1
Recent Case laws
And
Issues related to
Sec 54 and Sec 54EC
Presented By:
CA Amar K Shah
- Citicorp Finance (India) Ltd vs. ACIT (ITAT Mumbai) ITA No 8532/Mum/ 2011 ‘C’ Bench- Mumbai (Date of order: 13.09.2013)
FACTS
The assessee claimed credit for TDS which was denied by the AO on the ground that the claim did not match the entries shown in Form No. 26AS and that there was a discrepancy.
DECISION
TDS Credit must be given even if TDS Certificate is not available/ entry is not shown in Form-26AS
- CIT vs. Reliance Energy Ltd (Supreme Court) DTRJ 2013 0946 Appeal (Civil) No(s) 14013/2013 (Date of Order: 30.09.2013)
FACTS
For AY 1998-99, the AO passed an assessment order prior to 01.06.2003 in which interest u/s 234D was not levied.
The assessee filed an appeal against the said order on certain other issues and in giving effect to the order of the appellate authority, the AO levied interest u/s 234D on the ground that excess refund had been allowed u/s 143(1) than what the assessee was entitled to u/s 143(3).
Issue is when to charge interest u/s 234 D when AY are prior to A.Y. 2003-04.
CONCLUSION
Explanation 2 to s. 234D makes it clear that the provisions of the section shall not apply to an assessment year commencing before the 1st day of June, 2003 if the proceedings in respect of such assessment year is completed before the said date.
As the assessment order in the present case was passed before 1.6.2003, the question of retrospectivity of s. 234D does not arise.
Contrast with Indian Oil Corporation 254 CTR 113 (Bom) where it was held that s. 234D applies even pre 1.6.2003 if the assessment order is passed after that date
CIT vs. Bajaj Hindustan (Bombay High Court)
In answer to the question raised by the department as whether interest u/s 234D can be charged in respect of refunds granted prior to 1.6.2003 it was held that as s. 234D came on the statute w.e.f. 1.6.2003, it did not have retrospective effect
DECISION
S. 234D does not apply to an assessment year commencing pre 1.6.2003 if the assessment order is passed prior to that date
- Chironjilal Sharma HUF vs. UOI (Supreme Court)Civil Appeal No 10601 of 2013.
FACTS
Pursuant to a search conducted u/s 132, cash of Rs. 2.35 lakhs was recovered.
The AO passed an order u/s 132(5) in which he calculated the tax liability and appropriated the seized cash.
An assessment order was also passed to the same effect. The AO’s order was finally set-aside by the Tribunal and it became final. Consequently, the assessee was refunded the amount of Rs. 2.35 lakhs with interest from 4.3.1994 (date of last of the regular assessments by the AO) until the date of refund.
The assessee claimed that he is entitled to interest u/s 132B(4)(b) of the Act for the period from the expiry of period of six months from the date of order u/s 132(5) to the date of regular assessment order.
In other words, as the order u/s 132(5) was passed on 31.5.1990, six months expired on 30.11.1990 and the last of the regular assessments was done on 4.3.1994,
The assessee claimed interest u/s 132B(4)(b) from 1.12.1990 to 4.3.1994.
HELD by the Supreme Court:
The department’s argument that the refund of excess amount is governed by s. 240 and that s. 132B(4)(b) has no application is not acceptable.
S. 132B(4)(b) deals with pre-assessment period and there is no conflict between this provision and s. 240 or for that matter s. 244(A).
The former deals with pre-assessment period in the matters of search and seizure and the later deals with post assessment period as per the order in appeal.
The department’s view is not right on the plain reading of s. 132B(4)(b) and the assessee is entitled to simple interest at the rate of 15% per annum u/s 132B(4)(b) from 1.12.1990 to 4.3.1994. The interest shall be paid within two months from today.
DECISION
S. 132B(4)(b)/ 240/ 244A: Assessee is entitled to interest on cash appropriated during search even if refund is directed in appeal proceedings
- London Star Diamond Company (I) P. Ltd vs. DCIT (ITAT Mumbai)ITA No- 6169/M/2012 ‘D’ Bench, Mumbai (Date of Order: 11.10.2013)
FACTS
The assessee, an exporter of diamonds, entered into forward contracts with Banks to hedge the exchange loss, if any, in respect of the outstanding receivable in foreign currency.
The assessee suffered a loss of Rs. 4.69 crore on account of the maturity & premature cancellation of the said forward contracts.
The AO & CIT(A) held that the forward contracts constituted a “speculative transaction” u/s 43(5) and that the loss suffered thereon was a “speculation loss” which could not be set-off against the other income.
DECISION RELIED ON Sooraj Mull Magarmull 129 ITR 169 (Cal), BadridasGauridu 261 ITR 256 (Bom)
DECISION FOLLOWED AND SIMILAR FACTS
Panchamahal Steel 215 Taxman 140 (Guj) and Friends and Friends Shipping (Guj) followed;
The contrary view in S. Vinodkumar Diamonds (ITAT Mum) was passed in ignorance of BadridasGauridu 261 ITR 256 (Bom) and a MA is pending.
DECISION
Loss on foreign exchange forward contracts is incidental to the exports business and not a “speculation loss“. However, if the contract is prematurely cancelled, the assessee has to justify the loss.
- SHARE APPLICATION MONEY AND SEC.68 PRESENT STATUS
Share application money and Sec 68 unexplained cash credit.
It is true that in respect of share capital, it cannot be treated entirely on par with cash credit, so that where the identity of the subscriber is proved, the creditworthiness may not be required to be proved as is expected in the case of normal cash credits.
This is the law, which has been decided by the Supreme Court in CIT v. Lovely Exports P. Ltd. [2009] 319 ITR (St.) 5 (SC).
This precedent cannot be blindly applied, where there is admission before the Investigation Wing of the Department that the subscribers to the share capital had availed accommodation from bogus entry operators.
The Departmental appeal was, therefore, allowed by the High Court in CIT v. Youth Construction P. Ltd. [2013] 357 ITR 197 (Delhi) and the matter remitted back to the Tribunal for a fresh decision in accordance with law.
In a similar case of addition made on the basis of information from Investigation Wing of the Income-tax Department as to the accommodation entries, it was found that the assessee had done little to discharge its burden under section 68.
The Tribunal in this case could not merely follow Lovely Exports P. Ltd’s case (supra). It is not every case of share subscription that they are acceptable as genuine on mere identification, when there is information that the subscribers had availed of accommodation entries. The Tribunal, it was pointed out, cannot adopt a simplistic view ignoring the factual aspects and circumstances, without examining the evidence brought in before the authorities with reference to the bank accounts of the subscribers and statements.
It was in this view that the matter was remanded to the Tribunal for a fresh disposal by the High Court in CIT v. Titan Securities Ltd. [2013] 357 ITR 184 (Delhi).
These decisions of the High Court in all these cases relating to information from the Investigation Wing as to the practice of accommodation entries would mean that such information would be a valid starting point for further investigation. The conclusion could not depend solely upon such information nor could such information be ignored, where the assessee does not take any effort to rule out inference of non-genuineness based on such information.
LOVELY EXPORTS PVT LTD . (SC)
SHARE APPLICATION MONEY (NORMAL CIRCUMSTANCES )
SHARE APPLICATION MONEY (CIRCUMSTANCES WHEN DEPT HAS SOME INFORMATION OF BOGUS/ ACCOMODATION ENTRY than further proofs like explaining source of source and all three conditions like identity , creditworthiness , capacity needs to be proved . )
- Accounting/Accrual of Income in the matter of Advance licence and DEPB .
Advance licence and DEPB----When does the income arise?
Year in which you get the licence or year in which you utilize the licence
Facts :
Advance licence and Duty Entitlement Pass Book Scheme (DEPB) are available against export obligations.
Their value on the date on which such rights are available is indeterminate since such value is subject to fluctuations.
The rights may not be exercised at all, in which case there could be no income at all to be taxed.
The inference of the authorities was that there is income the moment such right becomes available, and that tax liability cannot be postponed till the income there from is realized.
The argument of the taxpayer is that such rights are taxable only when they are crystallized.
The right is meant to match the corresponding liability towards customs duty entitling the assessee to duty-free imports or such other concessions. Till such time the concessions materialize, the income is only hypothetical and not real.
DECISION
Taxable when they are crystalised . It means taxable when used by the assessee against import . (Assessee’s view has been accepted)
CIT v. Excel Industries Ltd. [2013] 358 ITR 295 (SC),
- S.2(22)(e) : Deemed dividend - Loans or advances to shareholders- Condition precedent
Where assessee shareholder had already divested his interest in shares of a company in favour of a trust, assessee could no more be said to be beneficial owner of those shares and, thus, any sum advanced by company to assessee subsequently could not be treated as deemed dividend. (A.Y. 2006-07)
CIT v. Navinbhai N. Patel (2013) 216 Taxman 137 (Mag.) (Guj.) (HC)
- Sec.74 :
Facts
Losses – Capital gains – S.50-Depreciable assets – Block of assets – Long-term capitalloss can be set off against short-term capital gain calculated u/s. 50
CONCLUSION
The assessee sold its office premises and secured long-term capital gains. However, being a depreciable asset, gains were computed in terms of section 50 of the Act as short-term capital gain.
The AO disallowed the claim of the assessee to set off its carry forward long term capital loss against the aforesaid long term capital gain u/s. 74 of the Act.
The CIT(A) upheld the order of the AO. On further appeal, the Tribunal allowed the claim of the assessee to set off its long term capital loss in terms of Section 74 of the Act by following its decision in the case of Manali Investments v. ACIT [2011] 45 SOT 128 (Mum).
The High Court, following its Order in the case of Manali Investments, dismissed the departmental appeal thereby permitting the set off of bought forward long term capital loss (A.Y.2006-07)
CIT v. Pursarth Trading Co.(P.)Ltd.(2013)217 Taxman 113 (Bom.)(HC)
- S.194J : Deduction at source – Technical and professional services – Service tax – As per contract
FACTS OF THE CASE
TDS ON PROFESSIONAL BILL
TDS ON BILL + SERVICE TAX
TDS ON BILL
TDS ON BILL IF BILL IS INCLUSIVE OF SERVICE TAX
CONCLUSION
Jaipur Bench of the Tribunal held that if the parties to a contract for provision of technical of professional services agree only on the consideration for such services and that service receiver agrees only on the consideration for such services and that the service receiver shall pay the applicable service tax to the service provider as per the extant law, then no tax need to be deducted at source on such service tax.
It was further held by the Tribunal that if the contracted amount includes the amount of the service tax, then tax ought to be deducted at source on the service tax portion as well. On appeal by revenue the High Court dismissed the appeal of revenue and confirmed the order of Tribunal (ITA no 413/Jaipur dt 31-03-09).(Income- tax Appeal nos 235/2011/222/2011/238/2011/239/2011 dt 1-07-2013)(A.Y.2008-09)
CIT v. Rajasthan Urban Infrastructure (Raj)(HC) (Un reported)
Bottom of Form
- Section 45(4) – Retiring partner takes only money towards the value of his share in the firm no distribution of assets – Provisions of section 45(4) are not attracted
CIT vs. Dynamic Enterprises (2013) 95 DTR (Kar.) (FB) 97
Section: 54
- Rajesh KeshavPillaivs ITO(Mum) Tribunal
FACT:
Capital Gains - Profit on sale of property used for residence - Exemption is available to multiple sales and purchases of residential houses - (S 45) Capital gains - Exemption - Sale of two or more houses and investment.
- CIT v Jagriti Agarwal (MS) 203 Taxman 203 (P&H)(2011)
FACT:
Capital - gains - Deposit of amount in capital gains account scheme by date mentioned under section 139(4) - Eligible for exemption.
- ACIT v Suresh Verma72 DTR 82 (Delhi)(2012) Tribunal
FACT:
Capital gains - Property used for residence - Exemption - House purchased in joint name, the assessee is entitled for exemption
- DIT(International Taxation)v Jennifer Bhide (Mrs)
252 CTR 444 (Karn)(2012)
FACT:
Capital gains - Property used for residence – Exemption - Investment in joint names of assessee and her husband.
No requirement that such investment should be in the name of assessee only -Property purchased in the joint name of assessee and husband .Eligible for benefit of deduction u/s 54.
- Ashok Syal v CIT, Jalandhar209 Taxman 376 (P &H )(2012) Similar decision .
Section: 54EC
1.The Tata Power Co Ltd vs ACIT (Mumbai) Tribunal
FACT:
Capital gains Deduction allowable before set-off of brought forward loss.
2.CIT v Vijay M Mahtaney 35 Taxman.com 228 (Mad)
(2013). High Court
FACT:
Capital gains - Investment in bonds - Long term capital loss of earlier years - Set off of loss before Sec. 54EC or After Sec. 54EC.
3. Kumar AmrutlalDoshivs Dy CIT
ITA No 1523/ Mum/2010, dt 09-02-2011,A Y 2006-2007,'G' Bench Mumbai ITAT,BCAJ pg 31, Vol 43-A, Part 1,April 2011. Tribunal
FACT:
Capital Gains - Exemption - Date of payment.
Date of issue of cheque for bond investment and not the date Of clearance of cheque is important .
4. VivekJairazbhoy v DCIT (Bang) Tribunal
FACT:
Capital gains - Investment in bonds - Limit of 50 lakhs limit of Rs 50L does not apply to the transaction but financial year. Cheque has to be issued within 6 months Encashment of Cheque & Allottment of Bonds beyoned 6 months is irrelevant.
5CIT v Voith Paper Fabrics India Ltd 64 DTR 58/ 245 CTR 516 (P&H)(2011).
FACT:
Capital gains - Profit on sale of property used for residential house - Investment of sale consideration - No requirement that such investment should be in the name of assessee only - Property purchased in the joint names of assessee and husband .
6. Chanchal Kumar Sircar v ITO Tribunal
FACT:
Capital gains - Investment in bonds - Time limit Investment time limit begins from date of receipt of consideration and not from date of transfer, hence entitled for exemption.
7.MaheshNemichandraGaneshwade v ITO (Pune) Tribunal
FACT:
Capital gains - Investment in bonds - Exemption - Within six months - If investment within 6 months of transfer is impossible, then relief available if investment made within 6 months of receipt of consideration
8.ACIT v Deepak S Bheda 52 SOT 327 (Mum)(2012).( Tribunal)
FACT:
Capital Gains - Investment in bonds - Exemption -Investment out of total capital gains in REC bonds, deduction cannot be denied on the ground that the assessee has availed the exemption u/s 54F also against a part of the capital gain
9. Dy CIT v Rajeev Goyal52 SOT 335 (Kol)(2012). Tribunal
FACT:
Capital Gains - Investment in bonds – Property also owned by minor child along with father/mother .
Exemption u/s 54EC limit is available to father only since income of minor is getting clubbed in the income of father or benefit 54EC is available separately to father and minor.
10 Dy CIT v Himalaya Machinery (P) Ltd 214 Taxman 291
(Guj)(2013). High Court
FACT:
Capital gains - Sale of depreciable assets - Investment in bonds –
CONCLUSION
Availability of benefit of Sec 54EC ?? .
CA Amar K Shah Baroda CPE Study Circle Meeting 24.12.2013