THE CHAMBER OF TAX CONSULTANTS 3, Rewa Chambers, Ground Floor, 31, New Marine Lines, Mumbai - 400 020 Tel.: 2200 1787 / 2209 0423 / 2200 2455 E-mail: office@ctconline.org Website: www.ctconline.org STUDY GROUP MEETING Thursday, 14 th December, 2017 SNDT, Committee Room, Churchgate, Mumbai. RECENT JUDGMENTS ON DIRECT TAX Date: 14.12.2017 By K. Gopal, Advocate Recent Decisions under Direct Taxes Supreme Court Judgments: 1. DCIT vs. ACE Multi Axes Systems Ltd. [2017] 88 taxmann.com 69 (SC) Even though eligible business of an assessee is given benefit of deduction under section 80-IB on assessee satisfying conditions mentioned in subsection (2) of section 80-IB, yet benefit of said deduction can be denied subsequently on ground that during 10 consecutive years, it ceases to be a small scale industry. 2. CIT vs. Modipon Ltd [2017] 87 taxmann.com 275 (SC) Advance deposit of central excise duty in Personal Ledger Account (PLA) constitutes actual payment of duty within meaning of section 43B and, therefore, assessee is entitled to benefit of deduction of said amount. 3. Rajmandir Estates (P.) Ltd vs PCIT [2017] 77 taxmann.com 285 (SC) 1
SLP dismissed against High Court's ruling that where assessee with a small amount of authorized share capital, raised huge sum on account of premium, exercise of revisionary powers by Commissioner opining that this could be a case of money laundering was justified. Assessee s SLP dismissed filed against the decision of Calcutta High Court in the case Rajmandir Estates Pvt. Ltd. vs. PCIT [2016] 386 ITR 162 (Cal) 4. M/s. SRD Nutrients Pvt. Ltd. vs. Commissioner of Central Excise [Civil Appeal No. 2781-2790 of 2010] It is trite that when two views are possible, one which favours the assessee has to be adopted. Circulars are binding on the Department. The Government itself has taken the position that where whole of excise duty or service tax is exempted, even the Education Cess as well as Secondary and Higher Education Cess would not be payable. This is the rational view High Court Judgments: 5. Hindustan Coca Cola Beverages Pvt. Ltd. [2017] 87 taxmann.com 295 (Rajasthan) Where there was an arrangement between assessee and distributors by which responsibilities of each party were stipulated and assessee sold goods to Distributors and no amount was paid to Distributors as commission while certain amounts were reduced from MRP fixed by assessee, there would be no occasion of invoking provisions of Section 194H 6. CIT vs. Parle Soft Drink[2017] 88 taxmann.com 24 (Bom) Where under master agreement between Coca Cola and Parle group, assessee-subsidiary was to be formed for bottling soft drinks for coca cola 2
and as a result of breach of contract by Coca Cola assessee's fundamental right for starting bottling business was taken away, compensation received by assessee from Coca Cola would be treated as capital receipt. 7. Kanan Devan Hills Plantations Co. (P.) Ltd. vs. ACIT [2017] 88 taxmann.com 14 (Kerala) Where renovation and modernization had brought substantial improvement in functioning of establishment and amount so spent was over 50 per cent of then existing book value of establishment, deduction was to be allowed under section 80-IA(4)(iv) 8. Ambience Hospitality vs. DCIT [Crl. Rev. P 16/2015] (Delhi) Submission that claim of depreciation on land was a mere clerical mistake is not acceptable if the assessee did not file a revised return to correct the alleged mistake. A claim in a return which is scrutinized by the auditors and the directors cannot be considered as a mere accounting mistake 9. PCIT vs. Paradice Inland Shipping Pvt. Ltd. [2017] 84 taxmann.com 58 (Bom) Companies which invest share capital cannot be treated as bogus if they are registered and have been assessed. Once the assessee has produced documentary evidence to establish the existence of such companies, the burden shifts to the Revenue to establish their case. Tribunal Judgments: 10. Airline Allied Services Ltd. vs. DCIT [2017] 87 taxmann.com 281 (Delhi-ITAT) Where advances given by holding company to assessee-company were written off by holding company but with clear information that said write off in books of account would not prejudice its right to recover amount 3
from assessee in future, section 41(1) could not be invoked against assessee. 11. ACIT (TDS) vs. Nexgen Education Trust [ITA 1148, 1149, 1150, 1151/Hyd/2016 No penalty can be levied merely because the tax was deducted as per section 194C under the bonafide belief as against 194J of the Act. 12. ACIT (TDS) vs. Nexgen Education Trust [ITA 1152, 1153, 1154, 1155/Hyd/2016 (Hyderabad- ITAT) No demand can be raised and interest can be levied without examining the nature of services provided under section 194C and 194J of the Act. 13. M/s. Lucent Technologies GRL LLC vs ACIT [MA No. 411/Mum/2016 to 414/Mum/2016 The amendment to s. 254(2) to curtail the limitation period for filing rectification applications to six months from four years is prospective and applicable to appeal orders passed after 01/06/2016 and not the orders passed prior to 01/06/2016. 14. Amira Pure Foods Pvt. Ltd vs. PCIT[2017] (ITA 3205/Del/2017) Explanation 2 to s. 263 inserted w.e.f. 01.06.2015 does not override the law as interpreted by the various High Courts whereby it is held that the CIT cannot treat the AO's order as being erroneous and prejudicial to the interest of revenue without conducting an enquiry and recording a finding. 15. Shri NileshJanardan Thakur vs. ITO [ITA 3738/Mum/2013] A receipt cannot be taxed u/s 56(2)(vi) merely on conjecture or surmises. The AO has to prove beyond doubt that a particular receipt is taxable as income. Merely because the person who paid the amount does not initiate any action for recovery of money is not sufficient for making addition ***************** 4
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