Skip to main content

Court rulings on Tax matters - Jan 2013

1) CIT vs. MAK Data Ltd (Delhi High Court)
January 29th, 2013

S. 271(1)(c): Surrender of income without explanation attracts penalty

A survey u/s 133A was conducted on the assessee’s premises in the course of which certain documents belonged to certain entities who had applied for shares in the assessee company were found. The AO called upon the assessee to prove the nature and source of the monies received as share capital, the creditworthiness of the applicants and the genuineness of the transactions. The assessee offered Rs. 40.74 lakhs as income from other sources “to avoid litigation and to buy peace“. It was made clear that in making the surrender, there was no admission of concealment. The AO completed the assessment by adding the said sum and levied penalty u/s 271(1)(c) for furnishing inaccurate particulars of income u/s 271(1)(c). This was upheld by the CIT(A) though reversed by the Tribunal (included in file) on the ground that there was no material to show any concealment and even in the penalty order it was not specified as to the particular credit in respect of which the penalty was being imposed. It was also emphasized by the Tribunal that the assessee had made it clear while surrendering that there was no admission of concealment and that the offer was made in a spirit of settlement. On appeal by the Department to the High Court, HELD reversing the Tribunal:

When the AO called upon the assessee to produce evidence as to the nature and source of the amount received as share capital, the creditworthiness of the applicants and the genuineness of the transactions the assessee simply folded up and surrendered the sum of Rs. 40.74 lakhs by merely stating that it wanted to “buy peace“. In the absence of any explanation in respect of the surrendered income, the first part of clause (A) of Explanation 1 to s. 271(1)(c) is attracted because the nature and source of the amount surrendered are facts material to the computation of total income. The absence of any explanation regarding the receipt of the money, which is in the exclusive knowledge of the assessee leads to an adverse inference against the assessee and is statutorily considered as amounting to concealment of income under the first part of clause (A) of the Explanation to s. 271(1)(c) and penalty has to be levied.


2) The Assistant Commissioner of Income Tax, Chennai Vs. A.R. Enterprises
Income Tax – Advance Tax – Undisclosed Income

The issue was whether payment of Advance Tax by an assessee would by itself tantamount to disclosure of income for the relevant assessment year and whether such income can be treated as undisclosed income for the purpose of application of Chapter XIVB of the Act? Scope of Chapter XIV-B and its Provisions

The Hon'ble Supreme Court decided that if we were to hold that the payment of Advance Tax reflects the intention of the assessee to disclose its income, it could result in a situation where the mandatory obligation of filing a return for disclosure of income under the provisions of the Act, would not be necessary. It will be open to an assessee to contend that payment of Advance Tax is tantamount to disclosure of income. Such a proposition would be contrary to the very purpose of filing of return, which ultimately leads to assessment of total income for the relevant assessment year.


........Mere deduction of tax at source, also, does not amount to disclosure of income, nor does it indicate the intention to disclose income most definitely when the same is not disclosed in the returns filed for the concerned assessment year.

3) I.C.D.S. Ltd. Vs. Commissioner of Income Tax, Mysore & Anr.
Income Tax – Depreciation

The question before the court was who is the owner of a vehicle and therefore who is entitled to claim depreciation for a vehicle paid for and leased out by a leasing company but is registered in the name of the lessee and also used by the lessee.

….. Therefore, in the facts of the present case, we hold that the lessor i.e. the assessee is the owner of the vehicles. As the owner, it used the assets in the course of its business, satisfying both requirements of Section 32 of the Act and hence, is entitled to claim depreciation in respect of additions made to the trucks, which were leased out. …. the appeals are allowed; the impugned judgments are set aside and the substantial questions of law framed by the High Court, extracted in para 6 (supra), are answered in favour of the assessee and against the Revenue.

Whether the Appellant (assessee) is the owner of the vehicles which are leased out by it to its
customers and Whether the Appellant (assessee) is entitled to the higher rate of depreciation on
the said vehicles, on the ground that they were hired out to the Appellant’s customers.

4) Bangalore Club Vs. Commissioner of Income Tax & Anr.
Income Tax – Exemption - Doctrine of mutuality

The question before the court was whether or not the interest earned by the assessee on the surplus funds invested in fixed deposits with the corporate member banks is exempt from levy of Income Tax, based on the doctrine of mutuality?

The court decided that "In our opinion, unlike the aforesaid surplus amount itself, which is exempt from tax under the doctrine of mutuality, the amount of interest earned by the assessee from the afore-noted four banks will not fall within the ambit of the mutuality principle and will therefore, be exigible to Income-Tax in the hands of the assessee-club."

Comments

Most viewed this month

Deposit Of Minimum 20% Fine/Compensation U/s 148 NI Act Mandatory

In OP(Crl.).No.348 OF 2019, T.K.SAJEEVAN vs FRANCIS T.CHACKO, the appeal was filed against the order of the lower court to deposit 25% of the fine before filling of appeal. The appellant argued that the deposit introduced through the Section 148 of the NI Act after amendment was directory in nature as it used the term 'may' while mentioning the issue of deposit. The Kerala High Court however disagreeing held that in view of the object of the Legislature while incorporating Section 148 into N.I. Act, the word 'may' will have to be read as 'shall'. The imposition of payment contemplated under Section 148 N.I. Act cannot be restricted to some prosecutions and evaded in other prosecutions. Since the amount directed to be deposited being compensation, undoubtedly, it is liable to be ordered to be deposited irrespective of the nature of the prosecution. Therefore, the word 'may' can only be taken to have the colour and meaning of 'shall' and there

NCLT - Mere admission of receipt of money does not qualify as a financial debt

Cause Title : Meghna Devang Juthani Vs Ambe Securities Private Limited, National Company Law Tribunal, Mumbai, CP (IB) No. 974/MB-VI/2020 Date of Judgment/Order : 18.12.2023 Corum : Hon’ble Shri K. R. Saji Kumar, Member (Judicial) Hon’ble Shri Sanjiv Dutt, Member (Technical) Citied:  Carnoustie Management India Pvt. Ltd. Vs. CBS International Projects Private Limited, NCLT Swiss Ribbons Pvt. Ltd. & Anr vs. Union of India & Ors. (2019) Sanjay Kewalramani vs Sunil Parmanand Kewalramani & Ors. (2018) Pawan Kumar vs. Utsav Securities Pvt Ltd 2021 Background Application was filed under section 7 of the Insolvency and Bankruptcy Code, 2016 alleging loan of Rs, 1.70 cr is due. The Applicate identified herself as the widow and heir of the lender but could not produce any documents proving financial contract between her Late husband and the CD but claimed that the CD has accepted that money was received from her husband. The applicant subsequently filed rejoinder claiming the debt t

Vanishing promoters and languishing shareholders

Over Rs 60,000 crore of shareholders’ wealth is stuck in 1,450 companies suspended by the stock exchanges. More importantly, near 100 per cent pledging of promoter holding appears to be common in many of these companies. This, almost rules out any chance of the companies bouncing back. The suspension is for non-compliance of the listing norms. Vanishing Companies - Definition As per the definition stipulated by SEBI, any listed company, which raised moneythrough initial public offer and, thereafter, stopped operations, did not file returnseither with the RoC or SEBI and did not exist on the registered premises wastermed as vanishing.There are provisions under Companies Act under which companies are termedvanishing companies on satisfying certain conditions. it is provided a companywould be deemed to be a vanishing company, if it satisfies all the conditions given below : a) Failed to file returns with Registrar of Companies (ROC) for a period of two years; b) Failed to fil