Govt tables Economic Survey Volumen II in House; Over 5 lakh new taxpayers added post-demonetisation
Services Sector continues to be key driver of growth but growth goes down to 7.7%: Survey
Survey expects Railways to explore non-fare avenues for revenue generation
GST
Reverse Charge Mechanism
CASE LAWS
2017-TIOL-1543-HC-AHM-IT
KRUPESH GHANSHYAMBHAI THAKKAR Vs DCIT: GUJARAT HIGH COURT (Dated: August 8, 2017)
Income Tax – Sections 2(22) (e), 143(1) & (3), 147 & 148
Keywords – Dividend income – Loan – Related party transaction
The assessee firm was served a reassessment notice. And the AO's ground was that the assessee had received Rs 4, 17, 65,430/- from another company during the year in the form of loans. The AO also stated that the assessee held 21.87% shares in that company. The other firm had mentioned such loans given under the heading “related party transaction”. Thereby, the AO held that such loans were covered under Sec 2(22) (e) of the Act, as dividend in the hands of the assessee firm, and so were taxable. The AO alleged that the assessee firm had failed to reveal this loan amount received as dividends, in its return of income.
In a writ, the High Court held that,
Whether provisions of Sec 2(22)(e) can be invoked even though it is established by the assessee that it had not received any sum rather it had advanced a loan to a related party - NO: HC
++ since the return filed by the assessee was accepted u/s 143(1) without scrutiny, the grounds for challenging the notice for reopening would undoubtedly be limited. In its objections before the AO and before this court as well, the assessee firm stated and demonstrated that the loan was not received by the assessee from the said company, instead said sum was advanced by the assessee to the company. The AO rejected such objection in the order, and also filed an affidavit in reply. However, in neither of these two documents, was the factual assertion made by the assessee dealt with. Considering the audited accounts in the balance sheet submitted by the assessee, the amount in question is shown as a demand to the other company. Loan is an advance made by the assessee to the other company. Thereby, the stand taken by the AO in the reasons recorded that such sum was received by the assessee from the company by way of a loan, is incorrect. Hence, the reason for re-opening the assessment lacked validity. Considering that the AO invoked section 2(22) (e) on the grounds that such amount was a loan and so, ought to be taxed as a dividend, and also that the assessee successfully proved that the amount was not a loan, the section 2(22)(e) does not apply in the present circumstances.
Assessee's appeal allowed
2017-TIOL-1542-HC-AHM-IT
ITO (INVESTIGATION) Vs DEPUTY SUPERINTENDENT OF POLICE: GUJARAT HIGH COURT (Dated: August 9, 2017)
Sections 132 & 132A
Keywords - Requisition - seizure memo - CPC
Whether when the Revenue has failed to issue requisition u/s 132A for cash seized by the State Police from occupants travelling by car, the Police is free to release the same if no offence is registered against them - YES: HC
Whether such cash seized by the police can be withheld under the provisions of the Criminal Procedure Code - NO: HC
The State Police seized cash of Rs 1.4 Crore from two persons travelling by a car. The car passengers claimed to be employees of Angadias and also told the police that the cash was withdrawn from banks and the seizure was wrongly made. An application for release of the seized sum was made before the Judicial Magistrate and also the Police.
Meanwhile, the State Police informed the I-T Department about the seizure. The Revenue made an application to the Magistrate not to release the cash on the ground that the I-T Department had initiated proceedings u/s 132 of the Act. The cash can, therefore, be released only by the Department. But, meanwhile, the Deputy Superintendent of Police, passed an order releasing the cash on certain terms and conditions. In a writ, the Revenue challeged the order passed by the State Police authority.
After hearing the parties, the HC held that,
++ the Income Tax Department has not issued any requisition with respect to the cash in question under section 132A of the Act. When no such requisition was made, the police authority had no business to withhold the cash, if the same was not required by the police and could not have been withheld under the powers of Criminal Procedure Code. So far as the police is concerned, when it was convinced that such amount was not involved in any illegal activity nor any offence was registered against the occupants of the car or any other person which may have link to such cash, the said authority had no reason to, in fact, no power to withhold such amount. It was always open for the competent authority acting under section 132A of the Act to requisition such amount, if the conditions contained therein were not satisfied. However, without any such requisition, it was not open to ask the police authorities not to release the amount which the said authorities otherwise did not require to withhold.
Revenue's petition dismissed
2017-TIOL-1541-HC-AHM-IT
ADANI WILMAR LTD Vs DCIT: GUJARAT HIGH COURT (Dated: August 9, 2017)
Income Tax - Writ - Sections 5, 73, 143(3) & 148.
Keywords - Reason to believe - Speculative loss - Speculative business & Speculative transaction.
The Assessee, a registered company, filed its return declaring loss of Rs.93.67 lakhs. Before amalgamation, the Assessee company was known as M/s Rajshri Packagers Limited. The assessment was completed u/s 143(3) and a notice was issued by the AO to reopen the said assessment after four years as he had a reason to believe that the income had escaped assessment.
In a writ, the High Court held that,
Whether reassessment can be initiated beyond a period of four years when the AO relies upon the material that formed part of the assessee's original return - NO: HC
++ the notice for reopening of assessment came to be issued beyond a period of four years from the end of relevant assessment year. Under the circumstances, the question of failure on part of the assessee to disclose truly and fully all material facts necessary for assessment, would assume significance. In this context, one may peruse the reasons recorded. The Assessing Officer has cited two reasons for reopening the assessment. First is that, in the return, the assessee had claimed a sum of Rs.12.02 crores by way of expenditure which was, in fact, suffered by the assessee in course of trading of crude and refined edible oil on settlement basis. According to the Assessing Officer, this was not an allowable business expenditure but was a speculative loss and therefore not allowable under section 73 of the Act. The reason itself records that scrutiny of the declarations made by the assessee revealed that the said sum of Rs.12.02 crores was debited as a net loss relating to the transactions concluded on settlement basis. The Assessing Officer has not referred to any material which did not form part of the assessee's return to form this belief that the assessee's claim of loss was not allowable claim;
++ in other words, from the face of the reasons recorded by the Assessing Officer, it can be gathered that the material which he seeks to rely upon, formed part of the return and accompanying documents filed by the assessee. There was thus no failure on the part of the assessee to disclose material facts. Counsel for the Revenue however argued that there was no indication in the accounts of the assessee that the transactions were completed without taking actual delivery, which made the transaction speculative. This contention also cannot be accepted since the reasons themselves mentioned that from the material on record the Assessing Officer had noted that the transactions were concluded on net settlement basis. He further elaborated that such transactions were not for purchase of raw material but were in the nature of speculative business;
Whether when the AO had examined certain transactions in the original assessment, even then re-assessment can be initiated on the same issue - NO: HC
++ the second ground cited in the reasons recorded pertains to additional sales tax exemption of Rs.29.70 crores received by the assessee from the Karnataka Government during the period relevant to the assessment year 2010-11. Against this sum, the assessee had reversed a sum of Rs.13.99 crores (rounded off) which the assessee had credited in the earlier years on provisional basis and the net amount of Rs.15.70 crores (rounded off) was disclosed as an operating income during the year under consideration. The Assessing Officer had twofold objections. One was, the assessee could have already taken deduction in the earlier years on such sum of Rs.13.99 crores and second that, in any case, since the income actually accrued during the present year, the entire amount should have been taken during such period;
++ we cannot ignore the fact that all these observations and formation of belief by the Assessing Officer are based on documents on record produced by the assessee along with the return of income. In fact, this issue was examined by the Assessing Officer during the original assessment. As can be seen from a detailed reply submitted by the assessee to the Assessing Officer under a letter dated 19.03.2014. This very issue thus, was scrutinized by the Assessing Officer. The question of failure on the part of the assessee therefore simply does not arise;
++ under the circumstances, impugned notice dated 02.12.2016 is set aside.
Assessee's writ allowed
2017-TIOL-1540-HC-MUM-IT
DIT Vs CREDIT GUARANTEE FUND TRUST
FOR MICRO AND SMALL ENTERPRISES : BOMBAY HIGH COURT (Dated: August 2, 2017)
Income tax - Sections 2(15) & 12AA(3)
Keywords - cancellation of registration - activities of trust
The Revenue preferred the present appeal challenging the action of ITAT in quashing the order, whereby the DIT(Exemptions) had cancelled the registration of Assessee Trust in exercise of powers u/s 12AA(3) on the ground that the activities as carried out by the Assessee were in the nature of trade, commerce or business etc and the Assesee trust had earned huge receipts during the A.Y 2009-10.
On appeal, the HC held that,
Whether registration of a trust can be cancelled by merely relying upon the proviso to Section 15(2) of I-T Act, as it stood before amendment - NO: HC
++ it is seen that in case of the Commissioner of Income Tax-II vs. the Mumbai Metropolitan Regional Iron and Steel Market Committee in Income Tax Appeal No.43 of 2015, decided on 17th July, 2017, it was observed by this court that: "....the powers u/s 12(AA)(3) are circumscribed by the limitations imposed u/s 12AA(3) of the Act. The Commissioner, nowhere has given the finding that the activities of the institution are not genuine one or that the said activity carried out are not in consonance with the object of the institution. The Commissioner has merely relied on proviso to Section 15(2) of the Act, as it stood then. The said proviso has subsequently gone amendment...." In the present case also, the ground enumerated in section 12AA(3) of the Act are not satisfied to cancel the registration. Therefore, no substantial question of law arises.
Revenue's appeal dismissed
2017-TIOL-2909-CESTAT-MUM
AVIAT HEALTHCARE PVT LTD Vs CCE: MUMBAI CESTAT (Dated: July 13, 2017)
CX - Appellant availed CENVAT credit on the strength of bill of entry which is not in their name but is in the name of USV Ltd. - credit denied by lower authorities - appellant before CESTAT and submit that even though the bill of entry is in the name of USV Ltd. but the material covered under the bill of entry was received by the appellant and used in the manufacture of goods on behalf of USV Ltd.; declaration from the customs also submitted. Held: Even though the bill of entry is not in the name of the appellant but on the strength of declaration which is in their favour and also on the fact of receipt of goods by the appellant, the CENVAT credit should be allowed - both the lower authorities have not gone into the documentary evidence regarding receipt and use of the material, therefore, matter remanded for reconsideration by adjudicating authority: CESTAT [para 4]
Matter remanded
2017-TIOL-2908-CESTAT-MUM
BHARAT PETROLEUM CORPORATION LTD Vs CST: MUMBAI CESTAT (Dated: July 7, 2017)
ST - Appellant availed of External Commercial Borrowings (ECB) amounting to US $ 200 million during November 2006 to December 2008 from non-resident lenders through Mandated Lead Arrangers (MLAs) and for the said purpose, the appellant paid arrangement fees/facility agent fees to Mandatory lead Arrangers - department raised service tax demand on the said arrangement fees/facility agent fees under reverse charge basis - appellant paid the entire service tax along with interest before issuance of SCN and are not contesting the same but seek waiver of penalties imposed u/ss 76, 78 of FA, 1994. Held: Issue was highly debatable and was finally resolved by the Bombay High Court in the case of Indian National Shipowners Association [2009-TIOL-150-HC-MUM-ST] and upheld by the Supreme Court [2011-TIOL-05-SC-ST] - In the said case, it was conclusively decided that on the reverse charge basis, service tax is payable w.e.f. 18.4.2006 when the Section 66A was enacted - Therefore there is no dispute on the fact that the issue is of interpretation of service tax law - bonafide belief of the appellant is justified - appellants case is squarely covered by Section 73(3) of the Finance Act, 1994 and, therefore, appellant should not have been issued any show cause notice, consequently no penalty either should have been proposed or imposed - Penalties set aside, appeal allowed to the said extent: CESTAT [para 4]
Appeal allowed
