12- 03 -2019 - Views: 148

Reported Judicial Decisions- March 2019 E-Newsletter

Reported Judicial Decisions

CA. P.M.Veeramani FCA

Statute: Income Tax Act – Sec.11 – Provision for exp;  No details in Form 10    
Decision in favour of : Assessee
Title  : CIT  vs  Ohio University Christ College
Citation: 408 ITR 352        Bench:Karnataka HC 

Section 11(1)(a) does not employ the term “spent” but “applied”, which term has wider connotation. Depending upon the normal accounting practices adopted by the assessee in the ordinary course of business, if a provision for expenditure is made in a particular year and the amount in question is “spent” in the subsequent period, it cannot be said that the amount is not “applied” for the specified purpose in that relevant assessment year.

The income derived from the trust property has to be computed on commercial principles and adjustment of expenses incurred by the trust for charitable and religious purposes in the earlier years against the income earned by the trust in the subsequent year will have to be regarded as application of income of the trust for charitable and religious purposes in the subsequent year.

In the case of accumulation of income as long as the purpose or purposes mentioned in form 10 are for achieving the objects of the trust, merely because of non-furnishing of the details, as to how the amount is proposed to be spent in future, the assessee cannot be denied the exemption as is admissible under sub-section (2) of section 11 .

Statute: Income Tax Act – Sec.32 – Enhanced depreciation on life saving equipment    
Decision in favour of : Assessee
Title  : CIT  vs  Vasantha Subramanian Hospitals Private Ltd
Citation: 408 ITR 176        Bench: Madras HC

The Assessing Officer held that the equipment on which depreciation at 40 per cent. was claimed are not listed in the list of Life Saving Medical Equipment under the new Appendix-I Schedule Part-III, (xia) of the Income-tax Rules. The Assessing Officer held that there is no provision in the Act for allowing depreciation for like or similar things and the word “being” used while listing the life saving equipment in the Act clearly shows that only equipment mentioned in the list alone can claim 40 per cent. depreciation.
The Tribunal had gone through the paper book submitted by the assessee which explained the nature of the equipment, purchase of the equipment, various write-ups of the equipment, bills, vouchers, etc., and after having been satisfied that they all formed part of the life saving equipment, had granted the relief to the assessee. Thus, the Tribunal was fully justified in granting the relief of depreciation at 40 per cent. Hence, the findings rendered by the Tribunal on the issue was confirmed.

Statute: Income Tax Act – Sec.36(1)(iii) – Notional interest income on advances 
Decision in favour of : Assessee
Title  : Principal CIT  vs  Basti Sugar Mills Co Ltd 
Citation: 408 ITR 184        Bench: Delhi HC

AO instead of disallowing interest on borrowed funds, had made an addition by notionally computing the interest  @18% on the interest free advance given by the assesse to the sister concern which was impermissible and contrary to law 

Statute: Income Tax Act – Sec.37 – Purchase of software    
Decision in favour of : Assessee
Title  : DCIT  vs  Avtec  Ltd
Citation: 67 ITR Trib 144    Bench: ITAT Delhi

E-TDS software, E-scan, antivirus attachment control, ME&S software upgrade were clearly in the nature of routine software for the purpose of antiviral control and for upgrading the existing software and was revenue in nature 

Statute: Income Tax Act – Sec.40(a)(ia) , 194 J – TPA payment to hospitals    
Decision in favour of : Assessee
Title  : CIT  vs  Dedicated Healthcare Services (TPA) India Private Ltd
Citation: 408 ITR 36        Bench: Bombay HC

The assesse carried on business as TPA for insurance companies and as part of its made payments to hospitals the claims received from the insurance companies without deduction of TDS. AO disallowed the payments u/s 40(a)(ia) even though the said payments were not routed through profit and loss account. Dismissing the department appeal, the court held that the tribunal had found that the assesse only facilitated the payments by the insurer to the insured for availing of the medical facilties. The asessee did not render any professional services to the insurer or insured , but only collected the amount the insurer and passed it on the various hospitals.  TDS was not attracted and disallowance not proper 

Statute: Income Tax Act – Sec…45(2) .. Conversion into stock in trade    
Decision in favour of : Revenue
Title  : Mahaveer Yadav vs ITO
Citation: 408 ITR 19        Bench: Rajasthan HC

The assesse had converted the agricultural land into residential plots and sold them . AO has found that by plotting of land , the assesse has converted the land into stock in trade.  The fair market value on the date of conversion as reduced by the cost of acquisition was required to be assessed under “Capital Gains” in the year of sale / transfer of stock in trade. The sales realization over the fair market value considered for capital gains was required to be assessed as “business income”

Statute: Income Tax Act – Sec.50B – Exchange is not slump sale
Decision in favour of : Assessee
Title  : Oricon Enterprises Ltd  vs  ACIT
Citation: 67 ITR Trib 433    Bench: ITAT Mumbai

In the business transfer agreement, there was no mention of any money to be received or  paid by the parties concerned. The business transfer agreement speaks of issue of fully paid shares. Section 2(42C) and Section 50B talk of sale consideration. As the assesse had received shares and not money in lieu of the transferred packaged divisions, the disputed transaction could not be termed as sale or slump sale to attract provisions of section 50B

Statute: Income Tax Act – Sec.54EC – Investment before sale    
Decision in favour of : Assessee
Title  : Rahul G Patel vs DCIT
Citation: 67 ITR Trib 280    Bench: ITAT Ahmedabad

If the assesse invests advance received in specified assets before the date of transfer of asset, the amount so invested would qualify for exemption under section 54EC.   CBDT circular 359 dated 10.5.1983 (143 ITR st 2)

Statute: Income Tax Act – Sec.55(2)(b) – FMV as on 1.4.1981
Decision in favour of : Assessee
Title  : Vasudev Manilal Patel  vs  ITO
Citation: 67 ITR Trib SN 23    Bench: ITAT Ahmedabad

The valuation as on April 1, 1981 could not be done solely on the basis of “comparable sale instances” inasmuch as the location of two pieces of land, no matter how similar, cannot be the same. The very basis of adopting the comparable sale instances proceeded on sweeping generalisations. Reliance on sale instances alone could not be the decisive factor to ascertain the value of a piece of land, at least, so far as April 1, 1981 was concerned. There was no material whatsoever to dislodge the findings of the Valuation Officer and the difference between the valuation as per the registered sale deed and the value adopted in the valuation report was less than 25 per cent. and was reasonably explained. The addition made by the Assessing Officer thus was deleted.

Statute: Income Tax Act – Sec.80G(5)(vi)  - Exemption    Decision in favour of : Assessee
Title  : CIT(Exemptions)  vs  SGAPS Ashram
Citation: 408 ITR 75        Bench: Delhi HC

The CIT(Exemptions) granted exemption under section 12AA of the Act but denied the exemption under section 80G(5)(vi) on the ground the assesse spent more than 5% of the receipts for religious purposes.  Once the exemption u/s 12AA is granted and the same was live, the application for exemption u/s 80G(5) cannot be denied 

Statute: Income Tax Act – Sec.80IA(4) – Business income eligible for deduction     
Decision in favour of : Assessee
Title  : Hubli Electricity Supply Co   vs  DCIT
Citation: 170 DTR 332        Bench: Karnataka HC
Penalty recovered from suppliers/contractors for delay in execution of works contracts, unclaimed SD/EMD balances of contractors written back constituted income derived by industrial undertaking and hence eligible for deduction under section 80IA(4)(iv)(c )

Statute: Income Tax Act – Sec.89(1) – Arrears of perquisites     
Decision in favour of : Assessee
Title  : Rajeshkumar  vs ACIT
Citation: 172 ITD 563        Bench: ITAT Agra

Relief under section 89 is available in respect of salary and by virtue of section 17(1)(iv) as a natural corollary thereof available qua perquisites also

Statute: Income Tax Act – Sec.147 – Explanation 3 –  Enlarged scope     
Decision in favour of : Assessee
Title  : Juliet Industries Limited  vs  ITO
Citation: 67 ITR Trib 371    Bench: ITAT Mumbai

Explanation 3 to section 147 could not enlarge the scope of basic provisions containing in section 147 and the primary condition  viz. reason to believe was required to be fulfilled before resorting to reassessment proceedings.  AO was not right in assuming jurisdiction with respect to independent and unconnected items without any tangible material or information suggesting escapement of income. Hence, enquiry on the increase in share capital during the year during re-assessment proceedings was not valid.

Statute: Income Tax Act – Sec.194 I – Lease line charges for internet    
Decision in favour of : Assessee
Title  : ACIT (TDS)  vs SDV International Logistics Ltd
Citation: 172 ITD 505        Bench: ITAT Kolkatta

Where lease line charges were paid to internet service provider for faster internet access on dedicated lease line, said payment was for use of telecommunication service/ connectivity for transmission and not for use of any asset and hence such payment was not liable for TDS 

Statute: Income Tax Act – Sec.195 – Import of computer software     
Decision in favour of : Assessee
Title  : Ciena India Private Limited  vs ITO
Citation: 67 ITR Trib 75        Bench: ITAT Delhi

The assessee had purchased a copyrighted article and not a copyright itself and thus the lump sum fee paid in terms of the service invoice could not be treated as royalty under article 12(4) of the Double Taxation Avoidance Agreement. Further, the support services or warranty services had not made available any technology or know-how to the assessee and therefore the payment made for such services would not qualify as fees for technical services under the Double Taxation Avoidance Agreement. The payment for services of installation, support, services, subscription and warranty was also not liable for tax in India either as royalty or fees for technical services and therefore the assessee was not required to deduct tax at source on the same.

Statute: Income Tax Act – Sec.263 – Appeal against consequential order    
Decision in favour of : Revenue
Title  : Adhyakshya Lok Mela Amlikaran Samimittee  vs ITO 
Citation: 67 ITR Trib SN 78           Bench: ITAT Rajkot

Commissioner in his revision order under section 263 directed the AO to enhance the income.  Appeal against the assessment order giving effect the revision order was not maintainable before Commissioner (Appeals) . Remedy of assesse lay to challenge the revision order passed by the Commissioner 

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