INCOME TAX JUDGEMENTS

• The Supreme Court in the case of Jean Knit Pvt. Ltd. vs DCIT held that a Writ Petition to challenge the issue of reopening notice u/s. 148 is maintainable as per law laid down in Calcutta Discount Co. Ltd. and Another vs ITO in 41 ITR 191. The Supreme Court further held that the law laid down in Chabil Dass Agarwal in 357 ITR 357 deals with the maintainability of Writ to challenge the assessment order and does not apply to a challenge to the reassessment notice (itatonline.org).

• The Mumbai High Court in the case of CIT vs Asian Paint (India) Ltd. reported in 243 Taxman 348 held that expenditure incurred by Assessee Company on corporate advertisement to maintain its corporate image which resulted in increased sale of products, was to be allowed as revenue expenditure.

• The Madras High Court in the case of CIT vs. Smt Jayalalitha Ammal. reported in 242 Taxman 449 held that where addition of undisclosed income was made on the basis of mere statement given by her son under section132 (4) which was not corroborated by any material evidence, neither such statement would be a conclusive evidence nor any addition could be made.

• The Rajasthan High court in the case of Pr. Commissioner of Income Tax vs. Vijay Shanthi Educational Trust. reported in 243 Taxman 212 held that where assessee an educational trust claiming depreciation on capital assets for which capital expenditure had already been allowed, the assessee was entitled to depreciation. The High Court followed its earlier decision in the case of CIT vs. Krishi Upaj Mandi Samithi (388 ITR 605).

• The Madras high court in the case of Holy Cross Primary School v/s CBDT Reported in 388 ITR 162 has held that payment of salary to priests and nuns of catholic institutions ultimately deposited the sum to the congregation or Dioceses which had benefit of exemption from tax and therefore no tax was required to be deducted from the salary so paid at source.

• The Punjab and Haryana High Court in the case of VMT Spinning Co. Ltd. v/s CIT reported in 389 ITR 326 has held that the Tribunal has powers to admit additional grounds before tribunal where such quations arise from facts already on record of assessment proceedings and further the tribunal can adjudicate such matters.

• The Bangalore tribunal in the case of ABB FZ-LLC v/s ITO reported in 75 Taxmann.com 83 has held that in the absence of specific article for fee from technical services (FTS), the income from services rendered in normal course of business is to be classifed as business income.

• The Mumbai Tribunal in the case of Hatkesh Co-op. Hsg. Soc. Ltd reported in 243 Taxman 213 held that in respect of transfer fees and TDR premium received by co-operative housing society from its members, principle of mutuality would apply.

• The Mumbai Tribunal in the case of Rajiv B Shah vs. ITO reported in 159 ITD 964 (SMC) held that the assessee cannot be denied deduction u/s. 54F if the assessee makes investment in residential house within the time limit prescribed u/s. 54F but is unable to get the title of the flat registered in his name or is unable to get the possession of the flat due to default of the builder.

• The Mumbai Tribunal in the case of ITO vs. Vikram A Pradhan in Appeal No. 2212/Mum/2012 dated 24th August 2016 held that amounts shown in Balance Sheet cannot be deemed to be cases of “cessation of liability” only because they are outstanding for several years. The AO has to establish with evidence that there has been a cessation with regard to the outstanding creditors.

• The Mumbai Tribunal in the case of Aditya Birla Minacs Worldwide Ltd. vs ACIT in Appeal No. 4549/Mum/2014 dated 2nd August 2016 held that tax is not required to be deducted u/s. 94I on reimbursement of rent and parking charges and therefore amount so reimbursed cannot be disallowed u/s. 40(a)(ia). In the said case the assessee reimbursed rent and parking charges amounting to Rs.71.49 lakhs to its holding company PSI Data Systems Ltd. The holding company had entered into a rent agreement with M/s. Golf Links. The Tribunal followed the decision of its Coordinate Bench in the case of Prime Broking Co. (I) Ltd. vs ACIT (ITA No. 6627/Mum/2010 dated 19th October 2012). The Tribunal further observed that the return of income of the holding company for the year under consideration has been accepted. Since the payment received from the assessee towards rent has been offered in the return of income filed by the holding company, the provisions of section 40(a)(ia) cannot be applied to the case of the assessee as per the second proviso thereto, which is held to be retrospective by the Delhi High Court in the case of Ansal Land Mark Township (P.) Ltd. (377 ITR 635)(Del.)

• The Mumbai Tribunal in the case of ACIT v/s Liva Healthcare Ltd reported in 161 ITD 63 held that expenses incurred towards free samples distributed to physicians will be allowable only if free samples of pharmaceutical products are distributed to physicians/ doctors at initial stage of introduction to test efficacy of products and same are incurred wholly and exclusively for purposes of business. It is further stated that if free samples were granted post-introduction of pharmaceutical products in market when its end use stood established, it would be hit by Explanation to section 37 and shall not be allowable as deduction.

• The Mumbai Tribunal in the case of Amritlal T. Shah v/s ITO reported in 182 TTJ 525 held that when assessee and his family members having sold their shareholding in a company to another company at a mutually agreed price in excess of NAV per share as part of the arrangement to facilitate restructuring of shareholding pattern of these companies, the entire transaction of sale of shares is a genuine and bonafide transaction, and therefore the capital gain is to be computed by taking the actual sale consideration of the shares and not the price based on NAV per share as full value of consideration. More so the Revenue has accepted the capital gains based on the same sale consideration in case of one of the member of the family and has also accepted the purchase of shares in the hands of the purchaser company at the same price.

• The Mumbai Tribunal in the case of CIT vs. Sunil Vishambharnath Tiwari reported in 388 ITR 630 held that disallowance u/s. 40(a)(ia) cannot be treated separately but it is to be added to gross total income which is eligible for deduction u/s. 80IB(10). In the said case the assessee was eligible for deduction u/s. 80IB(10). The AO made certain disallowances u/s. 40(a)(ia) of the Act on account of non-deduction of tax at source and did not allow deduction u/s. 80IB(10) in respect of the increased income of the project.

• The Chennai Tribunal in the case of P. K. Rajasekar v/s ITO reported in 161 ITD 189 held that where assessee claimed that there was a wrong credit entry by payer client in the form 26AS of the assessee, the AO should examine the genuineness of the transaction and not merely make addition on the basis of form 26AS.

• The Pune Tribunal in the case of Suresh Babulal Shah (HUF) v/s DCIT reported in 161 ITD 514 held that where assessee had continuously shown shares as investment in the balance sheet, it would be entitled to treat gains arising on purchase and sale of shares as capital gains even though the holding period of the shares was short and the volume and frequency of the transactions was high.

• The Mumbai Tribunal in the case of DCIT v/s Mahendra Brothers Exports (P.) Ltd reported in 161 ITD 772 held that where assessee earned dividend and claimed the same as exempt and the AO noticed that assessee had a common pool of funds, he partly disallowed interest expenses by applying section 14A r.w.r. 8D(2)(ii), it could be presumed that investments had been made out of surplus funds and therefore, no disallowance of interest can be made u/s 14A of the Act.