NEWS
DIRECT TAX
1. CBDT notifies TIEA between India-Marshall Islands.
[Notification no 40/2019/F.No. 503/1/2018-FT & TR– IV]
2. Form 15H can be furnished if no tax payable on income after sec. 87A rebate.
[Notification No. 41/2019/F. No. 370142/5/2019-TPL]
3. CBDT releases draft notification proposing new audit report Form for Trust/Institution.
[NOTIFICATION F.NO. 370142/6/2019-TPL, DATED 21-5-2019]
4. CBDT further deferred furnishing of GST & GAAR details in Form 3CD till March 31, 2020.
[CIRCULAR NO. 9/2019 [F.NO. 370142/9/2018-TPL], DATED 14-5-2019]
5. CBDT notifies tax exemption to Rolls-Royce Defense Services Inc on income arising from royalty/FTS from India.
[Notification No. 39/2019/F.No.200/53/2015-ITA.I]
UN
1. UN Publishes working methods and practices of Committee of Experts on International Cooperation
[https://www.un.org/]
OECD
1. International community agrees on a road map for resolving the tax challenges arising from digitalization of the economy.
[http://www.oecd.org/tax/international-community-agrees-on-a-road-map-for-resolving-the-tax-challenges-arising-from-digitalisation-of-the-economy.htm]
2. United Arab Emirates deposits its instrument of ratification for the Multilateral BEPS Convention.
[http://www.oecd.org/tax]
3. Albania signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.
[http://www.oecd.org/tax/albania-signs-landmark-agreement-to-strengthen-its-tax-treaties.htm]
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DOMESTIC TAX CASE LAWS
SUPREME COURT
1. Where High Court held that assessee was a trust eligible for registration under section 12AA and, thus, as a natural corollary, assessee’s application under section 80G(5) also deserved to be allowed, SLP filed against High Court’s order was to be dismissed. [CIT v Lok Sewa Sansthan Samiti Sonebhadra [2019] 105 taxmann.com 203 (SC)]
2. Where Assessing Officer initiated reassessment proceedings on ground that subsidy received by assessee from Government was directly credited to capital reserve account which resulted into non-consideration of such amount for computation of assessee’s book profit, however, said proceedings were quashed by High Court by holding that there was sufficient disclosure in return filed by assessee with respect to entry in question, SLP filed against decision of High Court was to be dismissed. [Dy. CIT v Pandesara Infrastructure Ltd. [2019] 105 taxmann.com 182 (SC)]
3. Where High Court upheld Tribunal’s order holding that once registration was granted to assessee trust under section 12A, then it was not open to Assessing Officer while examining compliancewith section 11 to revisit objects of assessee again, SLP filed against decision of High Court was to be dismissed. [DIT v Gemological Institute of India [2019] 105 taxmann.com 180 (SC)]
4. Where High Court upheld Tribunal’s order deleting addition made under section 68 on ground that assessee had discharged onus that was placed upon it to disclose identity of share applicants and genuineness of money infused, SLP filed against said order was to be dismissed. [Pr. CIT v E Smart Systems (P.) Ltd. [2019] 105 taxmann.com 159 (SC)]
5. SLP dismissed against order of High Court that placement fees/carriage fees paid by assessee-company, engaged in business of distribution of television channels, to cable operators/ MSO/DTH operators were payments for work contract covered under section 194C and not fees for technical service under section 194J. [CIT v Times Global Broadcasting Co. Ltd. [2019] 105 taxmann.com 314 (SC)]
6. SC dismissed SLP filed against HC’s order allowing claim for bad debts due to low tax effect. [Pr. CIT v Gujarat Lease Financing Ltd. [2019] 105 taxmann.com 157 (SC)]
7. Where High Court upheld Tribunal’s order deleting penalty under section 271(1)(c) on ground that addition on account of alleged stock was not as a result of purchases made outside books of account, but was only on account of wrong entries in books of account, SLP filed against said decision was to be dismissed. [Pr. CIT v Deccan Mining Syndicate (P.) Ltd. [2019] 105 taxmann.com 138 (SC)]
8. SC dismissed SLP against HC’s order that demurrage charges hadn’t accrued to assessee. [CIT v Rajasthan Small Industries Corporation Ltd. [2019] 105 taxmann.com 82 (SC)]
9. SLP dismissed against High Court order that it would only be net of interest excluding expenditure incurred in earning such interest income which should be excluded for purpose of deduction under section 80-IA. [Pr. CIT v Gujarat Paghuthan Energy Corporation (P.) Ltd. [2019] 105 taxmann.com 84 (SC)]
10. Where the assessee, a non-banking financial company, whose principal business activity was of trading in shares and securities, incurred loss (speculative loss) as a result of its activity of trading in shares, said loss was not capable of being set off against the profits which it had earned against the business of futures and options since the latter did not constitute profits and gains of a speculative business. [Snowtex Investment Ltd. v Pr. CIT [2019] 105 taxmann.com 282 (SC)]
11. SLP dismissed against High Court ruling that lack of declaration in Form No. 10 regarding specific purpose for which funds were being accumulated by assessee-trust, would not be fatal to exemption claimed under section 11(2). [CIT v Bochasanwasi Shri Akshar Purshottam Public cable Trust [2019] 105 taxmann.com 97 (SC)]
12. SLP dismissed against order of High Court allowing assessee to carry forward and set off unabsorbed depreciation of assessment years 1997-98 to 1999-2000 against profits of assessment year 2008-09. [CIT v Associated Cables (P.) Ltd. [2019] 105 taxmann.com 114 (SC)]
13. Where High Court upheld Tribunal’s order allowing assessee’s claims under section 80-IB by holding that where assessee had undertaken development of housing project at their own risk and cost, merely because land was held in name of original owner when housing development project was executed, it would not be detrimental to assessee’s claim of deduction under section 80-IB(10), SLP filed against said decision of High Court was to be dismissed. [Pr. CIT v Green Associates [2019] 105 taxmann.com 80 (SC)]
14. Where High Court upheld Tribunal’s order deleting penalty levied under section 271AAA on ground that assessee during course of assessment proceedings had submitted several documents/communications to substantiate manner in which undisclosed income was derived, SLP filed against said decision of High Court was to be dismissed. [Pr. CIT v Bhavi Chand Jindal [2019] 105 taxmann.com 78 (SC)]
15. SLP dismissed against High Court ruling that where assessee filed instant petition challenging validity of Tribunal’s order under section 254(2), in view of fact that Tribunal had accepted additional evidence without complying with provisions of rule 29 of ITAT Rules, impugned order passed by Tribunal became defective and, thus, same was to be set aside. [Dy. CIT v Radhika Roy [2019] 105 taxmann.com 35 (SC)]
16. SLP dismissed against High Court ruling that payment for delayed allotment of plot of land by Housing Corporation was not ‘interest’ under section 2(28A).[Pr. CIT v West Bengal Housing Infrastructure Development Corporation Ltd. [2019] 105 taxmann.com 64 (SC)]
17. SLP dismissed against High Court ruling that where there was no evidence on record that order passed by Tribunal was infact served on Director (International Taxation), which is mandatory requirement of section 260A(2)(a), appeal filed by revenue could not be dismissed being barred by limitation.[Hyundai Heavy Industries Co. Ltd. v DIT [2019] 105 taxmann.com 34 (SC)]
18. Tax effect being less than Rs. 1 crore, Departmental appeal filed before Supreme Court to be disposed of as per Instruction No. 3 of 2018, dated 11-7-2018. [CIT v Mereena Creations [2019] 104 taxmann.com 334 (SC)]
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HIGH COURT
1. Situs of AO is irrelevant to determine jurisdiction of HC over order of ITAT. [Pr. CIT v Sungard Solutions (I) (P.) Ltd. [2019] 105 taxmann.com 67 (Bombay-HC)]
2. Where investment in assessee-company was made by US based global private investment group with permission of Government authorities, same could not be branded as sham transaction merely because it involved huge investment and investor would not earn any dividend income immediately and investment was divested to group companies by assessee-company. [Pr. CIT v Aditya Birla Telecom Ltd [2019] 105 taxmann.com 206 (Bombay-HC)]
3. Where AO made addition to assessee’s income under section 69 in respect of advance rent received, since source was clear and there was proper explanation for amount in question in books of account, impugned addition was to be deleted. [CIT v Amritha Cyber Park (P.) Ltd [2019] 105 taxmann.com 229 (Kerala-HC)]
4. Repairs of office building using POP to be treated as capital expenditure. [South India Corporation Ltd. v Asst. CIT [2019] 105 taxmann.com 205 (Kerala-HC)]
5. By introduction of Explanation to section 10(23C) w.e.f. 1-4-2015, it has been clarified that if grant from Government is in excess of 50 per cent of its total receipts, it is to be taken as substantially financed by Government and ‘substantially financed’ in terms of Explanation to section 10(23C) means i.e., qua total receipts and not qua total expenditure. [DIT v Tata Institute of Social Science [2019] 105 taxmann.com 128 (Bombay-HC)]
6. Where assessee filed writ petition contending that impugned assessment order and subsequent recovery proceedings were to be set aside as there was no valid service of assessment notice upon assessee, since alternate efficacious statutory remedy of filling appeal to Commissioner (Appeals) was available, instant writ petition could not be entertained. [Camelot Enterprises (P.) Ltd. v TRO [2019] 105 taxmann.com 155 (Bombay-HC)]
7. Black Money Act has no retro-effect; no action against VVIP Chopper Scam accused ‘Gautam Khaitan’. [Gautam Khaitan v UOI [2019] 105 taxmann.com 276 (Delhi-HC)]
8. Where assessee-builder claimed proportionate deduction under section 80-IB(10) in respect of those residential units only which had area less than 1500 sq. ft. and Assessing Officer after conscious application of mind allowed same, reassessment after 4 years would be impermissible. [Dy. CIT v Visvas Promoters (P.) Ltd. [2019] 105 taxmann.com 65 (Madras-HC)]
9. No denial of approval u/s. 35(1)(iii) just because there was no commercial success of research activities. [Manipal Academy of Higher Education v CIT [2019] 105 taxmann.com 101 (Delhi-HC)]
10. When an application for stay of demand is filed before Assessing Officer, he has to apply his mind to said application and pass appropriate orders having regard to facts and circumstances of case but, it does not mean that Assessing Officer has to impose a per se condition that pending consideration of application for stay of demand, certain minimum amount has to be deposited.[Turner General Entertainment Networks India (P.) Ltd. v ITO [2019] 104 taxmann.com 333 (Delhi-HC)]
11. Claim of weighted deduction u/s 35(2AB) allowable, though Govt. approval for R&D facility was awaited. [CIT v TVS Electronics Ltd. [2019] 105 taxmann.com 36 (Madras-HC)]
12. Conversion of paddy into rice is manufacturing activity; eligible for sec. 80-IA/80-IB deduction. [CIT v Muthuramalingam Modern Rice Mill [2019] 105 taxmann.com 39 (Madras-HC)]
13. In terms of section 245D(2C) Settlement Commission can declare an application for settlement invalid, but such order has to be passed within prescribed time and under no circumstances, Settlement Commission can give retrospective effect to order invalidating settlement application of assessee. [Pr. CIT v Income tax Settlement Commission, Mum. [2019] 104 taxmann.com 367 (Bombay-HC)]
14. Where assessee entered into agreement for use and purchase of a windmill plant for power generation, amount forfeited by seller upon failure to pay full instalments within stipulated time period would be capital expenditure.[Nandkishor Motilal Shah v CIT [2019] 104 taxmann.com 370 (Bombay-HC)]
15. Where retiring partners were paid sums on reconstitution of assessee-partnership firm in proportion of their share in partnership business/asset, no transfer of assets being taken place, no capital gains would arise.[Pr. CIT v Electroplast Engineers[2019] 104 taxmann.com 444 (Bombay-HC)]
16. Where excess jewellery found during search proceedings belonged to partners of assessee-jewellery firm, no addition was to be made in hands of firm treating same as firm’s undisclosed income.[Sri. Kavitha Jewellers v Dy. CIT [2019] 104 taxmann.com 445 (Madras-HC)]
17. Where assessee, a shipping agent, received amounts from its customers towards ground rent payable to Port Trust as storage charges for containers of its customers but did not pay same to Port Trust for reason that ground rent charges were in dispute and Tariff Authority for Major Ports (TAMP) had not finally fixed rent charges and same was shown as liability in its books of account, in view of fact that TAMP had passed final order fixing rent charges and, therefore, liability of assessee to pay back to customers had ceased, addition under section 41(1) was justified. [CIT v Chakiat Agencies (P.) Ltd. [2019] 104 taxmann.com 430 (Madras-HC)]
18. Where a company made provision for payment of managerial remuneration to assessee, same created an obligation on assessee to bear tax liability on salary. [V. Ramakrishnan v Dy.CIT [2019] 104 taxmann.com 389 (Madras-HC)]
19. Where assessee purchased property in name of Secretary and Manager of society for running a school, it could be concluded that acquisition of property in name of individuals was indicative of fact that profits of institution was being used for self aggrandizement and, thus, assessee’s claim for exemption order section 10(22) was to be rejected.[Sree Chithra Educational Cultural and Film Society v Dy. CIT [2019] 104 taxmann.com 433 (Kerala-HC)]
20. Where AO made addition to assessee’s income on ground that there was mismatch between assessee’s consumption of raw material and output of various drugs manufactured by assessee, in view of fact that finding of AO was based on detailed appreciation of evidence on record, impugned addition was to be confirmed.[Paras Organics (P.) Ltd. v Addl. CIT [2019] 104 taxmann.com 405 (Bombay-HC)]
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INCOME TAX APPELLATE TRIBUNAL
1. Where assessee company had received share capital of huge amount from several companies, in view of fact that share applicants had very meagre income, thus, they did not have creditworthiness for making such huge investments and genuineness of transactions were also not established from documentary evidences shown by assessee, addition under section 68 in respect of share capital was justified. [ITO v Synergy Finlease (P.) Ltd [2019] 105 taxmann.com 208 (Delhi – Trib.)]
2. No sec. 271AAB penalty if income surrendered during search didn’t result in undisclosed income. [Smt. Aparna Agrawal v Dy. CIT [2019] 105 taxmann.com 233 (Jaipur – Trib.)]
3. Standard deduction u/s 24 not allowable on rental income earned by charitable trust. [Nandlal Tolani Charitable Trust v ITO [2019] 105 taxmann.com 232 (Mumbai – Trib.)]
4. Interest payment to creditors couldn’t be disallowed merely because no interest was charged from debtors. [Aditya Medisales Ltd. v Dy. CIT [2019] 105 taxmann.com 209 (Ahmedabad – Trib.)]
5. Where Assessing Officer rejected assessee’s claim for deduction under section 54F on ground that at time of sale of capital asset, assessee was owner of more than one residential house properties, in view of fact that one residential property was co-jointly owned in name of assessee and his wife and he could not be treated as ‘absolute owner’ of said property, deduction under section 54F could not be denied to him. [Ashok G. Chauhan v Asst. CIT [2019] 105 taxmann.com 204 (Mumbai – Trib.)]
6. Commissioner (Appeals) rightly confirmed addition of Short Term Capital Gain on sale of premises of assessee in Amarnath Tower as block of asset ceases to exit. Other Property of assessee was self occupied property, hence, it could not enter into block of depreciable asset. Further, plea to add purchase of new flat into block of assets can’t be accepted as income from same was taxable as house property income. [Sonu Nigam v Asst CIT [2019] 105 taxmann.com 331 (Mumbai – Trib.)]
7. In case of assessee, an asset management company, date of approval given by SEBI was to be regarded as date on which assessee set up its business and was ready to commence said business and, therefore, expenses incurred for purpose of business after said date of approval were eligible for deduction under section 37(1). [Dy. CIT v PPFAS Asset Management (P.) Ltd. [2019] 105 taxmann.com 103 (Mumbai – Trib.)]
8. Where executives of account department and one of directors were available to carry business of assessee-company, reason that assessee was indulged in criminal proceedings and only a director was ill, could not be cited as a reasonable cause for long delay in complying audit obligation; penalty was to be levied. [Haldar Foods (P.) Ltd. v ITO [2019] 105 taxmann.com 99 (Amritsar – Trib.)]
9. Where assessee paid hiring charges for use of cranes, such simpliciter payments, being not contractual payments, could not be brought within sweep of definition of term ‘work’ as envisaged in section 194C.[Bhangal Construction Co. v ITO [2019] 104 taxmann.com 363 (Amritsar – Trib.)]
10. Notice issued in name of deceased person isn’t binding on legal heirs. [Aemala Venkateswara Rao v ITO [2019] 105 taxmann.com 14 (Visakhapatnam – Trib.)]
11. Merely because assessee charitable educational institution was prosperous and failed to state as to why there was need for donations and it failed to submit list of proposeddonors, approval under section 80(5)(vi) could not be denied merely upon possibility of misuse of donations. [Adesh Foundation (Regd.) v CIT (Exmp) [2019] 105 taxmann.com 13 (Amritsar – Trib.)]
12. No cancellation of registration as cash deposited in old denomination notes was from fees collected from students. [St. Wilfred Educational Society v Pr. CIT [2019] 104 taxmann.com 387 (Jaipur – Trib.)]
13. Where assessee sold a residential property and invested sale consideration in new residential flat and made payment to developer within prescribed time, merely because assessee could not obtain possession and got purchase deed executed within period of three years as Consumer Redressal Commission had put stay on developer, assessee’s claim for exemption under section 54 could not be denied. [Bal Kishan Atal v Asst. CIT [2019] 104 taxmann.com 432 (Delhi – Trib.)]
14. Where assessee-company had been consistently determining fair market value of shares as per ‘Discounted Cash Flow’ method which was accepted by revenue, Assessing Officer was unjustified in adopting ‘Book Value’ method in current year; addition on account of premium on issue of share, thus made, was to be deleted. [Asst. CIT v Enterprises Business Solutions (P.) Ltd. [2019] 104 taxmann.com 362 (Amritsar – Trib.)]
15. Where assessee made payments to transporters toward freight without deducting TDS on such payments, since assessee was in receipt of details about PAN of transporters at time of payment of freights and, thus, complied with provisions of section 194C(6), no disallowance could be made under section 40(a)(ia). [Asst. CIT v Arihant Trading Co. [2019] 104 taxmann.com 336 (Jaipur – Trib.)]
16. CIT (A) has no power to declare TDS return filed by assessee as non-est. [Manoj Kumar Jaiswal v Asst. CIT [2019] 104 taxmann.com 372 (Bangalore – Trib.)]
17. In terms of section 206C(1A), any person responsible for collecting taxes under section 206C(1) need not to do so if he obtains a declaration from buyer that he is purchasing goods for reuse in manufacturing process or producing article or things.[Asst. CIT v Bansal Ship Breakers (P.) Ltd. [2019] 104 taxmann.com 399 (Ahmedabad – Trib.)]
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TRANSFER PRICING CASE LAWS
1. When there is a difference in level of capacity utilization of assessee and level of capacity utilization of comparable, then adjustment would be required to be made to profit margin of comparable on account of difference in capacity utilization in terms of rule 10-B (1)(e)(iii).[CIT v Petro Araldite (P.) Ltd. [2018] 93 taxmann.com 438 (Bombay-HC)]
2. Where Tribunal approved TP adjustment as proposed by TPO only on basis of one comparable which was objected to by assessee on account of its being functionally different from assessee, since entire TP adjustment has hinged only on one comparable and difference in functionality of assessee and said company was not discussed by Tribunal, entire issue of determining TP adjustment should be considered afresh by TPO. [Pyramid IT Consulting (P.) Ltd. v Addl CIT [2019] 105 taxmann.com 281 (Delhi-HC)]
3. No taxes to be withheld from cost apportioned by foreign AE which has no profit element.[Organon (India) Ltd. v Addl. CIT [2019] 105 taxmann.com 249 (Kolkata – Trib.)]
4. Interest on outstanding receivable is an international transaction as per amendment brought under Explanation to section 92B by Finance Act, 2012 retrospectively and assessee is liable to be visited with T.P. adjustment on account of interest short charged/uncharged. [Open Text Technologies India (P.) Ltd. v Dy. CIT [2019] 105 taxmann.com 163 (Hyderabad – Trib.)]
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INTERNATIONAL TAXATION CASE LAWS
1. Where Assessing Officer failed to demonstrate through prima facie material that entire transaction of sale of shares of an Indian Non-banking Financial Company by assessee promoter a Mauritian Company through IPO was sham and colourable device and a bogus transaction to simply avoid tax, Assessing Officer’s section 197 order denying ‘Nil’ withholding tax certificate to assessee was to be quashed and revenue was to be directed to release the withheld payment subject to adjustment in the assessment. [Indostar Capital v Asst. CIT [2019] 105 taxmann.com 96 (Bombay-HC)]
2. Assessee who is a resident but not ordinarily resident would be entitled for tax credit under section 91 in respect of federal as well as state taxes paid by him in USA. [Aditya Khanna v ITO (Intl Taxn) [2019] 105 taxmann.com 323 (Delhi – Trib.)]
3. Where services were rendered outside India, payments were made outside India and there was no permanent establishment or business connection of payees in India, commission paid to non-resident agents was not liable to tax under provisions of Act. [Dy. CIT v Jay Chemical Industries Ltd. [2019] 105 taxmann.com 41 (Ahmedabad – Trib.)]
4. Where customer did not acquire any copyright in software, rather there was mere transfer of copyrighted software, consideration would not amount to ‘royalty’ or fees for ‘included services’ or ‘technical services’ and, therefore, would not be taxable. [Sandvik Tooling Sverige AB v Dy. CIT [2019] 105 taxmann.com 37 (Pune – Trib.)]
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Disclaimer: Above said information are taken from publically available resources and believed to be accurate.
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Its a very informative and useful article, thanks a lot for sharing.