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Slide 1
By Mahesh Sarda July 6, 2013 Recent Case Laws in Direct
Taxes
I.C.D.S. Ltd. v. CIT 29 taxmann.com 129 3 Facts: A engaged in
business of hire purchase & leasing bought vehicles from
manufacturers and leased out to its customers who were actually
registered as owners of the vehicle. Claimed depreciation in
relation to vehicles which had been financed but registered in name
of customers. Also claimed depreciation at a higher rate-being used
in the business of running on hire. AO disallowed depreciation and
higher rate as A was neither the owner nor used for purposes of
business. The CIT(A) & tribunal allowed on both the counts.
However, the High Court reversed only a financer and not the owner
of the vehicles. On appeal to Supreme Court:
Slide 4
I.C.D.S. Ltd. v. CIT (29 taxmann.com 129) (cont) 4 Decision:
S.32 requires twin conditions: Asset must be owned, wholly or
partly, and Used for the purpose of the business. Ownership: A
vehicle along with its keys, was delivered to the assessee upon
which, the lease agreement was entered into which provides that o A
exclusive owner of vehicle at all point of time oIf lessee
committed default A empower to re-possess oAt conclusion of lease
period, lessee obliged to return the vehicle oA has right to
inspect the vehicle at all times. Departments objection - end of
lease period the ownership of vehicles is transferred to lessee at
nominal value - not important - A has right to retain the legal
title against the rest of the world - owner of the vehicle in the
eye of law.
Slide 5
5 The clues qua ownership lies in the lease agreement itself,
which clearly point in favour of the A Also analysed sub section 30
of section 2 and sub section 4 & 5 of section 51 of Motor
Vehicle Act. Relied on the decision of Supreme Court in case of
Mysore Minerals Ltd. v CIT 106 Taxman 166. Held that A is owner of
the Assets. Used for the purpose of business A had not used the
vehicles is also not acceptable because the vehicle was used by the
A in its business of leasing. Once it is held that leasing out of
the vehicles is one mode of doing business by the A and the income
derived from leasing out is treated as business income it would be
contradictory, in terms, to say that the vehicles are not used
wholly for the purpose of the A business. Relied on the Supreme
Court decision in case of CIT v Shaan Finance (P) Ltd. (1998) 231
ITR 308 I.C.D.S. Ltd. v. CIT (29 taxmann.com 129) (cont)
Slide 6
6 Higher rate of depreciation Import of the same term "purposes
of business", used in the second proviso to section 32(1) gains
significance. The interpretation of these words would not be any
different from that which was ascribed to them earlier, under
section 32(1). Therefore, the A fulfills even the requirements for
a claim of a higher rate of depreciation I.C.D.S. Ltd. v. CIT (29
taxmann.com 129) (cont)
Slide 7
CIT vs. Smifs Securities Ltd. 24 taxmann.com 222 7 Facts: In
scheme of amalgamation with Y ltd, assets and liabilities of Y Ltd.
were transferred. Excess consideration paid over value of net
assets acquired of Y Ltd. considered as goodwill on which
depreciation was claimed. AO rejected claim for depreciation as
goodwill was not an asset falling under Explanation 3 to section
2(1). On appeal to High Court. Decision: Sub para (b) of
Explanation 3 defines intangible assets: intangible assets, being
know-how, patents, copyrights, trademarks, licenses, franchises or
any other business or commercial rights of similar nature.
Slide 8
CIT vs. Smifs Securities Ltd.] 24 taxmann.com 222 (cont ) 8
Goodwill falls under the expression any other business or
commercial rights of similar nature. The principle of ejusdem
generis would strictly apply while interpreting the said
expression. The principle between the cost of an asset and the
amount paid constituted goodwill and that the assessee-Company in
the process of amalgamation required a capital right in the form of
goodwill because of which the market worth of the A stood
increased. In view of the above, depreciation on goodwill is
allowable under the said section.
Slide 9
CIT vs. Textool Co. ltd. Civil Appeal No. 447 of 2003 9 Facts:
The A set up a gratuity fund which was duly approved by the CIT.
Paid an amount of Rs. 50 lakhs as initial contribution and an
amount of Rs. 5 lakhs as annual premium to LIC pursuant to the
group Life Assurance Scheme framed by the LIC for the benefit of
the employees of the A instead of paying directly to the fund. In
the next year, amount paid directly to gratuity fund and in turn
fund has made the payment to LIC. Disallowed the claim for
deduction - payment towards the gratuity fund was made to LIC and
not to an approved gratuity fund, therefore, not allowable u/s
36(1)(v) The CIT(A), Tribunal and High Court (257 ITR 39 (Mad))
upheld the A claim on the basis that the payment to LIC under the
Group Life Assurance Scheme was for the exclusive benefit of the
employees of the A under the policy issued by it and that the
conditions stipulated in section 36(1)(v) had not been
violated.
Slide 10
CIT vs. Textool Co. ltd. Civil Appeal No. 447 of 2003 (Cont) 10
Decision: Though a fiscal statute has to be construed strictly and
nothing should be added to or subtracted from it, yet a strict
construction of a provision does not rule out the application of
the principles of reasonable construction to give effect to the
purpose and intention of any particular provision of the Act. A
bare reading of s. 36(1)(v) manifests that the real intention
behind the provision is that the employer should not have any
control over the funds of the irrevocable trust created exclusively
for the benefit of the employees. A had absolutely no control over
the fund created by the LIC for the benefit of the employees of the
A and further all the contribution made by the A in the said fund
ultimately came back to the Gratuity Fund, approved by the CIT.
Thus, the conditions stipulated in section 36(1)(v) were
satisfied.
Slide 11
Price Waterhouse Coopers (P) Ltd. 25taxmann.com 400 11 Facts:
Failure to add provision of gratuity to its total income when
already disallowed in the tax audit report filed was corrected in
revised return filed and that after reopening. AO imposed 200%
penalty u/s 271(1)(c). The Tribunal reduced to 100% on the view
that it was silly mistake considering the caliber and expertise of
the competent organization. : Decision: Reputed firm having great
expertise even could make a silly mistake It was not even noticed
by the AO who framed the original assessment order and made a
mistake in overlooking the contents of tax audit report. Calibre
and expertise of A have little to do with an inadvertent error. The
contents of Tax Audit Report no question of concealing its income
and no question of furnishing any inaccurate particulars. All that
has happened in the present case is through a bonafide and
inadvertent error.
Slide 12
12 CIT vs. Nalwa Sons Investment Ltd. 21 taxmann.com 184 SLP
dismissed against judgement of Delhi High Court in CIT v. Nalwa
Sons investment Ltd.[2010] 194 taxman 387. HIGH COURTS RULING When
assessment was made on income computed under section 115JB and tax
had been paid on income so computed, penalty under section
271(1)(c) would not be imposed with reference to additions that
would have been made taking into account concealment made by
assessee while making assessment under normal procedure
Slide 13
CIT vs. Silver Oak Laboratories Civil Application 18012/2009 13
S. 194C has been amended by the Finance (No.2) Act, 2009, w.e.f.
1.10.2009 to provide that work includes manufacturing or supplying
a product according to the requirement or specification of a
customer by using material purchased from such customer. It is
clarified that the definition of the word work will not include
manufacturing or supplying a product according to the requirement
or specification of a customer by using material purchased from a
person other than such customer. Note: This impliedly approves the
view taken in Glenmark Pharmaceuticals 324 ITR 199(Bom)
Slide 14
CIT v. Bongaigaon Refinery and Petrochemical Ltd. 25
taxmann.com 230 14 Facts: Deduction u/s 80HH claimed on the three
different and separate units set up for refinery, petrochemical and
polyster staple fibre business was allowed by AO after examining
unit wise P&L account. CIT however found that P&L account
was not supported by bifurcation of profits amongst three units and
disallowed deduction invoking s.263 holding that segregated
accounts for each unit should have been maintained to avail benefit
of 80HH and 80-I. Decision: Neither s.80HH nor s.80-I statutorily
obliges for maintaining accounts unit-wise. It was open to maintain
consolidated accounts. From which unit wise net profit should be
worked out. Once such working is certified by the Auditors the net
profit computation (unit-wise) could be placed before the AO who
can find out whether such profit(s) is properly worked out and on
that basis compute deduction under Section 80HH/80I.
Slide 15
2013 Deloitte Haskins & Sells High Court Decisions 15
Slide 16
CIT vs. Birla VXL Ltd.[2013] 32 taxmann.com 330 (Gujarat) 16
Facts: Incentives from State Govt. as sales-tax waiver/deferment
for modernization of existing industries in under developed area
treated as revenue receipts instead of capital receipts. CIT(A)
reversed the order observing the purpose as capital investment.
Tribunal confirmed the order of CIT(A). On Revenues appeal to High
court: Decision: The basic test with respect to the purpose of
subsidy needs to be applied judging the character of subsidy in the
hands of recipient, whether revenue or capital as laid down by
Supreme Court in case of Sahney Steel and Press Works Ltd 228 ITR
253 (Supreme Court) The point of time at which the subsidy is paid,
the source of the fund and the form of subsidy is irrelevant and
immaterial.
Slide 17
CIT vs. Birla VXL Ltd.[2013] 32 taxmann.com 330 (Gujarat)
(cont) 17 If the payment is in nature of subsidy to assist the
assesse in carrying on its trade or business, it is a trade
receipt. However, if the purpose is to help the assesse to set up
its business or complete the project, it should be treated as
having been received for capital purposes. Incentives were given to
industries existing in under-developed areas to undertake
modernization. Main purpose of the resolution was to modernize
existing industries which ordinarily would come at a considerable
cost, particularly when such industries were located in
under-developed areas Scheme was framed giving benefit of the Sales
Tax Waiver/Deferment Benefit had to be computed in terms of the
percentage of the fixed capital investment. Benefit, though
computed in terms of Sales Tax liability in the hands of the
recipient, the same was not mean to give any benefit on day-to-day
functioning of the business, or for making the industry more
profitable. The principle aim of the scheme was to cover the
capital outlay already made in undertaking special modernization of
its existing industry.
Slide 18
CIT vs. Kiccha Sugar Company Ltd. (Uttrakhand) Civil Appeal No.
50 of 2009 18 Facts: EPF collected not paid within due-date
specified in PF Act but paid before filing of return of income. AO
assessed the amount received as income u/s 2(24)(x) and refused
deduction u/s 36(1)(va) on the ground that amounts were not paid
within due date. CIT(A) and tribunal allowed deduction u/s 43B(b)
of the Act. Department filed an appeal Revenues contention: 43B did
not apply to employees contribution. In section 36(1)(va) Due date
has been defined in Explanation to Section which is under: For the
purpose of this clause, due date means the date by which the
assessee is required as an employer to credit an employees
contribution to the employees account in the relevant fund under
any Act, rule, order or notification issued thereunder or under any
standing order, award, contract of service or otherwise Due date as
per PF Act or not as per Income Tax Act
Slide 19
CIT vs. Kiccha Sugar Company Ltd. (Uttrakhand) (Civil Appeal
No.50 of 2009 (Cont) 19 Decision: S.2(24)(x) provides amounts of
employees contribution to provident fund collected by employer to
be assessed as his income and s.36(1)(va) provides for deduction of
the employees contribution if paid within the due-date of given
legislation. S.43B(b) provides that sum payable by employer by way
of any contribution to provident fund, etc shall be allowed if paid
before due date of filing of ROI. Due-date in s.36(1)(va) for
payment of EPF, ESIC, etc. contribution should be read with
s.43B(b) of the Act to mean due-date for filing ROI. The AO has
wrongly proceeded on the basis that the due-date in s.36(1)(va) is
the due date fixed by the PF Authority, whereas read in the context
of s.43B(b) it is the due-date fixed for filing ROI.
Slide 20
CIT vs. Kiccha Sugar Company Ltd. (Uttrakhand) (Civil Appeal
No.50 of 2009 (Cont) 20 Controversy: The same view is taken by
Delhi High Court in case of AIMIL 321 ITR 508 (Del)AIMIL However,
recently the ITAT Mumbai in case of LKP Securities has refused to
follow the decision of Delhi High Court on the ground that s. 43B
applies only to employers contribution and Honble High Court did
not notice the condition of section 36(1)(va) of the Act.
Slide 21
CIT vs. Syed Ali Adi 33 taxmann.com 212 (Andhra Pradesh) 21
Facts: Deduction was claimed u/s 54 on purchase of two independent
flats with sale proceeds of an ancestral house property. AO
restricted the claim to only one flat since two flats were
separated by strong wall, purchased from different vendors under
separate sale deeds. CIT(A) allowed 100% deduction. Tribunal
confirmed with CIT(A) Decisions : High court has dismissed the
appeal of the department relying on following decisions Karnataka
High court in case of D.Ananda Basappas 309 ITR 329 : "a
residential house" in Section 54 (1) of the Act has to be
understood in a sense that the building should be of residential
nature and "a" should not be understood to indicate a singular
number and where an assessee had purchased two residential flats,
he is entitled to exemption under Section 54, more so when the
flats are situated side by side and builder has effected
modification of the flats to make it as
Slide 22
CIT vs. Syed Ali Adi 33 taxmann.com 212 (Andhra Pradesh) (cont)
22 one unit, despite the fact that the flats were purchased by
separate sales deeds. Karnataka High Court in CIT V Smt.
K.G.Rukmaniamma 196 taxman 87 Where four flats in a single
residential complex were purchased by the assessee, it was held
that all four residential flats constituted a residential house for
the purpose of section 54 Delhi High court in case of Prem Prakash
Bhutani wherein it was held that exemption u/s 54 only requires
that property should be of residential nature and the fact that the
residential house consists of several independent units cannot be
an impediment to grant relief u/s 54 even if such independent units
were on different floors
Slide 23
Maersk Co. Ltd. 33 taxmann.com 165 (UttraKhand) 23 Facts: The A
was a non-resident company engaged in certain businesses in India
for which it employed 13 Danish nationals for doing work in India
and remunerated them for doing such work. Having regard to the
fact, principally, that those 13 Danish nationals received salaries
for services rendered in India, the AO and the CIT (Appeals) held
that their salaries were taxable in India. On appeal, the Tribunal
held that those remunerations were, in view of the Treaty between
India and Denmark, taxable in Denmark and not in India. Section
5(2) of the Act - total income of any previous year of a person,
who is non resident includes all income from whatever source
derived which is received or deemed to be received in India in such
year by or on behalf of such person; or accrues or arises or is
deemed to accrue or arise to him in India during the year.
Slide 24
Maersk Co. Ltd. - 33 taxmann.com 165 (Uttrakhand) (cont) 24
Section 9(1)(ii) - Income which falls under the head salaries, if
is rendered in India shall be regarded as income earned in India.
Undisputed facts - all the 13 peoples were Danish nationals and
stayed in India for less than 183 days and received salary for
services rendered in India As per DTAA between India and Denmark
remuneration derived by a resident of either of those two countries
in respect of an employment excercised in the other country shall
be taxable only in the country to which he belongs. If he is
Present in the other country for a period or periods not exceeding
in the aggregate 183 days in fiscal year of the other country
Remuneration is paid by or on behalf of employer, who is not a
resident of other country Remuneration is not borne by a permanent
establishment or fixed base which is the employer has in the other
country
Slide 25
Maersk Co. Ltd. - 33 taxmann.com 165 (Uttrakhand) (cont) 25 In
present case, it is found that all 13 peoples were stayed for less
than 183 days and payment was made by non resident employer and not
borne by PE or fixed base which employer has in India, therefore
not taxable. There was dispute in regard to the residence of
assessee, whether resident of Denmark or UK, where it held that
residence is of hardly any importance as, the treaty requires
employer to be a non-resident of India and not necessarily a
resident of Denmark.
Slide 26
CIT vs. Kutchi Dasa Oswal Moto Pariwar Ambama Trust 212 taxman
435 (Gujarat) 26 Facts: AO rejected application seeking
registration u/s 12A - no documentary evidence was submitted
regarding its activities and as a result, department will totally
remain in dark as to actual activities carried out by trust since
inception. The Commissioner keeping same view of AO denied
registration u/s 12AA of the Act. Decision: The Commissioner has to
satisfy himself regarding the objective of the trust and
genuineness of the activities. Merely on the ground that activities
of trust had not commenced, application u/s 12AA cannot be
rejected.
Slide 27
Gujarat High Courts judgments for section 80IB (10) 27 Nikhil
Associates & Safal Associates ITA No.1155 & 1357 of 2011 AO
disallowed the deduction claimed u/s 80-IB on the ground that
Assessee (i.e. developer) was not the owner of land on which
construction of Residential units were carried out. Honble High
court following own decision of Radhe Developers reported at [2012]
341 ITR 403(Guj), held that developer need not be the owner of the
land Sathdar Enterprises ITA No. 1389 &1390 of 2011 Deduction
u/s 80-IB cannot be denied even when Assessee follows Project
Completion method instead of Percentage Completion method as
prescribed by AS-7(Revised).
Slide 28
Gujarat High Courts judgments for section 80IB (10) (cont..) 28
Tarnetar Corporation ITA No. 1241 of 2011 Local authority declined
BU permission on technical grounds and not for non- completion of
construction. The permission was then granted by an order dated 19-
3-2009. Construction was completed before 31/03/08, several units
were sold before that date and application was also moved for BU
permission on 15/02/06 i.e. almost two years before the cut-off
date. The Local authority had rejected such application on 01/07/06
for some technical reasons and not on the ground of non-completion
of construction. Thereafter, upon revised efforts from the
assessee, it granted the said permission by an order dated
19/03/09. The High Court held that not every condition of the
statute can be seen as mandatory. If substantial compliance thereof
is established on record, a minor deviation thereof would not
vitiate the very purpose for which deduction was being made
available.
Slide 29
Miscellaneous Judgments 29 Sheela Christian charitable Trust
[2013] 32 taxmann.com 242 (Madras) Period of six months provided in
section 12AA(2) for disposal of application seeking registration is
only directory and, therefore, not passing an order within the said
period would not automatically result in granting registration of
trust. L G Chaudhary [2013] 3 taxmann.com 156 (Gujarat) Penalty u/s
271(1)(c) cannot be imposed for disallowance u/s. 40(a)(ia) for
non- payment of TDS, being a technical default.
Slide 30
2013 Deloitte Haskins & Sells Tribunal Rulings 30
Slide 31
Sabarmati Ashram Gaushala Trust ITA No. 670/Ahd/2013 (Ahmedabad
ITAT) 31 Facts: The trust is engaged in research in the field of
animal husbandry and improvement in the quality of animals. As a
part of the activities, the trust is producing and selling semen
doses to the government departments and co-operative departments
who in turn sell the doses to the farmers. Assessee filed return of
Income at Rs. Nil and claimed exemption u/s 11 of the Act. The
learned AO has held that the objects of the Appellant Trust are of
the category of Advancement of any other object of general public
utility and consequently hit by the proviso to section 2(15) of the
Act. The exemption u/s 11 is therefore denied to the Appellant
Trust. The CIT(A) sustained the order of AO against which assessee
was in appeal before ITAT.
Slide 32
Sabarmati Ashram Gaushala Trust ITA No. 670/Ahd/2013 (Ahmedabad
ITAT) (cont.) 32 Decision: The activity will be deemed to be in
nature of trade, commerce or business, only if same is carried on
with the intention to earn profit. The Courts in series of
decisions have held that it is an activity carried on in a
systematic manner with a view to earn profit, which will be termed
as business. In order to hold that the activity is in the nature of
trade, commerce or business, there should be profit motive. If some
profit is received by the Trust, which is incidental to the
activities of the trust, shall not be construed to be activity in
the nature of trade, commerce or business. The legislature
intention of inserting section 2(15) is to deny exemption to such
assessee who are engaged in business activities in the garb of
Charitable purpose
Slide 33
Sabarmati Ashram Gaushala Trust ITA No. 670/Ahd/2013 (Ahmedabad
ITAT) (cont) 33 Not affect the cases of charitable institutions
which are carrying on charitable activities genuinely To decide the
applicability of proviso to section 2(15) of the Act: the objects
the purpose and manner of activities, whether to make profit or
whether the profit earned was incidental to the activities of the
trust, overall facts and circumstances in its entirety, the volume
of the profit received, and whether the activities were conducted
in a way to fulfill its object of the trust, which have essentially
to be charitable in nature, and the intention of the trustees, all
have to be considered to arrive at a just and fair conclusion. Mere
selling some product at a profit will not ipso facto hit the
assessee by applying the proviso to section 2(15) and deny the
exemption available u/s 11 of the Act.
Slide 34
Sabarmati Ashram Gaushala Trust ITA No. 670/Ahd/2013 (Ahmedabad
ITAT) cont. 34 The intention of the trustees and the manner in
which the activities of the charitable trust/institution are
undertaken are highly relevant to decide the issue of applicability
of proviso to section 2(15) of the Act. Relied on CBDT Circular no.
11/2008 dated 19-12-2008 Decision of Delhi High court in case of
ICAI v DGIT Decision of ITAT chandigarh bench in case of Himachal
Pradesh Environment Protection and pollution control Board v
CIT
Slide 35
Abacus International Pvt. Ltd. 34 taxmann.com 21 (Mumbai ) 35
Facts: The assesse is a Singapore tax resident engaged in business
of providing Computerised Reservation System(CRS) for airline
companies. The assesse receive income tax refund along with
interest and such interest was offered to tax @15% claiming the
benefit of Article 11[dealing with Interest income] of
India-Singapore DTAA. The AO however denied the treaty relief
invoking Article 24 on the ground that no proof of remittance of
interest to Singapore was furnished and taxed interest @20%
applying domestic law.
Slide 36
Abacus International Pvt. Ltd. 34 taxmann.com 21 (Mumbai) cont.
36 Decision: Reduced tax rate under Article 11 would be available
only to the extent income is remitted to or received in Singapore.
The Article 24 makes it clear that receipt or remittance of income
in Singapore is sine qua non for claiming the benefit of lower rate
of tax Rejected A plea that encashment of refund voucher should be
taken as receipt in Singapore since the assesse did not have any
Indian bank A/c ITAT held that the burden is on the A to
demonstrate and prove that amount of income was positively remitted
to or received in Singapore.
Slide 37
JK Investors(Bombay) Ltd. ITA No. 7858/Mum/2011 (Mumbai) 37
Facts: The assesse company claimed dividend income of
Rs.8,4,27,436/- and interest on mutual funds of Rs.24,66,504 as
exempt u/s 10(38) and 10(35) of the Act Disallowed on its own u/s
14A - Interest expenses Rs.1,52,38,592 + Demat charges Rs.2,96,0180
+Administration expenses Rs.10,000/- The AO however invoked section
14A rwr 8D objecting to the quantum of administrative expenses and
triggered disallowance placing parity on Portfolio Management
Services which involves at least 2% charges The assesse submitted
that the receipt of income was either from group companies on five
dividend warrant receipts and dividend on mutual fund was on
reinvestment basis and one dividend was through ECR. Moreover the
investment did not change in character and the entire holding was
primarily for controlling interest over companies.
Slide 38
JK Investors(Bombay) Ltd. ITA No. 7858/Mum/2011 (Mumbai) cont
38 On appeal to CIT(A), placing reliance on decision of Bombay high
court in the case of Godrej & Boycee Mfg. co. Ltd. vs. DCIT on
the issue at large did not give any finding. On appeal to tribunal,
Decision: The issue before us is applicability of 14A r.w.r. 8D The
words that need reference in section 14A(2) are if AO having
regards to the accounts of the assesse, is not satisfied with the
correctness of the claim Assessing Officer can invoke Rule 8D only
when he records satisfaction in regard to the correctness of the
claim of the assessee, having regard to the accounts of the
assessee.
Slide 39
JK Investors(Bombay) Ltd. ITA No. 7858/Mum/2011 (Mumbai) cont
39 While rejecting the claim of the assesse with regard to the
expenditure or no expenditure, as the case may be, in relation to
exempt income, the AO would have to indicate cogent reasons and it
is therefore necessary for him to examine the accounts of the
assesse. The AO without considering the claim of assesse and cannot
straightaway embark upon computing disallowance under Rule 8D.
Moreover, the assesse itself has disallowed the interest which is
directly applicable, demat charges and administrative expenses on
estimation. With respect to the expenditure, AO has not examined
any expenditure in P&L account so as to relate to exempt
income, nor gave any finding that assessees claim was not correct
for any reason. Rule 8D cannot be invoked directly without
satisfying about the claims and consequently disallowance was not
permissible.
Slide 40
Gurinder Singh Bawa v. DCIT ITA No. 20175/Mum/2010 (Mumbai) 40
Facts: For AY 2005-06, the AO passed an intimation u/s 143(1)
accepting the return as filed. Subsequently, there was a search u/s
132. AO noticed that an amount of Rs. 93 lakhs received by the
assessee as a loan in earlier years had been treated as a gift and
credited to the capital account. He passed an assessment order u/s
153A in which he held that the said amount was assessable as a cash
credit u/s 68. The CIT(A) partly confirmed the addition. Before the
Tribunal, the assessee argued that as no incriminating material was
found during the search, the addition could not be made u/s
153A.
Slide 41
Gurinder Singh Bawa v. DCIT ITA No. 20175/Mum/2010 (Mumbai)
cont 41 Decision: In All Cargo Global Logistics 137 ITD 287
(Mum)(SB), the Special Bench held that in a case where the
assessment has abated the AO can make additions in the assessment,
even if no incriminating material has been found.All Cargo Global
Logistics However, in a case where the assessment has not abated,
an assessment u/s 153A can be made only on the basis of
incriminating material On facts, as the assessment was completed
u/s 143(1) and the time limit for issue of s. 143(2) notice had
expired on the date of search, there was no assessment pending and
there was no question of abatement. Therefore, the addition could
be made only on the basis of incriminating material found during
search. As the addition u/s 153A was made on the
information/material available in the return of income (i.e. the
information regarding the gift was available in the return of
income as capital account had been credited by the assessee by the
amount of gift) and not on the basis of any incriminating material
found during the search, the AO had no jurisdiction to make the
addition u/s 153A.
Slide 42
M Star Charitable Society - [2013] 32 taxmann.com 239 (Cochin )
42 The taxpayer conducting coaching classes cannot be treated as
charitable institution as provided in section 2(15) of the Act and
therefore not eligible for registration u/s 12AA of the Act.