CASE LAWS
2016-TIOL-209-SC-IT
CIT Vs ONGC LTD : SUPREME COURT OF INDIA (Dated: November 28, 2016)
Income Tax - Sections 37 & 92.
Keywords: royalty payment - extortion - bribe money - protection money & revenue expense.
The assessee company is engaged in oil exploration. In respect of oil exploration done on-shore, royalty was to be paid to the State Government and in respect of off- shore exploration royalty was to be paid to the Central Government. For the AY 2006-2007, AO issued notice calling upon the assessee to explain how despite the injunction contained in Section 6A of the Oilfield (Regulation and Development) Act, 1948, the assessee could have paid 9% extra. AO had not accepted the explanation offered by assessee and had disallowed the royalty paid in excess of 20%. The AO actually taxed the difference in royalty paid between the pre-discount and post-discount price.
On appeal, CIT(A) accepted the contention of the assessee and found that all the ingredients for allowing royalty as revenue expenditure were present and it could not be said to be hit by the explanation given in Section 37 and allowed the appeal in this regard.
The Tribunal held that the reasons for making payment of royalty to State Governments for onshore productions based on pre-discount price had been explained by the assessee before the AO and it had been submitted that the said payment was as per the guidelines and instructions of Central Government. Thus, Tribunal held that AO was not justified in holding that such payment of royalty to State Governments was not allowable, being the payment by infraction of law.
On further appeal, the HC held that Well Head Price for the purpose of calculating the royalty has been understood to mean by the Government of India, which is the Authority to administer the central legislation namely The Oilfields (Regulation and Development) Act, 1948 that it should be the price at which it is sold or capable of being sold at arm's length. We do not find any acceptable response to contradict this understanding of the transaction at arm's length. We can safely proceed on the basis that the Well Head Price would be the price as provided for in the resolution and valid for the year in question. If that be so, the Well Head Price cannot be the price, at which the assessee had sold the crude oil.
The Apex Court dismisses the appeal of the Revenue.
Revenue's appeal dismissed
2016-TIOL-208-SC-IT
RAJ HANS TOWERS PVT LTD Vs CIT: SUPREME COURT OF INDIA (Dated: November 15, 2016)
Income Tax - Section 133A - total income - surrender - additional income - disclosure of income & conclusive evidence .
The assessee company is engaged in real estate and constructions activities. It was subjected to survey operation u/s 133A, during which, the statement of one of its Directors was recorded, wherein he had disclosed that a sum of Rs.15,00,55,000/- was an additional income outside the regular books of accounts and furnished details in this regard. These amounts were split into three parts and had been reflected in a tabular statement in paragraph 6 of the impugned order. The assessee had not disclosed this income in its returns, but declared it at the time of survey. It was asked to show cause why the said unaccounted amount, disclosed by the Director on its behalf, should not be added back to the total income. The assessee alleged that the surrendered amounts were not voluntary and bona fide and the same was obtained in illegal and arbitrary manner, and in the absence of any evidence or material in relation to the surrender, the surrender made during the course of survey was also retracted.
AO rejected explanation and added back the amounts. On appeal, CIT(A) gave partial relief by taking into account the debit entries from the gross receipts, thus reducing the total taxable income.
HC held that in the circumstances of the case both the CIT (A) and ITAT were correct in adding back the amount of Rs.63,33,260/- after adjusting the expenditure indicated. The explanation given by the assessee, in the course of the appellate proceedings, that the surrender was in respect of a certain portion of the receipt which had remained undisclosed or that some parts of it were supported by the books, is nowhere borne out as a matter of fact, in any of the contentions raised by it before the lower authorities. For these reasons, this Court is of the opinion that no substantial question of law arises. The appeal is accordingly dismissed.
Before the Apex Court, the assessee itself wants to withdraw the SLP in view of correction of facts in the order passed by the High Court.
Assessee's appeal disposed of
2016-TIOL-207-SC-IT
RICK LUNSFORD TRADE AND INVESTMENT LTD Vs CIT: SUPREME COURT OF INDIA (Dated: November 21, 2016)
Income Tax - Sections 68, 147 & 148.
Keywords: best judgment assessment - ex parte assessment - reassessment of income - unexplained income & genuineness of shareholders.
The assessee's best judgment assessment u/s 144 was completed at a total income of Rs.27,05,365/-. AO held that the assessee was not able to explain any part of the sum of Rs.24,90,000/-. But the CIT(A) and the Tribunal were of the opinion that it could be said that he had been able to explain up to Rs.9,90,000/-. It was not the case of the assessee that any piece of evidence adduced by the assessee was ignored either by the AO or by the CIT(A) or by the Tribunal. It was only on the basis of the evidence adduced by assessee that the view was taken by the CIT(A) that it could be said that the assessee had succeeded in explaining an aggregate sum of Rs.9,90,000/-. The Tribunal concurred with the finding of CIT(A). Therefore, the question of the view taken by the Tribunal being perverse or arbitrary does not arise. The Tribunal was therefore justified in upholding the addition on account of alleged share capital to the extent of Rs.8,77,500/- u/s 68.
The HC held that the assessee was unable to prove that the amount was received by it on account of share application.
AO held that the assessee was not able to explain any part of the sum of Rs.24,90,000/-. But the CIT(A) and the Tribunal were of the opinion that it could be said that he had been able to explain up to Rs.9,90,000/-. It was not the case of the assessee that any piece of evidence adduced by the assessee was ignored either by the AO or by the CIT(A) or by the Tribunal. It was only on the basis of the evidence adduced by assessee that the view was taken by the CIT(A) that it could be said that the assessee had succeeded in explaining an aggregate sum of Rs.9,90,000/-. The Tribunal concurred with the finding of CIT(A). Therefore, the question of the view taken by the Tribunal being perverse or arbitrary does not arise. The Tribunal was therefore justified in upholding the addition on account of alleged share capital to the extent of Rs.8,77,500/- u/s 68.
The Apex Court dismissed the appeal filed by the assessee and confirmed the order of High Court.
Assessee's appeal dismissed
2016-TIOL-206-SC-IT
CIT Vs VMD MILLS PVT LTD: SUPREME COURT OF INDIA (Dated: November 25, 2016)
Income Tax - Section 80IA .
Keywords: eligible business - deduction u/s 80IA - set off of losses & initial assessment year.
The assessee is manufacturing concern. It had claimed deduction u/s 80IA. During the appellate proceedings, ITAT held that the assessee was entitled to deduction u/s 80IA without setting off the losses/unabsorbed depreciation pertaining to the windmill, which were set off in the earlier year against other business income of the assessee, following the decision of the jurisdictional High Court in the case of M/s. Velayudhaswamy Spinning Mills, when the same was pending appeal before the Supreme Court. The Revenue had also challenged the order, whereby the ITAT held that the initial assessment year u/s 80IA(5) would only mean the year of claim of deduction u/s 80IA and not the year of commencement of eligible business
On further appeal, the HC held that it was abundantly clear from Sub-Section (2) that an assessee who is eligible to claim deduction u/s 80IA has the option to choose the initial/first year from which it may desire the claim of deduction for ten consecutive years, out of a slab of fifteen (or twenty) years, as prescribed under that Sub-Section. It was clarified that once such initial assessment year has been opted for by the assessee, he shall be entitled to claim deduction u/s 801A for ten consecutive years beginning from the year in respect of which he has exercised such option subject to the fulfillment of conditions prescribed in the section. Hence, the term 'initial assessment year' would mean the first year opted for by the assessee for claiming deduction u/s 80IA. Hence, the appeal filed by the Revenue was dismissed.
The Supreme Court dismissed the special leave petition preferred by the Revenue and confirmed the order of the High Court.
Revenue's appeal dismissed
