CA Final Indirect Tax Case Laws Relevant for May 2015 Exam

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CA Final Direct Tax Case Laws Relevant for May 2015 Exam

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Supreme Court made BCCI to pay Service tax for recording IPL Cricket Matches

In August’ 14, Hon’ble CESTAT of Mumbai in case of BCCI v. Comm. of Service tax- Mumbai, held that:

1. The activity of producing audio-visual coverage of ‘Indian Premier League’ cricket matches held in India by non -resident service providers would be liable to tax under ‘programme production services’ and BCCI was liable to pay tax under reverse charge mechanism.
2. The Tribunal also took the view that supply of software programmes for recording also falls under the said taxable service.
3. It further held that BCCI has suppressed material facts from the department and hence, extended period of time has rightly been invoked for confirmation of service tax demand.
4. Aggrieved by the said judgement, BCCI filed appeal before the Apex Court.
5. The Hon’ble Supreme Court dismissed the plea of BCCI and upheld the order of CESTAT, thereby resulting in a big blow for BCCI for service tax amounting over Rs. 18 crores and interest & penalty thereupon.

For the sake of convenience, the said order of Supreme Court has been enclosed herewith.

Download Full Text of SC Order 

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Supreme Court: Mobile/cell charger is not a part of cell phone

Hon’ble Supreme Court has delivered a landmark verdict in the matter of STATE OF PUNJAB & ORS. v. NOKIA INDIA PVT. LTD. & pronounced that the mobile/cell phone charger is an accessory to cell phone and is not a part of the cell phone.

Brief facts of the case:

The matter pertains to the Punjab VAT Act, 2005 wherein the cellular telephones at allowed to be taxed at a concessional rate. M/s Nokia India Pvt. Ltd. deals in selling of mobile phones and mobile chargers. It paid concessional tax on chargers as well. The Assessing Authority held that the mobile chargers  are the accessories, hence full rate of tax was supposed to be levied thereupon. The matter went to appeal. The Deputy Commissioner(Appeals) as well as Tribunal upheld the stand taken by the assessing authority.

However, the P&H High Court took the contradictory view stating that battery charger is a part of the composite package of cell phone.

Aggrieved by the order of High Court, govt. filed an appeal before the Apex Court.

M/s Nokia contended that charger is an integral part of the cell phone and the cell phone cannot be operated without the charger and when any person comes for cell phone, he purchases the cell phone and then automatically takes away the charger for which no separate money is charged.

Conclusion:

The court held that battery charger cannot be held to be a composite part of the cell phone but is an independent product which can be sold separately, without selling the cell phone.

The said verdict may be accessed from the link hereinbelow:

http://judis.nic.in/supremecourt/imgs1.aspx?filename=42202

Comment:

It will be a setback for the industry(especially operating in Punjab VAT). It would be interesting to note whether the said interpretation shall be referred to the Constitutional Bench at a later stage or not.

This case law has been submitted by CA Sumit Grover. He can be reached at sumitgrover.ca@gmail.com.

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CA Final Indirect tax Supplementary Study Paper Relevant for May 2015 and November 2015 examinations

Download CA Final Indirect tax Supplementary Study Paper Relevant for May 2015 and November 2015 examinations

Labels: CA Final Case Law, CA Final Indirect tax Supplementary Study Paper Relevant for May 2015 and November 2015 examinations, case laws,

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CA Final Indirect Tax Select Cases Laws Relevant for May 2015 and November 2015 examinations

Download CA Final Indirect Tax Select Cases Laws Relevant for May 2015 and November 2015 examinations




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CA Final Direct Tax Supplementary Study Paper Relevant for May 2015 and November 2015 examinations

CA Final Direct Tax Supplementary Study Paper Relevant for May 2015 and November 2015 examinations

Labels: CA Final, CA Final Case Law, case laws, CA Final Direct Tax Supplementary Study Paper Relevant for May 2015 and November 2015 examinations,

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No depreciations to owner on assets given on lease if loan transaction was disguised as sale and lease back transaction

Assessee was not entitled to claim depreciation on asset which was purchased from Gujarat State Electricity Board and same was immediately leased back to it, since the transaction was a sham transaction

Facts:

a) The assessee had purchased energy meters of different makes for a consideration of Rs. 4.99 crores from Gujarat State Electricity Board (GEB) and these meters (assets) were then immediately leased back to GEB vide a lease agreement;

b) It accordingly claimed depreciation on the said meters under proviso to section 32(1). The Assessing Officer (‘AO’) disallowed the depreciation claim of assessee by holding that the alleged lease transaction was in reality a transaction of finance. On appeal, the CIT (A) upheld the order of AO.

The Tribunal held in favour of revenue as under:

1) The assessee’s contention that transaction was with a State Government and it would be highly improper to impute any collusiveness or colourable nature of the transaction without any concrete evidence was misconceived;

2) The facts on the file itself spoke that the transaction in question was a colourable device with the twin purposes of financing the GEB and at the same time making such an arrangement to enable the financer to claim depreciation on the assets and in lieu thereof to pay reduced rate of interest to the financer in proportion to the value of benefit availed by the financer, for which it otherwise was not entitled to;

3) A perusal of section 23 of the Indian Contract Act, 1872 reveals beyond doubt that even if the consideration or object of an agreement may not be expressly forbidden by law, but if it is of such a nature that, if permitted, it would defeat the provisions of law, the same will not be lawful;

4) It is always the goods or the assets itself which are the primary subject of a valid transfer, not the incidental benefits, which automatically pass on to the transferee with the transferred asset;

5) In the case in hand, only the incidental tax benefits were intended to be transferred without any intention to transfer the asset itself. Thus, whole of the effort had been made to transfer the right to claim depreciation on the assets to the assessee for the purpose of the Income-tax Act, but not the assets itself. Therefore, the Assessing Officer had rightly disallowed depreciation on electric meters - HATHWAY INVESTMENTS (P.) LTD. V. ACIT (2013) 38 taxmann.com 389 (Mumbai - Trib.)

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E-homes with pre-fitted gadgets akin to other residential units; their developer isn’t dominant player

E-homes with facilities like wifi, finger print security cannot be said to be different from other residential units

Facts:

a) The informant, allottee of e-homes, filed information alleging abuse of dominance by Opposite Party (‘OP’) for adopting anti-competitive practices for the allotment of their e-homes;

b) He alleged that the e-homes developed by OP were likely to attract buyers who wanted to buy homes pre-fitted with hi-tech gadgets like wifi, finger print security system, parkings lots, etc;

c) He also contended that the OP created the special category of e-homes and had acquired a 100% dominant status for being the only real estate developer to design and develop such e-homes in Delhi/NCR;

d) As a result of the dominance enjoyed by OP, it started demanding high premiums and forced allottees to sign an Allotment Agreement.

The Competition Commission held as under:

1) The argument of informant that 'the provision for services of e-home' was a distinct product having separate market for itself, does not seem to be convincing because the facilities being provided by the OP like prefitted hi-tech gadgets, i.e., wifi, finger print security system, parking lots, etc., could easily be installed in any house without much structural modifications and alterations;

2) Thus, e-homes in question couldn’t be deemed as different products from other residential flats;

3) There has been no information in the public domain to prove that the OP was a dominant real estate developer in the relevant market and it had been abusing its position of dominance;

4) As per the information in public domain, there were several upcoming residential projects in Delhi/NCR and OP was not the only real estate developer in the relevant geographical market;

5) Therefore, the OP did not, prima facie, appear to be a dominant player in the relevant market. In the absence of dominance of OP in the relevant market, there was, prima facie, no reason for abuse of dominance in that market - ACHYUT P. RAO V. DESIGNARCH INFRASTRUCTURE (P.) LTD. (2013) 38 taxmann.com 380 (CCI)

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Mother is natural guardian even during lifetime of father; clubbing provisions not unconstitutional

Sub-section (1A) of section 64, including clause (a) of the Explanation to said sub-section is constitutionally valid

Facts:

a) The assessing authority completed the assessment by clubbing the income of assessee’s two minor sons with her income as her income was greater than that of her husband;

b) The assessee contended that the provisions of clubbing the income of the minor child, infringed the right of equality as enshrined by article 14 of the Constitution of India and, thus, were ultra vires;

c) She further contended that clause (a) of the Explanation to section 64(1A), was violative of section 6 of the Hindu Minority and Guardianship Act, 1956, according to which the father is the natural guardian and after him the mother is the natural guardian. Thus, the assessee filed instant writ petition challenging the constitutional validity of section 64(1A).

The High Court dismissed the petition with following observations:

1) HC relied on following interpretation of SC in case of Githa Hariharan v. Reserve Bank of India (1999) 104 Taxman 220:

1. Under the Hindu law both mother and father are the natural guardians of the minor sons or daughters;
2. Gender equality is one of the basic principles of our Constitution and in the event the word 'after' is to be read to mean a disqualification of a mother to act as a guardian during the lifetime of the father, the same would definitely run counter to the basic requirement of the constitutional mandate and would lead to a differentiation between male and female;
3. The father by reason of a dominant personality cannot be ascribed to have a preferential right over the mother in the matter of guardianship, since both fall within the same category

2) Thus, it cannot be said that the mother is not the natural guardian during the lifetime of the father or until he is disqualified from being the natural guardian;

3) When both mother and father are natural guardians, then adding the income of the minor child in the income of the parent, whose income is greater, can’t be said to be arbitrary, artificial or evasive of the object sought to be achieved;

4) Therefore, the constitutional validity of sub-section (1A) of section 64, including clause (a) of the Explanation to the said sub-section was to be upheld and the same were not violative of article 14 of the Constitution of India or section 6 of the Hindu Minority and the Guardianship Act -ANJU MEHRA V. UNION OF INDIA (2013) 38 taxmann.com 383 (Punjab & Haryana)

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Vodafone India Services Pvt. Ltd (No. 2) vs. UOI (Bombay High Court)

Transfer Pricing: Existence of income is a jurisdictional requirement for the applicability of T. P. provisions. AO must deal with it after giving personal hearing before making reference to TPO. The dept should not treat the assessee as an adversary who has to be taxed, no matter what

The assessee, an Indian company, issued equity shares at the premium of Rs.8591 per share aggregating Rs.246.38 crores to its holding company. Though the transaction was reported as an “international transaction” in Form 3 CEB, the assessee claimed that the transfer pricing provisions did not apply as there was no income arising to it. The AO referred the issue to the TPO without dealing with the preliminary objection. The TPO held that he could not go into the issue whether income had arisen or not because his jurisdiction was limited to determine the ALP. He held that the assessee ought to have charged the NAV of the share (Rs. 53,775) and that the difference between the NAV and the issue price was a deemed loan from the assessee to the holding company for which the assessee ought to have received 13.5% interest. He accordingly computed the adjustment for the shares premium at Rs. 1308 crore and the interest thereon at Rs. 88 crore. The AO passed a draft assessment order u/s 144C(1) in which he held that he was bound u/s 92-CA(4) with the TPO’s determination and could not consider the contention whether the transfer pricing provisions applied. The assessee filed a Writ Petition challenging the jurisdiction of the TPO/AO to make the adjustment. On the merits of the adjustment, the assessee filed objections before the DRP. Before the High Court the assessee argued that (i) it was a precondition before the transfer pricing provisions apply that there has to be income arising to the assessee. As the allotment of shares at a premium does not give rise to income, the transfer pricing provisions do not apply, (ii) there was a breach of natural justice because neither the TPO nor the AO had heard the assessee on, or decided, the fundamental issue as to whether the transfer pricing provisions applied at all, (iii) the DRP does not offer an alternative remedy because the DRP has no power to quash the draft assessment order even if it is satisfied that the same is without jurisdiction & (iv) the DRP cannot take an unbiased view because one of its members is the DIT (TP). HELD by the High Court:

(i) The assessee’s contention that the DRP does not offer an alternative remedy because it does not have the power to quash the assessment order even if it is satisfied that the same is without jurisdiction is not acceptable because in Vodafone 37 taxmann.com 250 it was held that the DRP’s power to confirm would include the power not to confirm and to annul the draft assessment order;

(ii) It is clear from s. 92(1) that there must be income arising/ potentially arising by an international transaction for the application of the transfer pricing provisions. This is a jurisdictional requirement and has to be dealt with by the AO when specifically raised by the assessee before making reference to the AO. Grant of personal hearing before referring the matter to the TPO has to be read into s. 92CA(1) in cases where the very jurisdiction to tax under Chapter X is challenged by the assessee (Veer Gems 351 ITR 35 (Guj) disagreed with to the extent it holds that no hearing is required at the stage of reference to the TPO even on jurisdictional issues). If, after the hearing the assessee, the AO holds that there is an international transaction, that would be binding on the TPO;

(iii) The department’s contention, based on CBDT Instruction No.3 dated 20.05.2003, that the action of the AO in referring the international transaction is a mere administrative act is not acceptable. The AO is bound to hear the assessee in respect of jurisdictional issues before making the reference. The failure to do so is an illegality;

(iv) The assessee’s contention that the DRP would not give a fair hearing as one of its members is the DIT (TP) is not acceptable because it overlooks the fact that these are not appeal proceedings but to finalize the draft assessment order. Also, the DIT(TP) who approved the TPO’s order is not on the panel;

(v) The Revenue should keep in mind the sage advice of Nani Palkhivala that the department should not cause misery and harassment to the taxpayer and the gnawing feeling that he is made the victim of palpable injustice. In this case it would be natural for the assessee to feel harassed as neither the AO nor the TPO gave a hearing or dealt with the preliminary objection. It is hoped that the revenue will be more sensitive to the just demands of the assessee and not treat the assessee as an adversary who has to be taxed, no matter what;

(vi) The DRP should decide the assessee’s objection regarding chargeability of alleged shortfall in share premium as a preliminary issue. In case the DRP’s decision on the preliminary issue is adverse, the assessee shall be entitled to challenge it in a writ petition if it can show that the DRP’s decision on the preliminary issue is patently illegal notwithstanding the availability of alternate remedy before the ITAT.

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Revenue exempted from disclosing info obtained from Financial Intelligence Unit justifying search operations

Preparation of satisfaction note on information collected from Financial Intelligence Unit to be treated as unpublished document for which privilege under Evidence Act could be validly claimed.

Facts:

a) The assessee was a leading importer and exporter of bullion, platinum bars and other precious metals;

b) The search and seizure operations under section 132 were carried out against assessee on basis of information received from Financial Intelligence Unit (‘FIU’) that heavy cash amounts were deposited in bank accounts of assessee and its sister concern on a regular basis;

c) The assessee filed writ challenging the search and seizure operations and claimed its right to examine satisfaction note to assail validity and bona fides of search and seizure operation;

d) On other hand, revenue filed an application claiming privilege of unpublished material in public interest under the Evidence Act

The High Court held in favour of revenue as under:

1) It couldn’t be denied that the FIU, reporting directly to the Finance Ministry, was responsible for receiving, processing, analyzing and disseminating information related to suspected financial transactions;

2) It was also responsible for coordinating with and strengthening the efforts of national and international agencies, investigation into it in pursuance of global efforts against money laundering, terrorist financing and related crimes;

3) The preparation of the satisfaction note on such information could be treated as unpublished documents for which the revenue has validly claimed privilege under sections 123 and 124 of the Evidence Act;

4) A large amount of accounted black money is floating in the market which poses a serious threat to the national economy. The Government of India has adopted several methods to discouraging the parallel economy being run by unscrupulous persons;

5) The FIU is engaged in collecting such information against the money laundering, terrorist financing and related crimes. The sources and methods of the organization collecting and processing such sensitive information couldn’t be subjected to public scrutiny to jeopardize the interest of the organization and national interest.

6) Thus, the application filed by the Income-tax department was to be allowed - M.D. OVERSEAS LTD. V. DIRECTOR GENERAL OF INCOME-TAX (2013) 38 taxmann.com 433 (Allahabad)

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Assistance in financial and risk management is a ‘technical service’; FTS under India-US DTAA

Where assessee-company was making use of advice, input, experience and assistance rendered by US based company in its decision making process of financial and risk management, etc., services so rendered would be technical services under India-US DTAA.

Facts:

a) The assessee-company, engaged in providing software development services to the customers in India, claimed deduction of payment made to US based company (‘foreign company’) towards management services rendered by it;

b) In course of assessment, the Assessing Officer opined that the payment made by the assessee to foreign company would come within the ambit of consultancy fees and, therefore, the it was liable to deduct tax on these payments under section 195;

c) Since assessee failed to deduct tax at source, the Assessing Officer disallowed payments made by assessee by invoking provisions of section 40(a)(ia). Further, the CIT (A) confirmed said disallowance. The aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of revenue as under:

1) The assessee was making use of the advice, input, experience and assistance rendered by the foreign company in its decision making process of financial and risk management, etc;

2) The foreign company was also giving training to the assessee's employees in making use of the inputs, experience, experimentation, assistance and advice rendered by them for taking a better possible decision in order to achieve the desired objectives;

3) Decision making process is a highly complicated and technical one, unless the assessee gets a technical input and advice from financial and risk management experts it may be difficult to select a right process for the growth of the company;

4) It was not the case of the assessee that in given set of facts/problem, the foreign company gave its solution or advice. The solution or decision was, admittedly, taken by the assessee on the basis of the advice/service rendered by the foreign company;

5) Therefore, the technical knowledge, experience, skill possessed by the foreign company with regard to financial and risk management was made available in the form of advice or service which was used by the assessee in the decision making process not only in management affairs but also in financial matters;

6) Therefore, such service rendered by the foreign company was technical in nature as per India-USA treaty - US TECHNOLOGY RESOURCES (P.) LTD. V. ACIT (2013) 39 taxmann.com 23 (Cochin - Trib.)

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I-T - Whether legal heir is automatically deemed to be assessee upon death of original assessee

I-T - Whether legal heir is automatically deemed to be assessee upon death of original assessee - NO: ITAT

The issues before the Bench are –

•       Whether penalty can be levied on the deceased assessee, when the legal heir was never brought on record;
•      Whether the penalty can be levied on legal heirs when inaccurate return of income was filed by the deceased during his life time and
•      Whether the LR is automatically deemed to be the assessee upon the death of the original assessee. And the verdict goes in favour of the assessee.

Facts of the case

The assessee is the legal heir and representative of the original assessee who died during the pendency of assessment. The original assessee during his life time furnished inaccurate particulars in his return. During the pending assessment proceeding the legal heir of the assessee discovered that he was never impleaded and brought on records. Upon the said observation the assessee filed a rectification application before the AO intimating that original assessee had expired and to make the changes by impleading him and bringing on records.

AO did not made any changes and passed a show cause notice along a penalty order upon the original dead assessee upon the observation that the income earned by the late assesee was not only from its agricultural income and it willfully evaded the undisclosed income. Aggrieved assessee appealed before the CIT(A).

The CIT(A) passed an order under section 250 confirming the penalty levied under section 158BFA(2) for block period and held that the assessee had willfully evaded the undisclosed income and the explanation offered by the assessee was not satisfactory.

In appeal before the tribunal, the Counsel for the assessee contented that the fact that the assessee had expired was brought to the notice of the AO time and again, and still the AO passed penalty order in the name of dead assessee. Therefore, the impunged order passed by the AO upon the dead assesee was bad in law and illegal. The law is settled on this issue and a penalty imposed on dead person is null and void. The assessee also submitted that even on merits of the case, the assessee is not liable to penalty as the only source of income of the assessee is agriculture. Accordingly, even if some deposit is found to be not satisfactorily explained by the assessee, the same could not be assessed as undisclosed income of the assessee. It was further submitted that ITAT, Ahmedabad in the quantum appeal of the assessee had allowed only the credit of its agricultural income declared in the income-tax return for the block period, and credit of earlier years (prior to block period) income was not allowed to the assessee and directed the AO to compute undisclosed income by taking the figure of savings from agricultural income at 40% for some years, 60% for some other years and 80% in succeeding years. The basis for determining the saving figures of the assessee for the block period was merely on estimate, and that no penalty under section 158BFA(2) was imposable.

The revenue opposed the submissions made by the assessee and submitted that not mentioning the name of the son of late assessee as legal heir of his father is merely a clerical and typographic mistake, which does not render the order imposing the penalty as null and void. He submitted that the AO had given an opportunity of hearing to the assessee, and that the clerical error had not resulted in any adverse effect on the proceedings within the meaning of section 292B of the Act. It was further submitted that proviso to section 158BFA(2) makes the levy of penalty mandatory, once the assessed income is found to be more than returned income.

After hearing the parties, the Tribunal held that,

•    It is found in the present case that the son of the deceased assessee was never impleaded as the legal heir of his deceased father. The revenue also did not place any material before the tribunal to suggest that any order bringing the legal heir of the deceased assessee on record, was passed by the AO;
• 
  
•    It is found that decision of Punjab and Haryana High Court supported the case of the assessee. It is concluded that it was not merely a clerical mistake, but since the order imposing the penalty was passed on the dead person, the same is null and void, and penalty is liable to be cancelled on the ground alone. The decisions relied upon by the revenue were distinguishable;

•    In this case, before us, the only source of income being agriculture and that the credit for past savings from agriculture income, prior to the block period, having not been allowed in the quantum proceedings, and figure of addition having been determined on estimate basis, applying the average rate of 40%, 60% and 80% for working out the figures of savings from agricultural income in different years of block period, and the part of the addition having been sustained by the Tribunal on estimation only, we hold that penalty imposed under section 158BFA(2) is liable to be cancelled on merits also and is accordingly cancelled. 

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Sum paid to NR to identify potential customers and to conduct market survey abroad held taxable as FTS

Sum paid to NR to identify potential customers and to conduct market survey abroad held taxable as FTS

Payment made to a foreign company for marketing survey and identifying potential foreign customers for assessee's product was only for consultancy services and it was taxable in India as FTS

Facts:

a) The assessee engaged a foreign company ‘SR’ as marketing agent for South East Asian countries;

b) SR had to study the market situation in South East Asia for the products manufactured by the assessee and it had to market the products of the assessee in those countries;

c) The CIT(A) found that payment made to SR was consultancy charge, therefore, tax had to be deducted. Accordingly, it confirmed the disallowance made by the Assessing Officer. Aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of revenue as under:

1) The work of SR was to identify the potential customers and file a report regarding the market strategy and developmental studies;

2) The agreement did not enable SR to market the products of the assessee in South East Asian countries. The company SR only had to do survey and file a report so that the assessee could market its products after considering the report filed by the foreign party;

3) Therefore, the payment made to SR was only consultancy charge. It was not a case of marketing the products in the foreign country. The CIT (A) had rightly confirmed the order of the Assessing Officer. Thus, the order of the lower authority holding assessee liable for TDS was to be confirmed - ENGLISH INDIAN CLAYS LTD. V. ACIT (2013) 39 taxmann.com 50 (Cochin - Trib.)

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Cenvat credit was allowable to assessee even if supplier hadn't discharged its duty

Cenvat credit was allowable to assessee even if supplier hadn't discharged its duty

 

Requirement of taking "reasonable steps" does not mean that assessee is required to verify from department whether duty stands paid by supplier because that would be practically impossible and would lead to transactions getting delayed; therefore, assessee is entitled to credit even if supplier has not paid duty to department

In the instant case the assessee took deemed Modvat credit benefit under Notification No. 58/97-CE(NT) on basis of invoices issued by supplier of inputs, but on verification it was found that supplier had not paid duty. The Department opined that since rule 57A(6) required the assessee to take all reasonable steps to ensure that duty had been paid, no credit could be allowed if duty had not been paid on inputs supplied.

The Supreme Court held in favour of assessee as under:

1) In this case supplier of inputs had given declaration indicating that excise duty had been paid on said inputs. Fact that supplier had not discharged duty was a lapse on part of seller; it was different and not a condition or rather a precondition postulated in Notification;

2) When there was a prescribed procedure and that had been duly followed by the assessee, it could not be said that the assessee had not taken reasonable steps as prescribed in notification;

3) Due care and caution were taken by the assessee and it was not stated by Department what further care and caution could have been taken. Requirement of "reasonable care" does not mean verification from department whether duty stands paid by supplier because that would be travelling beyond notification and practically impossible and would lead to transactions getting delayed;

4) Thus, the Assessee was entitled to deemed credit under the Notification No. 58/97-CE(NT). - Commissioner of Central Excise, Jalandhar v. Kay Kay Industries (2013) 38 taxmann.com 336 (SC)

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An association of regional stock exchanges sets up to ensure secured trading and safety of funds gets trust registration

Where main object of assessee-trust was to protect investors by way of creating a fund, which was a public charitable fund set up to advance an object of general public utility, assessee became entitled to get registration under section 12AA

Facts:

a) The assessee-trust was formed by coming together of 23 regional Stock Exchanges of India to provide a common platform for trading in shares and securities;

b) Its main object was to protect investors by way of creating a fund, which could provide compensation to them in case of loss on account of default by any member of a participating recognized Stock Exchange;

c) The assessee made an application under section 12A for grant of registration which was rejected by competent authority. Aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) An object beneficial to a section of the public is an object of general public utility. To serve a charitable purpose, it is not necessary that the object leads to the benefit of the whole mankind or all persons in a particular Country or even State;

2) It would be sufficient if the intention is to benefit a section of the community, sufficiently defined and identifiable by some common quality of a public or impersonal nature;

3) What is to be seen is the intention to benefit a section of the public as distinguished from a specified individual or group;

4) Once it was decided that the assessee’s principal object was the advancement of an object of any general public utility, it would not be material if the income by way of contributions from the member stock exchanges was otherwise exempt under section 10(23EA) or not;

5) Thus, the fund created by assessee was a public charitable fund having been set up to advance an object of general public utility, assessee was entitled to get registration - INTER-CONNECTED STOCK EXCHANGE INVESTORS PROTECTION FUND (ISE IPF) V. DIRECTOR OF INCOME-TAX (EXEMPTION) (2013) 38 taxmann.com 329 (Mumbai - Trib.)

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Where capital gain arose out of long-term capital asset and was invested in specified assets, exemption under section 54EC could not be denied due to deeming fiction created under section 50

Where capital gain arose out of long-term capital asset and was invested in specified assets, exemption under section 54EC could not be denied due to deeming fiction created under section 50

The High Court held in favour of assessee as under:

1) There is nothing in Section 50 to suggest that the fiction created in it is not only restricted to Sections 48 and 49 but also applies to other provisions;

2) Section 50 makes it explicitly clear that the deemed fiction created in sub-sections (1) and (2) of Section 50 is restricted only to the mode of computation of capital gains contained in Sections 48 and 49;

3) It is well-established, in law, that a fiction created by the Legislature has to be confined to the purpose for which it is created. The fiction created under Section 50 is confined to the computation of capital gains only and cannot be extended beyond that;

4) Legal fiction created under section 50 is restricted to computation of capital gains; such deeming fiction cannot restrict application of section 54EC which allows exemption of capital gains, if assessee makes investment in the specified asset;

5) Exemption provided under section 54EC couldn’t be denied to the assessee due to deeming fiction created under section 50. Thus, the assessee couldn’t be charged to capital gains when short-term gains of long-term capital assets were invested in the areas specified under the law – CIT V. ADITYA MEDISALES LTD (2013) 38 taxmann.com 244 (Gujarat)

Supreme Court grants stay on High Court’s order treating constitution of CBI as ‘unconstitutional’

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Lease premium paid to acquire a leasehold land for 60 years isn’t a rent; no TDS under sec. 194-I

Lease premium paid for acquiring leasehold land for a period of 60 years did not fall within meaning of 'rent' under section 194-I and, therefore, assessee was not liable to deduct tax at source while making said payment

Facts:

a) The assessee entered into lease agreements for a period of 60 years with CIDCO for acquisition of leasehold rights in the land to develop and operate a SEZ;

b) It paid lease premium to CIDCO. The Assessing Officer held that lease premium amounted to payment of rent within meaning of section 194-I and, since, assessee did not deduct tax at source while making said payment, it was to be treated as assessee in default;

c) On appeal, the CIT (A) set aside the order of AO. Aggrieved revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) When the interest of the lessor is parted with for a price, the price paid is called lease premium or salami. But the periodical payments made for the continuous enjoyment of the benefit under the lease are in the nature of rent;

2) In the instant case, there was transfer of substantive interest of lessor for the leasehold land in favour of the assessee. There is a conferment of right on the lessee by acquiring leasehold land and the premium has been paid in lieu thereof and not for the purpose of use of land;

3) Therefore, the lease premium paid by the assessee for acquiring leasehold land with a right to develop a SEZ thereon couldn’t deemed as advance payment of rent;

4) Accordingly, premium paid by the assessee for acquiring leasehold land does not fall within the ambit of rent under section 194-I. Thus, the CIT (A) had rightly held that the provisions of section 194-I were not attracted in respect of lease premium paid by the assessee. Thus, revenue’s appeal was to be dismissed – ITO(TDS) V. NAVI MUMBAI SEZ (P.) LTD (2013) 38 taxmann.com 218 (Mumbai - Trib.)

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Download IDT Amendment Book for Nov 2013 Exam

Please find attached file of IDT Amendment Book for Nov 2013 Exam of CA Manoj Batra Sir.

This file has been shared with us by Deepesh Ruhela. He can be reached at deepeshruhela@hotmail.com

Tags: ca ipcc, Ipcc, CA, CA Final, amendments, Case Laws, 
         Case Law for CA Final IDT November 2013 Exam, 

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