Officer is taking the rates fixed by State PWD. 

 

                12. In the case of T.M.P.N.Murugesan -vs- Commissioner of Income-tax reported in 217 Taxmann 40, this Court, while considering the similar issue whether the rates fixed by the CPWD alone could be taken into consideration towards arriving at a cost of construction, held as follows:

                 "7. It is seen from the narration of the facts that evidently, except for the bare accounts maintained, there are no materials in the form of vouchers, to cross check the quantum of materials used in the construction.  In the absence of basic records with regard to the extent of materials, the materials purchased and consumed and the accounts thereby incomplete, the Assessing Officer referred the valuation to the Valuation Officer.  As is evident from the reading of assessment order, the Departmental Valuation Officer adopted CPWD rates, which were the rates prevalent in Delhi and other cities for working out the cost of construction of the building and the assessee's claim was rejected.

                8. We do no find any justifiable ground to adopt the rate prevailing in cities like Delhi for the purpose of working out the cost of construction of house at Virudhunagar.  When the details regarding the cost of construction at PWD rates for Virudhunagar District is applicable, there is no reason for the Valuation Officer to adopt the rate, which is prevalent at distant places and metropolitan cities like Delhi.  Hence, on going through the Valuation report, we find that the authorities below committed serious error, hence, we feel that the proper course herein is to remit the matter back to the Assessing Officer to apply the PWD rates at Virudhunagar District in the year 1998-99 with regard to the cost of construction of the assessee's house, so as to ultimately find out what could be the deemed income under Section 69B for the purpose of assessment. "

 

                13. Therefore, it is evident that in a case of this nature, the Department should give credence to the valuation of the State P.W.D. in relation to the value of construction either on the side of the assessee or on the side of the Department.  Since we find that there is no specific notification or circular indicating that CPWD rate alone should be adopted in arriving at the cost of construction,  the Tribunal is justified in adopting the valuation of the State P.W.D. rates for the purpose of determining the cost of construction.