2016-TIOL-202-SC-IT
ASHOK PRAPANN SHARMA Vs CIT: SUPREME COURT OF INDIA (Dated: November 24, 2016)
Income Tax - Sections 55(2).
Keywords - Comparable sales - compensation - cost of acquisition - land acquisition
Whether, for the purpose of determining capital gains, comparable sales cannot be overlooked for determination of cost of acquisition even if such sales are slightly subsequent in point of time relevant u/s 55(2) - YES: SC
Whether the High Court in exercise of its power u/s 260A should avoid making amends to ITAT's order unless such order is grossly incorrect or perverse - YES: SC
The assessee is an individual and was made liable to income-tax on capital gains accruing from land acquisition compensation and sale of land. The AO and FAA took into account the declaration made in the wealth tax return with respect to the said plot of land as the cost of acquisition. Some instances of comparable sales showing higher value at which such transactions were made were also laid before the AO. The same were not accepted as such sales were subsequent in point of time whereas u/s 55(2) the crucial date for determination of the cost of acquisition is 1st April, 1974. ITAT observed that comparable sales cannot be ignored and determined the cost of acquisition by slightly reducing the value. Upon appeal, the High Court reversed the said finding.
Having heard the parties, the Supreme Court held that,
++ if comparable sales are otherwise genuine and proved, the same cannot be excluded for determination of cost of acquisition even if such sales are somewhat subsequent in point of time relevant u/s 55(2). Also, since Tribunal is the last fact finding authority there is a limitation on the power of High Court u/s 260A to make amends to the decision of the Tribunal unless it is grossly incorrect or perverse.
Assessee's appeal allowed
2016-TIOL-201-SC-IT
JAI HIND CYCLE COMPANY LTD Vs CIT: SUPREME COURT OF INDIA (Dated: October 21, 2016)
Whether it is open to the High Court to answer any question in an appeal u/s 260A, without framing any substantial question of law - NO: SC
Income tax - Consequent to the search made in the business premises of Assessee as well as places of other connected persons, certain undisclosed income was found, and was accordingly added to the assessee's income along with a levy of penalty. On appeal, the ITAT also confirmed the addition made by AO u/s 69. When the matter reached the High Court, it was held that when the assessee fails to explain the source of investment, the Tribunal has no other choice but to go by the figures suggested by the Revenue for making additions u/s 69.
Having heard the parties, the Supreme Court held that, the High Court having decided the appeal u/s 260A without framing any substantial question of law, the matter needs to be remanded for a de novo consideration after formulating the substantial question(s) of law arising, if any. Although, the Apex Court does not expresses any opinion on the merits of the case.
Case remanded
2016-TIOL-200-SC-IT
MAXOPP INVESTMENT LTD AND Vs CIT: SUPREME COURT OF INDIA (Dated: November 24, 2016)
Income tax -The Assessee is in the business of finance, investment and of dealing in shares and securities and it holds shares and securities, partly as investments on the "capital account" and partly as "trading assets" for acquiring and retaining control over its group companies. The assessee had filed its return and profit resulting on sale of shares held as trading assets was offered to tax as business income, after claiming interest as business expenditure u/s 36(1)(iii). The AO however, invoked section 14A and apportioned the interest expenditure in the ratio of investment in shares of group company, on which dividend was received, to the principal amount of unsecured loans and made disallowance u/s 14A. When the matter reached the High Court, it was held that " expenditure (including interest paid on funds borrowed) in respect of investment in shares of operating companies for acquiring and retaining a controlling interest therein is hit by section 14A, inasmuch as the dividend received on such shares does not form part of the total income".
Having heard the parties, the Supreme Court holds that, it will hear the arguments of the counsel appearing in the matter of Civil Appeal No. 7020 of 2011 (as the lead case) on all issues (except retrospectivity of Section 14A and Rule 8D) that will arise or have been raised in the said case. The Apex Court also permitted the counsels to make necessary corrections in the categorization of cases in consultation with the Registry.
Case disposed of
2016-TIOL-199-SC-IT
CIT Vs DEFREE ENGINEERING PVT LTD: SUPREME COURT OF INDIA (Dated: October 24, 2016)
Income tax - Section 80IA.
The assessee company was engaged in the business of manufacturing and trading of copper and nickel alloy castings and also generating power through windmills. It had claimed deduction u/s 80IA on the income from the windmill division of the company. The AO however disallowed the said deduction, holding that the initial AY was the year from which the assessee commences its eligible business, since no profits were available for deduction in the relevant F.Y, after notionally bringing forward the unabsorbed depreciation and business loss. When the matter reached the High Court, it was held that "when the facts and circumstances based on which an appeal had arisen, are similar to those which had already been decided by the High Court in the Settled case of Velayudhaswamy Spinning Mills (P) Ltd. 2011-TIOL-979-HC-MAD-IT, it is not open to the Revenue to argue differently without any basis".
Having heard the parties, the Supreme Court decides the issue in favour of assessee, and dismisses the SLP filed by Revenue after observing that there is no infirmity in the order of the High Court.
Revenue's petition dismissed
