Notification no. 01/12024-25, dated 24-06-2024

The Central Board of Direct Taxes (CBDT) has specified the e-filing of 6 forms under rule 131 of the Income Tax Rules, 1962. These include forms for making applications under section 35AD, pre-filing meetings, Opting for Safe Harbour in respect of Specified Domestic Transactions, etc., namely, Form 3CN, 3CS, 3CEC, 3CEFB, 59, and 59A.

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Notification No.1/4/2019-NS, dated 28-06-2024

The Ministry of Finance has announced the small savings scheme rates for the second quarter of FY 2024-25. The interest rates for different small savings schemes during the second quarter of the Financial Year 2024-25, effective from July 1, 2024, to September 30, 2024, will remain unchanged from those set in the first quarter of FY 2024-25.

Click Here To Read The Full Notification

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Case Details: Income Tax Officer vs. The Theosophical Society - [2024] 163 taxmann.com 770 (Chennai-Trib.)

Judiciary and Counsel Details

• Mahavir Singh, Vice President & S.R. Raghunathan, Accountant Member
• N. Sanjay Gandhi, JCIT for the Appellant.
• Ms G. Vardini Karthik, Adv. for the Respondent.

Facts of the Case

The assessee is a society notified under section 10(23C)(iv) of the Income Tax Act, 1961. It is also registered under section 12A(a) of the Act. The Assessee filed a return of income admitting nil income after claiming an exemption under section 11 of the Act.

The Assessing Officer (AO) discovered that two individuals who had donated to the society had stayed in the society’s guest house, paying only nominal maintenance charges. He applied section 13(1)(c)(ii), arguing that the guest house had been rented to interested persons at an insufficient rate. As a result, the exemption under section 11 was revoked.

On appeal, the CIT(A) granted relief to assessee. Aggrieved Revenue filed the instant appeal before the Chennai Tribunal.

ITAT Held

The ITAT observed that it is an admitted fact that society has been registered under section 10(23C)(iv) along with the registration under section 12A(a). As per CBDT Circular No. 557, dated 19-3-1990, provisions of sections 11 and 13 relating to ‘interested person’ will not be applicable once the society is notified under section 10(23C).

Since the assessee was a charitable society duly registered under section 10(23C)(iv) along with section 12A(a), conditions prescribed in section 13 were not applicable, and the Assessing Officer could not make disallowance under section 11. Thus, there was no infirmity in the order of the CIT(A) in allowing the assessee’s appeal.

List of Cases Referred to

• ITO v. Virendra Singh Memorial Shiksha Samiti [2010] 35 SOT 1 (Lucknow) (para 7).

The post Provisions of Sec. 13 Not Applicable to Charitable Society Notified u/s 10(23C) Along with Sec. 12A | ITAT appeared first on Taxmann Blog.

Case Details: Ashish Gupta vs. Income-tax Officer - [2024] 163 taxmann.com 739 (Delhi-Trib.)

Judiciary and Counsel Details

• Shamim Yahya, Accountant Member & Ms Madhumita Roy, Judicial Member
• Subodh Gupta & Mukesh Agarwal, CAs for the Appellant.
• Kanv Bali, Sr. DR for the Respondent.

Facts of the Case

The assessee, an individual, sold land that he treated as agricultural land and did not disclose the capital gains in his return of income. The Assessing Officer (AO) noted that the said land was situated within 5 km of the municipal limits of Ghaziabad and asked the assessee to furnish a computation of capital gain on the transfer of this property.

The assessee responded that the said land is agricultural and does not fall within the meaning of capital assets as per provisions of section 2(14). AO rejected the assessee’s contention and held that the said land is about 5 km from the municipal limits of Ghaziabad. The asset transferred by the assessee during the year is held to be a capital asset within the meaning of Section 2(14), which was chargeable to capital gain tax.

Aggrieved by the order, the assessee preferred an appeal to the CIT(A). The CIT(A) upheld the AO’s order, and the matter then reached the Delhi Tribunal.

ITAT Held

The Tribunal held that the assessee’s argument that the distance of about 5 km from Dasna Flyover, Govindpuram, as confirmed by the Income Tax Inspectors and Tehsildars, was in February/March 2016. The assessee argued that the distance of the land in question should be reckoned as existing on Notification No. 9447 dated 06.01.1994, when the municipal limits were up to Hapur Chungi (near the Income Tax Office), from where the distance was 8.7 km approx. as per the IT Inspector’s report.

The assessee also referred to the response from Ghaziabad Nagar Nigam, which enclosed a Notification dated 31.08.1994 stating that municipal limits were extended to Govindpuram and Dasna Drain on 31.08.1994 after its upgrading from Municipal Council (Nagar Palika) to Municipal Corporation (Nagar Nigam) on the same date.

The Tribunal ruled that an exemption under section 2(14)(iii)(b) requires a mandatory notification by the Central Government. Since no notification was issued after January 6, 1994, the expansion of municipal limits from Hapur Chungi to Dasna Flyover on August 31, 1994, is irrelevant and should be disregarded.

Therefore, the land in question was undoubtedly beyond 8 km from the Municipal corporation’s limits. Accordingly, the assessee’s appeal was allowed.

List of Cases Reviewed

• Smt. (Dr.) Subha Tripathi v. Deputy Commissioner of Income Tax, Circle-6, Jaipur [2013] 34 taxmann.com 286 (Jaipur – Trib.)
• CIT v. Madhukumar-N.HUF, Karnataka High Court, ITA 396 of 2009 dated 29.03.2012
• ITO v. Akash Deep Farms Pvt Ltd, ITAT Ahmedabad, ITA 561/Ahd/2017 dated 10.12.2018 (para 8) – followed.

The post Distance of Land to Be Measured as per Old Notification if Municipal Limits Are Extended Without New Notification | ITAT appeared first on Taxmann Blog.

Case Details: Deloitte Haskins and Sells LLP vs. National E Assessment Centre - [2024] 163 taxmann.com 717 (Mumbai-Trib.)

Judiciary and Counsel Details

• • Girish Agrawal, Accountant Member & Sunil Kumar Singh, Judicial Member
  • J.D. Mistry & Niraj Sheth for the Appellant.
  • Ms Sanyogita Nagpal, CIT, DR for the Respondent.

Facts of the Case

The assessee is a limited liability partnership firm of chartered accountants that provides professional assurance and taxation services to domestic and international clients. The assessee follows a cash system of accounting. During the assessment proceedings, the Assessing Officer (AO) noticed certain payments were made to the retired partners.

For such payments, the assessee contended that income with respect to professional fees gets booked only on receipt of professional fees from the client. This practice results in a considerable amount of income, either unbilled or billed but not received, for which time was devoted and efforts were made when retired partners were active in the firm. Accordingly, the payments were made in terms of the clauses of the partnership deed and other relevant documents the assessee submitted by the assessee.

Unsatisfied by the reply, AO disallowed the expenses claimed by assessee and made additions to the income.

On appeal, CIT(A) upheld the AO’s order. Aggrieved by the order, the assessee filed an appeal before the Mumbai Tribunal.

ITAT Held

The Tribunal held that, in terms of the clauses of the partnership deed and other relevant documents, there was a prior charge in respect of payments due to the retired partners on the gross fees received by the continuing firm. Owing to the prior charge arising from the terms and provisions of the partnership deed, the sum payable to the retired partners is diverted by way of superior title.

The firm paid retired partners according to their partnership deed. The basis was that the partner would have rendered their professional services during their partner tenure but could not enjoy the fruits thereof because work had remained incomplete.

The identical issue was dealt by the co-ordinate Bench of ITAT wherein the addition so made was deleted because it was held to be an instance of the source of income being subject to an obligation. Thus, the outstanding fees paid to the retiring partners as per the terms of the deed of retirement were held and were not assessable as the firm’s income.

Considering the facts on record along with the documentary evidence, the assessee’s appeal was allowed.

List of Cases Referred to

• • CIT v. C.C. Chokshi & Co. ITA No.209 (para 7.6)
  • S.B. Billimoria & Co. v. Asstt. CIT [2010] 125 ITD 122 (Mumbai) (para 8)
  • ACIT v. Deloitte Haskins & Sells ITA No.2077/MDS/2016/ITA No. 1517/CHN/2017 (para 10)
  • C.C. Chokshi & Co. v. JCIT ITA No. 492-495/Mum/2003 (para 9.2)
  • CIT v. Mulla & Mulla & Craigie Blunt & Caroe [1990] 54 Taxman 192/190 ITR 198 (Bombay) (para 9.2)
  • CIT v. Sitaldas Tirathdas [1961] 41 ITR 367 (SC) (para 9.3).

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Case Details: Smt. Dhanashree Ravindra Pandit v. Deputy Director of Income-tax (Investigation) - [2024] 163 taxmann.com 695 (Karnataka)

Judiciary and Counsel Details

• M. Nagaprasanna, J.
• Sangram S. Kulkarni, Adv. for the Petitioner.
• Y.V. Raviraj & Tulajappa Kalaburgi, Advs. for the Respondent.

Facts of the Case

The assessee was the Directors of two British Virgin Island Companies. A complaint under the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 (‘BM Act’) was filed against the assessee for not disclosing the information of the assets located outside India, including financial interest in any entity, in the income tax return (ITR).

The complaint was filed under section 50 of the BM Act. Section 50 makes it an offence if the assessee fails to furnish any information about an asset located outside India, including financial interest. The section further provides for punishment with rigorous imprisonment, which shall not be less than 6 months but may extend to 7 years, and with a fine.

Assessee filed a writ petition to the Karnataka High Court contending that the complaint was filed for the act committed in 2009. The BM Act came into force on 01-07-2015. Thus, the said act does not fall within the ambit of Article 20(1) of the Constitution of India, which provides that no person shall be convicted of any offence except for violation of a law in force at the time of the commission of the act charged as an offence.

High Court Held

The High Court ruled that the Apex Court, in the case of Rao Shiv Bahadur Singh v. State of Vindhya Pradesh (1953 AIR 394), held that Article 20 of the Constitution of India grants a fundamental right to a person. This right ensures that a person cannot be convicted of an offence unless it violates the law in force at the time of the act, nor can they be subjected to a penalty greater than that which could have been imposed under the law in force at that time.

The Apex Court held that a legal fiction or a deeming fiction should not be extended beyond the purpose of the Act for which it is created or beyond the language deployed in the enactment. If the deeming section is given credence and criminal law is affirmed, it would defeat the tenor of Article 20 of the Constitution, as every post-facto law could be made retrospective.

In the present case, the assessee was prosecuted for the act committed before the BM Act came into force. The BM Act came into force on 01-07-2015, and the assessee was prosecuted for the act committed in 2009. Therefore, the assessee cannot be convicted of any offence except for violating the law in force at the time of committing the act charged as an offence.

List of Cases Referred to

• Union of India v. Gautam Khaitan (2019) 10 SCC 108 (para 14).

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Meenakshi Subramaniam – [2024] 163 taxmann.com 683 (Article)

Man to friend

“A strange thing has happened. Because time was running out, for capital gains exemption, I got my house constructed in great hurry. It’s now like no other house in world. On entering, you first land in kitchen. Then, a bedroom comes. Next, a store room is seen. Then, a swimming pool emerges. After that, a study room is built. Another bedroom appears. The back verandah is seen, next. The drawing room is last! “

Providing relief to many taxpayers, the Mumbai Tribunal has upheld in recent Sheela Ramchand Uttamchandani v. ITO [2024] 163 taxmann.com 265 (Mum.-Trib) case that only unspent amounts for under construction house would be subject to capital gains tax.

The only grievance of the assessee, in the present appeal, is against the denial of exemption claimed u/s 54 of the Act.

The assessee is an individual and for the year under consideration filed her original return of income on 25/07/2019 declaring a total income of Rs. 6,26,210/-. During the assessment proceedings, for assessment year 2013-14, it was observed that the assessee had sold a residential property, Flat No. 504, Tower No. 4, Raheja Tipco House CHS Ltd, on 31/07/2012 for a sale consideration of Rs. 1,80,00,000/-, which was purchased by assessee on 26/06/2008 for Rs. 54,73,095/-. It was observed that the assessee, in her return of income had not offered the Long Term Capital Gain of Rs. 99,35,840/- earned from the aforesaid sale transaction, claiming the same as exempt u/s 54 of the Act and deposited the entire capital gain in the Capital Gains Account Scheme on 29/07/2013. Further, it was noticed that the assessee purchased a new residential flat and had made certain payments. Since the construction of the project had not started till 31/07/2015, i.e. till the completion of a period of three years, the Assessing Officer (“AO”), vide assessment order disallowed the claim of the assessee u/s 54 of Act. The learned CIT(A) dismissed the appeal filed by the assessee and, inter alia, directed that remedial action may be initiated. Accordingly, proceedings u/s 147 of the Act were initiated for the year under consideration, and notice u/s 148 was issued. In response to notice, the assessee filed her return of income declaring total income similar to the original return. It was observed that the assessee had deposited an amount of Rs. 1 crore under the Capital Gains Account Scheme with the State Bank of India on 29/07/2013. It was further observed that though the assessee had partly invested the Long Term Capital Gain in buying a new house property, however, no construction has taken place and the money invested with the developer is still lying idle. Accordingly, the assessee was asked to show cause as to why the entire amount of Long Term Capital Gain of Rs. 99,35,840/- be not added to the total income of the assessee. In the absence of any response from assessee, the AO vide order dated 20/12/2019 passed order u/s 143(3) read with section 147 making an addition of the entire amount of Long Term Capital Gain of Rs. 99,35,840/- to the total income of the assessee on the basis that the assessee has neither purchased nor constructed any residential house/property as required for claiming relief u/s 54 of Act.

The learned CIT(A) dismissed the appeal of assessee and held that at the time of booking of the residential property on 10/09/2014, the assessee was under no doubt that the expected time period for completion of the project is 30 months, i.e. much beyond the time of three years permitted u/s 54 of the Act from the sale of original asset. Being aggrieved, the assessee made appeal before Tribunal.

During hearing, the learned AR submitted that for reasons beyond the control of the assessee the construction of the property got delayed, and due to the same, the assessee should not be denied exemption for which she is rightly eligible u/s 54 of Act.

The assessee had deposited the entire amount of capital gain under the Capital Gains Account Scheme and therefore, the amount can be withdrawn from the bank only for the purpose of purchase of the residential flat.

The AR also referred to correspondence between the assessee and the builder, wherein the assessee requested the builder to execute the agreement for sale and had refused to accept the refund of money paid by her.

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Case Details: Seo Lehenga House vs. DCIT - [2024] 163 taxmann.com 668 (Chandigarh - Trib.)

Judiciary and Counsel Details

• Aakash Deep Jain, vice president & Vikram Singh Yadav, accountant member
• Sudhir Sehgal, Adv. & Rishabh Marwah, CA for the Appellant.
• Smt. Kusum, CIT, DR for the Respondent.

Facts of the Case

During the survey, it was found that the assessee had made bogus purchases and bogus sales through a broker to whom a cash commission was paid on the total amount of bogus purchases and sales. The Assessing Officer (AO) issued a show cause notice to the assessee contending that the commission at the rate of 1% on the total amount of bogus purchases and sales should be treated as unexplained expenditure under section 69C of the Act.

The assessee submitted that it had itself shown a gross profit on bogus purchases and sales, which it never earned, @ 1.6% on the bogus sales of Knitted Cloth. Accordingly, the total alleged commission payment for declared bogus purchases and sales is duly covered by the gross profit shown in the books of account on bogus sales, which was never earned by them.

AO did not accept the assessee’s contentions and made additions under section 69C.

On appeal, CIT(A) upheld the additions made by the AO. Aggrieved by the order, an appeal was filed to the Chandigarh Tribunal.

ITAT Held

The Tribunal held that the assessee had been contending right from the assessment proceedings that it disclosed and offered to tax gross profit on bogus sales, which was accounted for in its books of accounts. The commission payment to the broker was, therefore, duly covered by the quantum of gross profit already offered to tax.

Upon reviewing the records, it was noted that the assessee reported a gross profit of 1.60% on fictitious sales of knitted cloth, amounting to approximately Rs 14 lakhs. Consequently, the commission for arranging the bogus purchases and sales, which was approximately Rs 5 lakhs as determined by the AO, is included within the reported gross profit of Rs 14 lakhs. Therefore, no separate addition should be made in this regard.

Therefore, the addition relating to the commission sustained by the CIT(A) was directed to be deleted.

List of Cases Referred to

• Anantharam Veerasinghaiah & Co. v. CIT [1980] 16 CTR 189/123 ITR 457 (SC) (para 22).

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CA S. Krishnan – [2024] 163 taxmann.com 660 (Article)

1. Introductory Remarks

The Income-tax Act (the Act) is an exhaustive enactment dealing with set of rules and regulations upon which the Income-tax Department levies, administers, collects and recovers taxes. Income-tax is a form of direct taxes that needs to be borne by the taxpayer. It cannot be transferred to another individual.

The Madras High Court in the case of CIT v. Indian Express (Madurai) (P.) Ltd. [1983] 140 ITR 705/13 Taxman 441 had firmly observed that the primary purpose of the Income-tax Act is to levy and collect Income-tax and the purpose of the statutory provisions, especially those relating to the administration and management of Income Tax, is to ascertain the tax liability correctly. These relevant observations made by the Hon’ble Judges at para.22 are extracted below-

“The primary purpose of the I.T. Act, 1961, is to levy and collect income-tax and as the purpose of the statutory provisions especially those relating to the administration and management of I.T. is to ascertain the tax liability correctly, the various provisions relating to appeal and reference, etc., cannot be equated to a lis or dispute arising between two parties as in a civil litigation. Although the I.T. statute makes the Department and its officers figure as parties in appeal proceedings, they are not in the strict sense what are called by American writers as parties to “adversary proceedings” because the very object of the appeal is not to decide a point raised as a dispute but any point which goes into the adjustment of the taxpayer’s liability and hence the authorities sitting in appeal in a tax case cannot be regarded as deciding a lis. They are only engaged in an administrative act of adjusting the taxpayer’s liability. Even though the appellate authorities exercise quasi-judicial functions, the proceedings before them lack the basic elements of adversary proceedings. In a case where the Revenue is a party, at the same time being an authority vested with the responsibilities of drawing up the assessment and determining the correct tax liability, it would not be in accord with the scheme of the Act to impose restrictions on the ambit and power of the Tribunal by notions such as finality, subject-matter of the appeal, etc.”

The term “lis” means “a piece of litigation, a controversy or dispute “[ Black’s Law Dictionary (8th Edition) as cited in Namit Sharma v. Union of India [2013] 1 SCC 745 (para.78.1)

[Source- Page 1120 from P. Ramanatha Aiyar’s The Law of Lexicon -Fifth Edition]

The Act has fixed time limits for levy and collection of taxes, penalties etc. The Act has also set certain time limits for filing tax returns and obtaining refunds. Sometimes inaction on the part of the assessees or their representatives may result in loss of income/money by the assessees. One such term, in this regard, which one frequently comes across is “Acquiesce” which means to give silent or passive assent to; to tacitly agree to; resting satisfied with any state of things. [ Section 23 of the Indian Trusts Act, 1882 and Section 20(b) of Civil Procedure Code, 2008] In simple language it also means to accept something reluctantly but without protest. The noun part of the verb is “acquiescence”.

In the ensuing paragraphs let us understand the definition of the term “acquiescence” as explained in English dictionaries, by authorities on law and how it has been understood and explained by various judicial authorities. Let us also analyse a few important cases in income-tax explaining the doctrine of “acquiescence”

2. Acquiescence – As defined in dictionaries

1. Cambridge Dictionary – the act of accepting or agreeing to something often unwillingly
2. Oxford Learner’s Dictionaries – the fact of being willing to do what somebody wants and to accept their opinions, even if you are not sure that they are correct.
3. Merriam-Webstar – passive acceptance or submission;
4. Vocabulary.com – Acquiescence is an agreement, usually a willingness to go along with what someone else suggests

3. Acquiescence – As explained by authorities on law

3.1 Acquiescence is the common element in a somewhat indefinite group of equitable estoppels, constituted by the fact that the person entitled has, as it is said,” slept upon his rights” and by his conduct at the time of a breach of them, or subsequently thereto, has with full knowledge, both of his own rights and the acts which infringe them, led that person responsible for the infringement to believe that he has waived or abandoned his rights. The Term “laches”,” acquiescence”, “standing by” and “delay” are frequently associated together, and they do not appear to be capable of distinct definitions. (Encyclopaedia of the Laws of England)

However, it is to be understood that while the words “laches” and “acquiescence” are often used as similar in meaning, the distinction in their import, is both great and important. The term “Laches” imports a merely passive, while the term “acquiescence” implies active, assent.

3.2 Acquiescence is to be distinguished from avowed consent, on one hand, and from open discontent or opposition, on other hand. It amounts to a consent which is impliedly given by one or both parties to a proposition, a clause, a condition or to any act whatever [Bouvier Law Dictionary]

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Case Details: Tata Autocomp Gotion Green Energy Solutions (P.) Ltd. vs. Central Board of Direct Taxes - [2024] 163 taxmann.com 643 (Bombay)

Judiciary and Counsel Details

• • Dr Neela Gokhale & K. R. Shriram, JJ.
  • P.J. Pardiwalla, Sr. Adv., Madhur Agrawal & Upendra Lokegaonkar for the Petitioner.
  • Ahileshwar Sharma for the Respondent.

Facts of the Case

Tata Autocomp Gotion Green Energy Solutions Private Limited (the petitioner) was a joint venture between Tata Autocomp Systems Ltd. and Hefei Guoxuan High-Tech Power Energy Co. Ltd. (GOTION CHINA). Petitioner was to be owned 60% by Tata Autocomp and 40% by GOTION China.

The petitioner stated that the commercial production started at the end of the Financial Year 2022-23, and the first bill for sale was raised on 31 March 2023. For AY 2020-21 and 2021-22, the petitioner had not exercised the option to be governed by Section 115BAB of the Act, which it thought of exercising for AY 2022-23.

Therefore, the petitioner filed an application under Section 119(2)(b) to condone delay in filing Form 10-ID to avail of the beneficial rate of tax of 15% under Section 115BAB of the Act for reasons mentioned in the application.

The matter was heard by Member (IT&R), CBDT, and subsequently, the Additional Commissioner of Income Tax (ITA Cell), CBDT, New Delhi, passed an order rejecting the application. Aggrieved by the order, the petitioner filed a writ petition to the Bombay High Court.

High Court Held

The High Court held that the order was challenged on various grounds. Still, two points stand out: first, the order has not been passed or signed by the Member who gave a personal hearing. Second, the order relies on the report of the Field Authorities, which the petitioner stated has not been provided.

CBDT received such a report and considered it only when the petitioner received the impugned order. The petitioner’s officers were called by the ‘Field Authorities’. Their explanations were sought after, but nothing was received by the petitioner. Further, the order says, “This issues with the approval of Member (IT&R), Central Board of Direct Taxes” and is signed by Virender Singh, Additional Commissioner of Income Tax (ITA Cell), CBDT, New Delhi.

If the Member (IT&R) has granted a personal hearing, the order should have been passed by him. The contention that there could be file notings was not made available to the petitioner. Therefore, on these grounds alone, the High Court quashed and set aside the impugned order and remanded the matter to CBDT.

The Member/Members shall make available to the petitioner all Field Reports/documents/instructions received by the CBDT from the Field Authorities. Within two weeks of receiving the same, the petitioner shall file, if advised, further submissions in support of its application for condonation of delay.

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