C&C Construction Pvt Ltd vs. CIT (Delhi High Court)

S. 260A: High Court has no power to consider issue not raised before Tribunal. The assessee filed an appeal before the Tribunal in which it argued that it had constructed a “temporary construction” which was eligible for 100% depreciation. This was rejected by the Tribunal on the basis that the construction was permanent. Before the High Court, the assessee argued for the first time that the expenditure was “revenue” in nature and admissible as business expenditure. HELD not permitting the assessee to raise the plea.

CWT Vs. Smt. Neena Jain 2011 P&H High Court

As per Sec. 2(ea), "assets" mean, inter alia, any building, whether used for residential or commercial purposes or for the purpose of maintaining a guest house or otherwise including a farm house situated within 25 kms from local limits of any municipality or a cantonment board. The Definition of "assets" under Sec. 2(ea) also includes urban land.
The High Court opined that the words "any building" could not be read in isolation and had to be harmoniously construed with the remaining portion of Sec.2(ea) i.e., whether the building was used for residential or commercial purposes or for the purpose of maintaining a guest house, because an incomplete building could not be possibly either be used for residential or commercial purposes or for the purposes of maintaining a guest house. Therefore, the word "building" has to be interpreted to mean a completely built structure having a roof, dwelling place, walls, doors, windows, electric and sanitary fittings, etc.
Consequently, the incomplete building is not an asset chargeable to wealth tax.

CIT v. Saurashtra Cement Ltd. (2010) Supreme Court

The assessee, a cement manufacturing company, entered into an agreement with a supplier for purchase of additional cement plant. One of the conditions in the agreement was that if the supplier failed to supply the machinery within the stipulated time, the assessee would be compensated at 5% of the price of the respective portion of the machinery without proof of actual loss. The assessee received Rs.8.50 lakhs from the supplier by way of liquidated damages on account of his failure to supply the machinery within the stipulated time. The Department assessed the amount of liquidated damages to income-tax. However, the Appellate Tribunal held that the amount was a capital receipt and the High Court concurred with this view.
The Apex Court affirmed the decision of the High Court holding that the damages were directly and intimately linked with the procurement of a capital asset i.e., the cement plant, which lead to delay in coming into existence of the profit-making apparatus. It was not a receipt in the course of profit earning process. Therefore, the amount received by the assessee towards compensation for sterilization of the profit earning source, not in the ordinary course of business, is a capital receipt in the hands of the assessee.

Dy CIT v Hotel Excelsior Ltd (2011) Delhi Tribunal

Since the assessee is in Hotel business its building is not merely a structure of four walls but includes all such things as are necessary to give the building better look and is a matter of attraction for the customers, therefore Landscaping done by assessee in its hotel is to be treated as “building” and depreciation is allowable.
Payments made by assessee to NDMC for unauthorized occupation , construction of diesel storage tanks and fire fighting tanks and covering sanitary lines without approval in respect of the hotel acquired by it from the Central Government formed part of purchase consideration as these payments were made to perfect the title of the assessee in the property and the amount being capitalized the assessee is entitled for depreciation.

ACIT vs. Maersk Global Service Center (ITAT Mumbai)

The assessee, a captive service provider rendering back office support services to its AEs, earned an adjusted Net Cost plus Margin of 7.90%. The assessee adopted TNMM and computed the mean of margins earned by the comparables at 7.62%. The TPO held that “No companies were identified as comparables” by the assessee and after selecting 12 companies as comparables, determined an arithmetic mean of 27.80% and made an adjustment of Rs. 10.49 crores. The CIT(A) deleted the addition. On appeal by the department, HELD dismissing the appeal.

CIT vs. Manjula J. Shah (Bombay High Court)

The assessee’s daughter purchased a flat on 29.1.1993 at a cost of Rs.50.48 lakhs. She gifted the flat to the assessee on 1.2.2003. The assessee sold the flat on 30.6.2003 for Rs. 1.10 crores. In computing LTCG, the assessee took the indexed cost of acquisition under Explanation (iii) to s. 48 on the basis that she “held” the flat since 29.1.1993. The AO held that as the assessee had “held” the flat from 1.2.2003, the cost inflation index for 2002-03 would be applicable. The CIT (A) and the Special Bench of the Tribunal upheld the claim of the assessee. On appeal by the department, HELD dismissing the appeal.

Director of IT vs. Maersk Co. Ltd., as Agent of Henning Skov (2011) Uttarakhand High Court

Advance tax is not payable on the salary of an employee in as much as the obligation to deduct tax at source is upon the employer under section 192, upon failure on the part of the employer to deduct at source, the assessee (employee) only becomes liable to pay the tax directly under section 191 and does not become liable to pay interest under section 234B.

CIT vs. Jyoti Plastic Works Pvt Ltd (Bombay High Court)

For Sec.80-IB “workers” need not be “employees”
The assesee was engaged in the manufacture of goods by using job workers; its total number of permanent employees was less than ten. The department relied on Venus Auto Pvt Ltd vs. CIT 321 ITR 504 (All) and claimed that the non-employment of at least 10 workers was in breach of s. 80IB(2)(iv) and deduction u/s 80IB was not admissible. This was reversed by the Tribunal. On appeal by the department, HELD dismissing the appeal.

ACIT vs. The Total Packaging Services (ITAT Mumbai)

For s. 80-IB, Modvat credit is “derived” from industrial undertaking
The assessee availed/set off Modvat credit of excise duty of earlier years amounting to Rs. 1.93 crores. The AO held that s. 80-IB deduction was not admissible on the said Modvat credit on the ground that the “source of the income was government policy imposing excise duty at differential rate” and it was not “derived” from the industrial undertaking. This was reversed by the CIT (A). On appeal by the department, HELD dismissing the appeal.

ITO vs. Indian Oil Corporation (ITAT Delhi)

The assessee entered into contracts with transporters for transporting petroleum products from the plant to various destinations. The assessee deducted TDS u/s 194C at 2% on the basis that the transportation contract was “work”. The AO held that the contract was a “hiring” of vehicles on the basis that
(i)the assessee had exclusive possession and usage,
(ii)the use was for a fixed tenure,
(iii)the tankers were customized to the assessee’s requirements
Thus TDS ought to have been u/s 194-I at 10%. The assessee was held to be in default u/s 201. On appeal, the CIT (A) reversed the AO. On appeal by the department, HELD dismissing the appeal.

Sood Brij & Associates vs. CIT (Delhi High Court)

The assessee, a firm of Chartered Accountants, provided by its partnership deed that the profits would be divided equally. By a supplementary deed of 1992 it was agreed that the working partners would be paid such remuneration as may be “mutually agreed upon” subject to the provisions of the Act. It was also specified that the total remuneration payable to the working partners would be an amount permissible as remuneration to the working partners under the Act. The AO, CIT (A) & Tribunal held that the deed did not satisfy the conditions of s. 40(b)(v) and deduction was not admissible. On appeal to the High Court, HELD dismissing the appeal.

Atma Ram Properties Pvt Ltd vs. DCIT - Delhi High Court

In AY 2001-02, the AO assessed advances of Rs. 1.56 crores received from a group concern as “deemed dividend” u/s 2(22)(e). In appeal, the CIT (A) held that the advances received in earlier years could not be assessed. The AO thereafter reopened the assessment for AY 1999-00 (after 4 years from the end of the AY). Though the AO alleged that there was a failure on the part of the assessee to disclose full and true material facts, he did not specify what that failure was. The reopening was upheld by the CIT (A) & the Tribunal. On appeal to the High Court, HELD allowing the appeal.

Maxopp Investment Ltd vs. CIT - Delhi High Court

No Sec.14A or Rule 8D Disallowance without showing how assessee’s calculation is wrong. Only real expenditure can be disallowed. The High Court had to consider two issues:
(a) whether interest paid on funds borrowed to acquire “trading shares” is hit by Sec.14A given that the profits there from are assessable to tax as “business profits” and the dividend is incidental and
(b) whether Rule 8D has retrospective operation.
High Court held that, "the AO cannot proceed to determine the amount of expenditure incurred in relation to exempt income without recording a finding that he is not satisfied with the correctness of the claim of the assessee. This is a condition precedent. While rejecting the claim of the assessee with regard to the expenditure or no expenditure in relation to exempt income, the AO will have to indicate cogent reasons for the same"
Also Sec.14A(2) & (3) were inserted w.e.f. 1.4.1962,but Rule 8D was inserted on 24.03.2008. Accordingly, Rule 8D would operate prospectively. However, here also, he will have to show why he is not satisfied with the correctness of the assessee’s claim.

ITO v Chander HUF (2011) Chennai Tribunal

A Town Panchayat is notified for urban agglomeration, but it is not a municipality. Agricultural lands falling within said town panchayat would not fall within municipality, and hence is not a capital asset as per the definition under Sec.2(14)(iii).

ITO v Chandar HUF (2011) Chennai Tribunal

A person makes investment in agricultural land within limits of town panchayats, and agricultural income was shown and declared year after year. Permission was sought to develop lands. No further action, was taken for over 12 years till date of sale, and entire land is sold after its value appreciated, it would not become adventure in the nature of trade.

CIT vs. Manish Build Well Pvt Ltd (Delhi High Court)

CIT(A) shall have to show cause AO before admitting additional evidences on assessee's application.
The AO asked the assessee to furnish confirmation letters from customers who had paid advances by cash (& not cheque) which the assessee complied with. In the assessment order, the AO treated the advances received by cheque as “unexplained cash credits” u/s 68. Before the CIT (A), the assessee produced confirmation letters from customers who paid by cheque. The CIT(A) admitted the additional evidence under Rule 46A & without giving the AO an opportunity, deleted the addition. In appeal by the department, the Tribunal upheld the CIT(A)’s action on the ground that as the AO had not called for the confirmations before making the addition, the CIT(A) was justified in admitting the additional evidence and there was no reason to set-aside the matter to the AO for a second innings. On further appeal to the High Court, HELD allowing the appeal.

Maximum Deposit Limit in PPF Increased

With NOTIFICATION [F.No. 1/9/2011-NS-II], dated 25-11-2011 Central Government has increased Maximum Limit to be deposited in the PPF Account has been increased from Rs. 70,000/- to Rs. 1,00,000/-.

Jayantibhai Meghibhai v Addl CIT - Ahmadabad Tribunal

Assessee having two self occupied properties. In case of the second property, relevant provisions of the Rent control Act were applicable. The Assessing Officer is bound to determine the standard rent of the premises in accordance with provisions of Act. However ,where the standard rent has not been determined by the rent control authority , the Assessing Officer is duty bound to do the exercise him self and determine the standard rent as per the provisions of the relevant Rent Control Act.

The Indian Hume Pipe Co Ltd vs. ACIT (Bombay High Court)

The assessee entered into an agreement in July 2001 for sale of development rights for Rs.39 crores. The transfer was in December 2003. The assessee computed LTCG of Rs. 23.19 crores. The assessee invested in eligible bonds between Feb & June 2002 (after the agreement to sell but before the transfer) and claimed exemption u/s 54EC. During the assessment proceedings, the AO asked for a copy of the agreements with the purchaser and other details which the assessee furnished. A copy each of the s. 54EC bonds (which gave the dates of investments) was also furnished. The AO allowed the deduction as claimed. After the expiry of 4 years from the end of the assessment year, the AO issued a notice u/s 148 claiming that as the investments were made prior to the date of transfer (Dec 2003), s. 54EC deduction was not admissible. The assessee filed a Writ Petition to challenge the reopening on the ground that there was no failure on its part to make a full and true disclosure of material facts. HELD dismissing the Petition.

TDS: AO in place of payment has no jurisdiction if assessee assessed outside.

The assessee, based & assessed in Delhi, was allotted land by MMRDA at Bandra Kurla Complex, Mumbai, on lease for 80 years. The lease premium of Rs.88.52 crores was paid without deduction of tax at source. The ITO (TDS) Mumbai passed an order u/s 201 in which he held that the assessee had defaulted in not deducting TDS u/s 194-I on the lease premium. The assessee filed a Writ Petition to challenge the jurisdiction of the ITO (TDS) Mumbai. HELD upholding the plea. - Indian Newspaper Society vs. ITO (TDS) (Bombay High Court)

ACIT v Punjab state Coop & Mktg - Chandigarh Tribunal

In AY 2007‐08, the assessee received dividend of in respect of investment in shares made in earlier years. No investments were made during the year. It was claimed that the investment in the earlier years was made out of reserves & surplus and that there was no expenditure incurred during the year to earn the dividend. The AO held that as in the earlier years, the assessee had borrowed funds, Sec.14A applied. It was held that if there is no nexus between borrowed funds and investments made in purchase of shares, disallowance u/s 14A is not warranted.