CASE LAWS
2018-TIOL-917-HC-AHM-IT + Case Story
ITO Vs JR CONSTRUCTION: GUJARAT HIGH COURT (Dated: March 5, 2018)
Income Tax - Writ - Sections 80IB(10) & 143(3).
Keywords: Deduction - Development of housing project - Special grounds & Underutilization of Floor Space Index.
The assessee partnership firm engaged in the development of housing project, had filed its return for the relevant AY and claimed deduction u/s 80IB(10) of the Act . Subsequently the AO took return in to security and observed that the assessee had developed three housing projects and had utilized about 20% or less of the permissible Floor Space Index (FSI) for construction. The AO further observed that substantial portion of assessee's profits was not derived from development of housing project but through sale of the unutilized FSI. Hence, the AO made disallowance on profits derived from the sale of unutilized FSI, by differentiating the same from the casual business activity of the asssessee. On appeal, both the CIT(A) and Tribunal took a contrary view.
On appeal, the High Court held that,
Whether development of a housing project qualifies for full deduction u/s 80IB(10), where the utilization of FSI is way short of the permissible area of construction & assessee has not made any special ground for under utilization of the FSI - NO: HC
++ the assessee was in the process of developing three housing projects viz. Subhlaxmi, Samruddhi, Bhagyalaxmi. In such projects, considering the land area and the permissible FSI of 1.6, the assessee was entitled to carry out total construction of 20198 sq.mtrs, 11426 sq.mtrs and 13130 sq.mtrs respectively. As against this, the assessee had actually carried out construction of 4538.13 sq.mtrs, 2212.42 sq.mtrs and 2639.26 sq.mtrs respectively in these projects. That left unutilized FSI of 15659.87 sq.mtrs, 9213.58 sq.mtrs and 10490.74 sq.mtrs respectively. Thus, in each of the projects, the assessee had utilized about 20% or less of the permissible FSI. It was in this context that the AO had raised objection of the assessee's profit being derived through sale of unused FSI. Such an issue was examined by this Court in case of Commissioner of Income Tax vs. Moon Star Developers and following the same, Revenue's appeal is allowed. Judgement of the Tribunal and CIT (A) are reversed and that of AO is restored.
Revenue's appeal allowed
2018-TIOL-916-HC-AHM-IT + Case Story
PR CIT Vs VALLABH PESTICIDES LTD: GUJARAT HIGH COURT (Dated: April 16, 2018)
Income Tax - Section 245D(2C).
Keywords - Application for settlement of proceedings - Date of assessment order - Service of assessment orders.
The assessee company had filed an application for settlement of its proceedings concerning AYs 2010-11 to 2014-15 on 27.12.2007 contending that till then, the assessments were pending. The Revenue appeared before the Settlement Commission in response to the notice issued and took a stand that the application for settlement was not maintainable since on 26.12.2017, the AO had already passed separate orders of concerned AYs. The assessee argued that till 29.12.2017, such orders were not served on the assessee. The assessee also contended that no such orders of assessment, as alleged, were passed on 26.12.2017. The Settlement Commission, overruled the Revenue's objection to the maintainability of the settlement application. The Commission was of the opinion that until orders of assessment were served on the assessee, he would have a continued right to apply for settlement. However, the Commission did not enter into the question of the orders of assessment being actually passed on 26.12.2017 or not. Aggrieved Revenue, filed petition challenging order of the Settlement Commission passed u/s 245D(2C) of the Act before the High Court.
The High Court held that,
Whether without verifying the actual date of passing of assessment order by AO, the settlement commission can proceed to decide the application for settlement of proceedings filed by assessee - NO : HC
Whether Settlement Commission is obligated to follow the decisions of the High Court reached after detailed consideration of issues on merit unless it follows the judgment of the larger Bench of the same High court or a judgment of the Supreme Court for identical situation - YES : HC
++ the Commission committed serious error both in the decision and the decision making process. It was the duty of the Settlement Commission to first ascertain whether the department had in fact, passed such orders of assessment on 26.12.2017 or not. Had the Commission come to the conclusion that no such orders were passed till the assessee filed the application for settlement on 27.12.2017, the Commissioner was perfectly justified in overruling the department's objection to the maintainability of the application for settlement. However, without doing so, the Settlement Commission held that the settlement application was maintainable;
++ the knowledge of the order of assessment of the assessee or its service on him were wholly inconsequential. The Settlement Commission committed a grave error in law disregarding the dictum of the High Court. In case of Shalibhadra Developers, the High Court had considered all relevant aspects of the matter before coming to legal conclusion. It was not open for the Settlement Commission to disturb such ratio of the judgement of the High Court. If the Settlement Commission had noticed a judgement of the larger Bench of the same High court or a judgement of the Supreme Court which, under identical situation, laid down law to the contrary, it was open for the Settlement Commission to record that the judgement of the High Court in case of Shalibhadra Developers was rendered per incuriam. Except for this proposition, it was simply not open for the Settlement Commission to disturb the conclusions of the High Court on law points reached after detailed consideration;
++ the assessee can not be left without remedy merely because the Commission chose not to examine the actual date of passing order by AO. In the result, the petition is disposed of. The proceedings are placed before the Settlement Commission for fresh consideration from the stage of passing of the order u/s 245D (2C) of the Act. The Settlement Commission shall examine the assessee's contention that contrary to what is suggested by the Revenue, the orders of assessment were never passed on 26.12.2017. The Settlement Commission shall, pass fresh order latest by 15.05.2018 bearing in mind, the observations and declaration of law by the High Court in case of Shalibhadra Developers.
Case Remanded
2018-TIOL-915-HC-AHM-VAT
RELIANCE INDUSTRIES LTD Vs STATE OF GUJARAT: GUJARAT HIGH COURT (Dated: March 16, 2018)
Gujarat Value Added Tax - Writ - Sections 11(3)(b) & 75
Keywords - Limitation - Power of revision
THE assessee company leading industrial conglomerate in India. In course of manufacture activities, the assessee sends goods outside the state of Gujarat, on account of branch transfer, on which it suffers reduction of tax credit of 4% u/s 11(3)(b) of the Gujarat Value Added Tax Act. The Department opined that where the input is fuel, the 4% reduction of tax credit should be applied twice. The assessee contested the same on grounds that u/s 11(3)(b), the reduction could be applied once only and not again. When the issue reached the High Court, it relied on a precedent decision in State of Gujarat v. Reliance Industries Limited and held that the legislature intended to limit the tax credit only once. Even if the input happens to be fuel, such reduction cannot be applied twice. When the Revenue approached the Apex Court, its appeal was allowed.
Thereupon, the assessee was served a notice proposing to revise an assessment order. Subsequently, another notice was served directing the assessee to produce necessary accounts for this purpose. Hence the assessee challenged both such notices.
In writ, the High Court held that,
Whether the Gujarat VAT Act permits the Commissioner to revise an assessment order passed by a subordinate officer, after expiry of three years limitation period from the date on which the order in question was passed - NO: HC
++ considering the provisions of Section 75 of the GVAT Act, in terms of clause (a) of subsection (1) of section 75 thus, the Commissioner has revisional powers which can be exercised on his own motion or under an application made to him for such purpose. He could take any order in revision passed by the officer appointed under section 16 of the Act to assist him by calling for and examine record of any such order and pass such order as he thinks just and proper. Exercise of such powers however, comes with prescription of limitation. The suo motu power for calling any record of any such order can be exercised within three years. If the same is to be exercised on a motion by the person concerned, the period of limitation prescribed is one year. The statute further provides that the order of revision could be passed within five years from the date of the order taken in revision. There is nothing on record to suggest that in the present cases, the Additional Commissioner had called for the record of the assessment of the assessee for the particular year within three years of the date of the order so as to enable him to exercise the revisional powers. In fact, looking to the tenor of the notice of revision it was not even possible for him to have done so. This is because the order of assessment was passed on 30.03.2013. Period of limitation would therefore expire on 30.03.2016. The judgment of the Supreme Court, to which, reference is made and reliance placed in the notices for revision was delivered on 22.09.2017. On all accounts thus, the action of the Additional Commissioner calling for the record of the assessment and issuing notice for revision is beyond the period of limitation prescribed.
++ similar situation had come up before this Court in number of cases to which reference can be made shortly. Before that, it may be noted that clause (a) of subsection (1) of section 67 of the Gujarat Sales Tax Act made pari materia provisions concerning the revisional powers of the Commissioner. Under the said section also, the Commissioner is empowered to call for and examine the record of any proceedings of the subordinate officer suo motu within three years or on an application made to him for such purpose within one year from the date of the order passed by such officer.
Assessee's writ petition allowed
2018-TIOL-914-HC-AHM-ST
BIRENBHAI K PATEL Vs ADDL CCE, C & ST: GUJARAT HIGH COURT (Dated: March 15, 2018)
ST - the assessee herein sought to file appeal against an O-i-O - However, he missed the time limit for doing so and sought to challenge such order through the present writ.
Held - Normally, an assessee has 60 days to file appeal - This period is extendable by 30 days if the appellate authority deems it fit to do so - Also in some cases High Courts have condoned delays where they are small and backed by justifiable reasons, while also cautioning that the same should not be treated as parallel remedy - But in the present case, the delay exceeds 400 days - The assessee also laid all the blame on his counsel for not informing him after receiving the order - The delay in this case is too large & the explanation provided does not pass muster: High Court (Para 1,2,3)
Writ Petition Dismissed
2018-TIOL-913-HC-AHM-VAT
STATE OF GUJARAT Vs TOLAT ELECTRONICS: GUJARAT HIGH COURT (Dated: March 9, 2018)
Gujarat Value Added Tax - Section 80
Keywords - Lighting equipment - Right to use - Transfer of possession
THE assessee company, engaged in providing specialized lights and equipments for public functions, also provided the same in some hotels which rent out spaces for such functions. On assessment, the Department opined that the assessee transfers the right of user of the equipments, which in turn would attract VAT liability. Hence, the Joint Commissioner later held that the assessee was required to pay tax u/s 80 of the Gujarat Value Added Tax Act @ 12.5%. On subsequent appeal, the Tribunal settled the issue in favor of the assessee. Hence the Department's appeal.
On hearing the matter, the High Court held that,
Whether supply of lighting equipment as well as installation & operational services by technically-trained staff without right to use, would attract VAT liability - NO: HC
++ the Tribunal had noted the several special features of the nature of service provided by the assessee. The Tribunal also noted that the authorities made no attempt to perform from the organizers or from the hotel management where such events and functions were held where there was any occasion to have the control on the possession, operation and use of the apparatus being transferred. The Tribunal noted that the hotel management would merely provide the space for the organizer to stage the event. The Tribunal therefore concluded that the assessee never parted with that control of the apparatus in favour of the organizers or the hotel management;
++ the Tribunal committed no error. As noted, the task of the assessee was not merely of fitting lights on special occasions and winding up the paraphernalia once the event is over. The assessee undertook the task of providing special lighting for the stage for organizers to hold programs and events. This would require special equipments, installation and operation by technically trained staff and constant supervision by such staff all throughout the program. There is no element of transferring the controlled possession and ultimately the right of the user of the equipments. If at all the assessee was engaged in providing service which may invite service tax at the prescribed rate. Hence the issue stands settled in favor of the assessee.
Revenue's Appeal Dismissed
2018-TIOL-705-ITAT-KOL
DCIT Vs BRITANNIA INDUSTRIES LTD: KOLKATA ITAT (Dated: April 25, 2018)
Income Tax - Sections 143(3) & 263.
Keywords: Application of mind - Assumption of jurisdiction - Power of revision.
The assessee company filed returns for the relevant AY. On assessment u/s 143(3), the JCIT passed the order. However, such assessment order was revised u/s 263 by the CIT. Accordingly, in pursuance to the directions issued by the CIT u/s 263, the AO passed the order u/s 143(3)/263, making certain additions. Against such revision order, the assessee preferred appeal before the Tribunal, which held there to be no error in the order passed by AO. The Tribunal quashed the order passed by CIT u/s 263. Hence the Revenue's appeal.
On appeal, the Tribunal held that,
Whether CIT can exercise power of revision upon assumption of jurisdiction, where assessment order being revised is passed with proper application of mind - NO: ITAT
++ in the instant case, there is no ambiguity that the order passed by the CIT u/s 263 in the case of assessee in ITA No. 775/Kol/2015 pertaining to AY 2009-10 was quashed vide order dated 28.10.2016 wherein, it was held that "... the assessment order is not the result of non application of mind or wrong assumption of facts or without any proper enquiry. And it, therefore, follows that assumption of jurisdiction u/s 263 by the CIT is unwarranted and the order cannot be sustained ..." ;
++ there remains no doubt that the disputed order passed by the CIT u/s 263 was held as unsustainable. Therefore, the order passed in consequent to direction issued u/s 263 becomes infructuous. Hence, we find no reason to interfere in the order passed by the CIT on the ground that the consequential order passed u/s 143(3)/263 is not maintainable and thus becomes infructuous. Hence, the additions made by the AO in his giving effect order are not sustainable.
Revenue's appeal dismissed
