CASE LAWS
2017-TIOL-1986-HC-DEL-WT + Story
CWT Vs ATMA RAM PROPERTIES PVT LTD: DELHI HIGH COURT (Dated: September 21, 2017)
Wealth Tax - Sections 25(2) & 40(3).
Keywords: Business asset - Net wealth - Rented property - Rule of consistency - Retrospectivity & Stock-in-trade.
The Assessee-company, had agreed to purchase a tenanted property namely, Scindia House property in New Delhi by way of an agreement dated 31st January, 1979. A sale deed in respect of the said property was executed on 31st May, 1980 and thereby the Assessee became its owner and was entitled to receive the rent from the tenants. The Assessee categorised the rental income from the said property in its return for AYs 1980-81, 1981-82 as 'business income'. For AY 1980-81, the AO held the rental income to be taxable as 'income from other sources'. After the CIT(A) agreed with the AO, an appeal was filed by the Assessee before the Tribunal, who agreed with the Assessee that letting out of the property was only incidental to its main business and therefore, the rental income should be treated as business income. However, for AY 1992-93, the Tribunal changed its view and held that the Assessee was not the owner of the property in AY 1980-81 but became the owner from AY 1981-82 onwards, hence, it made erroneous in accepting the claim of the Assessee that the rental income was a business income. A Special Bench (SB) was also constituted, where it held that the rental income earned from the said property was taxable as 'income from house property' and not 'business income' f or the AYs 1990-91 upto 1999-2000.
For the wealth tax assessments for AY 1984-85, the Assessee filed its return under the WTA not including the Scindia House property as part of its assets. The WTO referred the issue of valuation of the said property to the DVO. The WTO completed the assessment taking the value of the said property at Rs. 1,38,15,000 and accordingly, the wealth tax was determined. However, the CWT set aside the assessment order u/s 25(2) and directed the WTO to make a fresh assessment after making enquiries. The WTO then framed a fresh assessment whereby the claim of the Assessee that the said property constituted its stock-in-trade and, therefore, not liable to wealth tax, was rejected. The Assessee preferred four appeals for AYs 1984-85, 1986-87, 1987-88 and 1988-89 before the CWT(A). The CWT(A) agreed with the Assessee that if the property was taxable then its valuation of the asset had to be in terms of Schedule III to the WTA which was retrospective. However, the other ground of the Assessee that the amendment to Section 40(3) of the FA 1983 by the FA 1988 was retrospective was rejected.
On appeal, the High Court held that,
Whether the amendment made to Sec 40(3) vide FAs 1983 & 1988 is substantive in nature and that is why it cannot be retrospective - YES: HC
++ the Court is unable to agree with the reasoning of the Karnataka High Court in Prakashi Talkies Pvt. Ltd's case. It is plain from the language of the amendment, and the Memorandum explaining it that the amendment was prospective. It was to take effect from 1st April 1989. The amendment was substantive and not merely procedural. There was no warrant for attributing retrospectivity to such an amendment;
++ in Allied Motors (P) Limited's case, the Supreme Court held that if an amendment was remedial it could be retrospective. However, there the Court was not concerned with an amendment that was substantive in nature but a procedural one. The Court is, therefore, unable to agree with the decisions of the Madhya Pradesh High Court in Devshree Cinema's case and the Rajasthan High Court in Jodhan Real Estate Development Co. P. Ltd's case. The Court concurs with the reasoning and conclusion of the Madras High Court in Varadharaja Theatres (P) Ltd's case;
++ the additional question for AYs 1984-85 to 1988-89 is answered in favour of the Revenue and against the Assessee by holding that the amendment to Section 40(3) of the FA 1983 by the FA 1988 is not retrospective and will not apply to a period prior to 1st April 1989;
Whether a rented property cannot be considered as business asset/stock-in-trade and thereby forms net-wealth for the purpose of WT Assessment - YES: HC
++ a careful perusal of the assessment orders passed under the WTA, as well the orders of the CWT(A) and the Tribunal either affirming or reversing them reveals that the treatment, for the purposes of the I-T Assessment, of the rental income from the Scindia House property as 'business income' was the principal reason for treating the property as its stock-in-trade for the purposes of the WTA. The two were seen as inter-related. This is evident from the order dated 27th December 2004 of the ITAT which is under appeal in these matters;
++ it is significant that while the Assessee was formed for purchasing and selling properties, earning of income by letting out the properties owned by it was not one of its business objects. The general object of 'dealing' with the properties had to be read ejusdem generis the main object. This did not include renting out the properties for income;
++ the position since AY 1982-83 as regards the nature of the Scindia House property cannot be said to have been any different. Its essential character as a property owned by the Assessee has not undergone any change. Notwithstanding that it may have been shown as the Assessee's stock-in-trade in its balance sheet, the fact remains that it was not the Assessee's business asset. The earning of rental income therefrom was not the business object of the Assessee company;
++ the Assessee has accepted that from AY 1990-91 the income earned by it from the Scindia House property is not its business income. Applying the rule of consistency as explained by the Supreme Court in Radhasoami Satsang's case, as further explained by this Court in Mool Chand Khairati Ram's case, it must be held that even for AYs 1984-85 onwards till AY 1990-91 the Scindia House property cannot be considered to be the Assessee's stock-in-trade. In other words even for the said AYs, the Scindia House property formed part of the Assessee's net wealth for the purposes of the WTA;
++ the common question framed in all the appeals is answered in favour of the Revenue and against the Assessee by holding that the Scindia House property of the Assessee is not its 'business asset/stock-in-trade' and therefore, forms part of its 'net wealth' for the purposes of the WTA. Further, applying the rule of consistency, even for the AYs earlier to AY 1990-91, the Scindia House property of the Assessee cannot be considered to be its stock-in-trade.
++ consequently, the orders of the ITAT dated 27th December 2004, 12th January 2005 and 5th April 2005 insofar as they answer the questions in favour of the Assessee are hereby set aside and the corresponding orders of the WTO and CWT (A) are hereby restored. The appeals are accordingly allowed, but in the facts and circumstances of the case, with no orders as to costs.
Revenue's appeal allowed
2017-TIOL-1985-HC-MAD-IT
PR CIT Vs FL SMIDTH LTD: MADRAS HIGH COURT
(Dated: August 30, 2017)
Income Tax - Sections 80HHB & 271(1)(c).
Keywords : Bona fide error - Commissioning of cement plants - Foreign Projects Reserve Account & Inaccurate particulars of income.
The Assessee-company is engaged in the business of design, fabrication and supply of cement equipment in India and outside India and filed its return of fringe income claiming the deduction u/s 80HHB for the AY in question. The Assessee also filed a certificate issued by Chartered Accountant in Form No.10CCAH. The AO restricted the claim of deduction under Section 80HHB of the Act to the extent of amount transferred to the Foreign Projects Reserve Account referring to details submitted under certificate of CA and also levied a penalty u/s 271(1)(c) of the Act contending that the Assessee had concealed the income by showing wrong particulars in the certificate.
The Assessee preferred an appeal before CIT(A) contending that it was entitled to claim deduction on the profits derived from the business of execution of foreign projects under Section 80HHB(1) of the Act and the AO had failed to appreciate the fact that there was a mere inadvertent human error on the part of the CA while issuing the certificate u/s 80HHB. Thereafter, the CIT(A) deleted the penalty so levied. On further appeal by Revenue, the Tribunal upheld the decision of CIT(A) and dismissed the appeal.
On appeal, the High Court held that,
Whether mere satisfaction of concealment and/or furnishing of inaccurate particulars would in itself attract the penal provisions - YES: HC
Whether imposition of penalty is automatic in nature - NO: HC
Whether therefore, a bona fide error on part of the Chartered Accountant leads to the satisfaction that the Assessee had furnished inaccurate particulars and therefore, liable to be mulcted with penalty u/s 271(1)(c) of the Act - NO: HC
++ the amount added or disallowed in computing the total income of the assessee is, for the purpose of Section 271(1)(c), to be deemed to represent his income in respect of which particulars have been concealed, only if the assessee fails to offer an explanation or offers an explanation which is found by the Assessing Authority to be false or if the assessee offers an explanation which he is unable to substantiate and fails to prove that the explanation was bona fide and that facts material to the computation of his total income had been disclosed by him.
++ under Section 271(1)(c) of the Act, the imposition of penalty is not automatic whenever there is less income returned. The pre-condition for imposition of penalty is subjective satisfaction of the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or the Commissioner, as the case may be, that the assessee has concealed particulars of his income or furnished inaccurate particulars of such income. The furnishing of inaccurate particulars would have to be deliberate. There is no requirement on the part of the Revenue to establish mens rea for the purpose of imposition of penalty. Mere satisfaction of concealment and/or furnishing of inaccurate particulars would in itself attract the penal provisions.
++ in the case at hand, having regard to the particular facts and circumstances, the Tribunal upheld the order of the CIT(A) accepting the explanation of the Assessee of bona fide error on the part of the Chartered Accountant and allowing the appeal. The Tribunal, in effect, arrived at a clear finding that imposition of penalty was not justified having regard to the facts and circumstances of the case and there is no question of law, not to speak of any substantial question of law, that warrants interference under Section 260A of the Act and therefore, the appeal is not liable to be entertained and should be dismissed.
Revenue's appeal dismissed
2017-TIOL-1984-HC-DEL-MISC + Story
SANJEEV SHARMA Vs UoI : DELHI HIGH COURT (Dated: September 18, 2017)
GST GSTN informs that portal for uploading application seeking advance ruling to be ready only in January 2018; alternatively, facility for filing manual applications to be available from 20 October 2017 with a facility to deposit prescribed fees of Rs.5000 through GST portal for all applicants HC questions authority for postponement when fact is that provisions of law are already in force Notice issued to GSTN returnable on 27 September 2017: HC [para 2, 3]
Notice issued
2017-TIOL-1983-HC-KAR-CX
NMDC LTD Vs UoI : KARNATAKA HIGH COURT (Dated: September 04, 2017)
CX - The petitioner is a Central Govt. undertaking, which was aggrieved by a communication issued to it by the revenue, stating that w.e.f. 01.04.2016, any 3/8 service provided by Govt. or a Local Authority to a business entity was taxable and such service tax was leviable on the services in the nature of allocation of natural resources, right of way charges or any Fee/Licence for any service not exempted, provided by Govt. or a Local Authority - Pursuantly, the petitioner was asked to pay service tax on the royalty paid to the Govt. of Karnataka, for mining of Iron Ore within Karnataka, under Notfn. No. 30/2012 - Rather than appear in the proceedings, the petitioner directly approached the High Court.
Held - The litigation between the petitioner Govt. undertaking and the revenue was unfortunate and not desirable - If the Union of India thought it proper to tax even Govt. undertakings and Local authorities, such organizations could neither suo motu claim exemption or immunity from such payment of tax, nor could they refuse to appear before the concerned competent authority and make out their case - They should instead follow the law & procedure - Hence, the act of the petitioner in directly approaching the High Court, rather than resolving the matter before the appropriate authority, deserves to be discouraged - There is no material on record to show that the petitioner has no tax liability, whereas the Notifications cited in the communications in issue, may impose tax liability on the petitioner - No opinion on merits and petitioner free to agitate its case before the adjudicating authority: High Court (Para 1,2,3,7,8)
Writ petition dismissed
2017-TIOL-1982-HC-AHM-IT + Story
GENUS ELECTROTECH LTD Vs UoI : GUJARAT HIGH COURT (Dated: September 13, 2017)
Income tax - Sections 127(1) & (2)(a)
Keywords - transfer of assessment - opportunity of hearing - issuance of notice - attendance of assessee
The Assessee company, engaged in manufacture of electronic items, preferred the present petition challenging an order passed by the Principal Commissioner of Income-tax, Ahmedabad, transferring the Assessee's case for assessment from DCIT, Circle2, Ahmedabad to ACIT, Central Circle, Moradabad. The Assessee challenged such order before this Court mainly on the ground that without supplying necessary information and documents containing reasons though asked for and without even conveying the date of further hearing, the Principal Commissioner passed an exparte order transferring the assessment. The Court allowed the petition on the ground that requirement of hearing before passing the order of transferring the assessment was not satisfied. It was held that mere issuance of notice inviting attendance of an assessee for hearing of a case for transfer, would not fulfill the requirement of hearing envisaged u/s 127(1). After this judgment was passed, the authority issued a notice to Assessee informing that hearing was fixed to consider the transfer of case from Ahmedabad to Moradabad to facilitate coordinated investigation in search and seizure cases along with the case of other group companies. In response, the Assessee objected to the transfer of case interalia contending that transferring the assessment at a distance of nearly 800 kms away from Ahmedabad would cause great prejudice to Assessee. Ignoring such plea, the Principal Commissioner, Ahmedabad, passed the impugned order u/s 127(2)(a) transferring the case.
On Writ, the HC held that,
Whether an administrative action which is struck down on ground of breach of natural justice, does not stand terminated and it is open for the Authority to proceed from the stage where the defect has been detected - YES: HC
Whether Department is precluded from initiating fresh procedure for transfer of Assessee's case, if its previous procedure was struck down by Writ Court on basis of non compliance of Section 127(1) - NO: HC
++ from the record, it can be seen that earlier when the department had passed the order transferring the assessment of Assessee, the same was struck down by the High Court on the ground that the requirement of hearing was not fulfilled. The Court noted that before passing the order, all that the Principal Commissioner had done was to issue the notice to Assessee to attend his office and to state why the case should not be transferred. It is well settled that when an administrative action is struck down on ground of breach of principles of natural justice, action does not stand terminated and it is always open for the authority to proceed further from the stage where the defect has been detected. In any case, we do not see any warrant in the judgment of the High Court by which the department was precluded from initiating a fresh procedure for transfer of Assessee's case after following the requirements of law. In the present case, what the Department did was to supply tentative reasons why the authority was considering to transfer Assessee's case to Moradabad. The petitioner was allowed to make a representation. Such representation was considered and a final order was passed. Insofar as the requirement of hearing is concerned, therefore, we see no breach;
++ from the original files, we notice that the Principal DIT (Investigation) Kanpur, had written to the Principal CIT, Lucknow, pointing out that search and seizure operations were carried out in Genus Paper and Board group of companies by the Dehradhun unit of Directorate. Subsequently, the ADIT, Dehradhun, had sent a proposal for centralisation of 42 cases of the group proposing to centralise them with the AO, Central Circle, Moradabad. All the cases are covered under the warrant of authorisation u/s 132(1) and 132A and books and documents were found and seized in such cases. These cases are directly connected to the said group and for proper and meaningful coordinated investigation, these cases were required to be centralised before one AO. He was therefore, requested to consent for such centralisation of the cases, and the Principal CIT, Lucknow, conveyed his consent for centralisation of the cases of Assessee before ACIT, Central Circle, Moradabad. Thus clearly, the Principal CIT, Lucknow, had shown his agreement to the case of Assessee being transferred and centralised;
Whether when the competent authority grants a hearing to Assessee and, thereafter, passes a reasoned order transferring the assessment, his action would not fail merely because he did not record his agreement in writing - YES: HC
++ it is true that no formal letter has been written by the Principal Commissioner of Ahmedabad indicating his agreement. However, the record would suggest that previously he had passed the order transferring the assessment of Assessee. As noted, this order was struck down by judgment of the writ court. dated 18.7.2016. Thereafter, the said authority issued fresh notices calling upon the Assessee to participate in the hearing and indicating the grounds on which he proposed to transfer the assessment. Clause(a) of Section 127(2) refers to the agreement of the two heads of the jurisdiction from where an assessment is transferred to where it is being transferred. There is no format in which such agreement must be recorded or conveyed. As noted, the additional duty of the authority from whose jurisdiction the assessment is being transferred is to give a reasonable opportunity of being heard to the assessee and then to pass an order citing reasons. This would necessarily be after he agrees to allowing the assessment to be transferred. When therefore, Principal Commissioner of Ahmedabad had issued notices to Assessee on more occasions than one proposing to transfer the assessment, his agreement for such transfer was writ large on the face of the record;
++ we cannot put the requirement of clause(a) to Section 127(2) in such a straightjacket formula that even when the competent authority grants a hearing to the assessee and, thereafter, passes a reasoned order transferring the assessment, his action would fail merely because in writing he did not record his agreement. Further, when the High Court set aside the order of transfer of assessment, it was not necessary that the proposal for transfer of case would have to be reinitiated from the very inception. If the two Principal Commissioners had already reached an agreement on the question of transfer of case, no such fresh agreement had to be arrived at, unless there was material change in circumstances. In the present case, the Assessee is a part of group companies which were subjected to common search action. The assessments of all 42 group companies are being centralised at one place. Therefore, there is no reason to interfere in the transfer.
Assessee's petition dismissed
2017-TIOL-3453-CESTAT-KOL
ADANI POWER LTD Vs CCE : KOLKATA CESTAT (Dated July 13, 2017)
CX - The assessee is developer/co-developer of SEZ in Mundra Port & sought refund of duty paid on coal procured by them from M/s Mahanadi Coal Field Ltd. - The assessee claimed that no duty was payable on coal supplied to SEZ - The original authority rejected such claims on grounds that the assessee was falling under an SEZ, and that the said officer had no jurisdiction to decide claim by the person located in SEZ, in terms of SEZ Act and Rules - It was also held that due procedure for clearance of coal, such as ER-1 etc., was not followed - Subsequently, the Commr.(A) upheld such rejection for identical reasons.
Held - Considering Section 11B of the Act, and the decision of the Apex Court in Oswal Chemicals & Fertilizers Ltd., wherein it was held that the assessee having paid excise duty to a manufacturer, had the locus standi to claim refund of duty - Similar was the view of the Allahabad High Court in Indian Farmers Fertilizers Co-operative Ltd. - Hence the assessee has the necessary locus standi for claiming refund - The issue of jurisidiction under consideration with the Min. of Finance as well as the Min. of Commerce, upon which the former issued a Notfn. specifying that the refund, demand, jurisdiction, review and the appeal with reference to various operations under SEZ Act 2005, would be with a jurisdiction of Central Excise authorities, in accordance with the relevant provisions of Customs Act, 1962 - Such Notfn. clarifies the jurisdiction of Central Excise officers to deal with the refund claim - Hence matter remanded to original authority for de novo adjudication: CESTAT (Para 1,5-10)
Case remanded
2017-TIOL-3452-CESTAT-CHD
CCE & ST Vs BHARTI AIRTEL LTD : CHANDIGARH CESTAT (Dated July 24, 2017)
ST - The assessee is a provider of telecommunication services - The revenue alleged that the assessee provided both taxable & exempted services, and was not maintaining accounts in terms of Rule 6(2) of the CCR, 2004 - The revenue issued SCN under Rule 6(3), seeking to deny credit being availed on the input services, which restricted 20% of the credit of the duty, in terms of Rule 6(6) - The Adjudicating Authority verified records & obtained certificate of the Chartered Accountant to the effect that on capital goods and on 17 services which have been enumerated Rules 6(5), to hold that the assessee was eligible to avail full credit - For the remaining services, the assessee was held to be eligible to avail 20% of credit, and dropped the SCN.
Held - On examination of the SCN, no details are provided, and it has merely been issued on the grounds that the assessee has availed certain amount of credit on capital goods & input services under Rule 6(6) & that they are entitled to avail on 20% of credit, and that they are required to reverse the excess credit availed - Moreover, in the SCN there is no bifurcation given whether the entire credit pertained to the services other than those enumerated under Rules 6(5) - In absence of such details, the revenue cannot allege at this stage that the Adjudicating Authority omitted to verify the records - The Adjudicating Authority in fact verified the records, before holding that the assessee was eligible to avail full credit and 20% credit allowed for the remaining services - Hence, the order of the Adjudicating Authority warrants no interference: CESTAT (Para 2,6)
Appeal dismissed
