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Showing posts from October, 2014

'Place of work' - Defined

Sandvik Asia Ltd vs. CIT (Bombay High Court) The key word in Explanation is “work”. There could be a scenario where in the given set of facts and circumstances it could be validly contended that a hotel was a place of the work of the employees of the Assessee Company Whether expenses incurred in a hotel would fall within “or other place of their work” appearing in Explanation 2 to Section 37(2A) of the Act, would entirely depend on the facts of each case. There cannot be any generalization in this regard. The key word in Explanation is “work”. There could be a scenario where in the given set of facts and circumstances it could be validly contended that a hotel was a place of the work of the employees of the Assessee Company, but the same has to be examined on a case to case basis. In the present case, the factual findings given by the authorities below and as can be discerned from paragraph Nos.12 to 14 of the Tribunal’s Order, are against the Applicant/Assessee. Nothing has been ...

S. 271(1)(c): Wrong claim for depreciation by showing a finance or loan transaction as a lease transaction attracts penalty

Times Guaranty Ltd vs. ACIT (ITAT Mumbai) (i) The detailed findings of the AO, the assessee not agitating the findings of the AO in quantum proceedings, no plea of factual discrepancies during quantum proceedings and appeals, even no such plea before AO during penalty proceedings and no rebuttal to the findings of the AO that the transactions were bogus and sham are sufficient facts to hole that the assessee had put a false claim of depreciation during the assessment proceedings. The plea of the assessee that he did not contest the addition to avoid litigation or to buy peace etc. even does not seem plausible. The Hon’ble Supreme Court, in the case of “MAK Data P. Ltd. vs. Commissioner of Income Tax-II” civil appeal No.9772 of 2013 date of decision 30.10.13, has categorically held that it is the statutory duty of the assessee to record all its transactions correctly and to clear its true income in the return of income. The AO should not be carried away by the plea of the assessee li...

S. 43(5)(a): Loss on foreign currency forward contracts by a manufacturer/ exporter is a “speculation loss” and not a “hedging loss”

Araska Diamond Pvt. Ltd vs. ACIT (ITAT Mumbai) Unless the assessee shows that there was some existing contract in respect of which he was likely to suffer a loss because of future price fluctuations and that it was to safeguard against such loss that he entered into the forward contracts of sale, he could not claim the benefit of clause (a) of the proviso to section 43(5). ….. From the principles laid down by above mentioned judgments one thing becomes clear that for hedging transaction commodity dealt should be the same. If the subject matter of the transactions is different it cannot be termed a hedging transaction. …. In order that forward transactions in commodities may fall within proviso (a) to section 43(5) of the Act, it is necessary that the raw materials or merchandise in respect of which the forward transactions have been made by the assessee must have a direct connection with the goods manufactured or the merchandise sold by him. In other words raw material in re...

S. 275(1A): Assessee's claim for refund of penalty with interest cannot be defeated by inaction of revenue

Shanti Enterprise vs. ACIT (Gujarat High Court) (i) What is provided by Section 275(1A) is that the order imposing or enhancing or reducing or cancelling the penalty may be passed on the basis of the assessment as revised by giving effect to the order in appeal. The concerned authority was thus required to make specific order for cancelling the penalty by giving effect to the order in appeal made in favour of the petitioner. However, failure of assessing officer or concerned authority to pass such order would not mean that the assessee has no right of refund on his becoming successful in appeal against the order of assessment. Further, if there is failure to exercise power under Section 275(1A) within outer limit of six months, the assessee would be justified in approaching before this Court under Article 226 of the Constitution. In our view, word ‘MAY’ should be construed to create an obligation upon the authority to pass consequential order upon conclusion of the litigation. (ii...

Rule 8D(ii) & 8D(iii) do not apply to shares held as stock-in-trade. Loss arising out of derivatives from the income arising out of buying and selling of shares

DCIT vs. Baljit Securities Private Limited (ITAT Kolkata) (i) Both trading of shares and derivative transactions are not coming under the purview of Section 43(5) of the Act which provides definition of “speculative transaction” exclusively for purposes of section 28 to 41 of the Act. Again, the fact that both delivery based transaction in shares and derivative transactions are non-speculative as far as section 43(5) is concerned goes to confirm that both will have same treatment as regards application of the Explanation to Section 73 is concerned, which creates a deeming fiction. Now, before application of the said Explanation, aggregation of the business profit/loss is to be worked out irrespective of the fact, whether it is from share delivery transaction or derivative transaction. Now, this view has been confirmed by the Hon’ble jurisdictional High Court in assessee’s own case in GA No.3481 of 2013 and ITAT No. 215 of 2013 dated 12th March, 2014, has held as under:- It would, ...

Law on the tests to distinguish whether gains on sale of shares is short-term or business profits explained

Harsha L. Tahilramani vs. ACIT (ITAT Mumbai) (i) The assessee wonders as to why should she be not allowed her claim of the delivery-based transactions as being not trade, which stands admitted by her qua non-delivery based transactions? However, that precisely defines the controversy which is to be resolved (with reference to and on the basis of the facts), so that nothing turns on the said argument. If anything, it only raises a presumption of the assessee being well versed with the share market, devoting considerable time and resources toward the same, so that there is no reason why she would not extend it to the delivery-based segment (which is in fact the traditional, less sophisticated and, in fact, predate the derivative by decades) as well, or limit her engagement to only investment. It is no doubt open to the assessee to show, on facts, to be engaged only in investments, but we are only meeting the argument, having in fact observed the assessee’s case as de hors any referenc...

S. 2(1A): Gains from sale of agricultural land is exempt even though purchaser intends to use the land for commercial purposes

DCIT vs. M. Kalyan Chakravarthy (ITAT Hyderabad) The only reason the A.O. treated the land as non-agricultural land was that ‘agreement of sale’ read with ‘Irrevocable GPA’ does not indicate that land retained the character of agriculture at the time of transfer. This was also the ground raised by Revenue in the appeal that M/s. Ramky Estates and Farms P. Ltd., may put the property to commercial use, therefore, the land was meant for commercial exploitation and did not have the character of agricultural land at the time of his transfer. There is no dispute that assessee has purchased agricultural land and put to agricultural use as such earlier. The facts indicate that assessee has sold only agricultural land which was also used and put to agricultural use earlier and the purpose for which the purchaser utilized the land cannot be considered as an evidence of change of nature of land as was considered by Assessing Officer. In the case of M.S. Srinivasa Naicker and others vs. ITO (su...

Equal right for compensation to mother,father of accident

The Madras High Court bench here today ruled that under Motor Accidents Claims Act, both mother and father of a spinster, who died in a road accident, had equal right to claim compensation. Justice S Vimala on a compensation case filed by Sivappan, father of Kaliammal who died in an accident, said "the mother of the woman has as much right as the father of the woman in claiming the compensation". The mother S Parasakthi also could include herself as one of the claimants before the Motor Accident Claims Tribunal, the Judge said. Parasakthi was added as a claimant along with other legal heirs only after the death of Sivbappan. "Even at the time when the petition was filed claiming compensation, unfortunately, the mother, though alive, had not been added as a legal heir of the deceased", the judge said. Only after the death of Sivappan, Parasakthi had been brought on record as legal heir of her deceased husband. The mother of the deceased ought to have been ...

Insurance Co asked to pay Rs 4.94L to bank for customer fraud

A consumer forum here has ordered United India Insurance to pay Rs 4.94 lakhs to Thane District Central Co-operative Bank for being deficient in its services with regard to the bank's claim in a customer fraud case. The bank, in its complaint, told the Thane District Consumer Redressel Forum (TDCRF) that between May and October 2003, some of the bank employees had misappropriated a sum of Rs 4.94 lakhs from the account of one of the customers. The bank had immediately brought it to the notice of the insurance company and also lodged a police complaint.It had lodged a claim for the amount with United India Insurance from which it had taken insurance policy. The insurance company, despite more than 24 reminders, slept over the claim, the bank informed the forum. The insurance firm argued before the forum that the policy was to be honoured for limited contingencies like fire, theft, floods, etc, and not if there was a fraud in the bank. TDCRF president Umesh Jhavalikar and ...

Wife’s cruel behaviour a ground for divorce: HC

The Lucknow bench of the Allahabad high court has ruled that a man can seek divorce if his wife puts pressure on him for abandoning his parents and demands a fixed sum every month for personal expenses. Terming such behaviour as 'cruelty upon the husband', the court also ruled that a woman who makes these demands while earning more than her husband will not be entitled for permanent alimony. The court made these observations while upholding the judgment of a family court which granted divorce to a man on the above grounds and also declined permanent alimony to his wife under Section 25 of the Hindu Marriage Act. Expressing concern over the case which dragged for over 23 years, a division bench of Justice Rajiv Sharma and Justice Mahendra Dayal said, "The worst sufferer of this long litigation is the child and the parties are still not ready to reconcile or settle their dispute amicably." Radhika and Ashok (names changed) got married in Lucknow on February 5, 19...

Tenants of buildings under redevelopment are consumers

More and more old and dilapidated buildings are going in for redevelopment. The builder makes money by selling flats to new purchasers, but considers it onerous to provide accommodation to the existing tenants without charging money. Since free services are excluded from the purview of the Consumer Protection Act, would the tenants be entitled to file a consumer complaint for deficiency in service against a builder? Case Study: Jagdishbhai had a tailoring shop on tenancy basis in Moon House. The landlord sold the property to Surbhih Realtors, which decided to demolish the old building and construct a commercial property. Jagdishbhai was to be given shop no. 1 admeasuring 26.29 sq m in the new property in lieu of his existing shop. An agreement was executed, under which the builder agreed to bear expenses of registration of the sale deed. Possession of the shop was to be given in a month. In case of delay, the builder had agreed to pay Rs 10,000 per month. The builder failed to giv...

Land row: HC orders Rs 40 lakh fine for ‘sponsored litigation’

In an unprecedented order, the Bombay high court has ordered a Mumbai resident to shell out Rs 40 lakhs as legal costs while dismissing his application seeking to stop the allotment of a sprawling plot in Versova to a cooperative housing society and halt development by a city builder. Calling Ashok Kulkarni's application a "sponsored litigation" Justice Patel asked him to pay Rs 20 lakhs each to Samarth Development Corporation and Apna Ghar society. SDC had said that it had spent over Rs 3 crore in fighting the case. "Everything points to this being a sponsored litigation, with Kulkarni having lent his name to some other entity. On his account alone, huge amounts have had to be spent in defending this and associated litigations. The present litigation is one I have found to be without the faintest glimmer of merit. It is precisely the kind of litigation — speculative lacking in bona fides, sponsored, an abuse of the process of law and of the court, and perhaps eve...

License not necessary in theft cases - Consumer Forum

Venkat Rathnam P, a resident of Indira Street, Subbaiahnapalya, Bangalore, had parked his vehicle (KA-03-HK-6835) in front of Aishwarya Hair Dressers near Patel Public School, 80 Feet Road, Banaswadi at 7.30am on November 21, 2012. When he came out of the shop, he found his vehicle missing and immediately filed a complaint at the nearest police station. As the vehicle was insured with National Insurance, Venkat approached it to claim insurance. His policy (35100731126201121107) was valid from July 25, 2012 to July 24, 2013. As the theft happened in this covered period, the complainant was entitled to claim the insurance amount of Rs 33,603. The National Insurance official asked him to furnish the relevant police documents and the original vehicle registration certificate. Venkat submitted all the original documents and vehicle keys along with the FIR, chargesheet and claim petition to the insurance company officials. "Instead of settling the claim, the insurance company issue...

Man withheld vital information: NCDRC denies insurance claim

The apex consumer commission has denied insurance claim to the wife of a man, who was insured with LIC and died in 1999, noting that he had withheld material information at the time of taking the policy. National Consumer Disputes Redressal Commission (NCDRC), presided by Justice D K Jain, denied the insurance claim while setting aside the order passed by Rajasthan State Consumer Disputes Redressal Commission, in which the state commission had asked the insurance company to pay Rs 1.03 lakh to Neelam Sharma, a resident of Ajmer, Rajastan. "...We are of opinion that the answers given by insured in proposal form were untrue to his knowledge. There was clear suppression of 'material facts' in regard to the health of the insured," the NCDRC bench said. It added that it was not for insurer Krishanavtar Sharma, to determine whether information sought for in questionnaire was material for the purpose of the two policies. "At any rate, the statements made in the...

No vehicle insurance for victims if policy is in name of ex-owner

A customer buying a vehicle already in use must not only get it transferred in his/her name in the transport office record but also remember to apply it within 14 days before the insurance company to get the insurance policy transferred in his/her name. A South Delhi resident, who purchased a used car but did not get the insurance policy transferred in his name, was refused insurance cover by the State Consumer Dispute Redressal Forum since the policy was in the name of the previous owner on the date of the accident. Fully insured The complainant had purchased the fully ensured Maruti Esteem car from Sahara India Commercial Corporation Ltd. The car was insured with the National Insurance Company from January 1, 2006, to December 31, 2006. The car met with an accident on August 21, 2006. The complainant filed a claim for a sum of Rs.45,198. The insurance company repudiated the claim on the ground that on the date of the accident, the complainant did not have any insurable inte...

Employees undertaking VRS due to disability can be reinstated: Kerala HC

A Kerala High Court division Bench comprising of Justice Antony Dominic and Justice Dama Seshadri Naidu has held that an employee who took voluntary retirement due to a disability while in service should be reinstated if he or she wishes so later on. The Court was hearing an appeal filed by Southern Railway against an order issued by the Ernakulam bench of Central Administrative Tribunal, which had ordered such reinstatement, with effect from February 15, 2002 along with all consequential benefits. She had filed a petition in 2009, before the tribunal seeking reinstatement in service, claiming such right under section 47 of Persons with Disabilities (Equal Opportunities, Protection of Rights and Full Participation) Act of 1995. The Counsel for the Railways, Tojan J. Vathikulam had contended that the woman, Fancy Babu, had voluntarily applied for retirement. Rejecting the contention, the Bench asserted, “Railways could not take advantage of such an application made by a disabled...

SC - CAs/CSs are not capable of arguing/ deciding ‘Substantial Questions Of Law

The NTT Act “crosses the boundary” & is unconstitutional. CAs/CSs are specialists on accounts & facts and are not capable of arguing/ deciding ‘Substantial Questions Of Law Madras Bar Association vs. UOI (Supreme Court – Constitution Bench) The Full Bench of the Supreme Court had to consider whether the National Tax Tribunals Act, 2005, which sought to take away the jurisdiction of the High Courts in tax matters was constitutional. The Full Bench has struck down the entire Act as being unconstitutional on the ground that though “tribunalization” has been allowed subject to safeguards, the NTT Act “crosses the boundary” and “encroaches the exclusive domain” of the High Courts. In the course of the judgement, the Supreme Court had to consider whether Chartered Accountants could be appointed Members of the NTT and whether s. 13(1) of the Act which permitted Chartered Accountants to represent a party to an appeal before the NTT was valid in law. It also had to consider the app...

Himachal High Court Quashes Circular of Income Tax Department

The Himachal High Court Wednesday quashed a circular of Income Tax department regarding deduction of income tax on the award and interest accrued on them by court in Motor Accident Claims cases.               Passing the orders on a Public Interest Litigation (PIL), a division bench consisting of Chief Justice Mansoor Ahmad Mir and Justice Tarlok Singh Chauhan said the circular of October 14, 2011, issued by the Income Tax Authorities, whereby deduction of income tax has been ordered on the award amount and interest accrued on the deposits made under the orders of the court in Motor Accident Claims cases is quashed.     “In case any such deduction has been made by respondents, they are directed to refund the same with interest at the rate of 12 per cent from the date of deduction till payment, within six weeks from today”, the bench ruled.         The Registrar (Judicial) of the High Court had put up a note that ban...

Directors can be held liable for dishonour of cheque, rules SC

The Supreme Court has said that all directors involved in the day-to-day running of a company can be made liable for a bounced cheque, but not one who resigned before the cheque was issued. The top court said this while dealing with a case filed by a private company that had lent money to another. Gunmala Sales Pvt Ltd had filed cheque-bouncing cases under the Negotiable Instruments Act against Navkar Infra Projects Pvt Ltd and four of its directors. The Calcutta High Court quashed proceedings initiated by a magistrate on grounds that the complaint was based on a mere assertion that the directors were responsible for the day-to-day business of the accused company when the offence was committed. The high court reasoned that the complainant had in this case not clearly stated what part was played by each director and how they were responsible for the finances of the company and the issuing of cheques. The complainant then approached the apex court which remitted the issue back to ...