Legal News & Views

In ITO v. Kalpana Khandelwal, the Mumbai ITAT held that the amount received by a Share Broker is taxable as capital gain under the provisions of the Income Tax Act. The decision was based on the well settled proposition that the question as to whether a person has acted as a trader or as an investor in respect of share transactions, has to be decided on the basis of various factors listed out by the CBDT and Hon’ble Courts. While dismissing the departmental appeal, the bench noticed that the intention of the party is relevant in such cases. Assessee, who is registered as sub-broker with SEBI, claimed that the receipt out of sale of shares is asseaable to tax under the head “capital gain”. AO, however, completed assessment by holding that the same constitutes business income of the assessee. The first appellate authority reversed the decision on appeal. Aggrieved by the order of the CIT(A), Revenue preferred an appeal before the Tribunal contending that the assessee has been indul...

In ITO v. Sh. Chander Sekhar, the ITAT Delhi held that income earned from transfer of leasehold rights is chargeable to Income Tax under section 50C of the Income Tax Act which provides for special provision for full value of consideration. While allowing a departmental appeal, the bench held that capital gains must be determined by price of the plot from the value of the property. Assessee, in the instant case, was allotted a residential plot on 19.01.2004 in Sector-105, Noida through lottery on payment of allotment money of Rs. 1,30,000/-. The total purchase price of the plot was Rs. 16,75,000/-. Assessee entered into an agreement to sale with MIs Rosebud Construction Pvt. Ltd and agreed to transfer his leasehold rights in the said property for a consideration of Rs. 1,30,000/-. The balance amount to be paid for the acquisition of the plot i.e. Rs. 15,45,000/- was agreed to be paid by the Company directly to the Noida Authority. While completing assessment, AO took Full of Consider...

The Supreme Court, in Waryam Steel Castings Pvt Ltd vs Punjab State Power Corporation, has reiterated its stand that it would not be proper for the court to examine the fixation of electricity tariff rates or its revision, while dismissing appeals preferred by arc furnace industries in Punjab. A bench comprising Justice Ranjan Gogoi and Justice Navin Sinha was considering pleas against the high court order, whereby it dismissed the challenge questioning the correctness of the quantum/rate of surcharge as determined by the regulatory commission and upheld by the appellate tribunal. Article referred: http://www.livelaw.in/regulatory-commissions-not-courts-determine-electricity-tariff-sc-read-judgment/

In M/s Parco Diagnostics and Research Centre Pvt Ltd v. DCIT(TDS), the Cochin bench of the ITAT held that assessee-company is liable to pay TDS under section 194H of the Income Tax Act in respect of payment of secret commission to doctors for scanning and medical examinations. Assessee, is a company engaged in the business of running a diagnostic centre with CT and MRI scan facilities.  AO treated the entire business promotion expenses as commission payments to the doctors who referred the cases to the assessee for scanning and other medical examinations. Before the appellate authorities, assessee claimed that TDS is not leviable on business promotion expenses under section 194H since between the assessee and the doctors cannot be termed as a principal and agent but on a principal to principal basis. It was therefore, submitted that there is no justification to create the demand under Section 201(1) r.w.s. 194H and 201(1A) of the Income Tax Act, 1961. Article referred: http:/...

In Haresh Nagindas Vora Vs Union Of India, the division bench of the Bombay High Court upheld the constitutional validity of Section 129E of the Customs Act, 1962 mandating pre-deposit for filing 7.5% of demand on first appeal and 10% on second appeals. The petitioners, in the instant case, challenged the vires of Section 129E of the Customs Act, as amended by the Finance Act, 2014 prescribing a mandatory pre-deposit for filing an appeal before the Tribunal or the Commissioner (Appeals). Article referred: http://www.taxscan.in/provision-mandating-pre-deposit-filing-appeal-customs-act-constitutional-bombay-hc/8676/

In DCIT Vs. M/s Beas Valley Corporation Ltd.,  the ITAT Chandigarh held that the interest from Bank deposits prior to the period of commencement of the business is Capital receipt. It further allowed the assesses’ claim to set off the interest so received on short term deposit during the year on the loan received against the interest payable on PFC loan so as to reduce the cost of project. Assessee, Beas Valley Power is a Government Company promoted by HPSEBL to execute the 100 MW UHL Stage -III in Joginder Nagar Distt. Mandi. While completing the assessment against the assessee- Company, the AO noted that the interest on bank deposits earned by the Company before the commencement of business is a taxable income and should have be shown under the head ” Income from other sources”. Article referred: http://www.taxscan.in/interest-bank-deposits-prior-period-commencement-business-capital-receipt-itat-chandigarh/8515/

In ACIT v. M/s.Nokia Siemens Networks (P) Ltd, the Delhi ITAT held that assessee cannot be treated as Assessee-in-Default for Late payment of TDS due to system and connectivity issues at the bankers’ end. In the instant case, assessee was held as assessee-in-default for delay in deposit of TDS. Assessee maintained that the amount of TDS was debited from the bank account of the assessee on the due date i.e. 7.10.2009 and the delay in deposit of such tax by a day was on account of system and connectivity issues at the bankers’ end, which were beyond the control of the assessee. On appeal, the first appellate authority held in favour of assessee. However, it confirmed the levy of interest for late payment of TDS. Both the assessee and the Revenue preferred appeals against the order. Before the Tribunal, the Revenue contended that the first appellate authority erred in holding in favour of the assessee in view of the decision of the Supreme Court in the case of CIT Vs. Ogale Glass Work...

The Delhi High Court, in the case of VK Bhatnagar vs Canara Bank and Anr, has directed the bank to compensate the petitioner for the trauma and humiliation caused due to wrongful attachment of his property because of the bank’s negligence arising due to mistaken identity. The petition was filed by VK Bhatnagar, whose property was wrongly attached by Canara Bank for default of payment by a debtor of the same name. The petitioner faced extreme humiliation since not only was the warrant of attachment affixed to his property, but loudspeakers too proclaimed the same. The petitioner then filed objections before the Debt Recovery Tribunal, stating that he had undertaken no financial transactions with Canara Bank and also disclosing his parentage. He also showed that he was a resident of Delhi where as the debtor is a resident of Lucknow. Article referred: http://www.livelaw.in/delhi-hc-tells-canara-bank-pay-rs-2-62-lakh-compensation-wrongful-attachment-property-read-judgment/

In SAVYASACHI K. SAHAI vs Union Of India, the Delhi High Court has dismissed a review petition filed by four applicants who claimed to be the sons of previous Mutawalli or caretakers of the dargah at Amir Khusro Park and, therefore, asserted their right to some construction inside the tikona graveyard park, also known as Amir Khusro park. After examining all the submissions and evidence on record, a division bench of Acting Chief Justice Gita Mittal and Justice C Hari Shankar held that presumption of possession over an open land always is deemed to be that of the owner and not of a trespasser. An open place of land shall be presumed to be in possession of the owner unless it is proved by the trespasser that he had done some substantial acts of possession over the land, which may excite the attention of the owner that he has been dispossessed. Article referred: http://www.livelaw.in/occupancy-not-create-title-right-remain-possession-delhi-hc-dismisses-claim-encroachers-dar...

In Ahok Kr. Todi Vs. C.B.I., the Calcutta High Court dealt with framing of charges and held that - Criminal P.C. 1973 – S. 216 (5) – Sanction – At the time of dealing with the Section 216(5) of Cr.P.C. the court is to see if any sanction has been given on same facts or not, irrespective of any offence. Criminal P.C. 1973 – Ss. 226 & 227 – When the court shall frame charges – What are the factors to be considered by the court at the time of disposal of an application under Section 227 of Cr.P.C. – Held, Court should be very cautious in allowing an application Section 227 Cr.P.C. because without affording any opportunity to the prosecution to substantiate the allegation through witness, the accused gets an escape from the net of law. The Court is to see if any material for presumption is there or not. If the answer is affirmative, charge has to be framed. Criminal P.C. 1973 – Ss. 190 (1) (b) r/w. 197 – Cognizance – Supplementary Charge-sheet – What should be the basis – If ...

In URBAN INFRASTRUCTURE TRUSTEE LTD. V/s. NEELKANTH TOWNSHIP AND CONSTRUCTION PVT. LTD (Corporate Debtor), the THE NATIONAL COMPANY LAW TRIBUNAL while deciding on the objection of the Corporate Debtor that the applicant herein cannot file this application as a financial creditor when the applicant is continuing as one of the shareholders of the Company replied that since this court has not said anywhere if the financial creditor happens to be shareholder as well, the shareholder in the capacity of financial creditor cannot initiate insolvency resolution process, since it is the case of the financial creditor that 90% of the funding arisen by the company is only through this claim, this applicant claim cannot be shut on the ground the applicant continuing as shareholder. As there is no legal bar against this applicant to make his claim as a financial creditor, this Bench cannot read into such proposition to deprive the right of this applicant. Therefore, we do not find any merit in the ...

In Anwar Basith v. ACIT, the Bangalore ITAT held that the income of minor beneficiaries can be clubbed to income of parents under section 64(1)(a) of Income Tax Act, 1961. Assessee was a partner of Firm, M/s. INJ Enterprises, along with her husband and three minor children with equal distribution of profit among the partners including the three beneficiaries. The partnership firm was dissolved in the year 1989 with a condition that all the 5 partners would possess the asset and the liability of the firm as coowners and tenants in common and have equal shares in land & building. One of the source of funds used by M/s. INJ Enterprises for construction and development of the aforesaid property was a loan from Dr. Nayeema Khan Trust for which the Firm was paying interest. The said Trust was formed by assessee and her husband, Mr. Maqsood Ahmed as a trustee and their children as beneficiaries of the trust. While completing assessment against the assessee, the AO noted that to Pay ...

The National Consumer Disputes Redressal Commission (NCDRC) in SHEO PRAKASH GUPTA & ANR vs KANPUR DEVELOPMENT AUTHORITY, said that it is common parlance that, in the builder- buyer agreements the terms are framed as favorable and suitable to the builders/ service providers. In our view, these are unconscionable contracts. The builder exercise his right to charge penalty or interest at 18-24% on the delayed payment of installments. Thus, in our view, in the interest of natural justice the consumers at large deserve to receive same interest from opposite parties in cases of fault or deficiency. The commission made this observation while dealing with an appeal against the state commission dismissing their complaints against the builders. The complaint was regarding unfair trade practice and deficiency in service by the Kanpur Development Authority in keeping the huge amount for more than a year and refunding it without interest. Article referred: http://www.livelaw.in/builde...

The Central Board of Direct Taxes (CBDT) has clarified that trade advances would not attract the provisions of “deemed dividend” under the provisions of Section 2(22)(e) of the Income Tax Act. As per section 2(22) clause (e) of the Income Tax Act, “dividend” includes any payment by a company, not being a company in which the public are substantially interested, of any sum by way of advance or loan to a shareholder, being a person who is the beneficial owner of shares (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits holding not less than ten per cent of the voting power, or to any concern in which such shareholder is a member or a partner and in which he has a substantial interest (hereafter in this clause referred to as the said concern) or any payment by any such company on behalf, or for the individual benefit, of any such shareholder, to the extent to which the company in either case possesses accumulated profits. Art...

In N.SATHEESH KUMAR vs FAMILY COURT, NEDUMANGADU, the Kerala High Court has held that if the counsel of a litigant is aggrieved in a cause initiated by his client and if he has an independent cause of action, he can sue in his own name. The counsel for a litigant before the family court had himself challenged before the high court the objection raised by the registry of the court with regard to attestation in in vakalath, which he filed along with the maintenance case. Justice Dama Seshadri Naidu, speaking for the division bench, headed by Justice PN Ravindran, said: “It needs no much cogitation on our part to hold that a counsel cannot carry legal proceedings in his own name in a case initiated by his client. This proposition, however, needs to be qualified. If the counsel is aggrieved and, even in a cause imitated by his client, if he has an independent cause of action, he can sue in his own name.”

In Rajan Vs. Biju, Kerala High Court has held that in a claim under Section 163A of the Act, dependency has no relevancy because the persons eligible to file an application for compensation for death are the legal heirs and not the legal representatives. The High court also held that the view taken by the Division Bench in Kadeeja v. Kerala State Road Transport Corporation, 2013 is correct and the view of the court in Joseph v. Giji Varghese, 2009 is not a correct proposition of law.

The Karnataka High Court in D. GUNDAPPA vs State of Karnataka has observed that mere non-production of the accused from time to time and failure of the Magistrate to pass express order remanding the accused to custody do not vitiate the proceedings, nor does it confer a right on the accused to seek for his release on bail. The Bench comprising Justice H.G. Ramesh And Justice John Michael Cunha however clarified that the production of the accused before the Magistrate as mandated in section 167(2)(b) and section 209 CrPC is a rule and non-production of the accused is only an exception and it is only when the physical production of the accused is not possible on account of his hospitalization or such other unavoidable reasons, the Magistrate cannot refuse to extend the remand merely on ground of non-production of the accused. Article referred: http://www.livelaw.in/remand-order-passed-absence-accused-not-entitle-seek-bail-karnataka-hc-read-order/

Madurai Bench of the High Court of Madras in S.Robinson Vs 1.Tamil Nadu State Information Commission has held that the Right to Information (RTI) Act, 2005 cannot be invoked at the first instance, if an effective alternative remedy is available to obtain such information. “Although the learned counsel appearing for the petitioner has elaborately made his submission and taken this Court through the Scheme of RTI Act, particularly, Sections 4, 8 and 22 of the RTI Act, I am unable to persuade myself that RTI Act can be invoked for all purposes regardless of the fact that there is existence of alternative effective mechanism provided under the respective departments for seeking information. If such recourse is encouraged and entertained it will destroy the very frame work of the respective mechanism which provides for furnishing information under the respective department,” Justice V. Parthiban observed. Article referred: http://www.livelaw.in/rti-act-cannot-invoked-alternate-remed...

In AVTEC Limited v. DCIT, the division of the Delhi High Court held that AO is bound to look at the litigation history of the assessee and cannot expect the assessee to inform him.  In the instant case, the Petitioner, engaged in the business of manufacturing and selling of automobiles, power trains and power shift transmissions along with their components, approached the High Court challenging the re-assessment order passed against them. For the year 2006-07, the Petitioner entered into a Business Transfer Agreement with Hindustan Motors Ltd, as per which, the Petitioner took over the business from HML.  While filing income tax return for the said year, the petitioner claimed the expenses incurred in respect of professional and legal charges for the purpose of taking over of the business from HML as capital expenses and claimed depreciation. Article referred: http://www.taxscan.in/assessing-officer-bound-look-litigation-history-assessee-delhi-hc-read-order/8087/

In CIT v. M/S Rama Educational Society, the division bench of the Allahabad High Court held that benefit of section 80G of the Income Tax Act cannot be granted to assessee merely on ground that it satisfies all the conditions prescribed under section 10(23)(c) of the Income Tax Act. While quashing the ITAT order, the bench confirmed the order of the CIT denying exemption to the assessee for want of regular maintenance of Books of Accounts. Respondent-assessee, a society running a Dental College and Research Centre had availed exemption under s. 80 G of the IT Act. On expiry of the exemption, they made an application for renewal of the same. However, the Commissioner rejected the application on grounds that the department recovered and seized unaccounted cash amount belongs to the assessee during a search and the assessee was not properly maintaining its books of accounts. He was of the opinion that the exemption is not available to the assessee as they does not satisfies condition ...

In a significant judgement, the , has held that private self financing Colleges cannot withhold certificates of students, for payment of amount. The practise of withholding the certificates, and non-issuance of transfer certificate to students, to coerce them into meeting unconscionable demands like paying entire course fee for leaving the course midway, or to force them to serve the institution after completion of course, etc is very rampant. In clear unambiguous terms, the Court has held that such practise is illegal and opposed to public policy. Often faced with the supreme bargaining position of the Colleges, the students often execute bonds authorising colleges to do so. But, such bonds have no validity in the eyes of law. Article referred: http://www.livelaw.in/private-colleges-cannot-withhold-students-certificates-payment-amount-kerala-hc-read-judgment/

In N.K. Bhasin vs Union of India, the division bench of the Allahabad High Court upheld the constitutional validity of provisions of Finance Act, 1994 imposing Service Tax on rented immovable property. While dismissing a bunch of writ petitions, the Court also confirmed the vires of connected circulars passed by the Ministry of Finance. The petitioners in the instant case, approached High Court challenging the constitutionality of Sections 75(A)(6)(h) and 77 of Finance Act, 2010 and Sections 65(90)(a) and 65(105)(zzzz) read with Section 66 of Finance Act, 1994 as amended by Finance Act, 2007 and Finance Act, 2010. They urged that the provisions are illegal, arbitrary and lacking legislative competence infringing Articles 14, 246 and 265 of Constitution of India. They further impugned the validity of circulars dated 04.01.2008 and 22.05.2007. The bench noticed that a similar issue was raised before various High Courts wherein these Courts upheld the validity of the above provision...

In ITO v. Raghu Nandan Modi, the ITAT Kolkata held that rent-Free accommodation received by a Part Time-Director cum Employee from the Company cannot be taxable as “Business Income” under the provisions of Income Tax Act. Assessee, in the instant case, was a part-time Director of M/s Prabhukripa Overseas Ltd. during his tenure, assessee received rent-free accommodation in the flat owned by the Company, POL. AO completed assessment by holding the value of the rent fee accommodation is taxable in the hands of the assessee under Section 2(24)(iv) of the Income Tax Act r.w.s. 17(2)/ 28(iv) of the Income Tax Act. Article referred: http://www.taxscan.in/rent-free-accommodation-received-part-time-director-cum-employee-company-not-business-income-itat-kolkata/8145/

In Business Strategy Group v. ACIT, the ITAT, Delhi held that the loan obtained from a Company wherein the partners of the Assessee-Firm are the shareholders cannot be termed as ‘deemed dividend’ of the Firm and therefore, it is not taxable in the hands of the Firm under the provisions of Income Tax Act. Assessee-Firm is engaged in the business of rendering Management Consultancy Services. The partners of the Firm are equal share holders in a Private Ltd Company, i.e, M/s TMI Associates Pvt. Ltd. The AO found that the assessee firm had shown a loan of Rs. 3 lakhs from M/s TMI Associates Pvt. Ltd and treated the same as the deemed dividend which is taxable in the hands of the assessee-Firm. Before the Trbunal, the assessee contended that it is not a share holder in the said Company and Section 2(22)(e) has no application to the amounts received from a Company by the non-shareholder. Article referred: http://www.taxscan.in/loan-company-wherein-partners-firm-shareholders-not-deemed-...

The Amritsar bench of Income Tax Appellate Tribunal has recently rule in Dy. CIT, Jalandhar vs M/s Sarup Tanneries Ltd. that a Holding Company is entitled to get deduction in respect of the debt unrecovered from its subsidiary company under the provisions of the Income Tax Act, 1961. Coming to the facts of the case, the assessees, M/s Sarup Tanneries Ltd, is engaged in the business of manufacture and sale of leather goods, Shoe upper, soles etc. The Assessing Officer, while completing assessment for the relevant assessment year, has disallowed the claim made by the assessee in respect of loss written off due to its subsidiary company in US on ground that such losses claimed by assessee were not related to the business of assessee. On appeal, the Commissioner of Income Tax (Appeals) partly allowed the impugned order. The case was brought before the ITAT. The Revenue contended that reliance should be placed on the decision in Amalgamations Pvt. Ltd vs. CIT (1969) 226 ITR 188 (SC). Ar...

In DCIT v. M/s. The Hooghly Mills Co.Ltd, the ITAT Kolkata held that shareholding by Subsidiary Company is irrelevant while considering ‘deemed dividend’ liability of Holding Company under section 2(22)(e) of the Income Tax Act. Assessing Officer, while completing assessment against the assessee-Company, found that assessee had during the previous year accepted the loans of Rs.10,20,00,000/- from M/s. Mega Resources Ltd, in which the subsidiary company of the assessee holds equity shares. The Officer, considering  the shareholding of both the assessee and its subsidiary company and concluded that the assessee held more than 10% of the voting power in M/s. Mega Resources Ltd,. and therefore, the assessee is liable to pay tax on ‘deemed dividend’ under provision of section 2(22)(e) of the Income Tax Act. The first appellate authority allowed the plea of the assessee on first appeal. Article referred: http://www.taxscan.in/shareholding-subsidiary-co-irrelevant-considering-deemed-d...