CASE LAWS
2017-TIOL-214-SC-IT
CIT Vs LEMON TREE HOTELS LTD: SUPREME COURT OF INDIA (Dated: May 4, 2017)
Income Tax - Employees Stock Option - revenue expenditure
The Revenue preferred the present SLP challenging the judgment whereby the High Court held that the expenditure incurred in connection with issue of debentures or obtaining loan should be considered as revenue expenditure.
Having heard the parties, the Supreme Court condoned the delay and grants leave to the Revenue Department to defend their case on the issue of expenditure incurred for issuing debentures.
Leave granted
2017-TIOL-213-SC-IT
PR CIT Vs NITREX CHEMICALS INDIA LTD: SUPREME COURT OF INDIA (Dated: May 4, 2017)
Income tax - Sections 14A, 43A & 48
Keywords - capital gain - ESOP trust - enduring benefit - excessive commission - forex fluctuation & use of trademark
The Revenue preferred the present SLP challenging the judgment whereby the High Court had held that the expenses incurred for use of trademark could not be treated as capital expenditure, if such expenses was made for only one year and the undertaking for which such trademark was approached, was also sold subsequently. The High Court in its impugned order also held that where the Revenue was unable to pinpoint extraordinary features, it could not scrutinize the commercial terms that a business should take into account in making a decision and contend that certain percentage or quantum of commission was "excessive".
Having heard the parties, the Supreme Court condoned the delay and issued notices to the concerned parties directing their appearences for further hearing on the issue of treatment of expenses incurred for use of trademark.
Notice issued
2017-TIOL-874-HC-AP-ST
CONCRETE CONSTRUCTIONS Vs UoI: ANDHRA PRADESH HIGH COURT (Dated: April 17, 2017)
ST - Assessee is engaged in business of construction & a duty demand with interest & penalty was imposed - Assessee had paid major part of the demand amount before issue of SCN itself and paid the balance upon receipt of SCN - Assessee approached the Settlement Commission and even deposited the amount of interest - A subsequent O-i-O was issued confirming the duty demand - Whether assessee can challenge such O-i-O as it destroyed right to approach the Settlement Commission u/s 32E of the CEA.
Held - Assessee had not approached the Settlement Commission even till date and merely sent a letter requesting that revenue not pass an O-i-O, so that the assessee could approach the Settlement Commission - Had the assessee made an application on the date of the letter before the Settlement Commission claiming ignorance of the O-i-O, assessee may be entitled to raise all the legal issues - Admittedly the O-i-O has been served on a much later date - Therefore, assessee is not entitled to raise any of the above issues.
Writ Petition Dismissed
2017-TIOL-873-HC-AP-CX
RAVS STEEL PVT LTD Vs CC, CE & ST: ANDHRA PRADESH HIGH COURT (Dated: April 20, 2017)
CX - SCN was issued seeking to confiscate some amount of sponge iron belonging to assessee, based on interception of 4 trucks entering assessee's factory - Later, another SCN was issued based on statements of the assessee, allegedly extracted forcibly - Assessee sought settlement of matter before the Settlement Commission, which subsequently permitted settlement subject to certain pre-conditions - Whether assessee can allege violation of principles of natural justice as the impugned order was based on a report by the jurisdictional commr., which had not been supplied to the assessee.
Held - The order of the Settlement Commission itself mentions that it is not based upon the aforementioned report - Moreover a perusal of the impugned order reveals that the assessee literally challenged the report of the jurisdictional commr. in all its contentions and so cannot allege that it never received said report - Pre-conditions are imposed by the Settlement Commission to prevent it from becoming an adjudicating body, which it was not intended to be - There is little scope of interefering with these pre-conditions: High Court (Para 4,5,6,7,9,10)
Writ Petition Dismissed
2017-TIOL-872-HC-DEL-VAT
LARSEN AND TOUBRO LTD Vs GOVT OF NCT OF DELHI: DELHI HIGH COURT (Dated: April 28, 2017)
Delhi Value Added Tax Act, 2004 (DVAT Act) - Section 5(2)
Keywords - Compensation - sealing of premises.
This Court had set aside the order passed by the VATO sealing the three office premises of the Petitioner: at Shivaji Marg, Nehru Place, and Udyog Vihar. The Court also set aside the de-sealing order to the extent that it required the Petitioner to deposit Rs. 600 crores as a condition for de-sealing the aforementioned three premises of the Petitioner. The Court recorded a definite finding that the entire action was taken without the authority of law and in the background of challenge by the Petitioner to assessment proceedings for the year 2008-09 and a challenge to the validity of Section 5(2) of the DVAT Act, 2004. The entire action was found to be de hors the DVAT Rules and the Rules thereunder.
Having heard the parties, the High Court held that,
Whether assessee is liable to be compensated for loss arising on account of sealing of its office premises if such action was not valid in terms of the DVAT Act and Rules made thereunder - YES: HC
++ As per the directions of the Court, the petitioner filed an affidavit it is stating that the strength of the working staff in the three premises was 251. Further, 4943 personnel had been deployed at the various project sites. It is estimated that the loss suffered by the Petitioner as a result of the sealing of its three offices was to the tune of Rs. 2,57,37,002/-. There are several other consequential losses also mentioned in the affidavit. It was stated that the total loss worked out to Rs. 17.80 crores. The respondents submitted that there were certain factual inaccuracies in the affidavit. However, the Court refused to examine the correctness of the affidavit filed by the Petitioner at this stage. The Court proposed that a token amount be awarded to the Petitioner as costs with liberty to the Petitioner to pursue other appropriate remedies as far as the loss allegedly suffered by it is concerned.
Assessee's petition disposed of
2017-TIOL-871-HC-DEL-IT + Story
DELHI BUREAU OF TEXT BOOKS Vs DIT: DELHI HIGH COURT (Dated: May 3, 2017)
Income Tax - Sections 2(15), 10(22), 11 & 12
Keywords - Charitable purpose - Consistency - Profit Making - Educational Activity - Government Joint Venture - Selling of School Books
The Assessee is a society registered under the Societies Registration Act, 1860 and was set up by the Ministry of Education, Government of India as well as by the Government of NCT of Delhi (GNCTD). The Assessee was set up to ensure timely supply of prescribed text books at fair prices to school students and to improve the quality of primary and secondary school education in Delhi schools. The Assessee's income was exempt from tax u/s 11 of the Act during the AYs 1971-72 to 2005-06. However in AYs 1975-76 and 1976-77, when the benefit of exemption from payment of income tax was denied by the concerned AO, the Assessee went in appeal before the CIT(A) who restored the exemption. The Revenue's appeals against the said order were dismissed by the ITAT vide order in ITA Nos.1239/Del/1979 & 4448/Del/1979. Those orders of the ITAT for AYs 1975-76 and 1976-77 attained finality. The net result was that continuously from AY 1971-72 to AY 2005-06 the Assessee has had the benefit of exemption from payment of income tax.
For AY 2006-07, the Assessee filed its return declaring 'Nil' income claiming exemption u/s 11 and 12 of the Act. The AO called upon the Assessee to explain why the activity of publication and sale/purchase of books should not be treated as business activity. Secondly, the Assessee was asked whether it was maintaining books of accounts as mandated by Section 11 (4A) of the Act. The approach of the AO was to consider the Assessee as a 'General Public Utility.' Referring to the decision of the Supreme Court in Sole Trustee Loka Shikshana Trust v. Commissioner of Income Tax, the AO observed that since the Assessee was earning huge profit margins of about 35.15%, the activity of publication and sale of books could not be said to be a 'charitable activity'. Accordingly, the AO treated the income from the sale and publication of books as taxable for each of the AYs in question. For the subsequent AYs, the AO continued to deny the exemption by the assessment orders for the AYs 2008-09, 2009-10, 2006-07.
On appeal, the HC held that,
Whether an institution would cease to be an education educational institution, merely because had it generated profits out of the activity of publishing and selling of school text books, when the surplus amount was again ploughed back into the main activity of 'education' - NO: HC
Whether an educational society can be denied exemption u/s 11 & 12 of the I-T Act, merely because its activities were not solely for purpose of advancement of 'education' - NO: HC
++ the ITAT came to an erroneous conclusion that merely because the Assessee had generated profits out of the activity of publishing and selling of school text books it ceased carrying on the activity of 'education.' The ITAT failed to address the issue in the background of the setting up of the Assessee, its control and management and the sources of its income and the pattern of its expenditure. The ITAT had failed to notice that the surplus amount was again ploughed back into the main activity of 'education'. The question to be asked was whether the activity of the Assessee contributed to the training and development of the knowledge, skill, mind and character of students? In the considered view of the Court, the answer to that question was answered in favour of the Asseessee. The Court, accordingly, concluded that the ITAT was incorrect in setting aside the order passed by the CIT (A) and in denying exemption to the Assessee u/sections 11 and 12 of the Act. The ITAT erred in holding that the activities carried out by the Assessee fell under the 4th limb of Section 2 (15) of the Act, i.e., 'the advancement of any other object of general public utility' and that its activities were not solely for purpose of advancement of 'education'.
Whether the consistency in charitable activity of an organisation such as Delhi Bureau of Text Books if remains the same, even though it still makes some profit, it would be covered under the provisions of sections 11 & 12 - YES: HC
++ another question that was raised was on the issue of consistency, the Court noted that in assessee's case, continuously from AYs 1971-72 till 2005-06, exemption had been granted to the Assessee u/sections 11 and 12 of the Act. When for AYs 1975-76 and 1976-77 the AO sought to take a different view, the ITAT reversed that view and the decision of the ITAT was not challenged further by the Revenue. Apart from the fact that the Assessee was earning more profits from its essential activity of education, there was no change in the circumstances concerning the said activity since AY 2005-06 to warrant a different approach in the AYs in question.
Assessee's Appeal Allowed
2017-TIOL-870-HC-DEL-IT
FIIT JEE LTD Vs PR CIT: DELHI HIGH COURT (Dated: April 28, 2017)
Income Tax - Coaching institute - office memorandum - pre-deposit - revenue recognition method - tuition fees.
The short question involved in this petition is whether 'AO was justified in declining the Petitioner's prayer that the percentage of pre-deposit for stay of the demand created as a result of the assessment order should be fixed at less than 15% in light of the Office Memorandum (OM) dated 29th February 2016. The case of the Petitioner was that the AO erred in not accepting the Petitioner's adoption of the revenue recognition method for splitting the tuition fees collected by it from the students coming to its coaching institute as 60% in the first year and 40% in the second. It was submitted that although this change occurred from the AY 2012-13 (and the relevant year in this case is AY 2014-15), the revenue recognition method was accepted by the Tribunal in the Petitioner's own case for the earlier AYs 2007-08 and 2008-09.
Having heard the parties, the High Court held that,
Whether when addition on the same issue has been deleted by appellate authorities in earlier years then AO should refer the matter to Pr. CIT/ CIT for determining the qantum of demand to be paid - YES: HC
++ the AO should have, in the impugned order, discussed para 4(B)(b) of the aforementioned OM which provides that wherein AO is of the view that the nature of addition resulting in the disputed demand is such that payment of a lump sum amount lower than 15% is warranted that is in a case where addition on the same issue has been deleted by appellate authorities in earlier years, the AO should refer the matter to the administrative Pr.CIT/CIT, who shall then decide the quantum/proportion of the demand to be paid. Instead of remanding the matter to the AO for the above exercise, the Court is of the view that the interests of justice will be met by requiring the Petitioner to deposit around 10% of the demand as a lump sum amount.
Petitioner's writ petition allowed
