Whether when the assessee has significant interest in the business of the subsidiary and utilizes even borrowed money for furthering its business any disallowance can be made u/s 36(1)(iii).
THE Bombay High Court appears to have served a body blow to realtors in Maharasthra. The HC today dismissed their petition that challenged the applicability of Value Added Tax (VAT) on sale of flats. The builders argued that VAT is not payable on immovable property.
Mr. Sharma, learned A.S.G. however submits that the appeal has been filed prior to the issuance of circular dated 9th February, 2011, therefore, the circular does not apply to the present case.In the case of Commissioner of Income Tax V/s Polycott Corporation a Division Bench of this high Court, while interpreting similar Instruction No.2 of 2005, issued by the Central Board of Direct Taxes, regarding the earlier limit fixed for filing appeal before the High Court, has held that the circular would have a retrospective effect. In Commissioner of Income Tax V/s Smt. Vijaya V. Kavekar, a Division Bench of this Court, while interpreting the very circular which is involved in this appeal i.e. Circular No.3 of 2011, has held that the circular has a retrospective operation and instructions contained in the circular would apply even to the pending cases. Therefore, the contention of Mr. Sharma that the circular does not apply to the pending cases is rejected.
In the present case, as noted earlier, a provisional attachment has already been levied on 7 October 2011 under Section 281B by which the amount which was invested by the Assessee in mutual funds of SBI Mutual Funds was attached. The attachment was to the extent of Rs.36.54 Crores. That being the position evidently there would have been no basis for forming a reason to believe that if the period of 30 days was to be observed under Section 220(1), that would be detrimental to the Revenue.
Section 147 – Sanction Of Superior Officer Renders Reopening Void: Bombay High Court. The notice under section 148 can be issued beyond four year with prior approval of joint commissioner and at the same time joint-commissioner should be satisfied that this is fit case for issue of a notice in view of section 151(2). In the present case no new evidence or fresh evidence produce by assessing officer and the joint-commissioner granted approval without see the record for issuance of notice under section 148. The court held that there was no compliance of the mandatory requirements of Section 147 and 151(2), the notice reopening the assessment cannot be sustained in law.
irst Petitioner does have serious issues to be urged before the Commissioner of Income Tax (Appeals) in appeal. This is a case where the Assessing Officer while exercising the jurisdiction under Section 220(6) and the Director of Income Tax ought to have granted a complete stay of demand. The Assessee has highlighted the nature of its activities in several applications filed in support of the plea for stay and also explained its financial position. None of this has been taken into account while disposing of the application for stay.
For the purposes of Section 80IB (10) it is not the mandate of the Section that the housing project must be on a vacant plot of land having minimum area of one acre and that where a new housing project is constructed on a plot of land having minimum area of one acre but with existing housing projects would qualify for Section 80IB (10) deduction.
Supreme Court has held that the provisions of the Special Court Act, wherever they are applicable shall prevail over the provisions of the Income Tax Act, 1961. The words wherever they are applicable are crucial. The Special Court Act makes no provision in regard to the determination of the liability to pay interest under the Income Tax Act, 1961.
The validity of the notice reopening the assessment under Section 148 has to be determined on the basis of the reasons which are disclosed to the assessee. Those reasons constitute the foundation of the action initiated by the Assessing Officer of reopening the assessment. Those reasons cannot be supplemented or improved upon subsequently.
Supreme Court makes it very clear that a colourable device cannot be a part of tax planning. Therefore where a transaction is sham and not genuine as in the present case then it cannot be considered to be a part of tax planning or legitimate avoidance of tax liability. The Supreme Court in fact concluded that there is no conflict between its decisions in the matter of McDowell (supra), Azadi Bachao (supra) and Mathuram Agarwal (supra). In the present case the purchase and sale of shares, so as to take long term and short term capital loss was found as a matter of fact by all the three authorities to be a sham.
