Consolidatd Digest Imp Case Laws Jan Dec 2017

CONSOLIDATED DIGEST OF CASE LAWS (JANUARY 2017 TO DECEMBER 2017)
(Journals Referred: ACAJ /AIR/AIFTPJ/ BCAJ / BLR / IT Review//Comp Cas/CTR /

CCH/DTR /E.L.T./GSTR/ ITD / ITR / ITR (Trib) /JT/ SOT /SCC / TTJ /Tax LR /Taxman / Tax
World/ VST/ www.itatonline.org)
Compiled by Research team of KSA LEGAL CHAMBERS and AIFTP Journal committee
S. 2 (1A) : Agricultural income – Income derived from customers for services of plantations,
rock gardening etc. for taking care of its plants, is not agricultural income. [ S. 2 (1A) (b)
(ii), 2 (1A) (b) (iii), 10 (1) ]
Dismissing the appeal of the assesse the Court held that; Income derived from customers for
services of plantations, rock gardening etc. for taking care of its plants, was not agricultural
income. (AY. 1998-99 1999-2000)
Forest Development Corporation of Maharashtra Ltd. v. Addl. CIT (2017) 399 ITR
467/250 Taxman 41 /156 DTR 201/300 CTR 517 (Bom.) (HC)
S. 2 (12A) : Books of accounts - Entries in loose papers/sheets are irrelevant and

inadmissible as evidence - Offences and prosecution - Settlement commission. [S. 132, 143
(3), 245D, Evidence Act, S.34]
Entries in loose papers/sheets are irrelevant and inadmissible as evidence. Such loose papers are
not “books of account” and the entries therein are not sufficient to charge a person with liability.
Even if books of account are regularly kept in the ordinary course of business, the entries therein
shall not alone be sufficient evidence to charge any person with liability. It is incumbent upon the
person relying upon those entries to prove that they are in accordance with facts. Finding of
Settlement Commission disregarding such evidence as in admissible and unreliable . The
materials in question were not good enough to constitute offences to direct the registration of a
first information report and investigation therein. (C.B.I. v. V.C. Shukla (1998)3 SCC 410 (SC)
followed)
Common Cause (A Registered Society) v. UOI (2017) 394 ITR 220 /245 Taxamn 214 (SC)
S. 2 (14) (iii) : Capital asset – Agricultural land - Distance between the agricultural land and
nearest Municipality had to be measured to ascertain whether the land is an agricultural
land or not. [S. 2 (14)]
The High Court held that the distance between the agricultural land and nearest Municipality had
to be measured to ascertain whether the land is an agricultural land or not and that in between
agricultural land and nearest municipality, if there was mountain, or lake or private lands or
government properties, and in such other cases, where public had no access to reach
municipality and if there was alternative public road route, distance had to be measured only
through access road and not in straight line or horizontal plane and that land sold was
agricultural land and situated at distance of more than 8 km from nearest Avadi Municipality and
therefore profit on sale of such land was not liable to tax. (AY 2009-10)
CIT v. Shakunthala Rangarajan (Smt.) (2017) 147 DTR 220 (Mad.) (HC)
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Consolidated Digest of Case Laws (January 2017 to December 2017) http://itatonline.org
S. 2 (14) (iii) : Capital asset-Agricultural land-Sale of agricultural land to non –
agriculturist cannot be the ground to deny the exemption - Capital gains cannot be
chargeable to tax.[S. 45, Goa, Daman and Diu Land Revenue Code, 1968, S. 2 (1), 105]
Allowing the appeal of the assessee, the Tribunal held that, there is no bar under Goa, Daman
and Diu Land Revenue Code, 1968 that an agriculturist and /or one who possesses agricultural
land cannot transfer such land to any party who is not agriculturist . On facts there is sufficient
support that that land was used as agricultural land and the assesse was using the produce for
personal purposes . An entry in the record of rights and certified entry in the register of mutation
shall be presumed to be true until the contrary is proved or new entry is lawfully substituted
therefore. Accordingly property in question cannot be treated as capital asset as contemplated
under section 2 (14) (iii) and capital gains are not chargeable to tax. (AY.2007 - 08)
Shankar Dalal & Ors v. CIT (2017) 294 CTR 107 /150 DTR 197 /247 Taxman 170 (Bom.)
(HC)
S. 2 (14) (iii) : Capital asset-Agricultural land-Land situate at specified distance from

municipal limits-Report of Inspector of Survey and Land Records more reliable than that
of Income-tax Department Valuer-Gains on sale of land not assessable as capital gains - No
substantial question of law. [S. 45, 260A].
Dismissing the appeal of the revenue the Court held that; the Revenue Department and survey
authorities were competent to measure the land and issue appropriate certificates, and these could
not be ignored by the Assessing Officer, by relying on the report of the investigation wing. In
such matters, it would be appropriate, to take the assistance of the survey authorities to arrive at
the conclusion. On the facts and circumstances of the case, in the matter giving weightage to the
evidence adduced in this regard, report of the Departmental Inspector vis-a-vis certificates of the
Revenue authorities, produced before the Assessing Officer, the latter ought to be given
weightage and accepted, unless the contrary was proved. The Tribunal was justified in holding
that the land was agricultural. No substantial question of law arose from the order of the Tribunal.
(AY.2008-2009)
CIT v. K.R.N Prabhakaran (HUF) (2016) 73 taxmann.com 305/(2017) 393 ITR 175/155
DTR 80 (Mad.) (HC)
S. 2 (14) (iii) : Capital asset - Agricultural land - Sale of agricultural land neither assessable
as capital gains or business income [ S. 28 (1), 45 ]
The Tribunal held that the nature of the land as being agricultural is established and the assessee
has sold the land as agricultural land. Therefore, the transaction of purchase and sale of land
cannot be said to be and adventure in the nature of trade. The profit on sale of lands is neither
assessable as business income nor as capital gains. The Tribunal upheld the order of CIT (A) and
dismissed the appeal filed by revenue. Being the facts similar in both the appeals, both are
dismissed. Distance of land sold was 44 Kms. from local municipal corporation and 11 Kms from
Panchayat Samiti (AY. 2011-12)
ITO v. Jagdish Chandra Paliwal (2017) 188 TTJ 1 (Jd) (UO) (Trib.)
ITO v. Bhanwarlal Paliwal (2017) 188 TTJ 1 (Jd) (UO) (Trib.)
S.2 (14) (iii) : Capital asset - Agricultural land – Mere conversion of land by the purchasers
into non-agricultural would not make, land considered as non-agricultural not liable to be
assessed as capital gains. [S. 45]
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Allowing the appeal of the assessee, Tribunal held that merely because purchasers converted land
to non-agricultural and it remained uncultivated for long time, would not make it as non-
agricultural at time of selling of land. Land sold could not be treated as a capital asset hence not
liable to be as capital gains . (AY. 2010 – 2011)
Mohit Suresh Harchandrai v. ACIT (2017) 164 ITD 1 (Mum) (Trib.)
S. 2 (22) (e) : Deemed dividend-The HUF is the beneficial shareholder. Even if it is assumed
that the Karta is the registered shareholder and not the HUF, as per Explanation 3 to S. 2
(22), any payment to a concern (i.e. the HUF) in which the shareholder (i.e. the Karta) has a
substantial interest is also covered.
The Supreme Court had to consider the following question of law :
“Whether in view of the settled principle that HUF cannot be a registered shareholder in a
company and hence could not have been both registered and beneficial shareholder,
loan/advances received by HUF could be deemed as dividend within the meaning of Section 2
(22) (e) of the Income Tax Act, 1961 especially in view of the term “concern” as defined in the
Section itself?”
HELD by the Supreme Court dismissing the appeal; the Court held that; even if we presume that
it is not a registered shareholder in lending company loan received by HUF is liable to be
taxable as deemed dividend if karta shareholder has substantial interest in HUF. (AY. 2006-07)
Gopal and Sons (HUF) v. CIT (2017) 391 ITR 1 /145 DTR 289 /245 Taxman 48/291 CTR
321 (SC)
Editorial : Decision of Calcutta High Court in Gopal and sons (HUF) v. CIT (2017) 391 ITR 1 in
affirmed.
S. 2 (22) (e) : Deemed dividend - Any payment by a closely-held company by way of advance
or loan to a concern in which a substantial shareholder is a member holding a substantial
interest is deemed to be “dividend” on the presumption that the loans or advances would
ultimately be made available to the shareholders of the company giving the loan or advance.
However, the legal fiction in s. 2 (22) (e) does not extend to, or broaden the concept of, a
“shareholder”
Dismissing the appeal of the revenue, the Court held that; Any payment by a closely-held
company by way of advance or loan to a concern in which a substantial shareholder is a member
holding a substantial interest is deemed to be “dividend” on the presumption that the loans or
advances would ultimately be made available to the shareholders of the company giving the loan
or advance. However, the legal fiction in s. 2 (22) (e) does not extend to, or broaden the concept
of, a “shareholder”. (CA.No 3961 of 2013 dt .5 - 10 - 2017)
CIT v. Madhur Housing and Development Co (2018) 401 ITR 152/163 DTR 519 /301 CTR
524 (SC)
Editorial : Order in CIT v. Ankitech (P) Ltd (2011) 242 CTR 129/57 DTR 345 (Delhi) (HC) is
affirmed . In National Travel Services v.CIT (2018) 300 CTR 582/162 DTR 201 (SC), the
judgement in Ankitech has been doubted and the matter has been referred to a larger Bench
S. 2 (22) (e) : Deemed dividend – Common share holders - Addition if any can be made in
the hands of share holders and not in the hands of the assesse.
Dismissing the appeal of the revenue, the Court held that; Addition if any can be made in the
hands of share holders and not in the hands of the assesse. (AY. 2003-04, 2004-05, 2006-07)
PCIT v. Rungta Properties (P.) Ltd. (2017) 249 Taxman 18 /(2018) 162 DTR 64/403 ITR 234
(Cal.) (HC)
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S. 2 (22) (e) : Deemed dividend - Loan from company which held shares in company in
which assessee was a shareholder —Assessee was not a share holder hence was not
assessable as deemed dividend.
Dismissing the appeal of the revenue the Court held that; the assessee was not the shareholder of
the lender company and therefore, the advance received by the assessee from Jupitar Capital Pvt
Ltd was not assessable as deemed dividend in his hands. (AY. 2008 - 09)
PCIT v. Rajeev Chandrashekar (2017) 397 ITR 263 (Karn) (HC)
S. 2 (22) (e) : Deemed dividend—Share application money received by companies from

other companies—Additions cannot be made as deemed dividend.
Dismissing the appeal of the revenue, the Court held that; the sums received as share application
money by companies from companies in both of which the assessee had beneficial interest were
not loans and advances for the purposes of invoking section 2 (22) (e) of the Act (AY. 2002-03 to
2007 - 08)
CIT v. Vikas Oberoi (2017) 396 ITR 215 (Bom.) (HC)
Editorial : SLP is granted to the revenue CIT v. Vikas Oberoi (2017) 393 ITR 74 (St.)
S. 2 (22) (e) : Deemed dividend—Share application money—Assessee having beneficial

interest both in receiver and payer companies, sums cannot be treated as loans or advances.
Dismissing the appeal of the revenue the Court held that; the Appellate Tribunal was justified in
holding that the sums received as share application money by companies from companies in both
of which the assessee had beneficial interest were not loans or advances for the purposes of
section 2 (22) (e) of the Act. The concurrent findings of the appellate authorities were based on
evidence. (AY.2006 - 07)
CIT v. Vikas Oberoi (2017) 394 ITR 505 (Bom.) (HC)
Editorial : SLP is granted to the revenueCIT v. Vikas Oberoi (2017) 393 ITR 100 (St.)
S. 2 (22) (e) : Deemed dividend-Company is not shareholder of company which gave loan
hence loan is not assessable as deemed dividend.
Dismissing the appeal of the revenue the Court held that; Company is not shareholder of
company which gave loan hence loan is not assessable as deemed dividend. (AY. 2005 - 06)
CIT v. Mahavir Inductomelt P. Ltd. (2017) 394 ITR 50/(2018) 162 DTR 209 (Guj.) (HC)
S. 2 (22) (e) : Deemed dividend – Loan to a share holder unless he is substantial share
holder addition cannot be made.
Dismissing the appeal of the revenue the Court held that; it is only when payments are made by a
company by way of advance or loan to a shareholder or payment to a concern in which
shareholder is a member or partner and in which he has substantial interest, said amount of loan
would be regarded as deemed dividend within meaning of section 2 (22) (e) of the Act. (AY
2003-04).
CIT v.Namdhari Seeds (2017) 79 taxmann.com 107 (Karn.) (HC)
Editorial : SLP is granted to the revenue; CIT v. Namdhari Seeds (2017) 246 Taxman 61 (SC)
S. 2 (22) (e) : Deemed dividend - Salary received in advance cannot be considered as deemed
divided merely because it was not offered to tax in that year.
The Assessee, an individual, was the director and employee of a company in which he held
16.60% of share capital. He received an advance salary from the company for medical treatment
of his son-in-law. This was taxed u/s 2 (22) (e) of the Act by the AO, which was deleted by the
CIT (A). The Tribunal dismissed departmental appeal and held that merely because salary
received in advance was not offered to tax in that year by the Assessee could not be a basis to
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hold that the advance salary would partake the character of a deemed dividend u/s 2 (22) (e).
(ITA No. 799/Kol/2015 dt. 25.08.2017) (AY. 2009-10)
DCIT v. Navin Chand Suchanti (2017) 58 ITR 71 (SN) 71 (Kol) (Trib)
S. 2 (22) (e) : Deemed dividend-Substantial interest - Movement of funds in both ways on

need basis – Addition cannot be made as deemed dividend
Allowing the appeal of the assessee the Tribunal held that; though the assessee was holding
substantial interest in two companies, in view of fact that there was movement of funds in said
companies in both ways on need basis, amount in question could not be regarded as deemed
dividend. (AY. 2010-11)
Ravindra R Fotedar. v. ACIT (2017) 167 ITD 100/(2018) 192 TTJ 938 /165 DTR 162
(Mum) (Trib.)
S. 2 (22) (e) : Deemed dividend-Money Lending Substantial part of business of Company -

Substantial does not mean Major - Finding that company received substantial part of its
Income by way of Interest - Falls within Exception - Loan not to be treated as deemed
dividend.
Tribunal held that; The Commissioner (Appeals) had found that the company had been receiving
interest from year to year regularly which was a substantial amount and also a substantial part of
the business. He relied on the decision of the Bombay High Court wherein it was held that the
expression "substantial part" did not connote an idea of being the "major part" or the part that
constitutes majority of the whole. The Legislature had deliberately used the word "substantial"
instead of using the word "major" and did not specify any percentage of business or profit to be
coming under the lending business of the lending the money for the purpose of clause (ii) of
section 2 (22) (e). (AY. 2009-10)
ACIT v. G.D. Goenka Pvt Ltd (2017) 59 ITR 109 (SN) (Delhi) (Trib)
S. 2 (22) (e) : Deemed dividend – Transfer by book entries cannot be considered as cash
payment hence addition cannot be as deemed dividend .
Dismissing the appeal of the revenue the Tribunal held that; Transfer by book entries cannot be
considered as cash payment hence addition cannot be as deemed dividend . (AY. 2010-11)
ACIT v. Siddharth Gupta. (2017) 165 ITD 369 (Delhi) (Trib.)
S. 2 (22) (e) : Deemed dividend – Advance in the course of business, cannot be assessed as
deemed dividend.
Advance of loan in the course of business of the company cannot be assessed as deemed
dividend. (AY. 2010 – 2011)
Sarat Chand Bhavaraju v. ITO (2017) 164 ITD 562 /156 DTR 48 /188 TTJ 485 (Visakh)
(Trib.)
S.2 (22) (e) : Deemed dividend – Assessee was not a shareholder in lender company, loan
taken by any partner cannot be taxed as deemed dividend.
Dismissing the appeal of the revenue, the Tribunal held that; since assessee was not shareholder
in lender company loan cannot be taxed in hands of assessee as deemed dividend. (AY. 2009-10)
DCIT v. Siroya Developers (2017) 162 ITD 718 (Mum.) (Trib.)
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S. 2 (22) (d) : Deemed dividend – Buyback of shares - Payment made to its holding company
for buy back of shares Prior to 1-6-2013 can not be treated as dividend .[ S.115QA,
Companies Act ,S.77A ]
Tribunal held that transaction of buy back of shares could not be classified as dividend as per
provisions of S. 2 (22) when exclusion sub-clause (iv) of S. 2 (22) specifically excluded such a
payment on purchase of its own shares from a shareholder in accordance with provisions of
S.77A of Companies Act from definition of 'dividend'. Since S. 115QA was introduced in statute
by Finance Act, 2013 with effect from 1-6-2013, payment made by assessee on account of
purchase of its own shares prior to 1-6-2013 could not be termed as dividend as per provisions of
S. 15QA. (AY. 2011 – 2012)
Fidelity Business Services India (P.) Ltd. v. ACIT (2017) 164 ITD 270 (Bang) (Trib.)
S. 2 (24) : Income – Promotions - Appearances of promotion was never took place, hence no
income accrured to the assesse. [S. 2 (24) (iv)]
Allowing the appeal of the assessee the Tribunal held that, appearances of promotion was never
took place, hence no income accrued to the assessee. Tribunal also held that, the revenue had not
been able to point out as to how the assessee became entitled to earning of professional income.
(AY. 2009-10, 2010-11)
Shah Rukh Khan v. ACIT (2017) 164 ITD 18 / 185 TTJ 289 (Mum.) (Trib.)
S. 2 (47) (v) : Transfer-Development agreement - If the entire consideration is not received

by the assessee and physical possession of the property is not parted with, there is no
transfer - Investment made with in six months of transfer, was held to be eligible for benefit
of S. 54EC. [ S. 45, 54EC ]
Dismissing the appeal of the revenue, the Court held that; immovable property can be regarded to
have been transferred on the date of execution of the Development Agreement and irrevocable
General Power of Attorney only if the terms indicate that complete control is given to the
developer. If the entire consideration is not received by the assessee and physical possession of
the property is not parted with, there is no transfer u/s 2 (47) (v). Investment made with in six
months of transfer, was held to be eligible for benefit of S. 54EC. . (ITA No. 139 of 2015, dt.
20.11.2017) (AY.2008-09)
CIT v. Dr. Arvind S. Phake (2018) 401 ITR 96/164 DTR 77/301 CTR 650 (Bom) (HC)
S. 2 (29A) : Long-term capital asset - The period of holding shall be computed from the date
when the specific flat is earmarked and allotted by the builder in favour of the Assessee and
not from the date of registration of flat.[ S.2 (42A,) 45 ]
Tribunal held that; The period of holding shall be computed from the date when the specific flat
is earmarked and allotted by the builder in favour of the Assessee and not from the date of
registration of flat. (AY. 2010-11)
ACIT v. Yogesh Agencies & Investments Pvt. Ltd. (2017) 58 ITR 83 (SN) (Mum) (Trib.)
S. 4 : Charge of income-tax – Entertainment subsidy – Capital or revenue - A subsidy

granted by the Govt to achieve the objects of acceleration of industrial development and
generation of employment is capital in nature and not revenue. [ S. 28 (i) ]
Dismissing the appeal of the revenue the Court held that; A subsidy granted by the Govt to
achieve the objects of acceleration of industrial development and generation of employment is
capital in nature and not revenue. The fact that the incentives are not available unless and until
commercial production has started, and that the incentives are not given to the assessee expressly
for the purpose of purchasing capital assets or for the purpose of purchasing machinery is
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irrelevant. The object has to be seen and not the form in which it is granted. (CA. NOS. 6513-
6514 OF 2012, dt. 07.12.2017)
CIT v. Chaphalkar Brothers Pune (2018) 400 ITR 279/ 300 CTR 113/161 DTR 41 /252
Taxman 360 (SC)
Editorail : Decision in CIT v. Chaphalkar Brothers (2013) 351 ITR 309 (Bom) (HC) is affirmed
S. 4 : Charge of income-tax – Subsidy – Capital or revenue - Judgement of Delhi High
Court in CIT v. Bhushan Steels And Strips was stayed . [ S.28 (1), 56 ]
Supreme Court stays judgement of the Delhi High Court in CIT vs. Bhushan Steels And Strips
which held that if the recipient has the flexibility of using it for any purpose and is not confined to
using it for capital purposes, the subsidy is revenue in nature and is taxable as profits. Court held
that ,issue notice. In the meantime, the operation of the impugned judgment shall remain stayed.
(SLP No. 30728-30732/2017, dt. 20.11.2017)
Bhushan Steeel v. CIT (SC); www.itatonline.org
S. 4 : Charge of income-tax – Hindu law – Burden is on the member to establish the

property is his individual and not ancestral presumption continues to operate in family .
Court held that; as per settled principle of Hindu law that there lies a legal presumption that
every Hindu family is joint in food, worship and estate and in absence of any proof of division,
such legal presumption continues to operate in family. burden lies upon member who after
admitting existence of jointness in family properties asserts his claim that some properties out of
entire lot of ancestral properties are his self-acquired property. On facts the appellants failed to
adduce any kind of documentary evidence to prove their self-acquisition of properties nor were
they able to prove source of its acquisition, order of High Court declaring property as joint
property of family was upheld .
Adiveppa v. Bhimappa (2017) 250 Taxman 476/160 DTR 401 /(2018) 300 CTR 124 (SC)
S. 4 : Charge of income-tax – Capital or revenue receipt-Sales tax subsidy – Matter was

remanded to High Court for consideration. [S. 28 (i)]
Allowing the appeal of the revenue, the matter was remanded to the High Court and admit the
appeal and decide it on the merits. CIT v. Reliance Industries Ltd (2004) 88 ITD 273 (Bom.)
(SB) (Trib.)
CIT v. Nitco Tiles Ltd. (2017) 395 ITR 519/247 Taxman 308/155 DTR 145/297 CTR 1 (SC)
S. 4 : Charge of income – tax - Capital or revenue - Subvention received by assessee from

parent company at time when assessee making losses, payment to protect capital investment
was held to be not revenue receipt. [S.2 (24), 28 (i)]
On the question whether the subvention received by the assessee-company from its parent
company in Germany in a situation where the assessee-company was making losses had to be
treated as a capital or revenue receipt : Held, that the voluntary payments made by the parent
company to its loss making Indian company could be understood to be payments made in order to
protect the capital investment of the assessee-company. The payments made to the assessee-
company by the parent company for the assessment years in question could not be held to be
revenue receipts. (AY. 1999-2000, 2000-2001, 2001-2002)
Siemens Pub. Communication Network Ltd v. CIT (2017) 390 ITR 1 /291 CTR 22/244
Taxman 188 (SC)
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S. 4 : Charge of income-tax – Subsidy - Grant or subsidy was forwarded by the Government
of India to help the assessee in its revival by making payment to employees towards
voluntary retirement scheme. [ S. 2 (24), 2 (25) ]
Allowing the appeal of the assesse the Court held that; the grant or subsidy was forwarded by the
Government of India to help the assessee in its revival by making payment to employees towards
voluntary retirement scheme. It was a voluntary remittance fund by the Government of India to
the assessee. The Department failed to show anything so as to bring “grant” or “subsidy” it within
any particular clause of section 2 (24) of the Act. The amount of grant received by the assessee
from the Government of India could not be treated as “income”. The payment to employees
towards voluntary retirement scheme was to be allowed. (AY. 2002-03, 2003 - 04)
Scooters India Ltd v. CIT (2017) 399 ITR 559 (All) (HC)
Editorial : The Supreme Court has dismissed special leave petition filed by the Department
against this judgment.
S. 4 : Charge of income-tax – Diversion of income by overriding title – Company formed for

purpose of procuring tender and not for execution work, receipt cannot be treated as
income of assesse. [ S. 2 (24] ]
Allowing the appeal the Court held that; Company was formed for purpose of procuring tender
and not for execution work, receipt cannot be treated as income of assesse as there was diversion
of income at the source itself and therefore, there was diversion of income by overriding title. The
receipt of amount of Rs. 12,09,55,137 could not be treated as income of the assessee and it was
diversion of income by overriding title.
Soma TRG Joint Venture v. CIT (2017) 398 ITR 425/159 DTR 297 /299 CTR 420 (J&K)
(HC)
S. 4 : Charge of income-tax - Receiving 95 per cent. of payments against invoices after

deduction of commission of 5 per cent, assess is liable to pay tax only on actual received .[
S.37 (1) ]
Dismissing the appeal of the revenue, the Court held that; the assesse Received only 95 per cent.
of payments against invoices after deduction of commission of 5 per cent, hence the assess is
liable to pay tax only on actual received . (AY. 1997-98, 1998-99)
CIT v. Olam Exports (India) Ltd. (2017) 398 ITR 397 (Ker) (HC)
S. 4 : Charge of income-tax - Gain or loss on account of fluctuation in exchange rate is

neither in nature of royalty nor interest hence liable to tax-Receipt of foreign exchange on
sale proceeds of exports beyond the end of the previous year relevant to the assessment year
resulting in gain or loss would not be considered to be a part of export turnover, but an
income that arose on a separate transaction - DTAA - India – Malaysia . [S. 80HHC,90, Art
12, 13 ]
On reference the Court held that; Gain or loss on account of fluctuation in exchange rate is
neither in nature of royalty nor interest hence liable to tax . In the absence of any such specific
definition as insection 80HHC, receipt of foreign exchange on sale proceeds of exports beyond
the end of the previous year relevant to the assessment year resulting in gain or loss would not be
considered to be a part of export turnover, but an income that arose on a separate transaction, i.e.,
that arose due to variation in foreign exchange rates and would not be included as part of the
export turnover. (AY. 1991-92)
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Ballarpur Industries . Ltd v. CIT (No.1) (2017) 398 ITR 134 /(2018) 301 DTR 106 /162 DTR
264 (Bom) (HC)
S. 4 : Charge of income-tax - Capital or revenue - Subsidy — Government allowing assessee

to retain sales tax collected by it up to a particular limit and there was no conditions
attached to utilisation of amount therefore the subsidy is assessable as revenue in nature .
Court held that; the specific provision for capital subsidy in the main scheme and the lack of such
a subsidy in the supplementary scheme (of 1991) meant that the recipient, i.e., the assessee had
the flexibility of using it for any purpose. The absence of any condition towards capital utilisation
meant that the policy makers envisioned greater profitability as an incentive for investors to
expand units, for rapid industrialisation of the State, ensuring greater employment. Clearly, the
subsidy was revenue in nature (AY. 1995 - 96)
CIT v. Bhushan Steels and Strips Ltd. (2017) 398 ITR 216 /156 DTR 49 /299 CTR 474
(Delhi) (HC)
CIT v. Vardhaman Industries Ltd (2017) 398 ITR 216 /156 DTR 49 /299 CTR 474 (Delhi)
(HC)
S. 4 : Charge of income-tax - Mmaintenance charges collected from allottees of low cost

housing scheme is part of income of assessee . Issue of ground rent matter was remanded to
the Assessing Officer . .
Allowing the appeal of the revenue the Court held that; for the assessment year 2007-08, the court
had ruled that the maintenance charges collected by the assessee were part of its income and the
assessee had not challenged the decision in the Supreme Court. There was no reason for the court
to take a different view in the matter without any change in the circumstances in the present
assessment year. Therefore, the maintenance charges were to be treated as income of the assessee.
As regards ,the issue of treatment of ground rent was not examined in depth with reference to the
accounts of the assessee either by the Assessing Officer or the Commissioner (Appeals) or even
the Tribunal. The issue was to be remanded to the file of the Assessing Officer for re-
determination in accordance with law after examining the accounts of the assessee. (AY. 2008 -
09)
PCIT v. Delhi State Industrial Infrastructure Development Corp. Ltd. (2017) 398 ITR 96
/250 Taxman 194 (Delhi) (HC)
S.4 : Charge of income-tax - Capital or revenue – Sales tax subsidy for expansion and
diversification of existing unit is help to be capital receipt .
Dismissing the appeal of the revenue the Court held that; the character of the subsidy in the hands
of the recipient whether revenue or capital will have to be determined having regard to the
purpose for which the subsidy is given. The source of fund is quite immaterial. Where a subsidy
though computed in terms of sales tax deferment or waiver, in essence was meant for capital
outlay expended by the assessee for setting up the unit in the case of a new industrial unit and for
expansion and diversification of an existing unit, it would be a capital receipt. (AY.2004 – 05)
CIT v. Nirma Ltd. (2017) 397 ITR 49 (Guj) (HC)
Editorial : SLP is granted to the revenue, CIT v. Nirma Ltd. (2017) 396 ITR 71 (St)
S. 4 : Charge of income-tax – Capital or revenue - Sales tax subsidy is held to be capital in

nature.
9
Allowing the petition the Court held that; the Scheme, it appeared that the Scheme was oriented
towards and was subservient to the investment in fixed capital assets. The sales tax incentive was
envisaged only as an alternative to the cash disbursement and by its very nature, was to be
available only after production had commenced. Thus, in effect, the subsidy in the form of sales
tax incentive was not given to the assessee for assisting it in carrying out the business operations
but, to encourage the setting up of industries in the backward area. The amount representing sales
tax incentive was a capital receipt.
Garden Silk Mills Ltd. v.CIT (2017) 394 ITR 192 (Guj.) (HC)
S. 4 : Charge of income-tax – Accrual-Carbon receipts were neither sold and/or transferred

during the year cannot be included as income. [S. 5]
Dismissing the appeal of the revenue, the Court held that; neither CIT (A) nor Tribunal be said to
have committed any error in deleting the addition made by the AO as the carbon credits were
neither sold nor transferred in favour of foreign companies in the year under consideration. No
substantial question of law arises. (AY.2009-10)
PCIT v. Kalpataru Power Transmission Ltd. (2017) 293 CTR 484 /148 DTR 257 (Guj.)
(HC)
S. 4 : Charge of income-tax-Accrued interest on non-performing assets is not assessable. [S.

145]
Dismissing the appeal of the revenue, the Court held that; Accrued interest on non-performing
assets is not assessable. (AY. 2007-08)
CIT v. Raddi Sahakara Bank Niyamitha (2017) 395 ITR 652 (Karn.) (HC)
S. 4 : Charge of income-tax-Interest on non-performing assets cannot be recognised on

accrual basis, assessee is bound by Reserve Bank of India guidelines. [S. 43D, 119, 145,
Reserve Bank of India Act, 1934, s. 45Q, Non-banking companies prudential norms
(Reserve Bank) directions, 1998 ]
Dismissing the appeal of the revenue, the Court held that; Interest on non-performing assets
cannot be recognised on accrual basis, assessee is bound by reserve bank of India guidelines.
Therefore, notwithstanding the provisions of section 43D of the Act,since the provisions of the
Section 43 Q of Reserve Bank of India Act, 1934 Act had an overriding effect vis a vis income
recognisation principles in the Companies Act, 1956, the Assessing Officer is bound to follow the
direction of the Reserve Bank of India as far as income reognisation was concerned. (AY. 2010-
11)
PCIT v. Shri Mahila Sewa Sahakari Bank Ltd. (2017) 395 ITR 324 (Guj) (HC)
S. 4 : Charge of income-tax – Accrual-Carbon receipts were neither sold and/or transferred

during the year cannot be included as income [ S. 5 ]
Dismissing the appeal of the revenue, the Court held that; neither CIT (A) nor Tribunal be said to
have committed any error in deleting the addition made by the AO as the carbon credits were
neither sold nor transferred in favour of foreign companies in the year under consideration. No
substantial question of law arises . (AY.2009-10)
PCIT v. Kalpataru Power Transmission Ltd. (2017) 293 CTR 484/148 DTR 257 (Guj.) (HC)
S. 4 : Charge of income-tax-Interest on interim compensation received pending final

disposal by the High Court is chargeable to tax . [S. 145, CPC, S. 144]
Dismissing the appeal of the assessee the Court held that; Interest on interim compensation
received pending final disposal by the High Court is income is chargeable to tax . The fact that
the assessee may have to return the compensation and interest on the principle of restitution as
10
provided under S. 144 of the Civil Procedure Code is not relevant because restitution is not a
certainty. (ITA No. 17 of 2011, dt. 01.08.2017) (AY. 1998-99 to 2001-02)
Premlata Purshottam Paldiwal (Smt.) v. CIT (2017) 157 DTR 145 (Bom) (HC)
S. 4 : Charge of income-tax – Capital or revenue-Non-compete fees-Receipt of non-compete

fees is capital receipt and not assessable as capital gains.[S. 28 (iv), 45, 55 (2)]
Dismissing the appeals of the revenue the Court held that ;the amount received as non-compete
fees by the assessee could only be treated as capital receipt and was not liable to tax. The
Appellate Tribunal was right in holding that, (a) the provisions of section 28 (iv) of the Income-
tax Act, 1961 were not applicable in the case of the assessee, and (b) the amount of non-compete
fees received by the assessee was not taxable as capital gains under section 45 read with section
55 (2).
CIT v. Anjum G. Balakhia (2017) 393 ITR 320 (Guj) (HC)
Editorial : SLP of revenue was dismissed, CIT v. Anjum G. Balakhia (2017) 391 ITR 345 (St.)
S.4 : Charge of income-tax – Capital or revenue-Profits from sale of carbon credits capital
in nature.
Dismissing the appeal of the revenue, the Court held that , profits from sale of "carbon credits"
are capital in nature and would not form part of chargeable income under the Income-tax Act.
PCIT v. L.H. Sugar Factory P. Ltd. (2017) 392 ITR 568 (All.) (HC)
Editorial : SLP is granted to the revenue, PCIT v. L.H. Sugar Factory P. Ltd. (2017) 392 ITR
43 (St.)Ed.]
S. 4 : Charge of income-tax – Capital or revenue Transport subsidy to stimulate industrial

activity in backward region was held to be capital receipt. [S.2 (24)]
Held the transport subsidy received by the assessee was intended to stimulate industrial activity in
the backward region, to generate employment opportunities and bring about developments in the
North Eastern States and it was not meant to provide higher profit for the entrepreneur. It was
intended to encourage investment in difficult and far flung States and the sum received as subsidy
could not be treated as a revenue receipt. (AY. 2001-2002)
Shiv Shakti Flour Mills P. Ltd. v. CIT (2017) 390 ITR 346 /291 CTR 221/77 taxmann.com
115 /145 DTR 18 (Gauhati) (HC)
S. 4 : Charge of income-tax - Land purchased for company by its director-Sale of land

cannot be assessed in the hands of director.
Dismissing the appeal of the revenue, the Court held that; the assessee being a director executed
title deeds for and on behalf of the company and the beneficial owner for all practical purposes
was the limited company which had even paid due taxes later on at the time when the property
was sold. The amount was not assessable in the hands of the assesse. (AY. 2009-2010)
CIT v. Atma Ram Gupta (Individual) (2017) 392 ITR 12 (Raj) (HC)
S.4 : Charge of income-tax – Capital or revenue - Refundable security deposit received by

club cannot be assessed as revenue receipt .
Dismissing the appeals of the revenue the Court held that; merely because the security deposit
was not kept apart or subsequently the amount of security deposit was utilised by the club for
other purposes such as construction and providing other amenities at the club, it would not lose
the character of "deposit". The amount was not assessable as a revenue receipt. (AY. 2008-2009
to 2012-2013)
PCIT v.Gulmohar Green Golf and Country Club Ltd. (2017) 392 ITR 60168 /292 CTR
206/77 taxmann.com (Guj) (HC)
11
S.4 : Charge of income-tax – Co-operative society - Amounts transferred to Distribution
Pool Fund Account not assessable in hands of co-operative society.[S.2 (24), 2 (31), 80P]
The Government of India appointed a Salt Expert Committee to study salt manufacturing activity
in different parts of the country. The society was formed to save individual salt manufacturers
from extinction in terms of the advice tendered by the Salt Expert Committee. The very fact that
the bye-laws permitted the society to recover the "manufacturing expenses" and "other dues"
from its members was sufficient indication that the ownership of the salt to the extent of the
respective share of each individual member continued to remain with the respective member
himself. This inference was fortified by clause 80 of the bye-laws, which permits the members to
raise loans on the "security" of their proportional interest in the "agar" and "salt produced". AO
brought to tax the amounts transferred to distribution pool fund account. The addition was deleted
in appeal . On appeal by the revenue, dismissing the appeal the Court held that; logically the
amount transferred to the "Distribution Pool Fund Account" could not be brought within the
umbrella of Chapter XVI. Hence, it was not taxable in the hands of the society. (AY. 2006-2007)
CIT v. Nagarbail Salt-Owners Co-op. Society Ltd. (2017) 390 ITR 415/291 CTR 287 /145
DTR 166 (Karn.) (HC)
S.4 : Charge of income tax-Capital or revenue-Statutory authority-Funds received from

State Government for infrastructure development in State-Interest thereon capital receipt -
Incentive subsidy for distribution of subsidies to industrialists was not chargeable to tax.
[S. 2 (24),5]
Dismissing the appeal of the revenue, the Court held that ,funds received from State Government
for infrastructure development in State-Interest thereon capital receipt. Incentive subsidy for
distribution of subsidies to industrialists was not chargeable to tax. (AY. 2005-2006)
ACIT v. Bihar Industrial Area Development Authority (2017) 390 ITR 475 (Patna) (HC)
S. 4 : Charge of income-tax – Capital or revenue – Club-Security deposit as entrance fee

,which were refundable after 25 years is capital receipt.[S.28 (i)]
Dismissing the appeal of the revenue, the Court held that; where the assessee club enrolled
members on payment of security deposit as entrance fees which were refundable after 25 years &
such receipt is utilized for purpose of club’s construction & other amenities – Such deposit is to
be considered as ‘Capital receipt’. Relied on Siddheshwar Sahakari Sakhar Karkhana Ltd. v. CIT
[2004] 270 ITR 1 (SC). (AY.2008-09, 2011-12, 2012-13)
PCIT v. Gulmohar Green Golf & Country Club Ltd. (2017) 146 DTR 217 (Guj HC)
S.4 : Charge of income-tax – Capital or revenue – Compensation received for loss of rental
income was held to be capital receipts . [ S.28 (i) ]
Dismissing the appeal of the revenue, the Court held that, Compensation received from K.
Raheja Universal Construction Pvt. Ltd ,for loss of rental income was held to be capital receipts
. (ITA No. 4776/Mum/2014, dt. 01.11.2017) (AY. 2010-11)
DCIT v. Yogen D. Sanghavi (Mum) (Trib); www.itatonline.org
S. 4 : Charge of income-tax - Sale of CER certificate was held to be capital receipts.

The Tribunal held that receipts from sale of carbon emission reduction certificate are capital in
nature, therefore cannot be taxed. (AY. 2006-07 to 2009-10, 2011-12 to 2013-14)
Rajasthan State Mines & Minerals Ltd. v. ACIT (2017) 188 TTJ 137 (Jp) (Trib.)
S. 4 : Charge of income-tax - Difference between income as report in form 26AS and income
reflected in the books of accounts-Matter remanded. [S. 145]
12
The Tribunal held that the assessee has not offer any satisfactory explanation for its inability to
reconcile the difference between the income reported in form 26AS and the income reflected in
books of account, one more opportunity is granted to the assessee to reconcile the said difference
and accordingly this issue is restored back to the AO for de novo determination on merits. (AY.
2010-11)
Hi-Tech Engineers v. ITO (2017)164 ITD 94/155 DTR 334 /188 TTJ 453 (Mum.) (Trib.)
S. 4 : Charge of income-tax – Cash system - Advance payment - Advance received from

clients cannot be taxed as income in year of receipt itself .[ S.145 ]
Allowing the appeal of the assessee the Tribunal held that; assessee-law firm, following cash
system of accounting, received certain advance payments from its clients for making payment of
fees to Senior Advocates to appear on behalf of them before High Courts and Supreme Court,
since said amount was received by assessee in fiduciary capacity to discharge certain obligations
while representing case of its clients before various courts, same could not be brought to tax as
assessee's income in year of receipt itself (AY. 2010-11)
Associated Law Advisers. v. ITO (2017) 167 ITD 695 (Delhi) (Trib.)
S.4 : Charge of income-tax – Interest received on enhanced compensation was not liable to
be taxed as income from other sources [S. 56, Land Acquisition Act, 1894, S. 28, 34 ]
Interest received on enhanced compensation was not liable to be taxed as income from other
sources, as the interest on enhanced compensation would be calculated under section 28 of Land
Acquisition Act and not under section 34 of said Act . Followed CIT v. Ghanshayam HUF
(2009) 315 ITR 1 (SC) (AY. 2008 - 09)
DCIT v. Dinesh Sharma. (2017) 165 ITD 684 (Delhi) (Trib.)
S. 4. Charge of income-tax – Mutuality - A club whose membership is also open to the

persons from the public and whose management is looked after by officials of HUDA is
eligible to claim the benefits of mutuality.
Dismissing the appeal of the revenue, the Tribunal held that; there can not be said to be
straight jacket formula to say that in every a mutual concern the members must be entitled to a
share in the surplus. Since the affairs of the assessee trust are controlled by the serving officers of
HUDA, hence it has to pass through greater scrutiny as the chances of it crossing the thin line
between the mutuality and commerciality are very high. However, at this stage, so far the
Assessment Years under consideration are concerned, the revenue could not point out the taint of
commerciality in the contribution, management and application of the surplus collected through
contributions and subscriptions from the members and for price of the facilities availed by its
members, hence, the same cannot be said to be taxable income of the society. (ITA No.
1084/Chd/2009, dt. 26.09.2017) (AY. 2006-07)
ITO v. Gyamkhana Club (Chd.) (Trib), www.itatonline.org
S.4 : Charge of income-tax – Capital or revenue - Interest earned on fixed deposits – Funds
received from Reserve Bank of India to meet the capital expenditure for setting up the
project – Funds temporarily placed in fixed deposits with banks – Interest earned on such
deposits should be reduced from the capital cost of the project and not chargeable to tax -
Interest cannot be assessed as income from other sources . [ S.56 ]
The Tribunal held that the interest earned on fixed deposits was not an investments made
subsequent to the setting up of the project but was unutilized income parked in fixed deposits for
13
a temporary period and there was an inextricable link between the interest earned on the grants
and the original grant made by the State Government to set up the project. Relying upon the
decisions of the Apex Court in the case of CIT v. Karnal Co-operative Sugar Mills Ltd. [2000]
243 ITR 2 (SC), CIT v. Karnataka Power Corporation [2001] 247 ITR 268 (SC) and CIT v.
Bokaro Steel Ltd. [1999] 236 ITR 315 (SC),the Tribunal held that The interest earnedshould only
go to reduce the capital cost of the project to be set up by the assessee andwas not to be brought
to tax, as the interest was earned on capital account. (AY. 2011-12)
ITO .v. Bank Note Paper Mill India P. Ltd. (2017) 56 ITR 266 (Bang) (Trib.)
S.4 : Charge of income-tax – Capital or revenue - Accrual - Arbitration award received on

account of escalation damage and delays in completing the project will be a capital receipt.
Dispute regarding the contract and amount awarded on arbitration. The issue relating to
damages and interest still sub judice and hence cannot be taxed till the proceedings attain
finality. [ S.5, 145 ]
Dismissing the appeal of the revenue, the Tribunal held that; only receipt on which assessment
was completedwas the receipt of award during the year and there was no other income. The
assesseewas out of the contract due to dispute with the Delhi Development Authority.
Therefore,the damages so received were for loss of business and not merely loss of profit and
werecapital in nature. The issue relating to the damages and interest being still sub judice these
sumscould not be brought to tax in the year under consideration. The finding of the AO in this
respect that if the assessee failed in appeal by the judgment of the High Courtthen the sums would
be deducted from its income was not justified. (AY. 2007-08).
ACIT .v. Jagat Ram Trehan and Sons (2017) 56 ITR 286 (Delhi) (Trib.)
S. 4 : Charge of income Capital or revenue – Interest subsidy received under Technology

up gradation fund Scheme is capital receipt.
The Tribunal held that interest subsidy received under Technology upgradation Fund Scheme is a
capital receipt. Receipt of subsidy under the West Bengal Incentive Scheme, 2000 is a capital
receipt not chargeable to tax. (AY. 2007-08)
Dy. CIT v. Gloster Jute Mills Ltd. (2017) 185 TTJ 339/159 DTR 33 (Kol.) (Trib.)
S. 4 : Charge of income tax – Merely because HUF of assessee had not filed return of
income, AO cannot assess the capital gain in the hands of individual. [S. 45]
A property had been jointly held by all family members and did not belong to assessee in his
individual status. Conveyance deed was executed jointly by all co-owners. Merely because HUF
of assessee had not filed return of income, AO cannot assess the capital gains in hands of assessee
in his Individual capacity. (AY. 2009 – 2010)
Ashwin C. Jariwala v. ITO (2017) 164 ITD 255 (Mum) (Trib.)
S. 4 : Charge of income-tax – Capital or revenue-Gains due to fluctuation in foreign

exchange - Source of funds for capital expenditure hence capital receipt.
Tribunal held that entire gain due to fluctuation in foreign exchange when source of funds is for
capital expenditure, is a capital receipt. (AY. 2008-2009)
ACIT v. L. S. Cable India P. Ltd. (2017) 55 ITR 232 (Delhi) (Trib.)
S. 4 : Charge of income-tax-Method of accounting - stock in trade - Development of

property-Income in respect of transfer of immovable property recognised only when risks,
rewards and ownership of property transferred to buyer. Matching principle - Accounting
Standard-9. [S. 2 (47), 5, 145]
The assessee was engaged in the business of development of property. The Assessing Officer
held that the revenue should be recognised at every stage of receipt of sale consideration which
14
was up held by the CIT (A).On appeal allowing the appeal the Tribunal held that; provision
relating to deemed transfer as in case of capital assets not applicable to transactions of stock-in-
trade. Income in respect of transfer of immovable property recognised only when risks, rewards
and ownership of property transferred to buyer. Matching required to be done on accrual basis in
respect of income offered to tax. Matter remanded. (AY. 2007-2008)
S. K. Properties v. ITO (2017) 53 ITR 607 (Bang.) (Trib.)
S. 4 : Charge of income-tax – Accrual - Mercantile system of accounting— Retention money

not to be taken into account in computing profits. [S. 5, 145]
Certain percentage of contract price retained by customers to be paid on satisfactory performance
of contract. Assessee had no right to claim any part of retention money till verification of
satisfactory execution of contract therefore retention money not to be taken into account in
computing profits. (AY.2003-2004 to 2011-2012)
Electrosteel Castings Ltd. v. DCIT (2017) 53 ITR 5 (Kol.) (Trib.)
S. 4 : Charge of income-tax-Capital or revenue-Share warrants-Receipt of advance amount

was forfeited on account of non-payment was a capital receipt.
Advance received against Share warrants were forfeited on account of non-payment was a capital
receipt. (AY.. 2003-2004 to 2011-2012)
Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol) (Trib)
S. 4 : Charge of income-tax - Capital or revenue-Receipts from sale of carbon credits is

capital receipt.
Receipts from sale of carbon credits are capital receipt. (AY.2003-2004 to 2011-2012)
Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol) (Trib.)
S. 4 : Charge of income-tax - Capital or revenue-Sales tax remission scheme is capital

receipt - Subsidy cannot be reduced from actual cost for the purpose of depreciation [S. 32].
Subsidy received as per sales tax remission scheme is capital receipt. The amount is receivable
only after commencement of production would not alter character of subsidy. The referable to
cost of fixed assets cannot be the ground from reducing subsidy from actual cost for purposes of
depreciation. (AY. 2003-2004 to 2011-2012)
S.4 : Charge of income-tax-Accrual-Banking company - Interest on non-performing assets

cannot be assessed on accrual basis. [S.5, 145]
Dismissing the appeal of the assesse, the Tribunal held that; Interest on non-performing assets
cannot be assessed on accrual basis. (AY.2009-2010, 2010-2011)
ACIT v. Tambaram Co-op. Urban Bank Ltd. (2017) 53 ITR 1 (Chennai) (Trib.)
S.4 : Charge of income-tax – Amount not be taxed in hands of assessee merely because
offered to tax [S.119, Constitution of India, Art. 265]
Amount not be taxed in hands of assessee merely because offered to tax . Office memorandum to
Ministry of Civil Aviation is no authority in law which cannot be basis to hold an amount taxable.
(AY.2008-09)
Add.CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169 /148 DTR 201 (Mum.)
(Trib.)
S.4 : Charge of income-tax-Diversion of income by overriding title - Passenger service fee-

security component- - Surplus to be mandatorily transferred to account of Airports
Authority of India. Amount held in fiduciary capacity which is not taxable. [S.2 (24), 5]
15
Passenger service fee and security component, surplus to be mandatorily transferred to account of
Airports Authority of India. Amount held in fiduciary capacity therefore not taxable. (AY.2008-
09)
Addl CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169 (Mum.) (Trib.)
S. 5 : Scope of total income – Classification of asset from current to fixed and consequent
valuation of such asset at market value does not give rise to income
Assessee had a plot of land at Lucknow which was being disclosed in the past as current assets.
Book value of the plot was quite less than the market value. Assessee re-characterised the asset as
fixed asset and showed it at market value and created a revaluation account in the books.
Dismissing the appeal of the revenue the Court held that conversion of asset from current to
fixed and consequent valuation of the asset at market value does not give rise to any income in
the hands of the assessee.
CIT v. M.I. Builders (P.) Ltd. (2017) 248 Taxman 37 (All.) (HC)
S. 5 : Scope of total income - Salary paid to seafarer for rendering services outside India is
not chargeable to tax in India [ S. 5 (2) (a) ]
On the question whether the income earned by way of salary which became due and had accrued
to the assessee, a non-resident seafarer, for services rendered outside India, and which was not
chargeable to tax in India on “due” or “accrual” basis, could be said to be chargeable to tax on
“receipt” basis merely because the foreign employers, on the instructions of the assessee, had
remitted a part of the amount of salary to the assessee’s non-resident external bank account in
India; Allowing the appeal the Court held that; the Assessing Officer was wrong in adding the
income earned by way of salary which had become due and had accrued to the assessee, a non-
resident, for the services rendered outside India to the income chargeable to tax of the assessee
for the relevant assessment year. The interpretation given to section 5 (2) (b) could beapplied to
section 5 (2) (a) . The Circular No. 13 of 2017 dated April 11, 2017 was clarificatory in nature
and was applicable for construing the provision for the relevant assessment year (AY. 2010-11)
Sumana Bandyopadhyay (Smt.) v. Dy. DIT (IT) (2017) 396 ITR 406 (Cal.) (HC)
S. 5 : Scope of total income – Sub-contract - Amount received for work shared

proportionate to work was shown separately, hence Amount received by other person
cannot be added to his income - Income cannot be assessed as joint venture. [S.4]
Dismissing the appeal of the revenue, the Court held that; there was enough material to show that
the amount received from the contract was directly shared by the assessee and “B”. When after
receipt of the contract amount, the shares were identified and taken by both the parties of the joint
venture, it could not be treated as a sub-contract. There was no material brought by the Revenue
to show that there was any contract entered into by the assessee to assign the work to “B” as sub-
contractor. Further, when the respective share was received by the assessee, it had been shown as
the income by the assessee in the return of income. When the assessee had not claimed any
amount towards expenditure pertaining to the contract amount which had been received by the
assessee, there would not be any scope for disallowing any amount towards expenditure.
(AY.2005-2006, 2006-2007, 2007-2008)
CIT v. G. Balraj. (2017) 390 ITR 50 (Karn) (HC)
S. 5 : Scope of total income – Salary received by a non-resident for services rendered

abroad for a period of 286 days, accrues outside India and hence, was not chargeable to tax
in India. [S. 6,9,264]
A Writ Petition was filed before the HC challenging the order passed u/s. 264 and 143 (1),
contending that salary received was not taxable in India as the services were rendered outside
16
India and CIT ought to have completed the assessment rather than remanding the assessment to
AO. Allowing the Writ, the HC observed that income would not be taxed in India solely on the
basis that such income was received or deemed to be received in India but also, on whether the
income was accrued in India or outside India. The place of accrual of the income, i.e, the place
where the services have been rendered, becomes material in determining whether the income was
accrued in India or outside India. In present case, undisputedly, the petitioner had received
income/salary for rendition of services outside India for a period of 286 days, and therefore has to
be treated as accrued outside India and not chargeable to tax in India. (AY. 2011-12)
Utanka Roy v. DIT (IT) (2017) 390 ITR 109 /291 CTR 501 /146 DTR 27 (Cal.) (HC)
S. 5 : Scope of total income-Non-resident-Permanent establishment-Assessee deciding venue

and participating teams bound to it to compete in racing in terms agreed with assessee-
Proof of assessee carrying on business in India for duration of race within meaning of
expression under article 5 (1) of DTAA – DTAA - India-United Kingdom.[Art. 5 (1), 13 195]
The assessee was a United Kingdom tax resident company. Consequent to agreements entered
into between the FIA (an international motor sports events regulating association), FOAM (the
asset management company, and the assessee, FOAM licensed all commercial rights in the FIA
formula one world championship to the assessee for a 100 year term. Court held that; the entire
event, i.e., the FIA championship in the circuit was organised and controlled by the assessee. The
assessee’s participation and the undertakings given to it by each of these actors, who were
responsible for the event as a whole, brought out its central and dominant role. The
conceptualisation of the event and the right to include it in any particular circuit was that of the
assessee; it decided the venue and the participating teams were bound to it to compete in the race
in the terms agreed with the assessee. All these, unequivocally, showed that the assessee carried
on business in India for the duration of the race (and for two weeks before the race and a week
thereafter). Every right which it possessed was monetised; the US$40 million which was paid was
only a part of that commercial exploitation by the assessee. Thus the assessee carried on business
in India within the meaning of the expression under article 5 (1) of the Double Taxation
Avoidance Agreement between India and the United Kingdom (DTAA). The assesse was held to
be liable to deduct tax at source.
CIT v. Formula One World Championship Ltd. (2017) 390 ITR 199 /291 CTR 24/145 DTR
33 (Delhi) (HC)
Jaiprakash Associated Ltd v. CIT (2017) 390 ITR 199 /291 CTR 24/145 DTR 33 (Delhi)
(HC)
S.5 : Scope of total income – Suppliers showed recovered amount from assessee as advance
– Tax collected from customers shown as advance - Amount collected not to be taxed as no
real income accrued. [S.147]
The amount received from customers is because of recovery made of tax, by coal companies from
the assessee, which is shown as advance in the books of account. The assessee has also paid this
amount to coal companies, who in turn was showing it as advances in their books of account. If
revenue wants to tax this amount in the hands of the assessee, then, the assessee should be
allowed deduction on account of taxes paid to coal companies. This being so, there was no real
income in the hands of the assessee. (AY. 2008-09)
ACIT v. M.P. Laghu Udyog Nigam Ltd. (2017) 165 ITD 446 (Indore) (Trib.)
S.5 : Scope of total income - Direct credit of salary for services rendered outside India into
NRE bank account was held to be not taxable in India
Allowing the appeal of the assessee the Tribunal held that; Direct credit of salary for services
rendered outside India into NRE bank account was held to be not taxable in India . (AY. 2011-
2012)
17
Shyamal Gopal Chattopadhyay v. DIT (2017) 165 ITD 437/189 TTJ 327/156 DTR 297
(Kol) (Trib.)
S. 5 : Scope of total income – Accrual - Seafarer - Services were rendered outside India on a
foreign ship salary receipts shall not include in income as same was credited in NRE
account maintained in Indian Bank.
Allowing the appeal of the assessee, the Tribunal held that; salary accrued to a non-resident for
services rendered outside India on a foreign ship shall not be include in total income, as the salary
has been credited in NRE account maintained with an Indian Bank by seafarer. (AY . 2012 –
2013)
Asim Kumar Bera v. DIT (2017) 166 ITD 592 (Kol.) (Trib.)
S. 5 : Scope of total income – Marine engineer - Salary accrued outside India just because
foreign employer directly credited salary to NRE account ,same could not be brought to tax
in India
Allowing the appeal of the assessee the Tribunal held that just because foreign employer directly
credited salary for services rendered outside India into NRE bank account of non-resident
seafarer in India, same could not be brought to tax in India. (AY.2011-12)
Tarun Kumar Sarkar v. DIT (2017) 166 ITD 125 (Kol) (Trib.)
S. 5 : Scope of total income – Grossing up of income-tax withheld in USA (Federal and State
Tax) should not be added back to quantify income taxable in India - DTAA-India - USA [ S.
90, 198, Art 25 ]
Allowing the appeal of the assessee the Tribunal held that ;for clause (c) of S.5 (1), grossing up of
income is not required and only net income after TDS is to be taxed in India but for granting the
benefit of Federal tax withheld in USA, the same has to be quantified as per article 25 of Indo US
DTAA. (AY. 2011-12)
Sunil Shinde v. ACIT (2017) 166 ITD 597 (Bang.) (Trib.)
S. 5 : Scope of total income - Service rendered outside India, amount credited by Foreign
employer directly into NRE bank account of non-resident seafarer in India was held to be
not liable to be taxed in India .
Allowing the appeal of the assessee the Tribunal held that; where foreign employer directly
credited salary for services rendered outside India into NRE bank account of non-resident
seafarer in India, same could not be brought to tax in India . (AY. 2012-13)
Arnab Bose v. DCIT 166 ITD 404 (Kol) (Trib.)
S.5 : Scope of total income-When income accrues or arises or was deemed to accrue or arise
to assessee during previous year, it was to be taxed in that year. [S. 5 (1) (b) ]
Dismissing the appeal of the assessee the Tribunal held that; assessee itself had admitted that
there was error in the treatment given to the amount in question, that in the books of account
especially in the balance sheet, the sum was shown as liability in the books of accounts in the
year when the alleged liability had arisen, that the assessee claimed that there was dispute, that no
evidence was produced before the revenue authorities about the alleged dispute, that even before
court, no document was furnished to prove that the assessee had some dispute about the receipt.
Even if, for sake of argument existence of dispute is accepted then, it was for Rs. 14 lakhs only.
For such a small sum out of Rs. 3.14 crore, the assessee did not show the income during the year
18
under consideration. Court agreed with the FAA that same income cannot be taxed twice. So,
there should not be any addition of the impugned amount in any other year. It was further held
that when income accrues or arises or was deemed to accrue or arise to assessee during previous
year, it was to be taxed in that year. As per provisions of section 5 (1) (b), when income accrues
or arises or was deemed to accrue or arise to assessee during previous year, it was to be taxed in
that year as a result the appeal was decided against assessee. (AY .2007-08)
Yash Raj Films (P) Ltd. v. ACIT (2017) 49 CCH 253 /184 TTJ 741 /149 DTR 57 (Mum.)
(Trib.)
S. 5 : Scope of total income-Accrual – Developer-Income could be recognized only in year in

which conveyance deed was registered. [S.2 (47), 4, 145, AS, 9]
Assessee recognized revenue only in the year in which registration of conveyance deed of plots
sold took place however, the AO estimated income under mercantile system of deriving income
on yearly basis. On appeal CIT (A) confirmed he addition . Tribunal held that; As per the
accounting standard 9 the recognition of income also lays down that the income in respect of
transfer of immovable property can be recognized only when the risks, rewards and ownership of
the property is transferred to the buyer. On these observations the ITAT had remanded back to the
AO with a direction that the income in respect of sale of plots can be recognized only in the year
in which conveyance deed executed is registered in favour of the buyers and to allow the
development expenditure incurred as expenditure. (AY. 2007 - 08)
S.K. Properties v. ITO (2017) 162 ITD 419 /53 ITR 607 (Bang.) (Trib.)
S. 6 (1) : Residence in India – Individual – Resident – Not resident-Period of stay in India-

Assessee was in India for a period of 171 days in the financial year 2004-2005 and would be
classified as a non-resident as per provisions of Explanation (b) to section 6 (1) and hence
the amount remitted from outside India by him would not be liable to tax in India. [S. 6 (1)
(a) (b)]
Dismissing the appeal of the revenue, the Tribunal held that; Relaxation of period of 60 days as
per section 6 (1) (a) to 182 days when employment is taken outside India as per clause (a) of
Explanation 1 is applicable only "in relation to that year" i.e. the year in which employment is
taken outside India. Thereafter, for subsequent years, the residential status has to be seen as per
the provisions of clause (b) to Explanation 1-Assessee being a non-resident as per the aforesaid
provision is not liable to tax on the amount remitted from outside India. Economic or legal
relationship with India is not relevant (AY.2005-2006)
ADIT v. Sudhir Choudhrie (2017) 55 ITR 681 (Delhi) (Trib.)
ADIT v. Bhanu Choudhrie (2017) 55 ITR 681 (Delhi) (Trib.)
ADIT v. Dhruv Choudhrie (2017) 55 ITR 681 (Delhi) (Trib.)
S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Formula One
Grand Prix of India' event constitute business income, liable to deduct tax at source -
DTAA - India – UK. [S. 195, Art., 5, 13]
Dismissing the appeal of the assessee the Court held that; Formula One Grand Prix of India' event
constitute business income, liable to deduct tax at source .High Court rightly concluded that based
on exclusive nature of access and period for which it was accessed it could be concluded that
circuit constituted a fixed place PE of assessee in India.
Formula One World Championship Ltd. v. CIT (IT) (2017) 248 Taxman 192 (SC)
S. 9 (1) (i) : Income deemed to accrue or arise in India - Permanent Establishment (PE) -
“fixed place of business”, “service PE” and “agency PE” - The fact that there is close
association and dependence between the US company and the Indian companies is
19
irrelevant. The functions performed, assets used and risk assumed, is not a proper and
appropriate test to determine whether there is a location PE - DTAA - India - USA [ Art. 5,
6, 7, 26 ]
Dismissing the appeal of the revenue the Court held that; The fact that there is close association
and dependence between the US company and the Indian companies is irrelevant. The functions
performed, assets used and risk assumed, is not a proper and appropriate test to determine
whether there is a location PE . (AY. 2001-02 to 2007 - 08)
ADIT v. E - Funds IT Solution Inc (2017) 399 ITR 34/298 CTR 505/158 DTR 337 /251
Taxman 280 (SC)
Editorial : Decision in DIT v. E - Funds IT Solution Inc (2014) 364 ITR 256 (Delhi) (HC) is
affirmed
S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Formula One
Grand Prix of India' event constitute business income, liable to deduct tax at source -
DTAA - India – UK. [S. 195, Art., 5, 13]
Formula One World Championship Limited (‘FOWC’) and Jaypee Sports International Limited
(‘Jaypee’) filed applications before the Authority for Advance Ruling (AAR). FOWC had entered
into a ‘Race Promotion Contract’ (RPC) dated September 13, 2011 with Jaypee, granting Jaypee
the right to host, stage and promote the Formula One Grand Prix of India event for a
consideration of US$ 40 million. Some other agreements were also entered into between FOWC
and Jaypee as well as group companies of FOWC and Jaypee. In the applications filed by FOWC
and Jaypee before the AAR, advance ruling of AAR was solicited on two main questions/queries
:
(i) whether the payment of consideration receivable by FOWC in terms of the said RPC from
Jaypee was or was not royalty as defined in Article 13 of the ‘Double Taxation Avoidance
Agreement’ (DTAA) entered into between the Government of United Kingdom and the Republic
of India?; and
(ii) whether FOWC was having any ‘Permanent Establishment’ (PE) in India in terms of Article
5 of DTAA?
(iii) whether any part of the consideration received or receivable by FOWC from Jaypee outside
India was subject to tax at source under Section 195 of the Indian Income Tax Act, 1961
(hereinafter after referred to as the ‘Act’).
The AAR answered the first question holding that the consideration paid or payable by Jaypee to
FOWC amounted to ‘Royalty’ under the DTAA. Second question was answered in favour of
FOWC holding that it did not have any PE in India. As far as the question of subjecting the
payments to tax at source under Section 195 of the Act is concerned, AAR ruled that since the
amount received/receivable by FOWC was income in the nature of Royalty and it was liable to
pay tax there on to the Income Tax Department in India, it was incumbent upon Jaypee to deduct
the tax at source on the payments made to FOWC. FOWC and Jaypee challenged the ruling on
the first issue by filing writ petitions in the High Court contending that the payment would not
constitute Royalty under Article 13 of the DTAA. Revenue also filed the writ petition challenging
the answer of the AAR on the second issue by taking the stand that FOWC had PE in India in
terms of Article 5 of the DTAA and, therefore, tax was payable accordingly.
The High Court reversed the findings of the AAR on both the issues. Whereas it has held that the
amount paid/payable under RPC by Jaypee to FOWC would not be treated as Royalty, as per the
High Court FOWC had the PE in India and, therefore, taxable in India. While deciding this
question, the High Court has not accepted the plea of the Revenue that it was not a dependent PE.
The High Court has also held, as the sequitur, that Jaypee is bound to make appropriate
deductions from the amount payable to FOWC under Section 195 of the Act.
20
All three parties filed appeals before the Supreme Court. As per FOWC and Jaypee, no tax is
payable in India on the consideration paid under RPC as it is neither Royalty nor FOWC has any
PE in India. It is pertinent to mention that the Revenue has not challenged the findings of the
High Court that the amount paid under RPC does not constitute royalty. Therefore, that aspect of
the matter has attained finality. The main question in the appeals therefore pertained to PE. After
analysing various case laws on the subjects, the court held that; We are of the opinion that the test
laid down by the Andhra Pradesh High Court in Visakhapatnam Port Trust case fully stands
satisfied. Not only the Buddh International Circuit is a fixed place where the
commercial/economic activity of conducting F-1 Championship was carried out, one could
clearly discern that it was a virtual projection of the foreign enterprise, namely, Formula-1 (i.e.
FOWC) on the soil of this country. It is already noted above that as per Philip Baker27, a PE must
have three characteristics : stability, productivity and dependence. All characteristics are present
in this case. Fixed place of business in the form of physical location, i.e. Buddh International
Circuit, was at the disposal of FOWC through which it conducted business. Aesthetics of law and
taxation jurisprudence leave no doubt in our mind that taxable event has taken place in India and
non-resident FOWC is liable to pay tax in India on the income it has earned on this soil.
As regards deduction of tax at source, the Court observed that; Jaypee was bound to make
appropriate deductions from the amounts paid under Section 195 of the Act. In view of the
foregoing, the appeals preferred by the FOWC and Jaypee are dismissed, subject to observations
as made above.
Formula One World Championship Limited v. CIT (2017) 394 ITR 80 /150 DTR 305/247
Taxman 153/295 CTR 12 (SC)
Jaiprakash Associates Ltd v CIT (2017) 394 ITR 80/150 DTR 305 /295 CTR 12 (SC)
S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Liaison office
– Income attributable to liaison office was held to be not assessable in India - DTAA - India
– Japan [S. 44BB, Art, 5 ]
Dismissing the appeal of the revenue the Court held that; Income attributable to liaison office was
held to be not assessable in India. Having treated the project offices as separate taxable units and
having offered the profits therefrom to tax under section 44BBB, the project offices could not
also be treated as permanent establishments for the purpose of the Double Taxation Avoidance
Agreement. The Tribunal was right in holding that the offices of the assessee and its activities
during the assessment years in question could not be regarded as its permanent establishment in
India and the income directly or indirectly attributable to the offices was not taxable in India
during the assessment years 1994-95 and 1995-96 (AY. 1994 - 95, 1995 - 96)
DIT v. Mitsui and Co. Ltd. (2017) 399 ITR 505/156 DTR 291 (Delhi) (HC)
S.9 (1) (1) : Income deemed to accrue or arise in India - Capital gains - Arbitration -
Multiple foreign corporate entities of same group cannot bring multiple arbitration
proceedings under multiple investment protection treaties against a host State in relation to
same investment, same economic harm and same measures especially when reliefs sought
are same - DTAA-India - UK [ S.195, Art, 5 ]
Arbitration proceedings against retrospective tax imposed by Finance Act, 2012 brought by
Vodafone Group, UK under the Indo-UK BIPA (Bilateral Investment and Promotion Agreement)
are liable to be stayed when on same issue an arbitration proceeding brought by Vodafone
International Holdings BV is pending - Multiple foreign corporate entities of same group cannot
bring multiple arbitration proceedings under multiple investment protection treaties against a host
State in relation to same investment, same economic harm and same measures especially when
reliefs sought are same
UOI v. Vodafone Group PLC United Kingdom. (2017) 250 Taxman 217 (Delhi) (HC)
21
S. 9 (1) (i) : Income deemed to accrue or arise in India – Capital gains - Capital gain on sale
of shares of Indian Company by a resident of Mauritius was held to be not taxable in India -
DTAA - India – Mauritius [S. 9, 45, 90, 245 (R), Art.13 ]
It was held by the High Court upholding the decision of the AAR that the long term capital gain
arising on sale of shares of TIL, an Indian Company, by the assessee, a resident of Mauritius is
not taxable in India as, the same can be taxed only in Mauritius and not in India and that the sale
of shares is genuine and that the AAR had rightly held that the arrangement is not for the purpose
of avoidance of tax in India. Therefore ,capital gain on sale of shares of Indian Company by a
resident of Mauritius was held to be not taxable in India .
CIT (IT) v. JSH (Mauritius) Ltd (2017) 84 taxmann.com 37 /297 CTR 275/155 DTR 321
(Bom) (HC)
S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Capital gains
- Stay of Arbitration proceedings - Multiple foreign corporate entities of same group cannot
bring multiple arbitration proceedings under multiple investment protection treaties
against a host State in relation to same investment, when reliefs sought are the same –
DTAA-India – UK [ S. 195, 201 (1), 201 (IA ]
Allowing the petition the Court held that; arbitration proceedings against retrospective tax
imposed by Finance Act, 2012 brought by Vodafone Group, UK under the Indo-UK BIPA
(Bilateral Investment and Promotion Agreement) are liable to be stayed when on same issue an
arbitration proceeding brought by Vodafone International Holdings BV is pending . Multiple
foreign corporate entities of same group cannot bring multiple arbitration proceedings under
multiple investment protection treaties against a host State in relation to same investment, same
economic harm and same measures especially when reliefs sought are same . Court also held
that, defendant, their servants, agents, attorneys, assigns are restrained from taking any action in
furtherance of the notice of dispute and the notice of arbitration and from initiating arbitration
proceedings under India-UK Bilateral Investment Protection Agreement or continuing with it as
regards the dispute mentioned by the defendants.
UOI v. Vodafone Group PLC United Kingdom (2017) 250 Taxman 217 (Delhi) (HC)
S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Sale of shares
was held to be not liable to capital gains tax - DTAA - India – Nether lands – Singapore [ S.
2 (47), 269UA (d), Art .13 (1), 11 (1) ]
Dismissing the appeal of the revenue the Court held that; since assessee-company did not sell
immovable property or any rights in immovable property in which shareholders enjoyed
ownership as contemplated in section 269UA (d), article 13 (1) was not applicable and, therefore,
assessee company was entitled to exemption from taxation of its capitals gains in India. (AY.
2005-06)
DIT (IT) v. Vanenberg Facilities BV (2017) 249 Taxman 175 /297 CTR 291 /155 DTR 153
(AP) (HC)
S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection - AO satisfied
with income attributable under article 9 of India-Denmark DTAA in respect of 141 ships
out of 145 ships – revenue cannot bring income of these 4 ships to tax in India under section
9.
Where activity carried out by 4 ships had nexus with operation of 141 ships operating in
international traffic, which were given benefit under article 9 of India-Denmark DTAA, revenue
could not bring income of 4 ships alone to tax in India under section 9 of the Act.
DIT v. A.P.Moller Maersk A/S (2016) 76 taxmann.com 143 (Bom) (HC)
22
Editorial : SLP of revenue is dismissed, DIT v. A.P. Moller Maersk A/S (2017) 248 Taxman 83
(SC), followed DIT v. A.P.Moller Maersk A/S (2017) 392 ITR 186 (SC)
S.9 (1) (i) : Income deemed to accrue or arise in India - Royalty— Payment for software not
royalty hence not taxable in India as royalty, but business income, DTAA - India – China
[S.9 (1) (vi), Art. 12, Copyright Act, 1957, S. 14.]
Dismissing theof the revenue the Court held that; the software supplied was not independent, but
necessary for the hardware supplied by it, under the contract. The assessee also provided
upgrades for the software. The supplies made (of the software) enabled the use of the hardware
sold. It was not disputed that without the software, use of the hardware was not possible. The
mere fact that separate invoicing was done for purchase and other transactions did not imply that
it was royalty payment. In such cases, the nomenclature (of licence or some other fee) was
indeterminate of the true nature. Nor was the circumstance that updates of the software were
routinely given to the assessee's customers. These facts did not detract from the nature of the
transaction, which was supply of software, in the nature of articles or goods. The payments for
software did not constitute royalty.
CIT (IT) v. ZTE Corporation (2017) 392 ITR 80 /245 Taxman 252/293 CTR 94 /147 DTR
121 (Delhi) (HC)
S.9 (1) (i) : Income deemed to accrue or arise in India - International; Airlines Technical
Pool (IATP)-Reciprocity in service rendered and received from pool members-Amount
received from pool not taxable in India. DTAA India – Germany - Netherland. [Art. 8]
Dismissing the appeal of the revenue, the Court held that; the assessees participated in the
International Airlines Technical Pool and earned certain revenues from such activities and also
incurred expenditure. There was clear reciprocity as to the extension of services; membership was
premised upon each participating member being able to provide facilities for which it was
formed. As there was reciprocity in the rendering and availing of services, there was clearly
participation in the Pool; in terms of the two Double Taxation Avoidance Agreements (between
India and Germany and between India and the Netherlands) the profits from such participation
were not taxable in India.
DIT v. KLM Royal Dutch Airlines (2017) 392 ITR 218/245 Taxman 341/292 CTR 121 /147
DTR 1 (Delhi) (HC)
DIT v. Lufthansa German Airlines (2017) 392 ITR 218/245 Taxman 341/292 CTR 121 /147
DTR1 (Delhi) (HC)
S. 9 (1) (i) : Income deemed to accrue or arise in India – Capital gains - Investment income
of assessee was held to be not taxable in India as per article 14 (6) of Indo-Spain tax treaty,
and that gain on forex transaction entered in to hedge investment in securities was capital
gains and not taxable in India - DTAA-India – Spain [ Art 14 (5), 14 (6) ]
Dismissing the appeal of the revenue, the Tribunal held that; when the Spanish company, had
invested in some Indian companies which were in business of developing properties in India and
it was not holding any property, directly or indirectly, provisions of article 14 (5) of DTAA
between India and Spain being applicable for properties held by a Spanish company, said
transaction could not be taxed in India. As investment income of assessee was not taxable in India
as per article 14 (6) of Indo-Spain tax treaty, and that gain on forex transaction entered in to
hedge investment in securities was capital gains and not taxable in India. (AY. 2007 - 08 to
2009 - 10)
ADIT (IT) v. Merril Lynch Capital Market Espana S.A.S.V. (2017) 167 ITD 194 (Mum)
(Trib.)
23
S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Stay of
employee in India was only 90 days there was no permanent establishment in India –
Absence of exact work done by service engineers receipts cannot be assessed as royalty or
Fees for technical services - DTAA-India – Saudi Arabia [. Art, 5 (3) (b), 22 ]
Allowing the appeal of the assessee the Tribunal held that; where stay of assessee company's
employee in India was only 90 days, it being less than 182 days as required under article 5 (3) (b)
of India-Saudi Arabia DTAA, there was no permanent establishment in India of assessee
company in India. Tribunal also held that; in absence of exact details of work done by service
engineers of assessee in India, receipts of assessee could not be treated as royalty or Fees for
technical services . (AY. 2010-11)
Electrical Material Center Co. Ltd. v. DIT (IT) (2017) 167 ITD 248 (Bang) (Trib)
S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Expenditure
was incurred over all maintenance of Air Craft ,outside India and as there is no permanent
establishment in India the payment was held to be not taxable hence not liable to deduct
tax at source - Art 7, OECD Model Convention - DTAA - India – Germany [ Art 12 ]
Allowing the expenditure incurred over all maintenance of Air Craft ,outside India and as there is
no permanent establishment in India the payment was held to be not taxable hence not liable to
deduct tax at source. (AY. 2012-13)
DHL Air Ltd. v. DCIT (2017) 167 ITD 258/(2018) 191 TTJ 884 /163 DTR 140 (Mum)
(Trib.)
S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Part of the
profits earned from offshore supply of said equipments relatable to the operations carried
out in India was liable to tax in India - DTAA-India – China . [ DTAA . Art . 5 ]
Since the assessee, a China based company had a supervisory PE in India from which it was
supervising erection, installation and commissioning activities of equipments, a part of the profits
earned from offshore supply of said equipments relatable to the operations carried out in India
was liable to tax in India. (AY. 2007-08 to 2013-14).
Shanghai Electric Group Co. Ltd. v. DCIT (2017) 190 TTJ 11/ 84 taxmann.com 44 (Delhi)
(Trib.)
S.9 (1) (i) : Income deemed to accrue or arise in India - Business connection - Entire activity
of business to an Indian company was outside India hence the income was held to be not
taxable in India - DTAA - India - Germany [ Art. 5]
Allowing the appeal of the assessee the Tribunal held that ;since entire activity of designing,
manufacturing and delivery of equipment was made outside India and payment was also made
outside India, Permanent establishment of assessee had no role to play in any of above activities,
therefore business income of assessee was not taxable in India. (AY. 2009 – 2010)
24
Caterpillar Global Mining Europe GmbH v. ACIT (IT) (2017) 166 ITD 282 (Hyd) (Trib.)
S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection - Failure to
bring on record copy of agreement matter was remanded to AO - DTAA-India - USA [ Art.
12 ]
Allowing the appeal of the revenue the Tribunal held that; in absence of agreement entered into
between the assessee and non-resident, it is not possible to conclude as to whether the payment
made by the assessee was for commission purpose or the services offered to the assessee were
consultancy and technical in nature and moreover, the non-resident has Permanent Establishment
in India or not. Since, assessee failed to bring on record agreement entered into with non-resident
entities. Matter remanded back fresh disposal (AY. 2008-09 ,2013-14)
ACIT v. Changepond Technologies (P.) Ltd. (2017) 166 ITD 266 (Chennai) (Trib.)
S. 9 (1) (i) : Income deemed to accrue or arise in India - – Permanent Establishment – Two
projects cannot be combined to determine PE as they are not connected each other-DTAA -
India-UAE [ Art.5 ]
Dismissing the appeal of the revenue the Tribunal held that; actual period of two projects cannot
be combined as they were unconnected works, hence the income was held to be not taxable as
there is no PE in India . (AY.2009-10)
ACIT v. Valentine Maritime (Gulf) LLC. (2017) 166 ITD 1 (Mum) (Trib.)
S.9 (1) (i) : Income deemed to accrue or arise in India-Income from immobile property –
Income is being taxed in India credit for tax to be deductible has to be given – DTAA-India
– UAE. [S.90,Art,6]
Allowing the appeal of the revenue, the Tribunal held that in view of Notification Nos. 90 & 91
/2008 dated 28 - 08 - 2008, where DTAA entered in to by Indian Government and any other
country provides that any income of a resident of India “may be taxed” in other country, such
income shall be included in his total income chargeable to tax in India in accordance with the
provisions of the Income – tax Act, 1961 and relief shall be granted in accordance with the
method of elimination or avoidance of double taxation provided in such agreement . Accordingly
income from Dubai Villa of assesse was liable to be taxed in India inasmuch as same was
includible in return of income and whatever taxes that might had been levied in other contacting
state, credit thereof was required to be allowed . (AY. 2009-10, 2010-11)
Shah Rukh Khan v. ACIT (2017) 164 ITD 18 / 185 TTJ 289 (Mum.) (Trib.)
S. 9 (1) (i) : Income deemed to accrue or arise in India – Business income-Consideration

received for licensing of software programmes on the facts of the case cannot be assessed as
"royalty" it is to be assessed as business income - DTAA - India – Netherland [S. 9 (1) (vi),
90 (2), Art. 7, 12 ]
On appeal by the assessee to the Tribunal HELD allowing the appeal :
(i) A parallel to practical, every-day examples would be useful. Take, for instance, the example
of when one buys a book from Amazon for their Kindle device. In this case, Amazon can transfer
the intellectual property of the book to multiple other users simultaneously, but each single
transaction would still be a sale. This would also be true of the example of a music CD. The CD
is the ‘medium’ by which the intellectual property, viz. the songs, passes to the buyer. The
manufacturer can sell it to an end-user or to an intermediate retailer. The same song can be put on
countless CDs. This too is a sale. When one buys a car, one buys the technology that is contained
in the body of the car; the body is just the medium. On ITunes, when one buys a song, the song is
25
transferred into a format which is accessible to the buyer, a proprietory format that needs a
special device or software. Yet it is a sale. Limitless ITunes users can buy the song
simultaneously. This is a sale to each of them. In the case of CD containing software, say for
example Microsoft Word, the medium would again be the CD holding the intellectual property,
which would be the software technology. This would also be a sale, despite the fact that this same
software technology could be put on unlimited number of CDs and sold to multiple users
simultaneously. Effective control of that particular software on that one CD is passed to the
buyer. The buyer could use it, alienate it, destroy it, and do anything at all that he likes with it. If
he made illicit copies of it, this would constitute infringement; and that in itself would not make
the transfer of the software on a CD a service. Even if the buyer transferred this nontransferable
software, it would amount to a breach of contract provided in the CD package, just as it would
under Monsanto India’s sub-licensing agreement. However, this does not do anything to
disqualify the transaction itself from being a sale. These are all sales.
(ii) A perusal of the provisions of the Copyright Act reveals that the computer software is
included in the definition of literary work and is covered under the purview and scope of
copyright. The exclusive rights to do or authorize the doing of certain acts as mentioned in clause
(a) and clause (b) of section 14 vests in the owner of the work such as to reproduce the work, to
issue copies, to make translation or adaptation, to sell or give on commercial rental in respect of a
work. The internal use of the work for the purpose it has been purchased does not constitute right
to use the copy right in work. Our above also finds support from certain other provisions of the
Copyright Act.
(iii) In absence of transfer of rights to authorise doing of certain acts as mentioned in sections 2,
13 & 14 of the Copyright Act it cannot be said that there was transfer of copyright. Therefore, in
view of these judgments payment on sale of software shall not fall within the definition of
‘Royalty’, as per DTAA.
(iv) If we analyse and compare various provisions of the Copyright Act with the relevant clauses
of the master agreement, it is noted that the said agreement does not permit HLL to carry out any
alteration or conversion of any nature, so as to fall within the definition of ‘adaptation’ as defined
in Copyright Act, 1957. The right given to the customer for reproduction was only for the limited
purpose so as to make it usable for all the offices of HLL in India and no right was given to HLL
for commercial exploitation of the same. It is also noted that the terms of the agreement do not
allow or authorise HLL to do any of the acts covered by the definition of ‘copyright’. Under these
circumstances, the payment made by HLL cannot be construed as payment made towards ‘use’ of
copyright particularly when the provisions of Indian Income-tax Act and DTAA are read together
with the provisions of the Copyright Act, 1957.
(iv) It was also argued by the Revenue that provisions of section 9 (1) (vi) should be applied, and
if these are so applied, then the sale of software shall be covered under Explanation 4 to section 9
(1) (vi), and, therefore, the same should be brought to tax as such. In this regard also, it is noticed
by us that no corresponding amendment has been made in the provisions of the DTAA. Under
these circumstances, the assessee would be entitled to the provisions, which are more beneficial
to the assessee out of the provisions of Indian Income-tax Act and DTAA between India and the
Netherlands, in view of provisions contained in section 90 (2) of the Act. We have already held
that as per the provisions of India Netherlands DTAA, the amount received by the assessee on
account of sale of software would not fall within the definition of ‘Royalty’ as provided in Article
12 (4) of the DTAA. Under these circumstances, it will not be legally permissible for us to refer
to the provisions of the Act to decide the taxability of this amount in the hands of the assessee in
India. Thus, in our considered view, based upon the facts and circumstances of the case and legal
position as discussed above, the impugned amount received by the assessee is in the nature of
business profits assessable under Article 7 of India Netherlands DTAA and would not be taxable
as ‘Royalty’ under Article 12 of the DTAA. (I.T.A. Nos.83 & 84/Mum/2007, dt. 21.12.2016)
(AY. 1998-99, 1999-2000)
26
Qad Europe B. V. DDIT (Mum.) (Trib.); www.itatonline.org
S.9 (1) (i) : Income deemed to accrue or arise in India – Permanent establishment - There is
no agency PE hence no income could be said to be attributable to assessee, a foreign income,
in India from its Indian subsidiary also when TPO had accepted that transaction between
them was at ALP-DTAA-India Mauritius. [Art. 5, 7]
Assessee-company was engaged in business of broadcasting of sports channel, namely, 'Ten
Sports' all across globe including India. Its subsidiary (Taj India) was also appointed as exclusive
distributor of TV Channel 'Ten Sports' to cable operators and other permitted systems on
'principal to principal basis'. Taj India entered into sub-distribution agreement independently with
other parties in India under which it shared distribution revenue with such sub-distributors.
Assessee filed its return of income declaring 'Nil' income on ground that advertisement and
distribution revenue earned by it was not taxable in India . Assessing Officer held that assessee
had income chargeable to tax in India as Taj India was its agency PE. Tribunal in assessee's case
in earlier year held that Taj India did not constitute 'agency PE' in terms of India-Mauritius
DTAA . Tribunal also held that, when it was found that Taj India was being remunerated at arm's
length, on facts, no further income/profit could be said to be attributable to assessee in India from
its subsidiary. (AY.2006-07 to 2008-09
Taj TV Ltd. v. DIT (2017) 162 ITD 674 (Mum.) (Trib.)
S. 9 (1) (i) : Income deemed to accrue or arise in India – Service agreement - Once DTAA
does not recognize any income as FTS or royalty, then classification of said income has to be
as per other provisions of DTAA and assessable as business income - DTAA-India – UAE [
S.9 (1) (vi), 9 (1) (vii), Art. 5, 7, 12 ]
Assessee a non-resident company incorporated in UAE entered into service agreement with its
Indian counterpart ABB India for rendering certain services on which it did not pay any taxes in
India on ground that provisions of DTAA which did not have a clause on Fees for Technical
Services (FTS) were more beneficial than corresponding provisions of Income-tax Act. Allowing
the appeal of assesse, the, Tribunal held that once DTAA does not recognize any income as FTS
or royalty, then classification of said income has to be as per other provisions of DTAA. In
absence of provision in DTAA to tax FTS, same would be taxed as per article 7 of DTAA
applicable for business profit and in absence of PE in India, said income would not be chargeable
to tax in India. (AY. 2012-2013)
ABB FZ-LLC v. ITO (International Transactions) (2017) 162 ITD 89 /184 TTJ 351 /148
DTR 97 (Bang) (Trib.)
S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection - No operations
of the business of commission agent is carried on in India - Not liable to deduct tax at
source. [ S.5 (2), 9 (1) (vii), 195, 201 (1), 201 (IA)]
Dismissing the appeal of revenue the Tribunal held that; no operations of the business of
commission agent is carried on in India, the Explanation 1 to Section 9 (1) (i) takes the entire
commission income from outside the ambit of deeming fiction under section 9 (1) (i), and, in
effect, outside the ambit of income ‘deemed to accrue or arise in India’ for the purpose of Section
5 (2) (b), the assesse is not liable to deduct tax at source . (AY. 2010-11)
DCIT v. Welspun Corporation Limited (2017) 147 DTR 113/183 TTJ 697 /55 ITR 405
(Ahd.) (Trib.)
S.9 (1) (i) : Income deemed to accrue or arise in India-Undersea cable for providing
dedicated bandwidth to assessee - Installation beyond territory of India and no operations
carried out in India--Income did not accrue or arise in India - DTAA-India – USA. [Art. 12]
27
Non-resident parties in the case of the assessee did not have any business connection in India.
The undersea cable for providing dedicated bandwidth to the assessee was installed beyond the
territory of India and no operations were carried out by the non-resident party. It was responsible
for restoring connectivity and managing faults in connectivity etc. in respect of data transmitted
through undersea cable only. Similarly, the operations carried out by another company were also
in the U. S. A. and not in India. Since the operations by both the non-resident parties were carried
out beyond the territory of India, section 9 (1) (i) was not attracted in the case of the two non-
resident parties. (AY. 2002-2003, 2003-2004)
CIT v. Geo Connect Ltd. (2017) 54 ITR 481 (Delhi) (Trib.)
S.9 (1) (i) : Income deemed to accrue or arise in India - Sale of software products to end-
users in India-Matter was set aside[ Art 5, 12].
Assessing Officer to take into account facts and circumstances and to determine whether
permanent establishment existed and also whether income taxable as royalty to depend on his
determination. (.AY.2006-2007, 2008-2009)
Interwoven Inc. v. DDIT (2017) 54 ITR 320 (Mum.) (Trib.)
S. 9 (1) (i) : Income deemed to accrue or arise in India - Business connection – Tribunal held
that 2.6% of the total sales for working out the profits attributable to the PE in India as
against 3.5% which was applied by the Assessing Officer - Reassessment was up held –
Interest u/s 234B was deleted-DTAA-India – USA. [Art. 5, 7].
Deciding the Group matters of the assessee, the Tribunal dismissed the grounds of the assessee on
reassessment, and held that that 2.6% of the total sales for working out the profits attributable to
the PE in India as against 3.5% which was applied by the Assessing Officer. Entire law explained
on whether the deputation of personnel by a foreign company to assist the Indian subsidiaries in
negotiations, marketing etc leads to a “fixed place PE” or a “Dependent Agent PE” under Article
5 of the DTAA and if so, the manner in which the profits of the foreign company are attributable
to operations in India . Interest levied u/s 234B was directed to be deleted. () (AY. 2001-02)
GE Energy Parts Inc v. ADIT (2017) 56 ITR 51 /184 TTJ 570/DTR 97 (Delhi) (Trib.)
S.9 (1) (i) : Income deemed to accrue or arise in India-Non-resident-Undersea cable for
providing dedicated bandwidth to assessee-Installation beyond territory of India and no
operations carried out in India, income did not accrue or arise in India.
Dismissing the appeal of the revenue, the Tribunal held that; Undersea cable for providing
dedicated bandwidth to assessee--Installation beyond territory of India and no operations carried
out in India, income did not accrue or arise in India. (AY. 2002-2003, 2003-2004)
CIT v.GEO Connect Ltd (2017) 54 ITR 481 (Delhi) (Trib.)
S.9 (1) (i) : Income deemed to accrue or arise in India-Non-resident-Royalty—Transmission

of call data and its effective management, Consideration paid to non-resident parties is not
royalty.
Dismissing the appeal of the revenue, the Tribunal held that; Non-resident rendering services of
transmission of call data and its effective management. No agreement for use or right to use any
industrial, commercial or scientific equipment between non-resident and assessee, consideration
paid to non-resident parties is not royalty. (AY. 2002-2003, 2003-2004)
CIT v.GEO Connect Ltd. (2017) 54 ITR 481 (Delhi) (Trib.)
S. 9 (1) (i) : Income deemed to accrue or arise in India - Permanent establishment - Special
skill and knowledge of managing director, constituted dependent agent PE in India hence
not entitle the benefit of DTAA - DTAA-India - Switzerland [S.90 Art.5]
28
The Tribunal held that the assessee was relying on the special skills and knowledge of S who was
also the Managing Director of Indian entity, which was carrying on similar functions. S was
acting exclusively and almost exclusively for and on behalf of the assessee during the currency of
contracts in question. Therefore, S constituted a dependent agent PE of the assessee in India.
Assessee is not entitled to benefit of Article 5 of DTAA. Order of Assessing Officer was up held .
(AY. 2008-09)
Carpi Tech SA v. ADIT (2017) 183 TTJ 264 (Chennai) (Trib.)
S. 9 (1) (iv) : Income deemed to accrue or arise in India - Dividend income received from
Malaysian company is exempt from tax - DTAA-India – Malasiya [ Art . 10 ]
Dividend income received by assessee from a foreign country is exempt from taxation in terms of
India-Malaysia DTAA. (Followed CIT v. Torquouise Investment & Finance Ltd (2008) 300 ITR
1 (SC))
Dy. CIT v. Tripti Trading & Investment Ltd. (2017) 247 Taxman 108 (SC)
S. 9 (1) (v) : Income deemed to accrue or arise in India – Interest – Sale of shares of wholly
owned subsidiary-Interest on delayed payment was held to be not assessable - DTAA - India
– Netherlands . [ S.90 ,Art ,11, 13 (1) ]
Dismissing the appeal of the revenue the Court held that ;In effect, payment of the interest did not
partake of the nature of penalty charges as it was not penal in character, in any manner.
Therefore, article 11 (1) of the Agreement applied on all fours, and irrespective of whether such
interest accrued or arose or was deemed to have accrued or arisen in India under section 9 (1)
(i) of the Act, it stood exempted from taxation in India under the Agreement. (AY. 2005-06)
DIT (IT) v. Vanenberg Facilities BV (2917) 397 ITR 425 /297 CTR 291 (T & AP) (HC)
S. 9 (1) (v) : Income deemed to accrue or arise in India – Interest-Bank incorporated in

Mauritius - It was not requirement of treaty that assessee must be doing banking activities
in India as well to avail exemption in respect of interest income on securities as provided in
article 11 (3) (c) of India-Mauritius DTAA DTAA - India - Mauritius-Beneficial ownership -
matter remanded to the file of the AO. [S.115AD, Art.11]
The assessee was a Foreign Company (NR) registered as a 'Bank' in Mauritius. The assessee
earned certain amount as 'interest income' on securities. The assessee claimed the same as exempt
income under Article 11 (3) of the Indo-Mauritius DTAA.AO disallowed the exemption and
taxed the same as per the provisions of section 115AD of the Act.
Allowing the appeal of the assessee the Tribunal held that; assessee, a bank, incorporated in
Mauritius, was qualified to perform FII activities in India approved by SEBI and, it was not
requirement of treaty that assessee must be doing banking activities in India as well to avail
exemption in respect of interest income on securities as provided in article 11 (3) (c) of India. AO
should understand the expression ”Beneficial ownership” relates to the international fiscal
concept and it should be given such a meaning respecting the secrecy clause of the assessee, if
any. For the limited purpose, this issue was remanded to the file of the AO. (AY.2011-12)
HSBC Bank (Mauritius) Ltd. v.DCIT (2017) 163 ITD 310 /153 DTR 18 /186 TTJ 619
(Mum.) (Trib.)
S. 9 (1) (vi) : Income deemed to accrue or arise in India – Royalty – Design and drawings
supplied – Transaction of sale hence not liable to deduct tax at source – Reimbursement of
expenses – Not assessable as technical services - DTAA - India - USA [ Art. 12 ]
Dismissing the appeal of the revenue, the Court held that; Design and drawings supplied was
treated as transaction of sale hence not liable to deduct tax at source . Reimbursement of
expenses is also not assessable as technical services . (AY. 2004 - 05)
CIT v. Creative Infocity Ltd. (2017) 397 ITR 165/160 DTR 43 (Guj.) (HC)
29
S. 9 (1) (vi) : Income deemed to accrue or arise in India – Royalty – assessee received
certain amounts for providing contents in the form of tapes to Thailand based company
who broadcast the same from its satellite – amounts received by assessee cannot be treated
as royalty.
Where assessee, a producer of tele-programmes, provided contents in form of tapes to foreign
company, engaged in business of broadcasting TV programmes, and said company broadcast
contents through its satellite and in lieu of such broadcasting, it was paid various sums from time
to time, said payment would not partake of character of royalty. (AY.2001-02 to 2003-07)
DIT (IT) v. ATN International Ltd (2017) 155 DTR 284 (Cal) (HC)
S. 9 (1) (vi) : Income deemed to accrue or arise in India – Royalty – Payment received by
assessee on sale of shrink-wrapped software in India amounted to royalty as defined under
Explanation 2 to section 9 (1) (vi) [Art. 12].
The Tribunal had held that the payments received by assessee on sale of shrink-wrapped software
in India amounted to royalty as defined under Explanation 2 to section 9 (1) (vi) and under article
12 of applicable DTAA thereby giving rise to an income chargeable to tax in India. The HC held
that the questions of law are covered by Karnataka HC ruling in assessee’s own case CIT
v.Synopsys International Ltd. (2013) 212 Taxman 454 (Karn) (HC) and hence no questions of
law arise for consideration and the appeal was dismissed. (AY. 2007 - 08)
Synopsys International Ltd. v. ADIT (IT) (2016) 76 taxmann.com 118 (Karn.) (HC)
Editorial : SLP is granted to the Synopsys International Ltd. v. ADIT (IT) (2017) 245 Taxman
45 (SC)
S. 9 (1) (vi) : Income deemed to accrue or arise in India – Royalty – Payment for software
acquired by the assessee which falls in the category of ‘copyrighted article’ and not
‘copyright’ will not be qualify as royalty payment – Explanation to sec. 9 (1) (vi) would have
no application and therefore assessee not liable to deduct tax at source – DTAA - India –
America [ S. 195, Art 7.]
Allowing the appeal of the assessee the Tribunal held that; payment for software acquired by the
assessee which falls in the category of ‘copyrighted article’ and not ‘copyright’ will not be
qualify as royalty payment. Explanation to sec. 9 (1) (vi) would have no application and therefore
assessee not liable to deduct tax at source . (AY. 2008-09)
National Stock Exchange of India Ltd. v. DDIT (2017) 57 ITR 514// 154 DTR 118 /187 TTJ
430 (Mum) (Trib)
S. 9 (1) (vi) : Income deemed to accrue or arise in India – Royalty - Assessee had provided
to its customers a non-exclusive, non-transferable license within applicable subscription
period – Amount received was held to be not liable to tax as royalty in India - DTAA-India
– USA [ Art 12 ]
Allowing the appeal of the assessee the Tribunal held that; Assessee had provided to its
customers a non-exclusive, non-transferable license within applicable subscription period . It was
held to be sale of copy right of software hence the amount received was held to be not liable to
tax as royalty in India as per Article 12 of India USA DTAA. (AY. 2012 - 13)
Black Duck Software Inc. v. Dy.CIT (IT) 2017) 190 TTJ 284 /159 DTR 138 (Delhi) (Trib)
S. 9 (1) (vi) : Income deemed to accrue or arise in India – Royalty - Force of Attraction
principle, taxability of software embedded in hardware as royalty, make available of
technical services – Functional Permanent Establishment-Installation PE in India-Cannot
30
be taxesd as business income-DTAA-India-Netherlands. [S.9 (1) (i), 9 (1) (vii), Art. 5 (3), 12
(2)]
Allowing the appeal of the assessee the Tribunal held that ;under section 4 of the Act, the charge
to tax is on the total income of every person. Section 5 of the Act explains the scope of total
income of every person. Section 5 (2) lays down the scope of total income of every person who is
a non-resident. Any income received or deemed to be received in India and any income which
accrues or arises in India or is deemed to have, accrued and arisen in India shall be included in his
total income. Section 9 of the Act lays down as to when income shall be deemed to have accrued
or arisen in India. Section 90 of the Act provides that Central Government may enter into an
agreement with the Government of any country outside India for avoidance of Double Taxation
of income under the Act and under the corresponding law in force in that country. Section 90 (2)
provides that where such agreement exists with any country outside India, then in relation to an
assessee to whom such agreement applies, the provisions of the Act, shall apply only to the extent
they are more beneficial to that assessee. India and Netherlands have entered into an Agreement
for Avoidance of Double Taxation (DTAA) with effect from 21-1-1989 and therefore the
taxability of any income that accrues or arises in India to the assessee who is non-resident in India
and a tax resident of Netherlands will have to be determined in accordance with the said DTAA.
As to when a non-resident would be considered as having a PE in the other country is generally
decided on the basis of the facts in each case, the criteria being the extent to which the Non-
Resident has set a firm foot in the soil of the other country. If a non-resident is considered as
having a Permanent Establishment (PE) in the other country then income attributable to the PE
will be taxed in the other country. As to whether the income attributable to the PE alone has to be
taxed in the other country or any other income which accrues to the Non-Resident in the other
country having no connection with the PE, can also be brought to tax in the other country, is also
laid down in the various clauses of the DTAA between countries. Available Model Conventions
differ in this regard. Some provide for taxing profits/income only to the extent that they are
attributable to the PE, which is referred to as “No force of Attraction” principle. Some provide for
taxing income/profits from direct transactions effected by the non-resident, provided the
transactions are of the same or similar kind as that effected through the PE, which is referred to as
“Limited Force of Attraction” principle. Some provide for taxing profits/income from all
transactions whether they are attributable to PE or not or whether they are of the same kind of
transactions carried on by the PE or not, which is referred to as “Full Force of Attraction”
principle. As to which principle is applicable in a given case depends on the clauses of the
convention between two countries. Article 7 (1) of the DTAA between India and Netherlands
provides for taxing profits of the enterprise in the other state only to the extent they are
attributable to the PE in the other state, adopting “No Force of Attraction” principle. Accordingly
the Tribunal held that the sale of equipment and its accessories with software imbedded in the
equipment cannot be taxed in the hands of the assessee as business income as the assessee does
not have a PE in India to which the profits can be said to be attributable .In the circumstances, the
revenue cannot bifurcate the consideration towards software and licence embedded in the
equipment from the combined sale value of the equipment and accessories and seek to bring to
tax the amount bifurcated for software as in the nature of “ Royalty” as envisaged under section 9
(1) (vi) of the Act . (ITA No. 574/Kol/2014, dt. 08.02.2017) (AY. 2010-11)
HITT Holland Instituted of Traffic Technology B.V. v. DDIT (2017) 186 TTJ 734 (Kol.)
(Trib.); www.itatonline.org
S. 9 (1) (vi) : Income deemed to accrue or arise in India – Royalty-Payments received by

assessee from WIPRO/IBM in pursuance to MSA could not be treated as 'Royalty' – DTAA
– India – Nether land [Art . 12 (4),Copyright Act, 1957 S.14]
Dismissing the appeal of the revenue, the Tribunal held that; to fall within the realm and ambit
of right to use copyright in the computer software programme, the rights as mentioned under
31
Section 14 of the Copyright Act,1957 must be given and if the said rights are not given then, there
is no copyright in the computer programme or software. In the instant case, none of the conditions
of Section 14 of the Copyright Act,1957 were applicable on account of no such rights being
transferred which was evident from the terms of the MSA. Also, the software continued being
owned by the assessee and what IBM and Wipro got was making use or access to the computer
programmes to use the software. They acquired no rights in relation to the process that had gone
into the software and were not imparted with the source code. Hence there being no right to use
of any process, the payment could not be reckoned as “royalty” under Article 12 (4) of DTAA
accordingly the payment received would not be taxable in India. (AY.2006-07,2007-08, 2008-09)
Dy. DIT (IT) v. Shell Information Technology International BV (2017) 55 ITR 372 /189 TTJ
561 (Mum.) (Trib.)
S. 9 (1) (vi) : Income deemed to accrue or arise in India – Royalty - Sharing of Standard
Operating Procedures (SOPs) is royalty-DTAA - India - Germany [S. 195, Art.13].
Dismissing the appeal of the assesse, the Tribunal that as the assessee itself puts it "these
Standard Operation Procedures are non-transferable and the assessee is not allowed to make any
changes in it" and that "in other words, it can be said that the assessee is allowed to view only
SOP established by OSE (Company)". In effect thus, it is only sharing of the information about
the scientific experiences by the OSE, but then it is consideration for such a sharing of scientific,
or for that purpose industrial and commercial, experiences that is covered by article 13 (3) of
DTAA, hence taxable in India and liable to deduct tax at source . (AY. 2009-10)
Oncology Services India (P.) Ltd. v.ADIT (2017) 165 ITD 277 /154 DTR 68 / 187 TTJ 482/59
ITR 105 (Ahd) (Trib.)
S. 9 (1) (vi) : Income deemed to accrue or arise in India – Royalty - Only right to use cannot
be assessed as royalty - Reimbursement of expenses cannot be assessed as income - Not
liable to deduct tax at source, and cannot be treated as assesee in default - DTAA-India
Canada [ S. 195, 201, Art . 12 ]
Assessee made certain payments to a Canadian company for IT system support services.It was
observed by CIT (A) that the software application/services such as e-mail database, control tools,
barcoding solutions, HR Payroll System, finance reporting, applications for recording time &
attendance etc. used by the appellant are primarily in the nature of applications for data
processing or warehousing wherein the appellant does not get control/power of use/disposal of
hardware or server involved. No use or right to use of any equipment or process is conferred upon
the appellant. The appellant is merely granted a facility and the consideration for the same cannot
be construed as royalty.It was held by the Tribunal, upholding the order of the CIT (A) that
related payments made by the assessee to BT Canada were in the nature of reimbursements. The
service may involve use of equipment but that does not vest right in the assessee to use the
equipment.Similarly, even if the payment is to be considered as payment for use of software, as is
the settled legal position as on now, unless there is no transfer of copyright, there cannot be any
occasion to hold it as royalty. In any event, so far as the transaction between the assessee and the
BT Canada is concerned, it is simply in the nature of reimbursement of expenses incurred by BT
Canada, on behalf of the assessee, and it has no income element so far as BT Canada is
concerned. (AY. 2013-14)
DCIT v. Bombardier Transportation India (P.) Ltd. (2017)162 ITD 586/183 TTJ 605 (Ahd)
(Trib.)
S. 9 (1) (vi) : Income deemed to accrue or arise in India – Royalty – On line publications -
Data base - Payment for use of copyrighted material rather than for use of copyright is not
be treated as royalty and not liable to deduct tax at source – DTAA-India – USA. [S.195,
Art.12]
32
Dismissing the appeal of the revenue, the Tribunal held that; the article 12 (3) of Indo US tax
treaty unambiguously requires that use of copyright that taxability can be triggered in the source
country. When assessee made payment to a US based entity for access to its online
publication/database. It was noted that payment in question was not use of copyright but a
copyrighted material. Thus payment could not be treated as royalty liable to withholding tax.
(AY. 2009-10, 2010 – 2011)
ITO (IT) v. Cadila Healthcare Ltd. (2017) 162 ITD 575 /184 TTJ 178/151 DTR 267 (Ahd.)
(Trib.)
S. 9 (1) (vi) : Income deemed to accrue or arise in India – Royalty-Sale of software products
to end-users in India—Matter was set aside. [Art. 5, 12]
Tribunal held that the Assessing Officer shall first decide the issue of permanent establishment
which had a bearing on the ground raised by the Department in its appeal and then decide the
issues under appeal. The Assessing Officer shall also take into consideration various judgments as
may be relied upon by the assessee . (AY.2006-2007, 2008-2009)
DIT (IT) v. Interwoven Inc. (2017) 54 ITR 320 (Mum.) (Trib.)
S. 9 (1) (vi) : Income deemed to accrue or arise in India – Royalty Sale of software-
Maintenance service charges - Amount received by assessee not "use" of copyright-Not
royalty and not taxable in India - DTAA-India – Netherland. [S. 9 (1) (i),147, 148, Art.12
(4),Copyright Act, 1957, S. 2 (a)]
The claim of the assessee was that the income was not liable to be taxed as royalty but was in the
nature of business income and the income was not taxable in the absence of permanent
establishment of the assessee in India. AO has held that the said receipt was taxable as royalty
which was up held by the CIT (A). On appeal allowing the appeal he Tribunal held that;
agreement was not permitting Indian subsidiary to carry out any alteration or conversion of any
nature. Right given to customer for reproduction only for limited purpose therefore amount
received by assessee not "use" of copyright - and not royalty and not taxable in India. (AY.1998-
1999, 1999-2000)
Qad Europe B.V. v. DIT (2017) 53 ITR 259 (Mum.) (Trib.)
S.9 (1) (vi) : Income deemed to accrue or arise in India – Royalty – Payment made for use of
software could not be considered as royalty hence not liable to deduct tax at source – DTAA
– India – USA [S. 195, Art. 12 (4)]
Payment made to US company for use of software owned by US company, for use software only
for internal business operations and would not sub-license or modify same, could not be
considered as royalty within meaning of article 12 (4) of DTAA and hence not liable to deduct
tax at source. (AY. 2008-09, 2009-10)
ADIT v. First Advantage (P.) Ltd. (2017) 163 ITD 165 (Mum) (Trib.)
S. 9 (1) (vi) : Income deemed to accrue or arise in India – Royalty-Payment to various non-
resident companies for software support licence packages was not royalty - DTAA-India-
UK. [S.195, Art. 12, 13 ]
Allowing the appeal of the assesse, the Tribunal held that;Payment to various non-resident
companies for software support licence packages was not royalty and liable to deduct tax at
source. (AY 2006-07 to 2009-10)
Quaolcomm India (P.) Ltd. v ADIT (2017) 162 ITD 493 (Hyd.) (Trib.)
S. 9 (1) (vi) : Income deemed to accrue or arise in India - Fees for technical services - Data
processed through programmed software which was standard facility, without any human
33
intervention did not fall within purview of royalty or fee for technical services - DTAA -
India - Germany [ Art .12 ]
Allowing the appeal of the assessee the Tribunal held that; It was found that there was neither
transfer of any of right in respect of any patent, invention, model etc. or process of trademark or
any similar property by assessee to SCB, nor there was any imparting of information and entire
equipment and technology which were used for processing data were solely for performing
activity of assessee for itself. Moreover, data were processed through programmed software
which was standard facility, without any human intervention. Whether, on facts, payment made
by ECB to assessee did not fall within purview of royalty or fee for technical services. (AY.
2006-07 ,2008-09, 2012-13)
Atos Information Technology HK Ltd. v. Dy.CIT (2017) 190 TTJ 161 (Mum) (Trib)
S.9 (1) (vii) : Income deemed to accrue or arise from India - Automated software-based
communication system set up and maintained by assessee for use of its agents enabling them
to access customer and documentation information—Payment received for providing said
facility was held to be not taxable as fees for technical services - DTAA - India – Denmark.
[Art. 13, 19]
Dismissing the appeal of the revenue, the Court held that; Automated software-based
communication system set up and maintained by assessee for use of its agents enabling them to
access customer and documentation information. Payment received for providing said facility was
held to be not taxable as fees for technical services. (AY. 2001-2002)
DIT (IT) v. A.P. Moller Maersk A/S (2017) 392 ITR 186/246 Taxman 309/293CTR 1 /147
DTR 395 (SC)
Editorial : Decision in DIT (IT) v. A.P. Moller Maersk A/S (2015) 374 ITR 497 (Bom) (HC) is
affirmed
S. 9 (1) (vii) : Income deemed to accrue or arise in India-Fees for technical services –
Common facilities is not technical services-Reimbursement of a common technical
computer facility is not “fees for technical services”. Amount received by way of
reimbursement of expenses does not have the character of income DTAA-India -
Denmark. [Art. 12]
Dismissing the appeal of the revenue the Court held that; In order to constitute “technical
services”, services catering to the special needs of the person using them must be rendered. The
provision of a common facility is not “technical services”. Amount paid towards reimbursement
of a common technical computer facility is not “fees for technical services”. Amount received by
way of reimbursement of expenses does not have the character of income. (CA.No. 8040 of 2015,
dt. 17.02.2017) (AY. )
DIT v. A.P. Moller Maersk ASDIT (IT) v. A.P. Moller Maersk A/S (2017) 392 ITR 186/246
Taxman 309/293CTR 1 /147 DTR 395 (SC)
Editorial : Decision in DIT (IT) v. A.P. Moller Maersk A/S (2015) 374 ITR 497 (Bom) (HC) is
affirmed
S. 9 (1) (vii) : Income deemed to accrue or arise in India - Fees for technical services –
Reimbursement which had been received over and above the amount of fees for technical
services could not be included and taxed as part of fees for technical services.
Allowing the appeal of the assesse, the Tribunal held that; expression cost to “employ”
individuals is different from the expression cost incurred to “depute” a person - costs and
expenses incurred by the assessee on travel and insurance etc. for persons deputed in India for
providing training and technical services to the Indian company were incurred over and above the
cost of employment – such amount received by the assessee on account of reimbursement which
34
had been received over and above the amount of fees for technical services could not be included
and taxed as part of fees for technical services. (AY. 2009-10, 2011-12)
Gemological Institute International Inc. v. DCIT (2017) 57 ITR 116/157 DTR 274 /190 TTJ
710 (Mum) (Trib)
S. 9 (1) (vii) : Income deemed to accrue or arise in India - Fees for technical services —
Assessee should be eligible to benefits of India-UK tax treaty, as long as entire profits and
partnership firm were taxed in UK. – DTAA-India – UK. [S.90, Art. 13,15]
Allowing the appeal of the assesse the Tribunal held that; Assessee should be eligible to benefits
of India-UK tax treaty, as long as entire profits and partnership firm were taxed in UK. (AY.
2011-12)
Linklaters LLP v. Dy. CIT (IT) (2017) 185 TTJ 525/79 taxmnn.com 12/154 DTR 153
(Mum.) (Trib.)
S. 9 (1) (vii) : Income deemed to accrue or arise in India – Fees for technical services -
Aamount received as reimbursement of travel expenses of its employees deputed in India
for providing technical assistance to a group concern cannot be assessed as technical
services .
Allowing the appeal of the assessee the Tribunal held that, amount received as reimbursement of
travel expenses of its employees deputed in India for providing technical assistance to a group
concern cannot be assessed as technical services . (AY.2009 – 2010)
Gemological Institute International Inc. v. DCIT (2017)166 ITD 8 /57 ITR 116 (Mum)
(Trib.)
S. 9 (1) (vii) : Income deemed to accrue or arise in India – Fees for technical services -
Services rendered not usable independently in future, hence cannot be assed as 'fee for
technical services' - Not liable to deduct tax at source - DTAA India – Canada [S. 195, 201,
Art. 12 ]
It was held by the Tribunal that to invoke article 12 (4) (a) it is necessary that such services
should "make available" technical knowledge, experience, skill, know-how, or processes or
consist of the development and transfer of a technical plan or technical design. The services
provided by BT Canada were simply management support or consultancy services which did not
involve any transfer of technology.
The payment of consideration would be regarded as "fee for technical/included services" only if
the twin test of rendering services and making technical knowledge available at the same time is
satisfied which was not present in the case in hand. In view of the above, it was held that payment
made does not amount to ‘Fee for technical services'. (AY. 2013-14)
DCIT v. Bombardier Transportation India (P.) Ltd. (2017) 162 ITD 586/183 TTJ 605 (Ahd.)
(Trib.)
S. 9 (1) (vii) : Income deemed to accrue or arise in India-Fees for technical services –
Management support and other services – Merely because provision for services may
require technical input by providing services, it cannot be said that technical knowledge,
skill etc .are made available to person purchasing service - DTAA – India – Finland. [Art.
13]
Assessee a foreign company, earned revenue from management support and other services
provided to its AE in India. The AO held that these services constituted technical service. On
appeal allowing the appeal of the assessee, the Tribunal held that; no technology or technical
knowhow, skills etc. were made available by assessee in order to enable Indian company to
function on its own without dependence of assesse. Tribunal also held that to cover the provisions
of article 13 (4) of DTAA, not only services should be of technical nature but such services
35
should result in making technology available to person receiving technical services. Merely
because provision of service may require technical input by person providing service, cannot be
said that technical knowledge, skills, etc. are available. (AY. 2010-11, 2011-12)
Outotec Oyj v. DIT (2017) 162 ITD 541 /183 TTJ 289 (Kol.) (Trib.)
S. 9 (1) (vii) : Income deemed to accrue or arise in India-Fees for technical services-Bio
analytical services provided does not involve any transfer of technology hence the payment
is not a Fees for Technical Services – Not liable to deduct tax at source - DTAA - India – UK
- Canada – USA. [S.195, Art. 12, 13]
Assessee has made payments for services rendered by non-residents based in USA, Canada and
UK for services in nature of bio analysis .AO held that the payments made was highly technical
in nature and liable to deduct tax at source . On appeal CIT (A) decided the issue in favour of the
assessee.Dismissing the appeal of the revenue, the Tribunal held that; services provided by non-
residents did not involve any transfer of technology and recipient of services was enabled to use
these services in future without recourse to service providers. Therefore, payment to the non-
resident would not be treated as fees technical/included Services. (AY. 2009-10, 2010-2011)
ITO (IT) v. Cadila Healthcare Ltd. (2017) 162 ITD 575 /184 TTJ 178 /151 DTR 267 (Ahd.)
(Trib.)
S.9 (1) (vii) : Income deemed to accrue or arise in India-Fees for technical services-
Transmission of call data from end of Indian territory to person outside India is not fees
for technical services hence not taxable in India.
Transmission of call data from end of Indian territory to person outside India is not fees for
technical services hence not taxable in India. (AY. 2002-2003, 2003-2004)
S. 9 (1) (vii) : Income deemed to accrue or arise in India – Payment made towards various
IT support services received from the holding Company and associated enterprises of the
group concerns are not in the nature of Fees for Technical Services, hence not liable to
deduct tax at source – DTAA-India-Canada DTAA. [S.9 (1) (vi), 195, Art. 12]
Dismissing the appeal of revenue; the Tribunal held that; As we have noted earlier, it is not even
the case of the Assessing Officer that the assessee, i.e. recipient of services, was enabled to use
these services in future without recourse to BT Canada. The tests laid down by Hon’ble Court
were clearly not satisfied. There mere fact that there were certain technical inputs or that the
assessee immensely benefited from these services, even resulting in value addition to the
employees of the assessee, is wholly irrelevant. The expression ‘make available’ has a specific
meaning in the context of the tax treaties and there is, thus, no need to adopt the day to day
meaning of this expression, as has been done by the Assessing Officer. Accordingly; payment
made towards various IT support services received from the holding Company and associated
enterprises of the group concerns are not in the nature of Fees for Technical Services, hence not
liable to deduct tax at source. (AY. 2013-14)
DCIT v. Bombardier Transportation India Pvt. Ltd. (2017) 146 DTR 45 (Ahd.) (Trib.)
S. 9 (1) (vii) : Income deemed to accrue or arise in India - Fees for technical services -
opinions or services could be used by assessee for its business purposes in succeeding years
without any aid and assistance of consultant, payment made for said services amounted to
fee for technical services-OECD Model Convention.[Art. 12]
Assessee company was engaged in business of dairy products, It entered into agreement with
MJR, Singapore for purpose of providing advice to assessee on various matters of strategic and
operational importance. The AO held that consultancy charges paid by assessee to foreign
company amounted to fee for technical services. On appeal dismissing the appeal the Tribunal
36
held that; since consultancy services were rendered by foreign company, it was made available to
assessee for its enduring benefit and those consultancy advisories, opinions or services could be
used by assessee for its business purposes in succeeding years without any aid and assistance of
consultant, said services were rightly regarded as technical services. (AY.2007-08 to 2009-10)
Nilgiri Dairy Farm (P.) Ltd. v. ITO (2017) 162 ITD 109 (Bang.) (Trib.)
S. 9 (1) (vii) : Income deemed to accrue or arise in India-Fees for technical services-Fees
paid with respect to a ‘contract of work’ does not constitute "fees for technical services"
and consequently the assessee is not liable to deduct TDS.[S. 195, 201]
Dismissing the appeal of revenue, the Tribunal held that;There is a difference between a 'contract
of work' and a ‘contract of service’. In a 'contract of work', the activity is predominantly physical
while in a 'contract of service', the dominant feature of the activity is intellectual. Fees paid with
respect to a ‘contract of work’ does not constitute "fees for technical services" and consequently
the assessee is not liable to deduct tax at source. (AY. 2012-2013)
ITO v. Emami Paper Mills Ltd. (2017) 163 ITD 212/187 TTJ 213/156 DTR 229 (Kol.) (Trib.)
S. 9 (1) (vii) : Income deemed to accrue or arise in India - Fees for technical services -
Taxability of "Other income" under DTAA-Only income not covered by specific Articles
(e.g. alimony, lottery income, gambling income, damages etc) can be charged as "Other
Income”, fees for technical services cannot be taxed as other income – DTAA - India –
Thailand-Mauritius. [S.90, Art. 6 to 21, 22 ]
Dismissing the appeal of the revenue, the Tribunal held that ;income which is not chargeable
under specific provisions of Articles 6 to 21 cannot be taxed under the residuary provision. Only
income not covered by specific Articles (e.g. alimony, lottery income, gambling income, damages
etc) can be charged as "Other income". Fees for technical services cannot be taxed as other
income. (AY. 2011-12, 2012-13)
DCIT v. Ford India Limited (2017) 148 DTR 25 /184 TTJ 291 /56 ITR 433 (Chennai) (Trib.)
S. 10 (4) : Exemption—Interest earned on non-resident external account is entitle

exemption. [S.10 (4) (ii)]
Assessee a non-resident on deputation to India. Interest earned on non-resident external account.
Assessee entitled to exemption. (AY. 2008-2009, 2010-2011)
Venkatesh Satyaraj v. DCIT (2017) 53 ITR 406 (Mum.) (Trib.)
S. 10 (10B) : Compensation – Workman-Package received by workmen as compensation

pursuant to decision taken by Central Government to offer special protection to employees
of HPF, is exempted [S.10 (10C)
Allowing the appeal of the assesse, the Court held that package received by workmen as
compensation pursuant to decision taken by Central Government to offer special protection to
employees of HPF, is exempted from deduction to income tax.
Hindustan Photo Film Workers Welfare Centre (CITU) v. Government of India (2017)249
Taxman204/151 DTR 185 (Mad) (HC)
S. 10 (10C) : Public sector companies - Voluntary retirement scheme – Compensation – Not

liable to deduct tax at source [ S. 10 (10B)192 ]
Allowing the petition behalf of the employees the Court held that; monetary benefit given to
employees of company for special protection of employees would be in nature of compensation
qualifying parameters laid down under section 10 (10B) and the same would be exempted from
deduction to income-tax .
Hindustan Photo Film Workers' Welfare Centre (CITU) v. Government of India, New
Delhi (2017) 249 Taxman 204 /151 DTR 185/(2018) 400 ITR 299 (Mad.) (HC)
37
S. 10 (10C) : Public sector companies - Voluntary retirement scheme – Entitle to exemption
though the revised return was filed beyond limitation period.[S. 119 (1), 139 (5)]
Allowing the petition the Court held that; where default in complying with requirement was due
to circumstances beyond control of assessee, Board was entitled to exercise its power and relax
requirement contained in Chapter IV or Chapter VI-A ,thus assessee being a senior citizen could
not have been denied benefit of exemption under section 10 (10C).
S. Sevugan Chettiar v. PCIT (2017) 244 Taxman 267/291 CTR 596 /145 DTR 279 (Mad.)
(HC)
S. 10 (13A) : House rent allowance – House rent paid to mother was held to be not allowable
in absence of any adequate documentary evidence to prove genuineness of transaction.
Dismissing the appeal of the assessee the Court held that; house rent paid to mother was held to
be not allowable in absence of any adequate documentary evidence to prove genuineness of
transaction, claim of exemption for House Rent Allowance (‘HRA’) could not be allowed where
the rent was paid to mother of the assessee in cash. (AY. 2009-10 to 2011-12)
Meena Vaswani (Mrs.) v. ACIT (2017) 164 ITD 120 /57 ITR 497 /186 TTJ 689/152 DTR
121 (Mum) (Trib.)
S.10 (15) : Interest payable-Foreign currency loan-Requirement of approval of Central

Government necessary with regard to rate of interest-Assessee getting approval for
transaction and rate of interest from Department of Economic Affairs--Entitled to benefit of
deduction of interest. [S.10 (15) (iv) (c), 40 (a) (i).]
Allowing the appeal of the assessee the Court held that;a plain reading of the provision under
section 10 (15) (iv) (c) bear out the fact that the approval of the Central Government which was
necessary was not with respect to the transaction, but with regard to the rate of interest. Since no
specific agency was named where either the specific power was granted or the concerned
authority itself was mentioned, the particular reference to the Central Government could not in
any manner undermine or render valueless the approval granted by one of the agencies or
Departments of the Government. Further, the Department of Revenue did not express any
contrary opinion in its approval. What the Department of Economic Affairs approved was the
transaction and the rate of interest. That the assessee availed of a lesser amount of credit or loan
did not mean that there was no approval particularly, because it was not the Department's case
that the Department approved an entirely different transaction. The assessee was entitled to the
benefit of exemption of interest made by it, in its return. (AY. 1996-1997)
Tej Quebcor Printing Ltd. v. JCIT (2017) 392 ITR 67/246 Taxman 73 (Delhi) (HC)
S. 10 (20) : Local authority – Promotion of irrigation projects and water supplies -

Vidarbha Irrigation Development Corporation was held to be entitle exemption .
Commencement of business is a question of fact . [ S.28 (i) ]
Dismissing the appeal of the revenue the Court held that; the Tribunal, on an analysis of the
provisions of the Vidarbha Irrigation Development Corporation Act, 1997 had rendered a finding
that the assessee fell within the scope of section 10 (20A) of the 1961 Act. It had held that
according to section10 (20A) of the 1961 Act, it was not necessary that a direct nexus was to be
established with the purpose of satisfying the need for housing accommodation or for the purpose
of planning, development or improvement of cities, towns and villages and that an indirect nexus
would suffice. On that basis, the Tribunal had found that the functions performed by the assessee
under the 1997 Act resulted in facilitating the “development” of cities, towns and villages
because its actions made available drinking water as also electricity through hydro-electric
projects. The assessee was also involved in activities of flood control and resettlement of
displaced persons, thereby showing that there was a nexus with developmental activities. The
38
Tribunal was correct in holding that the assessee was entitled to the benefit of exemption in view
of the wide interpretation of section 10 (20A) of the 1961 Act. Commencement of business is a
question of fact and Tribunal has given the finding that the business was commenced hence order
of Tribunal was affirmed . (AY. 1998 - 99)
CIT v. Vidarbha Irrigation Development Corporation (2017) 399 ITR 131/156 DTR 281
/298 CTR 354 (Bom.) (HC)
S.10 (20) : Local authority--Greater Noida Industrial Development Authority is not

municipality or local authority hence not entitled to exemption [ S.194I, art. 243Q. ]
Greater Noida Industrial Development Authority is not municipality or local authority hence not
entitled to exemption
Rajesh Projects (India) P. Ltd. v. CIT (TDS)-II (2017) 392 ITR 483/293 CTR 121/78
taxmann.com 263 /148 DTR 33 (Delhi) (HC)
Editotail : SLP of assesse is admitted, Greater Noida Industrial Development Authority v. ACIT
(2017) 250 Taxman 98 (SC)
S.10 (20) : Local authority—Interest earned on temporary place in deposit was held to be
exempt - Contribution to provident fund and gratuity fund is entitled to exemption. [S.11,
12]
The Interest earned by the assessee on its surplus or idle funds was assessable under the head
"Income from other sources" and the rest of the income, being miscellaneous in character was
assessable as income from other sources, which was also exempt under section 10 (20).
That where the entire income of the assessee had been held to be exempt under section 10 (20)
there was no case for making disallowance of any expense at all. Any disallowance made of
expenditure would only result in enhancing the income of the assessee which in any case had
been held to be exempt from tax. Further the entire income earned from rendering services had
been held to be exempt at the threshold itself therefore there was no requirement of resorting to
the computational provisions relating to income under the head "Business and profession"
stipulated under section 28 to section 44. No disallowance on account of contribution to the
unapproved pension fund could be made. (AY. 2000-2001 to 2003-2004)
Haryana State Agricultural Marketing Board v. ACIT (2017) 54 ITR 368 (Chd.) (Trib.)
S.10 (20A) : Local authority-Remand by High Court to Tribunal – Appeal of revenue was
dismissed.
Dismissing the appeal of the revenue, the Court held that; remand by High Court to Tribunal to
consider matter in terms of Act under which assessee constituted and other Acts and Rules
affecting matter.
Addl. CIT v. Vidarbh Irrigation Dept. Corporation (2017) 392 ITR 1/150 DTR 150 /294
CTR 12 (SC)
Editorial : Vidarbha Irrigation Development Corporation v. Addl. CIT (2005) 278 ITR 521
(Bom) (HC)
S.10 (22A) : Hospitals and Nursing Homes - Disqualification under section 13 does not
apply to institutions covered under section 10 (22A) - Benefits received by settlor cannot
debar assessee from eligibility it fundamentally has under section 10 (22A)-Entitled to
exemption. [ S.12A,13 (3) ]
Held, allowing the appeals, that the exclusion of amounts received by virtue of section 10 (22A)
was not the subject matter of section 13 (1) of the Act or any of its further conditions. In other
words, the disqualification which attached in absolute terms by virtue of the provisions of section
13 (1) especially through section 13 (3) to the income out of which some benefit flowed to a
settlor, would not apply to institutions covered by section 10 (22A) of the Act. Having regard to
39
the specific nature of the income which till March 31,1999 could not be included as part of the
total income, and which Parliament later subsumed through sections 10 (23C) and 12A of the Act
by deleting section 10 (22A), there was no question of confusion regarding the amount received
by Dr.P.N.Behl, as benefits that could debar the assessee to the eligibility it fundamentally had
under section 10 (22A) of the Act. The assessee was entitled to exemption. (AY. 1993-1994,
1994-1995, 1995-1996)
Skin Institute and Public Services Charitable Trust v. CIT (E.) (2017) 390 ITR 609/245
Taxman 61/291 CTR 427 /145 DTR 425 (Delhi) (HC)
S.10 (23BBA) : Authorities or bodies for the administration of charitable trusts,

endowments, etc - Provision applies to a body or authority (whether or not a body
corporate or corporation sole) established, constituted or appointed by or under any
Central, State or Provincial Act which provides for administration of any public religious
or charitable trusts or endowments etc [ S. 11, 12 ]
Dismissing the appeal of the revenue the Court held that ;in the instant case, the Board was
constituted by the District Judge under S. 92 CPC for administration of a public religious
charitable trust. Therefore the Board was established under the Central Act, that too, for
administration of a public religious charitable trust. Accordingly the S.10 (23BBA) of the Act of
1961has rightly been applied by the Tribunal. S.11 and 12 apply where a body or authority is not
created in the manner given undersection 10 (23BBA) of the Act but the case in hand is not
covered by S. 11 and 12 of the Act . (AY. 2008-09,2009-10)
CIT v. Bade Mathureshji Temple Board (2016) 95 CCH 0366 /(2017) 299 CTR 198 (Raj)
(HC)
S. 10 (23C) : Educational institution - Genuineness of activities was not doubted - Direction

to grant registration was held to be justified .[ S.10 (23C) (vi) ]
Dismissing the appeal of the revenue the Court held that; since the PCIT has not doubted the
genuineness of the activities of the society, the Tribunal was right in directing him to grant
registration under section10 (23C) of the Act. (AY. 2014-15)
CIT (E) v. Kids R Kids International Education and Social Welfare Trust. (2017) 399 ITR
572 (P&H) (HC)
S.10 (23C) : Educational institution-Court directed the Assessing Officer to consider the
registration as the registration was granted with retrospective effect .[ S. 12AA ]
Allowing the appeal the Court heldthat; the Appellate Tribunal’s order was not an order of
dismissal simpliciter. It had proceeded on the basis that the assessee had not obtained registration
under section 12A or exemption under section 10 (23C) (iv) . The approval having been granted
with retrospective effect for the assessment years 2006-07 to 2014-15, after the order was passed
by the Appellate Tribunal, the matter was remanded to the Assessing Officer for consideration in
the light of the exemption granted under section10 (23C) . (AY. 2006-07 to 2011-12)
Haryana State Pollution Control Board v. Dy.CIT (2017) 397 ITR 79 (P&H) (HC)
S. 10 (23C) : Educational institution-Mere receipt of interest-free loan not indicative of

commercial activity.
Held, exemption u/s 10 (23C) could not be refused merely because a company had granted an
interest-free loan to the assessee for the purpose of establishing and running the educational
40
institution. The mere receipt of an interest-free loan was not indicative of a commercial activity
for profit.
Amrawati Welfare Society v. CBDT (2017) 390 ITR 471 (P&H) (HC)
S.10 (23C) : Educational institution—Delayed application - Order passed contrary to

circular of CBDT denying the exemption was not justified-Directed to Commissioner to
pass fresh orders. [S.10 (23C) (vi), 147]
Allowing the petition the court held that; as clause (4) of the Central Board of Direct Taxes
Circular No. 7 of 2010 provided that an exemption once granted operated in perpetuity till it was
withdrawn, the orders passed by the Department ignoring the circular were contrary to law and
liable to be set aside. The Commissioner was to pass fresh order on the assessee's application
considering the relevant clause of the circular. (AY. 2008-2009, 2009-2010)
Param Hans Swami Uma Bharti Mission v. CCIT (2016) 238 Taxman 538/287 CTR
350/(2017) 391 ITR 131 (P&H) (HC)
S. 10 (23C) : Educational institution-Application cannot be rejected on the ground that the

assesse charges fees for educational course or made arrangement with other institutes to
render medical facilities.[S12A, 80G]
Allowing the petition, the Court held that the objects of the assessee society were solely for the
purposes of education and medical care and not for the purpose of profit. Merely because it
charged fees for educational courses or that it entered in to arrangements with other institutions to
set up satellite centers, to give medical treatment, or that its treatment involved a layered
subsidization programme that would not justify rejection of its application. Denial of exemption
was not justified and the order was quashed .
Venu Charitable Society v DGI (2017) 383 ITR 63/150 DTR 51 /246 taxman 396 (Delhi)
(HC)
S. 10 (23C) : Educational institution - Generation of surplus is not fatal to the grant of

exemption, if such surplus is utilized for charitable purposes. The fact that the hospital
charges of the assessee, as compared to other commercial establishments, are very nominal,
throws further light on its charitable character. [S.10 (23) (vi), 10 (23) (via), 12A,80G]
The Commissioner of Income Tax rejected the claim of the assessee to renew the exemption
granted to it under Section 80G of the Act. Tribunal allowed the claim. On appeal by revenue,
dismissing the appeal the Court held that; in Visvesvaraya Technological University v. ACIT
(2016) 384 ITR 37 (SC), on the first issue, the Apex Court held that if the surplus accumulated
over the years is ploughed back for educational purposes, the institution would continue to exist
solely for educational purposes and not for the purpose of profit. However, on the second issue,
on facts, the Apex Court came to the conclusion that the assessee therein was neither directly nor
substantially financed by the Government and thus, not coming under the expression “wholly or
substantially financed by the Government”, as appearing in Section 10 (23C) (iiiab). Having not
agreed with the assessee on the second issue, the appeal was dismissed (Islamic Academy of
Education v. State of Karnataka – (2003) 6 SCC 697 and Queen’s Educational Society vs.
Commissioner of Income Tax – (2015) 8 SCC 47 referred). In view of the findings of the Apex
Court in paragraphs 8 and 9 of its judgment in Visvesvaraya’s case (supra), as reproduced earlier,
we unhesitantly conclude that even if substantial surplus is generated, but the same is found to
have been ploughed back for building infrastructure/assets, which in turn are used for
educational/charitable purposes, the institution would not lose its charitable character. In the case
before us, it has not been disputed that the assessee is registered under Section 12A and that it has
been held entitled to the grant of exemption under Section 10 (23C) (vi) of the Act as per orders
of this Court passed in C.W.P. No. 6031 of 2009, upheld by the Apex Court in Civil Appeal No.
9606 of 2013. It has further come on record that the assessee was granted exemption under
41
Section 80G of the Act from the year 1997 till the passing of the impugned order. Further, the
finding of the Tribunal, that the assessee has never mis-utilized its funds, has not been assailed
before us. The generated surplus having been ploughed back for expansion purposes also remains
undisputed by the Revenue as no challenge to the same has been made. In fact, the utilization of
surplus for large scale expansion at the behest of the assessee was also acknowledged by the
Commissioner. The Tribunal had further detailed in its order the receipts, expenditure, capital
expenditure, income/surplus of receipts over expenditure, income applied for the charitable
purposes and percentage of the income applied in a tabulated form, which clearly depicted
utilization of surplus by the assessee for only charitable purposes. (AY. 2010-11 to 2014-15)
CIT v. Gulab Devi Memorial Hospital Trust (2017) 146 DTR 34 (P & H) (HC)
S. 10 (23C) : Educational institution – If activities are held to be genuine registration cannot

be refused assuming there is violation S. 13 (3) of the Act .[ S. 13 (3) ]
Allowing the appeal of the assessee the Tribunal held that; provisions of S. 13 (3) are not relevant
for purpose of granting approval u/s.10 (23C) (vi) and only issue to be examined was genuineness
of activities of trust (AY. 2014-15)
Ajit Educational & Public Welfare Society v. CCIT (2017) 166 ITD 61 (Chd) Trib.)
S. 10 (23C) : Educational institution - Surplus amount was liable for taxation-fee collected
either in name of building fund, donation or library fund, etc. over and above fees fixed for
admission of students, was to be treated as capitation fee, matter remanded . [ S.11, 12A ]
Tribunal held that, surplus tuition fee which was not refunded to students was liable for
taxation. Fee collected either in name of building fund, donation or library fund, etc. over and
above fees fixed for admission of students, was to be treated as capitation fee . Matter remanded .
(AY.2008 - 09)
ACIT v. Meenakshi Ammal Trust. (2017) 165 ITD 551/189 TTJ 524 /158 DTR 73
(Chennai) (Trib.)
S. 10 (23C) : Educational institution – grant of approval could not be denied merely because
there were other objects in the original trust deed.[ S. 10 (23C (vi)
Allowing the appeal, the Tribunal held that; when it was proved on record that the assessee was
running an educational institution, the application for grant of approval could not be denied
merely because there were other objects in the original trust deed.AO should monitor the
activities year on year whether such institutions continue to apply their income or invest or
deposit their funds in accordance with the law. (AY. 2014-15)
Roland Educational and Charitable Trust v. PCIT (2017) 57 ITR 655 (Cuttack) (Trib.)
S.10 (23C) : Educational institution - Inquiry while giving approval – Assessee amending its
Trust deed removing other objects – CIT to re-examine the amended objects
Allowing the appeal of the assesse the Tribunal held that, PCIT has to examine whether or not
the amended objects clausesatisfied the requirement of law. Further where the assessee was
already in existence atthe time of seeking the approval, the Department can examine whether or
not its activitieswere being carried out for education purposes. As there was not enough material
availableon record to adjudicate the matter was remitted to the Principal Chief Commissioner
fordecision afresh. (AY. 2014-2015)
Jyoti Vidhyapeeth Trust v. PCCIT (2017) 57 ITR 353/(2018) 163 DTR 90 (Jaipur) (Trib)
S.10 (23C) : Educational institution - Surplus arising from activities of assessee after
meeting expenses incurred for educational activities, would not disentitle assessee to benefit
of provision of section 10 (23C) (iiiad). [S.10 (23C) (iiiad)]
42
Held that assessee received 85.37 % of total fees from recognized courses and 14.63% from
unrecognized courses which was also wholly for purpose of educational activities and hence the
assessee received the total annual fee from the educational activities carried on by it imparting
various courses. Therefore the activities of the trust fell within the ambit of education activities. If
surplus made by the trust was utilized and consumed for the purposes of furtherance of its object
of education, the trust would also be considered as existing for the purpose of educational purpose
only. (AY.2008-09)
Multipurpose Education Society Radio Electic Institute v. DDIT (E) (2017) 55 ITR 26 (SN)
(Mum.) (Trib.)
S.10 (23C) : Educational institution-Each educational institution should be considered

separately for applying threshold annual receipt of Rs. 1 crore for allowing exemption. [S.
10 (23C) (vi), 12AA]
Allowing the appeal the Tribunal held that; each educational institution should be considered
separately for applying threshold annual receipt of Rs. 1 crore, matter required a fresh look by
Assessing Officer. (AY. 2010-11,2011-12)
PKD Trust v. ITO (2017) 163 ITD 502 /57 ITR 214 (Chennai) (Trib.)
S. 10 (26) : Scheduled Tribe-Assessee's claim for exemption to be determined if he were

residing in such area, matter remanded.
Allowing the petition the Court held that; The jurisdictional Income-tax Officer had to re-visit
the assessees' claim for tax exemption, under section 10 (26) of the Income-tax Act, by
identifying the area where they resided and where they earned their salary income, in the context
of the areas specified in the notification dated February 23, 1951.Matter remanded.
Hara Kanta Pegu v. UOI (2016) 76 taxmann.com 131/(2017) 392 ITR 247 (Gauhati) (HC)
S. 10 (26B) : Schedule Castes or Schedule Tribes - Entity wholly financed by Government

and all activities were directly or indirectly benefiting Islanders who were all Scheduled
Tribes living in remote areas hence entitle to exemption.
Allowing the appeal of the assessee the Tribunal held that; entity wholly financed by Government
and all activities were directly or indirectly benefiting Islanders who were all Scheduled Tribes
living in remote areas hence entitle to exemption. (AY .2011-12 2012-13)
Lakshadweep Development Corporation Ltd. v. ACIT (2017) 166 ITD 219 /159 DTR 89
(Cochin) (Trib.)
S. 10 (29) : Marketing Authorities - Depreciation is not to be treated as an expenditure but

as an allowance - Deduction to be computed taking gross receipts from warehousing and
Inland container Depot . [ S. 41 (1) (2)]
Dismissing the appeal of the revenue the Court held that; Depreciation is not to be treated as an
expenditure but as an allowance Deduction is to be computed taking gross receipts from
warehousing and Inland Container Depot/Container Freight Station. (AY. 1989-90 to 2000-01)
PCIT v. Central Warehousing Corporation (2017)/399 ITR 212/250 Taxman 101 (Delhi)
(HC)
S. 10 (37) : Capital gains - Agricultural land – payment of compensation on agreed terms in

respect of the land acquired is entitled for exemption .
The issue in this case was as to whether the payment of compensation on agreed terms in respect
of the land acquired would be entitled for exemption u/s. 10 (37). SC held in favour of the
assessee relying on the decision of the SC in Balakrishnan v. Union of India (2017) 391 ITR 178
43
where it was held that even if the amount of compensation is paid on agreed terms it would not
change the character of the acquisition from that of compulsory acquisition to the voluntary sale
and the exemption provided under the Income Tax Act would be available.
UOI v. Infopark Kerala (2017) 154 DTR 99/247 Taxman 219/297 CTR 219 (SC)
CIT v. Greater Hyderabad Municipal Corporation (2017) 154 DTR 99/247 Taxman
219/297 CTR 219 (SC)
S. 10 (37) : Capital gains-Exemption-Transfer of agricultural land - The fact that the

assessee entered into a settlement with the Collector regarding the compensation amount
does not mean that the acquisition was not "compulsory" if the prescribed procedure was
followed - Exemption was allowed.[S.148, Land Acquisition Act, 1894, S.6]
The issue before the Court was “whether, on the facts and in the circumstances of the case, the
High Court was justified in denying the claim for exemption under section 10 (37) of the Income
– tax Act, 1961 to the appellant”
Reversing the judgement of the High Court the Court held that, The fact that the assessee entered
into a settlement with the Collector regarding the compensation amount does not mean that the
acquisition was not "compulsory" if the prescribed procedure was followed and proceedings
under section 148 was quashed. (AY. 2009-10)
Balakrishnan v. UOI (2017) 391 ITR 178 /247 Taxman 16 /149 DTR 137/294 CTR 6 (SC)
Editorial : Decision of Kerala High Court in Info Park Kerala v. ACIT (2008) 4 KLT 782 (2017)
391 ITR 178 overruled
S. 10 (38) : Long term capital gains from equities – conversion of shares from stock in trade
to investment – profit arising from sale of the same is taxable under the head long term
capital gains. [S. 45]
Where assessee converted its shares held as stock-in-trade into investment and sold them at later
stage, profit arising from sale of share would be deemed to be long-term capital gains and not
business income. (AY. 2006-07)
Deeplok Financial Services Ltd v. CIT (2017) 247 Taxman 139 (Cal) (HC)
S. 10 (38) : Long term capital gains from equities-Penny stocks - Shares - Transactions
cannot be held to be bogus.[S.45, 68]
Dismissing the appeal of revenue, Tribunal held that ;the fact that the Stock Exchanges
disclaimed the transaction is irrelevant because purchase and sale of shares outside the floor of
Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always
possible for the parties to enter into transactions even without the help of brokers. Therefore, it is
not possible to hold that the transactions reported by the assessee were sham or bogus. (ITA No.
1442/Ahd/2013 & Co. No. 209/Ahd/2013., dt. 06.01.2017) (AY.2005-06)
ACIT v. Vineet Sureshchandra Agarwal (Ahd.) (Trib.); www.itatonline.org
S.10 (38) : Long term capital gains from equities – Long term capital loss – Long term
capital gains - Unlisted shares-Loss on sale of shares off market transaction where no STT
was paid can be set off against long term capital gains on sale of long term capital gains
arising on sale of unquoted shares. [S.45, Finance, Act No 2, 2004, S.88]
Allowing the appeal of the assessee, the Tribunal held that; Loss on sale of shares off market
transaction where no STT was paid can be set off against long term capital gains on sale of long
term capital gains arising on sale of unquoted shares. (AY. 2009-10)
Asara Sales& Investments (P.) Ltd.v. ITO (2017) 163 ITD 682/151 DTR 215/186 TTJ 535
(Pune) (Trib.)
44
S. 10 (38) : Long term capital gains from equities – Penny stocks-Shares-Long-term capital
gains claimed cannot be treated as bogus unexplained income if the paper work is in order.
The fact that the Company whose shares were sold has violated SEBI norms and is not
traceable does not mean that the assessee is at fault. [S.45, 68]
Allowing the appeal of assessee the Tribunal held that,capital gains from penny stocks - Long-
term capital gains claimed cannot be treated as bogus unexplained income if the paper work is in
order. The fact that the Company whose shares were sold has violated SEBI norms and is not
traceable does not mean that the assessee is at fault. CIT vs. Carbo Industrial Holdings Ltd.
(2000) 244 ITR 422 (Cal) (HC). (ITA No. 1213/Kol/2016, dt. 11.01.2017) (AY. 2005-06)
Surya Prakash Toshniwal HUF v. ITO (Kol.) (Trib.); www.itatonline.org
S. 10A : Free trade zone - Deduction to be granted before computing gross total income of
eligible undertaking and without setting off losses of other units against exempt unit.
Dismissing the appeal of the revenue the Court held that; Deduction to be granted before
computing gross total income of eligible undertaking and without setting off losses of other units
against exempt unit . Followed CIT v. Yokogawa India Ltd (2017) 391 ITR 274 (SC) . (AY.
2009-10)
PCIT v. Rangsons Electronics P. Ltd. (2017) 398 ITR 619/160 DTR 290 /299 CTR 492 (SC)
Editorial : Decision in PCIT v. Rangsons Electronics P. Ltd. (2017) 398 ITR 619 (Karn) is
affirmed .
S.10A : Free trade zone – Depreciation and business losses pertaining to non 10A unit
cannot be set off against profits of units eligible for exemption.
Dismissing the appeal of the revenue, the Court held that, depreciation and business losses
pertaining to non 10A unit cannot be set off against profits of units eligible for exemption.
Referred CIT v. Yokogawa India Ltd (2017) 391 ITR 274 (SC). (AY. 2004-2005)
PCIT v. Makino India P. Ltd. (2017) 393 ITR 291/154 DTR 194 /296 CTR 104/250 Taxman
158 (SC)
S.10A : Free trade zone-Unabsorbed depreciation and business loss brought forward can
be set off against current year’s profit Dismissing the SLP of the Revenue, the Court held that;
Unabsorbed depreciation and business loss brought forward can be set off against current year’s
profit. (AY. 2005-06)
CIT v. J.P. Morgan Services India Pvt.Ltd. (2017) 393 ITR 24 /152 DTR 287/297 CTR 16
(SC)
Editorial : Decision of Bombay High Court in CIT v. J.P. Morgan Services India Pvt.Ltd.ITA
No. 2188 of 2013 dt 21—03 2016 (Bom) (HC) is affirmed .
S. 10A : Free trade zone – Derived from – The incidental activity of parking surplus funds
with banks or advancing of staff loans by assessees is an integral part of their export
business activity and a business decision taken in view of the commercial expediency, is
eligible for deduction, said income cannot be taxed as income from other sources .[ S.10B,
56 ]
The incidental activity of parking surplus funds with banks or advancing of staff loans by
assessees covered u/s 10A or 10B is an integral part of their export business activity and a
business decision taken in view of the commercial expediency. Such incidental income cannot be
delinked from the profits and gains derived by the undertaking engaged from the export of
specified goods and cannot be taxed separately u/s 56 of the Act. (AY. 2001-02)
CIT v. Hewlett Packed Global Soft Ltd. (2017) 159 DTR 89/299 CTR 118 (2018) 403 ITR 453
(Karn) (FB) (HC)
45
S. 10A : Free trade zone - Deduction to be allowed on profit increased by amount of
disallowance [ S. 40 (a) (v)]
Dismissing the appeal of the revenue the Court held that; Deduction to be allowed on profit
increased by amount of disallowance Followed CIT v Gem Plus Jewellery India Ltd (2011) 330
ITR 175 (Bom) (HC) (AY. 2008 - 09)
PCIT v. Lionbridge Technologies (P) Ltd. (2017) 158 DTR 397 /68 taxmann.com 101 (Bom.)
(HC)
Editorial : Lionbridge Technologies (P) Ltd. v.ITO (2014) 48 taxmann.com 46/151 ITD 553
(Mum) (Trib)
S. 10A : Free trade zone – Units were set up with fresh investments – Separate books of
account is maintained - Business of each unit is independent, distinct, separate and not
related with other, entitled to deduction .
Dismissing the appeal of the revenue, the Court held that; the AO in his remand report had
specifically observed that both units were set up with fresh investments. The assessee purchased
plant and machinery for these units and it was not the case that these units were formed by
splitting or reconstructing existing business. Separate books of account were maintained. The
employees of each of the units were fresh set of employees and were not transferred from the
existing business. The nature of activity of both units was totally different. The customers of each
unit were completely different and unrelated and both the units had new and independent sources
of income. Thus, unit II and unit III were not formed by reconstruction of earlier business nor
were they expansions thereof. Though permission was sought by way of an expansion, the facts
on record categorically and succinctly established that the business of unit II and unit III was
independent, distinct and separate and they were not related with each other or even with unit I.
Therefore, the assessee was entitled to benefit under section 10A of the Act (AY. 2005-06)
PCIT v. Hinduja Ventures Ltd. (2017) 397 ITR 139/298 CTR 192 /156 DTR 329 (Bom)
(HC)
S. 10A : Free trade zone-Manufacture of computer software/information technology

enabled services is entitled to deduction. Essential activity of data processing for
transmission carried out in special economic zone is entitle to deduction.[S. 10AA, 10B]
Dismissing the appeal of the revenue, the Court held that; Manufacture of computer
software/information technology enabled services is entitled to deduction .Essential activity of
data processing for transmission carried out in special economic zone is also entitle to deduction.
(AY. 2009-10)
PCIT v. Amadeus India P. Ltd. (2017) 395 ITR 659/82 taxmann.com 203/152 DTR 289
(Delhi) (HC)
PCIT v. Inter Globe Technology Quotient P. Ltd. (2017) 395 ITR 659/82 taxmann.com
203/152 DTR 289 (Delhi) (HC)
Editorial : Order of tribunal in Amadeus India P.Ltd. v. ACIT (2016) 52 ITR 83 (Trib.) (Delhi)
is affirmed
S. 10A : Free trade zone – Deduction cannot be denied if company had transferred certain
employees from an existing company or shared liabilities with an existing company.
The Assessee company claimed deduction u/s 10A, which was denied by the AO in AY 2009-10
on the basis that the assessee was formed by splitting up or reconstruction of an existing business.
The deduction was denied by the AO in the subsequent year as well, which was the impugned
46
year. The CIT (A), following his order for AY 2009-10, allowed the claim of the Assessee. The
Tribunal, following its own order for AY 2009-10, allowed the claim of the Assessee, holding
that transfer of employees and sharing of liability of another company could not be construed as a
company being formed by reconstruction or splitting up of old company. (ITA No. 827/Kol/2015
dt. 25.08.2017) (AY. 2010-11)
DCIT v. Axsys Technologies Ltd. (2017) 58 ITR 91 (SN) (Kol) (Trib)
S. 10A : Free trade zone - Profit &gains derided from export – Interest on margin money
will qualify for deduction however interest invest on FDRs will not be entitle to deduction .
Tribunal held that interest earned on margin money or credit facilities from the bank will quality
for deduction u/s. 10A, but the interest on surplus funds parked in FDRs will not be entitled to
deduction u/s. 10A. Matter remanded back to AO for adjudicate accordingly. (A.Y. 2010-11)
TIBCO Software India (P) Ltd. v. Dy. CIT (2017) 187 TTJ 556 /78 taxmann. com 261
(Pune) (Trib.)
S. 10A : Free trade zone – Income from other sources – Interest – Only net interest can be
disallowed [ S. 56 ]
Tribunal held that; Only net interest can be disallowed . (A.Y.2010-11)
Balaji Export Co. v. ACIT (2017) 59 ITR 36 (SN) (Mum.) (Trib.)
S.10A : Free trade zone - Providing business process management and information
technology enabled services to its parent company is entitled to exemption.
Held that Explanation 2 (b) to section 10A ‘computer software’ means any customized electronic
data or any product or service of similar nature as notified by the CBDT. The TPO in respect of
the AY 2006-07 categorically recorded that the assessee had provided the services mentioned in
section 10A to its parent company. The CIT (A) observed that the assessee submitted a summary
of invoices and copy of the forms that the same assessee submitted to the Software Technology
Parks of India authorities along with a copy of invoices raised and the documents were also
submitted during the course of assessment proceedings. Therefore, the assessee could be said to
have proved the actual development or export of the software. Assessee is thereby entitled for
exemption. (AY. 2006-07)
ITO v. WNS Mortgage Service P. Ltd. (2017) 55 ITR 63 (SN) (Delhi) (Trib.)
S.10A : Free trade zone – Exempt income to be enhanced to the extent of

disallowance.[S.14A]
That when any part of the expenditure claimed by the assessee was disallowed under section 14A
then as a consequence thereto the profits of the assessee eligible for deduction under section 10A
would witness a corresponding increase, leading to a consequent increase in the claim of
deduction of the assessee under section 10A pursuant whereto the net effect would remain at Rs.
nil. (AY.2010-2011, 2011-2012)
Informed Technologies India Ltd. v. DCIT (2017)54 ITR 397 (Mum.) (Trib.)
S. 10A : Free trade zone - Disallowance of expenses consequential enhancement of

exemption is allowable.[S. 14A]
Allowing the appeal the Tribunal held that; disallowance of expenses consequential enhancement
of exemption allowable. (AY. 2010-11,2011-12)
Informed Technologies India Ltd. v. Dy.CIT (2017) 162 ITD 153 /54 ITR 397 /183 TTJ 60
(Mum.) (Trib.)
47
S. 10AA : Special Economic Zones-Cigarettes, Alcoholic Beverages and re-exporting same
through its unit situated at SEZ was eligible for exemption. [SEZ, Act, 2005, S. 2 (20)]
Assessee was engaged in business of import of Cigars, Cigaretts, Alcoholic Beverages and re-
exporting same and to derive foreign exchange and it claimed exemption u/s. 10AA in respect of
export profit derived from unit situated at Cochin SEZ. AO disallowed exemption claimed on
ground that import and export activity could not be treated as 'service' for purpose of s. 10AA.
Tribunal held that trading activity in nature of import and re-export of goods falls within
definition of term 'services' as defined in s. 10AA and therefore, assessee was eligible for
exemption u/s.10AA. (AY. 2006-07 to 2010-11)
DCIT v. Bommidala Enterprises (P.) Ltd (2017) 164 ITD 306 (Visakha.) (Trib.)
S. 10B : Export oriented undertakings —Assessee enjoying exemption prior to amendment

is eligible for extended period if eligible on date of coming into force of amended provision.
Dismissing the appeal of the revenue the Court held that;Assessee enjoying exemption prior to
amendment is eligible for extended period if eligible on date of coming into force of amended
provision. (AY. 2001-02)
CIT v. Deutsche Software Ltd. (2017) 399 ITR 570 (SC)
Editor : Decision in CIT v DSL Software Ltd (2013) 351 ITR 385 (Karn) (HC) is affirmed
S. 10B : Export oriented undertakings-Legislative powers—Provisions mandating claim to

deductions with respect to profits of export oriented unit to be made in return within time
stipulated under section 139 (1) is not arbitrary. [S. 10B (1),80A (5), 139 (1) 139 (4), Art. 14,
226]
Dismissing the petition the Court held that; Provisions mandating claim to deductions with
respect to profits of export oriented unit to be made in return within time stipulated under section
139 (1) is not arbitrary. Parliament acted within its power to differentiate between a return of
income filed under section139 (1) and a belated return filed under section 139 (4) for the purposes
of deductions claimed under section 10B (1).A proviso is meant to limit the scope of the general
enactment and any proviso which does that cannot be said to be invalid as long as the objective of
the general provision is not frustrated. (AY . 2007 - 08)
Nath Brothers Exim International Ltd. v. UOI (2017) 394 ITR 577/247 Taxman 427/156
DTR 146 /298 CTR 159 (Delhi) (HC)
S. 10B : Export oriented undertakings - Assessee is entitled to set off loss of eligible units
against the profits of non-eligible units.
Assessee is entitled to set off loss of eligible units against the profits of non-eligible units. (AY.
2007-08 to 2011-12)
Brakes India Ltd .v. DCIT (2017) 56 ITR 341 (Chennai (Trib.)
S. 10B : Export oriented undertakings – Enhanced profit due to disallowances is held to

eligible for exemption.[S. 40 (a) (ia), 40A (3) 43B]
The Tribunal held that the CBDT has accepted vide circular No. 37 of 2016 dated 2nd November,
2016 that enhanced profit linked deduction under chapter VI-A is admissible on the profits
enhanced by the disallowances made by the revenue under section 32, 40 (a) (ia), 40A (3), 43B,
etc.
The Tribunal further held that section 10B is profit linked deduction and hence, the same has to
be allowed keeping in view the spirit of the said circular. Disallowance under section 40 (a) (i) is
a statutory disallowance and hence, enhanced profits due to such disallowance are to be
considered for deduction under section 10B. Followed CIT v. Gem Plus Jewellary (I) Ltd. (2010)
233 CTR 248 (Bom.) (HC) (AY. 2010-11)
48
ITO v. Anthelio Business Technologies (P) Ltd. (2017) 185 TTJ 698 /149 DTR 161 (Mum.)
(Trib.)
S.10B : Export oriented undertakings-Processing of Iron Ore through Plant and Machinery
located outside bonded area there is no violation of any condition exemption cannot be
denied.
Held that customs bonding was not a requirement or a condition precedent for granting exemption
under section 10B of the Act. Hence, deduction under section 10B could not be denied merely on
the ground that the iron ore excavated from the mining area belonging to the export oriented unit
was got processed through its plant and machinery outside the bonded area. Further raw material
and finished product belonged to the assessee and the finished product was exported by the
assessee. Therefore, there was no violation of any condition as provided under section 10B of the
Act for the claim of benefit of deduction. (AY. 2009-10,2011-12)
Lakshminarayana Mining Company v. Dy. CIT (2017) 55 ITR 55 (SN) (Bang.) (Trib.)
S. 10BA : Export of wooden articles or things - Modification and beautification of semi-

finished furniture for export is entitled to deduction.
Dismissing the appeal of the revenue, the Court held that; Modification and beautification of
semi-finished furniture for export is entitled to deduction.
CIT v. Manglam Arts (2017) 398 ITR 594 (Raj) (HC)
CIT v. Ranjana Johari (Smt) (2017) 398 ITR 594 (Raj) (HC)
S. 11 : Property held for charitable purposes – Cash credits – Donations as cash credits –
Denial of exemption was not justified. [S. 12A, 68]
Dismissing the appeal of the revenue the Court held that denial of exemption was not justified on
the ground that donations was treated as cash credits . DIT v.Keshav Social And Charitable
Foundation (2005) 278 ITR 152 (Delhi) (HC) (AY. 1998 - 99)
DIT v. Keshav Social And Charitable Foundation. (2017) 394 ITR 496 (SC)
S. 11 : Property held for charitable purposes – Propagation of yoga falls under category of
'Imparting of education' – Corpus donation to be excluded from total income – Higher
membership fee is also donation hence cannot be assessed as income [ S. 2 (15, 2 (24 (iia), 4,
13 ]
Dismissing the appeal of the revenue the Court held that; Propagation of yoga by way of
conducting yoga classes on a regular basis and in a systemized manner falls under category of
'Imparting of education' .Corpus donation was to be excluded from total income .Higher amount
from certain subscribers/donors in yoga camps who were provided corresponding benefits as
opposed to others, that by itself could not be basis for holding that membership fee was not a
donation and had to be treated as income liable to tax . (AY. 2009-10)
CIT (E) v. Patanjali Yogpeeth (NYAS) (2017) 159 DTR 377 /(2018) 402 ITR 164/ 252
Taxman 317 /300 CTR 266 (Delhi) (HC)
Editorial : Order in Patanjali Yogpeeth (NYAS) v. ADIT (E) (2017) 54 ITR 616 (Delhi) (Trib)
S. 11 : Property held for charitable purposes - Depreciation - Amendment denying the
depreciation where cost of assets allowed as application of income to charitable purposes is
applicable only with effect from 1-4 - 2015, not to assessment year prior to Assessment year
2015 - 16 . [ S. 11 (6),32 ]
49
Dismissing the appeal of the revenue the Court held that; Amendment denying the depreciation
where cost of assets allowed as application of income to charitable purposes is applicable only
with effect from 1-4 - 2015, not to assessment year prior to Assessment year 2015 - 16 .
DIT (E)v. Medical Trust of the Seventh Day Adventists (2017) 398 ITR 721 /298 CTR 58/156
DTR 113 (Mad) (HC)
S. 11 : Property held for charitable purposes - Charging of fee from members or non-
members for rendering services like training, conducting seminars cannot by itself lead to
denial of exemption [ S.2 (15), 12 ]
Dismissing the appeal of the revenue the Court held that; charging of fee from members or non-
members for rendering services like training, conducting seminars would not ipso facto lead to
denial of exemption. (AY. 2010-11, 2011-12)
CIT (E) v. Fertilizers Association of India (2017) 399 ITR 209 (Delhi) (HC)
S. 11 : Property held for charitable purposes – Filing of Form 10 during re-assessment

benefit of accumulation was available. [ S. 139 (4), 148 ]
Dismissing the appeal of the revenue, the Court held that; Filing of Form 10 was filed during re-
assessment by assessee-trust, benefit of accumulation was available because such filing would be
considered within time allowed for furnishing return of income under section 139 (4) . Followed,
CIT v. Nagpur Hotel Owners' Association (2001) 247 ITR 201 (SC) . (AY. 2000-01, 2001-02)
CIT v. Sakal Relief Fund (2017) 248 Taxman 31 /295 CTR 561 /152 DTR 89 (Bom.) (HC)
S. 11 : Property held for charitable purposes - Educational institution-Sale of land at higher

value cannot be said to be profit motive, exemption cannot be denied .[ S. 2 (15) -
Dismissing the appeal of the revenue, the Court held that; Sale of land at higher value cannot be
said to be profit motive, exemption cannot be denied . Even the subsequent conduct of the
assessee in utilising the profits earned, only for charitable purposes, it was evident that the
intention of the assessee was not to engage continuously in business or trade or commerce. The
assessee was entitled to exemption . (AY. 2010-11, 2011-12)
CIT v. Sri Magunta Raghava Reddy Charitable Trust (2017) 398 ITR 663 (Mad) (HC)
S. 11 : Property held for charitable purposes-Activities of assesse is not exclusively meant

for one particular religious community hence the assesse is entitled to exemption. [ S. 12A,
13 ]
Dismissing the appeal of the revenue, the Court held that ;the programmes conducted by the
society were open to the public at large without any distinction of caste, creed or religion and the
benefits of these programmes held at the meeting house were available to the general public at
large. Since the activities of the assessee, though both religious and charitable, were not
exclusively meant for one particular religious community, the exemption cannot be denied . (AY.
2012-13)
CIT (E) v. Indian Society of the Church of Jesus Christ of Latter Day Saints (2017) 397 ITR
762/159 DTR 83/299 CTR 396 /251 Taxman 136 (Delhi) (HC)
Editorial : SLP of revenue is dismissted CIT (E) v. Indian Society of the Church of Jesus Christ
of Latter Day Saints (2018) 403 ITR 307 (St) (SC)
S. 11 : Property held for charitable purposes – Exemption cannot be denied where details in
Form No. 10 are not furnished . [ Form No 10 ]
Dismissing the appeal of the revenue, the Court held that ;where the objects of a trust are
charitable in character and the purpose mentioned in Form No. 10 were for achieving objects of
50
trust, merely because details were not furnished, assessee could not be denied benefit of
exemption under section 11 (2). (AY. 2009-10, 2010-11)
CIT v. Gokula Education Foundation (2017) 394 ITR 236/292 CTR 32 / 77 taxmann.com 38
(Karn) (HC)
Editorial : SLP is granted to the revenue; CIT v. Gokula Education Foundation (2017) 248
Taxman 13 (SC)
S. 11 : Property held for charitable purposes – AO disallowed the claim invoking provisions
of s. 13 on the basis of assessee’s documents – without giving any reasons – not sustainable
in law.
AO having drawn an adverse inference on the basis of evidence furnished by the assessee to the
effect that alleged repayment of loan by the assessee to the trustee was in fact payment of trust
income in violation of s. 13 (1) (c), without giving any reasons, matter remanded to AO for
consideration afresh. (AY. 2005-06)
Devi Kamal Trust Estate v. DIT (E) (2017) 155 DTR 194 /298 CTR 100 (Cal) (HC)
S. 11 : Property held for charitable purposes – Urban development authority – Town

palnning authority - Amount realised on sale of plots was utilised for purpose of
development – Entitle to exemption .[ S. 2 (15) ]
Allowing the appeal of the assessee, the Court held that; the object and purpose of permitting the
Authority to sell the plots to a maximum extent of 15 per cent. of the total area, was to meet the
expenditure for providing infrastructural facilities like gardens, roads, lighting, water supply,
drainage system, etc. Therefore the activities of the assessee could not be said to be in the nature
of trade, commerce and business and therefore, the proviso to S.2 (15) of the Act was not
applicable so far as the assessee was concerned. Therefore, the assessee was entitled to exemption
under S. 11. (AY. 2009 - 10 to 2011-12)
Ahmedabad Urban Development Authority v. ACIT (E) (2017) 396 ITR 323/83
taxmann.com 78 /159 DTR 147 (Guj.) (HC)
Editorial : SLP is granted to the revenue, ACIT (E) v. Ahmedabad Urban Development
Authority (2018) 403 ITR 308 (St)
S. 11 : Property held for charitable purposes - Objects of trust in original trust deed and
amended trust deed identical and more than 85 per cent. of charges received from affluent
patients spent on charitable medical treatment - Exemption is allowable - Depreciation —
Allowance on capital expenditure . [ S. 32 ]
Dismissing the appeal of the revenue, the Court held that; the Commissioner (Appeals) and the
Appellate Tribunal had rendered a concurrent finding of fact that there had been no change in the
objects clause of the assessee-trust by virtue of the amended trust deed. Merely because in
rendering services to patients who could afford to pay, some income was generated, it would not
result in the assessee ceasing to be a charitable trust. Further, the Department had not been able to
show that the finding of the appellate authorities that 85 per cent. of its income was applied to
charitable purpose, was perverse. There was no question of the assessee taking double deduction
on account of depreciation on assets the cost of which had already been exempted as application
of income to charitable purposes. No question of law arose. (AY.2008-09)
CIT (E) v. Saifee Hospital Trust (2017) 395 ITR 225 (Bom.) (HC)
Editorial : SLP is granted to the revenue;CIT (E) v. Saifee Hospital Trust (2017)390 ITR 2 (St.)
S. 11 : Property held for charitable purposes – Application of income – Depreciation is

allowable on assets allowed as application of income – Amendment is prospective-
Scholarship for advancement of higher technical education to deserving students is
allowable. [S. 32]
51
Dismissing the appeal of the revenue, the Court held that; Depreciation is allowable on assets
allowed as application of income – Amendment is prospective - Scholarship for advancement of
higher technical education to deserving students is allowable. AY. 2006-07 to 2008-09)
CIT v. Seth Anandram Jaipuria Education Society. (2017) 394 ITR 712 (All) (HC)
S. 11 : Property held for charitable purposes-Publishing and printing books and selling
them at subsidised rates or distributing them free of cost - Exemption cannot be denied -
Rule of consistency .[S. 2 (15) 12, 12A, 12AA ]
Allowing the appeal of the assesse the Court held that; exemption cannot be denied on the
ground that, publishing and printing books and selling them at subsidised rates or distributing
them free of cost. It cannot be considered as business activity . Court also held that rule of
consistency has to be followed. (AY. 2006 - 07 to 2009 10)
Delhi Bureau of Text Books v. DIT (2017) 394 ITR 387/248 Taxman 272/151 DTR
234/(2018) 300 CTR 195 (Delhi)HC)
S. 11 : Property held for charitable purposes-As long as objects of trust were charitable in
character and the purposes mentioned in Form No. 10 were for achieving objects of Trust,
merely because the details were not furnished, the assessee could not be denied benefit of
exemption. [ Form No 10 ]
Dismissing the appeal of the revenue the Court held that; as long as the objects of the trust are
charitable in character and the purpose or purposes mentioned in Form No. 10 are for achieving
the objects of the Trust, the exemption u/s. 11 (2) cannot be denied merely because the details are
not furnished. (AY. 2009-10, 2010-11)
CIT v. Gokula Education Foundation (2017) 394 ITR 236/292 CTR 32 /145 DTR 415
(Karn.) (HC)
CIT v. Vidyaniketan Education & Cultural Trust (2017) 394 ITR 236/292 CTR 32/145 DTR
415 (Karn.) (HC)
Editorial : SLP is granted to the revenue; CIT v. Gokula Education Foundation (2017) 248
Taxman 13/394 ITR 3 (SC)
S. 11 : Property held for charitable purposes – Depreciation. [S. 12, 32]

Dismissing the appeal of the revenue, the Court held that; amendment made in section 11 (6)
denying depreciation deduction in computing income of charitable trust is prospective in nature
and it would operate with effect from 1-4-2015. (AY. 2008-09)
PCIT v. Sri Sri Adichunchunagiri Shikshana Trust (2016) 241 Taxman 289 (Karn.) (HC)
Editorial : SLP is granted to the revenue; PCIT v. Sri Sri Adichunchunagiri Shikshana Trust
(2017) 246 Taxman 372 (SC)
S. 11 : Property held for charitable purposes - Providing various facilities and protecting
farmers interests at national level was held to be charitable purposes hence entitle
registration . [ S.2 (15), 12A ]
Allowing the appeal of the assessee the Tribunal held that; the assessee society is essentially
involved in the upliftment of farmers by way of providing them various facilities and protecting
their interests at the national level. It is undertaking operations on the country wide basis and
focused at protecting the interests of farmers in various manners, therefore the object of the
Society was duly qualified for general public utility.
Bhartiya Kisan Sangh Sewa Niketan v. CIT (2017) 166 ITD 562 /189 TTJ 316 /157 DTR 142
(Delhi) (Trib.)
52
S. 11 : Property held for charitable purposes - In absence of any change in facts, AO could
not have taken a different view exemption is available .[ S. 2 (15) ]
The Tribunal held that in A.Ys. 2007-08, 2013-14 and 2014-15, the Assessee has been treated as
exempt u/s. 11 of the Act and therefore, in absence of any change in facts in impugned year, the
AO could not have taken a different view. Further, the AO did not bring anything on record to
suggest violation of S. 2 (15) of the Act. Hence, the Tribunal allowed the exemption u/s. 11 of the
Act. (AY. 2008-09 & 2009-10)
ADIT v. Flt. Lt. Ranjan Dhall Charitable Trust (2017)

58 ITR 47 (Delhi) (Trib.)
S. 11 : Property held for charitable purposes - Business held in trust – Activity of running
community hall - Trust is not entitle to exemption unless business is incidental to attainment
of objects of trust .[ S.2 (15), 11 (4), 12AA ]
Allowing the appeal of the revenue the Tribunal held that; mere carrying on business for and on
behalf of charitable trust and applying profits of same for object of trust is not entitle trust for
exemption u/s. 11 (4) unless business is incidental to attainment of objects of trust. Since there
was no connection between activities relating to running of community hall with attainment of
objects of assessee-trust of imparting education. (AY. 2010-11)
DCIT (E) v. Chennai Kammavar Trust. (2017) 166 ITD 196 /187 TTJ 674/154 DTR 312
(Chennai) (Trib.)
S. 11 : Property held for charitable purposes - The assessee’s operation was primarily
industrial, professional association of body and hence was not entitled to exemption [S. 2
(15) ] ]
Education is process of training and developing knowledge, skill, mind and character of students
by normal schooling. The assessee not showing capacity for educational activity in regular
manner and no income and expenditure was with reference to educational activity.The assessee’s
operation was primarily industrial, professional association of body and hence was not entitled to
exemption . (AY. 2011-12).
ITO v. FRP Institute (2017) 56 ITR (Trib.) 253 (Chennai) (Trib.)
S. 11 : Property held for charitable purposes - Accumulation of income — Failure tospend

accumulated funds within prescribed time — Matter remanded for reconsideration. [S. 11
(2), 11 (3) (c), 12AA)
Failure to spend accumulated funds within prescribed time.Matter remanded for reconsideration.
(AY. 2011-12)
Annadhanam Scheme Fund v. ADIT (E) (2017)56 ITR 296 (Chennai) (Trib.)
S. 11 : Property held for charitable purposes – Payment to educational institutions was

held to be application of income. [S. 12A]
Assessee, an educational society, made payment of education extension services out of its current
income to Diocese of Jalandhar, notified u/s. 10 (23C) (vi), as well as registered u/s. 12A and
pursuing object of promoting education through running various schools, said payment was to be
allowed as application of income as it duly satisfied provisions of s. 11 (1) (a) and 11 (3) (d).
(AY. 2006-07 to 2012-13)
53
St. Jude's Convent School v. ACIT (2017) 164 ITD 594 (Asr.) (Trib.)
S. 11 : Property held for charitable purposes – Sports and educational activities – Entitle to
exemption [ S. 2 (15), 12A, 13 (1) (c).
Dismissing the appeal of the revenue, the Tribunal held that; promotion of sport and educational
activities for its members being in the nature of general public utitlity, its claim for exemption of
income was to be allowed.Tribunal also held that, in order to invoke first proviso to s. 2 (15), it is
necessary and incumbent on part of AO to give a factual finding for engaged in trade, business or
commercial activity. (AY.2010 – 2011)
ITO v. Chembur Gymkhana. (2017) 164 ITD 279 (Mum) (Trib.)
S. 11 : Property held for charitable purposes – Mere generation of surplus from year to
year could not be basis to hold that it existed for purpose of profit.[ S.10 (23C), 13 (3)]
Dismissing the appeal of revenue, the Tribunal held that; while examining that educational
institute existed solely for educational purpose or for purpose of profit, mere generation of
surplus from year to year could not be basis to hold that it existed for purpose of profit. (AY
.2010-2011 2011-2012)
ACIT v. Mahima Shiksha Samiti (2017) 49 CCH 285 /79 taxmann.com 38 /185 TTJ 425/151
DTR 33 (Jaipur) (Trib.)
S. 11 : Property held for charitable purposes - Disqualification for exemption is only to the
extent trustee derived benefit and not the entire trust income - Amount shown in trust’s
balance sheet will be refunded by the trustee and his wife, exemption cannot be denied . [S.
13 (1) (c)]
Investment was made in flat and was registered in the name of trustee and his wife. Out of the
total investment, part investment was made by trustee and his wife. On sale of the flat, trust
(assessee) was entitled to the share of profit to the extent of its investment. Held that amount of
profit had to be taxed as per the provisions of section 13 (1) (c) but the entire exemption could not
be denied. Relying on CBDT circular no. 387 dated July 6, 1984 it was held that tax will be
leived at MMR only on part of income which had forfeited exemption under the provisions.
Tribunal also held that, exemption cannot be denied on account of temporary loan given to the
trustee and his wife according to the provisions of section 13 (1) (c). (AY. 2008-09)
ITO (E) v. Future Education and Research Trust (2017) 55 ITR 66 (SN)/150 DTR 258 /184
TTJ 688 (Kol.) (Trib.)
S. 11 : Property held for charitable purposes – Accumulation of income – Matter remanded

[ S. 11 (2) ]
When no specific purpose is specified by the assessee for additional accumulation of income, the
matter to be remanded to the Assessing Officer to enable the assessee to establish its plea before
him . (AY. 2010-11)
Research and Information System for Developing Countries v. DDIT (E) (2017) 58 ITR 74
(Delhi) (Trib)
S. 11 : Property held for charitable purposes – Transportation activities and games activity
being incidental to educational activity exemption cannot be denied on the grounds that
surplus was generated from said activities [ S. 10 (23C),12].]
Allowing the appeal of the assessee the Tribunal held that; Transportation activities and games
activity being incidental to educational activity exemption cannot be denied on the grounds that
surplus was generated from said activities. (AY. 2010-11, 2011-12)
54
Dehradun Public School v. ACIT (2017) 167 ITD 305 (Delhi) (Trib.)
S. 11 : Property held for charitable purposes – Promotion of sports and games - Merely
because collection of certain charges from coaching camps meant for promotion of sports
and games, exemption cannot be denied. [ S. 2 (15). 12 ]
Allowing the appeal of the assessee the Tribunal held that, as the main object or purpose of
assessee charitable trust was promotion of sports and games, merely because trust collected
certain charges from coaching camps meant for promotion of sports and games exemption cannot
be denied . (AY. 2011-12)
Dahisar Sports Foundation v. ITO (E) (2017) 167 ITD 710 (Mum) (Trib.)
S.11 : Property held for charitable purposes-Mere buying and selling of books as per
direction of Government is not commercial activity, exemption cannot be denied.[2 (15)]
Held by ITAT that mere buying and selling with presence of some profit for the purpose meeting
certain incidental expenditure may not be considered as commercial activity. Assessee had
purchased books and distributed the books according to the directions of Government to
anganwadis with a minimum profit which also fixed in consultation with state government. These
profit was to be utilized to meet the expenditure in the state resource centre which was taken over
by the assessee. An activity can be termed as commercial activity when it was carried out with the
intention of making profit only. When there was no presence of motive to make profit, it could
not be considered as commercial activity. As, assessee was not carrying any commercial activity
and proviso to section 2 (15) would not apply to assessee. Hence, exemption would be available.
(AY. 2010-11)
ITO (E) v. Society for Promotion of Audit Continuing Education (Space) (2017) 55 ITR 56
(SN) (Hyd.) (Trib.)
S. 11 : Property held for charitable purposes – Corpus donation - assessee was to furnish
PAN and addresses of donors for verification by Assessing Officer before exemption was
allowed [ S. 12A, 115BBC ]
On request of the assessee the matter was set a side to the Assessing Officer to provide an
opportunity to produce PANs and addresses of all donors would be furnished for verification by
Assessing Officer. In respect of unspent amount, also the matter was set aside for verification .
(AY.2010-11)
Madhavi Raksha Sankalp Nirmal Niketan v. DDIT (2017) 165 ITD 627 (Mum) (Trib.)
S. 11 : Property held for charitable purposes – Charitable objects - mere charging fee for
services rendered would not make it non-charitable unless profit motive was established. [S.
2 (15), 12, 12A]
Allowing the appeal of the assessee the Tribunal held that; object of trust was providing
guarantee to lending institutions helping only SSIs and micro enterprises in availing credit
facilities and it was not carrying any 'trade, commerce or business', mere charging fee for services
rendered would not make it non-charitable unless profit motive was established
Credit Guarantee Fund Trustfor Micro and small Enterprises v. ITO (2017) 163 ITD 285
/155 DTR 1 /187 TTJ 706 (Mum.) (Trib.)
S.11 : Property held for charitable purposes – Exemption cannot be denied for reshuffle of
specified investment. [S.2 (15), 11 (5)]
55
AO held that one set of mutual funds was divested within period of sixty days in violation of
provisions of section 11 (5), denied assessee's claim for exemption of income. On appeal by the
revenue, the Tribunal held that there is no stipulation under section 11 (5) placing restriction on
reshuffle of specified investment and even otherwise, since assessee-trust had reshuffled one set
of investments only with purpose of safeguarding interest of trust and in view of apprehension
that value of said mutual fund was fast declining, order passed by Assessing Officer was not
sustainable. (AY. 2008-09)
Dy.DIT v. M.C. Natha Bhatia High School Trust, (2017) 163 ITD 460 (Mum.) (Trib.)
S. 11 : Property held for charitable purposes - A Christian religious society pursuing

printing, publishing and distribution of Christian literature as its main activity would be
considered carrying on religious activity hence entitle to exemption [ S.2 (15), 12A, 13 ]
Allowing the appeal of the assessee the Tribunal held that; A Christian religious society pursuing
printing, publishing and distribution of Christian literature as its main activity would be
considered carrying on religious activity hence entitle to exemption .Merely because it was
publishing some other books incidentally, so as to attract general public to Christian religious
books, exemption could not be denied . Tribunal also held that ,noninclusion of two loss making
branches, which were not included in earlier years also, would not reverse grant of exemption
under section 11. (AY.2009-10)
Christian Literature Society v. JCIT (2017) 153 DTR 313 /187 TTJ 181 (Chennai) (Trib.)
S. 11 : Property held for charitable purposes-statues of the assessee in the earlier years, no
change in facts and circumstances of the case – Entitled to exemption.[S.12A]
Assessee formed with the main object of town planning having been granted registration under
S.12A and the revenue having accepted in the earlier years that the activities carried out by the
assessee were charitable in nature, it is entitled to exemption under S. 11 in the relevant
assessment year. (AY. 2009-10)
ITO v. Moradabad Development Authority (2017) 146 DTR 120 (Delhi) (Trib.)
S.11 : Property held for charitable purposes-Mutuality-Substantial part of assessee's

earning from advertisement in souvenirs, fees from seminars or conferences, interest--
Conducting conferences or seminars not incidental activity but pre-dominant activity-
Assessee not entitled to exemption on ground of mutuality. [S.2 (15)]
Dismissing the appeal of the assesse the Tribunal held that; there could be no doubt that the
assessee was earning substantial income from seminars, interest on investments and
miscellaneous items. The assessee could not claim that its earnings were only incidental to its
main objects nor that its income was exempt on the principle of mutuality since admittedly the
items comprised in other income were not exclusively earned from its members. Conducting
conferences or seminars was not done as an incidental activity but during the relevant previous
year it was the assessee's pre-dominant activity. It may not be appropriate to give an
interpretation to section 2 (15) which is not in consonance with the words used by the legislation,
where the predominant activity carried on was akin to a business or trade or service in connection
thereto. Therefore the assessee could neither be considered to perform charitable activities within
the meaning of section 2 (15) during the relevant previous year nor could it be considered as
exempt on the principle of mutuality. (AY.2009-2010)
Employers' Federation of Southern India v. ADIT (2017) 54 ITR 568 (Chennai) (Trib.)
56
S. 11 : Property held for charitable purposes-Propagation of yoga itself is a charitable
purpose-Trust-is entitle to exemption [S. 2 (15) 12, 12A]
Tribunal held that achieving medical relief through several methods and yoga one method.
Legislature removing all doubts by inserting yoga in definition as charitable purpose hence
propagation of yoga itself is a charitable purpose. Charging of fee to meet a part of cost for
rendering charitable services, would not alter charitable character of services therefore Trust is
entitled to exemption. Activities undertaken outside India by assessee neither substantiated nor
expenditure quantified therefore denial of exemption was not justified. (AY. 2009-10)
Patanjali Yogapeeth (Nyas) v. Add; DIT (E) (2017) 163 ITD 323 /54 ITR 616 /151 DTR 114
/185 TTJ 1 (Delhi) (Trib.)
S. 12A : Registration – Trust or institution - Order of Tribunal directing to grant

registration without recording satisfaction of object and genuineness of Trust was seta side .
Allowing the appeal of the revenue the Court held that; Order of Tribunal directing to grant
registration without recording satisfaction of object and genuineness of Trust was seta side .The
matter was remitted to Commissioner for recording his satisfaction .
CIT v. A. R. Trust. (2017)/251 Taxman 397 /(2018) 402 ITR 161/ (All) (HC)
S. 12A : Registration – Trust or institution - Donation - Cancellation of registration was
held to be not valid only on the ground that donations were collected from few students ,and
granting of renewal of approval under S. 80G was held to be valid [ S.80G ]
Dismissing the appeal of the revenue, the Court held that; As against 70 management quota seats
in educational institutions, assessee collected donation from nine students . Sum of donation was
within prescribed limit and Government had not at all prohibited receipt of same hence it cannot
be said that assessee was running educational institution on commercial lines. Therefore
,Commissioner was not justified in cancelling registration under section 12A and denying
renewal . (AY. 2010-11)
CIT v. Shikshan Prasarak Mandali (2017) 250 Taxman 491 (Bom.) (HC)
S. 12A : Registration – Trust or institution - Charitable purpose – Dominant activity

carried out by assessee-trust for over 130 years was to take care of old, sick and disabled
cows, incidental activity of selling milk which might result in receipt of money, by itself,
would not make it trade, commerce or business - Registration cannot be withdrawn.[S. 2
(15)]
Dismissing the appeal of the revenue the Court held that; the activity of milking the cows and
selling the milk is almost compelled upon the trust, in the process of giving asylum to the cows.
The activity to be considered in the nature of trade, commerce or business would in most cases
have to be carried out on a regular basis with a view to earn the profit. The presence of the profit
intent (even if it does not fructify) would normally be a sine qua non for the activity to be
considered as trade, commerce or business. Therefore, in the present facts, it is not as though the
keeping of the cows and milking them was with a view to carry out activity in the nature of trade,
commerce or business to earn profits. (AY. 2009-10)
DIT (E) v. Shree Nashik Panchvati Panjrapole (2017) 397 ITR 501/248 taxman 67 / 295
CTR 214/150 DTR 249 (Bom) (HC)
S. 12A : Registration - Trust or institution – One assessee having two registration for two
educational institutions of different date was held to be not proper.
57
Assessee, a society running two educational institutions. Application by assessee on 28-9-2004 to
grant registration in name of society. Commissioner granting registration in name of society with
effect from 1-4-2004 cancelling individual registrations. Appellate Tribunal granting registration
with effect from 1-4-1973 was held to be not proper. Such registration would cause overlapping
of period during which the two institutions had been enjoying the registration with effect from
different periods and that that would create complications in the matter had been overlooked.
CIT v. Allahabad High School Society (2017) 390 ITR 75 /147 DTR 258 /294 CTR 170 (All)
(HC)
S.12A : Registration – Trust or institution - Authority created under statute-Commissioner

cannot examine whether assessee is entitle to exemptions under S. 11 or 12 while
considering the application for registration-—Amount received by assessee to be used in
discharge of objectives and functions provided for benefit of general public is entitled to
registration.[ S. 2 (15), 11, 12AA ]
Dismissing the appeal of revenue the Court held that the CIT (E) while considering an application
for registration under section12AA, was not supposed to examine whether the assessee was
entitled to exemptions under section 11 or 12 since that was within the jurisdiction of the
assessing authority and not the Commissioner (E).Court also held that; the assessees being
statutory bodies, could not travel beyond the statutory functions prescribed. The primary purpose
and predominant object of the assessees was to conduct sovereign and statutory functions
assigned to them. They performed charitable activities during their life time. The assessees could
not function beyond the authority conferred by the Uttar Pradesh Industrial Area Development
Act, 1976 . Whatever amount was received by the assessees under different heads, whether tax,
rent, fee and sale consideration, was to be used in discharge of objectives and functions provided
under the 1976 Act, for the benefit of the general public. Thus, the assessees were entitled to
registration as charitable institutions.
CIT (E) v. Greater Noida Industrial Development Authority (2017) 395 ITR 18 (All) (HC)
CIT (E) v. New Okhla Industrial Development Authority (2017) 395 ITR 18 (All) (HC)
CIT (E) v. Yamuna Expressway Industrial Development Authority (2017) 395 ITR 18 (All)
(HC)
Editorial : SLP is granted to the revenue; CIT (E) v. New Okhla Industrial Development
Authority (2018) 403 ITR 307 (ST)
S. 12A : Registration – Trust or institution - Micro financing-Object of money lending and

earning interest cannot be held to be charitable purpose hence not entitle to registration .[
S. 2 (15), 11 ]
Dismissing the appeal of the assessee the Tribunal held that; Charitable institution, carried money
lending (micro financing) business and provided loan to general public and Self Help Group
(SHG) and earned interest income, money lending business and earning interest thereon fell under
advancement of any other object of general public utility and it would not be a charitable purpose.
(AY. 2009-10)
Sreema Mahila Samity v. DCIT (2017) 167 ITD 420/190 TTJ 857/(2018) 161 DTR 91 (Kol)
(Trib.)
S. 12A : Registration – Trust or institution - Charitable purpose - Denial of exemption was

not justified .[S. 2 (15), 10 (22) ,11]
The Tax Department has been consistently accepted the stand of the assessee in the preceding
years that the participatory research activities of the assessee fall within the scope of education as
envisaged u/s. 2 (15) as well as u/s. 10 (22) and simply because assessee’s income from education
58
is confined to distance learning course fee of Rs. 20.65 lakhs out of total receipts of Rs.21.45
Crores, proviso to 2 (15) can not be invoked to deny claim of exemption under S.11, 12 (AY.
2010-11).
Society for Participatory Research in Asia v. ITO (2017) 157 DTR 85 (Delhi) Trib.)
S. 12A : Registration – Trust or institution – Application for approval u/s. 80G was restored
back to the CIT. [ S.80G ]
Since there was no basis for arriving for arriving at conclusion that the activities of assessee are
predominantly religious in nature, the application for approval u/s. 80G was restored back to the
CIT. (AY. 2017-18)
Shree Kaila Devi Temple Trust v. CIT (E) (2017) 59 ITR 92 (SN) (Jaipur) (Trib.)
S. 12A : Registration – Trust or institution – Where although the main object of the Trust
included carrying on activities outside India, but no such activity were actually carried
outside India, grant of registration u/s. 12AA r.w.s 12A could not be denied on this ground.
[ S. 12AA]
Before the Tribunal it was contended that; though the main object of the trust included to carry
activities outside India, no activities have been actually carried outside India and therefore there
was no requirement of the approval from the CBDT. The Tribunal, allowing the appeal, held that
the approval from the CBDT was not required in case of a Trust whose objects includes carrying
out of activities outside India when it is evident that it had not carried out any activity outside
India. Therefore, in such circumstances and facts of the case, the DIT (E) was not justified in
denying registration u/s.12AA r.w.s. 12A of the Act. (AY. 2013-14)
National Informatics Centre Service Inc. v. DCIT (E) (2017) 57 ITR 457/189 TTJ 709 /155
DTR 329 (Delhi) (Trib.)
S. 12A : Registration – Trust or institution-Educational institution - Refusal of registration

was held to be not justified.[S. 2 (15, 11,12AA)
Allowing the appeal of the assessee the Tribunal held that; objects and activities of assessee-
society were to run education institutions to impart balanced and wholesome education to youth,
registration under section 12A was to be granted
Labana Sikh Educational Society v.CIT (2017) 163 ITD 87 /147 DTR 217/184 TTJ 433
(Chd.) (Trib.)
S. 12A : Registration – Trust or institution-Registration cannot be cancelled or withdrawn

only on the ground that the assessee trust was hit by monetary limits prescribed under
section 2 (15) of the Act. [ S.2 (15), 11 ,12AA ]
Allowing the appeal of the assessee, the Tribunal held that; registration granted cannot be
cancelled on the ground that; the assessee trust was hit by monetary limits prescribed under
section 2 (15) of the Act. (AY. 2009-10)
Bhakti Kala Kshetra v. DIT (E) (2017) 163 ITD 440 (Mum.) (Trib.)
S. 12A : Registration – Trust or institution-Merely charging of fees for carrying such

activities would not loose character of charity. [S. 2 (15)]
Tribunal held that where department had granted registration treating activities as charitable,
mere charging of fees for carrying such activities would not loose character of charity. Assessee
is entitle to registration. (AY 2010 – 2011)
59
Quality Circle Forum of India v. Dy.CIT (2017) 162 ITD 122 (Hyd.) (Trib.)
S. 12AA : Procedure for registration – Trust or institution - Search and seizure –

Cancellation of registration on the basis of statement of secretary general of the assesse was
held to be proper.[S. 132, 132 (4), 153A ]
Dismissing the petition the Court held that; Statement recorded of the Secretary general of
assesse under S.132 (4) in the course of the search pointed out to the activities of the assessee-
association and not his own activities. Tribunal had expressly recorded that the search
proceedings took place in the context of section 153A, in the very premises of Mr R.K.Meglani
with respect to the assesse therefore cancellation of registration was held to be proper however,
the cancellation of registration would be effective only from the date of introduction of
section 12AA (3), with effect from October 1, 2014 and not earlier.
U.P. Distillers Association v. CIT (2017) 399 ITR 143/159 DTR 108 /(2018) 301 CTR 250
(Delhi) (HC)
S. 12AA : Procedure for registration – Trust or institution - commissioner cannot delegate

his power to deputy director [ S.2 (15) 11, ]
Dismissing the appeal of the revenue the Court held that; the order sheet filed on record clearly
showed that none of the proceedings had been conducted by the Commissioner (E). The last order
sheet dated September 2, 2015 clearly showed that the entire proceedings had been conducted by
the Deputy Director (Systems) for the Commissioner (E) and nothing had been done in the matter
by the Commissioner (E) himself. At the end of the order sheet there was the initial of the
Commissioner (E). The order was not valid.
CIT (E) v. Amelorating India (2017) 399 ITR 196 (P&H) (HC)
S. 12AA : Procedure for registration – Trust or institution - Charitable purposes -

Preservation of environment including watersheds, forests and wildlife has a direct causal
connection to the activity of preservation of environment hence the assessee is entitle to
registration [ S. 2 (15) ]
Dismissing the appeal of the revenue the Court held that; the charitable purposes includes
preservation of environment including watersheds, forests and wildlife. The activity carried out
by the assessee had a direct causal connection to the activity of preservation of environment. The
Assessee is entitle to registration . (AY. 2012-13)
CIT (E) v. Water and Land Management Training and Research Institute (2017) 398 ITR
283 (T &AP) (HC)
S. 12AA : Procedure for registration – Trust or institution-Income derived by assessee by

way of fees from students for running educational institution is income derived which was
applied for aims and objects of assesse hence is entitled to registration .
The Commissioner failed to mention the exact enquiry report sent by the Departmental authorities
to ascertain the basis on which they did not recommend registration to the assessee. Thus, the
Tribunal rightly directed the Commissioner to grant registration to the assessee. No illegality or
perversity could be demonstrated by the Department in the findings recorded by the Tribunal.
(AY. 2012-13)
CIT (E) v. Lord Krishna Charitable Trust (2017) 398 ITR 370 (P&H) (HC)
S. 12AA : Procedure for registration – Trust or institution-Rectification deed – Grant of

registration was held to be valid .[ S. 12 ]
Dismissing the appeal of the revenue the Court held that; pursuant to the order of the court dated
April 17, 2017, an affidavit had been filed by one of the trustees of the assessee, placing on
60
record inter alia the rectification deed dated January 22, 2016. He had also enclosed, with the
affidavit, an order dated May 4, 2017 passed by the Commissioner (Exemptions) granting
registration to the assessee under section 12AAread with section 12A after taking on record its
rectification deed. Accordingly, no question of law arose. (AY. 2016-17)
PCIT (E) v. Uma Sanjeevani Charitable Trust. (2017) 397 ITR 538 (Delhi) (HC)
S. 12AA : Procedure for registration – Trust or institution - Survey - Subsequently it was

discovered in the course of survey that activity of the Trust was not charitable cancellation
of registration was held to be justified . [ S. 133A ]
Dismissing the appeal of the assesse the Court held that; subsequently it was discovered in the
course of survey that activity of the Trust was not charitable cancellation of registration was held
to be justified . (AY. 2008 - 09)
Dr. Bhim Rao Ambedkar Educational Society v. CIT (E) (2017) 397 ITR 295 (All) (HC)
S. 12AA : Procedure for registration – Trust or institution-At the time of registration of

trust only the genuineness of the objects has to be tested and not the activities. [S. 11, 12]
Dismissing the appeal of the revenue, the Court held that; at the time of registration of a
charitable institution u/s 12AA, the CIT is not required to look into the activities, where such
activities have not or are in the process of its initiation. The registration cannot be refused on the
ground that the trust has not yet commenced the charitable or religious activity. At this stage, only
the genuineness of the objects has to be tested and not the activities, unless such activities have
commenced. (ITA No. 33 of 2017, dt. 07.09.2017)
CIT v. Shreedhar Sewa Trust (All) (HC); www.itatonline.org
S. 12AA : Procedure for registration – Trust or institution-Application was rejected after

three years beyond limitation period of six months. Tribunal granting the registration
effective from date of application is held to be proper.[S. 10 (23C) (vi)]
Dismissing the appeal of the revenue, the Court held that; Appellate Tribunal had rightly held that
the registration should be granted to the assessee under section 12AA effective from the date of
application. The exemption which was granted under section 10 (23C) (vi) would be considered
on the basis of registration.
CIT v. Sahitya Sadawart Samiti (2017) 396 ITR 46 (Raj.) (HC)
S. 12AA : Procedure for registration – Trust or institution - Religious activities carried out
were minuscule in comparison to their main activity, hence cancellation of registration was
not valid in law.[S. 11, 12, 13 (1) (b)]
Allowing the petition the Court held that; where assessee-trust had established institution for
benefit of all sections of society and religious activities carried out by it were minuscule in
comparison to its main activity, Commissioner could not cancel registration of trust on ground of
violation of provisions of section 13 (1) (b). Cancellation of registration was held to be contrary
to law . (AY 2009-10)
Shri Mahavir Sthan Nyas Samiti v. UOI (2017) 245 Taxman 101 (Patna) (HC)
S. 12AA : Procedure for registration – Trust or institution-While granting the registration

the Commissioner cannot apply the provisions of section 13. [S. 2 (15), 11, 13]
Dismissing the appeal, of the Revenue, the Court held that; while granting registration CIT (E)
had to be satisfied of two conditions while granting the registration under section 12AA, whether
the objects of the assessee were charitable in nature and whether its activities were genuine. It
could not have concluded on the basis that the assessee had not filed its returns in earlier years,
that its activities were not genuine. It had further recorded that section 13 was to be considered by
61
the Assessing Officer at the time of granting exemption under section 11 and not at the time of
granting registration under section 12AA . (AY.2012-13 to 2014-15)
CIT (E) v. Shri Shirdi Sai Darbar Charitable Trust (Dharmashala) (2017) 395 ITR 567 /247
Taxman 260 (P&H) (HC)
S. 12AA : Procedure for registration – Trust or institution - Withdrawal of registration was

held to be not justified.[S. 2 ( (15), 12A]
Dismissing the appeal of the revenue, the Court held that the CIT is not entitled to withdraw S.
12A registration on the ground that the activities of the trust are no longer charitable after the
insertion of the proviso to S. 2 (15). The registration can be withdrawn only if a finding is given
that the activities of the institution are not genuine or that the activities carried out are not in
consonance with the object of the institution. Followed DIT v. Khar Gymkhana (2016) 385 ITR
162 (Bom) (HC). (ITA No. 43 of 2015, dt. 17.07.2017)
CIT v. The Mumbai Metropolitan Regional Iran and Steel Market Committee (2018) 404
ITR 171 (Bom.) (HC), www.itatonline.org
S. 12AA : Procedure for registration – Trust or institution - Application for registration

was filed in the year 1973 – Insertion of provision S. 12AA w.e.f 1-4 - 1997, granting of
exemption was held to be justified – Delay in submission of audit report was explained –
Corpus fund of earlier years cannot be assessed as income as it is capital in nature .[ S. 11,
12 ]
Dismissing the appeal of the revenue the Court held that; the amendment with effect from April
1, 1997, by which the words “whichever is later and such trust or institution is registered under
section12AA of the Income-tax Act, 1961 ” were inserted at the end of section 12A (a) did not
apply to the assessee for the assessment year 1993-94. The assessee’s application for registration
under section 12A was filed on June 23, 1973, and was pending on the date of amendment.
Therefore, the question of the assessee getting registered under section12AA did not arise. Delay
in filing the audit report was explained . Corpus fund was relating to earlier years cannot be
added as income of the current year . (AY. 1993 - 94)
DIT v. Vishwa Hindu Parishad. (2017) 394 ITR 411/248 Taxman 290 /151 DTR 345 /297
CTR 148 (Delhi) (HC)
S.12AA : Procedure for registration – Trust or institution-Receipts on account of

commercial activities exceeding limits prescribed in proviso to section 2 (15), in particular
year, does not give automatic power to Commissioner for cancellation of registration. [S. 2
(15), 12, 13 (8)]
Dismissing the appeal of the revenue, the Court held that; mere fact that in one particular year,
the assessee had income receipts in excess of Rs. 10 lakhs or such other limit as provided in the
proviso to section 2 (15) of the Act, by itself would not warrant cancellation of the registration
under section 12AA (3) and that there was a difference between registration and exemption.No
question of law arose. (AY .2009-2010)
DIT (E) v. North Indian Association (2017) 393 ITR 206/246 Taxman 318/293 CTR 169/148
DTR 76 (Bom.) (HC)
S. 12AA : Procedure for registration – Trust or institution - Activities of trust is genuine

Restoration of registration granted was held to be proper. [S. 2 (15), 11]
Dismissing the appeal of the revenue, the Court held that; the Commissioner could exercise his
power to cancel the registration granted to a trust only if at least one of the two conditions, that
either (i) the activities of the trust or institution were not genuine, or (ii) the activities of the trust
or institution were not being carried out in accordance with the objects of the trust or institution,
as specified therein was found to be satisfied. Such satisfaction of any of the two conditions had
62
not been shown by the Department. The Appellate Tribunal's order restoring the registration
granted was proper.
CIT v. Institute Management Committee of Industries Training Institute (2017) 393 ITR
161/148 DTR 74/293 CTR 167 (Bom.) (HC)
S. 12AA : Procedure for registration – Trust or institution – If aggregate receipts exceeds

specified relief exemption would be denied, however registration shall not be cancelled.
[S.2 (15)]
Dismissing the appeal of the revenue, High Court ,referred to the CBDT’s circular No. 21/2016
dt. 27-05-2016 and held that;if the aggregate receipts from activities of advancement of any other
object of general public utility during the year exceeds 25% of total receipts of the trust or
institution, the tax exemption would be denied to such trust or institution. But, registration
granted u/s. 12AA of the Act, shall not be cancelled.
CIT v. Himachal Pradesh Road Transport Corporation (2017) 291 CTR 417 /145 DTR 257
(HP) (HC)
S.12AA : Procedure for registration – Trust or institution - No material indicating that

assessee or its affairs not carried out in accordance with object of trust--Registration cannot
be cancelled. [S. (2.15)]
Dismissing the appeal of the revenue, the Court held that; there was nothing referred to by the
Director (E) which could show that the assessee was undertaking any activities which would
demonstrate that it was not a genuine trust or institution. There was no material which would
indicate that the assessee or its affairs were not being carried out in accordance with the object of
the trust or institution. These two aspects referred to in sub-section (3) of section 12AA of the Act
and the materials in that behalf were completely lacking. Therefore, there was no reason for the
Director (E) to exercise the power which he purported to exercise. (AY.2009-2010)
DIT (E) v. Maharashtra Housing & Area Development Authority (2017) 392 ITR 240
(Bom.) (HC)
S. 12AA : Procedure for registration – Trust or institution-Registration was directed to be

granted. [S. 80G (5) (vi)]
The Tribunal held that it is evident that through few objects are meant for the benefit of the
members and their establishments, but at the same time the benefits also extend to other
associations, women, children, old persons, education and social health and other objects in the
interest of the public at large. Therefore, in the circumstances and facts of the case learned CIT
(E) in not justified in rejecting the registration under section 12AA. The Tribunal directed CIT
(E) to grant the registration under section 12AA and under section 80G (5) (vi) of the Act. (AY.
2016-17)
Vyapar Sangh v. CIT (E) (2017) 188 TTJ 2 (Jd) (UO) (Trib.)
S. 12AA : Procedure for registration – Trust or institution - The Commissioner only had to
see whether the objects of the assessee-trust were charitable in nature or not and
accordingly directed the Commissioner to grant registration [ S. 2 (15) ]
Failure to file returns for the preceding years and also to get its accounts audited would not
disentitle an assessee from granting a registration – Objection that the funds used for purposes
other than charitable purposes and whether confirmations filed for corpus donations could not be
said to be directions from the donors and the said issue can be considered at the time of making
an assessment .The Commissioner only had to see whether the objects of the assessee-trust were
63
charitable in nature or not and accordingly directed the Commissioner to grant registration u/s.
12AA .
Sahid Munshi Ram Memorial Education Society v. CIT (2017) 59 ITR 40 (Delhi) (Trib.)
S. 12AA : Procedure for registration – Trust or institution-Withdrawal of exemption only

on the ground that ,receipts of assessee was exceeded monetary specified limits was held to
be not justified – Matter remanded. [ S. 2 (15)
Allowing the appeal of the assessee the Tribunal held that; Withdrawal of exemption only on the
ground that ,receipts of assessee was exceeded monetary specified limits was held to be not
justified .Matter remanded. (AY. 2005 - 06 to 2010-11)
Bharat Diamond Bourse v. DIT (E) (2017)153 DTR 281/187 TTJ 239/58 ITR 513 (Mum.)
(Trib.)
S. 12AA : Procedure for registration – Trust or institution - Registration cannot be refused
on the ground that it has not yet commenced charitable or religious activity.[S. 2 (15) 11,
12A]
Allowing the appeal of the assessee, the Tribunal held that; Registration cannot be refused on the
ground that it has not yet commenced charitable or religious activity . (AY. 2016-17)
Ashutosh Charitable Trust of Educational & Medical Sciences v.CIT (20170 163 ITD 301/55
ITR 59 (SN) (Chd.) (Trib.)
S.12AA : Procedure for registration – Trust or institution - If the object of the trust is
charitable, registration cannot be denied. [S.80G]
Allowing the appeal the Tribunal held that; if the object of the trust is charitable registration
cannot be denied. Accordingly, the Commissioner was directed to grant registration to the
assessee under section 12AA and also grant exemption certificate under section 80G of the Act.
Abacus Foundation v. CIT (2017) 53 ITR 629 (Kol.) (Trib.)
S. 12AA : Procedure for registration – Trust or institution - The activities of Banquet Hall
Hiring, Hospitality (Restaurants) and Permit Room (Bar) are prima facie in the nature of
carrying on trade, commerce, or business, the DIT is required to conduct detailed enquiry
and examination as to the nexus between the activities and trade, commerce or business,
matter was set aside to decide de novo. [S.2 (15), 11, 12A ]
The DIT (E) cancelled the registration by invoking newly inserted proviso to Section 2 (15) of
1961 Act by holding that the assessee’s main object is not for advancement of any other object of
general public utility as the assessee is carrying on the activities which are in the nature of trade,
commerce or business for consideration, therefore, in view of amended provisions of Section 2
(15) of 1961 Act. Section 2 (15) of 1961 Act, the assessee is not entitled for exemption u/s 11 of
1961 Act. On appeal by the assessee to the Tribunal held that; the activities of Banquet Hall
Hiring, Hospitality (Restaurants) and Permit Room (Bar) are prima facie in the nature of carrying
on trade, commerce, or business for consideration and are hit by the proviso to s. 2 (15). If the
receipts from these activities are in excess of the minimum prescribed threshold limit, the DIT is
required to conduct detailed enquiry and examination as to the nexus between the activities and
trade, commerce or business, following theHon’ble Bombay High Court in a recent decision in
DIT (E) v. North Indian Association, (2017) 79 taxman.com 410 (Bom.) dated 14-2-2017,
wherein, a significant observations in context of amended provisions of Section 2 (15) of 1961
Act in para-9 was made contemplating that if the transactions are in the nature of trade,
commerce and business are consistent and continuous/regular basis and exceeds threshold limit,
as prescribed by statute u/s 2 (15) of 1961 Act, then it is a matter of probe /investigation to come
64
to conclusion that the activities of the trust/institution is not genuine, in the light of amended
provisions of Section 2 (15) of 1961 Act. Accordingly the matter was set side to decide de novo
determination of the issue on merits in the light of the amended Section 2 (15) of the Act read
with Section 11 of the Act, considering the decision of Hon’ble Bombay High Court in the case
of DIT (E) v. North Indian Association. (AY. 2009-10)
MIG Cricket Club v. DIT (E) (2017) 57 ITR 56 (S.N.) (Mum.) (Trib.)
S. 13 : Denial of exemption-Trust or institution-Investment - Major activities charitable and

a few religious activities, Trust is entitled to exemption. [S.11, 263]
Court held that, major activities charitable and a few religious activities, Trust is entitled to
exemption, revision was held to be not valid, 263.
Imarat Shariah Educational and Welfare Trust v. CIT (2017) 392 ITR 301/245 Taxman 101
(Patna) (HC)
Shri Mahavir Sthan Nyas Samiti v. UOI (2017) 392 ITR 301 /245 Taxman 101 (Patna) (HC)
S.13 : Denial of exemption-Trust or institution-Investment restrictions - Disallowance of

repayments of loans from trustees and family members treating them as transfer of trust
funds-Matter remanded to Assessing Officer for fresh adjudication.[S.11, 13 (1) (c)]
Allowing the appeal of the assesse the Court held that ;The Assessing Officer did not discharge
his role as investigator relying upon any material or evidence to support his adverse finding that
the repayment of loan to its trustees was transfer of funds to trustees .Therefore, the claim was
remanded to the Assessing Officer for fresh adjudication on any evidence that might be adduced
to disprove the claim. No adjudication on the claim of accumulated deficit had been found in the
assessment order.Matter remanded. (AY. 2005-2006)
Devi Kamal Trust Estate v. DIT (E) (2017) 392 ITR 178/246 Taxman 196/151 DTR 82/297
CTR 97 (Cal) (HC)
S. 13 : Denial of exemption-Trust or institution-Investment restrictions – Investment was

made in the subsidiary in tune with scheme framed by SEBI, denial of exemption was held
to be not justified [ S. 11 (5), 13 (1) (d) (iii) ]
Allowing the appeal of the assessee the Tribunal held that; membership of assessee exchange
could be obtained by public at large subject to fulfilment of certain entry conditions as to
margins/safety/securities etc. - Members of assessee, in turn, could become sub-broker of
subsidiary company subject to fulfilment of further conditions which was in tune with scheme
framed by SEBI . Since investment made by assessee in subsidiary was in tune with requirement
of section 11 (5), read with rule 17C, assessee could not be visited with consequential
disallowance under section 13 (1) (d) (iii). (AY. 2010-11, 2011 - 12)
OTC Exchange of India v. ADIT (2017) 167 ITD 41 (Mum) (Trib.)
S. 13 : Denial of exemption-Trust or institution-Investment restrictions - In case of violation
income which is subject matter of violation only can be brought to tax. [ S.11, 12AA ]
In case of violation of S. 13 (1) (c) there cannot be complete denial of exemption u/s.11 for
violations of provisions of section 13 (1) (c) and income which is subject matter of violation only
can be brought to tax. (AY.19992000 to 200405)
Maharashtra Academy of Engineering and Educational Research v. Dy. CIT (2017) 55 ITR
242/(2018) 163 DTR 153 (Pune) (Trib.)
65
S. 14A : Disallowance of expenditure – Exempt income – Disallowance cannot be made in
the absence of proof that expenditure has actually been incurred in earning dividend
income – If the AO has accepted in earlier years he cannot take a contrary stand if the facts
and circumstances have not changed – Argument that the dividend is not tax free in the
hands of the payee is not accepted. [S.10 (33), 115O, 115R, R.8D]
Allowing the petition the Court held that;disallowance cannot be made in the absence of proof
that expenditure has actually been incurred in earning dividend income. If the AO has accepted in
earlier years he cannot take a contrary stand if the facts and circumstances have not changed.
Argument that the dividend is not tax free in the hands of the payee is not accepted, section 14A
disallowances has to be made also with respect to dividend on shares and units on which tax is
payable by the payer u/s 115-0 and 115R. (AY. 2002-03)
Godrej & Boyce Manufacturing Co Ltd v. DCIT (2017) 394 ITR 449 /247 Taxman 361/151
DTR 89/295 CTR 121 (SC)
S. 14A : Disallowance of expenditure - Exempt income - Own funds to cover investments

made by asessee, no disallowance can be made though the assesse himself shown the
disallowance at the time of filing of return – Matter remanded .[ R.8D, 254 (1) ]
Allowing the appeal of the assesse, when the assesse ha sown funds to cover investments made
by assesse, no disallowance can be made though the assesse himself shown the disallowance at
the time of filing of return . Matter remanded to Tribunal for disposal a fresh . (AY. 2008 - 09)
Darashaw & Company (P.) Ltd. v. DCIT (2017) 251 Taxman 394 (Bom) (HC)
S. 14A : Disallowance of expenditure - Exempt income – When there is no exempt income,

no disallowance can be made.CBDT circular cannot override the provisions of the Act. [
R.8D ]
Dismissing the appeal of revenue the Court held that; When there is no exempt income, no
disallowance can be made .Merely because tax auditor had suggested in tax audit report that there
ought to be such disallowance, it could not be a ground to make disallowance.The CBDT Circular
could not override the express provisions of section 14A read with rule 8D . (AY. 2011-12)
PCIT v. IL & FS Energy Development Company Ltd. (2017)399 ITR 483 / 250Taxman 174
/297 CTR 452/156 DTR 89 (Delhi) (HC)
S. 14A : Disallowance of expenditure - Exempt income - Duty of Assessing Officer to

examine accounts of assessee and determine whether any expenditure could be ascribed to
exempt income — Matter remanded [ R.8D ]
Allowing the appeal the Court held that; Duty of Assessing Officer to examine accounts of
assessee and determine whether any expenditure could be ascribed to exempt income .Matter
remanded
Pradeep Khanna v. ACIT (2017) 399 ITR 146 (Delhi) (HC)
S. 14A : Disallowance of expenditure - Exempt income – Sufficient interest free funds,

investments in mutual fund, income offered as capital gains, disallowance of interest and
administrative expenses was held to be not justified [ R.8D ]
Dismissing the appeal of the revenue the Court held that; Investments in mutual funds were made
from interest free funds and income offered as capital gains, disallowance of interest and
administrative expenses was held to be not justified . (AY. 2009-10)
PCIT v. Sintex Industries Ltd. (2017) 248 Taxman 449 (Guj.) (HC)
S. 14A : Disallowance of expenditure - Exempt income – Provision cannot be invoked when

there is no exempt income was earned during the relevant assessment year [ R.8D ]
66
Dismissing the appeal of the revenue the court held that Provision cannot be invoked when there
is no exempt income was earned during the relevant assessment year . (AY. 2011-12)
CIT v. Chettinad Logistics (P.) Ltd. (2017) 248 Taxman 55 (Mad.) (HC)
S. 14A : Disallowance of expenditure - Exempt income – Recording of satisfaction is

mandatory – Remanding the matter to CIT (A) is not justified [ R.8D ]
Allowing the appeal of the assesse the Court held that; Recording of satisfaction is mandatory;
once this mandatory was itself not fulfilled, the question of remanding the matter to the
Commissioner (Appeals) and to call for a remand report from the Assessing Officer for the
purposes of rectifying this jurisdictional defect would not arise. (AY. 2009-10
Eicher Motors Ltd v. CIT (2017) 398 ITR 51/250 Taxman 532 (Delhi) (HC)
S. 14A : Disallowance of expenditure - Exempt income – No disallowance can be made when

interest-free funds exceeding its interest-free investment. [ R.8D ]
Dismissing the appeal of the revenue the court held that; when interest free fund exceeded interest
free investment, no disallowance can be made . (AY. 2002-03)
PCIT v. UTI Bank Ltd. (2017) 398 ITR 514 (Guj.) (HC)
S. 14A : Disallowance of expenditure - Exempt income – Decrease in interest free funds

cannot be presumed that funds borrowed on interest was invested to earn exempt income . [
S. 36 (1) (iii) ]
Dismissing the appeal of the revenue the Court held that ;merely because the interest-free funds
with the assessee had decreased during any period it did not follow that the funds borrowed on
interest were utilised for the purpose of investing in assets which yielded exempt income and that
interest could not be attributed under section 14A. (AY.2008 - 09)
CIT v. Max India Ltd. (2017) 398 ITR 209 /295 CTR 448/151 DTR 220 (P&H) (HC)
S. 14A : Disallowance of expenditure - Exempt income - Recording of satisfaction-Mere

assertion that section is applicable is not sufficient .[ R.8D ]
Dismissing the appeal of the revenue the Court held that; Recording of satisfaction that mere
assertion that section is applicable is not sufficient. (AY. 2009 - 10)
CIT v. U.P. Electronics Corporation Ltd. (2017) 397 ITR 113 (All) (HC)
S. 14A : Disallowance of expenditure - Exempt income – Without recording the satisfaction

no disallowance can be made . [ R.8D (2) (iii) ]
Dis missing the appeal of the revenue the Court held that; The AO is not entitled to make any
disallowance under Rule 8D if he does not specifically record that he is not satisfied with the
correctness of the assessee's claim. The fact that the CIT (A) and ITAT were not satisfied with the
assessee's disallowance and enhanced it does not mean that Rule 8D becomes applicable and the
disallowance should be computed as per the prescribed formula. (AY.2007-08, 2008 - 09)
PCIT v. Reliance Capital Asset Management Ltd (2017) 251 Taxman 68 /(2018) 400 ITR
217 (Bom) (HC)
S. 14A : Disallowance of expenditure - Exempt income – Recording of satisfaction is

mandatory, disallowance of administrative expenses was held to be not justified - Sufficient
interest free fund to demonstrate that borrowed amount was not invested in shares and
securities, ITAT was not justified in setting aside the matter to the AO. [ R.8D, 254 (1) ]
Court held that ;since there was a failure by the AO to comply with the mandatory requirement of
Section 14 A (2) of the Act read with Rule 8D (1) (a) of the Rules and record his satisfaction as
required thereunder, the question of applying Rule 8D (2) (iii) of the Rules did not arise hence
67
disallowance of administrative expenses was held to be not justified .As regards disallowance of
interest the Court held that ,ITAT erred in remanding the matter concerning deletion of
disallowance of any interest under clause (ii) of Rule 8D (2) of the Act to the AO for fresh
determination in light of the decision in CIT v. Taikisha Engineering India Limited (2015) 370
ITR 338 (Delhi) (HC) The effect is that the Assessee’s appeal before the ITAT on the issue of
Section 14 A read with Rule 8D of the Rules must be treated as allowed and the Revenue’s appeal
on the said issue must be treated as dismissed. ( (AY. 2008 - 09)
H. T. Media Limited v. PCIT (2017) 399 ITR 576/156 DTR 250 (2018) 300 CTR 34 (Delhi)
(HC)
S. 14A : Disallowance of expenditure – Exempt income – Shares held as stock in trade ,no
disallowance can be made. [ R.8D ]
Dismissing the appeal of the revenue the Court held that; in case of assessee, engaged in business
of share trading, dividend income was treated as business income and shares held by assessee
were treated as stock in trade, AO couldnot proceed to make disallowance under section 14A by
applying Rule 8D. (AY. 2008-09)
CIT v. G. K. K. Capital Markets (P) Ltd. (2017) 246 Taxman 52 (Cal.) (HC)
S. 14A : Disallowance of expenditure - Exempt income – Estimation of expenditure was held

to be proper . [ S. 10 (34) ]
Dismissing the appeal of the assesse the Court held that on facts estimation of expenditure was
held to be proper . (AY. 2006 - 07)
Nahar Spinning Mills Ltd. v. CIT (2017) 395 ITR 12 / 82 taxmann.com 154 (P&H) (HC)
S. 14A : Disallowance of expenditure - Exempt income - Not expressly recording

dissatisfaction does not render assessing officer’s reasons for disallowance invalid. [ R.8D]
Dismissing the appeal of the assesse the Court held that ;Assessing Officer not expressly
recording dissatisfaction does not render assessing officer’s reasons for disallowance invalid if he
has substantial compliance with the provisions would, in fact destroy the mandate of
section 14A . The disallowance which was otherwise in accord with rule 8D was justified. (AY.
2009-10)
Indiabulls Financial Services Ltd. v. Dy. CIT (2017) 395 ITR 242 (Delhi) (HC)
S.14A : Disallowance of expenditure-Exempt income-Assessing Officer must record

satisfaction that claim regarding expenditure is not satisfactory-Disallowance of
expenditure on basis of estimate by Assessing Officer was held to be not permissible [R.8D].
Court held that, the Assessing Officer must record satisfaction that claim regarding expenditure is
not satisfactory-Disallowance of expenditure on basis of estimate by Assessing Officer was held
to be not permissible, however the Assessing Officer was justified in presuming that assesse had
incurred expenditure towards administration activities necessary to earn exempt income hence
entitle to resort rule 8D. (AY.2008-2009)
Punjab Tractors Ltd. v. CIT (2017) 393 ITR 223/246 Taxman 31 /293 CTR 50/147 DTR 307
(P&H) (HC)
S.14A : Disallowance of expenditure-Exempt income-Shares held by assessee treated as

stock-in-trade-No disallowance can be made.[R.8D]
Dismissing the appeal of the revenue, the Court held that; the shares held by the assessee having
been treated as stock-in-trade no disallowance can be made. (AY. 2008-2009)
CIT v. GKK Capital Markets (P) Ltd. (2017) 392 ITR 196 /246 Taxman 52 /293 CTR 323
/147 DTR 330 (Cal.) (HC)
68
S.14A : Disallowance of expenditure-Exempt income-No disallowance can be made in the
absence of exempt income [R.8D]
No disallowance can be made in the absence of exempt income. (AY. 2007-2008)
Redington (India) Ltd v. Addl. CIT (2017) 392 ITR 633/77 taxmann. com 257 (Mad.) (HC)
Editorial : Order in Redington (India) Ltd. v. Addl. CIT (2015) 41 ITR 646 (Chennai) (Trib.) is
reversed.
S.14A : Disallowance of expenditure-Exempt income-Incumbent upon Assessing Officer to

enquire and determine whether there is nexus.
Dismissing the appeal of the revenue, the Court held that; it was incumbent upon the Assessing
Officer to enquire into such larger amount and determine whether it had nexus with the
expenditure relatable to exempt income to attract section 14A. Without that procedure, section
14A would be reduced to a mere formality. There was no infirmity in the reasoning and
conclusions of the Appellate Tribunal. (AY. 2006-2007)
PCIT v. U.K. Paints (India) P. Ltd. (2017) 392 ITR 552 /244 Taxman 309 /153 DTR 201
(Delhi) (HC)
S.14A : Disallowance of expenditure - Exempt income - Stock in trade - no disallowance can

be made.[R.8D]
Dismissing the appeal of the revenue, the Court held that; the securities constituted the assessee's
stock-in-trade and the income that arose on account of the purchase and sale of the securities was
its business income and was brought to tax as such. Whether the securities yielded any income
arising therefrom, such as, dividend or interest, no expenditure was incurred in relation to it. The
Appellate Tribunal's deletion of the addition made on account of disallowance under section 14A
was proper. (AY. 2008-2009)
P. CIT v. State Bank of Patiala (2017) 391 ITR 218/245 Taxman 273/293 CTR 35 /147 DTR
290 (P&H) (HC)
S. 14A : Disallowance of expenditure - Exempt income – No disallowance can be made in
absence of any exempt income.[ R.8D ]
The assessee was into the business of tours & travels. During the year, assessee had made several
investments. The Assessing Officer made disallowance u/s 14A on the ground that debited
interest expenses. He also made certain adhoc disallowance of salary and other administrative
expenses. The CIT (A), on appeal, partly allowed the appeal and reduced the disallowance made.
On further appeal, Tribunal observed that there was no exempt income earned by the assessee
and consequently section 14A was not applicable in the given case. (ITA No. 5440 &
5583/Mum/2015, C.O. No. 117/Mum/2017 dt. 06-10-2017) (AY .2007 – 2008)
DCIT v. Cox & Kings (I) Ltd. (2017) 160 DTR 201/190 TTJ 785 (Mum) (Trib)
S. 14A : Disallowance of expenditure - Exempt income – No disallowance in case there is

sufficient interest-free funds.
During the course of assessment, the AO made an addition u/s 14A, despite the fact that the
Assessee had interest-free funds. The addition u/s 14A was made to the income determined u/s
115JB as well. Following the judgment of CIT vs. Gujarat State Fertilizers & Chemicals Ltd.
[2013] 36 taxmann.com 230 (Gujarat), the ITAT deleted the addition u/s 14A as the Assessee
had sufficient funds. (ITA No. 2544/Ahd/2014 dt. 26.09.2017) (AY .2011-12)
DCIT (OSD) v. Voltamp Transformers Ltd. (2017) 59 ITR 101 (SN) 101 (Ahd) (Trib)
S. 14A : Disallowance of expenditure - Exempt income - Apportionment of interest was held

to be not justified.
69
The Tribunal held that the presumption is that the assessee has used its own interest free capital
for making investment in shares and, therefore, disallowance made under section 14A cannot be
sustained. (AY. 2010-11)
Hi-Tech Engineers v. ITO (2017) 164 ITD 94/155 DTR 334 /188 TTJ 453 (Mum.) (Trib.)
S. 14A : Disallowance of expenditure-Exempt income – Assessing Officer cannot blindly

apply the Rule 8D, without elucidating and explaining why assessee's voluntary
disallowance was unreasonable and unsatisfactory. [R.8D (2)]
Dismissing the appeal of the Revenue the Court held that, the Assessing Officer cannot blindly
apply the Rule 8D, without elucidating and explaining why assessee's voluntary disallowance was
unreasonable and unsatisfactory. (AY. 2006-07)
PCIT v. U.K. Paints (India) (P.) Ltd. (2017) 244 Taxman 309 (Delhi) (HC)
S. 14A : Disallowance of expenditure - Exempt income - Investments from out of own funds
hence disallowance of interest expenditure was held to be not justified [ R.8D]
Tribunal held that; disallowances of interest expenditure and administrative expenses, since
assessee made investments from out of own funds, disallowance of interest expenditure was held
to be not justified . (AY. 2008 - 09)
DCIT v. Bombay Oxygen Corporation Ltd. (2017) 167 ITD 224 (Mum) (Trib.)
S. 14A : Disallowance of expenditure - Exempt income - Assessing Officer failed to satisfy

himself about correctness of assessee's claim, impugned disallowance was to be deleted [
R.8D ]
Allowing the appeal of the assessee the Tribunal held that; since, in instant case, Assessing
Officer failed to satisfy himself about correctness of assessee's claim, impugned disallowance was
to be deleted . (AY. 2010-11)
Associated Law Advisers. v. ITO (2017) 167 ITD 695 (Delhi) (Trib.)
S. 14A : Disallowance of expenditure - Exempt income – Interest-Own funds were more

than investment in tax free securities – No disallowance can be made - Quantum of
expenditure cannot exceed the actual expenditure attributable to exempt income ..[ R.8D ]
Dismissing the appeal of the revenue the Tribunal held that; assessee's own funds were more
than investment made in tax free securities, disallowance on account of interest expenditure under
was held to be not justified . Quantum of expenditure worked out under rule 8D could not have
exceeded actual expenditure attributable to exempt income and debited to profit and loss account.
(AY. 2008 - 09)
CIT v. Bosch Ltd. (2017) 167 ITD 650 (Bang) (Trib.)
S. 14A : Disallowance of expenditure - Exempt income – Disallowance was confirmed to the

extent of exempt income [ R.8D ]
Tribunal held that the assessee had various investments in shares and mutual funds apart from
investment in subsidiary companies therefore AO was justified in making disallowance under
section 14A, however the disallowance was confirmed to the extent of exempt income . (AY.
2011-12)
Future Corporate Resources Ltd. v. DCIT (2017) 167 ITD 33 (Mum) (Trib.)
70
S. 14A : Disallowance of expenditure – Exempt Income – Fixed terms debt scheme - Interest
on over draft cannot be dis allowed [ R.8D ]
Assesee having invested in the fixed maturity plans of various mutual funds which are basically
fixed terms debt scheme, the same are not tax free investments and therefore the interest on the
overdraft account could not be disallowed under the provisions of S. 14A of the Act. (AY. 2009-
10)
Allen Career Institute v. JCIT (2017) 190 TTJ 823/(2018) 161 DTR 25 (Jaipur.) (Trib.)
S. 14A : Disallowance of expenditure - Exempt income - No disallowance can be made when

no exempt income is earned during the year
No disallowance can be made when no exempt income is earned during the year (AY. 2008-09).
Religare Macquaire Wealth Management Ltd. v. ACIT (2017) 59 ITR 128 (Delhi)
(Trib)
S. 14A : Disallowance of expenditure - Exempt income - Assessing Officer is not empowered

to deem or assume certain expenditure to have been incurred in relation to tax free income.
No borrowed fund was utilised for investment hence no disallowances can be made [
R.8D]
Allowing the appeal of the assesse the Tribunal held that; the Assessing Officer is not empowered to
deem or assume certain expenditure to have been incurred in relation to tax free income. Tribunal also
held that, when No borrowed fund was utilised for investment hence no disallowances can be made .
(AY. 2008 - 09)
Aditya Birla Finance Ltd. v. ACIT (2017) 165 ITD 659/190 TTJ 349 /159 DTR 242 (Mum)
(Trib.)
S. 14A : Disallowance of expenditure - Exempt income – Where no exempt income was

received or receivable during relevant previous year no disallowance can be made .[ R.8D ]
Where no exempt income was received or receivable during relevant previous year no
disallowance can be made. Followed P CIT v. Ballarpur Industries Ltd. [IT Appeal No. 51 of
2016, Dated 13-10-2016] in which the Hon'ble Jurisdictional High Court, following the decision
of the Hon'ble Delhi High Court in the case of Cheminvest Ltd. v. CIT [2015] 378 ITR 33 (Delhi)
(HC) (AY.2011-12, 2012-13)
Dish TV India Ltd. v. ACIT (2017) 167 ITD 412/159 DTR 257 /190 TTJ 537/60 ITR 162
(Mum) (Trib)
S.14A : Disallowance of expenditure - Exempt income - Though no expenditure was

incurred,since statute has provided for presumptive expenditure, AO has to apply rule 8D.
[ R.8D ]
Dismissing the appeal of the assessee the Tribunal held that when deeming provision is made on
the basis of statutory presumption, the requirement of factual evidence is replaced by statutory
presumption and the Assessing Officer has to follow the consequences stated in the statute. It
means that even in a case where no expenditure is stated to have been incurred, the assessing
authority has to apply Rule 8D. As the statutory presumption substitutes the requirement of
factual evidence, the question of enquiry does not arise. (AY. 2012-13)
71
M.A. Alagappan v. ACIT (2017) 165 ITD 401 (Chennai) (Trib.)
S. 14A : Disallowance of expenditure - Exempt income - Share capital and free reserves
being more than investment in question, no disallowances under section 14A read with Rule
8D (2) (ii) can be made in respect of interest expenditure. [ R.8D (2) (ii) ]
Tribunal held that interest free funds available with the Assessee in the case of share capital and
free reserves being more than investment in question, no disallowances under section 14A read
with Rule 8D (2) (ii) can be made in respect of interest expenditure. (AY. 2010-11)
ABC Bearings Ltd v. ACIT (2017) 157 DTR 242/188 TTJ 437 (Mum) (Trib)
S.14A : Disallowance of expenditure - Exempt income - AO cannot deem or assume

expenditure to have been incurred in relation to tax free income.
Tribunal held that; when the expenses incurred has no relationship with the income not
includible in the total income, there cannot be any occasion to invoke the provision for making
the disallowance u/s 14A of the Act. (AY. 2006 – 07)
Inducto Steel Ltd. v. ACIT (2017) 165 ITD 405 /190 TTJ 582 /(2018) 161 DTR 136 (Mum)
(Trib.)
S. 14A : Dividend from mutual funds - Own funds were in excess of amount invested in
mutual funds, however disallowance was Rs 5000 was confirmed [ R.8D ]
Tribunal held that the assessee had received dividend income and since there were activities
relating to liquidation of mutual funds, some amount had to be disallowed u/s. 14A accordingly
disallowance of Rs. 5000 was confirmed . (AY. 2010 - 2011)
SvitzerHazira (P.) Ltd.v. DCIT 166 ITD 396 (Mum) (Trib.)
S. 14A : Disallowance of expenditure - Exempt income – When there is no expenditure was

incurred for earning exempt income, disallowances cannot be made [ R.8D ]
Tribunal held that when an assessee claims that no expenditure has been incurred to earn exempt
income, AO has to establish a nexus between expenditure and exempt income, in absence of any
direct nexus between expenditure and exempt income, AO could not invoke provisions of s.14A
to disallow said expenditure. (AY. 2007 - 08 to 2009-10)
Leena Kasbekar v. ACIT (2017) 166 ITD 440 (Mum) (Trib.)
S. 14A : Disallowance of expenditure - Exempt income – Disallowance of administrative

expenses was held to be justified [ R.8D ]
Dismissing the appeal of the assessee the Tribunal held that ;several instances of fresh investment
as well as sale of investment in shares - frequent movement in investment portfolio, cannot be
accepted that no expenditure had been incurred for earning exempt income . (AY. 2012 – 2013)
Vision EL Tech & Services (P.) Ltd. v. DCIT 166 ITD 205 (Bang) (Trib.)
S. 14A : Disallowance of expenditure - Exempt income - When no suo moto disallowances
was made burden is on assessee to show that no disallowances can be made - Matter
remanded [ R.8D ]
The Tribunal held that; When no suo moto disallowances was made burden is on assessee to
show that no disallowances can be made, since assessee had conceded that if one more
opportunity would be granted, matter was remanded . (AY. 2010 - 2011)
IDFC Capital Ltd. v. DCIT 166 ITD 316 (Mum) (Trib.)
72
S. 14A : Disallowance of expenditure - Exempt income - The disallowance cannot exceed the
exempt income [ R.8D ]
Allowing the appeal of the assessee, the Court held that; By no stretch of imagination can s. 14A
or Rule 8D be interpreted so as to mean that entire tax exempt income is to be disallowed. Also,
the disallowance cannot exceed the exempt income. (ITA NO.5048 & 5608/MUM/2016, dt.
31.10.2017) (AY. 2012-13)
Pest Control India Pvt. Ltd. v. DCIT (Mum) (Trib); www.itatonline.org
S. 14A : Disallowance of expenditure - Exempt income – Diminishing value of securities

cannot be considered as expenditure for the purpose of disallowance.[R. 8D ]
Tribunal held that diminishing value of securities cannot be considered as expenditure for the
purposes of disallowance . (ITA No. 1807 /Mum/2011 & 1812 /Mum/2011 Bench “A” dt. 16-
11 - 2017 (AY. 2006 - 07, 2008 - 09)
ACIT v AF-taab Investment Company Ltd. (Mum) (Trib) www.itatonline.org
S. 14A : Disallowance of expenditure - Exempt income – AO has to record satisfaction

before applying the Rule 8D of the Rules .[ R.8D ]
The Tribunal held that the Assessing Officer had not recorded any dissatisfaction about
thecorrectness of the claim of the assessee in respect of the expenditure in relation to theincome
which does not form part of the total income having regard to the accounts ofthe assessee. (AY
.2012-13)
Commercial Engineers and Body Builders Co. Ltd. v. Dy.CIT (2017) 57 ITR 567 (Luck)
(Trib)
S. 14A : Disallowance of expenditure - Exempt income – Investment in subsidiaries – Mixed

funds – matter remanded for fresh adjudication.
Tribunal held that, investment in subsidiaries is from mixed funds. matter remanded for fresh
adjudication. (AY .2011-12, 2012-13)
DCIT v. Sri Krishna Tiles and Potteries P. Ltd. (2017) 57 ITR 125 (Chennai) (Trib)
S. 14A : Disallowance of expenditure – Exempt income - Suo moto disallowance, wrongly

offered to tax – AOs should assesstaxable income and compute the tax liability of taxpayers
in accordance with law andshould not take undue advantage of the ignorance of the assessee
– Matter remanded back to AO for verification [ R.8D ]
Allowing the appeal of the assesse, the Tribunal held that; Suo moto disallowance, wrongly
offered to tax. AO should assess taxable income and compute the tax liability of taxpayers in
accordance with law and should not take undue advantage of the ignorance of the assessee .
Matter remanded back to AO for verification AO would be well within his powers to assess the
income below the amount offered by the assessee in the return of income, if the facts of this case
and law applicable thereon so demands. (AY. 2009-10, 2010-11)
Rupee Finance and Management Pvt. Ltd. v. DCIT (2017) 57 ITR 205 (Mum) (Trib)
S. 14A : Disallowance of expenditure - Exempt income – Substantial interest free funds –

Matter remanded [ R.8D ]
Assessee having substantial interest-free funds exceeding the investments in tax-free securities
.No disallowance of interest on notional basis in respect of overseas investments. The matter was
remanded for verification as to whether the assessee was having interest-free funds exceeding
investments in tax-free securities . (AY. 2006-07)
73
Strides Shasun Ltd .v. ACIT (2017) 56 ITR 419 (Mum) (Trib.)
S. 14A : Disallowance expenditure - Exempt income - Disallowance cannot exceed the

exempt income [ R.8D ]
Disallowance cannot exceed the exempt income . (AY. 2007-08 to 2011-12)
S. 14A : Disallowance of expenditure - Exempt income – Suo – moto withdrawal of

disallowance of claim was held to be valid, matter was set aside to decide the issue afresh [
R.8D, Art . 265]
The Assessee, a NBFC, made suo-moto disallowance of expense u/s 14A. During the AO
proceedings, the assessee found that disallowance had been wrongly offered in the ROI. The AO
and the CIT (A) did not accept the assessee’s claim and confirmed the disallowance. On appeal,
the Tribunal held that, in view of Article 265 of Constitution of India and CBDT’s Circular in
1955, the objective of income-tax proceedings was to compute the tax liability in accordance with
law and not take undue advantage of ignorance of the assessee. Given that the law w.r.t 14A had
evolved very recently and subsequent to passing of the assessment order, the Tribunal set aside
the issue back to the file of the AO to decide it in accordance with all legal and factual evidences.
(AY. 2009-10 ,2010-11)
Rupee Finance & Management (P.) Ltd. v. DCIT (2017) 81 taxmann.com 249 /57 ITR 205
(Mum.) (Trib.)
S.14A : Disallowance of expenditure-Exempt income – Interest income from debentures is

taxable hence could not be considered for the purposes of disallowance . [R.8D].
The claim of the assessee that opening interest bearing loans which were in the form of
debentures which were repaid during the year were not invested in shares and securities and
hence no disallowance of interest/premium on redemption of debenture can be made under
section 14A . As regards flat booking advances which was used for administrative purposes, the
matter was seta side to the AO for verification and AO has to justify the disallowance of expenses
keeping in view of accounts of the assesse. (AY. 2010-11)
Carpricon Reality Ltd v. DCIT (2017) 165 ITD 249/156 DTR 219// 188 TTJ 685 (Mum)
(Trib.)
S. 14A : Disallowance of expenditure - Exempt income – Interest – Having own funds no

disallowance can be made . [ R.8D ]
The Tribunal held that assessee having own funds, it will be presumed that tax free investments
was made out of own funds, hence no disallowance under section 14A r.w.r. 8D could be made.
However, suo motu disallowance made by assessee was liable to be sustained towards
administrative expenses. (AY. 2008-09)
Axis Bank Ltd. v. ACIT (2017) 185 TTJ 722/155 DTR 49 (Ahd.) (Trib.)
S.14A : Disallowance of expenditure - Exempt income – Expenditure should be incurred

cannot exceed exempt income – Matter remanded. [ R.8D ]
It was held that no borrowed funds were invested by the assessee for making investment in shares
or for earning dividend income. At best, if any disallowance could be made that can be restricted
to demat charges. Disallowance u/s 14A r.w. rule 8D cannot exceed the exempt income. Hence it
was restored to the AO to decide taking into consideration the above mentioned facts. (AY. 2009-
10)
Original Innovative Logistics India (P.) Ltd. v. JCIT (2016) 76 taxmann.com 364/(2017)183
TTJ 753 /147 DTR 89 (Chennai) (Trib.)
74
S.14A : Disallowance of expenditure-Exempt income – Interest on partner's capital is not
an expenditure hence no disallowance can be made.[R.8D]
It was observed that the firm was merely a compendium of its partners and its partners did not
have separate legal personalities under the Indian Partnership Act 1932. The interest paid to
partners and simultaneously getting subjected to tax in the hands of its partners is merely in the
nature of contra items in the hands of the firms and partners. It was thus held that the capital
diverted in the mutual funds to generate alleged tax free income does not lead to any loss in
revenue. In view of the inherent mutuality, when the partnership firm and its partners are seen
holistically and in a combined manner with costs towards interest eliminated in contra, the
investment in mutual funds generating tax free income bears the characteristic of and attributable
to its own capital where no disallowance under S. 14A read with Rule 8D is warranted. (AY.
2010-11)
Quality Industries v. JCIT (2016)161 ITD 217/(2017) 183 TTJ 350 (Pune) (Trib.)
S. 14A : Disallowance of expenditure-Exempt income - Book profit - The computation

under clause (f) of Explanation 1 to section 115JB (2) is to be made without resorting to the
computation as contemplated u/s 14A read with Rule 8D of the Income tax Rules 1962, (ii)
Only those investments are to be considered for computing the average value of investment
which yielded exempt income during the year. [S. 115JB, R.8D]
The Special Bench had to consider the following two important questions of law :
(i) Whether the expenditure incurred to earn exempt income computed u/s 14A could not be
added while computing book profits u/s 115JB of the Act? And
(ii) Whether investments which did not yield any exempt income should enter into the
computation under Rule 8D while arriving at the average value of investment, income from
which does not form part of the total income?
HELD by the Special Bench deciding both issues in favour of the assessee :
(i) We answer the question referred to us in favour of the assessee by holding that the
computation under clause (f) of Explanation 1 to section 115JB (2) is to be made without
resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income tax Rules
1962.
(ii) Only those investments are to be considered for computing the average value of investment
which yielded exempt income during the year. (AY. 2008-09)
ACIT v. Vireet Investment Pvt. Ltd. (2017) 165 ITD 27 /154 DTR 241/188 TTJ 1 (SB)
(Delhi) (Trib.)
S. 14A : Disallowance of expenditure-Exempt income – Non satisfaction of assesses claim

disallowance cannot be made. [R.8D]
The ITAT held that for the purpose of applying provisions u/s.14A r.w.rule 8D, the AO has to
record his non satisfaction on the claim of assessee for expenditure. If AO does not record the
same about the correctness of claim in respect of expenditure in relation to income which does
not form part of total income same is unsustainable in law. (AY. 2008 - 09)
Exim Scrips Dealers (P.) Ltd. v. DCIT (2017) 162 ITD 390 (Kol.) (Trib.)
S. 14A : Disallowance of expenditure-Exempt income-AO cannot directly invoke rule 8D

for making disallowance without examining the claim of the assesee.[R.8D]
Allowing the appeal of the assesssee, the Tribunal held that; AO cannot directly invoke rule 8D
for making disallowance without examining the claim of the assessee. (AY. 2010-11)
Fereshte Sethna (Ms) v. ACIT (2017) 162 ITD 412 (Mum.) (Trib.)
75
S. 14A : Disallowance of expenditure – Exempt income-Sufficient own funds, henceno part
of interest expenditure paid on borrowed fund could be disallowed.[R.8D]
Tribunal held that, the assessee proved that they holds sufficient own funds with other interest
free borrowed funds which were sufficient to cover corresponding investments which give rise to
tax free dividend income and other non-business utilization of funds. Therefore, No part of
interest expenditure paid on borrowed fund could be disallowed u/s. 14A. (AY. 2009-10)
Nirma Credit & Capital (P.) Ltd. v. ACIT (2017) 162 ITD 396 (Ahd.) (Trib.)
S.14A : Disallowance of expenditure – Exempt income – Stock in trade or investment is

irrelevant, disallowance was held to be justified. [R.8D]
Dismissing the appeal of the assesee the Tribunal held that; mandates of section 14A is to
disallowance of any expenditure in relation to income not forming part of total income, and does
not concern itself with character of such income, therefore holding of asset/property under
reference either as an investment or as stock-in-trade becomes inconsequential or irrelevant for
section 14A application. (AY. 2011-12, 2012-13)
Voltech Engineers (P.) Ltd. v.DCIT 163 ITD 469 (Chennai) (Trib.)
S.14A : Disallowance of expenditure-Exempt income-Recording of satisfaction – Not

expressly recording of satisfaction cannot be the ground to hold that no disallowances can
be made - No fresh investments during the year hence disallowance was to be deleted.
[R.8D]
Tribunal held that mere fact that Assessing Officer did not expressly record his satisfaction while
making said disallowance, cannot the ground to delete the addition. On facts, there was no fresh
investment made by assessee during year under consideration and tax free dividend income had
been earned from old investments, disallowance made by Assessing Officer was directed to be
deleted. (AY. 2009-10)
Delhi Towers Ltd. v.DCIT (2017) 163 ITD 124 (Delhi) (Trib.)
S. 14A : Disallowance of expenditure-Exempt income – Sales and purchase of shares-AO

had correctly applied formula prescribed under rule 8D (2) (ii) for determination of
expenditure attributable to dividend income. [R.8D]
Dismissing the appeal of the assessee, the Tribunal held that; assessee was engaged in sales and
purchase of shares and it had declared certain income as dividend income, which was exempt
from tax, AO had correctly applied formula prescribed under rule 8D (2) (ii) for determination of
expenditure attributable to dividend income. (AY. 2008-09)
Digvijay Finlease Ltd. v.DCIT (2017) 163 ITD 431 (Ahd.) (Trib.)
S. 14A : Disallowance of expenses – Exempt income-Investments which are not capable of

yielding dividend income needs to be excluded from total investment.[R.8D]
Dismissing the appeal of the revenue, the Tribunal held that ;in computing expenditure incurred
in relation to income not includible in total income under section 14A, read with rule 8D (2) (iii),
investments which are not capable of yielding dividend income needs to be excluded from total
investment. (AY. 2009 - 2010)
Dy.CIT v. Diamond Co. Ltd. (2017) 162 ITD 131 (Kol.) (Trib.)
S.14A : Disallowance of expenditure-Exempt income – No exempt income, hence no

disallowance could be made. [R. 8D]
Assessee not claiming any exempt income hence no disallowance could be made, however
disallowance was restricted in view of offer made by assesse. (AY.2007-2008, 2008-2009)
Merck Specialities P. Ltd. v. ACIT (2017) 54 ITR 256 (Mum) (Trib.)
76
S.14A : Disallowance of expenditure – Exempt income-Average investment from which
exempt income was received – Matter was set aside for verification [R.8D]
Allowing the appeal the Tribunal held that the Assessing Officer was to recalculate the
disallowance according to rule 8D according to the guidelines given by the Tribunal and calculate
the disallowance of expenditure under rule 8D (2) (iii) taking the average investment from which
the exempt income is received. (AY. 2009-2010, 2012-2013)
Yashoda Health Care Services P. Ltd. v. DCIT (2017) 54 ITR 26 (Hyd.) (Trib.)
S. 14A : Disallowance of expenditure - Exempt income – PMS brokerage fee and other
incidental expenses for making investment in to shares have not been debited in the P&
Loss account - No disallowance can be made. [ R.8D]
Assessing Officer disallowed the expenses merely following the formula u/s 14A Read with
R.8D. Assessee contended that the expenses relating to investment was debited to personal
account which was deducted from capital hence no disallowance can be made. CIT (A) accepted
the submission of assessee and deleted the addition. On appeal by Revenueismissing the appeal of
revenue the Tribunal held that; PMS brokerage fee and other incidental expenses for making
investment in to shares have not been debited in the P& Loss account, hence no disallowance can
be made.) (AY. 2010-11, 2011-12)
ACIT v. Sachin R. Tendulkar (2017) 163 ITD 65/147 DTR 282 / 184 TTJ 374 (Mum.)
(Trib.)
S. 14A : Disallowance of expenditure-Exempt income – Disallowance under the Rule 8D is

automatic, unless the AO examines the accounts and records the finding why the assessee's
claim/computation is not proper.[ R.8D ]
Allowing the appeal of the assessee the Tribunal held that; disallowance under theRule 8D is
automatic, unless the AO examines the accounts and records the finding why the assessee's
claim/computation is not proper . (AY. 2011-12)
Shapoorji Pallonji & Co. Ltd. v. DCIT (2017) 164 ITD 42 (Mum.) (Trib.)
14A : Disallowance of expenditure – Exempt income - Securities held as stock in trade has
to be considered for computing disallowance,however, the disallowance has to be computed
by taking into consideration only those shares which have yielded dividend income in the
year under consideration. [R.8D]
Disallowance u/s 14A & Rule 8D has to be made even in respect of securities that are held as
stock-in-trade by the assessee. However, the disallowance has to be computed by taking into
consideration only those shares which have yielded dividend income in the year under
consideration. (AY.2010-11)
Kalyani Barter (P) Ltd. v. ITO (2017) 163 ITD 571/154 DTR 73 /187 TTJ 352 (Kol.) (Trib.)
S. 14A : Disallowance of expenditure - Exempt income – Assessing Officer not recording

reasoning for his dissatisfaction with regard to claim of assesse. Authorities ignoring
mandate of section 14A. Disallowance was held to be not sustainable. [R.8D ]
Assessing Officer not to apply method prescribed by Rules straightaway without considering
whether claim made by assessee in respect of such expenditure is correct. Satisfaction of
Assessing Officer must be arrived at on an objective basis. Assessing Officer not following
guidelines of objective satisfaction. Assessing Officer not recording reasoning for his
dissatisfaction with regard to claim of assesse. Authorities ignoring mandate of section 14A.
Disallowance was held to be not sustainable. (AY.2009-2010)
JCIT v.J.M. Financial Services Ltd. (2017) 54 ITR 120 /186 TTJ 228 (Mum.) (Trib.)
77
S.14A : Disallowance of expenditure – Exempt income-No borrowed funds utilised for
investment— No disallowance could be made. [R.8D]
Source of investment out of grants received from Government of Karnataka or out of profits
earned by assesse. Assessing Officer failing to show direct nexus between borrowed funds and
tax-free investments, no disallowance could be made. (AY. 2008-2009, 2010-2011)
JCIT v. Karnataka State Industrial Infrastructure Development Corporation Ltd. (2017)54
ITR 425 (Bang) (Trib)
S.14A : Disallowance of expenditure-Exempt income – Satisfaction was not recorded,

disallowance cannot be made. [R.8D]
Assessing Officer has not recording satisfaction as to correctness of claim or otherwise having
regard to accounts of assessee. Disallowance was deleted. (AY.2008-09)
Addl.CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169/148 DTR 201 /184
TTJ 229 (Mum) (Trib.)
S. 14A : Disallowance of expenditure-Exempt income - Assessing Officer to consider only

those investments which yielded dividend income during previous year-,exclude investments
which were strategic investments, if own funds sufficient to cover investment, presumption
that assessee used in its own funds. [R.8D]
Assessing Officer not justified in including closing balance of investments in mutual fund while
calculating average value of dividend earning investment. Assessing Officer to consider only
those investments which yielded dividend income during previous year. Assessing Officer to
exclude investments which were strategic investments. If own funds sufficient to cover
investment, presumption that assessee used in its own funds. (AY. 2003-2004 to 2011-2012)
S. 15 : Salaries-Notice pay received from previous employers after deducting notice period
as per job agreement cannot not be taxed as salary income.
Assessee received salary from his previous employers after deducting notice period as per job
agreement with them, it was actual salary received by assessee that was taxable and amount
received as notice pay could not be taxed as salary income. (AY. 2010 – 2011)
Nandinho Rebello v. DCIT (2017) 164 ITD 440 (Ahd) (Trib.)
S.17 (2) : Perquisite - Non-employee director and shareholder - No substantial interest in

company - Foreign visits - Business purposes - Not perquisite. [S.69C]
It was held by the Tribunal that the assessee was only a director and not an employee-director.
The assessee also stated that no salary or director's fees was paid to her by the company. Hence
the said amount could not be treated as a perquisite. (AY. 2012-13)
Kinty Suri (Mrs.) v. ITO (2017) 165 ITD 301 (SMC) (Delhi) (Trib.)
S.17 (3) : Profits in lieu of salary - Amount paid to ex-employees under settlement cannot be
regarded as 'profit in lieu of salary - Not liable to deduct tax at source. [S. 15, 17 (3) (i),
133A, 192, 201 (1), 201 (IA)]
Dismissing the appeal of the revenue, the Tribunal held that ;amount paid to ex-employees under
settlement cannot be regarded as 'profit in lieu of salary' under section 17 (3) (i) and, thus,
assessee is not required to deduct tax at source while making said payment. (AY. 2009-10)
ITO v. Kuwait Airways Corporation (2017) 163 ITD 263 (Mum.) (Trib.)
78
S.22 : Income from house property-Business income-The objects clause is not
determinative. Income earned from sub – licenses is required to be taxed under the head
“Income from House Property”. [S. 27 (iii) (b),28 (i), 269UA (f)]
Dismissing the appeal pf the assessee, The Supreme Court held that to determine whether
income earned by the appellant from the shopping canter was required to be taxed under the head
business income or income from house property;analysing various sections and case laws the
Court held that; the object clause, as contained in the partnership deed, would not be the
conclusive factor. Matter has to be examined on the facts of each case as held in Sultan Bros. (P)
Ltd. case. Even otherwise, the object clause which is contained in the partnership firm is to take
the premises on rent and to sub-let. In the present case, reading of the object clause would bring
out two discernible facts. The Tribunal had specifically adverted to this issue and recorded the
finding that the assessee had not established that it was engaged in any systematic or organised
activity of providing service to the occupiers of the shops or stalls so as to constitute the
receipts from them as business income . The Tribunal being final fact finding authority and the
assessee has not shown the finding was perverse. (AY. 2000-01)
Raj Dadarkar & Associates v. ACIT (2017) 394 ITR 592/248 Taxman 1/298 CTR 117/157
DTR 225 (SC)
S. 22 : Income from house property – letting of building including charges for air
conditioning is assessable as income from house property and not as income from other
sources.[S. 32, 56 ]
Dismissing the appeal of the revenue, the court held that; the property was part of stock-in-trade
of the assessee and also that the assessee did not claim any depreciation on the air-conditioning
plant to the extent it was used for letting out the air-conditioned building. The assessee had not
claimed depreciation to that extent. Therefore, the rent receipt which also includes Air-
conditioning charges was income from house property. (AY. 1997-98)
CIT v. DLF Universal Ltd. (No.1) (2017) 398 ITR 708 (Delhi) (HC)
S. 22 : Income from house property – Compensation received for providing amenities like
security services etc which are in separable from house property is assessable as income
from house property and not as business income [ S. 28 (i) ]
Dismissing the appeal of the assessee the Tribunal held that; Compensation received for
providing amenities like security services etc which are in separable from house property is
assessable as income from house property and not as business income . (AY.2011 – 2012)
Star Gold (P.)Ltd.v. DCIT (2017) 166 ITD 471 (Mum) (Trib.)
S. 22 : Income from house property-Income from other sources-Rental income received

from lessee was to be taxed as Income from house property. [S. 24, 56]
Allowing the appeal the Tribunal held that; the assessee had let out land and building to tenant
with super structure, therefore, rental income received by it would be in nature of income from
house property therefore claim for deduction was also to be allowable. (AY. 2011 – 2012)
Premier Electrical Industries v. JCIT (2017) 162 ITD 45 (Chd.) (Trib.)
S. 23 : Income from house property —Double taxation - Lease of property to family

members at nominal rent – Family members letting the same at very higher amount –
Rental income was righty taxed in the hands of assessee, however same cannot be taxed
once gain in the hands of the family members. [ S.4, 22 ]
Dismissing the appeal of the assesse the Court held that; going by the nature of transaction, a
clear finding of fact had been arrived at by the authorities that a devise was made by the assessee
to show lower income in his hands and he purportedly entered into a lease agreement with his
79
wife, son and daughter-in-law in respect of the property letting the property to them at nominal
rates and allowing his family members to sub-let the property at much higher rents. In these
circumstances, these findings of fact could not be interfered with in appeals. Once it was found
that the income in fact belonged to the assessee, it was permissible for the Income-tax authorities
to tax the income in the hands of the assessee. At the same time, the Income-tax authorities had
taxed the same income in the hands of the wife, son and daughter-in-law of the assessee as well
who, as per the Department itself, were “wrong persons”. There would be double taxation on the
same income in the hands of two persons. It would be open to the wife, son and daughter-in-law
of the assessee to seek redressal of the taxation of income in their hands in appropriate
proceedings (AY. 1998 - 99)
Maneklal Agarwal v. Dy. CIT (2017) 396 ITR 721 /155 DTR 241/297 CTR 117/250 Taxman
94 (SC)
S. 23 : Income from house property - Annual value - let out a portion of building at lesser
rent to a related party, AO was justified to determine the annual value of the building at
the value/rent received from unrelated party. [S. 22 ]
Allowing the appeal of the revenue, the Court held that; where the assessee had let out a portion
of building on rent to a company in which he was a director at a value which was lesser than the
value/rent at which the remaining portion of the building were let out to unrelated party, the AO
was justified to determine the annual value of the building u/s. 23 (1) at the value/rent received
from unrelated party. (AY. 1996-97)
CIT v. Amina Moidu (Smt.) (2017) 292 CTR 237 (Ker.) (HC)
S. 23 : Income from house property-Annual value – Property remained vacant throughout

the year annual value will be determined notionally.[S. 22, 23 (1) (b), 23 (1) (c)]
Dismissing the appeal of the assessee, the Court held that, the annual value of the properties
which are more than one,owned by the assessee and which remained vacant throughout the
previous year would not be assessed under Section 23 (1) (c) but under Section 23 (1) (a).The
annual value would ,therefore, be determined notionally (AY. 2001-02 to 2007-08)
Susham Singla v. CIT (2017) 244 Taxman 302 /150 DTR 28 /298 CTR 204 (P&H) (HC)
Editorial : SLP of the assessee is dismissed. Susham Singla v. CIT (2017) 247 Taxman 312 (SC)
S. 23 : Income from house property - Annual value – Let out building annual value is to be
estimated [ S. 22, 23 (1) (b) ]
Allowing the appeal of the Revenue the Court held that; the annual value of the properties which
are let out by owners to firm or companies in which they are interested is to be determined by
applying the provision of section 23 (1) (b) . (AY. 1996-97)
CIT v. Dr. K.M. Mehaboob (2017) 244 Taxman 263 (Ker.) (HC)
S. 23 : Income from house property - Annual value – The Assessing Officer cannot treat a
rental income as business income without any substantial material on record – Rule of
consistency to be applied - Also, taxes paid by the landlord to the government, not
recovered from the client can be allowed as deduction from the business income even if not
deductible in S. 23. [ S. 22 ]
Rental income was reflected and assessed as income from house property for various assessment
years. However, the Assessing Officer in the year under consideration, treated it as business
income. The CIT (A) reversed the order as treated rental income as income from house property.
Further, the Assessing Officer had disallowed Service tax & cess paid by the assessee for the
rented premises since the same was not deducted from the Annual Value of the rented flat as per
the provisions of S. 23 of The Act. In appeal, the assessee submitted that though the amount of
80
service tax was not deducted from the Annual Value, it was rightly debited in the profit and loss
account. The assessee entered for lease agreements long back and there was no such clause for
payment of service tax by the tenants. The assesse also brought to the attention of the CIT (A)
that he had been regular in depositing the said tax with the government and the same was
substantiated by furnishing copies of Service tax returns. The CIT (A) allowed the deduction
from the total income. On department’s appeal to ITAT, the Hon’ble ITAT confirmed the CIT
(A) order observed that assessee has paid service tax as it was not recovered from the tenant and
filed service tax return with the Central Government. Therefore, it is a genuine expense. The
same is an allowable deduction from profits and gains. (ITA No. 445/Delhi/2015 order dt.13-10-
2017) (AY .2010 – 2011)
CIT v. Chadha Builders and Properties (2017) 59 ITR 111 (SN) (Delhi) (Trib)
S. 23 : Income from house property - Common Area Maintenance Charges and non-
occupancy charges paid by the assessee to the Society are deductible from the rent while
computing the annual letting value [ S. 22 ]
Dismissing the appeal of the revenue the Tribunal held that; Common Area Maintenance
Charges and non-occupancy charges paid by the assessee to the Society are deductible from the
rent while computing the annual letting value. (ITA No. 4776/Mum/2014, dt. 01.11.2017) (AY.
2010-11)
DCIT v. Yogen D. Sanghavi (Mum) (Trib); www.itatonline.org
S. 23 : Income from house property - Annual value – Properties under construction and
property/shop used by assessee for business purpose could not be estimated on market
value as the properties were vacant or under construction-Where the properties were let
out the AO has to take actual rent received and not on notional basis . [ S. 23 (1) (b) ]
Allowing the appeal of the assessee the Tribunal held that; where, properties under construction
and property/shop used by assessee for business purpose could not be estimated on market value
as the properties were vacant or under construction-Where the properties were let out the AO has
to take actual rent received and not on notional basis . (AY. 2010-11)
Ashok Kumar Gupta v. ITO (2017) 167 ITD 165 (Delhi) (Trib.)
S. 23 : Income from house property - Annual value – Notional interest on interest free
deposit or loan cannot be included while calculating fair rent of property - Municipal
valuation or actual rent received which ever is higher is to be taken . [ S. 22 ]
Dismissing the appeal of the revenue the Tribunal held that; Notional interest on interest free
deposit or loan cannot be included while calculating fair rent of property - Municipal valuation or
actual rent received which ever is higher is to be taken . (AY. 2010-11)
DCIT v. Gentex Merchants (P.) Ltd. (2017) 167 ITD 61 /159 DTR 73/(2018) 191 TTJ 308
(Kol) (Trib.)
S. 23 : Income from house property-Annual Value-Deemed rental value - and clubbing o

income - Matter was seta-side. [ S. 22, 64 (iv) ]
Considering the plea of the assesse that the property uninhabitable. Matter was set aside to the
AO. As regard s clubbing of income also matter was set aside to decide afresh. (AY. 2011-12)
Manish Dhirajlal Popat v. ACIT (2017) 55 ITR 71 (Mum.) (Trib.)
81
S. 23 : Income from house property – Notional interest on interest free security deposit has
to be considered. [ S. 22 ]
Dismissing the appeal of the assesse, the Tribunal held that; the interest-free security deposit
received while letting out the property should be considered. (AY. 2007 – 2008, 2009 – 2010)
Sobha Interiors (P.) Ltd. v. DCIT (2017) 162 ITD 267 (Bang.) (Trib.)
S. 23 : Income from house property--Annual letting value-Property was vacant for the
purposes of letting out, annual value to be taken at nil. [S. 22, 23 (1) (c) ]
Property let in earlier period and vacant for whole relevant year. Assessee holding property for
purpose of letting out therefore annual value of property to be taken at nil. (AY.2010-2011, 2011-
2012)
Informed Technologies India Ltd. v. DCIT (2017) 54 ITR 397 (Mum.) (Trib.)
S. 23 : Income from house property-Annual value-Vacancy allowance - Property is let in

earlier period and is found vacant for whole year under consideration, annual value of said
property would be determined u/s. 23 (1) (c). [S. 23 (1) (c)]
Allowing the appeal the Tribunal held that; as long as a property is let in earlier period and is
found vacant for whole year under consideration, subject to condition that such vacancy of
property is not for self-occupation of same by assessee, annual value of said property would be
determined u/s. 23 (1) (c)) (AY. 2010-11, 2011-12)
(Mum.) (Trib.)
S. 24 : Income from house property - Deductions - Deduction was allowable to extent

assessee was able to establish that subsequent loan was used for purpose of repayment of
earlier housing loan [ S. 24 (b) ]
Allowing the appeal the Tribunal held that; deduction was allowable to extent assessee was able
to establish that subsequent loan was used for purpose of repayment of earlier housing loan .
Matter remanded . (AY. 2005 - 06 to 2009 10)
Akulu Nagaraj Gupta Subbaraju v. ITO (2017) 167 ITD 76 (Bang) (Trib.)
S. 24 : Income from house property - Brokerage, electricity expenses, legal expenses and
bank charges are not eligible while calculating annual rental value. [S. 23]
Assessee earned rental income from house property and while calculating annual vale, claimed
expenditure towards brokerage, society charges, electricity expenses, legal expenses and bank
charges. Tribunal held that such expenditure were not permissible u/s. 23 and 24 for the purpose
of working of annual rental value. (AY. 2009 – 2010)
Ranjeet D. Vaswani v. ACIT (2017) 164 ITD 551 /187 TTJ 40 (UO) (Mum.) (Trib.)
S. 28 (i) : Business income – Income from house property - Rental income and service
charges received by Assessee Company as business income during course of business
carried out by them of operating and running Mall as commercial activity is held to be
assessable as business income.[ S. 22 ]
Dismissing the appeal of the revenue the Court held that Rental income and service charges
received by Assessee Company as business income during course of business carried out by them
of operating and running Mall as commercial activity is held to be assessable as business income
. Applied the principle laid down in Chennai Properties and Investments Ltd v. CIT (2015) 373
ITR 673 (SC)
CIT v. E-City Project Construction (P) Ltd (2017) 298 CTR 449/157 DTR 220 (Bom) (HC)
82
S. 28 (i) : Business income – Sale consideration received by builder was held to be assessable
as business income, provisions of S. 50C was held to be not applicable [ S.48, 50C ]
Dismissing the appeal of the revenue the Court held that; Sale consideration received by builder
was held to be assessable as business income, provisions of S. 50C was held to be not applicable
. (AY. 2009-10)
CIT v. Glowshine Builders & Developers (P.) Ltd. (2017) 251 Taxman 223 (Bom) (HC)
S. 28 (i) : Business income – Income from house property - Ware house charges assessable
as business income [ S. 22 ]
Dismissing the appeal of the revenue the Court held that; each case has to be looked at from a
businessman’s point of view to find out whether the letting of a property is the doing of a
business or the exploitation of the property by an owner. The concept of letting of a property by
an owner is distinct in business parlance and commercial parlance from utilising the premises
available to a person for carrying out the activity of letting of such premises to use, in the course
of its business activity, particularly warehousing. Accordingly the activities of the assesse letting
of ware house was held to be assessable as business income and not as income from house
property . (AY. 2003 - 04 to 2008 - 09)
ACIT v. Chhattisgarh State Warehousing Corporation (2017) 399 ITR 239 (Chhatigarh)
(HC)
S. 28 (i) : Business income - Capital or revenue - Non-Compete Fee — Agreement was held
to be non genuine hence assessable as business income [ S. 4 ]
Allowing the appeal of the revenue the Court held that ;the transaction of non-compete agreement
was an illusion and the non-compete agreement had to be interpreted on its own strength. As the
agreement was held to be non genuine the amount was held to be assessable as business income .
(AY. 2001-02)
CIT v. R. Radikka (2017) 397 ITR 69 (Mad.) (HC)
S. 28 (i) : Business income-Interest earned on short-term fixed deposits is assessable as

"profits and gains of business" and not as "income from other sources". [S.56]
Dismissing the appeal of revenue the Court held that ;The Tribunal records the fact that the three
fixed deposit were for a period of 1 day, 28 days and 90 days respectively. Considering the nature
of business of the assessee, the Tribunal, was of the view that the interest earned would be taxable
under the head ‘business income’. In support reliance was placed by the impugned order upon the
decision of this Court in CIT v. Indo Swiss Jewels Ltd. & another (2006) 284 ITR 389 (Bom.)
(HC). In the context of the respondent’s business and the period of fixed deposits, the Tribunal
holds the interest earned on them is taxable as business income. In fact this Court is almost
similar circumstances in Indo Swiss Jewels Ltd. (supra) has held interest earned on short term
deposits on the money kept apart for the purposes of business had to be treated as income earned
from business and could not be treated as income from other sources. Considering the short
duration in which the amounts were kept in fixed deposit awaiting use in its business operations
would necessarily mean income earned on account of business following the ratio of this Court in
Indo Swiss Jewels Ltd. (AY. 2011-12)
CIT v. Green Infra Limited (2017) 392 ITR 7 /292 CTR 233/146 DTR 262// 78 taxmann.com
340 (Bom) (HC)
83
S.28 (i) : Business-Income from house property-Main business activity of assessee consisting
of construction of different types of buildings and leasing them out, incomes will be
assessable as business income.[S.22]
Dismissing the appeal of the revenue, the Court held that the main objective of the assessee as
manifest from the partnership deed was to carry on business in construction of different types of
buildings such as godowns, residential or commercial buildings, flats and shops and lease them
out as a part of its business activity but not as exploitation of the property as an owner. The
assessee was right in showing its income under the head income from business. (AY. 2008-2009)
PCIT v. Sri Bharathi Warehousing Corporation (2017) 392 ITR 160/246 Taxman 137
(T&AP) (HC)
S.28 (i)) : Income from business - Income from other sources - Income from running of
departmental store is assessable as business income and not as income from house property
[S. 22 ]
Allowing the appeal of the assessee the Tribunal held that; income earned by assessee running a
departmental store would be assessable as business income and not income from house property
as it was not a case of exploiting property simpliciter but assessee was undertaking a set of
organized activities in support of counter holders who were executing sale and purchase of goods,
with objective of earning profits. (AY. 2006 - 07 to 2010-11)
Asiatic Stores & Soda Fountain. v. ITO (2017) 167 ITD 330 (Mum) (Trib.)
S.28 (i) : Business income - Capital gains - Amount received on sub-licencing was held to be
assessable as business income and not as capital gains [ S. 45 ]
Tribunal held that , the assessee was vested with right to use patented technology under license
agreement from its parent company and subsequent sub-licensing was only sharing of said right
without extinguishing its right to use said technology, amount received on sub-licensing had
rightly been assessed as business income. (AY. 2007 08 - 2008 - 09)
S. 28 (i) : Business income – Income from house property – Income from letting out of
property was held to be assessable as business income [ S. 22 ]
Allowing the appeal of the asessee the Tribunal held that; in terms of memorandum of
association, main object of assessee company was to acquire properties and to further let out such
properties, income earned from such letting out was to be assessed as 'business income' and not
as 'income from house property'. (AY. 2007 - 08)
Oberoi Investments (P.) Ltd. v. ACIT (2017) 167 ITD 385 (Kol) (Trib.)
S.28 (i) : Business income – Income from house property - Service charges received by
assessee by providing various services like telephone, electricity, swimming pool facilities
etc is to be assessed as business income and not as income from house property [ S. 22 ]
Dismissing the appeal of the revenue the Tribunal held that; service charges received by assessee
by providing services like telephone, electricity, swimming pool, car, furniture and fittings, gym
etc. which was in addition to rent for letting out of property, have to be assessed under head
'Income from business' and not 'income from house property. (AY. 2010-11)
84
DCIT v. Gentex Merchants (P.) Ltd. (2017) 167 ITD 61// 159 DTR 73 /(2018) 191 TTJ 308
(Kol) (Trib.)
S.28 (i) : Business income – Income from other sources - Financing being one of the object,
the interest income has to be assessed as business income [ S. 56 ]
Dismissing the appeal of the revenue the Tribunal held that; Financing being one of the object,
the interest income has to be assessed as business income, when earlier year the interest income
was assessed as business income . (AY.2009-10)
ITO v. Patel Corp. (P.) Ltd. (2017) 167 ITD 83 (Mum) (Trib.)
S.28 (i) : Business income - Rental income - Letting of building along with fittings and
fixtures was held to be assessable as business income. [S.22, 32, 56 ]
Tribunal held that; rental income earned by the assessee from lease of building would be taxable
under the head 'income from business and profession' and the Assessing Officer was directed to
grant depreciation on building while computing income from business as per law. (AY. 2009-10)
M.M. Creations v. ACIT (2017) 165 ITD 534 (Delhi) (Trib.)
S. 28 (i) : Business income – Capital gains - Frequent share transactions involved huge
amount therefore the gains as held to be assessable as business income [ S.45 ]
Tribunal held that; the assessee was buying and selling large number of shares in same year very
frequently and holding period of shares was very short, Huge amount of money were involved in
said shares transactions, therefore the AO was justified in treating profit arising out of sale of
shares as income from business. (AY.2009 - 10 )
Srinivasan Narayanasamy v. ACIT (2017)166 ITD 119 (Chennai) (Trib.)
S. 28 (i) : Business income - Composite letting of furnished flats – Assessable as business

income following the consistent view [ S.22 ]
Allowing the appeal of the assessee, the Tribunal held that though the principles of res judicata
are not applicable to income tax proceedings, but AO could not be permitted to take an
inconsistent view on basis of same set of facts which were there in earlier years. Income from
composite letting out activity had consistently been accepted and assessed by the department as
'business income' in the preceding years, therefore, the AO in the absence of any new facts
emerging during the year, adopting an inconsistent approach and assessing income under the head
Income from house property is not justified. (AY. 2009-10, 2010-11, 2011-12)
Shibani S. Bhojwani v. DCIT (2017) 166 ITD 488 (Mum) (Trib.)
S. 28 (i) : Business income - Tea Company – cess expenses on production of green leaf was
allowed before apportionment of income between tea grown and tea manufactured u/rule 8
(1).
Dismissing the appeal of the revenue the Tribunal held that; cess expenses on production of green
leaf was allowed before apportionment of income between tea grown and tea manufactured u/rule
8 (1). (AY 2003 – 04)
ITO v. Rungamattee Tea & Industries Ltd. (2017) 166 ITD 24 (Kol) (Trib.)
S. 28 (i) : Business income - Rental receipt from letting out commercial properties is
assessable as business income and not as income from house property.[S .22]
Allowing the appeal of the assessee, the Tribunal held that; rental receipt from letting out
commercial properties is assessable as business income and not as income from house property.
(AY. 201011)
85
Bharathi Ware Housing Corporation v. CIT (Appeals) (2017) 55 ITR 65 (Visakha.) (Trib.)
S. 28 (1) : Business income – Memorandum of understanding giving right of passage and all
kinds of privileges and rights to transferee is constructive transfer in favour of transferee
and the sum received is taxable as business income. [ S..2 (47)]
Tribunal held that memorandum of understanding giving right of passage and all kinds of
privileges and rights to transferee is constructive transfer in favour of transferee and the sum
received is taxable as business income. (AY. 2007-2008)
Dy. CIT v. Ramesh Batta (2017) 55 ITR 612 (Delhi) (Trib.)
S. 28 (i) : Business income-Short term capital gains - Shares were held for less than 30 days
during year assessable as business income.[S. 2 (42A, 2 (42B), 45]
Dismissing the appeal of the assesse the Tribunal held that; where the assessee had declared
income both by way of long-term capital gain and short-term capital gain arising from sale of
shares, lower authorities were not justified in treating short-term capital gain as business income
on plea that shares were held for less than 30 days during year. (AY.2008-09)
Digvijay Finlease Ltd. v.DCIT (2017) 163 ITD 431 (Ahd) (Trib.)
S. 28 (i) : Business loss – Embezzlement-Loss by embezzlement being incidental to banking

business of assessee bank, it should be allowed as deduction in year in which it was
discovered [ S. 145 ]
Allowing the appeal of the assesse the the Court held that; Loss by embezzlement being
incidental to banking business of assessee bank, it should be allowed as deduction in year in
which it was discovered . Circular No. 35D (XLVII-20) of 1965, dated 24-11-1965 was referred.
(AY. 1997-98)
J & K Bank Ltd. v. ACIT (2017) 250 Taxman 380 /298 CTR 500/157 DTR 361 (J&K) (HC)
S. 28 (i) : Business loss – Purchase and sale of shares - Assessing Officer has not brought
any evidence to show that the transaction were or false, hence disallowance of loss was held
to be not valid.
Dismissing the appeal of the revenue the Court held that; Assessing Officer has not brought any
evidence to show that the transaction were or false, hence disallowance of loss was held to be not
valid . (AY. 2003-04, 2004-05, 2006-07)
PCIT v. Rungta Properties (P.) Ltd. (2017) 249 Taxman 18 /(2018) 162 DTR 64 /403 ITR
234 (Cal.) (HC)
S. 28 (i) : Business loss - Foreign cars - not forming part of a block of assets - not granted
depreciation – Held, on sale, provision of S. 50 is not applicable – Held, loss on sale is a
business loss. [S.2 (11), 50]
The High Court held that since the foreign cars did not form part of a block of assets and,
admittedly, were not granted depreciation as depreciation was not allowable in respect of foreign
cars for the relevant period, provisions of section 50 was not applicable and the loss arising from
sale of car was to be allowed as business loss as the foreign cars were utilized in the business of
the assessee. (AY. 1999-00, 2000-01)
Madan, K. D. v. ITO (2017) 152 DTR 21/248 Taxman 157 /297 CTR 437 (Mad.) (HC)
S. 28 (i) : Business loss - Advancing loans – Companies in liquidation – Loss is allowable as

business loss - Stock in trade – Erosion in value of shares, valuation at market values is
permissible [ S. 37 (1) ]
86
Dismissing the appeal of the revenue, the Court held that; loss claimed in respect of companies
in liquidation is held to be allowable as business loss . Valuation of stock in trade at market value
due to erosion in value is held to be proper . (AY.1987-88)
CIT v. Tamilnadu Industrial Investment Corpn. Ltd. (2017) 394 ITR 255 (Mad) (HC)
S. 28 (i) : Business loss - Advances written off – Allowable as deduction [ S. 37 (1)]
Dismissing the appeal of the revenue the Tribunal held that; written off advances given in normal
course of business after taking necessary steps for recovery of same and also preferring civil suits
and criminal suits, wherever possible, same was to be allowed. (AY. 2010-11)
DCIT v. J. Thomas & Co. (P.) Ltd. (2017) 167 ITD 572 (Kol) (Trib.)
S.28 (i) : Business loss - Loss on sale of securities and bonds emanated from investments was
held to be allowable as business loss, notwithstanding fact that securities were grouped
under head 'investment' owing to prescribed format of RBI [ S.37 (1) ]
Dismissing the appeal of the revenue the Tribunal held that; Loss on sale of securities and bonds
emanated from investments which were sub-classified under 'available for sale' (AFS) category at
time of purchase, was of trading nature notwithstanding fact that securities were grouped under
head 'investment' owing to prescribed format of RBI. (AY.2009-10, 2010-11)
ACIT v. Chanasma Nagrik Sahakari Bank Ltd. (2017) 167 ITD 151 (Ahd) (Trib.)
S.28 (i) : Business loss - Loss on account of premium paid on face value of security is
required to be amortized for remaining period of maturity
Dismissing the appeal of the revenue the Tribunal held that; Assessee, co-operative bank
purchased Government securities at a price higher than their face value, loss on account of
premium paid on face value of security is required to be amortized for remaining period of
maturity. (AY.2009-10, 2010-11)
S.28 (i) : Business loss - Foreign exchange loss on forward contracts through hedging export
sales - Allowable as business loss.
Dismissing the appeal of the revenue, the Tribunal held that ;foreign exchange loss on forward
contracts through hedging export sales was held to be allowable business loss. (A.Y. 2012-13)
DCIT v. Elitecore Technologies (P.) Ltd. (2017) 165 ITD 153 /186 TTJ 1 /150 DTR 185
(Ahd.) (Trib.)
S.28 (i) : Business loss-Loss claimed by the assessee on account of mark to market losses on
account of fluctuation in foreign currency in respect of hedging forward contract is not
allowable as there was no underlying asset on the date of balance sheet . [S.43 (5)]
The assessee entered into forward contracts with banks at predetermined exchange rate of foreign
currency to safeguard its receivables from any fluctuation in foreign exchange. The assessee
instead of measuring the receivables on balance sheet date at foreign exchange rate contracted, it
measured the pending forward contracts on balance sheet date at a value of foreign currency in
the forward market. It was observed by the Tribunal that hedging forward contracts of foreign
currency cannot be 'marked to market' (MTM) on balance sheet date as already there is a
underlying asset and there is no extra outgo for settlement of the forward contract other than
already determined in the contract and thus there is no additional liability or benefit to the
assessee on the settlement date. Once there is no liability or benefit on the settlement date, there is
87
no possibility of liability or benefit to the assessee on balance sheet date also. It was held that
when the contention of the assessee that all the forward contracts were settled by way of actual
delivery through dollars received on export receivables, the assessee cannot be allowed 'mark to
market' losses on such forward contract and therefore it is not required to examine whether those
forward contract transactions were speculative in nature.In view of above facts and
circumstances, it was held that the loss claimed by the assessee on account of mark to market
losses on account of fluctuation in foreign currency in respect of hedging forward contract is not
allowable. (AY. 2009-10)
Bechtel India (P.) Ltd. v. ACIT (2017) 165 ITD 282/(2018) 162 DTR 90 (Delhi) (Trib.)
S. 28 (i) : Business loss-The loss on sale of shares of a wholly-owned subsidiary is allowable

as a business loss if the investment in the subsidiary was made for commercial purposes.
[S.37 (1)]
Allowing the appeal, the Tribunal held that;The loss on sale of shares of a wholly-owned
subsidiary is allowable as a business loss if the investment in the subsidiary was made for
commercial purposes. (ITA No. 223/Coch/2015 and 189/Coch/2016, dt. 10.1.2017) (AY. 2010-
2011 and 2011-12)
Apollo Tyres Ltd. v. ACIT (Cochin) (Trib.); www.itatonline.org
S.28 (i) : Business loss-Forward contracts on foreign exchange - Loss not a speculation loss.
Assessee making gains and loss on account of revaluation and claiming net loss is not a
speculation loss. (AY.2005-2006, 2006-2007, 2008-2009)
ACIT v. Dow Agro sciences India Private Limited (2017) 53 ITR 590 (Mum.) (Trib.)
S.28 (i) : Business loss-Expenditure for provision of liability regarding exchange rate
fluctuation was held to be revenue loss.[S.28 (i)]
The Tribunal held that the liability was incurred on account of raw material components and
hence it was revenue loss. (AY. 2004-05)
ACIT v. Timex Watches Ltd. (2017) 183 TTJ 27/145 DTR 81 (Delhi) (Trib.)
ACIT v Timex Group India Ltd (2017) 183 TTJ 27 .145 DTR 81 (Delhi) (Trib.)
S. 28 (i) : Business loss - – Amount fraudulently withdrawn from the account was held to
be allowable as business loss .
The Tribunal held that AO had not disputed this fact that there was a loss as a result of
unauthorized withdrawals made from the bank account in the course of business of the assessee
and once such was the position then such sum was eligible for deduction. (AY. 2004-05, 2005-06,
2006-07)
ACIT v Timex Group India Ltd. (2017) 183 TTJ 27 /145 DTR 81 (Delhi) (Trib.)
S.28 (i) : Business loss-Cash destroyed by fire was held to be allowable as business loss.
Allowing the appeal of the assessee, the Tribunal held that; Cash destroyed by fire was held to be
allowable as business loss. Assessing Officer could not disallow said claim without making
proper enquiries from persons from whom cash was alleged to have been received. (AY. 2010-
11)
Aparna Agency Ltd v ITO (2017) 163 ITD 511 (Kol.) (Trib.)
S. 28 (i) : Business loss-Co-operative bank-loss incurred on shifting securities from

'Available for sale' (AFS) category to 'Held to Maturity' (HTM) category is not allowable as
business loss
88
The assesse - bank claimed loss on shifting of securities from 'Available for sale' (AFS) category
to 'Held to Maturity' (HTM) category as business loss.The AO disallowed the said loss.
Dismissing the appeal of the assessee,the Tribunal affirmed the view of the AO. (AY.2009-10)
Hindustan Co-operative Bank Ltd. v. JCIT (2017) 162 ITD 434 (Mum.) (Trib.)
S.28 (i) : Business loss-Forward exchange contracts – Losses incurred on account of

entering with banks for purpose of hedging loss in connection with its import/export
business was held to be allowable as business loss. [S.43 (5)]
Assessee was in business of export of rice and agricommodities and it entered into forward
exchange contracts with its bankers to hedge possible fluctuation in foreign currency. Loss was
claimed as business loss.AO held that forward contracts entered were in nature of speculative
transactions therefore he rejected the same, further observed that loss incurred was a marked to
market (MTM) losses, which was in nature of notional loss and could not be allowed as
deductions. CIT (A) held that loss was allowable as business loss. On appeal by the revenue,
dismissing the appeal the ITAT held that when the foreign exchange loss incurred on account of
entering into forward contracts with banks for purpose of hedging loss in connection with its
import/export business it had to be a business loss. (AY. 2009 – 2010)
ACIT v. Sri Ramalingeswara Rice & Oil Mill (2017) 162 ITD 696 (Visakha) (Trib.)
S.28 (1) : Business loss-Chit fund - If subscriber incur the loss and if the amount was utilsed
for the purpose of business, the same is allowable as business loss. [S. 37 (1)]
Allowing the appeal of the assessee the Tribunal held that; in case amount of chit fund money is
utilized for the purpose of business, if any loss incurred out of the same is allowable as business
expenditure. (AY. 2004-05)
Kamal Raheja v. ITO 2017) 162 ITD 55 183 TTJ 538 /145 DTR 225 (SMC) (Luck.) (Trib.)
S. 28 (i : Business loss – Foreign exchange fluctuation loss on account of export proceeds

lying in EEFC account based on RBI guidelines, is allowable as revenue loss. [ S. 37 (1) ]
The Tribunal, relying on the decision of the Hon’ble Supreme Court in the case of Woodward
Governor India (P.) Ltd. (2009) 312 ITR 254, (SC) allowed the foreign exchange fluctuation loss
as revenue loss. ( (AY. 2008-09)
Thermodyne Technologies Private Limited v. ACIT (2017) 58 ITR 20 (Chennai) (Trib.)
S.28 (1) : Business loss - Fenders which were reflected as a ‘Fixed asset in the ‘Balance sheet
- Loss was not allowable as business loss.
Tribunal held that the assessee had failed to place on record any material which could go to
substantiate its claim that the fenders were purchased pursuant to orders placed on it by a
shipping company, which orders could not fructify for the reason that by the time the fenders
were received the vessels had already left the docks, and held that the fenders were purchased by
the assessee with a predetermined intent of commercially exploiting the same and deriving
income therefrom. As a result the appeal of the assesee was dismissed (AY. 2009-10)
International Ships Stores Suppliers v. JCIT (2017)162 ITD 73/183 TTJ 161/145 DTR 1
(Mum.) (Trib.)
S. 28 (i) : Business loss-Share trading and future and option losses-loss on derivatives being
future option loss on transactions entered on NSE, he would be entitled to set off same
against profit on sale of property. [S. 22]
Dismissing the appeal of the revenue, the Tribunal held that; loss on derivatives being future
option loss on transactions entered on NSE, assesse would be entitled to set off same against
profit on sale of property. (AY. 2007 – 08)
89
ITO v. PKS Holdings (2017) 162 ITD 1/152 DTR 215 /187 TTJ 60 (Kol.) (Trib.)
S. 28 (i) : Business loss-Trading-Fenders were purchased which was reflected as capital

asset in books of account, loss on sale of fenders was held to be not allowable as business
loss.
Dismissing the appeal of the revenue, the Tribunal held that; Fenders were purchased which was
reflected as capital asset in books of account, loss on sale of fenders was held to be not allowable
as business loss. (AY. 2009 – 2010)
International Ships Stores Suppliers v. JCIT (2017) 162 ITD 73 /183 TTJ 161/145 DTR 1
(Mum.) (Trib.)
S. 28 (i) : Business loss-Chit fund business-If a subscriber incurs loss in subscribing to chit
fund to raise funds to use them in his business or for business purpose, such a loss is an
allowable deduction.
Allowing the appeal the Tribunal held that; If a subscriber incurs loss in subscribing to chit fund
to raise funds to use them in his business or for business purpose, such a loss is an allowable
deduction. Referred,CBDT instruction No.1175 under order F. No. 169/21/78-IT (80) dated
May16, 1978. (AY. 2004-05)
Kamal Raheja v. ITO (2017) 162 ITD 55 /183 TTJ 538 /145 DTR 225 (SMC) (Luck) (Trib.)
S. 28 (iv) : Business income - Value of any benefit or perquisites - Converted in to money or

not – Only fact that the assessee attended annual day celebrations and addressed to
employees of the Company which gifted a villa to the assessee in Dubai does not amount to
rendering of professional services or carrying out brand endorsement activities and hence
the value of villa cannot be brought to tax u/s. 28 (iv) [S.. 28 (iv)]
Assessee, an actor by profession received a villa as simple unilateral gratuitous act of gift from
‘N’ a friend of the assessee and Executive Director/Chairman of ‘PJSC’, a Dubai based Company
on account of love and affection towards the assessee. The AO held that PJSC was using the
assessee’s brand image which was corroborated by the fact that he attended the annual day
celebrations of PJSC and hence brought the value of the villa to tax u/s. 28 (iv). The CIT (A)
upheld the stand of the AO. On appeal, the Tribunal held that the assessee had merely addressed
the employees of PJSC at the annual day celebrations and he did not give any stage performance.
Also, the gift was offered to assessee in 2004 whereas the annual day took place in 2007 and that
the assessee was under no obligation to attend the same and undertake any sort of brand
endorsements for PJSC and hence the gift received was not taxable in the hands of the assessee
u/s. 28 (iv) . (AY. 2008-09).
Shahrukh Khan v. ACIT (2017) 189 TTJ 547/158 DTR 77/84 taxmann.com 209 (Mum)
(Trib.)
S.28 (iv) : Business income – Amalgamation-There was no business transaction in

amalgamation, surplus of assets over liability of subsidiary company resulting from said
amalgamation was not taxable .[ S.28 (i) ]
Allowing the appeal of the assesse the Tribunal held that; where 100 per cent owned subsidiary
company of assessee was amalgamated with assessee-company and there was no business
transaction in amalgamation, surplus of assets over liability of subsidiary-company resulting from
said amalgamation was not taxable . (AY. 2003-04)
Sundaram Finance Ltd. v. ACIT (2017) 165 ITD 563 (Chennai) (Trib.)
90
S.28 (iv) : Business income - Value of any benefit or perquisites - Converted in to money or
not - Concession of duty on import of capital goods conditional on certain quantum of
export, still be a concession on capital account hence cant be assessed as business income . [
S.4 ]
Dismissing the appeal of the revenue the Tribunal held that; since the concession was linked to
the import of capital goods, though conditional on fulfilling export obligation, was a concession
on the capital account. The assessee was also not allowed to use the import entitlement in any
manner other than for import of capital goods. There was no benefit or perquisite that accrued to
the assessee on account of this transaction and it did not have any component of revenue nature
and hence, the provisions of section 28 (iv) would not apply. (AY. 2001-02, 2004-05, 2006-07)
ACIT v. India Cements Ltd. (2017) 165 ITD 496 (Chennai) (Trib.)
S. 28 (iv) : Business income - Value of any benefit or perquisites - Converted in to money or
not - Part-time director as well as employee, not drawing salary - Value of rent free
accommodation was held to be not a perquisite – Value of rent free accommodation to be
determined as per guidelines of Municipal Corporation .[S. 2 (24) (iv), 17 (2), 23 (1) (a)]
Tribunal held that; the provision of section 2 (24) (iv) requires to bring the benefit of perquisites
received by a director under the net of taxes. The residual section where the perquisites value can
be determined for the purpose of taxation of rent free accommodation is section 23 (1). The next
issue arises for consideration is whether the value shall be determined as per clause (a) or clause
(b) of section 23 (1). The only clause that is now applicable is clause (a), which requires to
determine the same as per municipal guidelines. (AY. 2010-11, 2011-12)
ITO v. Raghu Nandan Modi. (2017) 165 ITD 522/159 DTR 209 /189 TTJ 454 (Kol) (Trib.)
S.31 : Repairs – Current repairs-Textile Mill-Repair or substitution of old machine is not

current repairs. [S. 37 (1)]
Allowing the appeal of the Revenue, the Court held that; when each division old textile mill
performed different functions, repair or substitution of an old machine would not come within the
definition of the word “ current repairs “ and the assesse is not entitle to deduction. (AY. 1974-
75)
CIT v. Sarangpur Cotton Mfg. Co Ltd (2017) 393 ITR 108/152 DTR 233 /295 CTR 587 /247
Taxman 94 (SC)
S. 31 : Repairs - Expenditure incurred on repair of vessels was to be allowable

Dismissing the appeal of the Revenue the Court held that; Tribunal was justified in holding that
expenditure incurred by assessee were 'current repairs' which was necessary to keep vessel in
good working condition and to keep them seaworthy. Increased expenditure did not result in an
increase of capacity of vessels or any new advantage or capital asset coming into existence.
PCIT v. Sesa Resources Ltd. (2017) 250 Taxman 182 (Bom.) (HC)
S. 31 : Repairs - Expenditure on repairs and maintenance of existing assets without creating

any new assets was held to be revenue and not capital in nature . [ S. 37 (1) ]
Tribunal held that; details of the expenditure incurred on repairs to plant and machinery, clearly
shows that no new asset has been acquired and that the expenses are on repairs of the existing
assets, for instance replacement of fencing, repair of the tile work in the administrative block,
whitewash and partition, dismantling of old damaged wall, etc. None of the items of expenses has
been show to result I acquisition of any new asset. Considered in the light of the material on
record, it is found that the CIT (A) made no mistake in holding that the expenses are in the nature
of routine repairs and not in the nature of capital. (AY. 2010-11)
91
S. 32 : Depreciation-Lessee cannot be said to be owner for claiming depreciation, however

lessee is entitled to depreciation on the cost of construction incurred by him but not on the
cost incurred by the owner and reimbursed by the lessee.
Dismissing the appeal of the assesse theCourt held that; title to immovable property cannot pass
when its value is more than Rs.100/- unless it is executed on a proper stamp paper and is also
duly registered with the sub-Registrar. Accordingly, a lessee cannot be said to be the "owner" for
purposes of claiming depreciation. Under Explanation 1 to S.. 32, the lessee is entitled to
depreciation on the cost of construction incurred by him but not on the cost incurred by the owner
and reimbursed by the lessee. (CA. No. 3360 of 2006, dt.08.03.2017) (AY.1992-93)
Mother Hospital P. Ltd. v. CIT (2017) 392 ITR 628/247 Taxman 12/149 DTR 63/294 CTR
25 (SC)
Editorial : Decision in CIT v. Mother Hospital Pvt. Ltd. (2005) 275 ITR 563 (Ker) (HC) is
affirmed.
S. 32 : Depreciation - Charitable Trust-Even if the entire expenditure incurred for

acquisition of a capital asset is treated as application of income for charitable purposes,
assesse is entitle to depreciation and entitle to carry forward. S. 11 (6) inserted by Finance
(No 2) Act, 2014 is effective from asst .year 2015-16 and it is prospective in nature . [ S.11
(1) (a) ]
Dismissing the appeal of the revenue the Court held that; even if the entire expenditure incurred
for acquisition of a capital asset is treated as application of income for charitable purposes u/s 11
(1) (a) of the Act, the assessee is also entitled to depreciation u/s 32. The argument that the grant
of depreciation amounts to giving double benefit to the assessee is not acceptable. It may also
bementioned at this stage that the legislature, realising that there was no specific provision in this
behalf in the Income Tax Act, has made amendment in Section 11 (6) of the Act vide Finance Act
No. 2/2014 which became effective from the Assessment Year 2015-2016. The Delhi High Court
has taken the view and rightly so, that the said amendment is prospective in nature.It also follows
that once assessee is allowed depreciation, he shall be entitled to carry forward the depreciation as
well. For the aforesaid reasons, we affirm the view taken by the High Courts in these cases and
dismiss these matters. (CANO. 7186 OF 2014, dt. 13.012.2017)
CIT v. Rajasthan and Gujarati Charitable Foundation Poona (2018) 402 ITR 441 /300
DTR 1/161 DTR 33 /253 taxman 165 (SC)
S. 32 : Depreciation – Cost of acquisition – For purpose of allowing depreciation in respect

of acquisition of thermal power station, actual purchase price accepted by Central
Electricity Regulatory Commission was to be regarded as basis and not value of tariff
determined under Electricity Act.
Assessee acquired a Thermal Power Station owned by State Government for a consideration of
Rs. 1,000 crores. Central Electricity Regulatory Commission accepted transfer price of Rs.
607.00 crores but for purpose of depreciation, restricted computation to Rs. 431.09 crores which
was the value of tariff under Electricity Act. Appellate Tribunal took a view that treatment for
depreciation under Act and for determination of tariff under Electricity Act were different.
Accordingly, Appellate Tribunal upheld order of Regulatory commission. Supreme Court held
that actual purchase value had to be basis for computing depreciation.
92
N.T.P.C. Ltd. v. Central Electricity Regulatory Commission (2017) 247 Taxman 97 (SC)
S. 32 : Depreciation —Shuttering part of plant and entitled to 100 per cent. matter
remanded. [ S. 260A ]
Allowing the appeal of the revenue the Court held that; whether Shuttering part of plant and
entitled to 100 per cent. Since it was a substantial question of law, it could be raised before the
High Court. Since it might involve some factual investigation, the matter was to be remanded to
the Tribunal to look into this aspect and pass a fresh order in accordance with law. Matter
remanded. (AY. 2009 - 10)
PCIT v. U.P. State Bridge Corporation Ltd. (2017) 399 ITR 546 (All) (HC)
S.32 : Depreciation - Additional depreciation - Though the control of plant and machinery
of windmill was with GEB assessee is entitle to additional depreciation . [ S.32 (1) (iia) ]
Dismissing the appeal of the revenue the Court held that ;merely because control of plant and
machinery of windmill was with GEB, it could not be said that assessee was not owner of
windmill installed and once it was established that Company established windmill /plant and
machinery, then assessee should be entitled to additional depreciation on cost of such windmill
u/s. 32 (1) (iia), not withstanding the fact that the assessee is not engaged in the business of
generation electricity (AY. 2006-07)
PCIT v. Jalaram Ceramics Ltd. (2017) 150 DTR 69 (Guj) (HC)
S.32 : Depreciation — lease — lessee is entitled to depreciation .

Dismissing the appeal of the revenue the Court held that, lessee is entitled to depreciation. (AY.
1995 - 96)
CIT v. Bhushan Steels and Strips Ltd. (2017) 398 ITR 216 (Delhi) (HC)
CIT v. Vardhaman Industries Ltd (2017) 398 ITR 216 (Delhi) (HC)
S.32 : Depreciation-Non-compete fees - Depreciation was allowed in earlier years and has
to be allowed also in current year.
In absence of any change in facts, assessee was entitled to claim depreciation on non-compete
fees. (AY.2009 - 10)
PCIT v. Zydus Wellness Ltd. (2017) 247 Taxman 397 (Guj) (HC)
S. 32 : Depreciation – Lease back of assets – Boiler – Depreciation was held to be allowable

transaction could not be termed as dubious or colourable device, but a genuine business
transaction.
Dismissing the appeal of the revenue the Court held that, leas back of assets transaction could
not be termed as dubious or colourable device, but a genuine business transaction, thus, assessee
was to be allowed depreciation on boiler. (AY. 1985-86)
CIT v. Bombay Burmah Trading Corpn. Ltd. (2017) 250 Taxman 436/(2018) 161 DTR 312
(Bom.) (HC)
S. 32 : Depreciation - Block of assets - Entitle to depreciation which formed block of assets

though assets of one unit was sold and transferred and were not put to use during the year
[ S. 2 (11) ]
Allowing the appeal of the assesse, the Court held that; assesse is Entitle to depreciation which
formed block of assets though assets of one unit was sold and transferred and were not put to use
during the year . (AY. 2005-06)
Sony India (P) Ltd. v. CIT (2017) 147 DTR 177/292 CTR 396 (Delhi) (HC)
93
S. 32 : Depreciation – Installation/UPS used as conjuction with a computer network is
entitle depreciation .
Dismissing the appeal of the revenue the Court held that Tribunal was justified in allowing
depreciation in respect of uninterrupted power supply installation/UPS used as conjuction with a
computer network.
P CIT v. Sesa Resources Ltd. (2017) 250 Taxman 182 (Bom.) (HC)
S. 32 : Depreciation - Activity of mining, mineral processing for exports, shipping and

stevedoring carried out by assessee would amount to production hence entitle to additional
depreciation.
Dismissing the appeal of the revenue the Court held that; Activity of mining, mineral processing
for exports, shipping and stevedoring carried out by assessee would amount to production hence
entitle to additional depreciation.
P CIT v. Sesa Resources Ltd. (2017) 250 Taxman 182 (Bom.) (HC)
S. 32 : Depreciation-Brand Equity — Business or commercial rights” of a similar nature

hence entitle depreciation.
That the brand equity constituted an intangible asset under section 32 (1) (ii) upon which
depreciation was liable to be granted. The Department had admitted that the brand equity of a
sum of Rs. 75 lakhs valued at Rs. 75 lakhs was an intangible right within the purview of
“business or commercial rights” of a similar nature. (AY. 2001-02)
CIT v. R. Radikka (2017) 397 ITR 69 (Mad.) (HC)
S. 32 : Depreciation - Actual cost – Customs duty paid subsequent on debonding of unit was
held to be added to actual cost [ S. 43 (1) ]
Dismissing the appeal of revenue the Court held that; Customs duty paid subsequent on
debonding of unit was held to be added to actual cost
CIT v. Jindal Polyester Ltd. (2017) 397 ITR 282 (All) (HC)
S. 32 : Depreciation - Ownership of asset was not established - Depreciation was held to be

not allowable .
Dismissing the appeal the Court held that, the ownership of asset was not established, hence the
depreciation was held to be not allowable . (AY. 2008-09, 2009-10, 2010-11)
Chintels India Ltd v. Dy. CIT (2017) 397 ITR 416/249 Taxman 630 /297 CTR 574 /156 DTR
317 (Delhi.) (HC)
S. 32 : Depreciation – Set off of unabsorbed depreciation – Allowed to be carried forward.

[S. 32 (2)]
Tribunal has followed General Motors India Pvt.Ltd. v. Dy.CIT (2013) 354 ITR244 (Guj.) (HC),
where in it was held that the unabsorbed depreciation for the assessment year 1997-98 up to the
assessment year 2001-02 could be allowed to be set off if it was still unabsorbed on April 1, 2001
and would be dealt with in accordance with the provisions of section 32 (2) as amended by
the Finance Act, 2001 . Nothing had been shown to indicate why the decision should not be
followed. No question of law arose. (AY. 2006 - 07)
CIT v. Hindustan Unilever Ltd. (2016) 72 taxmann.com 325 /(2017) 394 ITR 73 (Bom.)
(HC)
S. 32 : Depreciation – Additional depreciation - In term of section 32 (1) (iia), assessee can

claim balance additional depression in assessment year which follows assessment year in
which machinery has been bought and used for less than 180 days. [ S. 32 (1) (iia) ]
94
High Court held that, plain language of section 32 (1) (iia) read along with the relevant proviso
brings one to the conclusion that there is no limitation placed on the assessee claiming the balance
of additional depreciation in the succeeding assessment year. Further, an amendment has been
made to remove any doubt w.e.f. 1.4.2016 which is clarificatory in nature and therefore, would
not apply prospectively. (AY .2011-12)
CIT v. Shri T. P. Textiles (P.) Ltd. (2017)394 ITR 483 /246 Taxman 324 (Mad.) (HC)
S. 32 : Depreciation – Balance allowance is allowable only in case of machinery or plant in

respect to assets of an undertaking engaged in generation or distribution of power. [S. 32
(1), 32 (1) (iii)]
Allowing the appeal of the revenue, the Court held that; S. 32 (1) (iii) of the Act would apply
only in the case of machinery or plant in respect of which depreciation was claimed and allowed
under section32 (1) (i) of the Act. S.32 (1) (i) related to assets of an undertaking engaged in
generation or distribution of power. Since, the assessee was not engaged in generation and for
distribution of power during the relevant year, the provisions of section 32 (1) (i) would not apply
in respect of the assets claimed to have become unusable and written off. The assessee was not
entitled to depreciation under section 32 (1) (iii) .Order of AO was confirmed . (AY. 2005 - 06)
CIT v. Brawn Pharmaceuticals Ltd. (2017) 394 ITR 478 /248 Taxman 285/152 DTR 17
(Delhi) (HC)
S. 32 : Depreciation - Plant - Mineral Oil Well constitutes Plant.

Allowing the appeal of the assesse the Court held that ;Mineral Oil Well constitutes Plant and not
building . (AY. 1998-99)
Niko Resources Ltd v. ACIT (2017) 395 ITR 301 /157 DTR 105 /299 CTR 411 (Guj) (HC)
S. 32 : Depreciation - Good will – Depreciation was held to be allowable .

Dismissing the appeal of the revenue the Court held that; the depreciation on good will is
allowable . Followed CIT v.Smifs Securities Ltd. (2012) 348 ITR 302 (SC) (AY. 2000-01)
CIT v. Aditya Birla Nuvo (2017) 246 Taxman 202 (Bom.) (HC)
S. 32 : Depreciation - Merely because functioning of Jetty was done by using a conveyor

belt, same would not convert a Jetty into a plant; Temporary jetty/loading platform was
eligible for 100 per cent depreciation [ S. 43 (3) ]
High court held that; even, if, the functional test was employed, the main function of a Jetty, in
the facts of the instant case, was to provide a passage or, a platform to ferry articles onto the
concerned vessels and this could have been done manually. Thus the HC concluded that if it was
done by using a conveyor belt, it would not, convert a Jetty into a plant. However Jetty in
question, being a temporary structure was eligible for 100 percent depreciation. (AY. 2005-06)
CIT v.Anand Transport (2017) 396 ITR 204 /246 Taxman 390 /152 DTR 187 (Mad.) (HC)
S.32 : Depreciation-Additional depreciation-Acquisition of machinery in previous year and

installation during assessment year-Assessee entitled to additional depreciation at 20 per
cent.[S. 32 (1) (iia)]
Held, dismissing the appeal of the revenue the Court held that; The purpose and object of
granting additional depreciation under section 32 (1) (iia) was to encourage industries and to give
a boost to the manufacturing sector by permitting the assessees setting up new undertakings or
installation of new plant and machinery an additional depreciation allowance. Thus, the provision
of section 32 (1) (iia) was required to be interpreted reasonably and purposively as the strict and
literal reading of section 32 (1) (iia) would lead to an absurd result denying the additional
depreciation to the assessee though the assessee had installed new plant and machinery. No
question of law arose. (AY. 2006-2007)
95
PCIT v. IDMC Ltd. (2017) 393 ITR 441/246 Taxman 6 (Guj.) (HC)
S. 32 : Depreciation--Additional depreciation—leasing - Additional depreciation is

allowable - Lessee using machinery in double shift and not assesse. Assessee entitled to extra
shift allowance of depreciation.[S. 32 (1) (iia)]
Court held that for claiming additional depreciation under section 32 (1) (iia), there was no
requirement that the plant and machinery must be installed and used by the assessee for
manufacture of articles or things. Therefore, the additional depreciation claimed by the assessee
was allowable. Lessee using machinery in double shift and not assesse. .Assessee entitled to extra
shift allowance of depreciation. (AY. 1986-1987)
CIT v. Industrial Credit and Investment Corporation of India Ltd. (2007) 393 ITR 298
(Bom.) (HC)
S. 32 : Depreciation – Lease of hotel premises – Lessee is entitle to depreciation.

Dismissing the appeal of the revenue, the Court held that ;where the lessee was given an option to
purchase the leased property on expiry of three years from the commencement of the lease, the
lessee was entitled to depreciation on such leasehold property. Followed, Mysore Minerals Ltd. v.
CIT (1999) 156 CTR 1 (SC). (AY. 1994-95)
CIT v. Bhushan Steels & Strips Ltd. (2017) 146 DTR 169 (Delhi) (HC)
S. 32 : Depreciation - Carry forward deficit of earlier years - Entitle to claim the

depreciation and also allowed to set off carry forward deficit of earlier years. [S.11]
Dismissing the appeal of the revenue, the Court held that; an education trust could claim
depreciation on assets acquired for purpose of carrying out charitable activities and also carry
forward deficit of earlier years and set it off against income of current year. (AY. 2007-08)
DIT v. Mumbai Education Trust (2017) 244 Taxman 163 (Bom.) (HC)
S. 32 : Depreciation-Ownership of asset - Toll roads not owned by assessee - Order of

Appellate Tribunal directing Assessing Officer to grant depreciation on toll roads was held
to be not proper.
Held, the Appellate Tribunal was not right in granting depreciation on assets not owned by the
assessee treating the toll roads as plant and machinery. (AY. 2007-2008)
CIT v. West Gujarat Expressway Ltd. (No.1) (2017) 390 ITR 398 (Bom.) (HC)
S. 32 : Depreciation-Building constructed solely for manufacture of medicine - Factory

building a plant-Entitled to depreciation at 25%.
Held, allowing the appeal, that in view of the finding of the Assessing Officer that the factory
building was a plant of the assessee and qualified for depreciation at 25% for the previous two
assessment years, 1997-98 and 1998-99, and applying the functional test, the building which was
constructed solely for the manufacturing of medicine was a "plant" and was entitled to higher
depreciation at the rate of 25%. (AY. 1999-2000)
Cachet Pharmaceuticals P. Ltd v. CIT (2017) 390 ITR 466 (Patna) (HC)
S. 32 : Depreciation-Ownership of asset-Leased premises - Non-registration of lease

agreement-Does not negate entitlement to continue in possession in part performance of
agreement to sell - Assessee entitled to claim depreciation. [Transfer of Property Act, 1882,
S.53A]
96
Non-registration of the agreement did not imply that the benefit otherwise available under section
53A of the Transfer of Property Act, 1882 of being entitled to continue in possession in part
performance of an agreement to sell, was to be denied. (AY. 1994-1995)
CIT v. Bhushan Steels and Strips Ltd (2017) 390 ITR 485 (Delhi) (HC)
S. 32 : Depreciation - Plant - Truck terminus charging parking fees - Plant entitled to

higher rate of depreciation at 25%.[S.43]
Held, the truck terminus was spread across 27 bighas of land. The trucks were parked in the truck
terminus for which parking fee was collected by the assessee and in order to encourage the truck
drivers to park their vehicles in the truck terminus, resting and toilet facilities were provided in
the appurtenant building in the truck terminus. The definition of the term plant is of wide
magnitude and when it was clear enough that the buildings were not let out by the assessee to
earn rent, the parking fee income generated by the truck terminus could not be attributed to the
building which housed the resting quarters and the toilet facility, for the truck drivers. The truck
terminus was a plant and not building, for the purpose of claiming depreciation under section 32
read with section 43. Consequently the assessee was held entitled to depreciation at the rate of
25% as prescribed for plant and not at 10%, as applicable for building. (AY.2004-2005)
Guwahati Metropolitan Development Authority v. CIT (2017) 390 ITR 137/291 CTR 297
/77 taxmann.com 116 (Gauhati) (HC)
S. 32 : Depreciation-User of asset-Not necessary that all items falling within plant and
machinery should be simultaneously used - Finding that assets used for business-Assessee
entitled to depreciation.
Once the factory building was put to use, it was not possible to restrict the depreciation on the
building on the ground that only a portion thereof was put to use. In relation to block of assets, it
was not possible to segregate items falling within the block for the purposes of granting
depreciation or restricting the claim thereof. Once it was found that the assets were used for
business, it was not necessary that all the items falling within plant and machinery have to be
simultaneously used for being entitled to depreciation. Therefore, the Tribunal was not right in
disallowing the depreciation.
Nirma Credit and Capital Ltd. v. ACIT (2017) 390 ITR 302 (Guj.) (HC)
S. 32 : Depreciation – User of assets - Manufacturing activity was stopped on account of

stay from Court and commenced after litigation was over, depreciation was held to be
allowable .
Assessing Officer disallowed the depreciation on the ground that, no business activities were
carried on during the relevant year . On appeal the Tribunal held that; Manufacturing activity
was stopped on account of stay from Court and commenced after litigation was over, depreciation
was held to be allowable . (AY. 2009-10)
Babul Products (P.) Ltd. v. ACIT (2017) 167 ITD 402 (Ahd) (Trib.)
S. 32 : Depreciation - 'Visicooler' was installed by manufacturer of cold drink, at
distributor's or retailer's premises was entitle to additional depreciation [ S. 32 (1) (iia), 43
(3) ]
Dismissing the appeal of the revenue the Tribunal held that; 'Visicooler' installed by
manufacturer of cold drink, at distributor's or retailer's premises so as to ensure that cold drink
served chilled to ultimate consumer, same would tantamount to usage of 'visicooler' for purpose
of business and, thus, additional depreciation was to be allowed . (AY. 2010-11)
97
DCIT v. Bengal Beverages (P.) Ltd. (2017) 167 ITD 393 (Kol) (Trib.)
S. 32 : Depreciation - Generation of electricity – Eligible additional depreciation .[ S. 32

(iia).
Allowing the appeal of the assessee; business of generation of electricity by harnessing wind
energy and electricity so generated was an article or thing within meaning of section 32 (1) (iia),
claim made by assessee on account of additional depreciation was allowable. (AY. 2007 - 08,
2011-12, 2012-13)
Wind World India Infrastructure (P.) Ltd. v. PCIT (2017) 167 ITD 438 (Mum) (Trib.)
S.32 : Depreciation - Property held for charitable purposes – Claim of depreciation on

capital assets of the charitable trust is allowable .[ S.11]
Tribunal followed the decision of coordinated bench in the case of Moogambigai Charitable and
Education Trust vs. ADIT (E) (ITA No. 1224/Bang/2015) wherein it was held that depreciation
depreciation on capital assets of the charitable trust is allowable for determining the quantum of
funds which have to be applied in terms of section 11 of the Act thereby dismissing the claim of
the department. (AY. 2011-12, 2012-13)
ACIT (E) v. G.R. Education Trust (R) (2017)

59 ITR 37 (SN) (Bang) (Trib.)
S. 32 : Depreciation – Additional depreciation - Activity of drying and threshing of tobacco

leaves was held to be manufacture hence entitle for additional depreciation.[ S.32 (iia) ]
Dismissing the appeal of the revenue the Tribunal held that; the activity of drying and threshing
of tobacco leaves amounts to manufacture, which is eligible for additional depreciation. (AY
.2009-10)
DCIT v. Maddi Lakshmaiah & Co. Ltd. (2017) 166 ITD 69 (Visakha) (Trib.)
S. 32 : Depreciation – Infrastructure facility - Right to collect toll is an intangible asset

hence eligible depreciation [ S. 32 (1) (ii) ] .
Tribunal held that the right to collect toll granted to the assesse in consideration of developing,
constructing and maintaining the infrastructure facility i.e. road and transferring the same to the
state Government free of charge after the specified period is an intangible asset eligible for
depreciation under section 32 (1) (ii) of the Act. (AY. 2006 - 07 to 2010-11)
Ashoka Infrastructure Ltd. v.ACIT (2017) 189 TTJ 749 /(2018) 163 DTR 321 (Pune) (Trib.)
S. 32 : Depreciation - Non-compete fee - Matter was seta side to decide accordance with law
.
Tribunal held that; the AO should consider whether the verdict in Sharp Business System v CIT
(Delhi) (HC), that non-compete rights are not intangible assets for depreciation can apply to a
case where there is no joint venture between the person paying the non-competition fee and the
recipient and both parties are outsiders. Law laid down in Nat Steel Equipment’s v. CCE AIR
1988 SC 631 on the meaning of the term "similar" to be considered.. (ITA No. 3661/Del/2013, dt.
22.09.2017) (AY.2009-10)
98
DCIT v. Caparo Engineering India P. Ltd. (Delhi) (Trib); www.itatonline.org
S. 32 : Depreciation – landscape expenses incurred on leasehold land to level uneven land

for construction of factory building had to be included in the block of building and
depreciation ought to be granted. [ S. 2 (11)]
Landscape expenses incurred on leasehold land to level uneven land for construction of factory
building since capital in nature ought to be added to the block of building and depreciation @
10% to be granted on the same (AY. 2007-08).
Sicpa India (P.) Ltd. v. DCIT (2017) 186 TTJ 289 (Kol. (Trib.)
S. 32 : Depreciation – landscape expenses incurred on leasehold land to level uneven land

for construction of factory building had to be included in the block of building and
depreciation ought to be granted. [ S. 2 (11)]
Landscape expenses incurred on leasehold land to level uneven land for construction of factory
building since capital in nature ought to be added to the block of building and depreciation @
10% to be granted on the same (AY. 2007-08).
S. 32 : Depreciation – Generation of electricity is akin to manufacture entitled to claim

additional depreciation [S. 32 (1) (iia)]
The generation of electricity is akin to manufacture and hence the assessee is entitled to claim
additional depreciation on windmill. (AY. 2007-08)
Sanwaria Agroils Ltd. v. ACIT (2017) 189 TTJ 337 /165 ITD 604 (Indore) (Trib.)
S. 32 : Depreciation - Written down value – Slump price – Tangible and intangible - If the
allocation is done in a systematic manner by an independent valuer and there is no fallacy,
the AO is bound by the allocation. Depreciation cannot be disallowed in respect of part of
the block of assets . [ S. 2 (11),2 (42C), 43 (6), 50]
Tribunal held that; The slump price paid to acquire a business has to be bifurcated between
tangible and intangible assets for purposes of allowing depreciation. If the allocation is done in a
systematic manner by an independent valuer and there is no fallacy, the AO is bound by the
allocation. If an asset forms part of the block of assets and depreciation is allowed, it loses its
identity and depreciation cannot be denied in a later year. (ITA No.
1507/Pune/2012.dt.12.12.2017) (AY. 2004-05)
Johnson Matthey Chemicals India Pvt. Ltd.v. DCIT (Pune) (Trib); www.itatonline.org
S. 32 : Depreciation - Computer peripherals - UPS system/inverter is part of computer

system hence eligible for depreciation at rate of 60 per cent.
Dismissing the appeal of the revenue the Tribunal held that ;Computer peripherals such as UPS
system/inverter are essentially part of computer system and computer in modern age cannot work
independently without these basic peripherals hence, UPS/Inverters/Printers are eligible for
depreciation at rate of 60 per cent. (AY .2006 - 2007 to 2008 – 2009)
DCIT v. OCHOA Laboratories Ltd (2017) 166 ITD 508 /189 TTJ 839/158 DTR 129 (Delhi)
(Trib.)
99
S. 32 : Depreciation - Additional depreciation – Asset purchased and installed after 30-09-
2010 – AO allowed 50% of additional depreciation of 20% - Balance additional depreciation
of 10% to be allowed in subsequent year. [ S. 32 (1) (iia)
The Tribunal held that the assessee had purchased and installed the new plant and machinery
duringthe year after September 30, 2010. The Assessing Officer directed toallow balance
additional depreciation to the assessee being 50 % of 20 % of the costof new plant and machinery
installed by the assessee during the preceding assessmentyear after September 30, 2010 as had
been allowed to the assessee in the precedingassessment year i.e. the assessment year 2011-12.
(AY. 2012-13)
Commercial Engineers and Body Builders Co. Ltd. v. DCIT (2017) 57 ITR 567 (Luck)
(Trib)
S. 32 : Depreciation – Assets used as tool for carrying out charitable object of institution is
not entitle to depreciation . [ S. 11, 12AA ]
The assessee, a charitable institution not carrying out any business or profession claimed
depreciation in respect of assets used as tool for carrying out charitable object of institution.
Tribunal held that the assesse is not entitled to claim depreciation. The commercial principle of
computing the total income or the customary practice of computing business cannot override
specific provision of the Act. (AY. 2010-11).
Music Academy Madras .v. DDIT (2017)56 ITR 301 (Chennai) (Trib.)
S. 32 : Depreciation – Additional depreciation - Machinery installed in the second half of

the preceding year on which 50% of the additional depreciation was allowed – the assessee
cannot claim the balance 50% of the additional depreciation in the subsequent year.
Deprecation on UPS equipment is to be allowed at the rate of 60%.
Machinery installed in the second half of the preceding year on which 50% of the additional
depreciation was allowed – the assessee cannot claim the balance 50% of the additional
depreciation in the subsequent year. Deprecation on UPS equipment is to be allowed at the rate
of 60%. (AY. 2007-08 to 2011-12)
Brakes India Ltd .v. DCIT (2017) 56 ITR 341 (Chennai) (Trib.)
S.32 : Depreciation - Depreciation is allowable on plant and machinery even if the factory of
the assessee is closed due to some reason.
Dismissing the appeal of the revenue the Tribunal held that ;Depreciation is allowable on plant
and machinery even if the factory of the assessee is closed due to any reason. followed, CIT v.
Lakshmiji Sugar Mills Ltd. (2012) 20 taxmann.com 41 (Delhi) (HC). (AY. 2000-01)
Rajasthan Explosives & Chemicals Ltd. v. JCIT (2017) 57 ITR 143 (Jaipur) (Trib)
S. 32 : Depreciation - Additional depreciation is held to be allowable even in second and

subsequent year. [S. 32 (1) (iia)]
The Tribunal held that only condition imposed by section 32 (1) (iia) is that the plant and
machinery must be new at the time of installation to be eligible for additional depreciation. The
condition for allowing additional depreciation only in the initial year ceased to exist, therefore the
additional depreciation even in the second and subsequent years have to be allowed on the
original cost of the asset. (AY. 2007-08)
S. 32 : Depreciation-Unabsorbed depreciation of the EOU which is eligible for deduction

under section 10B can be set off against the profits on non-eligible unit. [S.10B, 70]
100
The Tribunal held that provisions of section 10B have to be regarded as deduction provision,
therefore unabsorbed depreciation of the EOU which is eligible for deduction under section 10B
can be set off against the profits on non-eligible unit. (AY. 2007-08)
S. 32 : Depreciation – Block - Entire block of assets was not put to use for business purposes
during the period hence depreciation was held to be not allowable.[S.2 (11)]
Assessee claimed depreciation on its block of assets consisting of its single manufacturing unit.
Said unit was lying closed since 2005 and, thus, entire block of assets was not put to use for
business purposes. Held that depreciation claimed was not allowable. (AY. 2010 – 2011)
DCIT v. Ashik Wollen Mills Ltd. (2017) 164 ITD 331/56 ITR 184 (Mum.) (Trib.)
S. 32 : Depreciation-Additional depreciation - Windmill - Production of electricity eligible

additional depreciation.
Dismissing the appeal of the revenue, the Tribunal held that; even prior to the amendment
brought in by the Finance Act, 2012, the assessees engaged in generation or generation and
distribution of electricity were held eligible for additional depreciation. The said amendment
cannot be read to negate the settled legal position that generation of electricity is akin to
manufacture or production of an article or thing. As held by Coordinate Bench in CIT v. M.
Satishkumar [2013] 33 taxmann.com 396 (Chennai) (Trib.) the said amendment by the Finance
Act, 2012 gives an impetus to the view that generation of electricity is a manufacturing process.
Therefore, the assessee is held entitled to the additional claim of depreciation on the power plant
and the windmill installed during the year. (AY. 2008-09,2009-2010)
ACIT v. Mangalam Cement Ltd. (2017) 55 ITR651/148 DTR 329 (Jaipur) (Trib.)
S.32 : Depreciation – Carry forward and set off – Entitled to Carry forward and set off
against profits and gains without any limit whatsoever.
Held relying on decision of General Motors 354 ITR 244 (Guj HC) that any unabsorbed
depreciation available to an assessee on 01st April 2002 will be dealt with in accordance with the
provisions of section 32 (2) as amended by the 2001 Act. Circular No. 14 of 2001 clarified that
the restriction of 8 years has been dispensed with. (AY. 2010-11)
ITO v. Schott Glass India Pvt. Ltd. (2017) 55 ITR 28 (SN) (Mum.) (Trib.)
S.32 : Depreciation – Carry forward and set off – Assessee entitled to Carry forward and set
off against profits and gains without any limit whatsoever.
Held relying on decision of General Motors 354 ITR 244 (Guj HC) that any unabsorbed
depreciation available to an assessee on 01st April 2002 will be dealt with in accordance with the
provisions of section 32 (2) as amended by the 2001 Act. Circular No. 14 of 2001 clarified that
the restriction of 8 years has been dispensed with. (AY. 2006-07)
Petrofils Co-Operative Ltd. v. ACIT (2017) 55 ITR 22 (SN) (Ahd.) (Trib.)
S.32 : Depreciation - Generation of electricity by windmills amounts to production of an

article or thing and, entitle for additional depreciation on purchase of windmills.[S. 32 (1)
(iia)]
Allowing the appeal of the asessee the Tribunal held that generation of electricity by windmills
amounts to production of an article or thing and, therefore, assessee's claim for additional
depreciation on purchase of windmills under section 32 (1) (iia) was to be allowed. (AY. 2011-
12, 2012-13)
Giriraj Enterprises v.CIT (2017) 163 ITD 1 /57 ITR 159 /149 DTR 95/186 TTJ 146 (TM)
(Pune) (Trib.)
101
S.32 : Depreciation – Put to use-Trial run without generation of electricity – Depreciation
was held to be not allowable.
Assessee claimed depreciation on new windmill purchased during relevant year on the basis of
trail run production and though no commercial production was produced . AO disallowed the
claim . On appeal tribunal held that the claim based on trial production was without any basis
hence disallowance was confirmed. (AY 2010 – 2011)
G. Shoes Exports v.ACIT (2017) 162 ITD 619 (Mum.) (Trib.)
S.32 : Depreciation-Company engaged in business of carrying passengers in buses on

licenced routes, was entitled to claim depreciation on buses at higher rate of 30 per cent.
Allowing the appeal of the assessee, the Tribunal held that the, assessee-company engaged in
business of carrying passengers in buses on licenced routes, was entitled to claim depreciation on
buses at higher rate of 30 per cent. (AY. 2008-09 to 2012 - 2013)
Dabwali Transport Co. Ltd. v. DCIT (2017) 163 ITD 579 (Asr.) (Trib.)
S. 32 : Depreciation-Intangible assets-Bombay Stock Exchange and National Stock

Exchange membership cards is entitled to depreciation.
Bombay Stock Exchange and National Stock Exchange membership cards is entitled to
depreciation. (AY.2009-2010)
JCIT v.J.M. Financial Services Ltd (2017) 54 ITR 120/186 TTJ 228 (Mum.) (Trib.)
S. 32 : Depreciation-Intangible assets-slum purchase of a business right to use distribution

network did not result in creation of any intangible asset hence not eligible for depreciation.
Dismissing the appeal of the assesse the Tribunal held that; right to use distribution network did
not result in creation of any intangible asset hence not eligible depreciation. (AY. 2006 – 07)
Sanyo BPL (P.) Ltd. v. Dy.CIT (2017) 162 ITD 176 /185 TTJ 227 (Bang.) (Trib.)
S.32 : Depreciation-Airport operator-Upfront fee for development and modernise airport

and collect charges was held to be intangible asset and entitle depreciation.
Payment for licence to develop and modernise airport and collect charges is intangible asset and
is entitled to depreciation. (AY.2008-09)
Addl.CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169/148 DTR 201 (Mum.)
(Trib.)
S.32 : Depreciation - Airport operator - Taxiways and aprons - Depreciation is allowable at

15%.
Depreciation on taxiways and aprons is allowable at fifteen per cent. (AY.2008-09)
Addl.CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169/148 DTR 201 (Mum.)
(Trib.)
S.32 : Depreciation-Additional depreciation-Claimed in the subsequent year when the plant

and machinery was put to use was held to be allowable.[S. 32 (1) (iii)]
Assessee claimed balance additional depreciation in subsequent year not claimed in year
acquiring and installing plant and machinery as the plant and machinery being put to use for a
period less than 180 days. Additional depreciation was held to be allowable. (AY. 2003-2004 to
2011-2012)
S. 32 : Depreciation – Computer accessories and peripherals form an integral part of the

computer system is entitle to 60 percent depreciation.
102
The Tribunal held that computer accessories and peripherals form an integral part of the computer
system and the same cannot be used without computer and they are entitled to depreciation at the
higher rate of 60 per cent. (AY. 2005-06,2006-07)
ACIT v. Timex Group India Ltd. (2017) 183 TTJ 27/145 DTR 81 (Delhi) (Trib.)
ACIT v. Timex Watches Ltd (2017) 183 TTJ 27/145 DTR 81 (Delhi) (Trib.)
S. 32 : Depreciation-Additional depreciation – Cutting & Polishing of diamond amounts to

manufacture and eligible additional depreciation. [ S.32 (1) (iia)
The Tribunal held that cutting and polishing of diamonds amounts to manufacture eligible for
additional depreciation under section 32 (1) (iia). (AY. 2008-09)
ACIT v. D. A. Jhaveri (2017) 183 TTJ 447/148 DTR 132 (Mum.) (Trib.)
S. 32A : Investment allowance—Leasing - leasing machinery to third party for use of

machinery in manufacture is entitled to investment allowance.
leasing machinery to third party for use of machinery in manufacture is entitled to investment
allowance. (AY. 1986-1987)
CIT v. Industrial Credit and Investment Corporation of India Ltd. (2007) 393 ITR 298
(Bom.) (HC)
S 32AB : Investment Deposit Account —Entitled to deduction equal to 20 per cent. of

profits of particular unit being profits of eligible business.
Allowing the appeal the Court held that; Section 32AB of the Act was amended and the word
“eligible” was deleted by the Finance Act, 1989, with effect from April 1, 1991. Since the dispute
was with respect to the assessment year 1988-89, considering the provisions of section 32AB of
the Act prevailing at the relevant time, the assessee was entitled to the deduction under
section 32AB of the Act equal to 20 per cent. of the profit from “eligible business or profession”
(AY. 1988-89)
Harsiddh Specific Family Trust v. ACIT (2017) 395 ITR 312 /153 DTR 303 (Guj.) (HC)
S. 32AB : Investment deposit account-Interest-Cannot be considered as business income for

purposes of sections 32AB and 80HHC-Directions to Assessing Officer to pass fresh
assessment order.[S. 56,80HHC]
Allowing the appeal of the revenue, the Court held that; what sub-section (3) of section 80HHC
of the Act required was a consideration of the profits of the business as rightly computed under
the head "Profits and gains of business". It could not possibly have required consideration of the
amounts wrongly computed under the head "Profits and gains of business". There was no warrant
for knowingly including amounts under a wrong head. To insist upon an error being continued
invited the authorities and the court to endorse the error. There was nothing in law or in principle
that prohibited the authorities under the Income-tax Act, 1961, or the court from returning a
finding regarding the correct head under which the income ought to have been assessed and then
directing the Assessing Officer to pass a fresh assessment order in accordance with the finding for
all purposes.
The Court also held that; the assessee's case fell under clause (b) of sub-section (3) of section
32AB and not clause (a). Clause (b) did not provide for the profits to be computed in accordance
with the requirements of Parts II and III of Schedule VI to the Companies Act, 1956. Reading the
missing words in clause (b) would amount to re-writing the clause which was not permissible.
The Legislature in the same sub-section, provided for a particular manner of computation of
profits in the clause but not in the other must have been deemed to have intended that the profits
were to be calculated differently in those sub-clauses. Unlike as in section 80HHC the words in
103
clause (b) were not "profits of the business" as computed under the head "Profits and gains of
business", which however, made no difference. It was not necessary for the Legislature to use the
entire expression in clause (b) for sub-section (1) itself referred to the income as including
income chargeable to tax under the head "Profits and gains of business or profession". (AY.
1989-1990)
CIT v. Hero Cycles Ltd. (No.1) (2017) 393 ITR 144 /293 CTR 10/88 taxmann.com 496
(P&H) (HC)
Editorial : SLP is granted to the assessee;Hero Cycles Ltd. (No.1) v.CIT (2017) 391 ITR 344
(St.)
S. 33AB : Tea development account - Utilisation of amount with drawn from ABARD
account for purchase of computer and its ancillaries hence no disallowance can be made .[
S.28 (i) ]
Dismissing the appeal of the revenue the Tribunal held that; amount withdrawn from ABARD
account was utilised for purchase of computer and its ancillaries was held to be allowable and no
disallowance can be made. (AY. 2003-04)
ITO v. Rungamattee Tea & Industries Ltd. (2017) 166 ITD 24 (Kol.) (Trib.)
S. 33AB : Tea development account - Depreciation – Plant and machinery purchased from
amount withdrawn from NABARD account, eligible for depreciation. [ S. 32 ]
Dismissing the appeal of the revenue, the Tribunal held that; amount withdrawn from NABRD
account was utilised for purchase of machinery .Depreciation is allowable on plant and
machinery which was purchased from withdrawal NABARD amount. Such depreciation is not an
expenditure but an allowance, same is out of purview of provision of s. 33AB (6), depreciation on
plant and machinery was to be allowed. (AY. 2003 – 04)
ITO v. Rungamattee Tea & Industries Ltd. (2017) 166 ITD 24 (Kol) (Trib.)
S. 35 : Scientific research expenditure - Development of in-house research and development

facility--Assessee entitled to weighted deduction. [S.35 (2AB)].
Court held that the Appellate Tribunal rightly held that the assessee was entitled to weighted
deduction in respect of the entire expenditure incurred for the development of in-house research
and development facility in terms of section 35 (2AB). (AY .1995-1996)
CIT v. Torrent Pharmaceuticals Ltd. (2017) 393 ITR 625 (Guj.) (HC)
Editorial : SLP is granted to the Department,CIT v. Torrent Pharmaceuticals Ltd. (2017) 392
ITR 5 (St.)
S. 35 : Scientific research - Once a research facility is approved, entire expenditure so

incurred on development of R&D facility has to be allowed for weighted deduction [ S. 35
(2AB ]
Allowing the appeal of the assessee the Tribunal held that; once a research facility is approved,
entire expenditure incurred on development of R&D facility has to be allowed for weighted
deduction. S.35 (2AB) read with rule 6 does not prescribe any time-limit within which application
for approval in Form No. 3CM has to be made and once approval is granted, same would apply
till it is revoked . (AY. 2012-13)
Texmaco Rail & Engineering Ltd. v. PCIT (2017) 167 ITD 118 (Kol) (Trib.)
104
S.35 : Scientific research - Income earned from research and development centre could not
have been reduced from gross expenditure for purpose of allowing deduction under section
35 (2AB) [ S. 35 (2AB]
Receipts of research and development centre which were in nature of revenue/income being part
of total income of assessee could not have been reduced from gross expenditure of in-house
research and development centre for purpose of calculating weighted deduction under section 35
(2AB). (AY. 2007 - 08. 2008 - 09)
S. 35 : Scientific research - Assessee failed to prove that scientific research in relation to
which capital expenditure was incurred was carried on for its own business, it could not be
allowed deduction under section 35 (1) (iv) – Revision was held to be justified [ S. 263 ]
Dismissing the appeal of the assessee the Tribunal held that; - since assessee had failed to prove
that scientific research in relation to which capital expenditure was incurred was carried on for its
own business, Assessing Officer was in error while allowing deduction claimed under section 35
(1) (iv).Accordingly the revision was held to be justified . Tribunal also held that Research and
Development activities must be connected with business of assessee if it is not connected with
the assessee the said capital expenditure can not be allowed u/s 35 (1) (iv) of the Act. (AY. 2007
- 08)
SI Group India Ltd. v. CIT (2017) 167 ITD 52 (Mum) (Trib.)
S.35 : Scientific research expenditure-Donation to Institute of Life Sciences for research

project was held to be not deductible as commercial expediency of donation was not
established. [S.37 (1)]
Donation to Institute of Life Sciences for research project was held to be not deductible as
commercial expediency of donation was not established. (AY.2007-2008, 2008-2009)
Dr. Reddy's Laboratories Ltd. v. (2017) 53 ITR 285 /184 TTJ 41 (Hyd.) (Trib.)
S. 35 : Scientific research expenditure – Due to retrospective cancellation of approval,

donor's claim of deduction could not be denied.[ S. 35 (1) (ii) ]
Tribunal held that, when institution was enjoying approval on date of receipt of donation, on
retrospective cancellation of approval of concerned institution, weighted deduction claimed by
assessee in respect of donation could not be denied . (AY. 2012-13)
Deviyani Dilip Patel (Smt.) v. ITO (2017) 165 ITD 598 (Chennai) (Trib.)
S.35 : Scientific research expenditure-Weighted deduction— Merger-Post-merger

expenditure cannot be reduced.[S. 35 (2AB)].
Company merged with assessee incurring expenditure on scientific research. Post-merger all
activities of company also activities of assessee. Facility and expenditure approved by prescribed
authority. The AO disallowed the claim.Tribunal held that ;in-house research and development
facility of the assessee was approved by the prescribed authority as provided under section 35
(2AB). The expenditure approved by the prescribed authority included a sum of Rs.1054.314
lakhs on account of PPL. A copy of Form 3CL was placed on record. By virtue of merger with
effect from June 1, 2006, all the activities of the PPL were also the activities of the assessee. As
the facility and also the expenditure had already been approved by the relevant authority, post-
merger, the expenditure could not be reduced while allowing the deduction under section 35
(2AB). Therefore the deduction under section 35 (2AB) was allowable even on the expenditure
incurred on PPL after January 1, 2006 i.e. the date of its merger. (AY.2007-2008, 2008-2009)
105
Dr. Reddy's Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd.) (Trib.)
S.35 : Scientific research expenditure-Clinical trials-Entitle deduction 100% . [ S. 35 (1) (iv)

]
Assessee having research and development center but not approved by prescribed authority,
assessee is entitled to deduction under section 35 (1) and hundred per cent. (AY.2007-2008,
2008-2009)
Dr. Reddy's Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd) (Trib)
S.35 : Scientific research expenditure - Weighted deduction on gross amount and not on net
amount of expenditure. [S.35 (2AB) ]
The Tribunal held that the Tribunal has decided this issue for A.Y. 2005-06 against the assessee
and the ground of the assessee is rejected. (AY. 2005-06 & 2006-07)
Bosch Ltd. v. ACIT (2017) 183 TTJ 215/150 DTR 345 (Bang.) (Trib.)
S. 35 (2AB) : Scientific research – Existence of recognition is sufficient compliance for

claiming the deduction neither cut-off date mentioned in certificate of SIR nor date of
approval is relevant [ S.35]
Allowing the petition the Court held that; for allowing the deduction, under section 35 (2AB)
what is relevant is not date of recognition or cut-off date mentioned in certificate of DSIR or even
date of approval but existence of recognition and, therefore, extending benefit of section 35
(2AB) only from date of recognition would amount to reading more in law which is not expressly
provided. (AY. 2011-12 to 2013-14)
Maruti Suzuki India Ltd. v. UOI (2017)397 ITR 728/250 Taxman 113 /(2018) 162 DTR 316
(Delhi) (HC)
S. 35 (2AB) : Scientific research – Claim cannot be rejected only on the ground that
competent authority has failed to send intimation in Form 3CL to the department .[ S. 25,
263 ]
Dismissing the appeal of the revenue the Court held that ;merely because the competent authority
has failed to send intimation in Form 3CL to department, claim of assesse cannot be disallowed,
however the Assessing Officer failed to give finding whether the claim is capital or revenue the
matter was seta side for limited purpose of verification . (AY. 2009-10)
CIT v. Sun Pharmaceutical Industries Ltd. (2017) 250 Taxman 270 (Guj.) (HC)
S. 35 (2AB) : Scientific research - Both revenue and capital expenditure is allowable-

Remanding the matter to CIT (A) is not justified .[ S. 35 ]
Allowing the appeal of the assesse the Court held that; Both revenue and capital expenditure is
allowable. Since, the legislative intent behind the provision was to encourage innovation, research
and development in India, the assessee was entitled to the full benefit of section 35 (2AB). (AY.
2009-10)
Eicher Motors Ltd v. CIT (2017) 398 ITR 51 /250 Taxman 532 (Delhi) (HC)
S.35 (2AB) : Weighted deduction - Expenditure incurred on repairs, rent and other
expenses incurred relating to research and development premised could not form a part of
the cost of land and building.
106
Expenditure incurred on repairs, rent and other expenses incurred relating to research and
development premised could not form a part of the cost of land and building. (AY. 2007-08 to
2011-12)
S. 35AB : Know-how – Expenses incurred for use of technical know-how-Matter remitted to

Assessing Officer for adjudication. [ S. 37 (1) ].
Court held that; the Appellate Tribunal was right in remitting the matter to the Assessing Officer
for adjudication in respect of the allowability of deduction on the sums of the expenses incurred
on account of use of technical know-how. (AY .1995-1996)
ITR 5 (St.)
S. 35AC : Eligible projects – Amendment terminating benefit with effect from 1-4-2017
was held to be valid . [ Art . 226 ]
Dismissing the petition the Court held that; withdrawal of deduction under section 35AC to any
donations made to assessee-trust and other institutions after 1-4-2017 was held to be valid it
cannot be held to be harsh.
Prashanti Medical Services& Research Foundation v. UOI (2017) 399 ITR 450/ 250
Taxman 515/157 DTR 241 /298 CTR 265 (Guj.) (HC)
S. 35B : Export Markets development allowance —Commission paid to agent is held to be

eligible for weighted deduction .
Allowing the appeal, the Court held that; the finding of the High Court that the assessee had not
put up a case that it had maintained branch or agency outside the country was clearly an
erroneous finding and against the record. Although the assessee was not maintaining any branch
office, it had paid commission to agent for export business hence eligible for weighted deduction.
(AY. 1983-84)
Velvet Carpet and Co. Ltd v. CIT (2017) 395 ITR 515 /155 DTR 273 /297 CTR 113 (SC)
S. 35D : Amortisation of preliminary expenses – Capital or revenue-Expenditure incurred

on public issue of shares is capital expenditure.
It has been held by the Hon’ble Supreme Court that the Expenditure incurred on public issue of
shares was in nature of capital expenditure. The apex court relied on the decision of Gujarat High
Court in case of Ahmedabad Mfg. & Calico (P.) Ltd. v. CIT [1986] 162 ITR 800 (AY. 1994-95)
Dy. CIT v. Raghuvir Synthetics Ltd (2017) 394 ITR 1/151 DTR 153/295 CTR 143 /247
Taxman 393 (SC)
S. 35D : Amortisation of preliminary expenses-Premium collected by a company on

subscribed issued share capital is not “capital employed in the business of the Company"
hence not includible in preliminary expenses for amortization. [S. 37 (1)]
Dismissing the appeal of the assessee, the Court held that; Premium collected by a company on
subscribed share capital is not “capital employed in the business of the Company" within the
meaning of S. 35D so as to enable the claim of deduction of the said amount as prescribed u/s
35D. (AY.196-97, 1997-98)
Berger Paints India Ltd. v. CIT (2017) 394 ITR 113/149 DTR 57 /294 CTR 18 /247 Taxman
1 (SC)
S. 35D : Amortisation of preliminary expenses – Onus on assessee to prove, the matter
remanded – Interest on borrowed capital, matter remanded . [ S. 36 (1) (iii) .
107
Tribunal held that; onus is on assessee to prove that the ROC fee for increase in authorised share
capital and claimed 1/5 of said expenses as allowable under section 35D, on ground that increased
capital base was used for setting up new undertaking which was by way of expansion of capacity.
Similarly as regards the allowability of interest on borrowed capital, matter remanded . (AY.
2009 10, 2010-11)
Kuloday Technopack (P.) Ltd. v. ITO (2017) 167 ITD 270 (Mum) (Trib.)
S. 35D : Amortisation of preliminary expenses - Share issue expenses is held to be

allowable.
Assessee engaged in film production, later on, assessee got converted into public company and
issued share capital and it claimed deduction of share issue expenses u/s.35D. department rejected
assessee's claim. Tribunal held that due TDS had been deducted on brokerage charges, assessee
earned substantial revenue from production of films and, hence, was an 'industrial undertaking'.
assessee's claim for deduction was allowable. (AY.2008 – 2009)
ACIT v. Precept Ltd. (2017) 164 ITD 163 (Mum.) (Trib.)
S. 36 (1) (iii) : Interest on borrowed capital – Advance of loan to an individual or to a

director of company for the purpose of business hence interest was held to be allowable .
Dismissing the appeal of the revenue, the Court held that; Advance of loan to an individual or to a
director of company for the purpose of business hence interest was held to be allowable .
PCIT v. Sesa Resources Ltd. (2017) 250 Taxman 182 (Bom.) (HC)
S. 36 (1) (iii) : Interest on borrowed capital – Borrowing was utilised for setting up a new
unit and capitalised in the books of account was held to be allowable as revenue
expenditure.
Dismissing the appeal of the revenue the Court held that ;Borrowing was utilised for setting up a
new unit and capitalised in the books of account was held to be allowable as revenue
expenditure.. (AY. 1997 - 98)
CIT v. Mangalam Cement Ltd. (2017) 398 ITR 621 (Raj) (HC)
S. 36 (1) (iii) : Interest on borrowed capital – Advances to subsidiaries from interest free
funds – No disallowance was made in earlier years hence deletion was held to be justified .
Dismissing the appeal of the revenue the Court held that; the Assessing Officer did not make any
disallowance in respect of expenditure incurred on borrowed funds in relation to interest-free
loans and advances given to the said three subsidiary companies in the earlier years. (AY.2008 -
09)
CIT v. Max India Ltd. (2017) 398 ITR 209/295 CTR 448 /151 DTR 220 (P&H) (HC)
S. 36 (1) (iii) : Interest on borrowed capital – Where money was advanced to the subsidiary
out of reserves and not out of interest paid borrowings, interest paid on borrowings was
deductible.
Dismissing the appeal of the revenue the Court held that; deduction in respect of interest was
allowable as it was ascertained that no interest bearing funds were used for advancing the sums to
the subsidiary company and that the assessee had sufficient reserves. (AY. 1996-97, 1997 - 98)
CIT v. Golden Tobacco Ltd. (2017) 399 ITR 653/ 248 Taxman 101 (Bom.) (HC)
108
S. 36 (1) (iii) : Interest on borrowed capital-Incomplete findings recorded by commissioner
(Appeals) and Appellate tribunal— matter remanded to Tribunal to decide the matter with
in six months of filing of the certified copy of the order. [S. 254 (1)]
Allowing the appeal the Court held that ;on principle of law laid by Supreme Court in Hero
Cycles Pvt. Ltd. v. CIT (2015) 379 ITR 347 (SC) no disallowance of interest can be made
;however The Appellate Tribunal had misdirected itself and had recorded an incomplete finding
the matter was remanded to Tribunal with the direction that the Tribunal to decide the matter with
in six months of filing of the certified copy of the order. (AY. 2010-11)
Venus Auto v. CIT (2017) 396 ITR 477 (All.) (HC)
S. 36 (1) (iii) : Interest on borrowed capital - Borrowed fundsdeployed as secured loans and
unsecured loans to sister concerns and members at lower rate of interest. Difference
between interest paid and recovered is held to be deduction - Mutual benefit company -
Doctrine of lifting of corporate veil is not applicable only because charge of lower rate of
interest.
Dismissing the appeal of the revenue the Court held that ;Borrowed funds deployed as secured
loans and unsecured loans to sister concerns and members at lower rate of interest. Difference
between interest paid and recovered is held to be deduction - Mutual benefit company . Doctrine
of lifting of corporate veil is not applicable only because charge of lower rate of interest . (AY.
1993 - 94)
CIT v. Sahu Investment Mutual Benefit and Co. (2017) 396 ITR 595 /158 DTR 217 (All.)
(HC)
S. 36 (1) (iii) : Interest on borrowed capital – Sale and lease agreement - Compensation
charges are held to be deductible. [S.37 (1)]
Dismissing the appeal of the revenue the Court held that ; Compensation charges are held to be
deductible . With respect to the alternative plea under section 37 of the Act, the equipment had
been acquired for the expansion of the business of the assessee. The second unit at Nemam was
also engaged in the bottling of beverages under the existing franchise. Thus, while a new asset
was acquired, it was for the purpose of the expansion of the existing business of the assessee and
not for the development of a new line of business. The charges paid were consequently allowable
under section 37 (1). (AY. 1999-2000)
CIT v. Alankar Business Corporation Ltd. (2017) 396 ITR 280 (Mad.) (HC)
S. 36 (1) (iii) : Interest on borrowed capital – Amount borrowed was advanced to sister
concern carrying on similar business, interest payment was held to be allowable - Order is
not perverse . [ S. 260A]
Dismissing the appeal of the revenue, the Court held that; the order was not perverse for three
reasons : (a) that the Department itself before the Tribunal did not dispute the finding of fact
recorded by the Commissioner (Appeals), (b) that it was not only at one place that the finding of
fact was recorded but subsequently at two places similar factum was also recorded and (c) that
when such finding of fact was not disputed and was also reiterated by the Commissioner
(Appeals) and the reiteration was also not disputed and the Tribunal had relied upon it and had
proceeded as an undisputed fact, such a view on the part of the Tribunal could not be said to be
perverse. The interest was deductible. (AY. 2003-04 ,2004 - 05)
CIT v. Golf View Homes Ltd. (2017) 394 ITR 540/148 DTR 27 (Karn.) (HC)
S. 36 (1) (iii) : Interest on borrowed capital — Borrowed money was utlised for the
purposes of business and giving interest-free advances to its partners entitled to deduction .
Court held that; there was no dispute that the borrowing was for business purposes, it was utilised
in the business and the assessee had paid interest on it therefore, the interest so paid was
109
deductible under section 36 (1) (iii) of the Act. Accordingly, denial of deduction on any other
ground was not tenable in law. Therefore, the interest amount paid by the assessee was liable to
be deducted under section 36 (1) (iii) of the Act. (AY. 1996 - 97)
Ganpati Associates v. CIT (2017) 395 ITR 562 (All) (HC)
S. 36 (1) (iii) : Interest on borrowed capital--Borrowed funds spent on incomplete project--

Capitalised interest--Expenditure incurred for business purpose hence allowable as
deduction.
Court held that the capitalised interest receipt paid on borrowed funds was expenditure incurred
for the purpose of business and the assessee was entitled to deduction under section 36 (1) (iii).
(AY.1995-1996)
ITR 5 (St.)
S. 36 (1) (iii) : Interest on borrowed capital-Interest-free advance to another concern for

purpose of business-Assessee proving availability of interest-free funds-Deletion of
disallowance proper.[S.37 (1)]
Court held that the records showed that the assessee had earned income during the assessment
year and it had submitted evidence and proved that it had enough funds to have advanced interest-
free advance to another company. There was nothing on record to prove that the borrowed funds
were diverted for making the interest-free advances. It was found by the Appellate Tribunal that
the advances were given for the purpose of business. Interest expenditure was allowable
deduction. (AY .1995-1996)
ITR 5 (St.)
S. 36 (1) (iii) : Interest on borrowed capital-Interest paid for two years-Interest was held to
be deductible as prior period expenditure.
Dismissing the appeal of the revenue, the Court held that ,interest paid for two years-Interest was
held to be deductible as prior period expenditure. (AY. 1993-1994)
CIT v. Nav Sansar Agro Products (2017) 392 ITR 399 (Delhi) (HC)
S. 36 (1) (iii) : Interest on borrowed capital - Interest free loan to relatives - Since no interest
free own funds were available disallowance of proportionate interest was held to be justified
.
Dismissing the appeal of the assessee the Tribunal held that; since no interest free own funds
were available at disposal of assessee, disallowance of proportionate interest expenses was
justified in respect of interest free advances to relatives . (AY. 2011-12)
Bombay Sales Corporation v. J CIT (2017) 167 ITD 88 (Ahd) (Trib.)
S. 36 (1) (iii) : Interest on borrowed capital – No disallowance in case Assessee had sufficient
funds and interest-free advances were given to sister companies based on commercial
expediency.
The Assessee Company claimed interest expense, which was disallowed by the AO on the ground
that loans on which interest was paid by the assessee and claimed as a deduction have not been
110
used for the purpose of business but had been given as interest free loans to the assessee’s holding
companies. The CIT (A) deleted the disallowance as the Assessee had sufficient interest-free
funds. The Tribunal upheld the order of the CIT (A) and observed that in case Assessee had
sufficient interest-free funds, then the presumption was that interest-free advances were given out
of the same. (ITA No. 827/Kol/2015 dt. 25.08.2017) (AY. 2010-11)
DCIT v. Axsys Technologies Ltd. (2017) 58 ITR 91 (SN) (Kol) (Trib)
S. 36 (1) (iii) : Interest on borrowed capital – Advance to subsidiaries – Sufficient interest

free funds – No disallowance can be made [ S. 37 (1) ]
Allowing the appeal of the assessee the Tribunal held that; the assessee had sufficient interest
free funds to cover advances given to its subsidiaries and no interest bearing fund was advanced
to subsidiaries, no part of interest expenditure was to be disallowed (AY. 2013-14)
Captronic Systems (P.) Ltd. v. DCIT (2017) 167 ITD 95 (Bang) (Trib.)
S. 36 (1) (iii) : Interest on borrowed money - Availability of enough own funds for the
purpose of making the interest free advances, no disallowance could be made .
The AO made disallowance of interest pertaining to interest free advances made to two parties.
The CIT (A) upheld the order of the AO. The Tribunal held that where the nexus between interest
bearing funds and interest free advances is ruled out and where the assessee has demonstrated the
availability of enough own funds for the purpose of making the interest free advances, no
disallowance under section 36 (1) (iii) of the Act could be made . (AY. 2010-11, 2012-13)
International Fresh Farm Products (India) Ltd. v ACIT (2017) 190 TTJ 228/(2018) 161
DTR 153 (Chd) (Trib)
S. 36 (1) (iii) : Interest on borrowed capital – Loan taken on higher interest and loan given
at lower interest – AO cannot sit in the armchair of the business man, disallowance was
deleted.
Allowing the appeal of the assesse, the Tribunal held that; though the Loan taken on higher
interest and loan given at lower interest.AO cannot sit in the armchair of the business man, when
transactions were found to be genuine. Disallowance was deleted. (AY. 2009-10,2010-11)
Rupee Finance and Management Pvt. Ltd. v. DCIT (2017) 57 ITR 205 (Mum) (Trib)
S. 36 (1) (iii) : Interest on borrowed capital - Disallowance was held to be not justified
Borrowed money was utilised for the purpose of business disallowance was held to be not
justified . (AY. 2010-11)
ABC Bearings Ltd v. ACIT (2017) 157 DTR 242/188 TTJ 437 (Mum) (Trib
S.36 (1) (iii) : Interest on borrowed capital - Borrowed fund was utilsed for the purpose of
profession - Advance of own funds – No disallowance of interest can be made .[ S.37 (1) ]
Dismissing the appeal of the revenue, the Tribunal held that; in case of availability of own funds
as well as borrowed funds, the presumption can be made that for non-business purposes funds
have been lent from own funds and borrowed funds had not been used for the non-business
purposes .If it is established that the borrowings had been utilised for the purpose intended, and
no part of interest on this borrowing should be disallowed even if the assessee had made any
interest-free advances. (AY. 2005-06, 2009-10).
111
ACIT v. Nishith Desai (2017)56 ITR 560 (Mum) (Trib.)
S.36 (1) (iii) : Interest on borrowed capital - Interest on loans specifically borrowed to
acquire the business assets - borrowed funds not diverted as interest free loans to the
relatives - funds not given to the relatives from the overdraft account - financial expenses
were purely spent for the purposes of the business and should be allowed fully
The Commissioner of Income-tax (Appeals) held that the interest expenses which were
disallowed by the AO were interest on loans which were specifically borrowed to acquire the
business assets of the assessee. None of the borrowed funds were diverted as interest free loans to
the relatives. Further, it was not the case that funds were given to the relatives from the over draft
account. Therefore the financial expenses were purely spent for the purposes of the business and
should be allowed fully. Tribunal held that ;The Commissioner of Income-tax (Appeals) had
verified the extent of interest-free funds available with the assessee and the balance-sheet at the
end of the year and was of a view that the assessee had sufficient capital to give interest-free
loans. Therefore no disallowance could be made. (AY. 2005-06, 2009-10).
S. 36 (1) (iii) : Interest on borrowed capital – Where payment and earning of interest was
duly verified by the AO, no disallowance of interest could be made merely on ground that
assessee had net interest expense
The Assessee, a NBFC, engaged in finance business, took loans from various parties and gave
loans to few other parties. The AO disallowed the balance interest expenses as no prudent person
would borrow at higher rates and lend at lower rates. On appeal, the CITA (A) upheld the AO’s
order by rejecting the assessee’s contention that due to bad market conditions, the rate of interest
was decreased and could not be negotiated properly. On further appeal, the Tribunal held that
nothing had been brought on record by the lower authorities that any higher amount was received
by the assessee apart from the amounts mentioned in the accounts. It also observed that
incurrence of net expense by the assessee could not be a ground for disallowance by the AO,
because the revenue could not sit in the businessman’s armchair and dictate the terms of business.
Therefore, the claim of the assessee was to be allowed. (AY. 2009-10 ,2010-11)
Rupee Finance & Management (P.) Ltd. v. DCIT (2017) 81 taxmann.com 249 /57 ITR 205
(Mum.) (Trib.)
S. 36 (1) (iii) : Interest on borrowed capital – Interest paid on borrowed capital for
acquiring a new machinery is not allowable as business expenditure and is liable to be
capitalized. [Proviso to S. 36 (1) (iii), 43 (1)]
Dismissing the appeal of the assessee the Tribunal held that; in light of the proviso to S. 36 (1)
(iii), any loan borrowed for the purpose of acquisition of machinery is liable to be capitalized and
interest on such loan would not be available for deduction u/s. 36 (1) (iii). (AY. 2006-07)
Sonali Castings Pvt. Ltd. v. DCIT (2017) 57 ITR 225 (Hyd) (Trib.)
S. 36 (1) (iii) : Interest on borrowed capital - Interest and remuneration from firm being
taxable in hands of assessee, interest expenditure to this extent could not be disallowed. [
S.10 (2A) ]
Interest and remuneration from firm would be taxable as business income in hands of assesse.
Hence, interest payment to this extent could not be disallowed. (AY. 2010 – 2011)
Vineet Maini v.ITO (2017) 164 ITD 640/157 DTR 125 /190 TTJ 125 (SMC) (Delhi) (Trib.)
S. 36 (1) (iii) : Interest on borrowed capital - Sufficient interest free own funds were
available – Disallowance cannot be made on presumptions.
112
Allowing the appeal, the Tribunal held that; when there is sufficient interest free fund are
available, disallowance of interest cannot be made on the presumption that borrowed funds was
used for non business investment. (AY. 2010 – 2011)
Kissan Fats Ltd. v. DCIT (2017) 162 ITD 404 (Chd.) (Trib.)
S. 36 (1) (iii) : Interest on borrowed capital-Furniture deposit— Held to be allowable.

For purpose of assessee's business and for use of existing furniture for which assessee not paying
rent hence allowable as deduction. (AY.2010-2011)
CIT v. Sales India Pvt. Ltd. (2017) 54 ITR 272 (Ahd.) (Trib.)
S.36 (1) (iii) : Interest on borrowed capital-Shares held as stock-in-trade converted into
investments on 31-3-2005-Interest paid on loan deductible.
Tribunal held that the department had not shown any evidence that the shares were converted on
dated April 1, 2004. The Department failed to bring anything on record. On the other hand, the
assessee had given sufficient proof in support of its claim that the shares were converted as
investment on dated March 31, 2005. At the time of hearing the Department failed to bring
anything contrary to the findings of the Commissioner (Appeals). Thus there was no reason to
interfere in the order of the Commissioner (Appeals). (AY.2005-2006 to 2009-2010)
ITO v. Right Address Ltd. (2017) 54 ITR 287 (Kolk.) (Trib.)
S.36 (1) (iii) : Interest on borrowed capital-Interest free loans funds, presumption is that
such funds came from interest free funds, disallowance of interest was not justified.
When the assesse is having sufficient interest free funds and interest-free loans far below interest-
free funds, presumption that such investments came out of available interest-free funds and not
out of interest bearing funds or overdraft account. Assessee has no onus to prove that advance
was not from borrowed funds .Disallowance of interest was not justified. (AY.2010-2011)
Kushalbagh Marbles P. Ltd. v. JCIT (SMC) (2017) 53 ITR 134 /183 TTJ 99 /145 DTR 106
(Jodh.) (Trib)
S. 36 (1) (iii) : Interest on borrowed capital - Investing borrowed funds through its sister
concern in shares as stock in trade,interest was held to be allowable.
The assessee invested the borrowed funds through its sister concern in the shares of VNL.
Therefore, the shares in VNL were acquired in the ordinary course of business and were correctly
disclosed as stock-in-trade in the balance-sheet,hence the interest paid on borrowed capital was
held to be allowable.
Divakar Solar Systems Ltd. v. Dy.CIT (2017) 53 ITR 516 (Kol.) (Trib.)
S. 36 (1) (v) : Contribution approved gratuity fund – Payment of gratuity was held to be
allowable [ S. 37 (1), 40A (7) ]
Allowing the appeal the Court held that; the narrow interpretation straining language of
section 36 (1) (v)of the Act so as to deny deduction to the assessee should not be followed since
the objective of fund was achieved. The payment of gratuity was to be allowed. (AY. 2002-03,
2003 - 04)
Scooters India Ltd v. CIT (2017) 399 ITR 559 (All) (HC)
Editorial : The Supreme Court has dismissed special leave petition filed by the Department
against this judgment.
S.36 (1) (v) : Contribution approved gratuity fund-Payment towards LIC group leave
encashment scheme is held to be deductible.
113
Payment towards LIC group leave encashment scheme is held to be deductible. (AY.2010-2011)
A.P. Beverages Corporation Ltd. v.DCIT (2017) 54 ITR 228 (Hyd.) (Trib.)
S. 36 (1) (va) : Any sum received from employees - Contributions paid after due dates under
respective acts but before due date for filing of return was held to be allowable .
Dismissing the appeal of the revenue the Court held that; the Contributions paid after due dates
under respective acts but before due date for filing of return was held to be allowable .
CIT v. Manglam Arts (2017) 398 ITR 594 (Raj) (HC)
CIT v. Ranjana Johari (Smt) (2017) 398 ITR 594 (Raj) (HC)
S. 36 (1) (va) : Any sum received from employees-Employees' contribution towards

employees' State insurance and employees' provident fund-Payments after due dates
prescribed in relevant statutes but before filing return was entitled to deduction.[S. 2 (24)
(x)]
Allowing the appeal the Court held that; the admitted position being that the amounts of the
employees' contribution to the employees' state insurance and employees' provident fund were
credited much before the date of filing the return under the Income-tax Act, 1961, the assessee
was entitled to the deletion of the addition. (AY. 2004-2005)
Bihar State Warehousing Corporation Ltd. v. CIT (2017) 393 ITR 386 (Patna) (HC)
S.36 (1) (va) : Any sum received from employees-Provident Fund and Employees' State
Insurance contributions, cannot be disallowed if paid after due date under respective Act
but paid before filing of return. [S. 43B, 139 (1)]
Dismissing the appeal of the revenue the Court held that; Provident Fund and Employees' State
Insurance contributions, cannot be disallowed if paid after due date under respective Act but paid
before filing of return. (AY. 2003-2004 to 2008-2009)
CIT v. Rajasthan State Beverages Corporation Ltd. (2017) 393 ITR 421/154 DTR 195/297
CTR 250 (Raj.) (HC)
CIT v. Rajasthan State Gangangar Sugar Mills Ltd. (2017) 393 ITR 421/154 DTR 195/297
CTR 250 (Raj.) (HC)
Editorial : SLP of the revenue was dismissed ,CIT v. Rajasthan State Beverages Corporation
Ltd. (2017) 392 ITR 2 (St.)
S. 36 (1) (va) : Any sum received from employees – Deposited with the Government before
the due date of filing of return of income is allowable. [ S.139 (1) ]
The Assessee deposited employees’ contribution to provident fund belatedly, but before the due
date of filing of return. The AO disallowed it on the basis that employees’ contribution to PF was
deductible only if paid within the due date as per s. 36 (1) (va), which was deleted by the CIT
(A). The ITAT, following the order in the case of Tetra Soft (India) Pvt. Ltd. vs. ACIT (2015) [40
ITR (Trib) 470 (Hyd)] and Essae Teraoka (P) Ltd. vs. DCIT[366 ITR 408 (Kar)], dismissed the
appeal of the Department, and held that due date referred to s. 36 (1) (va) should be read in
conjunction with s. 43B (b) and payment will be allowed in case it is made before the due date of
filing of return of income. (ITA No. 374/Vizag/2017, CO No. 73/Vizag/2017 order
dt.20.09.2017) (AY. 2012-13)
ACIT v. Eastern Power Distribution Company of AP Ltd. (2017) 59 ITR 67 (SN) 67
(Vishakha) (Trib)
S. 36 (1) (vii) : Bad debt – Advance to suppliers for business which was lying outstanding
for number of years was written off was held to be allowable as deduction, though the suit
was not filed for recover of the said amounts .[ S. 28 (i) ]
114
Dismissing the appeal of the revenue the Court held that; Advance to suppliers for business which
was lying outstanding for number of years was written off was held to be allowable as deduction,
though the suit was not filed for recover of the said amounts.
PCIT v. Rajasthan State Beverages Corpn. Ltd. (2017) 250 Taxman 32 (Raj.) (HC)
Editorial : SLP of revenue is dismissed, PCIT v. Rajasthan State Beverages Corporation Ltd.
(2017) 250 Taxman 16 (SC)
S.36 (1) (vii) : Bad debts - Advances to suppliers for business purposes was written off.
Merely because a suit was not filed no disallowance can be made .
Assessee had given certain advances to suppliers for business purposes but supply of goods was
not received. Amounts being old and outstanding had been written off in the books of account .
Merely because a suit was not filed disallowance cannot be made . (AY.2009 - 10)
PCIT v. Rajasthan State Beverages Corpn. Ltd. (2017) 250 Taxman 32 (Raj) (HC)
Editorial : SLP of revenue is dismissed, PCIT v. Rajasthan State Beverages Corpn. Ltd. (2017)
250 Taxman 16 (SC)
S. 36 (1) (vii) : Bad debt – Held, embargo placed in section 36 (2) as to whether debts had
been offered to tax in earlier years would not apply in case of non-banking financial
company. [S.36 (2)]
Assessee, a non-banking financial company claimed deduction of bad debts written off in books -
Revenue called for proof showing that amounts claimed as bad debts had been offered to tax in
earlier years in accordance with provisions of section 36 (2). High Court held that embargo
placed in section 36 (2) would not apply in case of non-banking financial company all that
remained was to examine if debt had been written off in accordance with mandate of section 36
(1) (vii). (AY 2004-05)
Operating Lease & Hire Purchase Co. Ltd. v. Dy. CIT (2017) 247 Taxman 423 (Mad.) (HC)
S. 36 (1) (vii) : Bad debt - Money advanced to broker for purchase of shares cannot be
allowed as bad debt as sum was not shown to be part of income of assesse for earlier
previous year.[S. 28 (i)]
Allowing the appeal of the revenue the Court held that; Money advanced to broker for purchase
of shares cannot be allowed as bad debt as sum was not shown to be part of income of assesse for
earlier previous year . The failure by the broker to return the sum was at the highest a business
loss and nothing more. (AY. 1993 - 94)
CIT v. Escotrac Finance and Investments Ltd. (2017) 396 ITR 563 /249 Taxman 514 (Delhi)
(HC)
S. 36 (1) (vii) : Bad debt – Accounts maintained for the purpose of income tax, the amounts
was written off - Bad debt is allowable as deduction.
Dismissing the appeal of the revenue, the Court held that; when assessee maintaining two sets of
accounts, one for income-tax purposes and other for purposes of Companies Act. In corporate
accounts, assessee made provision for bad debts and for income tax accounts, debts were written
off. Since in the books maintained for income-tax purpose, the debts were written off, deduction
was allowable. (AY 2006-07)
CIT v. Shriram Transport Finance Company Ltd. (2017) 246 Taxman 89 (Mad.) (HC)
S.36 (1) (vii) : Bad debt – Provision for doubtful debts – No evidence to prove the non-
recovery of such debts – Rejection of claim was held o be justified .[ S.28 (i) ]
115
Tribunal held that; it is found that the assessee could not produce any evidence to show that the
suppliers refused to pay the outstanding amount or denied their liability in any manner which
could lead to a conclusion that the impugned provision crystallized during the year. The
expenditure to be admissible, at the threshold, must be capable of being classified as an
expenditure at the first instance and deduction of mere provisions/estimation could not be allowed
to the assessee unless provided by the statute. On the same analogy, the same is not admissible
either under section 28 (i). (AY. 2009-10)
Elite International (P.) Ltd. v. ACIT (2017) 165 ITD 479 (Mum) (Trib.)
S. 36 (1) (vii) : Bad debt - Bad debt written off is an allowable deduction – If such debt is
subsequently recovered, then it shall be treated as income of that year.[ S. 41 (1) ]
Allowing the appeal the Tribunal held that; Bad debt written off is an allowable deduction. If
such debt is subsequently recovered, then it shall be treated as income of that year. (AY. 2000-01)
S. 36 (1) (vii) : Bad debt - Loans and advances written off based on the rehabilitation
scheme sanctioned by the BIFR is an allowable loss [ S.28 (i) ]
Allowing the appeal the Tribunal held that; write off is in pursuance to rehabilitation scheme
sanctioned by BIFR. As per the scheme, the balance sheet for the year was re-casted by the BIFR
and only those items which are to be taken over by the new management were shown and that the
other items not taken over were written off in the line of provision of the sanctioned scheme.
(AY. 2000-01)
S. 36 (1) (vii) : Bad debt - Value of certain furniture, fixtures and Light vehicles were
written off as they were found missing on takeover of business by new management was
held to be not allowable as bad debt. [ S. 28 (i) ]
Certain Furniture, Fixtures and Light vehicles were written off as they were found missing on
takeover of business by new management which was disallowed by the lower authorities . On
appeal the Tribunal held that, neither FIR was lodged nor insurance was claimed hence
disallowance is held to be justified . Tribunal also held that ,such assets was already incorporated
in Block of assets on which depreciation is claimed and allowed. (AY. 2000-01)
S. 36 (1) (vii) : Bad debts – Debt from export business, merely because assessee had not
obtained approval of RBI to write off debts pertaining to foreign party, claim of assessee
could not be disallowed.
AO disallowed bad debts arised out of export turnover written off by assessee on ground that
assessee had written off these bad debts in contravention of provisions of RBI guidelines.
Tribunal held that Act does not make any difference between debts that have arises in course of
domestic business and export business. since assessee had written off bad debts as irrecoverable
in books of account and these debts were offered as income in computing income in earlier years,
merely because assessee had not obtained approval of RBI to write off debts pertaining to foreign
party, claim of assessee could not be disallowed. ( (AY.2006-07 to 2010-11)
S.36 (1) (vii) : Bad debt-Profit and loss account was debited when provision was made and
debtors' accounts credited in year when finally debtors' accounts written off, assessee is
entitled to claim deduction.
116
Profit and loss account debited in year when provision made and debtors' accounts credited in
year when finally debtors' accounts written off. Profit and loss account already debited with
corresponding amount according to accounting procedure followed by assessee, provision
complied with and the assessee is entitled to claim deduction. (AY.2011-2012)
Greater Bombay Co-op. Bank Ltd. v. Dy.CIT (2017)53 ITR 356 (Mum.) (Trib.)
S. 36 (vii) : Bad debt-Amount written off bad debts in books of account is held to be
deductible. [S.36 (2)]
Amount representing sales made by assessee in earlier years, amount written off bad debts in
books of account is held to be deductible. (AY.-2005-2006, 2006-2007, 2008-2009)
ACITv. Dow Agro Sciences India Pvt. Ltd. (2017) 53 ITR 590 (Mum.) (Trib.)
S. 36 (1) (viia) : Bad debt-Provision for bad and doubtful debts - Schedule bank - 10% of
advances allowable even though amount claimed in P&L account is less than the actual
claim
Claim in respect of provision for bad and doubtful debts at 10% of advances allowable even
though amount claimed in P&L account is less than the actual claim. (AY.2010-11)
ACIT v. Prathma Bank (2017) 188 TTJ 52/155 DTR 26 (Delhi) (Trib.)
S. 36 (1) (viii) : Eligible business - Special reserve – Loan was transferred to different entity
and received commission, held that the assesse is not entitle to deduction .
Dismissing the appeal the Court held that; when the loan was transferred to another entity and
commission was received ,the income arising out of such activity would therefore not be the
assessee's income from the business of providing long-term finance hence the assessee was not
entitled to the deduction. (AY. 2001-02, 2004-05)
Gruh Finance Ltd v. Dy. CIT (2017) 397 ITR 643/248 Taxman 26 (Guj) (HC)
S. 37 (1) : Business expenditure - Capital or revenue - Technical Know-How - Agreement

crucial for setting up of plant project for manufacture of goods hence the payment was held
to be capital in nature .
What is “capital expenditure“ and what is “revenue“ are not eternal verities but must need to be
flexible so as to respond to the changing economic realities of business. The expression “asset or
advantage of an enduring nature“ was evolved to emphasise the element of a sufficient degree of
durability, appropriate to the context.On facts the payment was made for setting up of plant
project for manufacture of goods hence the payment was held to be capital in nature . (AY. 1999-
2000 to 2005 - 06)
Honda Siel Cars India Ltd v. CIT (2017) 395 ITR 713/295 CTR 569 /249 Taxman 1 (SC)
Editorial : Affirmed the order in CIT v. Honda Siel Cars India Ltd (2017) 395 ITR 194 /292
CTR 253 (All) (HC)
S. 37 (1) : Business expenditure – Capital or revenue-Interest paid on loan taken for

establishment of new unit was held to be revenue expenditure.[S. 32, 145]
Dismissing the appeal of the revenue, the Court held that, the Tribunal was justified in allowing
the expenditure incurred by the assessee towards the interest paid on loans taken and expenditure
on other items connected with establishment of the unit which have been capitalized by the
assessee but claimed as revenue expenditure. Court also observe that if the assessee has taken
any depreciation on the on the amount of interest and other items which has been allowed as
revenue expenditure that such much depreciation should be reversed by the assessing authority.
(AY. 2000-01)
117
CIT v. Shri Rama Multi Tech Ltd. (2017) 393 ITR 371/151 DTR 169/295 CTR 233 /151
DTR 169 /247 Taxman 148 (SC)
S. 37 (1) : Business Expenditure – Foreign exchange losses due to fluctuation in the rate of
foreign exchange as on balance sheet date are deductible. [ S. 145 ]
Dismissing the appeal of the revenue the Court held that; the AO had failed to consider the
judgement of Supreme Court in case of Woodward Governor India (P.) Ltd (2009) 312 ITR 254
(SC), wherein it was held that loss suffered by the assesse, maintain accounts regularly on
mercantile system and following accounting standards prescribed by the ICAI, on account of
fluctuation in the rate of foreign exchange as on the date of balance sheet was an item of
expenditure under S.37 (1) not withstanding that the liability has not been discharged in the year
in which the fluctuation in the rate of foreign exchange occurred. (AY. 2008 - 09)
PCIT v. Lionbridge Technologies (P) Ltd. (2017) 158 DTR 397 /68 taxmann.com 101 (Bom.)
(HC)
Editorial : Lionbridge Technologies (P) Ltd. v.ITO (2014) 48 taxmann.com 46/151 ITD 553
(Mum) (Trib)
S. 37 (1) : Business expenditure – Transportation charges was paid by account payee cheque
after deduction tax at source ,expenditure was rightly deleted by the Tribunal .[ S. 133
(6),260A ]
Payment of transportation charges, assessee brought on record proof of actual performance of
work and, moreover, payments were made by account payee cheques after deducting tax at
source, assessee's claim for deduction in respect of said payments, was to be allowed. (AY.2007 -
08)
CIT v. Haresh D. Mehta. (2017) 251 Taxman 346 (Bom) (HC)
S.37 (1) : Business expenditure-Firm-Partner - Expenditure incurred by partner on behalf
of the firm was held to be allowable as deduction in the hands of the firm .
Allowing the appeal of the assesse the Court held that; Expenditure incurred by partner on behalf
of the firm was held to be allowable as deduction in the hands of the firm . (AY. 2012-13)
Hitech Analytical Services v. PCIT (2017) 251 Taxman 60 (Guj) (HC)
S. 37 (1) : Business expenditure – Commission – Neither the commission was paid nor the
agent has accounted the commission in his account it being fictitious entry disallowance was
held to be justified [ S. 36 (1) (ii) ]
Dismissing the appeal of the assessee the Court held that, Neither the commission was paid nor
the agent has accounted the commission in his account it being fictitious entry disallowance was
held to be justified . (AY. 1994 - 95, 1995-96)
Ema India Ltd. v DCIT (2017) 158 DTR 183 /81 taxmann.com 221 (All.) (HC)
S.37 (1) : Business expenditure - Foreign travel expenses by employees is held to be

allowable expenditure.
Foreign travel expenses of employees is held to be allowable expenditure as complete details of
employees who travelled abroad, duration of visit, etc. were submitted. (AY.2009 - 10)
118
S.37 (1) : Business expenditure - Capital or revenue - Web design charges, trademark
expenses and survey expenses were incurred by company for facilitating its business and no
new asset was acquired, such expenses were revenue in nature
Web designing charges, trade mark expenses and survey expenses were incurred for facilitating
business of assessee-company and by incurring such expenses no new asset was acquired and/or
there was no change in fixed asset of company, expenses were allowable as revenue expenditure .
(AY.2009 - 10)
S. 37 (1) - Business expenditure – Deduction of expenses for services like identifying buyer
and also carrying out various other tasks relating to sale of property involved to be allowed
while calculating income from sale of land
Dismissing the appeal of the revenue the Court held that; Deduction of expenses for services like
identifying buyer and also carrying out various other tasks relating to sale of property involved to
be allowed while calculating income from sale of land . (AY. 2005 - 06)
PCIT v. Entrepreneurs (Calcutta) (P.) Ltd. (2017) 251 Taxman 527 (Cal.) (HC)
S.37 (1) : Business expenditure – Capital or revenue - Up gradation of technology was held
to be revenue expenditure .
Dismissing the appeal of the revenue the Court held that, expenditure incurred on technology
which would enable assessee to update and improve its current process of manufacturing
laminates, payment made towards acquisition of said technology was to be allowed as revenue
expenditure . (AY. 1985-86)
CIT v. Bombay Burmah Trading Corpn. Ltd. (2017) 250 Taxman 436/(2018) 161 DTR 312
(Bom.) (HC)
S. 37 (1) : Business expenditure — Construction business — Disallowance of site expenses

was held to be not justified - Restriction of disallowance of labour expenses by the Tribunal
was held to be justified .
Court held that, disallowance of site of site expenses was held to be not justified . As regards
labour expenses restricting the disallowance by the Tribunal was held to be justified . (AY. 2008
- 09)
CIT v. Construction Engineer (2017) 399 ITR 149 /155 DTR 219 (J&K) (HC)
S. 37 (1) : Business expenditure - Capital or revenue - Technical know-how fees and royalty
to foreign collaborator was held to be capital in nature
Allowing the appeal of the revenue, the Court held that, payment of technical know-how fees and
royalty to foreign collaborator as per the agreement was held to be capital in nature. The payment
was for enduring benefit of business it was for bringing the business in to existence and then for
running and sustaining it (AY. 1999-2000 to 2005 - 06)
CIT v. Honda Siel Cars India Ltd (2017) 147 DTR 145 (All) (HC)
S. 37 (1) : Business expenditure – Liquidated damages in the nature of penalty for delaying
delivery or late completion of terms and conditions of order was held to be allowable as
business expenditure .
119
Dismissing the petition the Court held that; Liquidated damages in the nature of penalty for
delaying delivery or late completion of terms and conditions of order was held to be allowable
as business expenditure. (AY. 2010-11)
PCIT v. Mazda Ltd. (2017) 250 Taxman 510 (Guj.) (HC)
S. 37 (1) : Business expenditure – Promotion of medical products of holding company

conducting seminars etc was held to be allowable business expenditure .Matter was
remanded .
Allowing the appeal of the assesse the Court held that; Promotion of medical products of
holding company conducting seminars etc was held to be allowable business expenditure . Court
also held that, the Tribunal failed to examine as to whether Circular No 5 dated 1-8-2012 was
prospective in nature and, thus, not applicable for assessment year in question. Matter was to be
remanded back for disposal afresh. (AY. 2011-12)
Boston Scientific India (P.) Ltd. v. ACIT (2017) 250 Taxman 426/159 DTR 353 /299 CTR 492
(Delhi) (HC)
S. 37 (1) : Business expenditure – Capital or revenue-Consultancy charges paid to keep on

investment in general is held to be allowable as business expenditure .
Dismissing the appeal of the revenue, the Court held that; Consultancy charges paid to keep on
investment in general is held to be allowable as business expenditure . (AY. 2009-10)
PCIT v. Sintex Industries Ltd. (2017) 248 Taxman 449 (2018) 403 ITR 418 (Guj.) (HC)
S. 37 (1) : Business expenditure – Payment made as per agreement for joint production of
film was held to be allowable as business expenditure .
Dismissing the appeal of the revenue, the Court held that, Payment made as per agreement for
joint production of film was held to be allowable as business expenditure . (AY. 2006-07)
CIT v. Dharma Productions (P.) Ltd. (2017) 248 Taxman 465 /297 CTR 24 /153 DTR 105
(Bom.) (HC)
Editorial : Order in Dharma Productions (P.) Ltd v. Dy.CIT (2014) 42 taxmann.com 8 (Mum)
(Trib) is affirmed .
S. 37 (1) : Business expenditure – Commission - Disallowance of commission only on the

ground that supply was made to Govt department would not be sustainable .Matter
remanded .
Allowing the appeal the Court held that; Disallowance of commission only on the ground that
supply was made to Govt department would not be sustainable .Matter remanded . (AY. 2005-06)
Brijbasi Hi-Tech Udyog Ltd. v. CIT (2017) 248 Taxman 92/154 DTR 69 (All.) (HC)
S. 37 (1) : Business expenditure – Merely on ground that GMDC agreed to pay diesel
expenses to extent of 30 per cent, the Assessing Officer was not justified in restricting said
expenses
Dismissing the appeal of the revenue ,the Court held that; Merely on ground that GMDC agreed
to pay diesel expenses to extent of 30 per cent, the Assessing Officer was not justified in
restricting said expenses . (AY. 2007-08)
PCIT v. Purshottam B. Pitroda (2017) 248 Taxman 118 (Guj.) (HC)
S. 37 (1) : Business expenditure — Prepaid insurance expenses was held to be allowable .

Dismissing the appeal of the revenue the Court held that ;prepaid insurance was held to be
allowable .
CIT v. Shiv Agrevo Ltd. (2017) 398 ITR 608 (Raj.) (HC)
120
S.37 (1) : Business expenditure — Employees’ stock option plan — Once option given and
exercised by employee liability is ascertained it is not contingent liability hence allowable as
business expenditure.
Dismissing the appeal of the revenue the Court held that; As regards employees stock option plan
,once option given and exercised by employee liability is ascertained it is not contingent liability
hence allowable as business expenditure. (AY. 2007-08)
CIT v. New Delhi Television Ltd. (2017) 398 ITR 57 /156 DTR 217 /298 CTR 230 (Delhi)
(HC)
Editorial : SLP is granted to revenueCIT v. New Delhi Television Ltd. (2017)396 ITR 71 (St.)
S. 37 (1) : Business expenditure — Capital or revenue - Contribution as part of shelter fund

paid to land and building department of government to protect land held as stock-in-trade
from acquisition is held to be revenue expenditure .
Dismissing the appeal of the revenue the Court held that ;Contribution as part of shelter fund paid
to land and building department of government to protect land held as stock-in-trade from
acquisition is held to be revenue expenditure . (AY. 1995 - 96)
CIT v. DLF Universal Ltd. (No.2) (2017) 398 ITR 712 /251 Taxman 238 (Delhi) (HC)
S. 37 (1) : Business expenditure – Mercantile system - liability for enhanced fees had
accrued and was deductible. [ S. 145 ]
Allowing the appeal the Court held that ;the assessee was following the mercantile system of
accounting. It had to book the liability in the year in which it arose irrespective of whether in fact
it discharged the liability in that year. In that sense, the liability to pay the enhanced licence fee
would arise in the year in which the demand was made or in the year to which it related
irrespective of when the enhanced fee was actually paid by the assessee. The assessee would be
justified in claiming the enhanced licence fee as deduction in the year in which such enhancement
had accrued even though the assessee had not paid such enhanced licence fee in that year. (AY.
1977-98 to 2002-03, 2004 - 05, 2009-10)
Jagdish Prasad Gupta v. CIT (2017) 397 ITR 578/250 Taxman 308 /157 DTR 193 (Delhi)
(HC)
S. 37 (1) : Business expenditure – Capital or revenue – Amount paid on conversion of

exported unit to a domestic tariff unit was held to be revenue expenditure .
Dismissing the appeal of the revenue, the Court held that; the assessee converted its unit from a
100 per cent. export oriented unit under the Export Promotion Capital Goods Scheme to a
domestic tariff area unit and would sell goods in the domestic market, hence allowable as revenue
expenditure .
S. 37 (1) : Business expenditure — Capital or revenue — legal expenditure to protect lease

is held to be revenue expenditure .
Dismissing the appeal of revenue the Court held that; legal expenditure incurred by the assessee
to defend the writ petitions filed to quash the Government notification and lease deed was not a
capital expenditure and deduction was allowable (AY. 2008 - 09, 2009 - 10)
Dy.CIT v. B. Kumara Gowda (2017) 396 ITR 386/249 Taxman 377 (Karn) (HC)
S.37 (1) : Business expenditure - Reduction of disallowance of 25 per cent. to 2.5 per cent. by
Commissioner (Appeals) and affirmation by Tribunal is a question of fact. [S. 260A]
Dismissing the appeal of the revenue, the Court held that; reduction of disallowance of 25 per
cent. to 2.5 per cent. by Commissioner (Appeals) and affirmation by Tribunal is a question of fact
. (AY.2007 - 08)
121
CIT v. Ajay Kailashchandra Kanodia HUF (2017) 396 ITR 221 (Guj.) (HC)
S.37 (1) : Business expenditure-Expenses on voluntary retirement scheme is held to be

allowable as business is continued.
Dismissing the appeal of the revenue the Court held that; expenses on voluntary retirement
scheme is held to be allowable as business is continued. (AY.2000-01)
CIT v. Aventis Pharma Ltd. (2017) 396 ITR 688 (Bom.) (HC)
S. 37 (1) : Business expenditure – Capital or revenue – Expenditure on termination contract

is held to be revenue expenditure.
Dismissing the appeal of the revenue the Court held that, the Expenditure on termination contract
is held to be revenue expenditure on the basis of commercial expediency. (AY.2006 - 07)
(HC)
S. 37 (1) : Business expenditure – Capital or revenue-Lease rent for ten years was held to
be revenue expenditure.
Dismissing the appeal of the revenue the court held that lease rent paid for plot allotted for period
of ten years by Gujarat Martine Board was held to be allowable as revenue expenditure . (AY.
2005 – 6)
CIT v. Mahavir Inductomelt P. Ltd. (2017) 394 ITR 50 /(2018) 162 DTR 209 (Guj) (HC)
S. 37 (1) : Business expenditure-Legal expenses to protect and maintain its registered

software is held to be allowable as business expenditure.
Dismissing the appeal of the revenue the Court held that; legal fee to protect and
maintain its right in a registered software and incurred expense towards Provisional Indemnity
Insurance bid held to be allowable both as incurred on account of commercial expediency and
wholly and exclusively for purpose of business . (AY .2006-07)
PCIT v. Managed Information Services (P.) Ltd. (2017) 396 ITR 490/246 Taxman 409 /153
DTR 124 (Mad.) (HC)
S. 37 (1) : Business expenditure – Brand promotion expenses was held to be allowable

business expenditure.
The AO disallowed 10% from the expenditure on brand enhancement on the ground that it was
allocable to the overseas owner/collaborator. The AO reasoned that any enhancement in the brand
presence of the assessee invariably had a fall-out vis-a-vis brand value of the overseas IPR
proprietor.
On appeal, the CIT (A) and the Tribunal disagreed with the AO’s view.
The High Court observed that the expenses were incurred by the assessee and that the
arrangement inter alia between the assessee and the brand proprietor was such that specified
required brands were made available in the assessee’s deals. The High Court further observing
that the overseas owner did not set up any other licensee, in the area where the assessee operated,
to operate as a rival and that under the Trade Mark Act, held that as long as the arrangement
existed, the assessee, who was a licensee of the products, was entitled to claim them as business
expenditure even though in the ultimate analysis they might have enhanced the brand of the
overseas owner. (AY. 2003-04)
PCIT v. Seagram Manufacturing (P.) Ltd. (2017) 245 Taxman 389 (Delhi) (HC)
Editorial : SLP of revenue was dismissed; PCIT v. Seagram Manufacturing (P.) Ltd (2018) 252
Taxman 383 (SC)
122
S. 37 (1) : Business expenditure – Capital or revenue - Expenses incurred on buy back of
shares was to be allowed as revenue expenditure
The AO disallowed the said expenditure on buy back of shares holding it as capital in nature.
The CIT (A) allowed expenses incurred on printing, postage, advertising etc. but disallowed the
other expenditures. The Tribunal relying on the decision of Hon’ble Bombay HC in case of CIT
v.Hindalco Industries Ltd ITA No 517 of 2009 dt. 9 - 9-8 - 2012 held that the entire expenditure
was to be allowed as revenue in nature. The HC held that since the issue was covered by
jurisdictional HC, it upheld the Tribunal’s order. (AY. 2001-02)
CIT v .Aditya Birla Nuvo (2017) 246 Taxman 202 (Bom.) (HC)
S. 37 (1) : Business Expenditure – Capital or revenue - Premium paid on pre redemption of

debentures was to be allowed as revenue expenditure
The AO allowed the contention of assessee that the said expenses was revenue in nature, however
concluded that 1/3 expenditure shall be allowed in the current year and balance in subsequent two
years. The CIT (A) relying on decision of Overseas Sanmar Financial Ltd. (86 ITD 602) allowed
the expenditure. The Tribunal relying in the case of Grindwell Norton Ltd. (ITA 5512/M/2007)
which was later ratified by HC in (ITA 694/2012 dt . 24 - 12 - 2012, upheld the order of the CIT
(A). The HC after placing reliance on the case of Grindwell Norton Ltd. dismissed the revenue’s
appeal. (AY. 2001 - 02)
CIT v.Aditya Birla Nuvo (2017) 246 Taxman 202 (Bom.) (HC)
S. 37 (1) : Business expenditure – Capital or revenue - Expenditure incurred by assessee on

technical and marketing know how, was to be allowed as revenue expenditure
The AO bifurcated the technical know-how and marketing know-how separately and allowed the
same as deferred revenue expenses. The CIT (A) placing reliance on the SC case of Kedarnath
Jute Mfg. Co. Ltd v . CIT (1971) 82 ITR 363 (SC) held that once the expenditure was allowed to
be revenue expenditure, then it had to be allowed. The Tribunal held that CIT (A) had rightly held
that expenditure was revenue in nature. On appeal, the HC held that order of Tribunal and CIT
(A) were valid in law and dismissed the appeal of the revenue. (AY. 2000-01)
CIT v. Aditya Birla Nuvo (2017) 246 Taxman 202 (Bom.) (HC)
S. 37 (1) : Business expenditure – Privilege fees paid to Government for grant of lease was
held to be allowable expenditure - Assessing Officer has no power to question the validity
of Government enactment . [ S. 40 (a) (iib), Art .226 ]
Dismissing the appeal of the revenue, against the judgement of single judge order, the Court held
that, Privilege fees paid to Government for grant of lease was held to be allowable expenditure -
Assessing Officer has no power to question the validity of Government enactment . Order
passed by the Assessing Officer, the High Court can set aside the order . Amendment with effect
from 1.4 .2014 was held to be prospective in nature . (AY. 2009-10 to 2012-13)
CIT v. Karnataka State Beverages Corporation (2017) 395 ITR 444/246 Taxman 280/294
CTR 142 /150 DTR 227 (Karn) (HC)
S. 37 : Business expenditure - Capital or revenue - One-time technical know-how fee and

royalty at 2 per cent of net ex-factory selling price of the product for period of five years
from the date of commencement of production is revenue in nature.
Following the decision of the Honourable Apex Court in the case of Alembic Chemical Works
Co. Ltd. v. CIT [1989] 177 ITR 377 (SC), the High Court held that one-time technical know-how
fee and royalty at 2 per cent of net ex-factory selling price of the product for period of five years
from the date of commencement of production is revenue in nature as a concurrent finding was by
Commissioner of Income-tax (Appeals) and Income-tax Appellate Tribunal that on termination of
agreement, which was for a period of five years, assessee would return all relevant material
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relating to know-how acquired through agreement and that the right granted to an assessee was a
non-exclusive right. (AY. 1988-89)
UPCOM Cables Ltd.;CIT v. (2017) 292 CTR 280 /147 DTR 33/78 taxmann.com 235 (All)
(HC)
S. 37 (1) : Business expenditure—Capital or revenue - Hotel business — Expenditure on

repair and on arranging for temporary entrance and exit during repair was held to be
revenue expenditure.
Dismissing the appeal of the revenue, the Court held that ;expenditure by the Hotel on repair and
on arranging for temporary entrance and exit during repair was held to be revenue expenditure .
AY. 2007-08)
CIT v. Seaprincess Hotels and Properties P. Ltd. (2017) 395 ITR 511/246 Taxman 173
(Bom.) (HC)
S.37 (1) : Business expenditure-Accrued or contingent liability—Award of damages -

Dispute pending-Grant of stay by Division Bench does not relieve assessee from liability of
interest-Entitled to deduction on interest. [S. 40 (a) (i), 145]
Allowing the appeal the Court held that; with the award being made rule of the court by a single
judge, the mere fact that the judgment and decree was stayed by a Division Bench would not
relieve the assessee of its obligation to pay the interest in terms thereof to A. Such liability had
commenced in the previous year in which the judgment and decree was passed by the single
judge. The order of the Special Bench of the Appellate Tribunal confirming the disallowance of
interest was unsustainable. (AY. 2001-2002, 2002-2003)
National Agricultural Co-op. Marketing Federation of India Ltd v. CIT (2017) 393 ITR 666
/247 Taxman 338 /150 DTR 385 /295 CTR 113 (Delhi) (HC)
Editorial : Order in National Agricultural Co-operative Marketing Federation of India Ltd. v. J
CIT [2015] 44 ITR 275 (SB) (Delhi) (Trib.) was set aside
S. 37 (1) : Business expenditure-Redemption of debentures-Premium-Assessee's obligation

to debenture holders in praesenti hence allowable expenditure.
Dismissing the appeal of the revenue, the Court held that; the assessee's obligation to pay the
debenture-holders at a premium was certain in praesenti and known at the time when the
debentures were issued and was to be payable in ordinary circumstances. It was only for the
company to avoid payment of such liability if it decided to repurchase the debentures earlier.
Such repayment prior to the due date, was contingent on exercise of option. It would not make the
liability, which was certain in praesenti, a contingent one merely because on happening of a
certain event, it could be avoided. The Appellate Tribunal was in error in confirming the order of
the Assessing Officer disallowing the expenditure. (AY .1995-1996)
ITR 5 (St.)
S. 37 (1) : Business expenditure-Mercantile system of accounting-Dispute pending in suit -

Interest neither paid nor entries in books of account showing it to have accrued, deduction
cannot be claimed. [S. 145 ]
allowing the appeal of the revenue, the Court held that; the assessee could not be permitted to
claim deduction for the bank interest which was neither paid nor shown to have been accrued in
the books of account. The assessee had also disputed the liability. If the liability on account of
principal itself was disputed, there could be no basis for any liability on account of interest. (AY.
1990-1991, 1991-1992)
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CIT v. Hanuman Sugar Industries Ltd. (2017) 393 ITR 561 (Cal.) HC)
S. 37 (1) : Business expenditure-capital or revenue-Commercial expediency-Payment of

privilege fee to Government for procuring right to manufacture and sell liquor-Statutory
levy having direct nexus to carry on and continue with business, allowable as revenue
expenditure.
Dismissing the appeal of the revenue, the Court held that ;Payment of privilege fee to
Government for procuring right to manufacture and sell liquor--Statutory levy having direct
nexus to carry on and continue with business, allowable as revenue expenditure. The commercial
expediency is to be considered from the angle of a businessman and not from the angle of
Revenue. The Revenue cannot sit in the arm chair of a businessman and dictate the terms to the
assessee as to how one is required to conduct the business or incur an expenditure and how it is to
be allowed. (AY. 2003-2004 to 2008-2009)
CIT v. Rajasthan State Beverages Corporation Ltd. (2017) 393 ITR 421/154 DTR 195
(Raj) (HC)
CIT v. Rajasthan State Gangangar Sugar Mills Ltd. (2017) 393 ITR 421/154 DTR 421 (Raj)
(HC)
Ltd. (2017) 392 ITR 2 (St.)
S. 37 (1) : Business expenditure – Provision for disputed excise tax liability was allowable as
a business expenditure in case of an assessee following mercantile systems of accounting.
[S.145]
Allowing the appeal ,the Court held that; in the mercantile system of accounting, a prudent
assessee can certainly make provision for expenditure towards tax liability, even though the
assessee may dispute the departmental claim. The precise amount of excise duty payable in the
concerned year has remained inconclusive and therefore the reflection of the disputed amount in
the books of accounts cannot be said to be an unreasonable act. (AY. 2009-10)
Modi Revlon (P.) Ltd. v. CIT (2016) 291 CTR 420 /77 Taxmann.com 83/(2017) 145 DTR
109 (Gauhati) (HC)
S. 37 (1) : Business expenditure - Capital gains - Assesses not under legal obligation to make
payments to original allottee-Amount cannot be claimed as against costs for development of
land. [S. 45, 48]
Dismissing the appeal, that the memorandum of understanding clearly stated that the transfer of
expenses included all expenses such as, licence fee, external development charges and conversion
charges. Instead, the expenses towards conversion and development of the commercial complex
were to be transferred to the books of account of the assessee. Significantly, it did not stipulate
reimbursement of any monies by the assessee to the original allottee. Therefore, the assessee was
under no obligation to make any payments to the original allottee. Hence, its payment to the
original allottee was of its free volition and under no legal obligation under any of the documents
relied upon by the assessee. The amount could not be claimed as against the costs for
development of the land. The valuation of the closing stock whatever it might be would by itself
not create a liability to pay any amounts to the original allottee, since no such liability was
transferred to the assessee. The Tribunal was right in disallowing the cost claimed by the assessee
Unitech Hospitality Services Ltd. v. ACIT (2017) 392 ITR 508 /246 Taxman 243 (Delhi)
(HC)
Editorial : SLP of assesse is dismissed, Unitech Hospitality Services Ltd. v. ACIT (2017) 250
Taxman 156 (SC)
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S. 37 (1) : Business expenditure-Expenditure on motor cars and telephone bills-Finding that
expenditure had not been incurred solely for business purposes-Disallowance of 50% of
expenditure was held to be justified.
The Assessing Officer found that eight cars were maintained by the assessee as his personal fad.
It was also found that the assessee had not maintained any log register or other materials to
establish that all these 8 cars were used by the assessee exclusively for the purpose of carrying on
his business. The Tribunal had also found that the assessee had not maintained a proper data base
to verify whether all the phones were used for the purpose of his business. Disallowance of 50%
of the expenditure on the cars and telephone bills was justified. (AY. 2004-2005)
S. Gopalkrishnan v. CIT (2017) 390 ITR 518 (Ker.) (HC)
S. 37 (1) : Business expenditure-Expenditure incurred in executing contract was held to be

allowable.
Dismissing the appeal of the revenue, the Court held that; the Tribunal had rightly deleted the
whole addition. For execution of the Dahej project, expatriates were working. The sub-contract
was also given to the Indian company which was a subsidiary of the parent company and the
expenses were to be borne by the parties as per the agreement. Some technical persons were
required to be employed and their expenses were debited and the Tribunal had rightly appreciated
this aspect of the matter. (AY .1998-1999)
DIT (IT) v. Sksanska Cementation International Ltd. (2017) 390 ITR 441 (Guj.) (HC)
S. 37 (1) : Business expenditure-Liquidated damages for failure to pay dividends was held to
be not deductible.
The assessee issued thirty lakhs cumulative redeemable preference shares of Rs. 10 each at par
aggregating to a sum of Rs. 3 crores to UTI Bank redeemable at par on March 31, 2000 carrying
assured dividend of 12% per annum. The case of the assessee was that it was unable to pay
dividend to the shareholders as agreed. The shares were, therefore, redeemed before the
prescribed time. After the shares were redeemed, in order to avoid ruinous litigation, a sum of Rs.
50,71,328 was paid by the assessee to the former shareholders by way of liquidated damages. The
assessee claimed deduction of the amount. The Assessing Officer and the Tribunal held that the
amount was not deductible. On appeal :
Held, the fact that the payment took the character of liquidated damages did not obliterate the fact
that the liability to pay was on account of dividend. Failure on the part of the assessee to pay
dividend was a breach of the contract which entitled the UTI bank to recover damages. Therefore,
when the assessee paid the damages the assessee was really discharging its liability to pay
dividend under the contract. The amount was not deductible. (AY. 2002-2003)
G.G.L. Hotels and Resort Company Ltd. v. CIT (2017) 390 ITR 160 (Cal.) (HC)
S. 37 (1) : Business expenditure-Capital or revenue - Expenditure on launching new product

was held to be revenue expenditure.
Court held that since the expenditure was incurred in connection with launching of the assessee's
new product it was deductible as revenue expenditure. (AY .2004-2005)
S. Gopalkrishnan v. CIT (2017) 390 ITR 518/77 taxmann.com 97 (Ker.) (HC)
S.37 (1) : Business expenditure-Capital or revenue-Expenditure incurred on replacement of

old fittings with new ,expenditure creating advantage of enduring nature expenditure which
is capital in nature.
Dismissing the appeal the Court held that; the finding of the Tribunal revealed that by making
such expenditure, the assessee had renovated and refurnished its hotel which enhanced the
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standard of the hotel and added an advantage of an enduring nature which would be reflected in
terms of the higher rental and higher occupancy in the hotel. Therefore, the expenditure could not
be covered under the general provisions of expenditure allowable under section 37 of the Income-
tax Act, 1961. (AY. 1995-1996)
U.P. Hotels Ltd. v. CIT (2017) 391 ITR 203 (All) (HC)
S. 37 (1) : Business expenditure-Loss - "setting up of business" and "commencement of

business". All expenditure after "setting up" is deductible business expenditure even if the
business has not commenced. A business is "set up" when steps are taken to recruit
employees and take premises etc. Expenditure incurred was held to be allowable as business
loss. [S. 28 (i),29]
Dismissing the appeal of revenue, the Court held that ;all expenditure after "setting up" is
deductible business expenditure even if the business has not commenced. A business is "set up"
when steps are taken to recruit employees and take premises etc Followed Western India
Vegetable Products Ltd. v. CIT (1954) 26 ITR 151 (Bom) (HC). (AY. 2007-08)
CIT v. Axis Pvt. Equity Ltd. (2017) 391 ITR 370 (Bom) (HC)
S.37 (1) : Business expenditure-Accrued liability-Mercantile system of accounting - Liability

for payment of 60 per cent. arising during assessment year in question is ascertained
liability hence be allowed as deduction. [S. 145]
Dismissing the appeal of the revenue the court held that; provision for payment of arrears made in
two consecutive years in instalments of 40 per cent. and 60 per cent. - Liability for payment of 60
per cent. arising during assessment year in question - hence ascertained liability was to be
allowed. (AY. 2010-2011)
CIT v. Haryana Agro Industries Corporation Ltd. (2017) 391 ITR 127 (P&H) (HC)
S.37 (1) : Business expenditure – Capital or revenue - Amount paid for acquiring limited
rights for using a software cannot be treated as capital expenditure and thus cannot be
disallowed.
The assessee company had paid license fees to a US based company for acquiring the right to use
the software for providing various services to its clients. The agreement provided limited rights to
the assessee company to use the license. It had various clauses as to the use and exclusivity of the
license. The Assessing Officer disregarded various clauses mentioned in the agreement, and
passed an order treating license fee payment as capital expenditure on the ground that it provided
enduring benefit. The CIT (A) reversed the order. The CIT (A) elucidated the various terms in the
agreement which stated that the payment was for limited access of the software and violation of
the conditions would lead to termination of use of the software. The ITAT dismissed the
departmental appeal following its order for earlier years and allowed the expenditure. (ITA No.
4975/Del/2015 order dt.01-09-2017) (AY. 2011 – 2012)
Dy.CIT v. GE Capital Business Process Management Services Pvt. Ltd. (2017) 59 ITR 188
(Delhi) (Trib)
S. 37 (1) : Business expenditure – Capital or revenue - compensation towards infringement
of rights of the land owners of the mines along with the royalty - payment would still
constitute a revenue payment.
The assessee was engaged in the manufacture of cement, for which limestone was the main raw
material. The assessee had obtained a mining lease from State Government for quarrying
limestone, for which it paid royalty as well as compensation towards infringement of rights of the
mine owners. The assessing officer disallowed this expenditure on the ground that the same
provided enduring benefits to the assessee and hence should be capitalized. On appeal, the CIT
(A) deleted the addition made by the AO. On further appeal by revenue, the ITAT held that the
compensation paid by the assessee was paid for the damage caused on the infringement of right of
the land owner and that this expenditure was incidental to the business since the mine was
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necessary for the conduct of business operations. The said expenditure was occurrence of
business activities. The ITAT directed the AO to allow the expenditure. (ITA No. 686,
1101/Kol/2014 dt. 13-09-2017) (AY. 2010 – 2011)
Birla Corporation Ltd. v Dy. CIT (2017) 59 ITR 59 (SN.) (Kol) (Trib)
S. 37 (1) : Business expenditure – Business was not commenced, expenses was held to be
not allowable
The Tribunal held that the expenses laid by the assessee for the purposes of getting the mining
land and leasehold land are required to be treated as capital expenditure. (AY. 2006-07 to 2009-
10, 2011-12 to 2013-14)
S. 37 (1) : Business expenditure – Rural development expenses - Not proved for the
purposes of business, hence not allowable as deduction .
The Tribunal held that in the absence of material proving the expenses incurred for the business
of the assessee, same cannot be allowed under section 37 of the Act. (AY. 2006-07 to 2009-10,
2011-12 to 2013-14)
S. 37 (1) : Business expenditure – Afforestation, plantation and environment expense, was

held to be allowable as business expenditure.
The Tribunal held that the expenditure incurred for maintaining the gardens, obtaining
environmental clearances and trees paid to pollution control board has been made out and
expended wholly and exclusively for the business purpose. The disallowance is deleted. (AY.
2006-07 to 2009-10, 2011-12 to 2013-14)
S. 37 (1) : Business expenditure – Mines development expenses was held to be not allowable
The Tribunal held that the assessee having not consumed commercial production during the
relevant year, mines development expenses are not allowable as deduction. (AY. 2006-07 to
2009-10, 2011-12 to 2013-14)
S. 37 (1) : Business expenditure – Capital or revenue - Attending the court was held to be
allowable – For interior design was to be capitalised, and depreciation was to be allowable.[
S. 32 ]
Tribunal held that ,professional fee paid for attending Court matters was held to be allowable as
business expenditure however professional fee for purpose of interior design and drawing of set
up of property, it was to be capitalized and assessee was to be given depreciation thereon; if
property was under development, expenditure was to be added to cost of project (AY. 2012-13)
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Krunal Industrial Estate Developers (P.) Ltd. v. ITO (2017) 167 ITD 407 (SMC) (Mum)
(Trib.)
S. 37 (1) : Business expenditure - Interest paid beyond credit period was held to be
allowable .
Allowing the appeal of the assessee the Tribunal held that; Interest paid beyond credit period was
held to be allowable, as the payment was made in relationship to business conducted by assessee.
(AY. 2012-13)
(Trib.)
S. 37 (1) : Business expenditure - Foreign travelling expenses of employees – Allowable on

the principle of consistency .
Dismissing the appeal of the revenue the Tribunal held that; Assessee had incurred foreign travel
expenses in earlier years also and revenue had allowed same as business expenditure, when there
was no change in facts and circumstances of case during year under appeal, revenue could not
take a different stand and disallow said expenses ignoring principle of consistency. (AY. 2010-
11)
DCIT v. J. Thomas & Co. (P.) Ltd. (2017) 167 ITD 572 (Kol) (Trib.)
S. 37 (1) : Business expenditure - Capital or revenue-Application of soft ware expenditure

allowable as revenue expenditure.
Tribunal held that expenditure incurred by assessee in respect of application software had not
resulted in bringing a new capital asset in existence, same had to be allowed as a revenue
expenditure. (AY. 2007 - 08)
DCIT v. Bosch Ltd. (2017) 167 ITD 650 (Bang) (Trib.)
S.37 (1) : Business expenditure-Penalty-Delayed payment – Interest being penal in nature is

held to be not allowable as deduction. [Micro, Small And Medium Enterprises
Development Act, 2006, S. 16, 23 ]
Allowing the appeal of the revenue . the Tribunal held that in view of specific provisions under
Micro, Small and Medium Enterprises Development Act, 2006, interest paid to Micro, Small and
Medium Enterprises on account of delayed payment being penal in nature, said expenditure, the
said payment was held to be not allowable as deduction . (AY. 2007 - 08. 2008 - 09)
S. 37 (1) : Business expenditure – Capital or revenue - Stamp duty and registration charges
on flats to attract buyers as incentive was held to be allowable as revenue expenditure.
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Allowing the appeal of the assesse the Tribunal held that; Stamp duty and registration charges
on flats to attract buyers as incentive was held to be allowable as revenue expenditure. (AY.
2012-13)
(Trib.)
S.37 (1) : Business expenditure – Dormant - Expenditure was held to be allowable .

Dismissing the appeal of the revenue the Tribunal held that the normal business expenditure has
to be allowable when the business is dormant and has not been able to obtain the contract . It
cannot be held that the business was ceased to exist . (AY.2009-10)
ITO v. Patel Corp. (P.) Ltd. (2017) 167 ITD 83 (Mum) (Trib.)
S.37 (1) : Business expenditure - Advertisement expenses-Expenditure incurred toward

statute to be installed on circle of town was held to be business expenditure to enhance
brand image .
Dismissing the appeal of the revenue the Tribunal held that; expenditure incurred expenditure
towards a statue to be installed on circle of town, said expenditure was business expenditure
being incurred to enhance brand image of assessee's business. (AY.2009-10, 2010-11)
S. 37 (1) : Business expenditure - Club expenses claimed by advocate assessee - Advocate is

being restricted for advertising in view of the regulation of the Bar Council of India and
such type of expenditure is hit by the Explanation to section 37 (1) and therefore, the same
is disallowed
The assessee is an advocate and claiming the club expenses in view of his profession. The
advocate is being restricted for advertising in view of the regulation of the Bar Council of India
and such type of expenditure has been hit by the Explanation to section 37 (1) of the Act. No
plausible explanation has been given before us to justify the claim of the assessee. (AY .2005-06)
Nadir A. Modi v. JCIT (2017) 58 ITR 27 (Mum) (Trib)
S. 37 (1) : Business expenditure – Allowances to custom officials - Encashment of bank

guarantee - Allowable as deduction.-Provision for license fee , matter remanded.[S. 41 (1) ]
The assessee once agreed to bear these costs, thereafter, cannot interfere with GOI in discharging
its duties, obligation and responsibilities towards performance of sovereign functions of State
under Customs Act,1962, unless it is brought on record that decision of GOI in deploying
additional staff and officers is unconscionable or is suffering from perversity. Nothing of that sort
is emanating from records and pleadings. These functions under Customs Act,1962 to be
performed by GOI are sovereign functions of State and it is the responsibility of GOI to properly
discharge its duties, obligations and responsibilities as mandated under the Customs Act, 1962.
Further, it has now come on record that the outstanding amount payable by the assessee to GOI is
now recovered by GOI through encashment of bank guarantee, the disallowance made by the
130
Assessing Officer, thus, cannot be sustained. For limited verification of the claim of the assessee
that the entire liability towards customs stood discharged, we are remitting the matter back to the
file of Assessing Officer for limited verification. As regards provision for license fee matter was
remanded to the AO for verification. (AY. 2005 - 06 to 2010-11)
Bharat Diamond Bourse v. DIT (E) (2017)153 DTR 281/187 TTJ 239/58 ITR 513 (Mum.)
(Trib.)
S. 37 (1) : Business expenditure – Provision for warranty based on notional basis at 2% of

total sales , matter was remitted to AO for fresh consideration .
Tribunal held that the methodology followed to make the impugned warranty provisions is on
notional basis and hence, not allowable as business expenditure. The Assessee is duty bound to
explain the basis for making such provision and hence, remitted the issue to the AO for fresh
consideration. (AY. 2006-07 to 2009-10)
S. 37 (1) : Business expenditure - Capital or revenue - Travelling abroad for purchasing

machine for purpose of business — Machine put to use in business — Foreign travelling
expenses for purposes of business needs held to be allowable as revenue expenditure
On appeal, held that one of the partners of the assessee went abroad to purchase a machine for the
purposes of business and the machine was subsequently purchased and put to use in the business
of the assessee as well. Therefore, since the foreign travelling expenses incurred by the assessee
were admittedly for the purposes of business they had to be allowed as revenue expenditure.
Pile Foundation Co. v. ITO (2017) 59 ITR 256 (Delhi) (Trib)
S. 37 (1) : Business expenditure – Ad hoc disallowance was held to be not justified .
Deleting the addition the Tribunal held that ad hoc disallowance was held to be not valid . (AY.
2010-11)
S.37 (1) : Business expenditure - Expenses on account of compensation paid to its clients -
Losses occurred to Client due to negligence of Assessee's employees – Normal course of
Business - expenditure allowed. [ S.28 (1)]
Tribunal held that the amount paid to the client is necessarily an expenditure which is allowable
under section 37 of the Act as section 37 clearly states that any expenditure not in the nature of
capital expenditure or personal expense laid out or expenditure wholly and exclusively incurred
for the purposes of business or profession shall be allowed in computing the income chargeable
under the head profits and gains or business or profession. Moreover, circular no. 35 issued by
Board clearly states the losses arising due to negligence of employees has to be allowed as
expense if the loss took place in the normal course of the business and the amount involved was
necessarily kept for the purpose of business. In the present case, the losses were necessarily
131
incurred in the normal course of business of assessee and therefore, the expenditure was
allowable. (Circular no. 35-DCXLVII-20 of 1965, F. No. 10/48/65-IT (AI) dated 24-11-1965)
(AY. 2010-11)
Ashwani Financial Services (P.) Ltd. v. JCIT (2017) 165 ITD 486 (Asr) (Trib.)
S. 37 (1) : Business expenditure – Capital or revenue - Expenditure incurred on purchase of

plastic cans and crates, for the purposes of transportation of milk, is allowable as revenue
expenditure.
Dismissing the appeal of the revenue the Tribunal held that ,expenditure incurred on purchase of
plastic cans and crates, for the purposes of transportation of milk, is allowable as revenue
expenditure. (AY. 2012-13)
ACIT v. Tirumala Milk Products Pvt. Ltd. (2017) 59 ITR 137 (SN) (Visakha) (Trib.)
S. 37 (1) : Business Expenditure - Bogus Purchases – Books of account of Assessee not

rejected - Disallowance of purchases not proper. [ S.133 (6)]
Dismissing the appeal of the revenue the Tribunal held that; it was held that merely because the
suppliers had not appeared before the AO or CIT (A), it could not be conclude that the purchases
were not made by the Assessee. This is the case where books of account of the Assessee had not
been rejected and the AO had not brought on record anything which may prove that the evidences
submitted by the Assessee was bogus. Relying on the Bombay High Court decision in the case of
Nikunj Exim Enterprises Pvt. Ltd. 372 ITR 619, the Hon’ble Tribunal deleted the addition of
disallowing the purchases made by the Assessee. (AY. 2011-12)
ACIT v. Skylark Builders SSJC (Ghatkopar) (2017) 58 ITR 77 (SN) (Mum) (Trib.)
S.37 (1) : Business expenditure-Assessee-contractor bore expenses on account of provident

fund contribution of employees of sub-contractor was held to be allowable .
It was held by the Tribunal that S.37 (1) does not curtail or prevent an assessee from incurring an
expenditure which he feels and wants to incur for the purpose of business. As long as the
expenditure incurred is wholly and exclusively for the purpose of business, the AO cannot by
applying his own mind, disallow whole or a part of the expenditure. The AO cannot question the
reasonableness by putting himself in the arm-chair of the businessman and assume status or
character of the assessee and that it is for the assessee to decide whether the expenses should be
incurred in the course of his business or profession or not. Courts have also held that if the
expenditure is incurred for the purposes of the business, incidental benefit to some other person
would not take the expenditure outside the scope of section 37 (1). (AY. 2009-10]
Ratilal Bhagwandas Construction Co. (P.) Ltd. v. ITO (2017) 165 ITD 327 (Pune) (Trib.)
S. 37 (1) : Business expenditure – Expenses cannot be disallowed merely on the ground that
expenses were supported by self made vouchers, matter was remanded .
Tribunal held that; Expenses cannot be disallowed merely on the ground that expenses were
supported by self made vouchers, matter was remanded . (AY. 2012-13)
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Resonance Eduventures (P.) Ltd. v. ACIT (2017) 165 ITD 514 (Jaipur) (Trib.)
S. 37 (1) : Business expenditure - Setting up of business - JV started the construction hence

the business was said to be set up, therefore expenditure incurred in the said process was
held to be revenue expenditure .
Allowing the appeal of the assessee the Tribunal held that; JV started the construction hence the
business was said to be set up, therefore expenditure incurred in the said process was held to be
revenue expenditure . (AY.2009 - 10)
Samsara Hospitality (P.)Ltd. v. ITO (2017)166 ITD 416 (Mum) (Trib.)
S.37 (1) : Business expenditure – Capital or revenue – Major repair and maintenance
allowable as business expenditure
Dismissing the appeal of the revenue the Tribunal held that even though assessee incurred
expenses on major repair and maintenance of machinery, there was no enhancement in capacity
of plant and machinery or increase in efficiency and no new equipment was purchased, since no
enduring benefit was created by assessee out of said expenses, same was to be allowed as
business expenditure . (AY.2009 - 10)
DCIT v. Kalyanapur Cement Ltd. (2017) 165 ITD 637 (Kol) (Trib.)
S. 37 (1) : Business expenditure – Difference between the purchase price of stock

appreciation right and in sale price of stock appreciation right on exercise by employees is a
revenue expenditure deductible while computing the total income .
Difference between the purchase price of stock appreciation right and in sale price of stock
appreciation right on exercise by employees is a revenue expenditure deductible while computing
the total income. (AY. 2008-09).
(Trib)
S. 37 (1) : Business expenditure - Entire expenses incurred on abandoned project

development is allowable even if the assessee had amortized the same over a period of five
years in its books
Entire expenses incurred on abandoned project development is allowable even if the assessee had
amortized the same over a period of five years in its books. (AY. 2008-09)
Royal Calcutta Turf Club v. DCIT (2017) 158 DTR 92 /189 TTJ 433 /59 ITR 656 (Kol.)
(Trib.)
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S. 37 (1) : Business expenditure - Capital or revenue - Expenditure incurred in connection
with issue of foreign currency convertible bonds was held to be revenue expenditure.
Dismissing the appeal of the revenue the Tribunal held that; expenditure incurred in connection
with issue of foreign currency convertible bonds was held to be revenue expenditure.
(AY.2009-10)
DCIT v. Reliance Natural Resources Ltd (2017) 166 ITD 385 (Mum) (Trib.)
S. 37 (1) : Business expenditure - Business promotion expenses and vehicle running and
maintenance cannot be disallowed on estimate without any cogent material
Dismissing the appeal of the revenue the Tribunal held that; Business promotion Expenses and
vehicle running and maintenance cannot be disallowed on estimate without any cogent material .
(AY. 2011 – 2012)
ACIT v. Mohinder Kumar Jain (2017)166 ITD 302 // 189 TTJ 529/57 ITR 78 (SN) (Delhi)
(Trib.)
S. 37 (1) : Business expenditure – Capital or revenue – Non - compete fee - 1% of annual

turnover paid to holding company was held to be allowable as revenue expenditure.
Allowing the appeal of the assessee the Tribunal held that ; 1% of annual turnover paid to
holding company for rendering various services was held to be allowable as revenue expenditure,
without such non-compete fee the assessee could not carry on its business more efficiently and
profitably . (AY. 2012-13)
Kapil Chits (Kakatiya) (P.)Ltd. v. ACIT (2017) 166 ITD 608 (Hyd.) (Trib.)
S. 37 (1) : Business expenditure - Sales promotion expenses – Pharmaceutical company -

Sponsoring of doctors - 50 per cent of expenses of sales promotion was allowed .
Tribunal held that since no documentary evidence in support of said claim or confirmation from
any doctor for availing services to assessee disallowance of 50 per cent of expenses was justified.
(AY. 2006-07 to 2008-09)
DCIT v. OCHOA Laboratories Ltd (2017) 166 ITD 508/189 TTJ 839 (Delhi) (Trib.)
S. 37 (1) : Business expenditure - Free air travel, stay and food in hotels, local car
conveyance to doctors for prescribing medicines of assesse is being contravention of public
policy, disallowance was held to be justified
Tribunal held that ;expenses incurred on Free air travel, stay and food in hotels, local car
conveyance to doctors for prescribing medicines of assesse is being contravention of public
policy, disallowance was held to be justified . (AY. 2006 – 2007)
DCIT v. OCHOA Laboratories Ltd (2017) 166 ITD 508 /189 TTJ 839 (Delhi) (Trib.)
S. 37 (1) : Business expenditure – Compensation paid to the Family Members of freelance

divers was held to be allowable expenditure .
Dismissing the appeal of the revenue, the Tribunal held that; compensation paid to the Family
Members of freelance divers of Assessee,died in ship accident, same was to be allowed as
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business expenditure as the expenses incurred during the course of business and was of to
safeguard business interest. It was a commercial decision taken by assesse thus assesse is eligible
. (AY.2012-13.)
DCIT v. Adsun Offshore Diving Contractors (P.) Ltd. (2017) 166 ITD 16 (Mum) (Trib.)
S. 37 (1) : Business expenditure – Ad-hoc disallowance of 10% - Expenses on fuel and

lubricants and incentive to staff – AO disallowed the same for non-production of evidence
on expenditure – Not permissible especially when the AO accepted the audited accounts and
when the assessee had disclosed a higher net profit as against the net profit in trade [
S.44AB]
Allowing the appeal of the assesse the Tribunal held that; when the AO has accepted the audited
accounts u/s. 44AAB in Form 3CB, the disallowance so made is not permissible on the ground of
non-production of the evidence particularly when the assessee has disclosed a net profit of 9.9%
as against the net profit of 1% to 4% in the same trade. The assessee having shownthe profit at
9.9% and having regularly maintained books of account in the regularcourse of business duly
audited u/s. 44AB, the Assessing Officer as well as theCommissioner of Income-tax (Appeals)
had exceeded their powers to disallow the deductions claimedby the assessee in the face of the
books of account duly audited u/s. 44AB,having been accepted by the Assessing Officer. (AY.
2009-10).
Gurudev Singh .v. ACIT (2017)56 ITR 503 /188 TTJ 44 (UO) (Cuttack) (Trib.)
S. 37 (1) : Business expenditure - Car gifted to ex-employee though no terms of employment

- Personal gift not part of employment or contribution made to assessee’s business hence
not allowable
Tribunal held that; the car was purchased on September 1, 2008 and in the same month it was
transferred to ex-employee, Mrs .Shefali Goradia. The terms of employment did not provide for
giving any car to employees. The gift of car was purely gratitude. This expenditure was not
incurred wholly and exclusively for the purpose of business. The assessee had not given a car to
every employee. Therefore it was a personal gift rather than a part of employment or contribution
made to the assessee’s business. Every businessman is free to make the expenditure but it must be
allowable in the sense that it was wholly and exclusively for the purpose of business. (AY. 2005-
06, 2009-10).
S. 37 (1) : Business expenditure - Expenses incurred for co-publication of book presented to

foreign and Indian clients coming to India for professional work such as business law and
international taxation — payment to international fiscal association relating to
international taxation and starting of centre for professional development — Allowable
business expenditure .
The assessee had paid to Chatrapati Shivaji Maharaj Vasthu Sangrahalaya publication and
American India Foundation. The AO disallowed the payment to publication stating this was not
connected to the assessee’s business and the expenditure was not for business purposes.
Similarly, disallowed payment to American India Foundation stating that the assessee did not
explain how the payment was connected with the assessee’s business. It was held that Held, that
the assessee had made the payment to Chatrapati Shivaji Maharaj Vasthu Sangrahalaya towards
co-publication of the book named Indian Life and Landscape By Western Artists. The assessee
had been provided 100 copies of the book which the assessee had presented to foreign and Indian
clients who were coming to India for professional work such as business law and international
taxation. The expenditure was a business expenditure. The assessee had paid Rs. 12,50,000/- to
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International Fiscal Association which comprised tax professionals from world over and had
initiated a centre for thought leadership in international taxation to look into the emerging issues
in international taxation and find new generation solutions for cross border tax issues in a fair and
equitable manner. Therefore this was a genuine expenditure for professional development and
had to be allowed. (AY. 2005-06, 2009-10).
S. 37 (1) : Business expenditure - Expenditure towards conference and sponsorship of

seminars and pertaining to hotel, food and travelling expenses —Disallowance was held to
be justified
Tribunal held that; the disallowance of Rs .27,35,250, expenditure towards conference and
sponsorship of seminars and pertaining to hotel, food and travelling expenses was held to be
justified. (AY. 2005-06 ,2009-10).
S. 37 (1) : Business expenditure - Electricity charges — assessee using adjoining premises

not owned by him — assessee not paying any compensation for utilising premises except
paying electricity charges — expenses allowable .
Since the assessee was facing shortage of space to accommodate his employees, he used the
office premises of P adjoining the assessee’s existing office. Therefore the entire electricity
expenses were borne by the assessee. The assessee did not pay any compensation to P for using
the office premises and therefore he paid the electricity charges. The Commissioner of Income-
tax (Appeals) was justified in allowing the electricity expenses. (AY. 2005-06, 2009-10).
S. 37 (1) : Business expenditure – Bogus purchases - Addition to the extent of 12.5% of

bogus purchases was up held . [ S. 69C ]
The Tribunal held that the assessee was in possession of purchase invoices but these invoices
were incomplete with respect to details of transportation and the revenue having failed to
establish the purchases as non-genuine beyond doubt, addition on account of bogus purchases is
upheld to the extent of 12.5% on the facts of the case. (AY. 2009-10 ,2010-11)
Toscano Infrastructure (P) Ltd. v. DCIT (2017) 187 TTJ 1 (UO) (Mum.) (Trib.)
S. 37 (1) : Business expenditure-Contribution to Provident Fund established under a

scheme framed under Employees Provident Funds Act, 1952 is held to be allowable
deduction though not taken any recognition from Commissioner. [2 (38)]
AO disallowed the contribution made to the recognized Provident Fund on the ground that the
Fund was not recognised by the Commissioner . Allowing the appeal of the assessee, the Tribunal
held that; the assessee had contributed to the Provident Fund established under a scheme framed
under the Employees Provident Funds Act, 1952 and though it has not taken any recognition
from the department u/s. 2 (38),the assessee satisfies the condition of contributing to Recognized
Provident Fund as per s. 2 (38) of the Act hence allowable as deduction. (AY. 2011 – 2012)
Voxiva India (P.) Ltd. v. ITO (2017) 164 ITD 544 /188 TTJ 39 (SMC) (Delhi) (Trib.)
S. 37 (1) : Business expenditure – Loss was recouped with earnings from sponsorship of
assessee's Cricket Team Kolkata Knight Riders was held to be wholly & exclusively for
purpose of business, same was to allowed.
Assessee was an actor by profession; he entered into an Artist Service agreement with Star India
for acting as anchor and host of a programme. Consideration was received by assesse, after
production of half of episodes, Star India decided not to produce balance episodes for commercial
136
reasons. Since balance episodes were not produced, Star India wanted to recover value of
unutilised amount from assessee for non-shooting of remaining episodes. Assessee entered into
an agreement with Star India on a mutually agreed basis to recoup loss suffered by Star India by
securing it sponsorship of Cricket Team Kolkata Knight Riders (KKR) and paid to KKR on
behalf Star India. Expenditure was incurred wholly and exclusively for purpose of business, and,
same was to be allowed. (AY. 2009-10, 2010-11)
Shah Rukh Khan v. ACIT (2017) 164 ITD 18 / 185 TTJ 289 (Mum) (Trib.)
S. 37 (1) : Business expenditure – Capital or revenue-Repairs and maintenance – Property

adjacent to assessee's registered office which was used for business purposes was held to be
allowable as revenue expenditure .
Assessee debited towards maintenance of a property and submitted that said property was
adjacent to registered office of assessee and was used for business purposes only. Tribunal held
that since expenditure was related to business of assessee, deduction of such expenditure was
held to be allowable . (AY. 1996 – 1997)
ITO v. GKW Ltd. (2017) 164 ITD 621/(2018) 162 DTR 54 (Kol.) (Trib.)
S.37 (1) : Business expenditure - Provision for warranty on actual basis was held to be
allowable . [ S. 145 ]
Provision for warranty on actual basis was held to be allowable as deduction. (AY. 2008 – 2009,
2011 – 2012)
Anchor Electricals (P.) Ltd. v. DCIT (2017) 164 ITD 510 (Mum) (Trib.)
S.37 (1) : Business expenditure - Licence fee paid for use of goodwill by a law firm is held
to be allowable deduction.
The issue was with respect to whether the disallowance of license fee paid by the assessee to
RSCPL for license to practice as 'Remfry & Sagar' and for use of the said name, trade mark and
goodwill is correct or not.
The revenue was of the opinion that segregation of goodwill from the legal practice cannot be
permitted. It was further argued that under the Advocates Act, 1961, the goodwill earned by an
advocate cannot be alienated to any person or company which is not entitled to practice under the
Advocates Act, 1961.
It was observed by the Tribunal that no specific law or section or no legal prohibition was
brought to the notice of the Bench in support of the argument that good will of a profession
cannot be sold to a company which does not have a right to carry on practice. In any event, the
ITAT has no power or authority to adjudicate the issue as to whether, the gift of goodwill of
profession of law, to a company is violating the Advocates Act, 1961 or the Bar Council Rules.
No authority has held that such an arrangement violates any Act or law of the land.
It was thus held by the Tribunal that the assessee firm could not have continued and carried on the
profession of Attorneys-at-Law in the name of "Remfry & Sagar" and use its goodwill and all its
associated rights without the impugned agreement with RSCPL. Hence the payment has to be
held as that which is incurred wholly and exclusively for the purpose of business or profession.
(AY. 2003-04 to 2010-11)
Remfry & Sagar v. JCIT (2016) 182 TTJ 744/(2017) 162 ITD 324/147 DTR 313 (Delhi)
(Trib.)
S.37 (1) : Business expenditure - Failure of assessee to fulfil its obligation in nature of
default of business obligation - compensation paid was held to be as business expenditure .
[ S. 145 ]
The Tribunal held that the liability was already in existence in terms of the agreement between
the parties that in the event of failure to deliver the completed constructed area, the assessee
137
would be liable to make good of the losses and damages to the other party. The liability to pay the
compensation and damages is also a certain liability as per the terms and conditions of the
agreement between the parties though the quantum was to be determined through arbitration. In
the case on hand, the failure of the assessee to fulfil its obligation is in the nature of default of
business obligation and therefore the compensation payable/paid by the assessee would become
an allowable claim being the business loss/expenses in order to carry out their business/obligation
and therefore the said claim of deduction is in the revenue field. (AY. 2005-06)
Canara Housing Development Company v. JCIT (2017) 165 ITD 76/190 TTJ 314 /(2018) 162
DTR 153 (Bang) (Trib.)
S.37 (1) : Business expenditure-Expenditure incurred on construction of houses which were

donated to people affected from flood was held to be not allowable as deduction.
It was held by the Tribunal that the expenditure was incurred by the assessee voluntarily. In order
to claim deduction under section 37 (1) conditions to be satisfied are that a item of expenditure
should not be an item of expenditure described in sections 30 to 36 and should not be described as
capital expenditure or personal expenses of the assessee. It should be laid out or expended wholly
and exclusively for the purpose of business or profession. Needless to mention, all the three
conditions should be cumulatively satisfied.The only dispute is regarding satisfaction of the
condition that the expenditure was laid out and expended wholly and exclusively for the purpose
of business.Onus lies on the assessee to prove that the expenditure was incurred for the purpose
of business.Mere bald assertion that the expenditure was incurred for promoting business cannot
be accepted without establishing the nexus between expenditure and business. Therefore, it
amounts to application of income voluntarily towards charity which cannot be allowed as a
deduction. (AY. 2011-12, 2012-13 )
Kanhaiyalal Dudheria v. JCIT (2017) 165 ITD 14 (Bang.) (Trib.)
S.37 (1) : Business expenditure – No proof to show that penalty levied is not for breach of
law – Disallowance was held to be justified.
When nothing was brought on record to show that the penalty was not paid for breach of any
provisions of the law, the sum debited to the P&L a/c as expenditure was not allowed as a
deduction. (AY. 2011-12, 2012-13)
Kanhaiyalal Dudheria v. JCIT (2017) 165 ITD 14 (Bang.) (Trib.)
S.37 (1) : Business expenditure-Provision for warranty claims for software products was
held to be allowable as business expenditure. [S. 145]
The Tribunal held that as long as the assessee has made the provision for warranty claims on a
scientific basis and historical data, this is admissible as deduction in computation of business
income. (AY. 2012-13)
DCIT v. Elitecore Technologies (P.) Ltd. (2017) 165 ITD 153 /186 TTJ 1/150 DTR 185
(Ahd.) (Trib.)
S.37 (1) : Business expenditure-Tax withheld abroad is hit by disabling provisions of section
40 (a) (ii) hence not allowable as business expenditure . [S. 40 (a) (ii)].
Assessee earned income in different countries. It was in respect of those income that the taxes
were withheld in the respective source countries.
It was held by the Tribunal that if the main provision, as is the claim of the assessee, does not
cover the taxes paid abroad, there cannot be any occasion to include, under Explanations to
section 40 (a) (ii), taxes in respect of which relief under sections 90 and 91 is not admissible. No
deduction under section 37 (1) can be allowed in respect of any income tax withheld abroad as
the same will be hit by the disabling provisions under section 40 (a) (ii) of the Act. (AY. 2012-
13]
138
(Ahd) (Trib.)
S. 37 (1) : Business Expenditure – Genuineness of payment for consultancy services -

Restored back to AO .
This issue was restored back to AO for de novo determination. (AY. 2008-09)
ACIT v. I&E Trade Consultants (P) Ltd. (2017) 185 TTJ 760 (Mum.) (Trib.)
S. 37 (1) : Business expenditure – Capital or revenue - Advertisement expenditure in

connection with change of name is held to be revenue expenditure .
The Tribunal held that expenditure on advertisement in connection with change of name was
allowable as revenue expenditure. (AY. 2008-09)
Axis Bank Ltd. v. ACIT (2017) 185 TTJ 722/155 DTR 49 (Ahd.) (Trib.)
S. 37 (1) : Business expenditure - Its single unit lying closed and its assets were under
control of secured banks, expenditure was held to be not allowable.
Assessee a manufacturer of yarn, and had incurred manufacturing expenses, selling &
administrative expenses and financial expenses, the AO disallowed these expenses as not being
related to business of assesse. CIT (A) allowed said expenses as these expenses were required to
be incurred for keeping factory in a ready to operate condition. Tribunal held that; single
manufacturing unit was lying closed since 2005 and lending banks were in possession of secured
assets of assesse. Further there was no evidence placed by assessee on record to demonstrate that
any attempt or efforts had been made by it to do any business or to re-start its manufacturing unit.
Held that expenses claimed cannot be allowed as business expenses as they were not incurred
wholly and exclusively for purpose of business of assesse. Further expenses like auditor fees,
ROC fee and other expenses etc. incurred by assesse allowed as these expenses were incurred for
meeting and complying with statutory compliances and obligations as imposed by law. (AY
.2010 – 2011)
DCIT v. Ashik Wollen Mills Ltd. (2017) 164 ITD 331/56 ITR 184 (Mum) (Trib.)
S.37 (1) : Business expenditure-Film distributor – Advertisement expenses to be incurred by

producer in terms of agreement is not entitled to deduction in terms Rule 9B (1) [R.9B (1)].
Assessee acquired film rights on minimum guarantee basis and claimed deduction for
advertisement expenses. Tribunal held that ;advertisement expenses to be incurred by producer in
terms of agreement is not entitled to deduction in terms of Rule 9B (1). (AY.2010-2011, 2011-
12)
ACIT v. Madhusudhana Reddy (2017) 55 ITR 629 (Chennai) (Trib.)
Madhusudhana Reddy v. ACIT (2017) 55 ITR629 (Chennai) (Trib.)
S.37 (1) : Business expenditure-Foreign travel expenditure- Allowable as business

expenditure though no export business was generated during the year .
Dismissing the appeal of the revenue, the Tribunal held that; foreign travel expenditure is held to
be allowable as business expenditure though no export business was generated during the year .
(AY. 2009-10)
ACIT v. Allied Gems Corporation (2017) 55 ITR198 (Mum.) (Trib.)
S. 37 (1) : Business expenditure-Commission expenses - No evidence on record to prove that

work done by agents hence the disallowance was held to be justified.
Dismissing the appeal of the assessee, the Tribunal held that, assessee has not produced any
evidence to prove the work done hence disallowance was held to be justified. (AY.2009-
2010,2010-2011)
139
Milap Industrial Corporation v. JCIT (2017) 55 ITR 193 (Chd.) (Trib.)
S. 37 (1) : Business expenditure—Expenditure incurred voluntarily and without any

necessity would be allowable so long as it had been incurred for promoting business of
assessee.
Allowing the appeal of assesse the Tribunal held that; expenditure incurred voluntarily and
without any necessity would be allowable so long as it had been incurred for promoting business
of assessee. (AY. 2009-10 ,2010-11)
Shah Rukh Khan v. ACIT (2017)164 ITD 18/49 CCH 253 /185 TTJ 289/150 DTR 25
(Mum.) (Trib.)
S. 37 (1) : Business expenditure – Commission-Volcker Committee-Not proved that

commission payments were illicit, it could not be concluded that same were not made for
purpose of business and, thus, Expl. 1 to s. 37 (1) could be invoked.
Allowing the appeal of the assessee, the Tribunal held that; Explanation 1 to s. 37 (1) could not
be invoked merely on basis of an un-established doubt that expenditure incurred could be for
infraction of law. Assessee exported goods to Iraq under UNO 'oil for food scheme. In this
connection, it paid commission to its agent for providing services to them and realization of
export proceeds. Authorities below held that commission paid by assessee were illicit payments.
It was noticed that commission payments were for services rendered by its agents to it. Further,
noticed that there was nothing to show that said transactions were non genuine or excessive or
unreasonable. It was held that not proved that impugned commission payments were illicit, it
could not be concluded that same were not made for purpose of assessee's business and Expl. 1
could not be invoked. (AY. 2003-04 2005-06)
Bajaj International (P.) Ltd. v. DCIT 162 ITD 278 (Mum) (Trib.)
S. 37 (1) : Business expenditure – Tribunal restricted the disallowance of 10% of land

development expenses as against 25 % disallowed by the AO.
On appeal by the assessee the Tribunal;restricted the disallowance of 10% of land development
expenses as against 25% disallowed by the AO. (AY. 2009-10)
Fatehsinh Mohansinh Chauhan v. DCIT (2017) 163 ITD 591 (Ahd.) (Trib.)
S. 37 (1) : Business Expenditure - Once business is set up even if no business income is

earned during the year, business expenses would be allowable.
Allowing the appeal of the assesse, the Tribunal held that ,Once business is set up even if no
business income is earned during the year, business expenses would be allowable . (AY.2010-11)
Globex Energia (P.) Ltd. v. ACIT (2017) 162 ITD 532 (Mum) (Trib.)
S.37 (1) : Business expenditure-Capital or revenue – Software expenses-Expenditure for

installation of ERP software is a capital expenditure.
Assessee incurred expenditure for installation of Enterprise Resource Planning (ERP) software
and claimed it as revenue expenditure. Tribunal held that ;since ERP was part of profit making
apparatus of business, for enabling its management and operations, for improving productivity
without which said business operations would not have been possible, it had been rightly
regarded as a capital asset and expenditure on same being capital expenditure. (AY. 2011-12,
2012-13)
Voltech Engineers (P.) Ltd. v.DCIT 163 ITD 469 (Chennai) (Trib.)
140
S. 37 (1) : Business expenditure – Capital or revenue-Dubbing costs, foreign language TV
program was held to be capital expenditure and to be amortised along with cost of licence
fee.
Allowing the appeal of the revenue, the Tribunal held that; without incurring dubbing costs,
foreign language TV program could not be utilised for earning revenue, hence it would form part
of licence fees paid for acquiring said program; it would amount to capital expenditure should be
amortised along with cost of licence fee. (AY. 2010-11)
DCIT v. United Home Entertainment (P.) Ltd. (2017) 163 ITD 172 (Mum.) (Trib.)
S.37 (1) : Business expenditure-SBLC charges paid to bank as guarantee to a bank was held
to be allowable as business expenditure.
Dismissing the appeal of the revenue, the Tribunal held that; SBLC charges were received by
assessee as income and similar charges were paid as guarantee to a bank, same amount being
income on one hand and expenditure on other hand, nullified all accounts, therefore, such amount
would be considered as business expenditure. (AY. 2009-10)
ITO v. Shalini Properties & Developers (P.) Ltd. (2017) 163 ITD 666 (Kol.) (Trib.)
S. 37 (1) : Business expenditure-Interest income from FDR was shown in excess in previous
year, cannot be claimed as expenditure in subsequent year. [S. 145 ]
Dismissing the appeal of the assesse the Tribunal held that, Interest income from FDR was shown
in excess in previous year, cannot be claimed as expenditure in subsequent year. Only remedy
was revising return for said year. (AY. 2012-13)
Haryana State Electronics Development Corporation Ltd. v.DCIT (2017) 163 ITD208
(Chd.) (Trib.)
S. 37 (1) : Business expenditure – Commission-Assessee has to prove the services rendered

by recipient of commission, matter was set aside.
Allowing the appeal of the revenue, the Tribunal held that; to claim expenditure on account of
commission had to prove that services were rendered, by recipient of commission from assessee.
Payment was made by account payee cheque or fact that tax had been deducted at source or fact
that recipient of commission had declared commission in his return of income and paid taxes
thereon, were all irrelevant considerations. Since evidence regarding nature of services rendered
by recipient of commission had not been placed on record matter required to be re-adjudication.
(AY. 2007-08)
ITO v. PKS Holdings (2017) 162 ITD 1/152 DTR 215/187 TTJ 60 (Kol.) (Trib.)
S. 37 (1) : Business expenditure – Ad-hoc disallowance-Where the books of accounts were

audited, AO was not justified in disallowing 20 per cent expenditure.
Allowing the appeal of the assessee the Tribunal held that; where the books of accounts were
audited, AO was not justified in disallowing 20 per cent expenditure. (AY. 2010 – 2011)
Quality Circle Forum of India v. Dy.CIT (2017) 162 ITD 122 (Hyd.) (Trib.)
S.37 (1) : Business expenditure – Cricketer-Direct nexus between professional income along
with expenditure needs to be established before allowing expenses-Matter remanded.
Assessee a cricketer received match fees/retainerships from various cricket bodies as declared
under head 'income from business and profession. The expenditure was claimed against the said
income, which was rejected by the AO. In appeal the CIT (A), partly allowed the appeal . On
appeal by the revenue, the Tribunal held that there has to be direct nexus between professional
income and expenditure, however, neither Assessing Officer nor Commissioner (Appeals) sought
to establish a direct nexus between assessee's professional income and expenditure, thus, matter
was to be remanded back for adjudication afresh. (AY. 2009-10, 2012-13)
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DCIT v. Parthiv A. Patel (2017) 163 ITD 146 (Ahd.) (Trib.)
S. 37 (1) : Business expenditure-Capital or revenue-Renovation of rented show rooms was

held to be revenue expenditure. Expenditure incurred to make premises more suitable and
conducive to business activity on replacement or repairing of existing furniture and fixtures and
modification to facilitate display of products was held to be revenue expenditure (AY.2010-2011)
CIT v. Sales India Pvt. Ltd. (2017) 54 ITR 272 (Ahd.) (Trib.)
S.37 (1) : Business expenditure-Capital or revenue-Setting up of business-Expenses incurred

after business set up and before commencement of business was held to be revenue
expenditure.
Expenses incurred after business set up and before commencement of business was held to be
revenue expenditure. (AY. 2002-2003, 2003-2004)
S. 37 (1) : Business expenditure – Business of giving rigs on hire for drilling oil has been set
up in earlier years, mobilization expenses is to be allowed as revenue expenditure.
Where assessee imported new rigs to give them on hire for oil drilling and incurred mobilization
expenses thereupon to make them operational, said expenses were of revenue nature as rigs were
acquired as expansion of existing business and no new business had been set up nor any new
source of income had come to existence. (AY. 2009-10)
Dewanchand Ramsaran Industries (P) Ltd. v. ACIT (2017) 146 DTR 25 (Mum.) (Trib.)
S. 37 (1) : Business expenditure – Pharma Company - Advertisement and sales promotion

expenses – Expenses incurred by assessee could not be reckoned as freebies given to doctors,
thus expenditure being purely for business purpose had to be allowed as business
expenditure.
Expenditure incurred by assessee Pharma Company for customer relationship management, key
account management, gift articles, free medicine sample, advertisement and sales promotion was
purely for brand recognition and could not be considered as freebies given to doctors. Hence, the
same is allowable as business expenditure and were not impaired by Explanation 1 to section 37
(1). (AY.2010-11)
Dy. CIT v. PHL Pharma (P) Ltd. (2017) 163 ITD 10 /146 DTR 149 /184 TTJ 1/55 ITR 168
(Mum.) (Trib.)
S. 37 (1) : Business expenditure – Foreign travel – Expenditure on travelling expenses of the

partner was held to be allowable.
Dismissing the appeal of the revenue, the Tribunal held that expenses incurred by partners of the
firm on foreign travel to countries from which substantial business was generated, was to allowed
as deduction. (AY. 2009-10)
ACIT v. Allied Gems Corporation (Bombay) (2017) 163 ITD 56 (Mum.) (Trib.)
S. 37 (1) : Business expenditure-Capital or revenue-Stock Options (appreciation rights) are

intended to motive employees and so the expenditure thereon is a deductible revenue
expenditure. The discount (difference between market price and vesting price) is allowable
upon vesting subject to reversal if the options lapse.
Allowing the appeal of assessee the Tribunal held that;Stock Options (appreciation rights) are
intended to motive employees and so the expenditure thereon is a deductible revenue expenditure.
The discount (difference between market price and vesting price) is allowable upon vesting
subject to reversal if the options lapse. (ITA No. 2283/Del/2013, dt. 04.01.2017) (AY. 2008-9-
09)
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Religare Commodities Ltd. v. ACIT (Delhi) (Trib.); www.itatonline.org
S. 37 (1) : Business expenditure - Capital or revenue – Testing fee cannot be categorized as

capital expenditure .
Assessee has not acquired any technology, advantage or enduring benefit by paying testing fee to
its non-resident AE for testing the rubber hose pipes produced by it for quality control purpose
and therefore, the impugned expenditure cannot be categorized as capital expenditure. (AY.
2002-03)
ACIT v. Gates India (P) Ltd (2017) 159 DTR 17/189 TTJ 473 (Delhi) (Trib)
S.37 (1) : Business expenditure-Amount paid to State authority-Not payment for

infringement or irregularity of law, payment cannot be disallowed. [S. 37 (1), Expln.,
Maharashtra Housing and Area Development Act, 1976]
The construction expenses incurred for alleged bogus tenants was disallowed on the ground that
the payments was in contravention of, Maharashtra Housing and Area Development Act, 1976.
On appeal the CIT (A) held that the proportionate cost of construction was to be disallowed in the
year when project was completed .On appeal Tribunal held that; since the project was not
completed by the assessment year 2008-09, no profit could be assessed for that year there no
disallowance can be made for the relevant year. The Tribunal also held that expenditure incurred
was legal and accordance with law and the amount under Maharashtra Housing and Area
Development Act, 1976 was also in the nature of cost of construction and admissible as business
expenditure . The payment was either in the nature of fine nor in the nature of penalty. It was not
attributable to any irregularity or infringement of law. Therefore the claim was admissible for
deduction as business expenditure. (AY.2004-2005 to 2011-2012)
ACIT v. Layer Exports P. Ltd. (2017) 53 ITR 416 (Mum) (Trib.)
S.37 (1) : Business expenditure-Capital or revenue - Renovation of road is held to be

revenue expenditure.
Treatment as capital in books of account not relevant, refurbishment expenses of terminals of
airport is held to be revenue expenditure. (AY.2008-09)
Addl. CIT v. Mumbai International Airport P. Ltd. (2017) 53 ITR 169 /148 DTR 201
(Mum.) (Trib.)
S.37 (1) : Business expenditure-Penalty-Demurrage charges are in the form of punitive

charges not illegal payment or payment opposed to public policy,payment being under
contractual obligation, allowable as deduction.
Dismissing the appeal of the revenue the Tribunal held that; Demurrage charges are in the form
of punitive charges not illegal payment or payment opposed to public policy, payment being
under contractual obligation, allowable as deduction. (AY. 2010 - 11)
Dy. CIT v. Ripley and Co. Ltd. (2017) 53 ITR 541 (Kol.) (Trib.)
S.37 (1) : Business expenditure-Employees stock option scheme-Discount on issues of option

allowable-Assessing Officer was directed to work out deduction.
Discount on issue of option on employees stock option scheme, the Assessing Officer was
directed to work out the deduction. (AY.2007-2008, 2008-2009)
143
S.37 (1) : Business expenditure Capital or revenue-Process of research includes trial run of
new drug, experiments on new drug not new line of business, expenses allowable as
revenue.
Process of research includes trial run of new drug, experiments on new drug not new line of
business, expenses allowable as revenue. (AY.2007-2008, 2008-2009)
S.37 (1) : Business expenditure-Capital or revenue-ERP package for recording of

manufacturing and accounting is held to be revenue expenditure.
ERP package for recording of manufacturing and accounting is held to be revenue expenditure.
(AY.2007-2008, 2008-2009)
Dr. Reddy's Laboratories Ltd. v. Add. CIT (2017) 53 ITR 285 (Hyd.) (Trib.)
S.37 (1) : Business expenditure-Capital or revenue-Laying of roads was held to be revenue

expenditure.
Tribunal held that Lying of roads, facilitating assessee to carry on business effectively which is
revenue expenditure. (AY.2007-2008, 2008-2009)
Dr. Reddy's Laboratories Ltd. v. (2017) 53 ITR 285 (Hyd) (Trib)
S.37 (1) : Business expenditure-Capital or revenue-Website development expenses was held

to be revenue expenditure.
Website development expenses was held to be revenue expenditure it does not create an asset but
only to provide a means for disseminating information about assessee. (AY.2002-2003)
ITO v. All India Technologies Ltd. (2017) 53 ITR 620 (Kol.) (Trib.)
S.37 (1) : Business expenditure-Liquor business-Privilege fee or special privilege fee paid to
Government is held to be deductible.
Privilege fee or special privilege fee paid to Government is held to be deductible. (AY.2010-
2011)
S.37 (1) : Business expenditure—Capital or revenue-Setting up of business—Expenses

incurred after business set up and before commencement of business is revenue
expenditure.
Dismissing the appeal of the revenue, the Tribunal held that expenses incurred after business set
up and before commencement of business was held to be revenue expenditure. (AY. 2002-2003,
2003-2004)
S.37 (1) : Business expenditure-Contribution to Chief Minister Fund deductible.
Contribution to Chief Minister Fund is held to be deductible.
(AY. 2008-2009, 2010-2011)
ITR 425 (Bang.) (Trib.)
S. 37 (1) : Business expenditure – Provision for legal and statutory services, matter was set
aside.
The Tribunal sent the matter back to AO to verify whether the amount pertains to this year. (AY.
2005-06,2006-07)
ACIT v. Timex Group India Ltd. (2017) 183 TTJ 27/145 DTR 81 (Delhi) (Trib.)
144
S. 37 (1) : Business expenditure – Capital or revenue-Project expenses written off is held to
be allowable as revenue expenditure.
The Tribunal held that the expenditure incurred on the project which was abandoned at the stage
of work in progress did not result in creation of any new asset or an advantage of enduring nature
and therefore, the said expenditure which have been written off in the books of account are
allowable as revenue expenditure. (AY. 2011-12)
Ajmer Food Products (P) Ltd. v. Jt. CIT (2017) 183 TTJ 132 /145 DTR 57 (Jp.) (Trib.)
S. 37 (1) : Business expenditure – Payment for acquisition of trade mark cannot be allowed
as revenue expenditure, however depreciation is allowable. [S. 32 (1) (iii)]
The Tribunal held that as per section 32 (1) (ii) and expl. 3 to section 32 (1) expression assets
includes intangible assets including trade mark and depreciation of 25% is prescribed on such
intangible assets. The view taken by AO in earlier years is not a possible view as per law and
claim for deduction cannot be allowed by adhering to rule of consistency. (A.Y. 2005-06, 2006-
07)
Bosch Ltd. v. ACIT (2017) 183 TTJ 215 /150 DTR 345 (Bang.) (Trib.)
S. 40 (a) (i) : Amounts not deductible - Deduction at source – Joint venture has paid the
taxes and no amount was payable by the assessee at the close of the year hence no
disallowance can be made .
Allowing the petition the Court held that; insertion of proviso by the Finance Act, 2012 to
section 40 (a) (ia) of the Act as otherwise also since the taxes have been paid by the joint
ventures, the assesse could not be held to be an assesse in default to disallow the amount
attributed by the joint venture . Disallowance also cannot be made as no amount was payable by
the assessee at the close of the year and if two views were possible, the one which favoured the
assessee had to be adopted.
Soma TRG Joint Venture v. CIT (2017) 398 ITR 425/159 DTR 297/299 CTR 420 (J&K)
(HC)
S. 40 (a) (i) : Amounts not deductible – Commission having been received in India – no
details are furnished to show that the commission is received for onward transmission –
addition of commission is justified.
Commission payments received by the Indian agent on behalf of the foreign entity in India is
disallowable under s.40 (a) (i) for non deduction of TDS under s. 195 when no details are
forthcoming to establish that the Indian entity has received the same for onward transmission.
(AY. 2002-03)
Fathima Harris (Smt.) v. ITO (2017) 153 DTR 69 (Mad) (HC)
S. 40 (a) (i) : Amounts not deductible - Deduction at source - Payment of commission to

resident agent – Liable to deduct tax at source .[ S. 37 (1), 195 ]
Dismissing the appeal of the asssessee, the Court held that; the commission had been received in
India by an agent of the foreign entity and Circular No. 786, dated February 7, 2000 issued by the
Board was inapplicable to the assessee’s case. The assessee’s contention that the provisions of
section 40 (a) (ia) under which the disallowance had been effected, was inserted only with effect
from April 1, 2004 and therefore was not applicable to the assessment year 2002-03, had not been
raised by her either at the time of assessment or first appeal but for the first time before the
Appellate Tribunal, even though all the earlier orders were passed after the insertion of sub-clause
(ia) of section 40 (a). However, the disallowance had been effected under sub-clause (i) of
section 40 (a) in respect of the payment made to a non-resident agent. The payments having been
received by the Indian agent on behalf of the Hong Kong entity in India, there was no infirmity in
145
the order of the lower authorities, disallowing the commission amount paid for not deducting the
tax at source. (AY. 2002-03)
Fathima Harris (Smt.) v. ACIT (2017) 396 ITR 393/298 CTR 200 /153 DTR 69 (Mad.)
(HC)
S. 40 (a) (i) : Amounts not deductible - Deduction at source - Business connection-Fees for
technical services - Payments towards promotional expenses – Not liable to deduct tax at
source - DTAA-India – France [ S.9 (1) (9 (1) (vii) ]
Dismissing the appeal of the revenue the Tribunal held that; payment to non-residents towards
promotional expenses as the services were rendered outside India hence the income not deemed
to accrue or arise in India and also not fees for technical services .Consequently, no obligation to
deduct at source and hence no disallowance can be made. (AY. 2005-06).
DCIT .v. Incent Tours P. Ltd (2017) 56 ITR 44 (Delhi) (Trib.)
S. 40 (a) (i) : Amounts not deductible - Deduction at source - Non-resident – Testing fee
paid to AE – Not liable to tax in India hence not liable to deduct tax at source - DTAA -
India – USA [ S. 9 (1) (vii), 195, Art, 12 ]
Tribunal held that; the payment of testing fee to the AE is not fees for technical services. Since
AE of the assessee is not having any permanent establishment in India, the said receipt/income in
the hands of the AE is not taxable in India and consequently, the assessee wad under no
obligation to deduct tax at source. (AY. 2002-03)
ACIT v. Gates India (P) Ltd (2017) 159 DTR 17 /189 TTJ 473 (Delhi) (Trib)
S. 40 (a) (i) : Amounts not deductible - Deduction at source - Non-resident – Payments to

Italian/Japanese personnel towards advisory/consultancy services fell within the purview of
Independent personnel services and stayed less than 183 days in India hence not liable to
tax in India-DTAA - India – Italy-Japan [ S. 195, Art. 14 ]
Tribunal held that both the recipient individuals are engineers/consultants and, in fact, the
contracts with them specifically say that their services have been engaged as advisors/consultants.
They have rendered services in their professional capacity and stayed less than 183 days in India
hence not liable to tax in India therefore not liable to deduct tax at source . (AY. 2010-11)
S. 40 (a) (i) : Amounts not deductible - Deduction at source - Fes for technical services -
Payment of 'Rights fee' on account of ICC cricket World Cup - Not liable to deduct tax at
source . [S. 9 (1) (vi), 9 (1) (vii), 195 ]
Payment of 'Rights fee' on account of ICC cricket World Cup which was exclusively for use of
Marks of ICC for purposes of promotion and advertisement. Payment is not in nature of 'Royalty'
or 'Fees for technical services' covered under sections 9 (1) (vi) or 9 (1 (vii) hence no obligation
to deduct tax at source . (AY. 2011-12).
146
Reebok India Company .v. DCIT (2017) 56 ITR 211 /186 TTJ 176/79 taxmann.com 271 /152
S. 40 (a) (i) : Amount not deductible – Deduction at source – Non-resident – Fee for
technical services - Payment of commission to foreign agents for securing orders abroad, is
not chargeable to tax and hence, no liability to deduct tax at source. [ S. 9 (1) (vii),195 ]
The Tribunal held that the commission paid to foreign agent was a commission simplicitor and
not ‘fee for technical services’ u/s. 9 (1) (vii) of the Act. Thus, there was no requirement to
deduct tax at source. (A.Y. 2008-09)
S. 40 (a) (i) : Amounts not deductible - Deduction at source - Fees for technical services –
Payment for services rendered in London only by a third party nominated by the assessee to
represent itself in London is not liable to tax in India - DTAA - India – UK [ S.9 (1) (vi), Art,
13 ]
Management consultancy fees paid by holding Co. in UK. Services rendered in India after
deputing their employees in India and hence taxable in India as fees for technical services and
subsequently tax ought to be deducted at source on the same. Payment for services rendered in
London only by a third party nominated by the assessee to represent itself in London is not liable
to tax in India . (AY. 2004-05 to 2006-07)
ACIT v. Sterlite Industries (India) Ltd. (2017) 56 ITR 377/81 taxmann.com 57 (Chennai)
(Trib.)
S. 40 (a) (i) : Amounts not deductible-Deduction at source-Export commission is not in the

nature of royalty hence not liable to deduct tax at source.[S.9 (1) (vi)]
Dismissing the appeal of the revenue the Court held that;Export commission is not in the nature
of royalty hence not liable to deduct tax at source (AY. 2006 - 07)
CIT v. Hero Motocorp Ltd. (2017) 394 ITR 403/248 Taxman 14 /152 DTR 65 /297 CTR 268
(Delhi) (HC)
S.40 (a) (i) : Amounts not deductible-Deduction at source – Non-resident – Commission -

Not liable to deduct tax at source [ S.5 (2), 9 (1) vii),195]
Payment of commission to non-resident agents for services rendered outside India is not liable to
tax in India. Explanation to S.9 (2) with retrospective effect by the Finance Act 2010 considered.
(ITA No. 5603/Del/2014, dt.14.09.2017) (AY. 2010-11)
Divya Creation v. ACIT (2017) 157 DTR 203 /189 TTJ 466 /59 ITR 40 (N) (Delhi) (Trib.)
S.40 (a) (i) : Amounts not deductible deduction at source - Payments made by assessee not
in nature of royalty either under domestic law or under DTAA--No disallowance can be
made. [S.195]
That under the Agreement the restricted meaning of the term royalty shall continue to operate
despite the amendment in law. Therefore the payments made by the assessee were not in the
nature of royalty either under the domestic law or under the Agreement. The obligation under
section 195 to deduct tax is at the time of credit of such income to the account of the payee or at
the time of payment thereof in cash or by issue of cheque or draft or any other mode, whichever is
earlier. Therefore, it is relevant to see the obligation of the payer at the time of credit or actual
payment and any subsequent amendment through retrospective effect, cannot create any
obligation upon the payer which did not exist at the time of crediting or actual payment of the
sum. Therefore no disallowance could have been made under section 40 (a) (i) for non-deduction
of tax on the payments to non-resident parties. (AY. 2002-2003, 2003-2004)
147
S.40 (a) (i) : Amounts not deductible – Deduction at source - Payment of transponder fee to
US based company for utilizing its transponder facilities in India and not for right to use
artistic work or scientific equipment, it did not fall within ambit of royalty, hence not liable
to deduct tax at source-DTAA-India – USA [S. 9 (1) (vi), 195, Art. 12]
Assessee, a Mauritian company, entered into an agreement with US company to utilize
transponder facility for telecasting its sports channel in India and made payment to said company
. The Assessing Officer held that the said payment was taxable under section 9 (1) (vi) as
'royalty' and also under article 12 (3) (b) and since no TDS was deducted, he invoked section 40
(a) (i) and made disallowance. Allowing the appeal of the assesee the Tribunal held that,
payment of transponder charges to U.S Company was not for 'use' or 'right to use' any copyright
of a literary, artistic, or scientific work. It was also not for use or right to use any industrial,
commercial, or scientific equipment. On facts, said payment did not fall within ambit of royalty in
terms of Article 12, hence not liable to deduct tax at source. (AY.2006-07 to 2008-09)
Taj TV Ltd. v. DIT (2017) 162 ITD 674 (Mum.) (Trib.)
S. 40 (a) (i) : Amounts not deductible - Deduction at source - Commission paid to its foreign
agents for soliciting sale orders abroad – Not liable to deduct tax at source as non-resident
agents does not have PE in India. [S.9 (1) (i), 195, Art.7 OECD Model Convention]
Allowing the appeal of the assesssee, the Tribunal held that, commission paid to its foreign
agents for soliciting sale orders abroad was cannot be disallowed for failure to deduct tax at
source as the non-resident agents does not have PE in India. (AY. 2010 – 2011)
G. Shoes Exports v.ACIT (2017) 162 ITD 619 (Mum) (Trib.)
S. 40 (a) (i) : Amount not deductible – Deduction at source - payment to non-resident

parties for “call transmission services was held to be not liable to deduct tax at source,
hence no disallowance can be made. DTAA-India-USA. [S. 9 (1) (i), 9 (1) (vi), 9 (1) (vii),195,
Art. 12 (2), 12 (4)]
Allowing the appeal of assesee the Tribunal held that;no disallowance could have been made
under section 40 (a) (i) of the Act for non-deduction of tax on the payments to non-resident
parties, namely, M/s Kick Communication and M/s IGTL Solutions. Since in the call connectivity
and transmission from end of the Indian Territory at Mumbai to the termination of call in USA,
no technical knowledge has been made available to the assessee, respectfully following the
decision of the Tribunal in the case of Bharti Airtel Ltd v.. ITO we hold that payment for the
services of call transmission through dedicated bandwidth provided by the non-resident parties to
the assessee, cannot be termed as Fee for Technical services under the treaty also, in the hands of
the recipients. (ITA No. 1927/Del/2008 & 127/Del/2011, dt. 17.01.2017) (AY. 2002-03 & 2009-
10)
Geo Connect Ltd. v. DCIT (Delhi) (Trib.); www.itatonline.org
S. 40 (a) (i) : Amounts not deductible - Deduction at source - Non-resident – Payments to

UK and USA companies towards agency fees, commission and fronting fees, trustee
maintenance fees and professional charges was held to be not liable to deduct tax at source,
hence no disallowances can be made [ S.195, Art 7, OECD Model ]
Dismissing the appeal of the revenue the Tribunal held that; Payments to UK and USA
companies towards agency fees, commission and fronting fees, trustee maintenance fees and
professional charges was held to be not liable to deduct tax at source, hence no disallowances can
be made . (AY.2009-10)
DCIT v. Reliance Natural Resources Ltd. 166 ITD 385 (Mum) (Trib.)
148
S. 40 (a) (i) : Amounts not deductible-Deduction at source-Non-resident-DTAA-India &
Belgium – Issuing gradation certificate, the payment cannot be characterize as fees for
technical services, not liable to deduct tax at source-DTAA-India - Belgium [S. 9 (1) (vii],
Art. 12,13]
The Tribunal held that the Belgium company is not ‘making available’ its technical knowledge,
expertise skill or know how to the assessee in the course of issuing gradation certificate, the
payment cannot be characterize as fees for technical services. Taxability of a sum in the hands of
recipient on account of subsequent retrospective amendment would not expose the payer of
income to an impossible situation of requiring deduction of tax at source on the anterior date of
payment of such income. Thus on this count also assessee cannot be held to be in default for not
deducting the tax at source. Disallowance was rightly deleted by CIT (A). (AY. 2008-09)
ACIT v. D. A. Jhaveri (2017) 183 TTJ 447/148 DTR 132 (Mum.) (Trib.)
S.40 (a) (ia) : Amounts not deductible-Deduction at source – Though there is a difference
between “paid” and “payable”, section covers not only those cases where the amount is
payable but also when it is paid. [S.194C, 200]
Though there is a difference between “paid” and “payable”, S. 40 (a) (ia) covers not only those
cases where the amount is payable but also when it is paid. The contrary interpretation that s. 40
(a) (ia) applies only to cases where amounts are “payable” will result in defaulters going scot free.
S. 194C read with s. 200 are mandatory provisions. Court held that; view taken by the High
Courts of Punjab & Haryana, Madras and Calcutta is the correct view and the judgment of the
Allahabad High Court in CIT v. Vector Shipping Services (P) Ltd., (2013) 357 ITR 642 did not
decide the question of law correctly. Thus, insofar as the judgment of the Allahabad High Court is
concerned, we overrule the same. Consequences of the aforesaid discussion will be to answer the
question against the appellant/assessee thereby approving the view taken by the High Court.
(AY.2006 - 07)
Palam Gas Service v. CIT (2017) 394 ITR 300/247 Taxman 379/295 CTR 1 (SC)
S.40 (a) (ia) : Amounts not deductible - Deduction at source - Disallowance of expenses for
failure to deduct tax at source, covers not only those cases where amount remains payable
at end of year but also where it has already been paid without deducting tax at source [
S.194C ]
Allowing the appeal of the revenue the Court held that; Disallowance of expenses for failure to
deduct tax at source covers not only those cases where amount remains payable at end of year
but also where it has already been paid without deducting tax at source Followed Palam Gas
Services v. CIT (2017) 394 ITR 300 (SC) . (AY. 2009 10)
PCIT v. Manzoor Ahmed Walvir (2017) 158 DTR 286 /298 CTR 579/84 taxmann.com 233
(J&K) (HC)
Editorial : Manzoor Ahmed Walvir v Dy .CIT (2013) 38 taxmann.com 62 /(2014) 61 SOT 70

(UO) (Asr) (Trib)
S.40 (a) (ia) : Amounts not deductible - Deduction at source – Contractor – sub contractor -
No disallowance can be made due to human mistake Form 15J was filed before the
Assessing Officer instead of Commissioner. [ S.194C, 292B ]
149
Dismissing the appeal of the revenue, the Court held that; No disallowance can be made due to
human mistake Form 15J was filed before the Assessing Officer instead of Commissioner.
(AY.2008 - 09)
CIT v. Shridhar Shantinath Patravali (2017) 248 Taxman 550 (Karn.) (HC)
S. 40 (a) (ia) : Amounts not deductible - Deduction at source – Transport charges -

Deposited tax deducted at source before due date of filing of return – No disallowance can
be made-Amendment to section 40 (a) (ia) by Finance Act, 2010 with effect from 1-4-2010
would also apply for the AY.2009 - 10 [ S. 139 (1), 194C ]
Allowing the appeal of the assesse the Court held that; Assessee has deposited tax deducted at
source before due date of filing of return therefore no disallowance can be made as the
amendment to section 40 (a) (ia) by Finance Act, 2010 with effect from 1-4-2010 would also
apply for the AY.2009 - 10 . (AY. 2009-10)
Allahabad Wholesale Central Coop. Store Ltd. v. PCIT (2017) 248 Taxman 302/157 DTR
357/299 CTR 528 (All.) (HC)
S. 40 (a) (ia) : Amounts not deductible – Deduction at source on fees for technical services –
Payment of fees for transmission of electricity did not constitute payment for ‘technical
service’, thus tax was not deductible u/s 194J and therefore no disallowance can be made.[S.
9 (1) (vii), 194J]
Dismissing the appeal of the revenue, the Court held that ;Payment of fees for transmission of
electricity did not constitute payment for ‘technical service’, thus tax was not deductible u/s 194J
and therefore no disallowance can be made . (AY. 2008-09, 2009-10)
PCIT v. Madhyanchal Vidyut Vitran Nigam Ltd. (2017) 293 CTR 216 /148 DTR 49 /(2018)
404 ITR 160 (All) (HC)
PCIT v. U.P. Power Corporation Ltd. (2017) 293 CTR 216/148 DTR 49 /(2018) 404 ITR 160
(All.) (HC)
S.40 (a) (ia) : Amounts not deductible - Dedcution at source-Transaction one of purchase
and sale—Payment was not in nature of royalty and provisions of section 9 (1) (vi) is not
applicable, assessee was not liable to deduct tax at source.[S. 9 (1) (vi),194J]
Dismissing the appeal of the revenue, the Court held that; It was an admitted fact that the assessee
was engaged in buying and selling software in the open market. The transaction in question was
thus one of purchase and sale of a product and nothing more, hence the Tribunal was justified in
deleting the disallowance.
CIT v. Vinzas Solutions India P. Ltd. (2017) 392 ITR 155/292 CTR 332/245 Taxman 289/147
DTR 105 (Mad) (HC)
S. 40 (a) (ia) : Amounts not deductible – Deduction at source - Payment of fees for
transmission of electricity did not constitute payment for ‘technical service’, thus tax was
not deductible u/s 194J and therefore no disallowance can be made.[S. 194J]
Dismissing the appeal of the revenue, the Court held that ;Payment of fees for transmission of
electricity did not constitute payment for ‘technical service’, thus tax was not deductible u/s 194J
and therefore no disallowance can be made . (AY. 2008-09)
PCIT v. Madhyanchal Vidyut Vitran Nigam Ltd. (2017) 293 CTR 216 /148 DTR 49 (All)
(HC)
PCIT v. U.P. Power Corporation Ltd. (2017) 293 CTR 216/148 DTR 49 (All.) (HC)
S.40 (a) (ia) : Amounts not deductible - Deduction at source – Legal and professional fees –
No disallowance can be made for short deduction.
The Assessing Officer disallowance certain amount u/s 40 (a) (ia) on the basis of short deduction
of tax at source. CIT (A) confirmed the disallowance. On appeal, the Tribunal held that no
150
disallowance can be made on account of short deduction by relying on various judgements of the
High Courts. (ITA No. 5440 & 5583/Mum/2015, C.O. No. 117/Mum/2017 dt. 06-10-2017) (AY
.2007 – 2008)
DCIT v. Cox & Kings (I) Ltd. (2017) 160 DTR 201 /190 TTJ 785 (Mum) (Trib)
S.40 (a) (ia) : Amounts not deductible - Deduction at source – Recipient had included said
sum in his gross receipt and computed its income, disallowance of said expenses could not
be made .[ S.201 ]
Allowing the appeal of the assessee the Tribunal held that; since in relevant Form 26A Chartered
Accountant clearly confirmed that recipient had included said sum in his gross receipt and
computed its income, disallowance of said expenses could not be made . (AY. 2012-13)
Koley Construction v. ITO (2017) 167 ITD 217 (Kol) (Trib.)
S.40 (a) (ia) : Amounts not deductible - Deduction at source - Reimbursement paid to its
Clearing and forwarding agents expenses incurred towards clearing imported
consignments from third party service providers, it would be liable to deduct income-tax at
source on failure by its C & F agents to deduct income-tax at source-Matter remanded .[ S.
194C ]
Tribunal held that; reimbursement paid to its Clearing and forwarding agents expenses incurred
towards clearing imported consignments from third party service providers, it would be liable to
deduct income-tax at source on failure by its C & F agents to deduct income-tax at source. Matter
was remanded . (AY. 2009 10, 2010-11)
S.40 (a) (ia) : Amounts not deductible - Deduction at source – Shipping business-
Reimbursement of expenses on behalf of foreign shipping companies are not liable to
deduct tax at source . [ S. 172, 194C, 195 ]
Allowing the appeal of the assessee the Tribunal held that; in view of CBDT Circular No. 723,
dated 19-9-1995, ocean freight, demurrage charge, handling charges or other amount of similar
nature which are paid on behalf of foreign shipping companies to Indian agents or authorized
representative of non-resident shipping company who carry passengers, livestock, mail or goods
shipped at port in India are merely reimbursement of expenses not covered for deduction of tax at
source under provisions of sections 194C and 195 and they could not have been disallowed by
invoking provision of section 40 (a) (ia). (AY. 2009-10 2010-11)
S.40 (a) (ia) : Amounts not deductible - Deduction at source – Reimbursement of expenses –
No disallowance can be made, however the matter was set aside for verification
Allowing the appeal of the assessee the Tribunal held that; on reimbursement of expenses no
disallowance can be made; however the matter was set aside for verification . (AY. 2011-12)
151
DHL Air Ltd. v. DCIT (2017) 167 ITD 258/(2018) 191 TTJ 884 /163 DTR 140 (Mum)
(Trib.)
S.40 (a) (ia) : Amounts not deductible - Deduction at source – Deduction of tax at source u/s
194C and revenue alleging that the provision of S. 194J is applicable, for short deduction of
tax at source no disallowance can be made [ S. 194C. 194J ]
Assessee deducted the tax at source by applying the provision of S. 194C . Revenue contended
that the provision of S. 194J is applicable as there is short deduction of tax provision of S.40 (a)
(ia) is applicable . Tribunal held that since there was only shortfall in deduction of TDS, section
40 (a) (ia) could not be invoked and assessee could not be held as defaulter. (AY.2011-12, 2012-
13)
Dish TV India Ltd. v. ACIT (2017) 167 ITD 412/159 DTR 257 /190 TTJ 537/60 ITR 162
(Mum) (Trib)
S.40 (a) (ia) : Amounts not deductible - Deduction at source – Freight charges - Total
responsibility/risk of transporting goods on Assessee - No deduction of tax at source
required. [ S.194C ]
It was held that the since the assessee had taken vehicles on mere hire basis to be deployed in the
places where he has undertaken transport contract with ITC Limited. The risk associated with the
goods till transportation to the destination rests with the assessee. The lorry owners/drivers had
not undertaken any responsibility of risk in the goods. Therefore, the payments made to lorry
owners are not liable for TDS as per the provisions of section 194C of the Act, consequently, the
expenditure incurred under the head 'freight charges' are not liable for disallowance under section
40 (a) (ia) of the Act. (AY. 2007-08)
DCIT v. Chennupati Kutumbavathi. (2017) 165 ITD 454 /188 TTJ 356 /155 DTR 233
(Visakha) (Trib.)
S. 40 (a) (ia) : Amounts not deductible - Deduction at source – Provision is also applicable to
sums already paid as on the last date of the relevant year without deduction of tax at source,
however, if the recipient furnishes evidence that the amount paid to him has been offered to
tax in his return of income and tax on the same has been paid by him, no disallowance is
called for.
Provision is also applicable to sums already paid as on the last date of the relevant year without
deduction of tax at source, however, if the recipient furnishes evidence that the amount paid to
him has been offered to tax in his return of income and tax on the same has been paid by him, no
disallowance is called for. (AY. 2008-09)
(Trib.)
S.40 (a) (ia) : Amounts not deductible - Deduction at source – No tax is required to be
deducted on reimbursement of expenses.
No tax is required to be deducted at source on the reimbursement of expenses . (AY. 2008-09).
152
(Trib)
S.40 (a) (ia) : Amounts not deductible - Deduction at source – Bona fide belief that for
almost more than a decade, provisions of TDS did not apply to sale of prepaid sim cards
hence disallowance was held to be not valid [ S.194H, 201, ])
Allowing the appeal the Tribunal held that; Assessee was under a bona fide belief for almost
more than a decade that provisions of tax deduction at source did not apply to transaction of sale
of prepaid sim cards and consequently had not deducted tax at source, disallowance was held to
be not valid . (AY. 2007-08)
Bharti Airtel Ltd. v. ACIT (2017) 166 ITD 179 (Delhi) (Trib.)
S.40 (a) (ia) : Amounts not deductible-Deduction at source – Commission and audit fee -
payments was shown as part of income of payees which was duly returned and tax was paid
thereon, assessee could not be treated as assessee in default
Allowing the appeal of the assesse, the Tribunal held that; where assessee incurred expenses
towards commission and audit fees, to extent assessee was able to adduce evidence that payments
formed part of income of payees which was duly returned and tax was paid thereon, assessee
could not be treated as assessee in default. (AY. 2012-13)
Susai Raju (F.) v. ITO (2017) 163 ITD 533 /184 TTJ 780 /148 DTR 169 (Chennai) (Trib.)
S.40 (a) (ia) : Amounts not deductible – Deduction at source - Tax deducted was deposited
before filing of return – No disallowance can be made. [S. 139 (1), 200 (1) ]
Allowing the appeal of the assessee, the Tribunal held that; Tax deducted was deposited before
filing of return,no disallowance can be made. (AY.2007 08)
Aarson Engg. Construction (I) (P.) Ltd. v. ITO (2017) 163 ITD 696 (Mum.) (Trib.)
S.40 (a) (ia) : Amounts not deductible - Deduction at source - Day of arrival and day of
departure-One of the days excludible to consider period of stay-Period of stay in India less
than ninety days-Amount not taxable in India—No disallowance can be made - DTAA-
India-USA. [S.9 (1) (vii) (b), Art.15, 16]
Allowing the appeal the Tribunal held that, there was no dispute with reference to the
applicability of section 9 (1) (vii) (b), the issue as decided by the Commissioner (Appeals) was
with reference to article 15 of the Double Taxation Avoidance Agreement between India and the
U. S. A. The provisions of the Agreement would override the provisions of the Act. If the
services were considered as dependent personal services rendered by the executive director of a
one-man company then they would come under article 16 in respect of which the Commissioner
(Appeals) gave a finding that the amount was not taxable. In the alternative, if the services were
reconsidered as independent personal services under article 15 the period of ninety days was
relevant. However, the Commissioner (Appeals) made a mistake in calculating the days by
including the day of arrival and the day of departure also for the period of stay. One of the days
was to be excluded to consider the period of stay. If that was taken into consideration, for the
seven trips made by the person the period of stay would come to eighty-six days i.e., less than
ninety days. In either case, as the amount was not taxable in India applying the provisions of the
Agreement the question of disallowance under section 40 (a) (ia) did not arise. Moreover no steps
153
were taken by the Assessing Officer under section 201 and section 201 (1A) under the tax
deduction at source provisions. Keeping the amendment brought to section 40 (a) (ia) on the issue
also the amount was not disallowable under section 40 (a) (ia). (AY. 2009-2010)
Spectrum Power Generation Ltd. v CIT (2017) 162 ITD 516/54 ITR 751 (Hyd.) (Trib.)
S.40 (a) (ia) : Amounts not deductible - Deduction at source – Merely adding identification
of company logo on readymade gift articles purchased is not liable to deduct tax at source [
S.194C ]
Merely adding identification of company logo on readymade gift articles purchased is not liable
to deduct tax at source (AY.2009 - 10)
S.40 (a) (ia) : Amounts not deductible-Deduction at source-If income is not taxable in terms
of the Income – tax Act, no disallowance can be made.[S.195]
Allowing the appeal the Court held that ;before effecting deduction at source one of the aspects to
be examined is whether such income is taxable in terms of the Income-tax Act. This aspect had
not been considered by the Tribunal while concluding that the assessee had committed a default
in not deducting the tax at source. The disallowance under section 40 (a) (ia) was not justified.
Sesa Resources Ltd. v. Dy. CIT (2017) 391 ITR 413/299 CTR 69 (Bom.) (HC)
S.40 (a) (ia) : Amounts not deductible-Deduction at source – Payment of commission to non-
resident agents for carrying out activities outside India - No disallowance can be made. [S.9
(1) (i), 195]
Commission paid by the assessee to the non-resident agents for carrying out business activities
outside Indian territories is not taxable in the hands of the letter in India under s.9 (1) (i) or under
s.9 (1) (vii). Hence, the provisions of S.195 are not attracted to such payments. Therefore,
commission paid by the assessee cannot be disallowed under s.40 (a) (ia) of the Act. (AY. 2009-
10)
Dy.CIT v. Troikara Pharmaceuticals Ltd. (2017) 146 DTR 177 /184 TTJ 120 (Ahd.) (Trib.)
S.40 (a) (ia) : Amounts not deductible - Deduction at source-connection – Non-resident

commission agents were not taxable in India in respect of their commission earnings from
orders procured abroad, not liable to deduct tax at source. [S.195]
Since no part of the operations of the business of the commission agents is carried out in India,
the non-resident commission agents were not taxable in India in respect of their commission
earnings from abroad. Hence, the assessee was not under any obligation to deduct TDS from the
commission payments to the non-residents. Therefore, commission payments could not be
disallowance under s. 40 (a) (ia). (AY.2012-13)
ITO v. Excel Chemicals India Ltd. (2017) 146 DTR 171 /184 TTJ 114 (Ahd.) (Trib.)
S.40 (a) (ia) : Amounts not deductible-Deduction at source – The amounts paid by the
assessee to the clinical research organisations were not taxable in India. There was no need
for the assessee to deduct tax at source - DTAA-India – Canada. [S.195, Art, 12, 15]
Tribunal held that ,tax resident of Canada was only providing final results to its Indian clients by
using highly sophisticated bio-analytical know-how, without providing any access whatsoever to
the clients to such know-how, fee received by it was business income and not fees for technical or
fees for included services or royalty and the assessee having no permanent establishment in India,
such income would not be taxable in India by virtue of the relevant provisions of the Double
Taxation Avoidance Agreement between India and Canada. The amounts paid by the assessee to
154
the clinical research organisations were not taxable in India. There was no need for the assessee
to deduct tax at source. (AY.2007-2008, 2008-2009)
S.40 (a) (ia) : Amounts not deductible – Deduction at source - Royalty - Payments made by
assessee not in nature of royalty either under domestic law or under DTAA--No
disallowance for non-deduction of tax at source - DTAA-India – USA. [Art. 12]
Payments made by assessee not in nature of royalty either under domestic law or under DTAA,
hence no disallowance for non-deduction of tax at source. (AY. 2002-2003, 2003-2004)
S. 40 (a) (v) : Amounts not deductible - Deduction at source - Tax on tax - - Employer had
paid tax on tax perquisite provided to employee and not claimed exemption hence no
disallowance of expenditure could be made. [ S. 10 (10CC) ]
The AO made disallowance as the 'tax' on 'tax perquisite' being non-monetary in nature and paid
by the assessee on behalf of its employees, was not to be added again for the purpose of
computation of taxable income of the employee and, consequently, it was not an admissible
expenses in the hands of the employer . CIT (A) held that the amount debited to profit and loss
account due to grossing up but was not included the said amount in gross salary of the expatriate
employees. Dismissing the appeal of the revenue the Tribunal held that; the assessee paid tax on
tax perquisite and not claimed exemption u/s. 10 (10CC). Therefore, there cannot be disallowance
. (AY. 2006 - 07)
ADIT v. Joy Partnership (2017) 166 ITD 103 (Kol) (Trib.)
S. 40 (ba) : Amounts not deductible - Deduction at source-Joint venture – Reimbursement

of administrative expenses – No disaalowance can be made .[ S.260A ]
Dismissing the appeal of the revenue the Court held that; Reimbursement of administrative
expenses, no disaalowance can be made . Genuness of the exoeses was not in doubt, no question
of law (AY. 2008-09)
CIT v. ITD CEM India JV (2017) 160 DTR 17/(2018) 300 CTR 442 (Bom.) (HC)
S. 40A (2) : Expenses or payments not deductible – Excessive or unreasonable – Rate of

interest paid and received from the family members were at prevailing market rate hence
no disallowance can be made .
Dismissing the appeal of the revenue the Court held that; Rate of interest paid and received from
the family members were at prevailing market rate hence no disallowance can be made .
S. 40A (2) : Expenses or payments not deductible – Excessive or unreasonable – Payment

was not excessive disallowance was held to be not justified.
Dismissing the appeal of the revenue, the Court held that; the records revealed that the barges
were taken on payment of time charter charges of income earned from the transportation of iron
ore on the basis of per tonne rate as prescribed by the Goa Barge Owners Association. The
Tribunal also took note of the circular dated July 6, 1968, particularly para 74 thereof and noted
that there was nothing on record to show that either of the parties was enriched by getting a fixed
sum of money as charter hire charges and the tax due by the assessee had been reduced. The
Tribunal was right in deleting the addition made by the Assessing Officer disallowing the charter
hire charges of barges as being excessive under section 40A (2) (a) . (AY. 2003 - 04)
155
CIT v. Goa Minerals P. Ltd. (2017) 396 ITR 452 (Bom.) (HC)
S. 40A (2) : Expenses or payments not deductible – Excessive or unreasonable – Burden is

on the revenue to establish that expenditure is excess of fair market value, disallowance is
not automatic.
Dismissing the appeal of the revenue, the Court held that; provisions of section 40A (2) are not
automatic and can be called into play only if the Assessing Officer establishes that the
expenditure incurred is, in fact, in excess of fair market value. (AY .1997-98)
CIT v. Parameswari (Smt. L.) (2017) 246 Taxman 126/153 DTR 63 (Mad.) (HC)
S. 40A (2) : Expenses or payments not deductible – Excessive or unreasonable - Salary paid
to son of assessee — Nothing to establish son did not render any services to assessee’s
business — starting salary of firm for fresh graduate more than assessee son’s salary —
Salary expenses was held to be allowable .
On appeal, it was held that The Commissioner of Income-tax (Appeals) held that the AO could
not establish that the son of the assessee had not rendered any services to the assessee’s business.
Moreover in this firm the starting salary for a fresh graduate was Rs. 60,000/- per month, and in
this year the salary paid to the assessee’s son was Rs. 40,000/- per month only. Therefore, The
Commissioner of Income-tax (Appeals) had rightly allowed the claim. (AY. 2005-06 2009-10).
S. 40A (2) : Expenses or payments not deductible – Excessive or unreasonable – Purchases

from sister concern – Department was not able to prove that rate was higher, addition was
not justified .
Assessee filing details of purchase from sister concern showing sale of identical item to other
independent parties at a higher rate, however the department was unable to show that rate was
higher ,addition was deleted. (AY. 2005-2006)
Loil Overseas Food Ltd.v. ITO (2017) 55 ITR 544 (Chd.) (Trib.)
Dy. CIT v. Loil Overseas Food Ltd. (2017) 55 ITR 544 (Chd.) (Trib.)
S. 40A (2) : Expenses or payments not deductible – Excessive or unreasonable – Rate of tax
being same no disallowance can be made.
Allowing the assessee's appeal and dismissing the Department’s that the Department had not
controverted the findings of the Tribunal in an identical case and no distinction had been brought
on record with respect to the terms and conditions of the administrative support agreement. The
fact that both the companies had the same incidence of tax had also not been rebutted. The claim
of the assessee for the assessment years 2007-08 to 2011-12 was to be allowed. (.AY. 2007-
2008 - 2011-2012)
CIT v. Tata Ficosa Automotive Systems Ltd. (2017) 54 ITR 203 (Pune) (Trib.)
S. 40A (2) : Expenses or payments not deductible – Excessive or unreasonable –

Commission - No distinction drawn between facts of current assessment year vis-a-vis in
earlier years hence expenditure is held to be allowable. [S. 37 (1)]
Allowing the appeal the Tribunal held that; there was no dispute that the assessee had actually
made the commission payments after deducting tax at source thereupon at the prescribed rates in
furtherance of the various agreements with its payees for marketing and other similar services.
Their confirmations by way of contra accounts and debit notes were filed. The confirmations
were nowhere doubted before both the lower authorities. There was no distinction drawn between
the facts of the assessment year vis-a-vis those in the earlier years. The Assessing Officer was
directed to allow its entire claim of commission payments. (AY. 2011-2012)
Stallion Laboratories P. Ltd. v. ITO (2017) 53 ITR 633 (Ahd.) (Trib.)
156
S. 40A (2) : Expenses or payments not deductible-Excessive and unreasonable payments-
excess of fair market value-Onus is on Department-No material comparable brought on
record - No disallowance could be made.
The A.O. held that assessee had paid interest to the customer of the assessee for the unsecured
loan advanced. That payments made to the holding company was unreasonable and in excess of
the fair market value and therefore he added 2% u/s. 40A (2).
The Tribunal held that the AO to bring on record to show that in the facts and circumstances of
the case, the provisions of section 40A (2) are indeed applicable. Only in such cases, he could
disallow to the extent that such payment was found to be excessive or unreasonable in his
opinion. In this case, the AO not brought any comparable cases on record to disprove the
purchases made from holding company by the assessee.
S. 40A (2) : Expenses or payments not deductible - Excessive and unreasonable payments -
Salary and professional fee – furnished full details regarding nature of services provided -
No disallowance could be made.
Tribunal held that none of these services purported to be rendered by CP was disputed by the
Department except merely harping on the technical educational qualification as a pre-requisite for
rendering the services. Business expediency in the subject mentioned transaction was proved by
engaging a liaison officer who was a trusted person of the management more especially stakes
involved in thetelecommunications project. For rendering these services at least, no technical
qualification was required as the service could be done by experience. Business acumen is
developed by a person not by educational qualification but by his or her native intelligence and
presence of mind which does not come from education alone. The assessee had made payments to
CP disallowed by the Department, which was not rectified even when specifically brought to its
notice. The assessee had provided the complete details of nature of services rendered by CP. In
the absence of bringing any other evidence to the contrary, no disallowance could be made in the
facts and circumstances of the case. Just because the payment was made to a relative of the
director, the principles of business expediency did not get disturbed. Even if no difference
whether the expenditure was incurred towards relatives or non-relatives per se was incurred
wholly and exclusively for the purpose of business. (S.37)
S. 40A (3) : Expenses or payments not deductible – Cash payments exceeding prescribed
limits – Payment made to same person in a day was less than Rs. 20,000 – Provision
restricting payment in excess of Rs. 20,000 to a person in a day applicable from A.Y. 2009-
10 only. [40A (3)]
Allowing the appeal the Tribunal held that; the amended provisions of S. 40A (3) which disallow
aggregate payments made to person in a day in excess of Rs. 20,000 are applicable only from
A.Y. 2009-10 and not during impugned assessment year. Since each cash payment was less than
Rs. 20,000 even if made to a person in a day, it would not attract S. 40A (3) as applicable. (AY.
2006-07)
Sonali Castings Pvt. Ltd. v. DCIT (2017) 57 ITR 225 (Hyd) (Trib.)
S.40A (3) : Expenses or payments not deductible - Cash payments exceeding prescribed
limits – Land purchased as investment converted in to stock in trade, genuineness was not
in doubt, no disallowance can be made .
Assessee developer claimed that he had purchased impugned lands as agricultural lands for
investment purpose, As said lands were converted into stock-in-trade. The AO disallowed cash
payments made towards purchase of lands stating that lands were purchased as stock-in-trade for
157
trading purpose and not for investment purpose. Tribunal held that assessee filed evidences, lands
were acquired as investment and, subsequently, converted into stock-in-trade in business as there
existed a business expediency. Since payments were genuine, S..40A (3) could not be invoked to
disallow cash payments. (AY. 2010 – 2011)
Hanumantha Rao v. ITO (2017) 164 ITD 659 /157 DTR 198 /189 TTJ 660 (Visakh.) (Trib.)
S. 40A (3) : Expenses or payments not deductible - Cash payments exceeding prescribed
limits – Agricultural land - Transaction would fall under exceptional circumstances covered
under Rule 6DD [ R. 6DD ]
Dismissing the appeal of the revenue the Tribunal held that; there was no dispute on the fact that
the identity of the payee was proved, the genuineness of the transaction was proved and the
source payment was also established in as much as such amount was found to be withdrawn from
the bank account of the assessee. In the case of Smt. Harshila Chordia v. CIT [2008] 298 ITR 349
(Raj) the High Court while interpreting the provisions of section 40A (3) had clearly held that
when the genuineness of the transaction or payment was not disputed and the identity of the
payee received was established then such case would fall under the exceptional circumstances
covered under rule 6DD of the Income Tax Rules, 1962. Therefore the Commissioner (Appeals)
had rightly held that the assessee’s case was covered under the exceptional circumstances under
rule 6DD. (AY. 2006 - 07)
ACIT v. Marigold Merchandise Pvt Ltd (2017) 59 ITR 25 (SN) (Delhi) (Trib)
S. 40A (3) : Expenses or payments not deductible-Cash payments exceeding prescribed

limits - Unless plea that seller insisted for cash payment was proved, same could not be
regarded as valid ground to allow cash payment.[R.6DD]
For purchase of immovable property, assessee made a part of payment in cash. He claimed that
payments were made for business expediency and the sellers insisted for cash payment .
Dismissing the appeal of the assesse the Tribunal held that ;mere plea that sellers insisted on cash
payment, itself being unproved, was not a legally valid argument. Disallowance was up held.
(AY. 2012-13)
F.Susai Raju v. ITO (2017) 163 ITD 533 /184 TTJ 780 /148 DTR 169 (Chennai) (Trib.)

limits – Burden is on assessee is to demonstrate that its case was covered by either of
exceptions contemplated under rule, mere genuineness of transaction is not sufficient. [R.
6DD]
Dismissing the appeal of the assesse, the Tribunal held that; since assessee had not been able to
demonstrate that its case was covered by either of exceptions contemplated under rule 6DD,
amount has been rightly disallowed . (AY. 2009 – 2010)
International Ships Stores Suppliers v. JCIT (2017) 162 ITD 73 /183 TTJ 161/145 DTR 1
(Mum) (Trib.)

limits-Payments to local producer of raw hides/skin exceeding Rs.20,000-No disallowance
could be made. [R.6 DD]
Dismissing the appeal of the revenue, the Tribunal held that; payments to local producer of raw
hides/skin exceeding Rs.20,000, no disallowance could be made. (AY.2010-11)
ITO v. Standard Leather (P.) Ltd. (2017) 162 ITD 285 (Kol.) (Trib.)
158
limits – Identity, genuineness and business expediency was explained hence disallowance
was held to be not justified.
The Tribunal held that the identity and existence of the payees and genuineness of transactions
are not at all disputed. It was only because of the insistence of the seller, that the assessee had to
pay in cash and the assessee has explained the business expediency of making the cash payments
to parties. Followed, Anupam Tele Services v. ITO (2014) 268 CTR 121 (Guj.), Smt. Harshila
Chordia v. ITO (2008) 298 ITR 349 (Raj.). (AY. 2011-12)
Ajmer Food Products (P) Ltd. v. Jt. CIT (2017) 183 TTJ 132 /145 DTR 57 (Jp.) (Trib.)

limits – Mere genuineness of payment cannot be the ground allow the claim, unless the
assesse establishes exceptional circumstances . [R.6DD (j)
The Tribunal held that the assessee has not been able to demonstrate that its case is covered by
either of the exceptions under R.6DD. Mere finding of the purchase transactions as genuine
would not take the same beyond the scope of the disallowance u/s 40A (3). The exception
contemplated by sub-r (j) of R.-6DD to relax the rigours of S..40A (3) in certain situations was
omitted from the statue by an amendment. Hence the same cannot come to the rescue of the
assessee whose case is covered by the post amended section 40A (3)r/w r.6DD hence the
disallowance was upheld. (AY. 2009-10)
International Ships Stores Suppliers v. JCIT (2017)162 ITD 73/183 TTJ 161/145 DTR 1
(Mum.) (Trib.)
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability – Principal

amounts of loan was written off was being capital nature hence not taxable . [S.28 (iv) ]
Dismissing the appeal of revenue the Court held that; Principal amounts of loan was written off
as per BIFR order, was being capital nature hence not taxable .Ratio in Solid Containers Ltd v
Dy.CIT (2009) 308 ITR 417 (Bom) (HC) is considered. (AY. 2006-07)
CIT v. Graham Firth Steel Products (I) Ltd. (2017) 250 Taxman 235 /159 DTR 278 (Bom.)
(HC)
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability – Amount of

outstanding creditors addition cannot be made .
Dismissing the appeal of the revenue the Court held that; the Tribunal was justified in deleting
the addition made by the Assessing Officer amounting to Rs. 6,88,842 on account of outstanding
creditors under section 41 (1) of the Income-tax Act. Followed earlier year order. (AY. 2008 09)
CIT v. Glenmark Pharmaceuticals Ltd. (2017) 398 ITR 439 /85 taxmann.com 349 (Bom.)
(HC)
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability - Advances

received from parent company for business purposes to be adjusted against future supplies
which was transferred to capital reserve is capital receipt not liable to tax.
Allowing the appeal the Court held that; advances received from parent company for business
purposes to be adjusted against future supplies which was transferred to capital reserve is capital
receipt not liable to tax. (AY. 2000-01)/
Transworld Garnet India P. Ltd. v. ACIT (2017) 397 ITR 233/250 Taxman 258/160 DTR
160 DTR 395 (Mad) (HC)
159
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability - Deposits
collected under sales promotion scheme — Amounts not returned for a number of years
and treated by assessee as its own funds hence amount was held to be assessable.
Dismissing the appeal the Court held that; the assessee had not taken the amount to its profit and
loss account. Nevertheless, the assessee had treated the amount as its own. The scheme itself
terminated many years back. Limitation for claiming the amount back had also ceased. There was
absolutely no movement or correspondence between the assessee and its members with respect to
the claim or with respect to the deposited amounts. The amount was assessable under section 41
(1) (AY. 2012-13)
Gujtron Electonics P. Ltd v. ITO (2017) 397 ITR 462 /249 Taxman 443 (Guj) (HC)
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability - Burden is

on department to prove such cessation.
Dismissing the appeal of the revenue the Court held that; no material was brought on record by
the assessing authority to establish that such transporters could be actually brought before the
assessing authority and upon their cross-examination, their transactions were found to be fake or
incorrect. (AY.2010-11)
CIT v. Ramgopal Minerals. (2017) 394 ITR 696 (Karn.) (HC)
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability - Merely

where creditors could not be traced on date of verification addition cannot be made as
cessation of trading liability.
Dismissing the appeal of the revenue, Court held that; Merely where creditors could not be traced
on date of verification addition cannot be made as cessation of trading liability (AY. 2010-11)
PCIT v. Ramgopal Minerals (2017) 394 ITR 696 /246 Taxman 267 (Karn.) (HC)
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability - Mere

inability to prove credit not sufficient, addition was held to be not justified .
Dismissing the appeal of the revenue, the Court held that; there are two requirements for
invoking the provisions of section 41 . The sine qua non is, the remission or cessation of the
trading liability and the additional requirement is, some benefit in respect of such trading liability
is taken by the assessee. If these conditions are satisfied, then alone can section 41 (1) be invoked
by the AO. Merely because the creditor could not be traced on the date when the verification was
made, is not a ground to conclude that there was cessation of the liability. Cessation of the
liability has to be cessation in law, of the debt to be paid by the assessee to the creditor. The debt
is recoverable even if the creditor has expired, by the legal heirs of the deceased creditor : Held,
that it was not the case of the Department that any benefit in respect of trading liability was taken
by the assessee. The fact that the debt could not be verified was not sufficient. S.41 was not
applicable. (AY. 2010-11)
CIT v. Alvares And Thomas. (2017) 394 ITR 647 (Karn) (HC)
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability - Stale

demand drafts and pay orders for sums owed by assessee-bank to customers cannot be
assessed as liability still subsisting.
Dismissing the appeal of the revnue, the Court held that; the addition could not be made under
section 41 (1) of the Act, since the liability of the assessee-bank to pay back the amounts to the
customers in respect of such stale demand drafts and pay orders does not cease in law. (AY.
2007-08)
CIT v. Raddi Sahakara Bank Niyamitha (2017) 395 ITR 652 (Karn.) (HC)
160
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability – Addition
cannot be made unless liability in accounts had been written off.
Allowing the appeal of the assessee the Tribunal held that; liability shown under the head sundry
creditors for expenses or for supply of goods can not be assessed as income unless liability in
accounts had been written off . Further the Assessing Officer had not brought any evidence on
record to show that liability had ceased. (AY. 2009 10)
Babul Products (P.) Ltd. v. ACIT (2017) 167 ITD 402 (Ahd) (Trib.)
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability – Holding

company witting off in books without prejudice to recover in future addition cannot be
made .
Allowing the appeal of the assessee the Tribunal held that the assessee has not written off in their
books of account, therefore merely on the ground that ,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 from assessee addition
cannot be made as cessation of trading liability . (AY. 2008 - 09 - 2010-11)
Airline Allied Services Ltd. v. DCIT (2017) 167 ITD 717 /(2018) 62 ITR 41 (Delhi)
(Trib.)
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability – Waiver of

loan cannot be assessed as income [ S.28 (iv) ]
Tribunal held that loan was not utilised for trading liability of assesse therefore waiver of loan
cannot be assessed as income of the assesse. (AY.2009 - 10)
DCIT v. Kalyanapur Cement Ltd. (2017) 165 ITD 637 (Kol) (Trib.)
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability -

Outstanding sundry creditors for last three years, even if sundry creditors were not in
existence and PAN of creditors were found to be invalid addition cannot be made .
Allowing the appeal of the assessee the Tribunal held that; these creditors had been paid in
subsequent years through banking channels, revenue not established that assessee had written off
outstanding liabilities in books and that assessee had obtained any benefit of reduction in earlier
years of such liabilities by way of their remission or cessation. Hence, amount could not be added
to total income of assessee. (AY. 2011 – 2012)
Satpal & Sons (HUF) v. ACIT (2017) 166 ITD 616 (Delhi) (Trib.)
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability - No loss or

expenditure qua sundry creditors was claimed, writing off in question was not assessable.
161
Assessee bought running business of several companies on 'going concern basis'. It acquired all
assets and liabilities of those companies as they stood on date of purchase. Thereafter, certain
outstanding 'Sundry Creditors' belonging to vendor companies were written back by assessee by
way of credit to profit and loss account. The AO opined that assessee capitalized consideration
paid to take over business in its books of account and claimed depreciation thereupon and, hence,
write-back of creditors constituted income in hands of assessee in terms of s. 41 (1). Tribunal
held that; assessee never claimed any loss or expenditure qua those sundry creditors, writing back
of same was not covered by clause (a) of S. 41 (1). (AY. 2008 – 2009)
Adarsh Kumar Swarup v. DCIT (2017)164 ITD 188 (Delhi) (Trib.)
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability - Share

application money which was subsequently written back in books of account, could not be
treated as income of assessee either under section 41 (1) or section 28 (iv). [ S. 28 (iv) ]
Dismissing the appeal of the revenue, the Tribunal held that; share application money which was
subsequently written back in books of account, could not be treated as income of assessee either
under section 41 (1) or section 28 (iv). (AY.2011-12)
Dy. CIT v. Nalwa Chrome P. Ltd. (2017) 55 ITR 468 (Mum.) (Trib.)
Dy. CIT v. Tranquil and Holding P. Ltd. (2017) 55 ITR 468 (Mum.) (Trib.)
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability – Loan taken
for the purpose of acquisition of capital asset on remission was not chargeable to tax either
under section 41 (1) or S. 28 (iv).[S. 28 (iv)]
Dismissing the appeal of the revenue the Tribunal held that, Loan taken for the purpose of
acquisition of capital asset on remission was not chargeable to tax either under section 41 (1) or
S. 28 (iv)
Garware Polyster Ltd. v.Dy.CIT (2017) 151 DTR 228 /185 TTJ 276 (Mum.) (Trib.)
S. 41 (1) : Profits chargeable to tax - Remission or cessation of trading liability - Share

application money which was subsequently written back in books of account, could not be
treated as income either under section 41 (1) or section 28 (iv). [S. 28 (iv)]
Dismissing the appeal of the revenue, the Tribunal held that the ,amount received by assessee on
account of share application money which was subsequently written back in books of account,
could not be treated as income of assessee either under section 41 (1) or section 28 (iv) of the Act.
(AY. 2011-12)
DCIT v. Nalwa Chrome (P.) Ltd. (2017) 163 ITD 598 (Mum.) (Trib.)
S. 41 (1) : Profits chargeable to tax-Remission or cessation of trading liability-Waiver of

loan taken for acquisition of a capital asset and on capital account cannot be taxed as it is
neither on revenue account nor a remission of a trading liability so as to attract tax in the
year of remission.
Allowing the appeal of the assessee, the Tribunal held that;waiver of loan taken for acquisition of
a capital asset and on capital account cannot be taxed u/s 41 (1), as it is neither on revenue
account nor a remission of a trading liability so as to attract tax in the year of remission. (ITA No.
923 & 930/Bang/2009, dt. 13.01.2017) (AY. 2004-05)
JSW Steel Ltd. v. ACIT (Mum.) (Trib.) www.itatonline.org
S. 42 : Business for prospecting-Mineral oil – Provision do not override S.45. [S.2 (14), 42
(2) (b), 45]
S. 42 (2) (b) deals with a situation in which sales consideration of the "business of prospecting
for, or extraction or production of, petroleum gas" is more than the prospecting expenses incurred
by the assessee which have not been allowed as a deduction till the point of time when the interest
162
in that business is transferred.S.2 (14), includes "property of any kind held by an assessee,
whether or not connected with business or profession", these participation interests are required to
be treated as capital assets. The gains on transfer of the participation rights is, therefore, required
to be treated as capital gain u/s 45.In view of the above, it was held by the Tribunal that the
provisions of Section 42 (2) (b) do not override the provisions of Section 45, and, therefore,
Section 42 (2) (b) cannot have any bearing on deciding as to whether a receipt is in the nature of
capital receipt leading to capital gains. (AY. 2010-11)
Mosbacher India LLC v. ADIT (2016) 76 taxmann.com 31/(2017) 183 TTJ 1 (Chennai)
(Trib.)
S. 43 (1) : Actual cost – The assessee received Investment Promotion Allowance for
expansion of projects - subsidy is not directly/indirectly linked to acquisition of a particular
asset - capital receipt and cannot be reduced from the actual cost of any asset.
The assessee received investment promotion allowance (IPA) from West Bengal State
Government under a scheme for development and promotion of industries. In order to obtain the
subsidy, the assessee had provided various feasibility reports and project reports and was
qualified as a Mega Project. Under the said scheme, the assessee was eligible for IPA of an
amount equal to 75% of sales tax paid in the preceding year by the assessee which was to be
adjusted against the sales tax liability of the year of claim of the IPA. The AO treated this subsidy
amount as revenue receipt and brought it to tax. The AO also gave an alternative argument that,
had the said amount been treated as capital receipt, it should be reduced from the cost of the asset
as per explanation 10 to S. 43. The CIT (A) treated the said subsidy as a capital receipt, and
directed the AO to re-compute the depreciation after taking into account the cost of the asset as
per explanation 10 to sec 43. Both the assessee and Revenue filed an appeal against this order of
the CIT (A). The ITAT held that subsidy could be reduced from cost only if it is for the purpose
of acquiring the asset. The subsidy was made available after commencement of the production
and for adjustment against sales tax liability and was not for acquiring any assets. If the subsidy
goes to encourage setting up of industry, it does not go to reduce the cost of assets. Thus it should
be treated as capital subsidy and also should not be reduced from the cost of the assets. (ITA No.
686 and 1101/Kol/2014 dt. 13-09-2017) (AY .2010 – 2011)
Birla Corporation Ltd. v Dy. CIT (2017) 59 ITR 59 (SN.) (Kol) (Trib)
S. 43 (1) : Actual cost-Subsidy-A subsidy/grant from a foreign sovereign Country does not
fall within Explanation 10 because the foreign Country is not a "person" as defined in s. 2
(31). [Explanation 10, 2 (31)]
Allowing the appeal of the assessee, the Tribunal held that; the law laid down in PJ Chemicals
210 ITR 830 (SC) that only a subsidy or grant given to offset the cost of an asset can be reduced
from the "actual cost" of the asset and not a general subsidy continues to hold good even after the
insertion of Explanation 10 to s. 43 (1). A subsidy/grant from a foreign sovereign Country does
not fall within Explanation 10 because the foreign Country is not a "person" as defined in S.2
(31) of the Act. (ITA No. 1295/Mum/2012, dt. 03.08.2017) (AY.2000-01, to 2008-09)
Spectrum Coal & Power Ltd. v. ACIT (2018) 162 DTR 225 (Delhi) (Trib)
S. 43 (1) : Actual cost – Capital or revenue - subsidy was given as encouragement for setting
up expansion of industrial unit, subsidy amount could not be reduced from actual cost of
capital asset for purpose of computing depreciation
Allowing the appeal of the assesse the Tribunal held that ;since incentive in form of subsidy could
not be considered as a payment directly or indirectly to meet any portion of actual cost, it fell
outside ken of Explanation 10 to section 43 (1) and, thus, subsidy amount could not be reduced
from actual cost of capital asset for purpose of computing depreciation allowable to assessee .
(AY. 2006 - 07)
163
Dayal Steel Ltd. v. ACIT (2017) 165 ITD 593 (Patna) (Trib.)
S.43 (1) : Actual cost - Explanation 3 to section 43 (1) is applicable if the assessee claims
enhanced cost as the actual cost and the Assessing Officer is able to show that the cost
claimed by the assessee is more than the market value of the asset.
Dismissing the appeal of the revenue, the Tribunal held that; Explanation 3 to section 43 (1) is
applicable if the assessee claims enhanced cost as the actual cost and the Assessing Officer is able
to show that the cost claimed by the assessee is more than the market value of the asset. (AY.
2011-12)
DCITv. S.V.P.B. Spinners (P.) Ltd. (2017) 165 ITD 235 (Chennai) (Trib.)
S. 43 (1) : Actual cost – Purchase of second hand windmill at enhanced cost - Assets already
depreciated in hands of seller – Conditions for invoking explanation 3 to section 43 (1)
satisfied – Order of the AO is held to be justified. [S. 32]
Held allowing the appeal of department that the depreciated value of windmill in the hands of the
seller was negligible at the time of sale. AO correctly invoked explanation 3 to section 43 (1) as it
came to conclusion that the main purpose of transfer was reduction of tax liability. AO had
adopted a fair method of multiplying the average generation per year with per unit cost of
electricity generated. This was the method adopted by the assessee for valuing 4 windmill offered
by it as collateral for raising the loan from the bank except for the difference in unit rate. Hence,
conditions for invoking Explanation 3 to section 43 (1) of the Act was satisfied and order of AO
was to be reinstated. (AY.2009-10)
Sabithamani (V.) (Smt.) v. ACIT (2017) 55ITR17 (SN) (Chennai) (Trib.)
S. 43 (1) : Actual cost - Purchase of assets from related party, assigned inflated value to
those assets in order to claim higher depreciation, AO was justified in determining actual
cost of assets by invoking Explanation 3 to s. 43 (1). [S. 32]
Dismissing the appeal of the assessee,the Tribunal held that; assessee purchased assets from
related party which had already been depreciated, assigning higher value to those assets in order
to avoid tax liability resulted in satisfaction of conditions prescribed under Expl. 3 to s. 43 (1).
Therefore, decision of the AO was to be upheld. (AY. 2006 – 07)
Sanyo BPL (P.) Ltd. v. Dy.CIT (2017) 162 ITD 176 /185 TTJ 227 (Bang.) (Trib.)
S.43 (1) : Actual cost - Depreciation – Purchased old wind mill much higher than the
original cost, cost in hands of assesse was to be reduced. [S.32]
Dismissing the appeal of the assessee, the Tribunal held that; old windmill was purchased at
enhanced price which resulted in aggregate of depreciation claimed by previous and present
owner much higher than original cost, purpose of transfer was reduction of tax liability and,
hence, cost in hands of assessee was to be reduced. (AY.209-10)
V. Sabithamani (Smt.) v.ACIT (2017) 163 ITD 478 (Chennai) (Trib.)
S. 43 (5) : Speculative transactions - Forward exchange contracts - Hedge contract does not
exceed value of underlying exposure to foreign currency forward contract hence could not
be speculative in nature . [ S.45 (5) (d)]
Dismissing the appeal of the revenue the Tribunal held that; total forward contracts entered with
bankers did not exceed value of underlying exposure to foreign currency at any point of time,
therefore, premium charges on such foreign currency forward contracts could not be said to be
speculative in nature . (AY. 2009-10)
164
S. 43 (5) : Speculative transactions - Forward contracts entered in to too safeguard against
price fluctuations in realization of trade debtors was in nature of business loss and not
speculation loss. [ S. 28 (i) ,43 (5) (d) ]
Any loss incurred on forward contracts entered by assessee with its bankers to hedge export
receivables, in order to safeguard against price fluctuations in realization of trade debtors was in
nature of business loss and not speculation loss . (AY. 2009 – 2010)
S.43 (5) : Speculative transactions--Cash segment and futures segment and final outcome
profit-Profit or loss against both segments be adjusted or set off against each other. [S. 73]
Dismissing the appeal of the revenue, the Tribunal held that; Assessee carrying out transactions in
cash segment and futures segment and final outcome profit. Both segments part of composite
business of assesse. Business of assessee cannot be segregated to arrive at profit and loss in both
transactions independently or separately. Profit or loss against both segments be adjusted or set
off against each other. (AY.2009-2010)
JCIT v.J.M. Financial Services Ltd. (2017) 54 ITR 120/186 TTJ 228 (Mum.) (Trib.)
S.43 (6) : Written down value - Depreciation-Intangible assets-Two valuation reports –

Matter was set a side - Alterative claim was not adjudicate by CIT (A) - Matter was set a
side.
Purchaser has obtained two valuation reports and the CIT (A) has not adjudicated alternative
claim hence the matter was seta side . (AY.2007-2008, 2008-2009)
Merck Specialities P. Ltd. v. ACIT (2017) 54 ITR 256 (Mum.) (Trib.)
S. 43A : Rate of exchange - Foreign currency – Loan repayment - Liability increased or

reduced during the privous year shall be added to or deducted from actual cost of asset .[
S.43B ]
Dismissing the appeal of the revenue the Court held that; S. 43A requires treatment of foreign
exchange fluctuation to follow pupose of borrowing; it is to be seen as to whether pupose of loan
was for finacing of fixed or for financing working capital. As per S.43B the amount by which
liability aforesaid is so increased or reduced during previous yaer shall be added to, or as case
may be deducted from actual cost of asset. The liability fell in to capital stream, therefore the
foreign exchange fluctuation deduction was held to be justified . (AY. 2003-04)
PCIT v. Seagram Manufacturing (P.) Ltd. (2017) 245 Taxman 389 (Delhi) (HC)
Editorial : SLP of revenue was dismissed; PCIT v. Seagram Manufacturing (P.) Ltd (2018) 252
Taxman 383 (SC)
S. 43A : Rate of exchange - Foreign currency – Loan was utilised for purchase of assets,
differences are required to be adjusted against cost of asset at time of making actual
payment.
Allowing the appeal of the assessee the Tribunal held that; foreign exchange difference arising on
account of ECB loan, which was used to purchase assets, would be governed by provisions of
S.43A and further difference are required to be adjusted against cost of asset at time of making
actual payment. Therefore, where assessee accounted for foreign exchange differences arising on
165
ECB loan as per Accounting Principles, same was required to be ignored for purpose of
computing total income as per provisions of S..43A. (AY.2009 - 10)
SvitzerHazira (P.) Ltd.v. DCIT (2017) 166 ITD 396 (Mum) (Trib.)
S. 43A : Rate of exchange - Foreign currency - Interest could not be considered as foreign
currency loans acquired for purpose of acquiring an asset from a country outside India,
hence exchange loss was held to be allowable as revenue expenditure [ S. 37 (1) ].
Dismissing the appeal of the revenue the Tribunal held that ;S.43A would not be applicable, as
the asset had been acquired in India and loans were borrowed in Indian currency and,
subsequently, converted into foreign currency loans. Therefore the loss was held to be allowable
as revenue expenditure . (AY 2009 – 2010)
S. 43B : Deductions on actual payment - Advance deposit of central excise duty in the
Personal Ledger Account (PLA) constitutes actual payment of duty within the meaning of
S. 43B and the assessee is entitled to the benefit of deduction of the said amount
Dismissing the appeal of the revenue the Court held that; Advance deposit of central excise duty
in the Personal Ledger Account (PLA) constitutes actual payment of duty within the meaning of
S. 43B and the assessee is entitled to the benefit of deduction of the said amount.. (AY. 1993 - 04,
1996 - 97 to 1998 - 99)
CIT v. Modipon Limited (2017) 160 DTR 73/(2018) 400 ITR 1/252 Taxman 123 (SC)
CIT v.Paharpur Cooling Towers Ltd (2017) 160 DTR 73/(2018) 400 ITR 1 (SC)
Editorial : Decision Paharpur Cooling Towers Ltd v.CIT ( (2013) ITR-OL177 (Cal) (HC) is
affirmed
S. 43B : Deductions on actual payment - Payment of PF and ESI having been deposited on
or before due date of filing of returns, same could not be disallowed.
Dismissing the appeal of the revenue the Court held that; Payment of PF and ESI having been
deposited on or before due date of filing of returns, same could not be disallowed.
PCIT v. Rajasthan State Beverages Corpn. Ltd. (2017) 250 Taxman 32 (Raj.) (HC)
Editorial : SLP of revenue is dismissed ,PCIT v. Rajasthan State Beverages Corporation Ltd.
(2017) 250 Taxman 16 (SC)
S. 43B : Deduction on actual payment-Electricity Board collecting electricity duty from

customers as agent of State—Provisions is not applicable . [Electricity Duty Act, 1963, 3 (1)
]
Dismissing the appeal of the revenue, the Court held that; Electricity Board collecting electricity
duty from customers as agent of State hence provisions is not applicable. (AY. 2008-2009)
CIT v. Kerala State Electricity Board (2017) 393 ITR 337 (Ker.) (HC)
Editorial : Order in A CIT v. Kerala State Electricity Board (2015) 38 ITR 458 (Cochin) (Trib)
is affirmed. SLP is granted to the revenue, CIT v. Kerala State Electricity Board (2016) 380
ITR 8 (St.)
S. 43B : Deductions on actual payment - Provident Fund and ESI was paid before due date
of filing of returns, same could not be disallowed .[ S. 36 (1) (va)]
166
Provident Fund and ESI was paid before due date of filing of returns, same could not be
disallowed . (AY.2009 10)
PCIT v. Rajasthan State Beverages Corpn. Ltd. (2017) 250 Taxman 32 (Raj) (HC)
Editorial : SLP of revenue is dismissed, PCIT v. Rajasthan State Beverages Corpn. Ltd. (2017)
250 Taxman 16 (SC)
S. 43B : Deductions on actual payment – Deposited contribution towards provident fund

and ESI before due date of filing of returns, deduction is allowable.[S.36 (1) (va)]
Allowing the appeal of the assessee, the Court held that ;employer contribution and employee
contribution made towards provident fund and ESI can be claimed as deduction if deposited
before due date of filing of the return. (AY. 2001-02)
Sagun Foundry (P.) Ltd. v. CIT (2017) 291 CTR 557/78 taxmann.com 47 /145 DTR 265
(All.) (HC)
S.43B : Deductions on actual payment – Amount deposited as custom duty – Held to be

allowable deduction.
Dismissing the appeal, the Court held that;the deposit amounts paid were expenses and within
the ambit of section 43B.
(AY. 2007-2008)
PCIT v. Praveen Saxena (2017) 391 ITR 365 (Delhi) (HC)
S.43B : Deductions on actual payment-Bank interest-Amount credited by assessee written
back upon waiver of partial interest-Interest remaining outstanding after conversion of
write off into loan-If income to be considered then loss also to be considered for relevant
assessment year-Interest allowable as deduction.[S. 37 (1)].
Allowing the appeal the Court held that;if the income was to be considered then the loss was also
to be considered for the relevant year and therefore, the interest was allowable as deduction.
Sunil Synchem Ltd. v. CIT (2017) 392 ITR 165 (Raj) (HC) (HC)
S. 43B : Certain deductions only on actual payment – Provision for sick leave liability would
be covered under S. 43B (f)
The assessee made a provision towards sick leave liability for its employees and claimed that the
same should be allowed as deduction. It claimed that the provision had been made as per the
guidelines given in AS 15. The AO however, made disallowance of the said provision by
invoking section 43B (f). Before CIT (A), the assessee submitted that the provision was
determined by actuarial method to assess liability including death-service and incapacity benefits
after considering the assumptions as stated in AS 15. The CIT (A) after considering the
assumptions, held that the provision was made for payment to be made to the employees in
respect of un-availed sick leave at the credit of employees and hence it fell within the ambit of
43B (f). The CIT (A) observed that the provision would be reversed at the time of retirement or at
the time of the quitting the job, and therefore, concluded that the liability was notional and was
not representing any certain financial liability. Thus the CIT (A) upheld the order of the AO. On
further appeal by the assessee against the order of the CIT (A), the Tribunal held that, the liability
was purely notional in nature and could not be allowed as deduction. ITAT also observed that,
since there is no outflow on account of this provision in any year, the liability is based purely on
entries in books of accounts basis notional figures and while computing total income, such
notional amount cannot be allowed as deduction. (ITA No. 686 and 1101/Kol/2014 dt. 13-09-
2017) (AY .2010 – 2011)
Birla Corporation Ltd. v. Dy. CIT (2017) 59 ITR 59 (SN) (Kol) (Trib)
167
S. 43B : Deductions on actual payment - Contribution paid during Financial year even
though beyond prescribed due date no disallowance can be made . [ S .36 (1) (va), 154 ]
Dismissing the appeal of the revenue the Tribunal held that;the amount in question had been paid
during the financial year itself even though beyond the prescribed due date. Therefore, the
addition was liable to be deleted. (AY. 2010-11, 2011-12)
ACIT v. Instrumentation Ltd (2017) 59 ITR 100 (SN) (Jaipur) (Trib)
S. 43B : Deductions on actual payment - Service tax liability will be payable only upon
actual realization of services rendered .
The Tribunal held that the assessee was liable to pay service tax only upon actual realization of
services rendered against that liability and not on accrual basis and further held that although the
service tax liability may have been shown as outstanding at year end, yet the same may not have
become actually payable as per service tax rules. In these circumstances the rigour of section 43B
does not apply in case the liability to pay service tax did not arise as per the service tax rules. The
Tribunal sent the matter back to the file of learned AO for verification. (AY. 2009-10, 2010-11)
Toscano Infrastructure (P) Ltd. v. DCIT (2017) 187 TTJ 1 (UO) (Mum.) (Trib.)
S. 43B : Deductions on actual payment – Service tax – No expenditure was booked in the
profit and loss account, hence no disallowance can be made .
Dismissing the appeal of the revenue the Tribunal held that; service tax and land tax are statutory
liabilities were paid during the year as per the orders of the CESTAT and Rajasthan High Court.
These were statutory liabilities which pertained to the business carried on by the assessee. The
assessee could not be denied deduction in respect of these payments merely on account of the fact
that these were disputed payments and no expenditure was booked in the profit and loss account.
Accordingly, the order of Commissioner of Income-tax (Appeals) was upheld. (AY. 2008-
09,2009-2010)
ACIT v. Mangalam Cement Ltd. (2017) 55 ITR651 /148 DTR 329 (Jaipur) (Trib.)
S.43B : Deductions on actual payment-Provision for leave salary—Assessing Officer would

take necessary action after pronouncement of judgment by Supreme Court.[S.43B (f)]
Commissioner (Appeals) directing Assessing Officer to take necessary consequential action in
pursuance of final outcome of special leave petition filed before Supreme Court. Interest of
assessee taken into consideration by Commissioner (Appeals)--Assessing Officer would take
necessary action after pronouncement of judgment by Supreme Court. (AY.2007-2008, 2008-
2009)
Merck Specialities P. Ltd. v. ACIT (2017) 54 ITR 256 (Mum.) (Trib.)
S.43B : Deduction only on actual payment-Provision for leave encashment—Stay on

decision of High Court-Assessing Officer was directed to decide issue in accordance with
final decision of Supreme Court. [S.43B (f)]
Supreme Court ordering stay of decision of High Court holding provision invalid and directing
disallowance to be made in terms of provision during pendency of appeal. Assessing Officer to
168
decide issue in accordance with final decision of Supreme Court. (AY.-2005-2006, 2006-2007,
2008-2009)
ACIT v. Dow Agrosciences India Private Limited (2017) 53 ITR 590 (Mum.) (Trib.)
S.43B : Deductions on actual payment-Additional claim made in revised computation,

appellate authorities entitled to consider new claim made subsequent to filing of return.
[S.139 (1)]
Additional claim made in revised computation, appellate authorities entitled to consider new
claim made subsequent to filing of return. (AY.-2005-2006, 2006-2007, 2008-2009)
ACIT v. Dow Agro sciences India Pvt. Ltd. (2017) 53 ITR 590 (Mum.) (Trib.)
S.43D : Public financial institutions - Purpose of classification of debts as NPA and purpose
for non - recognition of income for purposes of Act were different – Every change in NHB
guidelines there would not be corresponding automatic change in Rule 6EB. [ S.145, R6EB
]
Dismissing the appeal of the assesse the Court held that; After 31.03.2005, NHB guidelines
mandated that where interest on loan was not received for period of more than 90 days, it was to
be treated as NPA. However, no corresponding change was brought about in Rule 6EB. High
Court held that Section 43D of the Act read with Rule 6EB was complete Code in itself which
provided an element of discretion to follow or not to follow NHB guidelines as and when they
were revised. Given wording of relevant provisions of the Act and the NHB Act, High Court held
that it was not possible to agree to HUDCO's proposition that with every change in NHB
guidelines there would be corresponding automatic change in Rule 6EB.
Housing & Urban Development Corporation Ltd v. Add. CIT (2017) 155 DTR 12 (Delhi)
(HC)
S. 43D : Public financial institutions – Accrual of income — Interest from non-performing

assets —Guidelines of National Housing Board under National Housing Board Act do not
override provisions of Income-Tax Act.
Dismissing the appeal of the assesse the Court held that; the Appellate Tribunal was correct in
confirming the Commissioner (Appeals)’s conclusion with respect to the assessee’s entitlement to
deduction on account of de-recognition of interest accruing upon non-performing assets, by
applying rule 6EB of the Income-tax Rules, 1962 which the assessee claimed was contrary to the
directions issued by the National Housing Bank under section 6EB read with section 6EBof the
1987 Act, in the given facts and circumstances of the case. (AY . 2005 - 06 to 2009-10)
Housing and Urban Development Corporation Ltd. v. Addl.CIT (2017) 396 ITR 667/249
Taxman 364/299 CTR 184 (Delhi) (HC)
S. 44 : Insurance business – Profit on sale of investments made in general insurance

companies could not be brought to tax prior to assessment year 2011-12 .
Allowing the appeal of the assesee, the Court held that; Profit on sale of investments made in
general insurance companies could not be brought to tax prior to assessment year 2011-12 . (AY.
2005-06)
Oriental Insurance Co. Ltd. v. Dy. CIT (2017) 250 Taxman 291 /160 DTR 104 (Delhi) (HC)
S. 44 : Insurance business – Losses on write off of investments was held to be not allowable
as the profit on sale or redemption was held to be not taxable .
169
Dismissing the appeal of the assesse the Court held that; claim on profit from sale/redemption of
investments has been allowed as not taxable, deduction as a result of losses on write off of such
investments was held to be not allowable . (AY. 2005-06)
Oriental Insurance Co. Ltd. v. Dy. CIT (2017) 250 Taxman 291/160 DTR 104 /(2018) 300
S. 44 : Insurance business-Profit on sale of investment was held to be not assessable –

Circular of CBDT is binding on the revenue.[S. 119]
Dismissing the appeal of the Revenue, the Court held that; Profit on sale of investment was held
to be not assessable.Circular of CBDT is binding on the revenue. (AY.2005 - 06, 2006 - 07))
PCIT v. National Insurance Company Ltd. (2007) 393 ITR 52 /246 taxman 176/160 DTR 97
/(2018) 300 CTR 392 (Cal.) (HC)
S.44AD : Civil construction-Gross receipts of assessee exceeding Rs. 40 lakhs provision is

not applicable – Application of net profit at 7 percent.
Dismissing the appeal of the revenue ,the Court held that;according to the proviso to section
44AD (1) of the Income-tax Act, 1961 read with Circular No. 737, dated February 23, 1996
(1996) 218 ITR 97 (St.)of the Central Board of Direct Taxes, section 44AD was not applicable to
the assessee whose gross receipts exceeded Rs. 40 lakhs. Resultantly, the challenge to the claim
to depreciation allowed by the Appellate Tribunal failed. A net profit rate of 8 per cent. could not
be applied as the provisions of section 44AD were not attracted. Application of net profit rate at 7
per cent. as ordered by the Appellate Tribunal was not arbitrary or perverse. (AY. 2010-2011)
CIT v. Ram Kumar (2017) 392 ITR 561 (P&H) (HC)
S.44AD : Civil construction – Rejection of books of account and estimation income at 8

percent of gross receipt was held to be justified as the assesse had kept only self made
vouchers in respect of major expenses - When the income was estimated further deduction
of depreciation was held to be not allowable. [S. 32,145]
Dismissing the appeal of the assessee the Tribunal held that; Rejection of books of account and
estimation income at 8 percent of gross receipt was held to be justified as the assessee had kept
only self made vouchers in respect of major expenses. When the income was estimated further
deduction of depreciation was held to be not allowable. (AY. 2009-10)
G. Raja Gopala Rao v. DCIT (2017) 163 ITD 46 (Visakha) (Trib.)
S. 44AE : Goods carriages - Assessee plying of goods carriages having chosen option of
declaring income at prescribed fixed rate in its revised return of income was held justified.
As per s. 44AE, an assessee, being transporter, has option either to declare profit earned from
business of plying at rate of a fixed prescribed sum per month per good carriage or to declare
higher profit. Where assessee had chosen option to declare profit from plying of goods carriage at
prescribed rate per month per goods carriage, even if higher income could be declared, income
declared by assessee was to be accepted. (AY. 2010 – 2011)
Pawa Industries (P.) Ltd. v. ITO (2017) 164 ITD 287 (Delhi) (Trib.)
S. 44B : Shipping business - Non-residents – Computation – Ship or an aircraft is engaged

in business of operating in international traffic, its income would be taxable in place of its
HQ, onus is on assesee to prove - DTAA-India – Singapore [S. 9 (1) (i), 90, Art, 8]
Dismissing the appeal of the assessee the Tribunal held that pre-condition for claiming
exemption from Indian tax law, is to establish fact that income accruing to an assessee has arisen
from operation of ships in international traffic and onus is on assessee to prove said fact .On facts
170
as no evidence was brought on record assessing the income u/s 44B of the Act was held to be
APL Director Co. Pte. Ltd. v. ADIT (IT) (2017) 167 ITD 603 (Mum) (Trib)
S. 44B : Shipping business-Non-residents – Slot hire charges' received from operation of

ships in international traffic was eligible for article 8 benefit of India-UAE DTAA, not liable
to tax in India. [S.90, Art. 8]
Allowing the appeal of the assessee,the Tribunal held that; income from slot hire charges earned
by the assessee, a UAE company engaged in shipping business from Indian company, was a part
of income from shipping operations in international traffic and, thus, it would be eligible for
benefit of article 8 and consequently, same was not taxable in India. (AY. 2007 - 2008)
Orient Shipping Services LLC v. ADIT (2017) 162 ITD 509 (Mum.) (Trib.)
S. 44BB : Mineral oils – Computation – Amounts received as “mobilisation fee” on account

of provision of services and facilities in connection with the extraction etc. of mineral oil in
India attracts S. 44BB and have to be assessed as business profits .[S.4,5, 9 (1) (i) ]
Dismissing the appeal of the assesse the Court held that; the amounts received as “mobilisation
fee” on account of provision of services and facilities in connection with the extraction etc. of
mineral oil in India attracts S. 44BB and have to be assessed as business profits. S. 44BB has to
be read in conjunction with ss. 5 and 9 of the Act. Ss. 5 and 9 cannot be read in isolation. The
argument that the mobilisation fee is “reimbursement of expenses” and so not assessable as
income is not acceptable because it is a fixed amount paid which may be less or more than the
expenses incurred. Incurring of expenses, therefore, would be immaterial. Also, the contract was
indivisible. Therefore, the ultimate conclusion drawn by the AO, which is upheld by all other
Authorities is correct, though some of the observations of the High Court may not be entirely
correct which have been straightened by us in the above discussion. For our aforesaid reasons, we
uphold the conclusion. Resultantly, all the appeals of the assessees are dismissed. (AY. 1986 - 87,
1987-88 ,2000-01)
Sedco Forex International Inc v. CIT (2017) 399 ITR 1/299 CTR 1 /159 DTR 33 /251
Taxman 459 (SC)
S. 44BB : Mineral oils – Award - Umpire held that tax was paid by sub-contractor under
sections 5 and 9 as existing at relevant time, impugned award was to be set aside [ S. 5, 9,
Arbitration Act, 1940 S. 13, Contract Act, 1872, S. 37 ]
Court held that, on reference, Umpire held that tax was paid by sub-contractor under sections 5
and 9 as existing at relevant time, impugned award was to be set aside . (AY.1984-85 to 1988-89
]
Hyundai Corporation v.Oil and natural Gas Corpn. Ltd. (2017) 251 Taxman 219 (SC)
S. 44BB : Mineral oils – Computation – Reimbursement of actual expenses was not be

excluded while computing the income.[S.2 (45), 5 (2)]
Dismissing the appeal of the assessee,the Court held that; Reimbursement of actual expenses was
not be excluded while computing the income as section 44BB is a complete code in itself.
Ensco Maritime Ltd. v. ADIT (2017) 244 Taxman 261 (Uttarakhand) (HC)
171
Editorial : SLP is granted to the assessee; Ensco Maritime Ltd. v. Addl. DIT (2017) 244
Taxman 190 (SC)
S. 44BB : Mineral oils – Supply, installation etc. of software used for oil andgas exploration
has been held as taxable under section 44BB
The Tribunal observed that the software maintenance/support services has alreadybeen accepted
by the assessee as falling under section 44BB of the Act.Since the software maintenance/support
services was carried in respect ofthe software sold by the assessee, both the activity of sale of
software andsoftware maintenance/support services are composite contract to be consideredunder
section 44BB of the Act. (AY. 2007-08 ,2009-10)
Hampson Russel Limited Partnership v.ADIT (IT) (2017) 57 ITR 719 (Delhi) (Trib)
S.44BB : Mineral oils-Include crude petroleum and liquid products derived from crude
petroleum, not restricted to petroleum and natural gas. Words and phrases--"Mineral oils".
Section 44BB is a special provision and has a self contained code relating to the taxability of non-
residents for providing services in connection with prospecting for, extraction of and production
of mineral oils and prevails over other general provisions including that of section 44DA.
Hyundai Heavy Industries Co. Ltd., In re (2017) 392 ITR 37 (AAR)
S. 44BB : Mineral oils – Non – residents-Amount received from hiring of barge used for
offshore accommodation of employees was also liable to be taxed under section 44BB.
Allowing the appeal of the assessee the Tribunal held that; Amount received by assessee from
hiring of barge used for offshore accommodation of employees was also liable to be taxed under
section 44BB as the said section does not envisage only direct use of plant and machinary in
prospecting for or extraction or production of mineral oils. (AY. 2007-08)
Valentine Maritime (Gulf) LLC v. ADIT (2017) 163 ITD 32/55 ITR 8 (SN) /186 TTJ 328
/156 DTR 84 (Mum.) (Trib.)
S. 44BB : Mineral oils – Business for prospecting/exploration, mineral oil etc. – Insertion of
s. 44DA in proviso to s. 44BB is with effect from 1-4-2011 is prospective in nature.[S. 44DA]
The assessee filed its return of income offering the income u/s 44BB. The AO had completed
assessment u/s.44DA by making additions as revenue generated outside India. CIT (A) deleted
the addition . On appeal by the revenue dismissing the appeal the Tribunal held that; proviso of
s.44DA in proviso to s. 44BB is inserted w.e.f. 1-4-2011, is prospective in nature. (AY. 2005 –
2006 ,2009 – 2010)
ADIT (IT) v.Iranian Offshore Engineering & Construction Company (2017)162 ITD 425
(Delhi) (Trib.)
S. 44BB : Mineral oils – Computation – Payment by a non-resident to another non-resident

[ S.115A ]
The tribunal held that once an assessee satisfied the requisite qualifying conditions contained in
sub-section (1) of section 44BB, then the income is to be deemed at 10% of the receipts in terms
of this section. In such a scenario, the AO cannot compute income under Chapter IV-D by
applying the provisions of sections 30 to 43D. The Tribunal further held that the AO’s later action
in applying the provisions of Chapter IV-D cannot be countenanced as section 44BB is fully
attracted and this section opens with a non-obstante clause and that the assessee was right in
offering receipts from C Co under section 44BB of the Act. (AY .2013-14)
Gx Technology Eame Ltd. v DCIT (2017) 160 DTR 105 /190 TTJ 306 (Delhi) (Trib)
172
S.44BBB : Foreign companies-Civil construction-Turnkey power projects - Consultancy
services is not covered – Matter remanded [S.145].
Assessing Officer had taken the rate of 10% from section 44BBB of the Act, which is a special
provision for computing on presumptive basis income of foreign companies engaged in the
business of civil construction etc. in certain turnkey power project, whereas assessee regarded the
net profit rate of 10% applied over the receipt.It was held that in the case of consultancy, major
expenses are on human resources whereas in the construction or other business of erection etc. of
turnkey power projects involves materials and wages etc. and hence cannot be compared with
consultancy business. Hence S.44BBB was not applicable to the assessee and the matter was
remanded to the assessing officer to apply the net profit rate on the basis of comparable cases.
(AY. 2008-09)
SMEC International (P.) Ltd. v. ADIT (2017) 77 taxmann.com 4/183 TTJ 45 (Delhi) (Trib.)
S. 45 : Capital gains-Joint development agreement – Transaction which never materialised

cannot be assessed as real income - -There was no transfer of land where development
agreement entered in to between developer and housing society for development of certain
land owned by society was not registered [ S 2 (47) (v), 48 Transfer of Property Act, 1882,
S. 53A,Indian Registration Act,1908, S. 17, 49]
Dismissing the appeal of the revenue, the Court held that; in the present case, the assessee did not
acquire any right to receive income, inasmuch as such alleged right was dependent upon the
necessary permissions being obtained. This being the case, in the circumstances, there was no
debt owed to the assessees by the developers and therefore, the assessees have not acquired any
right to receive income under the JDA. This being so, no profits or gains “arose” from the transfer
of a capital asset so as to attract Sections 45 and 48 of the Income Tax Act.
footnote : The maxim “noscitur a sociis” has been repeatedly applied by this Court. A recent
application of the maxim is contained in Coastal Paper Limited v. Commissioner of Central
Excise, Visakhapatnam, (2015) 10 SCC 664 at 677, para 25. This maxim is best explained as
birds of a feather flocking together. The maxim only means that a word is to be judged by the
company it keeps.Transaction which never materialised cannot be assessed as real income . (AY.
2007 - 08)
CIT v. Balbir Singh Maini (2017) 398 ITR 531/298 CTR 209 /157 DTR 273 /251 Taxman 202
(SC)
Editorial : Judgement in C.S.Atwal v CIT (2015) 378 ITR 244 (P& H) (HC) is affirmed .Also
refer SLP of revenue is dismissed in PCIT v. Charanjit Singh (2018) 403 ITR 307 (ST)
S.45 : Capital gains-An amount received from a wholly-owned subsidiary in consideration

of transfer of shares of the WOS to a group of shareholders is not taxable as capital gains.
The Department cannot subject a transaction under the Gift-tax Act and also levy tax
under the Income-tax Act. [Gift – tax Act]
Dismissing the appeal of the Revenue Court held that ;an amount received from a wholly-owned
subsidiary in consideration of transfer of shares of the WOS to a group of shareholders is not
taxable as capital gains. The Department cannot subject a transaction under the Gift-tax Act and
also levy tax under the Income-tax Act.
CIT v. Annamalaiar Mils (2017) 393 ITR 293/150 DTR 66 /294 CTR 4 /247 Taxman 222
(SC)
S.45 : Capital gains - Transfer – Development agreement was not registered hence there
was no transfer, therefore not liable to capital gains tax [ S. 2 (47) (v), Transfer of Property
Act, 1882, S.53A ]
173
Dismissing the appeal of the revenue the Court held that; On facts as the development agreement
was not registered, there was no transfer, therefore not liable to capital gains tax. (AY.2008-09)
PCIT v. Ranjit Kaur (2017) 81 taxmann.com 319 (P& H) (HC)
Editorial : SLP of revenue was dismissed, PCIT v. Ranjit Kaur (2018) 252 Taxman 382 (SC)
S.45 : Capital gains —Business income —Purchase and sale of land — Finding that lands
did not constitute stock-in-trade of assesse therefore gains on sale assessable as short-term
capital gains and not as business income [ S. 28 (i) ]
Dismissing the appeal the Court held that ;there were only two properties shown as “stock-in-
trade” by the assessee. The mere fact that the sale of the property in the earlier assessment year
and the resultant reduction of the “stock-in-trade” was not questioned by the Assessing Officer
would not relieve the assessee from having to demonstrate that the sale of the plot in question in
the assessment year under consideration was not by way of an investment resulting in short-term
capital gains. There was nothing perverse in the factual and concurrent determination of the
Assessing Officer, the Commissioner (Appeals) and the Appellate Tribunal that the plot in
question was the investment of the assessee and not its “stock-in-trade”. The assessment as short-
term capital gains was justified (AY. 2009-10)
Saras Metals P. Ltd v. CIT (2017) 399 ITR 270 (Delhi) (HC)
S. 45 : Capital gains - Business income-Mere object clause in memorandum of

understanding with developer couldn't be a determining factor to conclude that this was a
part of assessee's regular business – Sale of flats assessable as capital gains and not as
business income [ S. 2 (13), 28 (i) ]
Dismissing the appeal of the revenue, the Court held that; Mere object clause in memorandum of
understanding with developer couldn't be a determining factor to conclude that this was a part of
assessee's regular business . Sale of flats assessable as capital gains and not as business income.
(AY. 2003-04, 2004-05, 2006-07)
PCIT v. Rungta Properties (P.) Ltd. (2017) 249 Taxman 18 /(2018) 162 DTR 64/403 ITR 234
(Cal.) (HC)
S. 45 : Capital gains - Capital gains account scheme - AO was directed to issue no

objection certificate for with drawl from the scheme in respect of five accounts . [ S. 54 ]
Allowing the petition the Court held that, Out of eight accounts, three being sufficient to recover
the total amount of tax in dispute, AO was directed to issue no objection certificate for with drawl
from the scheme in respect of five accounts . (AY. 2013-14)
Padma Swaaminathan (Mrs.) v. ITO (2017) 295 CTR 320 /151 DTR 165 (Mad.) (HC)
S.45 : Capital gains — Transfer of possession of land to developer amount to transfer and
liable to capital gains tax - land and development charges deductible from sale
consideration - Market value od land as on 1-4 - 1981 has to be taken .[ S. 2 (47), Transfer of
property Act, 1953, S. 53A ]
174
Court held that Held, Transfer of possession of land to developer amount to transfer and liable to
capital gains tax - land and development charges deductible from sale consideration.The value
declared in the tax return filed by the assessees under the Wealth-tax Act could not be taken to be
the cost of acquisition in the hands of the assessees. The cost of acquisition of land had to be the
market value of land as on April 1, 1981. The land and development charges had to be reduced
from the sale consideration (AY. 1995 - 96)
CIT v. Sidharth P. Chand (2017) 398 ITR 316 /159 DTR 199 (Delhi) (HC)
CIT v. Vasavi Pratap Chand (2017) 398 ITR 316/159 DTR 199 (Delhi) (HC)
S. 45 : Capital gains - Transfer – Development agreement land owned by society, agreement

was not registered hence not liable to capital gains tax. [ S .2 (47) (v), Transfer of Property
Act, 1882, S. 53A]
Dismissing the appeal of the revenue, the Court held that Development agreement land owned by
society, agreement was not registered hence not liable to capital gains tax. (AY. 2008 - 09)
PCIT v. Ranjit Kaur (Smt.) (2017) 248 Taxman 21 (P&H) (HC)
Editoraial : SLP of revevue is dismissed; PCIT v. Ranjit Kaur (Smt.) (2018) 252 Taxman 382
(SC)
S. 45 : Capital gains - Transfer – Development agreement land owned by society, agreement

was not registered hence not liable to capital gains tax. [ S .2 (47) (v), Transfer of Property
Act, 1882, S. 53A]
Dismissing the appeal of the revenue, the Court held that unregistered Development agreement
land owned by society, agreement was not registered hence not liable to capital gains tax.
Followed . Followed C.S.Atwal v CIT (2015) 378 ITR 244 (P& H) (HC) (AY. 2008 - 09)
PCIT v. Amrik Singh Basra (Dr.) (2017) 248 Taxman 180 (P&H) (HC)
S. 45 : Capital gains - Business income – Investment in shares – As explained in Circular
No. 6, dated 29-2-2016, in respect of listed shares and securities held for a period of more
than 12 months immediately preceding date of its transfer has to be assessed as capital
gains [ S. 28 (i) ]
Dismissing the appeal of the revenue, the Court held that as explained in circular No. 6, dated 29-
2-2016, in respect of listed shares and securities held for a period of more than 12 months
immediately preceding date of its transfer, if assessee desires to treat income arising from transfer
thereof as capital gain, same shall not be put to dispute by Assessing Officer subject to condition
that consistent view of the assesse in subsequent years also . (AY. 2006-07)
PCIT v. Ramniwas Ramjivan Kasat (2017) 248 Taxman 484 (Guj.) (HC)
S. 45 : Capital gains - Long-Term capital loss — Redeemable cumulative preference shares

resulting in long-term capital loss - carry forward of long-term capital loss was held to be
justified .[S. 2 (29B) ]
Dismissing the appeal of the revenue, the Court held that, loss on redemption of 2 % redeemable
cumulative preference shares resulting in long-term capital loss was accepted as genuine in the
earlier year, hence carry forward of long-term capital loss was held to be justified . (AY. 2006 -
07)
175
PCIT v. Consolidated Finvest and Holdings P. Ltd. (2017) 397 ITR 540 (Delhi) (HC)
S.45 : Capital gains — Business income — profit from sale of shares — shares had been
purchased as investment hence profits from sales assessable as capital gains [ S. 28 (i)]
Allowing the appeal of the assesse, the Court held that; the assessee had made investment in
shares as an investor and therefore, the income arising to the assessee out of sale of shares was
assessable under the head Capital gains and not Profits and gains of business or profession.
Referred CBDT Instruction No . 1827, dt. 31-08 - 1989 and Circular No. 4 of 2007 dt. 15 - 06-
2007 (2007) 291 ITR 384 (St.) (AY. 1992 - 93 to 1996 - 97)
Deepaben Amitbhai Shah v. Dy. CIT (2017) 397 ITR 687 (Guj) (HC)
S. 45 : Capital gains - Development agreement – Amount to be received by the developer

cannot be assessed as the development agreement itself did not survive later on . [ S. 2 (47)
(v) ]
Dismissing the appeal of the revenue the Court held that; Assessee-society entered into a
development agreement of land.The assessee had only transferred its entitlement to additional FSI
to the developer for reconstruction of building. However, once that agreement itself did not
survive and this benefit was to flow from the agreement, the Tribunal concluded that in the light
of the factual circumstances, when there was no benefit obtained by way of transfer of additional
FSI and that could have been transferred only on demolition of old building, the ingredients of
Section 2 (47) (v) are not at all satisfied and attracted.. (AY. 2009-10)
CIT v. Bhatia Nagar Co-op Society Ltd. (2017) 246 Taxman 387 /155 DTR 304 (Bom.) (HC)
S.45 : Capital gains-Family arrangement does not amount to transfer – Corporate veil can
be piereced only for the benefit of revenue - Lifting of corporate veil on the basis of family
arrangement was held to be not valid, the fact that the company is wholly owned subsidiary
of the family is irrelevant - Transfer of shares are held to be liable to capital gains tax. [S. 2
(47), 47]
The Question before the High Court was “whether in the facts and circumstances of the case and
in law the Tribunal was right in holding that the transaction of transfer of shares by the assessee
company in pursuance of family arrangement amounted to transfer and was exigible to tax”
Dismissing the appeal of the assesee the Court held that; a family arrangement/settlement does
not amount to a "transfer" u/s 2 (47) as it only recognizes "pre-existing rights" between the
parties, the same applies only to members of the families and not to transfers made by corporate
entities. The corporate veil can never be lifted at the instance of the company itself because that
would amount to its denying its own corporate existence. The fact that the Company is wholly
owned by the members of the family is irrelevant. Transfer of shares are held to be liable to
capital gains tax . Accordingly the Tribunal was correct in holding that the transaction of transfer
of shares by the independent corporate entity was assessable to capital gain tax. Corporate veil
can be piered only for the benefit of Reveue . Therefore, the substantial questions of law which
arise for our consideration are all decided in favour of the respondent/revenue and against the
appellant/assessee. (AY. 1995-96)
B. A. Mohota Textiles Traders Pvt. Ltd. v. DCIT (2017) 397 ITR 616/248 Taxman 490 /156
DTR 272/297 CTR 605 (Bom) (HC)
S. 45 : Capital gains-Business income-Equity shares – Frequent transactions - Receipts to be

treated as short-term capital gains [S. 28 (i),111A]
Dismissing the appeal of the revenue, the Court held that; Appellate Tribunal had taken note of
the clauses in the partnership deed by which the partners/firm were debarred from doing trading
activities in shares and mutual funds and wherever the assessee had incurred losses the assessee
176
had never claimed them as business losses. Finding of fact, hence no substantial question of law.
(AY .2008-2009, 2009-2010)
CIT v. Tejas Securities (2017) 393 ITR 132/245 Taxman 362 (Guj.) (HC)
S. 45 : Capital gains-Transfer of trading stock into investment is permissible--Profit from

sale of shares was held to be assessable as Long-term capital gains and not as business
income.[S.10 (38),28 (i), 45 (2)]
Allowing the appeal the Court held that; the Tribunal erred in affirming the order of the
Assessing Officer rejecting the conversion of the trading shares into investment shares and
treating the long-term capital gains that arose from the sale of those shares as profit of trading in
shares and chargeable business income. The only reason given by the Appellate Tribunal in
rejecting the claim of the assessee for the previous assessment year 2005-06 was that there was no
provision in the Income-tax Act, 1961 in respect of conversion of stock-in-trade into investment.
Section 45 (2) provided for the conversion by the owner of a capital asset into or its treatment by
him as stock-in-trade of a business carried on by him as chargeable to tax as income of his
previous year in which such stock-in-trade was sold or otherwise transferred by him and fair
market value of the asset on the date of conversion or treatment should be deemed to be the full
value of the consideration received or accrued as a result of the transfer of a capital asset. The Act
however did not provide for the conversion of stock-in-trade into capital asset. Such omission
could not operate as a bar on an assessee. It was a fundamental principle of law that a natural
person had the capacity to do all lawful things unless his capacity had been curtailed by some rule
of law. (AY. 2006-2007)
Deeplok Financial Services Ltd. v. CIT (2017) 393 ITR 395/247 Taxman 139/151 DTR 267
/297 CTR 543 (Cal.) (HC)
S.45 : Capital gains - Business income-land had been purchased as investment, gains on sale
of land was assessable as capital gains.[S.28 (i), 260A]
Dismissing the appeal of the revenue the Court held that; land had been purchased as investment,
gains on sale of land was assessable as capital gains. . The view on the basis of facts placed
before the Tribunal was one of possible views and not an impossible view applying the test of
reasonable prudence. The income was assessable as capital gains. (AY. 2005-2006)
Bagmane Developers P. Ltd. v. CIT (2017) 392 ITR 379 (Karn.) (HC)
S. 45 : Capital gains-Sick Company – When assessee started earning profits liability to

capital gain tax was up held.
Scheme for revival of assessee was sanctioned by BIFR. Assessee started earning profits. Joint
Director (Recovery) rejected assessee's request for exemption. On writ the dismissing the petition
the Court held that; liability to capital gains tax on sale of assets of assessee was justified.
However, having regard to these peculiar facts, HC issued direction to the Revenue not to charge
interest or penalty on the capital gains tax amounts. (AY.2010-11)
Laxmi Automatic Loom Works Ltd. v. DCIT & Anr. (2017) 390 ITR 150/292 CTR 243/146
DTR 271/78 taxmann.com 335 (Delhi) (HC)
S.45 : Capital gains-Full value of consideration is neither market value nor necessarily price
stated in document for sale but the price actually arrived at between parties to transaction.
[S. 48,55A]
Dismissing the appeal of the revenue, the Tribunal held that; The Assessing Officer is not
entitled to determine fair market value merely because parties interrelated. Consideration stated in
sale document higher than valuation by stamp authority. Full value of consideration received by
or accruing to assessee to be taken into consideration for computing capital gains. Market price of
177
property not relevant for this purpose hence reference to Valuation Officer was without
jurisdiction. (AY. 2006-2007)
PCIT v. Quark Media House India P. Ltd. (2017) 391 ITR 145/245 Taxman 226/292 CTR
46 (P&H) (HC)
S.45 : Capital gains-Cost of acquisition – Life interest in trust – Relinquishment/surrender

does not constitute gift – Cost of acquisition of asset would be deemed to be nil [ S. 49 (1)
(ii), Gift tax Act, 1958, S. 2 (xii), 4 (1) (c), 4 (1) (d)]
Answering the question in favour of the assessee, the Court held that Tribunal was not justified in
holding that the life interest held by the assessee in trust was an asset coming within the purview
of section 49 (1) (ii), as it was acquired on the release executed by the previous life interest holder
which amounted to a gift and therefore the cost of the acquisition of asset would be deemed to
be the cost of the original settlor . (AY. 1984-85)
Nulsi N.Wadia v. CIT (2017) 151 DTR 325/248 Taxman 46 (Bom.) (HC)
Editorial : Order in Nulsi N.Wadia v. ACIT (1996) 56 TTJ 88 (Mum) (Trib) is set aside.
S. 45 : Capital gains - Penny stocks - If the DMAT account and contract note show details of
the share transactions and the AO has not proved the transactions to be bogus, the capital
gains earned on the said transactions cannot be treated as unaccounted income .The fact
that the broker was tainted and violated SEBI regulations would not make assessee’s
transactions bogus. [ S. 68]
Dismissing the appeal of the revenue the Tribunal held that ;If the DMAT account and contract
note show details of the share transactions and the AO has not proved the transactions to be
bogus, the capital gains earned on the said transactions cannot be treated as unaccounted income
.The fact that the broker was tainted and violated SEBI regulations would not make assessee’s
transactions bogus. (ITA No. 4862/mum/2014, dt. 18.09.2017) (AY. 2005-06)
ITO v. Arvind Kumar Jain HUF (Mum) (Trib), www.itatonline.org
S.45 : Capital gains - Purchase and sale of shares - Average holding period was 72 days
hence income earned was held to be assessable as capital gains and not as business income [
S.28 (i) ]
Dismissing the appeal of the revenue the Tribunal held that the assesse has invested his own
funds in purchase of shares, in view of fact that he entered into delivery based transactions and,
moreover, average holding period of shares was around 72 days, income earned on sale of those
shares was liable to tax as short term capital gain. (AY. 2010-11)
ACIT v. Jignesh Madhukant Mehta. (2017) 165 ITD 646 (Mum) (Trib.)
S.45 : Capital gains – Business income - Plots shown as investment - Subjected same to
wealth tax – Intention at the time of Purchase to be considered - Consequential gains to be
capital gains. [ S. 2 (14) ,28 (i) ]
Tribunal held that ;what is relevant to determine the issue is to enquire into the intention at the
time of acquisition of asset and not when the asset is proposed to be sold. While description of a
particular portfolio in the balance-sheet may not be conclusive in determining the nature of
transactions per se, it is certainly an important factor to ascertain the intention of acquisition of
assets. Accordingly, it is held that land/properties were held by the assessee as 'capital assets'
before its sale and consequential gains arising on sale thereto is chargeable under the head 'capital
gains'. (AY. 2011-12)
178
Hiteshkumar Ashokkumar Vaswani v. Jt CIT (2017) 165 ITD 505/157 DTR 167/(2018) 191
TTJ 495 (Ahd) (Trib.)
S. 45 : Capital gains-Capital asset - Conversion of agricultural land to non-agricultural –

Sale is liable to be capital gains tax. [S. 2 (14) (iii), 133 (6)]
It was held by the Tribunal that the assessee had not been carrying on agricultural operations for
many years continuously and consistently. It is not a case of intermittent stoppage of agricultural
operations. It is a case of permanent stoppage of agricultural operations in the light of real estate
development taking place in the particular area. Therefore, by virtue of not carrying on
agricultural activities for a quiet long time in the past, the character of the land occupied by the
assessee had been naturally converted into a non-agricultural land. Hence the gain on sale was
taxable. (AY. 2012-13)
ITO v. Vijay Shah. (2017) 165 ITD 348 /190 TTJ 260 /(2018) 161 DTR 356 (Chennai) (Trib.)
ITO v.Rajesh v.Shah (2017) 165 ITD 348 /190 TTJ 260 /(2018) 161 DTR 356 (Chennai)
(Trib.)
S.45 : Capital gains – Allotment letter - Indexation - Allotment right constitutes a capital
asset ,hence profit earned on sale of such allotment right would be taxable as capital gains
and not as income from other sources [ S. 2 (14), 56v]
Allowing the appeal of the assessee, the Tribunal relying in the case of CIT vs. Sam Global
Securities Ltd. (2014) 360 ITR 682 (Delhi) (HC) held that though in the ROI the assessee claimed
the profit on sale of allotment right as Income from other sources, the assessee’s claim in the
assessment proceedings of treating it as capital gains could not be denied. Further, the Tribunal
relying on in the case of CIT v. Tata Services Ltd. (1980) 122 ITR 594 (Bom HC) also held that
when more than 90 per cent of the payments have been made for the property, it would
tantamount to a right which was transferable and therefore, would be termed as a capital asset and
the gains would be offered under the head ‘Capital Gains’. (AY. 2010-11)
Satnam Overseas Exports v. DCIT (2017) 57 ITR 78 (Delhi) (Trib.)
S. 45 : Capital gains – Real income - An amount which is payable only on fulfilment of

conditions does not create an enforceable right and has to be excluded while computing
capital gains. [ S. 48 ]
Allowing the appeal of the revenue the Court held that; The scheme of the Act is to assess real
income and not hypothetical income. The word "accrue" in "full value of consideration received
or accruing" in S. 45 means that the assessee has a legally enforceable right to receive the sum.
An amount which is payable only on fulfilment of conditions does not create an enforceable right
and has to be excluded while computing capital gains. . (ITA No. 5097/Mum/2015, dt.
01.11.2017) (AY.. 2010-11)
Gordhandas S. Garodia, (Late). v. DCIT (Mum) (Trib) www.itatonline.org
S.45 : Capital gains – Transfer - In terms of Joint Development Agreement, assessee gave
vacant and peaceful possession of his land to builder after receiving a part of agreed cash
179
deposits amounts to transfer of property and liable to capital gains tax in year in which said
JDA was entered into. [S. 2 (47) (v)]
In terms of Joint Development Agreement, assessee gave vacant and peaceful possession of his
land to builder after receiving a part of agreed cash deposits amounts to transfer of property and
liable to capital gains tax in year in which said JDA was entered into ie .AY. 2007-08.
Accordingly the addition was deleted and the capital gain for the relevant year shown by the
assesse was directed to be assessed as capital gains. (AY .2011 – 2012)
ITO v. Shafiq Mohammed Shah. (2017) 164 ITD 664/190 TTJ 379 /159 DTR 161 (Chennai)
(Trib.)
S. 45 : Capital gains - Joint venture agreement - Possession as well as development rights

were given to the developer-Taxable in year in which development agreement executed.
[S.2 (47) (v), 147. 148, Transfer of Property Act, S. 53A]
The assessee had entered into a joint venture agreement for development of land owned by him.
In terms of the said agreement possession as well as development rights were given to the
developer. In consideration of the said agreement, the assessee received certain cash and certain
percentage of the constructed area.
It was held by the Tribunal that the legal ownership continued with the owners to be transferred
to the developer at a future distant date really does not affect the applicability of section 2 (47)
(v). The transferee was undisputedly willing to perform its part of the contract, in this
circumstance it is held that there is transfer under section 2 (47) (v). Thus, the possession and
control of the property was already vested with the transferee and the impugned development
agreement had not been duly cancelled and it was still in operation, it has to be decided that there
is a transfer under section 2 (47) (v).One has to see the real intention of the parties. Entering into
the property and handing over of the possession was instantaneous thus entire conspectus of the
case has attracted the provision of section 45 on fulfilment of conditions laid down in section 53A
of the Transfer of Property Act. (AY. 2007-08)
Sumeru Soft (P.) Ltd. v. ITO (2017) 165 ITD 48/188 TTJ 605 /(2018) 161 DTR 105
(Chennai) (Trib.)
S. 45 : Capital gains – Possession - Registration of sale deed related to back date on which
agreement for sale was executed hence capital gains arose from such sale was to be assessed
in year of execution of sale deed. [S. 2 (47)]
Conveyance deed of joint family property was executed on 31-3-2008 and same was registered
under Registration Act on 1-7-2008. Possession of property was given to buyers on 31-3-2008
and assessee along with other co-owners had received entire consideration before 31-3-2008.
Tribunal held that property had been transferred during year relevant to AY. 2008-09, hence the
AO was not justified in assessing same in AY. 2009-10. (AY. 2009 – 2010)
Ashwin C. Jariwala v. ITO (2017) 164 ITD 255 (Mum.) (Trib.)
S. 45 : Capital gains – Transfer - Mere execution of Power of Attorney cannot be considered

as transfer for assessing the capital gains as neither any agreement for sale was executed
nor handed over the possession .[ S.2 (47) (v) ]
Tribunal held that, mere execution of Power of Attorney cannot be considered as transfer for
assessing the capital gains,as neither any agreement for sale was executed nor handed over the
possession. (AY. 2007 – 2008)
Mithra Ram (Smt.) v. ITO (2017) 164 ITD 411/57 ITR 555 (Chennai) (Trib.)
S. 45 : Capital gains – Assessable in the year of possession and not in the year of registration
of agreement or advance received. [ S. 2 (47) (v)]
Allowing the appeal of the assessee the Tribunal held that; The documents on record duly
establish that during this period, i.e. between the date of registration of sale agreement on 03-07-
180
2009 and till the date of handing over of possession on 26th June, 2011, the flat was in the
exclusive possession, enjoyment and custody of assessee only. For completion of sale in absolute
terms, the following three conditions need to be satisfied :
 Execution of registration of conveyance deed
 Handing over of possession and
 Payment of full consideration.
On considering the facts and circumstances on record, it was evident possession was handed over
by the assessee on 26-06-2011. Thus, on failure to fulfil two of the three conditions, (viz. handing
over of possession and payment of full consideration) the sale was not complete in AY 2010-
2011 and accordingly deleted the addition made by the Assessing Officer for the aforesaid year.
(AY. 201011)
Ashok M. Seth v. Dy. CIT (2017) 55 ITR 594 /159 DTR 201 /190 TTJ 371 (Mum.) (Trib.)
Nirmal A. Sheth v. Dy. CIT (2017) 55 ITR 594/159 DTR 201 /190 TTJ 371 (Mum.) (Trib.)
S.45 : Capital gains-Transfer of participating interest to Indian contractor, profit is taxable

as capital gain.[S.2 (14), 2 (42)]
It was held by the Tribunal that consideration received by the assessee for transfer of his entire
participating interests in Oil Rigs, etc, to Hindustan Oil Exploration Ltd, and that since definition
of capital asset, under section 2 (14), includes "property of any kind held by an assessee, whether
or not connected with business or profession", these participation interests are required to be
treated as capital assets. The gains on transfer of these participation rights is, therefore, required
to be treated as capital gain and is liable to be taxed in the year in which the transfer of related
asset takes place. (AY. 2010-11)
Mosbacher India LLC v. ADIT (20167 76 taxmann.com 31/183 TTJ 1 (Chennai) (Trib.)
S. 45 : Capital gains-Capital or revenue-Amount received from assignment of patent is

taxable as capital gain under section 55 (2) (a) and its cost has to be taken at Rs. Nil. [S. 55
(2) (a)]
AO has held that the amount received on sale of patent was held to be revenue receipt. On appeal
CIT (A) held that receipt was assessable as capital gain and cost to be taken at nil. On appeal
dismissing the appeal of the assessee the Tribunal held that; amount received from assignment of
patent is taxable as capital gain under section 55 (2) (a) and its cost has to be taken at Rs. Nil.
(AY. 2008-09)
Bharat Serums & Vaccines Ltd. v.ACIT (2017) 163 ITD 253 /155 DTR 39/187 TTJ 598
(Mum.) (Trib.)
S.45 : Capital gains - Penny stock – Failure to provide a copy of the statement and cross
examination,the addition is bad in law - Direct evidences relating to sale /purchase,
brokers note cannot be disregarded.
Allowing the appeal of the assessee, the Tribunal held that; failure to provide a copy of the
statement relied upon and of cross-examination renders the assessment order void. The claim of
capital gains from penny stocks cannot be denied on presumption and surmises by disregarding
direct evidences relating to the sale/purchase transactions of shares supported by broker’s contract
notes, confirmation of receipt of sale proceeds through regular banking channels and the demat
account.. (ITA No. 501 & 502/Ahd/2016, dt. 09.03.2017) (AY. 2008-09)
Sunita jain (Smt.) v. ITO (Ahd.) (Trib.) : www.itatonline.org
Rachna Sachin jain (Smt.) v. ITO (Ahd.) (Trib.);www.itatonline.org
S. 45 : Capital gains Penny stocks-Failure to give opportunity of cross examination -

Addition was deleted.[S. 131 147 ]
181
The s. 131 statement implicating the assessee is not sufficient to draw an adverse inference
against the assessee when the documentary evidence in the form of contract notes, bank
statements, STT payments etc prove genuine purchase and sale of the penny stock. Failure to
provide cross-examination is a fatal error. Additions made by the AO was deleted . (AY. 2006-
07)
Kamla Devi S. Doshi v. ITO (2017) 57 ITR 1 (Mum.) (Trib)
Jaswantraj Bhutaji Shah HUF v. ITO (2017) 57 ITR 1 (Mum.) (Trib.)
Rajmal M .Sanghvi v. ITO (2017) 57 ITR 1 (Mum.) (Trib.)
S.45 : Capital gains – Capital loss-Capital asset-Convertible share warrants – Share

warrant is a capital asset and loss generated from its forfeiture is capital loss. [S. 2 (14)]
Dismissing the appeal of the revenue; share warrant is a capital asset and loss so generated from
forfeiture of share warrant is nothing but a capital loss . (AY. 2009 – 2010)
Dy. CIT v. Diamond Co. Ltd. (2017) 162 ITD 131 (Kol.) (Trib.)
S. 45 : Capital gains-Long term capital gains – Purchase of shares in off market – Sale
consideration received should be assessable as long term capital gain and not income from
undisclosed sources. [S.69]
Assessee having purchased and sold shares through a registered broker which are supported by
proper contract notes and demat account and received the sale consideration by account payee
cheques, the transactions cannot be treated as bogus and sham, more so as the broker as well as
the stock exchange has confirmed the purchase and sale transactions. Thus, the income arising
from sale of shares is assessable as long term capital gains. (AY.2005-06)
Dolarrai Hemani v. ITO (2017) 146 DTR 93 (Kol.) (Trib.)
S.45 : Capital gains-Business income – Investment portfolio-Investment was kept for long
term assessable as capital gain and not as business income. [S. 28 (i)]
Tribunal held that; the A.O himself admitted that Assessee not only maintained two separate
portfolios in the year under appeal but also in earlier years. Further the same was also supported
by the Assessee’s books of accounts. In addition, the Books of accounts of Assessee were not
rejected by A.O and the stand of Assessee in offering long term capital gains under investment
portfolio was not disputed by revenue, therefore, it was held that the net surplus on sale of shares
under investment portfolio should be chargeable to capital gains only and Assessee was not to be
treated as a trader in respect of sale and purchase of shares in investment portfolio. (AY. 2006-07)
Dy.CIT v. Lokenath Saraf Securities Pvt. Ltd. (2017) 183 TTJ 241 (Kol.) (Trib.)
S. 45 : Capital gains – Business income-Shares transferred from trading to investment

account were held for a long time - Surplus arising on sale of shares under investment
portfolio was to be brought to tax as capital gains. [S.28 (i)]
Where assessee, a stock broker, holding dual portfolio, i.e., investment portfolio and stock
portfolio, earned capital gain from sale of shares kept in investment portfolio, in view of fact that
assessee did not use borrowed funds for buying those shares and, moreover, it kept shares in
question for sufficiently long period of time, income declared by assessee could not be brought to
tax as business income. (AY. 2006-07)
Dy. CIT v. Lokenath Saraf Securities (P) Ltd. (2017) 146 DTR 125 (Kol.) (Trib.)
S. 45 : Capital gains - Full value of the consideration-Under value of assets - If the AO does
not allege that the assessee received more consideration than is stated in the sale deed, he
cannot make an addition to the stated consideration. [S.40A (2) (b), 48, 50C, 55A]
Dismissing the appeal of the Revenue the Court held that; the AO is not bound to accept the
consideration stated in the sale deed. In a case where property is sold between arm’s length
182
parties at a gross undervaluation, the onus is on the assessee to explain and if there is no
explanation, the AO is entitled to draw an inference. The presumption against the value being
understated (not undervalued) is greater where parties are connected or related. However, if the
AO does not allege that the assessee received more consideration than is stated in the sale deed,
he cannot made an addition to the stated consideration. (CIT v. George Henderson and Co. Ltd.
(1967) 66 ITR 622 (SC) & CIT v. Gillanders Arbuthnot& Co. (1973) 87 ITR 407 (SC)
(AY.2006-07)
PCITv. Quark Media House India Pvt. Ltd. (2017) 292CTR 146/146 DTR 233 (P & H)
(HC)
S. 45 : Capital gains-Long term or short term-Letter of allotment – for considering whether

an asset is a "long-term capital asset", the period of holding must be computed on a de facto
basis. The letter of allotment, even though not "ownership", must be taken as the date of
holding the assetand not the agreement to sell was registered. [S. 2 (14),2 (29A), 2 (42A), 2
(47), 54, 54F]
Allowing the appeal of the assessee the Tribunal held that, S. 2 (42A) uses the term "held", the
other provisions use the terms "acquired", "purchased" and "owner". Accordingly, for considering
whether an asset is a "long-term capital asset", the period of holding must be computed on a de
facto basis. The letter of allotment, even though not "ownership", must be taken as the date of
holding the asset and not the agreement to sell was registered. (AY. 2011-12)
Anita D. Kanjani v. ACIT (2017) 163 ITD 451 (Mum.) (Trib.)
S. 45 : Capital gains-Business income-Portfolio Management Scheme (PMS) – Gains

assessable as capital gains and not as business income.[S. 28 (i), 48]
Dismissing the appeal of the revenue, the Tribunal held that; Share held in portfolio Management
Scheme (PMS) cannot be assessed as business income, it has rightly assessed as capital gains.
CBDT Circular No. 4/7 dated 15.06.2007 and Circular No. 6 of 2016 dated 29.02.2016
considered and entire law on the subject is explained. (AY. 2010-11, 2011-12)
ACIT v. Sachin R. Tendulkar (2017) 163 ITD 65/ 147 DTR 282 /184 TTJ 374 (Mum.)
(Trib.)
S.45 : Capital gains - Business income-Investor in shares-Long term capital gain was
accepted as an investor, short term capital gains cannot be assessed as business income as
an trader. [S. 10 (38), 28 (i)]
Dismissing the appeal of the revenue, the Tribunal held that; if the AO has accepted the claim for
exemption for long-term capital gains and conceded that the assessee is an "investor", he cannot
change his stand and treat the assessee as a "trader" in respect of the claim of short-term capital
gains alone. (ITA No. 2799 & 2799/Kol/2013, dt. 27.01.2017) (AY. 2006-07 & 2009-10)
ITO v. Dilip B. Desai HUF (2017) 55 ITR 19 (SN) (Kol.) (Trib.); www.itatonline.org
S. 45 : Capital gains-The capital gains arising on transfer by a foreign company of shares in

another foreign company holding assets in India is liable to tax in India-DTAA-India-UK.
[S. 2 (14), 2 (47),9 (1) (i), Art. 14]
Dismissing the appeal of the assessee,the Tribunal held that, The capital gains arising on transfer
by a foreign company of shares in another foreign company holding assets in India is liable to tax
in India.The argument that the transfer is a mere re-organisation of assets within the group and
that there is no “real income” is not acceptable. The argument that the India-UK DTAA should be
given a “static” interpretation and that the retrospective amendment to s. 9 by the Finance Act
2012 should be ignored is also not acceptable. Where the DTAA provides that the income shall
be chargeable to tax in accordance with the provision of the domestic law, the said domestic law
has to be the amended law. (AY.2007-08)
183
Cairn UK Holdings Ltd. v. DCIT (2017) 150 DTR 57 /185 TTJ 593 (Delhi) (Trib.)
S.45 : Capital gains—Business income-Portfolio management scheme--Principle of

consistency—AO was directed to assesse the income as capital gains. [S. 28 (i)]
Allowing the appeal the Tribunal held that; department consistently in all subsequent years
treating sale proceeds as capital gains. Assessing Officer directed to treat income from portfolio
management services as capital gains. (AY. 2008-2009, 2010-2011)
Venkatesh Satyaraj v. DCIT (2017) 53 ITR 406 (Mum.) (Trib.)
S.45 : Capital gains-Search - Purchase and sale of shares-Long-term capital gains was to be
accepted.[S. 153A]
Dismissing the appeal of the revenue, the Tribunal held that; the assessing Officer not making any
attempt to collect details from return filed by share broker. Assessee selling shares through
another broker by dematerialising shares. Dematerialisation of shares would not happen without
physical shares, hence long-term capital gains on sale of shares declared by assessee to be
accepted. (AY.2003-2004)
CIT v. Asha V. Mehta (Smt.) (2017) 54 ITR 191 (Mum.) (Trib.)
S. 45 : Capital gains – Sale of shares cannot be assessed as income from undisclosed sources
when the broker and stock exchange confirmed the genuineness of transaction. [S.69]
The Tribunal held that the assessee having purchased and sold shares through a registered broker
which are supported by proper contract notes and demat account and received the sale
consideration by account payee cheque, the transactions cannot be treated as bogus and sham.
The broker as well as the stock exchange have confirmed the purchase and sale transactions and
therefore, the income arising therefrom is assessable as long term capital gains and not as income
from undisclosed sources. (AY. 2005-06)
Dolarrai Hemani v. ITO (2017) 183 TTJ 433 (Kol.) (Trib.)
S. 45 (2) : Capital gains - Conversion of a capital asset in to stock-in-trade – Land is

converted in to stock in trade - Capital gains is to be computed up to the date of conversion
in to stock in trade and for a period thereafter as business income . [ S. 28 (i), 45 ]
On appeal by revenue, dismissing the appeal the Court held that; when the land is converted in to
stock in trade, capital gains is to be computed up to the date of conversion in to stock in trade and
for a period thereafter as business income . Assessing Officer should apply provisions of section
45 (2) and compute capital gains upto date of conversion into stock-in-trade, and thereafter on
actual sale of land, i.e., difference between value of sale and stock-in-trade, was to be considered
as business income . (AY. 2011-12)
CIT v. Essorpe Holdings (P.) Ltd. (2017) 249 Taxman 222 /159 DTR 403 (Mad.) (HC)
S. 45 (2) : Capital gains - Conversion of a capital asset in to stock-in-trade - Non-disclosure

of conversion of capital asset into stock-in-trade – Does not change characteristics of
transactions.[ S.45 ]
Dismissing the appeal of the revenue, the Tribunal held that; It was held that once the assessee
has proved the conversion of capital asset into stock-in-trade, the provisions of section 45 (2) of
the Act come into play and the income is to be determined in accordance with the said section.
Therefore, the documents furnished by the assessee clearly indicate that the assessee had
converted his capital asset into stock-in-trade and hence, rightly computed resultant profit by
applying the provisions of section 45 (2) of the Act. (AY. 2007-08)
184
DCIT v. Chennupati Kutumbavathi. (2017) 165 ITD 454 /188 TTJ 356 /155 DTR 233
(Visakha (Trib.)
S. 45 (5) : Capital gains – Accrual - Compulsory acquisition - Enhanced compensation and

interest thereon under an interim order passed by the High Court in pending appeals
relating to land acquisition matter are liable to be assessed for income tax in the year in
which it has been received [ S. 5, 45, 155 (16) ]
Allowing the appeal of the revenue; the Court held that; the enhanced compensation and interest
thereon under an interim order passed by the High Court in pending appeals relating to land
acquisition matter are liable to be assessed for income tax in the year in which it has been
received . CIT v. Ghanshyam (HUF) (2009) 315 ITR 1 (SC) followed .
CIT v. Chet Ram (HUF) (2017) 251 Taxman 4/160 DTR 369/299 CTR 459 (2018) 400 ITR
23 (SC)
Editorial : Decision in CIT v. Chet Ram (HUF) (2009) 315 ITR (3 (P& H) (HC) was reversed .
S.47 : Capital gains-Conversion of partnership in to a company – Premature transfer of

shares, transferee company is not liable to pay capital gains tax.[ S.45, 47 (xiii), 245 N ]
Application was filed before the AAR on a question as to whether notwithstanding the non –
compliance with clause (d) of proviso to section 47 (xiii), the assesse was liable to pay capital
gain tax. AAR has held that, the assesse was not liable to capital gains tax . On writ by the
Revenue, dismissing the petition the Court held that, where there is no gain or profit arises at the
time of conversion of partnership firm in to a company, in such a situation, notwithstanding non
compliance with clause (d) of proviso to section 47 (xiii) by premature transfer of shares,
transferee company is not liable to pay capital gains tax .
CIT v. Umicore Finance Luxemborg (2017) 244 Taxman 43 /291 CTR 174/145 DTR 121
(Bom.) (HC)
S. 48 : Capital gains – Computation – Stamp valuation - Reference to DVO for ascertaining

full value of consideration would not be maintainable – S. 50C would apply even to case
where document evidencing transfer of capital asset had not been presented for registration
[ S. 45,50C, 55A ]
Reference to DVO for ascertaining full value of consideration would not be maintainable. S. 50C
would apply even to case where document evidencing transfer of capital asset had not been
presented for registration . (AY. 2009 - 10)
CIT v. Akash Association. (2017) 251 Taxman 342 (Guj) (HC)
S. 48 : Capital gains – Computation - Cost of acquisition has to be arrived at on basis of

actual consideration paid by assessee to vendors for purchasing property and not on basis
of only apparent consideration stated in sale deed. [ S.45, 50C ]
Allowing the appeal of the assesse the Court held that; For purpose of computing capital gain,
cost of acquisition has to be arrived at on basis of actual consideration paid by assessee to
vendors for purchasing property and not on basis of only apparent consideration stated in sale
deed. (AY. 2007-08)
S. P. Balasubramaniam v. ACIT (2017) 399 ITR 191 / 248 Taxman 326 (Mad.) (HC)
185
S. 48 : Capital gains - Cost of acquisition – Interest on loan for acquiring capital asset is to
be treated as part of cost of acquisition
The Tribunal held that interest paid to the bank for acquiring capital asset is to be treated as part
of cost of acquisition. (AY. 2013-14)
Gayatri Maheshwari v. ITO (2017) 187 TTJ 33 (UO) (Jd.) (Trib.)
S. 48 : Capital gains - Cost of acquisition - Expenditure claimed for getting illegal occupants
evicted from land was held to be allowable .
Assessee sold a piece of land during relevant year, expenditure claimed by her for getting illegal
occupants evicted from land was allowed as deduction for computing long-term capital gain.
(AY. 2009 – 2010)
Anasuya Mekala (Smt.) v. DCIT (2017) 164 ITD 498 /187 TTJ 363 /153 DTR 220 (Hyd.)
(Trib.)
S. 48 : Capital gains – Indexation - Government securities indexation benefit is available [ S.

45 ]
Assessee sold Government Securities and claimed indexation benefit on such sale which resulted
in to loss. Assessing Officer denied the indexation benefit holding that the government securities
were in the form of bonds and debentures as per third proviso to S. 48 of the Act. On appeal the
Tribunal held that, since bonds and debentures are distinguishable from government Securities as
per third proviso, indexation benefit was held to be allowable . (AY. 2003-04)
Sundaram Finance Ltd. v. ACIT (2017) 165 ITD 563 (Chennai) (Trib.)
S.48 : Capital gains-Family partition-Indexed cost of acquisition to be computed with

reference to year in which previous owner acquired asset and not year in which assessee
acquired asset. [S.45]
When capital asset is acquired by assessee through family partition, indexed cost of acquisition
to be computed with reference to year in which previous owner acquired asset and not year in
which assessee acquired asset. (AY. 2010-2011)
ITO v. Saroja Naidu (Mrs.) (2017) 53 ITR 250 (Chennai) (Trib)
S. 49 : Capital gains - Previous owner - Cost of acquisition - Relinquishment of life interest

in property is not gift in absence of transfer by releaser to assesse. No acquisition of capital
assets by way of gift [ S. 49 (1) (ii), Gift – tax Act, 1958 S. 4 (1) (c), (d) (e) ]
On a reference by assesse, allowing the reference, the Court held that; the relinquishment of a
life interest in the property would not constitute a gift in the absence of a transfer by the releaser
to the assessee nor would it come under section 4 (1) (c), (d) or (e) of the Gift-tax Act, 1958 . The
releaser was not absolutely entitled to the property nor had he caused the property to be vested in
himself jointly with any other person. He had also not caused any appropriation to be made from
and within the property. Moreover, the effect of section 4 (1) (d) of the 1958 Act would be a
deemed gift made in favour of the other person by the person who caused the property to be so
vested upon appropriation and the Tribunal was not correct in concluding that the assessee had
acquired a capital asset by way of gift. The Tribunal's decision to restore the matter to the file of
the Assessing Officer was not justifiable. (AY. 1984 - 85)
Nusli N. Wadia v.CIT (2017) 394 ITR 638/248 Taxman 46/151 DTR 325 (Bom) (HC)
186
S. 49 : Capital gains – Previous owner – Cost of acquisition – Merely mentioning in sale
deed that property was free from all encumbrances was not material and thus, was not a
correct interpretation of the legal position
The husband of the assessee inherited the property from his father by virtue of a will, who later
transferred the same to the assessee. One of the sisters of the assessee’s husband filed a suit
against the will and ended up in a compromise with a share of 30 per cent in the property. While
computing capital gains tax liability on sale of property by the assessee, she considered the ‘sale
consideration’ excluding the share of the sister-in-law.
The AO and the CIT (A) observed that, the recital stated in the sale agreement stated that, the
property was free from all encumbrances. Accordingly, they considered the sale consideration
without excluding sister-in-law’s sharebecause when the property was inherited by assessee’s
husband from his father, there was no dispute and he had transferred the property free from all
burden /encumbrances.
On appeal, the Tribunal held that merely deciding the issue on the basis of recital in the sale deed
that the property was free from all encumbrances was an incorrect legal interpretation of the legal
position. Further, the assessee had stepped into the shoes of her husband for all intents and
purposes. Thus, she could not have acquired a better title than her husband and the cost of
acquisition of the property was required to be taken accordingly i.e 70 per cent share in the
property. (AY. 2012-13)
Rama Vohra (Smt.) v. ITO (2017) 57 ITR 694 (Delhi) (Trib)
S. 49 : Capital gains - Cost with reference to certain modes of acquisition-Will - cost of

acquisition of a property has to be taken on basis of its market value on date of acquiring
same by previous owner and not when said property was originally acquired [ S. 45 ]
Assessee's grandmother purchased a plot of land before 1-4-1981, After her demise on 31-3-1985,
property was acquired by assessee's mother by way of Will and finally, assessee inherited said
property on death of his mother on 16-3-1994. The assessee sold said plot of land, to compute
capital gain, assessee took cost of acquisition of plots sold as per valuation report prepared by
Govt. Approved Valuer in which rate of land was adopted at rate of 730 per sq. yard in 1985. The
AO held that for purpose of cost of acquisition circle rate of property as on 1-4-1981 was to be
taken and therefore he made addition to long-term capital gain. Tribunal held that in terms of s.
49 (1), market value should have been taken as was in hands of previous owner, i.e., assessee's
mother from whom he had received property, because she was previous owner as far as assessee
was concerned. assessee's mother had acquired property as on 31-3-1985, market value of
property should have been taken into account as on 31-3-1985 as worked out by registered valuer
at Rs.730 per sq. yard. Acquisition of a property has to be taken on basis of its market value on
date of acquiring same by previous owner and not when said property was originally acquired.
(AY .2011 – 2012)
Adarsh Kumar Swarup v. DCIT (2017)164 ITD 188 (Delhi) (Trib.)
S. 50 : Capital gains - Depreciable assets - Block of assets – Sale of business - Value of

breakages of bottles not deductible in computing written down value of bottles in
determining capital gains . [ S.45 ]
Dismissing the appeal of the revenue the Court held that ;the assessee had been consistently
providing for breakage of bottles and crates, 33 per cent. in the present year as against 15 per
cent. in the past, adding it back for the claim of depreciation. The assessee also did not claim the
loss from breakage since it was capital in nature. Therefore in the light of the fact that the
breakages had not been claimed in the computation of income, there was no justification for any
further reduction from the written down value. (AY. 1999-2000)
CIT v. Alankar Business Corporation Ltd. (2017) 396 ITR 280 (Mad) (HC)
187
Editorial : Order in Alankar Business Corporation Ltd. v. Dy.CIT (2008) 298 ITR (AT) 18
(Chennai) (Trib) is affirmed.
S : 50 : Capital gains - Depreciable assets - Block of assets - Once depreciation is allowed on

an asset it would remain a business asset and any profit earned on sale of such asset would
be taxed [ S.2 (11), 32, 45 ]
Dismissing the appeal of the assessee the Court held that; Once depreciation is allowed on an
asset it would remain a business asset and any profit earned on sale of such asset would be taxed .
High Court held that; the tribunal was right in holding that an asset cannot move out of the block
of assets once depreciation is allowed on that particular asset and that since initially depreciation
was allowed on both the galas, even though subsequently one gala was not used for the business
of the assessee, the same continued to be a part of block of assets on which depreciation was
allowed and the gain on sale of such asset should be taxed under section 50. (AY. 1991 - 92)
Meena V. Pamnani (Smt.) v. CIT (2017) 159 DTR 1/251 Taxman 100 (Bom) (HC)
S. 50 : Capital gains - Depreciable assets - Block of assets – Where an asset is demolished,

and the block of asset ceases to exit, the difference between the written down value and the
salvage received shall be treated as short term capital gain or short term capital loss . [S. 2
(11), 43 (6), 45, 148 ]
The AO reopened the assessment since according to him, short term capital loss on demolition of
asset does not constitute a transfer of capital asset and hence the set off of such short term capital
loss against long term capital gain has resulted into income escaping assessment. The CIT (A)
upheld the action of the AO. On appeal the Tribunal held that the depreciation have been claimed
in the earlier years on the same building and it forms a part of the block of asset. Since the asset
was demolished during the year the difference between the written down value and the salvage
received has to be treated as short term capital loss/gain, as the case may be (AY. 2003-04).
Sidamshetty Ramesh (HUF) v. ITO (2017) 154 DTR 82 /187 TTJ 498 (Hyd.) (Trib.)
S. 50 : Capital gains - Depreciable assets - Block of assets – Acquiring the property for fit-
out has demonstrated that it acquired the property, however if the property was not used
for the purpose of business during the relevant year the assesse is not entitle to depreciation.
[S. 32]
The Tribunal held that when the assesse has paid entire consideration and taken the possession
for fit – out the same is sufficient to hold that the assesse has acquired the property on the basis
of part occupation certificate though the assessee has not entered in to a registered agreement
with the builder. However the depreciation was not allowable, if the property was not used for
the purpose of business during the relevant year the assessee is not entitle to depreciation. (AY.
2012-13)
Indogem v.ITO (2017) 151 DTR 376/186 TTJ 392 (Mum.) (Trib.)
S. 50 : Capital gains - Depreciable assets - Block of assets - Asset on which depreciation is

not allowable on account of its non-user for business purpose during relevant year, would
not form part of said block for calculation purpose. [S. 2 (11), 32]
188
The Assessee sold old windmill which resulted in profit as the WDV of relevant block was less .
Assessee purchased new windmill and added to the block of asset . AO disallowed the
depreciation on new wind mill for failure to use relevant assessment year and reduced from the
block resulting in to surplus from sale of old wind mill as short term capital gains . On appeal
Tribunal held that; even though for purpose of computing capital gain arising from sale of a
depreciable asset falling in block of asset, it is value of block at end of relevant year which is
relevant, yet an asset on which depreciation is not allowable on account of its non-user for
business purpose during relevant year, would not form part of said block for calculation purpose.
Since, new windmill was purchased on last day of relevant year and, thus, depreciation could not
be allowed on it due to its non-user, capital gain was to be computed on sale of old windmill after
excluding cost of new windmill from value of block of asset standing at end of relevant year.
(AY. 2010 – 2011)
G. Shoes Exports v.ACIT (2017) 162 ITD 619 (Mum.) (Trib.)
S. 50B : Capital gains – Slump sale-Undertaking is sold as a running business with all assets
and liabilities for a slump price, no part of the consideration can be attributed to
depreciable assets - If the undertaking is held for more than three years, it constitutes a
"long-term capital asset" and the gains are assessable as a long-term capital gain.[S. 45,
48,50 (2)]
On appeal by the department to the Supreme Court HELD dismissing the appeal; If an
undertaking is sold as a running business with all assets and liabilities for a slump price, no part
of the consideration can be attributed to depreciable assets and assessed as a short-term capital
gain.. If the undertaking is held for more than three years, it constitutes a "long-term capital asset"
and the gains are assessable as a long-term capital gain. (AY.1991-92)
CIT v. Equinox Solution Pvt. Ltd. (2017) 393 ITR 566 /247 Taxman 89/294 CTR 1/150 DTR
137 (SC)
S.50B : Capital gains-Slump sale-Specific and separate valuation for land, building and
machinery was ascertained hence the sale cannot be considered as of "slump sale" - Review
petition was dismissed. [S.2 (14), 2 (42C), 45]
Dismissing the review petition against the order in Vatsala Shenoy v. JCIT [2016] 389 ITR 519
(SC), the Court held that;by order of court business continued by partners with controlling
interest pending completion of winding up. Assets of firm ultimately put to sale in winding up
and outgoing partners receiving net share of value of assets of firm after deduction of liabilities.
Asset sold was capital asset and gains from transfer thereof capital gains. Specific and separate
valuation for land, building and machinery was ascertained therefore the sale was not a case of
"slump sale". (AY. 1995-1996)
Vatsala Shenoy v. JCIT (2017) 391 ITR 363/247 Taxman 155 (SC)
S. 50B : Capital gains – Slump sale – If defiant assets are or properties left out because they
cause certain circumstances exemption cannot be denied. [ S.2 (19A), 2 (42C), 45]
Allowing the appeal of the assessee, the Court held that; where in case of slump sale certain
assets or properties are left out because they would cause inconvenience or lead to some kind of a
trouble for buyers, it is well within assessee's right to exclude same from list of assets. Merely
because two assets were retained by assessee, i.e., one in form of bad debt and another shown to
be written off, it could be said that it was not a case of slump sale so as to deny benefit of section
50B to assessee
Triune Projects (P.) Ltd. v. CIT (2017) 291 CTR 268 /77 taxmann.com 40 (Delhi) (HC)
189
S. 50C : Capital gains - Full value of consideration - Stamp valuation - Contribution of
immoveable property as capital by partner - Transaction was held to be colourable device
and non genuine addition was held to be justified [ S. 45 (3) ]
Allowing the appeal of the revenue, the Court held that; the Tribunal failed to appreciate that the
entire land came to be acquired by the assessee only on March 31, 2002. Prior thereto, it had no
lawful right or interest in the property in dispute which belonged to the State of U. P. Even
according to the book value, the cost of land determined and share profits determined between the
parties and their capital contribution was negligible, as it did not conform to any normal business
transaction entered into by a person of ordinary prudence, and, therefore, there existed all the
facts and circumstances to show prima facie that the entire transaction of contribution to
partnership was a sham and fictitious transaction and an attempt to avoid tax. Even the terms and
conditions of the partnership fortified the above inference. The Tribunal had erred in law in
holding that the full value of consideration shall be determined in terms of section 45 (3) and not
under section 50C of the Act . (AY. 2004 - 05)
CIT v. Carlton Hotel P. Ltd. (2017) 399 ITR 611 (All) (HC)
Editorial : SLP of assesse was dismissed,Carlton Hotel P. Ltd v. CIT ( 2017) 399 ITR 614 (SC)
S. 50C : Capital gains - Full value of consideration - Stamp valuation - Insertion of proviso
to section 50C by Finance Act, 2009 with effect from 1-10-2009 has prospective effect -
Valuation determined by Assessing Officer was nothing but harassment to the honest
taxpayers .[ S. 45 ]
Dismissing the appeal of the revenue the Court held that; Insertion of proviso to section 50C by
Finance Act, 2009 with effect from 1-10-2009 has prospective effect. Neither the stamp authority
has assessed the complete charges because transaction has not taken place, and, the valuation
which was determined by the Assessing Officer is nothing but harassment to the honest taxpayers
of a transaction which has been rightly reversed by the Commissioner (Appeals) and confirmed
by the Tribunal.
CIT v. Satya Dev Sharma. (2017) 251 Taxman 31 (Raj) (HC)
S. 50C : Capital gains - Full value of consideration - Stamp valuation – Provision governs
valuation of property to determine capital gains but it has no application while determining
'profits and gains of business or profession’. [S.43CA]
The assessee was a builder/developer following the project completion method of accounting.
During relevant assessment year, the assessee offered certain net profit on sale of flats as its
business income. AO took a view that value of the flats had to be considered not on the basis of
consideration received but on application of the provisions of section 50C. High Court held that,
section 50C would not have any application while determining 'Profits and gains of business or
profession’ as its application is only limited to computation of income chargeable under the head
'Capital gains’. Further, similar provision is inserted under the head ‘Business income’ in the
form of section 43CA and which is effective from 1.4.2014. (AY 2009-10)
CIT v. Neelkamal Realtors & Erectors India (P.) Ltd. (2017) 246
Taxman 274 (Bom.) (HC)
Editorial : Affirmed, Neelkamal Realtors & Erectors India (P.) Ltd. v DCIT (2013) 145 ITD 217
(Mum) (Trib)
S.50C : Capital gains - Full value of consideration - Stamp valuation – When there are two
valuation reports, one by the Departmental Valuation Officer and the other by the
190
registered valuer of the Income-tax Department, in such a situation, the adjudicating
authority has to examine both the reports on facts and come to a conclusion as to which
report is more realistic on the facts of the case and then choose to adopt the same.[ S.45 ]
The assessee co-owned a plot of land located in remote area of Kolkata along with 2 other
owners. During the year under consideration, the said land was sold for Rs. 19,35,015/-. The
Assessing Officer noticed that the sale value adopted by the stamp valuation authority for the
entire plot of land was of Rs.2,56,33,822/- whereas the deed of conveyance reflected the sale
consideration to the tune of Rs.58,05,000/- only. In terms of the deed of conveyance the assessee
was to have received Rs.19,35,000/- as its one-third share of the sale proceeds, the amount
receivable in terms of the stamp duty valuation was of Rs.85,44,607/-. The Assessing Officer
referred the matter to the District Valuation Officer (‘DVO’), who estimated the total value of the
impugned land at Rs.2,52,13,000/-. The assessee objected to such adoption of value of the land on
the ground that he omitted to consider several factors and related documents furnished to him
including the valuation report of the impugned land made by a registered valuer Mr. A. K. Dey
who valued the land at Rs.58,05,000/-. The Assessing officer made the addition on the basis of
value estimated by the DVOs. In appeal, the CIT (A) accepted assessee’s contention that owing to
the locality of the plot, its surrounding factors the value of the plot could not be derived basis the
value of other plots in the said ward but as per the value adopted by the assessee. It was also
observed that there had been no addition in respect of the said transaction in case of the other two
co-owners. On department’s appeal, the Tribunal confirmed the CIT (A). It held that where there
were two valuation reports, one by the District Valuation Officer and the other by the registered
valuer of the Income-tax Department, the adjudicating authority had to examine both the reports
on the facts and come to a conclusion as to which report was more realistic on the facts of the
case and then choose to adopt the report. The contention that the valuation made by the District
Valuation Officer could not be looked into or interfered with by the appellate authorities was not
correct. The issue of determination of “fair market value” was a finding of a fact and the report of
the District Valuation Officer was an opinion in arriving at this fact. The report of the District
Valuation Officer or the registered valuer was an expert opinion and it could be challenged and
questioned by the parties before the authorities. When the District Valuation Officer’s report was
proved wrong, then it was open to the authorities to reject it and adopt other methods for arriving
at the “fair market value”. (ITA No. 640/Kol/2015 dt.23-08-2017) (AY. 2005 – 2006)
Dy.CIT v. Bajaj Chemicals (2017) 59 ITR 132 (Kol) (Trib)
S.50C : Capital gains - Full value of consideration - Stamp valuation – Sale of shares of
subsidiary company – Provision cannot be applied . [S.2 (47), 45 269UA]
It was held by the Tribunal that what was transferred by the assessee, were the shares in the
subsidiary company and not the land and building or both. The assets transferred being the shares,
which were never part of assessment of Stamp Duty Authority of the State Government, there
cannot be any question of invoking the provisions of the section 50C as there was no direct
transfer as enumerated in section 50C read with section 2 (47). [AY. 2011-12]
DCIT v. Maya Appliances (P.) Ltd. (2017) 165 ITD 340 /190 TTJ 130 /158 DTR 210
(Chennai) (Trib.)
S. 50C : Capital gains - Full value of consideration - Stamp valuation – Agreement to sell
entered much before the date of transfer of property – first and second proviso inserted by
Finance Act, 2016 w.e.f. 01-04-2017, should be treated as curative in nature and with
retrospective effect from 1st April 2003 [ S. 45 ]
191
Allowing the appeal of the assesse, the Tribunal held that first and second proviso inserted by
Finance Act, 2016 w.e.f. 01-04-2017, should be treated as curative in nature and with
retrospectiveeffect from 1st April 2003, i.e. the date effective from which section 50Cwas
introduced. Thus the matter was restored back to the AO with a direction that in case he finds that
aregistered agreement to sell, as claimed by the assessee, was actuallyexecuted on June 29, 2005
and the partial sale consideration was receivedthrough banking channels, the Assessing Officer,
so far as computation ofcapital gains is concerned, will adopt the stamp duty valuation, as on
June29, 2005, of the property sold as it existed at that point of time. (AY. 2008-09)
Dharamshibhai Sonani v. ACIT (2017) 57 ITR 669 (Ahd) (Trib)
S. 50C : Capital gains - Full value of consideration - Stamp valuation - The AO is not
entitled to make an addition to the sale consideration declared by the assessee if the
difference between the valuation adopted by the Stamp Valuation Authority and that
declared by the assessee is less than 10%. [ S. 45 ]
Allowing the appeal of the assesse, the Tribunal held that ;The AO is not entitled to make an
addition to the sale consideration declared by the assessee if the difference between the valuation
adopted by the Stamp Valuation Authority and that declared by the assessee is less than 10%.
(ITA No. 7545/Mum/2014, dt. 25.01.2017) (AY. 2010-2011)
John Fowler (India) Pvt. Ltd. v. DCIT (Mum) (Trib), www.itatonline.org
S.50C : Capital gains-Full value of consideration - Stamp valuation - Unregistered sale,

value declared by assessee is to be adopted-Matter remanded for verification.[S. 45, 48]
It was held by the Tribunal that, the sale transaction in question is not registered with stamp value
authorities, then full value of consideration has to be accepted as declared by the assesse and not
the stamp valuation. Matter remanded for verification. (AY. 2006-07)
Jastinder Singh Vedi v.DCIT (2017) 165 ITD 7 (Delhi) (Trib.)
S. 50C : Capital gains-Full value of consideration-stamp valuation - Failure by the AO to

refer the valuation of the capital asset to a valuation officer instead of adopting the value
taken by the stamp duty authorities is a fatal error and the assessment order has to be
annulled. The matter cannot be set aside to the AO for a second chance. The power of the
ITAT to set aside cannot be exercised so as to allow the AO to cover up the deficiencies in
his case.[S. 45, 254 (1)]
Dismissing the appeal of the revenue, the Tribunal held that; On the very perusal of the
provisions laid down under section 50C of the Act reproduced hereinabove, we fully concur with
the finding of the id. CIT (Appeals) that when the assessee in the present case had claimed before
Assessing Officer that the value adopted or assessed by the stamp valuation authority under sub
section (1) exceeds the fair market value of the property as on the date of transfer, the Assessing
Officer should have referred the valuation of the capital asset to a valuation officer instead of
adopting the value taken by the state authority for the purpose of stamp duty. The very purpose of
the Legislature behind the provisions laid down under sub section (2) to section 50C of the Act is
that a valuation officer is an expert of the subject for such valuation and is certainly in a better
position than the Assessing Officer to determine the valuation. Thus, non-compliance of the
provisions laid down under sub section (2) by the Assessing Officer cannot be held valid and
justified. The Honble jurisdictional High Court of Allahabad in the case of Dr . Shashi Kant Garg
v. CIT (2003) 285 ITR 158 (All) (HC) has been pleased to hold that it is well settled that if under
the provisions of the Act an authority is required to exercise powers or to do an act in a particular
manner, then that power has to be exercised and the act has to be performed in that manner alone
and not in any other manner. Similar view has been expressed by the other decisions cited by the
id. AR. (AY. 2009-10)
192
ITO v. Aditya Narain Varma (HUF) (2017) 154 DTR 62 /187 TTJ 476 /57 ITR 449 (Delhi)
(Trib.)
S. 50C : Capital Gains – Full value of consideration-Stamp valuation - Value adopted by

Stamp Authorities is deemed to be full value of consideration for purposes of computation
of capital gains. [S.48]
The Assessee has sold the his ancestral property for Rs. 1.05 crores.The AO applied the
provisions of S. 50C and on basis of report of stamp valuation authority, adopted sale
consideration for Rs. 1.06 crores . On appeal by the assesse, dismissing the appeal the Tribunal
held that; the Assessee neither challenged value as adopted by stamp duty valuation authorities
nor sought reference to DVO. Therefore, deeming fiction of s. 50C would come into operation for
adoption of value for purposes of S. 48. (AY. 2009 – 2010)
Niamat Mahroof Virji v. ITO (2017) 162 ITD 378/186 TTJ 133/149 DTR 43 (Mum.)
(Trib.)
S. 50C : Capital gains-Full value of consideration-Stamp valuation-Family settlement –

Transfer of a plot to his nephews in terms of mutual family settlement and no sale deed was
registered, provisions of section 50C could not be invoked. [S. 2 (47), 45]
Allowing the appeal of the assessee, the Tribunal held that; Transfer of a plot to his nephews in
terms of mutual family settlement and no sale deed was registered, provisions of section 50C
could not be invoked. (AY. 2009-10)
Ramesh Verma v.DCIT (2017) 163 ITD 421 (Chd.) (Trib.)
S.50C : Capital gains— Full value of consideration - Stamp valuation - On request of the
assesse the Assessing Officer to make reference to District Valuation Officer.[S. 45]
Allowing the appeal the Tribunal held that, before considering the valuation under section 50C
(1), if the assessee requests for reference to the Departmental Valuation Officer, the Assessing
Officer shall refer the matter to the Departmental Valuation Officer and he could not overlook it.
Hence, the Assessing Officer was directed to refer the matter to the District Valuation Officer and
thereafter frame the assessment in accordance with law. ( (AY.2006-2007)
Nitin R. Bhuva v. ITO (2017) 54 ITR 14 (Chennai) (Trib.)
S. 50C : Capital gains-Full value of consideration - Stamp valuation - The stamp duty value
on the date of the agreement to sell has to be adopted and not the value on the date of the
deed of sale. The proviso to s. 50C, though inserted by the Finance Act 2016 w.e.f.
01.04.2017, has to be given retrospective effect from 01.04.2003 as it is intended to remove
an undue hardship and is curative in nature. [S.45]
Allowing the appeal of the assessee the Tribunal held that;The stamp duty value on the date of the
agreement to sell has to be adopted and not the value on the date of the deed of sale. The proviso
to s. 50C, though inserted by the Finance Act 2016 w.e.f. 01.04.2017, has to be given
retrospective effect from 01.04.2003 as it is intended to remove an undue hardship and is curative
in nature . (ITA.No.639/Vizag/2013, dt. 23.12.2016) (AY. 2009-10)
Chalasani Naga Ratna Kumari (Smt.) v. ITO (Vizag) (Trib); www.itatonline.org
S. 50C : Capital gains-Full value of consideration-Stamp valuation - Unregistered property

was sold on 7-08-2006-Provisions of Section 50C will not be attracted since the sale is before
01/10/2009, which is the date on which the circular becomes applicable. [S. 45, 48]
The Tribunal held as per the CBDT circular, provisions of Section 50C were not applicable in so
far as sales deed so executed were not registered with the Stamp Duty Valuation Authority and
since the difference between the sale consideration of the property shown by the assessee and the
FMV determined by the DVO under Section 50C (2) being less than 10 per cent, AO was not
193
justified in substituting the value determined by the DVO for the sale consideration disclosed by
the assessee. The tribunal further held that since transfer was made prior to the amendment of
Section 50C w.e.f. 1/10/2009, the provisions of section 50C would not be applicable. The
unregistered property was sold on 07/08/2006 which means, since the unregistered property was
sold before the clarification was issued under Circular No.5/2010 dated 03/06/2010 where it
clearly states that the scope of the provisions do not include transactions which are not registered
with stamp duty valuation authority, and executed through agreement to sell or power of attorney
and hence the provisions of Section 50C will not be attracted since the sale is before 01/10/2009,
which is the date on which the circular becomes applicable. In the result, appeal of the assessee
was allowed. (AY. 2007-2008)
Krishna Enterprises v. Addl. CIT (2017) 183 TTJ 677 (Mum.) (Trib.)
S. 53 : Capital gains – Residential house – Exemption claimed on investment of capital gains

on purchase of a residential plot for construction of residential house could be offered to tax
only at the end of three years from the date of transfer of original asset
The Assessee claimed exemption qua vacant residential plot purchased for the construction of
residential house. The AO and the CIT (A) denied the exemption on the ground that the assessee
failed to produce any evidence to substantiate the construction of the house on the plot of land.
On appeal, the Tribunal held that when it was not in dispute that the capital gains was invested in
a residential plot purchased for the construction of a residential house. If the assessee did not
construct residential house, then the exemption could be withdrawn only at the end of three years
from the date of transfer of original asset. Thus, the AO was directed to verify whether the
assessee had offered the capital gains at the end of three years and if the claim was found
incorrect, then the same was to be brought to be tax in those years. (AY. 2012-13)
Rama Vohra (Smt.) v. ITO (2017) 57 ITR 694 (Delhi) (Trib.)
S.54 : Capital gains - Profit on sale of property used for residence – Possession and
consideration exchanged before execution of sale deed Valid transfer to claim deduction.
Sale consideration was invested one year before the sale of property would be eligble for
deduction . [S.2 (47), 45 ]
It was held by the Tribunal that when there was an agreement for sale and physical possession of
the property was handed over to the purchaser and the purchaser was in enjoyment of the property
as his own, there was transfer of property under the Act. Tribunal also held that it was immaterial
whether the assessee invested the sale consideration in purchasing of new flat on receipt of the
money after the date of sale or one year before the sale of property. In this case, the assessee
invested the sale consideration one year before the sale of property, therefore, the assessee is
eligible for deduction (AY. 2013-14)
Devichand Kanthilal Shah v. ITO (2017) 165 ITD 336 (Chennai) (Trib.)
S. 54 : Capital gains - Profit on sale of property used for residence – Acquisition of new flat
in an apartment under construction should be considered as a case of “Construction” and
not “Purchase”. The date of commencement of construction is not relevant for purpose of
claiming exemption .[ S. 45 ]
194
Allowing the appeal of the assesse, the Court held that; Acquisition of new flat in an apartment
under construction should be considered as a case of “Construction” and not “Purchase”. The date
of commencement of construction is not relevant for purpose of S. 54. The fact that the
construction may have commenced prior to the date of transfer of the old asset is irrelevant. If the
construction is completed within 3 years from the date of transfer, the exemption is available..
(I.T.A. NO. 6108/MUM/2017, dt. 18.12.2017) (AY. 2013-14)
Mustansir I Tesildar v. ITO (2018) 61 ITR 465 /168 ITD 523 /164 DTR 141/193 TTJ 400
(Mum) (Trib)
S. 54 : Capital gains – Profit on sale of property used for residence - Demolition of new asset
in subsequent year for construction of commercial property - Exemption cannot be denied
.[ S. 45 ]
Allowing the appeal of the asseee the Tribunal held that, subsequent demolition of new asset, for
construction of commercial property exemption cannot be denied . (AY. 2012 – 2013)
Vikas Kumar v. DCIT (2017) 166 ITD 481/189 TTJ 587 (Hyd) (Trib.)
S. 54 : Capital gains – Profit on sale of property used for residence – Amendment to section
54 (1) was to be construed as prospective in nature and therefore, as per earlier provisions
assessee would be entitled to exemption of two residential houses and not a single property
only
The Assessee invested the long term capital gains from sale of property in two residential houses
and claimed exemption u/s 54 of the Act. The AO restricted the exemption in respect of only one
residential property. On appeal, the CIT (A) held that, the assessee was entitled to exemption in
respect of the property more beneficial to the assessee.
On further appeal, the Tribunal relying on the Karnataka HC’s decision in the case of CIT vs.
Khoobchand M. Makhija (2014) 43 taxmann.com 143 (Kar. HC) held that the assessee was
entitled for exemption u/s 54 (1) qua two residential houses since the intended amendment u/s 54
(1) was applicable prospectively from AY 2015-16. (AY. 2012-13)
Rama Vohra (Smt.) v. ITO (2017) 57 ITR 694 (Delhi) (Trib)
S.54 : Capital gains - Profit on sale of property used for residence - Substantial amount
invested in new house - Deduction cannot be denied for reason that house is not constructed
within three years or purchased within two years. [S. 45]
Long-term capital gain was shown from sale of a residential house and deduction was claimed u/s
54 on the ground that a substantial part of said gain had been invested in a flat.Deduction u/s 54
was denied to the assessee because she had not complied with the condition stipulated in the
section of purchase/construction of new house within the stipulated period of two or three years
respectively. Tribunal held that as per section 54 (2), exemption to the extent of amount utilized
for construction is to be granted in the year of transfer of asset and the condition of completion of
construction is to be looked into only after the window period provided by the Act of three years
expires.The Tribunal held that if substantial amount of capital gain has been invested by the
assessee for the purpose of purchasing a new house, deduction under section 54 cannot be denied
for the reason that construction was not completed within three years or house was not purchased
within two years. In the present case the capital gain earned by the assessee is Rs.74,33,137/- and
the amount invested in the new house is Rs.62,10,000/- and thus she is entitled to claim deduction
under section 54. (AY. 2013 – 14)
Bhavna Cuccria v.ITO (2017) 165 ITD 124/156 DTR 251 /188 TTJ 253 (Chd) (Trib.)
195
S.54 : Capital gains-Profit on sale of property used for residence - Capital gains
appropriated in new property within time limit - Exemption to be granted - Completion of
construction not mandatory. [S. 45]
The assessee had appropriated the capital gains for the purpose of construction of residential unit.
However, construction was not completed within the stipulated period. It was held that Liberal
interpretation to be considered while granting exemption under section 54, as it is beneficial
provision. Completion of construction within three years was not mandatory and what was
necessary was that the construction should be commenced. The assessee over and above satisfied
the conditions laid down by section 54 and demonstrated his intention to invest the capital gains
in residential house. The assessee ought not to have been denied the claim of deduction under
section 54. (AY. 2012-13)
Kannan Chandrasekarv. ITO (2017) 165 ITD 223 (Chennai) (Trib.)
S. 54 : Capital gains - Profit on sale of property used for residence - Profits on sale of
property invested in purchase of new property is entitled for full exemption even though
property was purchased in joint names with brother [ S. 45 ]
The assessee, owner of flat jointly with his wife, sold said flat and invested his share in another
new property, along with stamp duty and registration charges, he will be entitled to full
exemption u/s. 54 even though property was purchased in joint names with his brother. The AO
could not have restricted exemption u/s. 54 to extent of 50 per cent of value of new house. (AY.
2010 – 2011)
Jitendra V. Faria v. ITO (2017) 164 ITD 443 (Mum) (Trib.)
S. 54 : Capital gains - Profit on sale of property used for residence - Deduction is available
even if land, which is appurtenant to residential house, is sold and it is not necessary that
whole of residential house should be sold [ S. 45 ]
Deduction u/s. 54 is available even if land, which is appurtenant to residential house, is sold and it
is not necessary that whole of residential house should be sold. Where assessee sold a piece of
land which was forming part of residential house and all property was duly assessed to house tax
and was self-occupied, claim for deduction u/s. 54 was allowed. (AY. 2011 – 2012)
Adarsh Kumar Swarup v. DCIT (2017) 164 ITD 188 (Delhi) (Trib.)
S. 54 : Capital gains-Profit on sale of property used for residence - New residential house
purchased outside India is entitle to exemption-Prior to the amendment by the Finance
(Nos.2) Act, 2014 w.e.f. 01/04/2015. [S.45, 54F]
Dismissing the appeal of the revenue, the Tribunal held that; there is no requirement that the
investment in the new residential house should be situated in India prior to the amendment by the
Finance (Nos.2) Act, 2014 w.e.f. 01/04/2015. (ITA no. 6883/Mum/2014, dt. 26.04.2017)
(AY.2011-12)
ITO v. Nishant Lalit Jadhav (Mum.) (Trib.),www.itatonline.org
S. 54 : Capital gains - Profit on sale of property used for residence – Payments made for
purchase of asset subsequent to furnishing of return u/s 139 (1) and before due date u/s 139
(4) subsequent payments are required to be made out of deposits made in capital gains
account scheme [ S. 45, 139 (1) 139 (4) ]
Tribunal held that; Payments made for purchase of asset subsequent to furnishing of return u/s
139 (1) and before due date u/s 139 (4) subsequent payments are required to be made out of
deposits made in capital gains account scheme . (AY. 2011-12)
Anita Ajay Shad. v. ITO (2017) 167 ITD 613 (Ahd) (Trib.)
196
S. 54 : Capital gains-Profit on sale of property used for residence – Purchase of house on
credit for which the payment to be made in future – Exemption cannot be denied.[S. 45, 139
(4)]
Allowing the appeal of the assessee the Tribunal held that; assessee had invested in the new
property within the time allowed u/s. 139 (4), therefore assesse entitled for exemption u/s. 54 to
the extent the amount invested in the new property.Even if an assessee acquires a new house on
credit, i.e., payment for which may be made in future. (AY 2007 – 2008)
Gopal Saran Darbari v. ITO (2017) 162 ITD 342 (Delhi) (Trib.)
S.54 : Capital gains-Profit on sale of property used for residence - Utilisation of loan and
capital gains from sale of old house for purchase of new house – Entitle to exemption. [S.45]
Allowing the appeal of assessee the Tribunal held that; assessee had availed loan and also
utilised capital gain from sale of old house for purchase of a new house, and total investment was
much more than loan amount plus amount of capital gain, capital gain was to be treated as an
investment in purchase of new house is entitle for exemption. (AY. 2008-09)
Joseph Devadass v. ACIT (2017) 163 ITD 712 (Bang.) (Trib.)
S.54 : Capital gains - Profit on sale of property used for residence - Sale of residential house
property and investment sale consideration in another residential property-Conversion of
two flats into one flat-Entitle to exemption. [S. 45, 54F]
Assessee acquiring flats with intention to use them as one residential unit, whether flats
constructed as such by builder or flats altered or combined into one at the instance of assesse,
there is no distinction. Assessee is entitled to exemption. (AY.2011-2012
CIT v. Sanjay B. Pahadia (2017) 54 ITR 37 (Mum.) (Trib.)
S. 54 : Capital gains - Profit on sale of property used for residence – Investment with in time
– Delay in construction due to default of the builder exemption cannot be denied. [S.45]
Asseseee invested with in time, however, due to default on part of builder causing delay in
construction of flat within time limit prescribed under Act which is beyond control of assessee,
assessee is entitled to benefit. (AY. 2010-2011)
ITO v. Saroja Naidu (Mrs.) (2017) 53 ITR 250 (Chennai) (Trib.)
S. 54 : Capital gains-Profit on sale of property used for residence - Investing gains in house
property in United States of America, change in law is only with effect from April 1, 2015
[S.45]
Assessee investing gains in house property in United States of America in previous year relevant
to assessment year 2010-11, is entitled to exemption,in previous year relevant to assessment year
2010-11. Change of law with effect from April 1, 2015 that property must be purchased only in
India is prospective in nature. (AY. 2010-2011)
ITO v. Saroja Naidu (Mrs.) (2017) 53 ITR 250 (Chennai) (Trib.)
S. 54B : Capital gains - Land used for agricultural purposes - Though the document is
registered in the name of spouse wife exemption cannot be disallowed - Revision was held
to be not valid [ S. 45, 50C. 54F, 263 ]
Allowing the appeal of the assesse the Court held that; The fact that the investment and
document is registered is made in the name of the spouse (wife) is not a ground for disallowing
exemption from capital gains u/s 54B if the funds utilized for the investment belong to the
assessee. Revision was held to be not valid . (ITA No. 20/2016, dt. 08.12.2017)
197
Mahadev Balai v. ITO (Raj) (HC); www.itatonline.org
S. 54B : Capital gains - Land used for agricultural purposes – — Purchase of agricultural
land in name of assessee’s wife, assessee is not entitled to exemption [ S. 45 ]
Dismissing the appeal of the assesee the Court held that; purchase of agricultural land in name of
assessee’s wife, assessee is not entitled to exemption . (AY. 2007 - 08)
Kamal Kant Kamboj v. ITO (2017) 397 ITR 240 (P&H) (HC)
S. 54B : Capital gains - Land used for agricultural purposes - Transfer of agricultural land
being complete on execution of agreement to sell assessee is entitled to claim deduction -
Purchase cannot be interpreted and detached from definition of word transfer . [ S. 2 (47).
45 ]
Assessee sold agricultural land for a consideration and claimed deduction under section 54B on
purchase of two agricultural lands one through sale deed and another through agreement to sell. -
Assessing Officer allowed deduction for property purchased through registered sale deed but
disallowed deduction for property purchased through agreement to sell. On appeal Tribunal held
that transfer being complete on execution of agreement to sell, assessee was entitled to claim of
deduction under section 54B in respect of purchase of property through agreement to sell . If a
liability to pay tax arise in case of seller, consequent right to get deduction on purchase of
property accrues in favour of purchaser, if he otherwise is so eligible to claim it as per relevant
provisions of Act . (AY.2008 - 09, 2014-15)
Anil Bishnoi v. ACIT (2017) 167 ITD 381 (Chd) (Trib.)
S. 54B : Capital gains - Land used for agricultural purposes – Growing of dry crops in two
assessment years prior to sale of land – Exemption was held to be allowable [ S. 45 ]
Dismissing the appeal of the revenue the Tribunal held that when the assessee has provided
evidence that , growing of dry crops in two assessment years prior to sale of land ,exemption was
held to be allowable . (AY. 2006-07)
ACIT v. Govardhan S. Pawar. (2017) 167 ITD 511/191 TTJ 429 (2018) 161 DTR 313
(Pune) (Trib.)
ACIT v. Anita Govardhan Pawar. (2017) 167 ITD 511/191 TTJ 429 /(2018) 161 DTR 313
(Pune) (Trib.)
S. 54EC : Capital gains-Investment in bonds-The amounts received as an advance is eligible

for education. The fact that the investment is made prior to the transfer of the asset is
irrelevant.[S.45]
Dismissing the appeal of revenue the Court held that; an amount received on sale of a capital
asset as an advance on the basis of Agreement to Sale and the same being invested in specified
bonds before the final sale, would entitle the assessee to the benefit of Section 54EC of the
Act.The Tribunal upheld the claim of the assessee by following the decision of its coordinate
bench in Bhikulal Chandak HUF v.ITO (2009) 126 TTJ 545 (Nag) (Trib) wherein it has been
held that where an assessee makes investment in bonds as required under Section 54EC of the Act
on receipt of advance as per the Agreement to Sale, then the assessee is entitled to claim the
benefit of Section 54EC of the Act. The Revenue had preferred an appeal against the order of the
198
Tribunal in Bhikulal Chandak HUF (supra) to this Court (Nagpur Bench) being Income Tax
Appeal No.68 of 2009. This Court by an order dated 22nd August, 2010 refused to entertain the
Revenue’s above appeal from the decision of the Tribunal in Bhikulal Chandak HUF (supra). In
the above view, the question as proposed for our consideration in the present facts does not give
rise to any substantial question of law. (ITA No. 1009 of 2014, dt. 14.12.2016) (AY.2008-09)
CIT v. Subhash Vinayak Supnekar (Bom.) (HC); www.itatonline.org
S. 54EC : Capital gains - Investment in Bonds – Delay in making investment of about 6

months – Exemption should not be denied merely on bar of limitation especially when the
CBDT has wide power of condonation delay was condoned. [ S. 119 ]
Allowing the petition the Court held that; it was undisputed that assessee made eligible
investment in infrastructure bonds thus, substantial condition for availing exemption under
section 54EC stood satisfied. Accordingly, the Court held that since the assessee had substantially
satisfied condition for availing the exemption, the same should not be denied, merely on bar of
limitation, especially, when legislature has conferred wide discretionary powers to condone such
delay on CBDT. (AY. 2013-14)
Sujatha Ramesh (Dr. Smt) v. CBDT (2017) 251 Taxman 494 /299 CTR 261 /159 DTR 233
(Karn.) (HC)
S. 54EC : Capital gains – Investment in Bonds - Period of six months mentioned in s. 54EC
has to be regarded as six British Calendar months. [S. 45, General Clauses Act, 1897)
The assessee sold his ancestral property on 13-10-2008 and received the consideration. The
Assessee invested the said amount in REC bonds on 24-4-2009 whereas bonds were allotted on
30-4-2009. While filling the ROI assessee claimed deduction u/s. 54EC. The AO held that, the
investment made u/s. 54EC was not made on or before 12-4-2009, i.e., within six months from
the date of transfer of the property, assessee not eligible for claim made u/s.54EC. Allowing the
appeal of the assessee, the Tribunal held that ;in terms of General Clauses Act, 1897, period of six
month mentioned in S.54EC has to be regarded as six British Calendar months and therefore,
assessee sold his ancestral property on 13-10-2008, and investment made in REC bonds on 30-4-
2009 was eligible for deduction. (AY. 2009 - 2010)
Niamat Mahroof Virji v. ITO (2017) 162 ITD 378 /186 TTJ 133 /149 DTR 43 (Mum.)
(Trib.)
S. 54F : Capital gains - Investment in a residential house – Getting more than one
residential house in several blocks arising from one development agreement is entitled to
exemption .[ S.45 ]
The assessee and his two sons owned certain contiguous extents of land. The assessee along with
his two sons entered into a joint development agreement with a builder to develop the land by
constructing 16 flats therein with a total built-up area of 56,945 square feet. The assessee and his
two sons on the one hand and the builder on the other hand agreed to share in a 70 : 30 ratio
between them. The land was developed, 16 flats with separate kitchens and 37 car parks were put
up. In lieu of the 70 : 30 ratio set out in the builders’ agreement, the assessee got 9 flats and his
two sons got 3 flats each. The AO rejected the claim on the ground that the assesse has got more
than one residential house . CIT (A) and Tribunal allowed the claim of the assesse. On appeal by
the revenue the rejecting the appeal the Court held that the assessee having got flats along with
his two sons would not disentitle him from getting the benefit under section 54F of the Act only
199
on the ground that all the flats were not in the same block, particularly in the light of the admitted
factual position that all the flats were located at the same address. As long as all the flats were in
the same address, even if they were located in separate blocks or towers it would not alter the
position. After all, all the flats were a product of one development agreement of the same piece of
land. Therefore, the assessee was entitled to get the benefit of section 54F of the Act. (AY. 2012 -
13)
CIT v. Gumanmal Jain (2017) 394 ITR 666 (Mad) (HC)
S.54F : Capital gains-Investment in a residential house – Surrender of tenancy rights-

Failure by assessee to obtain allotment letter under provision of Maharashtra Ownership of
Flats Act, 1963,not entitle to exemption.[S.45,Maharashtra Ownership of Flats Act, 1963]
Dismissing the appeal of the revenue, the Court held that; Failure by assessee to obtain allotment
letter under provision of Maharashtra Ownership of Flats Act, 1963,not entitle to exemption.
(AY 2006-2007)
Rasiklal M. Parikh v. ACIT (2017) 393 ITR 536/150 DTR 73 /295 CTR 373 (Bom.) (HC)
S. 54F : Capital gains - Investment in a residential house – Failure to deposit the amount of
consideration not utilized towards the purchase of new flat in the specified bank account
before the due date of filing return of Income u/s 139 (1) is fatal to the claim for exemption.
[S. 45 ,139 (1)]
The allotment letter issued by the developer does not confer title until the agreement for sale
under the provisions of the MOFA is registered. Failure to deposit the amount of consideration
not utilized towards the purchase of new flat in the specified bank account before the due date of
filing return of Income u/s 139 (1) is fatal to the claim for exemption. Humayun Suleman
Merchant vs. CCIT is not per incuriam. Assessee is not entitle to exemption. (AY. 2006-07)
Rasiklal M. Parikh v. ACIT (2017) 391 ITR 395/80 taxmann.com 22 (Bom.) (HC)
S.54F : Capital gains-Investment in a residential house - Purchase of residential house

outside India prior to amendment-Exemption is allowable. [S.45]
Allowing the appeal the Court held that; Purchase of residential house outside India prior to
amendment is entitle to exemption.It was only after the amendment to section 54F of the Act by
the Finance (No. 2) Act, 2014, which came into force with effect from April 1, 2015 that the
assessee should invest the sale proceeds arising out of sale of capital asset in a residential house
situated in India within the stipulated period. When section 54F was clear and unambiguous, there
was no scope for importing into the statute words which were not there.
Leena Jugalkishor Shah v. ACIT (2017) 392 ITR 18 /(2018) 163 DTR 4 /301 CTR 178 (Guj.)
(HC)
S. 54F : Capital gains - Investment in a residential house-Stamp valuation - Where whole of

capital gain was invested ,provisions of S. 50C (1) are not applicable to S.54F for purpose of
determining meaning of full value of consideration [ S. 45 ,4850C ]
Dismissing the appeal of the revenue the Tribunal held that; Where whole of capital gain was
invested ,provisions of S. 50C (1) are not applicable to S.54F for purpose of determining meaning
of full value of consideration . (AY. 2011-12)
ITO v. Raj Kumar Parashar. (2017)167 ITD 237 (Jaipur) (Trib.)
S. 54F : Capital gains - Investment in a residential house – Exemption claimed in in a return
filed pursuance of notice u/s 148 was held to be allowable [ S. 147, 148 ]
200
Allowing the appeal the Tribunal held that S. 54F does not cast any statutory obligation on part
of assessee to file his return of income within stipulated time period contemplated under section
139 or section 148 as a precondition for entitling him to claim exemption, thus the claim of
exemption raised by an assessee under section 54F in a belated 'return of income' filed in
compliance to a notice issued under section 148 is allowable . (AY. 2003-04)
Amina Ismil Rangari (Smt.) v. ITO (2017) 167 ITD 199 (Mum) (Trib.)
S. 54F : Capital gains - Investment in a residential house – Commercial premises –

Construction started prior to sale of original asset - Exemption cannot be denied on the
ground that residential house was constructed on a commercial plot and started
construction prior to sale of original asset.[ S.45 ]
Dismissing the appeal of the revenue the Tribunal held that , exemption cannot be denied on the
ground that the construction was done on commercial premises and construction of new
residential house was started prior to transfer of original asset, if same was completed within
three years of transfer of original asset, exemption under section 54F could not be denied. (AY.
2009-10)
ITO v. Saroj Devi Agarwal. (Smt.) (2017) 167 ITD 367 (Jaipur (Trib.)
S. 54F : Capital gains - Investment in a residential house – When investment is made for
purpose of construction of new house with in specified time, though the new house was not
constructed with in specified time exemption cannot be denied . [ S.45 ]
Allowing the appeal of the assessee the Tribunal held that; When investment is made for purpose
of construction of new house with in specified time, though the new house was not constructed
with in specified time exemption cannot be denied . (AY. 2009-10)
Babitha Kemparaje Urs (Smt.) v. CIT (2017) 167 ITD 125 // 160 DTR 217 /(2018) 191
TTJ 473 (Bang) (Trib.)
S. 54F : Capital gains - Investment in a residential house – Amount was not deposited in
specified account but invested in construction of residential premises with in three years
from sale was held to be eligible for deduction [ S. 45 ]
Allowing the appeal of the assessee the Tribunal held that; sale consideration though not
deposited in specified account but, invested in construction of residential premises within three
years period from sale, eligible for section 54F deduction. (AY. 2004 - 05)
Sunayana Devi v. ITO (2017) 167 ITD 135 (Kol) (Trib.)
S. 54F : Capital gains - Investment in a residential house - As per development agreement

landowner received three residential units on same location, assessee would be entitled to
exemption in respect of all units (Position prior to 1-4-2015) [ S.2 (47) (v), 45, Transfer of
Property Act, 1882, S. 53A ]
201
As per development agreement, assessee got 3 constructed flats to her share, at same location in
pursuance of development agreement, assessee was eligible for exemption, however since, legal
heirs had sold two flats in subsequent year within 3 years from date of acquisition, amount of
capital gain exempted in respect of two flats would be brought to tax in such subsequent year.
(AY. 2007 - 08)
ITO v. Sureddy Venkata Ramanamamma. (Smt.) (2017) 165 ITD 574 /190 TTJ 665
(Visakha) (Trib.)
S.54F : Capital gains - Investment in a residential house – Residential building along with
empty land appurtenant – Allowable exemption. [ S.45 ]
The assessee had purchased land described in two Schedules of the agreement with a building
constructed on land prescribed in one of the schedules. The property was purchased as a single
composite unit. The assessee claimed exemption under section 54F on account of investment in
the property. It was held that the cost of vacant land appurtenant to and forming part of the
residential unit is to be considered for claim of exemption under section 54F even if no
construction has been done on the appurtenant land. (AY. 2012-13)
DCIT v. Kalyanaraman Nataraja. (2017) 165 ITD 307 (Chennai) (Trib.)
S. 54F : Capital gains - Investment in a residential house - Multiple investments on same

property is held to be eligible to get the exemption . [ S. 45 ]
Dismissing the appeal of the revenue the Tribunal held that; capital gains earned on sale of house
properties and same invested in construction of house property more than once for same new
property is entitle exemption,if cost of property is within capital gains that arose to assessee, then
assessee is eligible to get the benefit of the exemption . (AY. 2011-12)
ACIT v. Mohinder Kumar Jain (2017) 166 ITD 302// 189 TTJ 529/57 ITR 78 (SN) (Delhi)
(Trib.)
S. 54F : Capital gain – Investment in a residential house - Non-utilisation of deposit made in

capital gain account scheme - Addition cannot be made in the year of deposit - It is not the
discretion of assessee or AO to against the provisions. [ S. 45,54 ]
The Tribunal held that the amount of capital gain which was not utilized by the assessee but was
deposited in the scheme is chargeable to tax in the previous year 2014-15 i.e. AY. 2015-16. It is
not the discretion of assessee or AO to against the provisions of section 54/54F. Thus the addition
made by the AO in the year 2012-13 is not sustainable. (AY. 2012-13)
Anupama Nagesh (Smt.) v. ITO (2017) 187 TTJ 27 (UO) (Bang.) (Trib.)
S. 54F : Capital gains - Investment in a residential house - Entire amount of capital gain not
utilised for purpose of acquiring new house, nor was unutilized amount deposited in capital
gains account, assesse is entitled for exemption only amount invested in acquiring new
residential property till date of filing of return. [ S. 45, 139 (1) ]
Assessee transferred shares on which long term capital gain was earned. Assessee purchased an
under construction residential property and claimed deduction u/s.54F. Assessee paid half amount
out of consideration on sale of shares before due date of filing of return. And did not deposit
balance net consideration on sale of shares with capital gain account maintained with bank as
stipulated u/s.54F (4) before filing of return.
202
Tribunal held that assessee entitled to exemption of amount which was invested in acquiring new
residential property till date of filing of return of income and not the whole consideration. (AY.
2011 – 2012)
Basaribanu Mohd. Rafiq Latiwala (Smt.) v. ITO (2017) 164 ITD 346 /56 ITR 315 (Mum)
(Trib.)
S. 54F : Capital gains - Investment in a residential house - Invested entire sale consideration
in business with help of loan had completed construction of new house within three years
period of date of transfer - exemption cannot be denied. [S. 45]
Assessee's claim for deduction u/s.54F was denied on ground that sale proceeds of transferred
capital asset were not deposited in bank account under Capital Gains Account Scheme, but
diverted to and deployed in assessee's business. Further it was observed that assessee had
constructed residential house with help of a loan within stipulated period of three years from date
of transfer. ITAT held that entire amount having been transferred to assesse’s business purpose,
but, since assessee had completed construction of house within three years period of date of
transfer, i.e., by date of filing return. Assessee eligible for deduction u/s.54F. (AY. 2010-11)
R. Jayabharathi v.ITO (2017) 164 ITD 368 (Chennai) (Trib.)
S. 54F : Capital gains – Invested in a residential house, before due date of filing of return is
held to be entitle to exemption.[S. 45, 139]
Investment made before filing due date of fling of return is held to be eligible deduction . (AY.
2010 – 2011
R. Jayabharathi v.ITO (2017) 164 ITD 368 (Chennai) (Trib.)
S. 54F : Capital gains - Investment in a residential house – The residential house was
neither constructed within specified period of three years from date of transfer nor the
balance amount was deposited in capital gains account scheme – Not entitled to
exemption.[S. 45]
Assessee sold a piece of land and invested part of sale consideration in plot of land. While filling
the return of income, claimed balance sale consideration utilized in construction of property. But,
assessee had not constructed residential house within specified period of three years from date of
transfer and further balance amount was also neither utilized in construction nor deposited in
capital gains account scheme. Tribunal held that; the assessee is not entitled to exemption and
balance sum neither utilized nor deposited in capital gain account therefore it would be taxed in
year 2010-11. Further assessee claimed to have offered long-term capital gain in assessment year
2013-14 and paid taxes thereon. ITAT remanded to the AO to verify claim whether assessee had
disclosed long-term capital gain in assessment year 2013-14. (AY .2010 – 2011)
Sushil Kumar Bafna v. ITO (2017) 164 ITD 372 (Indore) (Trib.)
S. 54F : Capital gains-Investment in a residential house-A trust which is for the sole benefit
of an individual, has to be assessed as an “individual” and not as an “AOP”. Consequently,
a trust is eligible for exemption.[S.161]
Allowing the appeal of the assessee, the Tribunal held that; from the above case laws it is amply
clear that by virtue of Section 161 of the I.T. Act the representative assessee is subject to the same
duties, responsibilities and liabilities as if the income was received by him beneficiary, and
whatever benefits the beneficiary will get in the said assessment must be made available to the
trustee while assessing him u/s. 161. It is clear that it is only by virtue of u/s. 161 that the trust has
been assessed for the income that is for benefit of sole beneficiary. According respectfully
following the precedent we hold that the assessee is principally entitled to deduction u/s. 54F and
it cannot be said that since it is a AOP and not a individual or HUF the said exemption/deduction
should be denied. (AY. 2012-13)
203
Balgopal Trust v. ACIT (2017) 164 ITD 584 /155 DTR 229 // 188 TTJ 373 (Mum.) (Trib.)
S.54F : Capital gains-Investment in a residential house – Deposit was not within due date
for filing return but return filed belatedly-Deposit in specified bonds made within due date
for filing was held to be entitled to exemption. [S. 45,54EC, 139 (4)]
Tribunal held that, the assessee filed the return within the time provided under section 139 (4) of
the Income-tax Act, 1961. The return was not filed within the time provided under section 139
(1). Therefore, the matter needed to be reconsidered by the Assessing Officer and shall find out
whether the assessee had invested the money in construction of property after getting approval of
the Panchayat Union and thereafter decide the issue afresh in accordance with law after giving a
reasonable opportunity to the assessee. That the property was sold on January 10, 2011 and the
assessee deposited a sum of Rs. 50 lakhs on March 31, 2011 and another sum of Rs. 20 lakhs on
June 30, 2011 in the REC Bonds. Since the deposit was made within the due date for filing of the
return, the Commissioner (Appeals) had rightly allowed the claim of the assessee. (AY.2011-
2012)
Eswari (Mrs.) v. ITO (2017) 54 ITR 557 (Chennai) (Trib)
S. 54F : Capital gains-Investment in a residential house – Net consideration invested in the

construction of new house before the due date of filing return of income - Construction of
the house was also completed within the prescribed time limit of three years – exemption
cannot be denied. [S. 139 (1)]
Assessee having sold a property and invested more than the net consideration thereof in a new
residential plot even before the due date prescribed under s.139 (1) and also completed
construction of the house within the time limit of three years under s. 54 (1), exemption cannot be
denied on the ground that the assessee did not deposit the sale consideration as per the scheme
notified by the Government under s.54F (1) of the Act. (AY. 2010-11)
Nirmala Yadav (Smt.) v. ITO (2017) 146 DTR 63 /183 TTJ 769/54 ITR 387 (Jodhpur)
(Trib.)
S. 54G : Capital gains-Shifting of industrial undertaking from urban area - Deposit of

unutilised capital gain was made by assessee within time limit provided for filing of return
under section 139 (5), assessee would be entitled to exemption-Period of six months for
making deposit under section 54EC should be reckoned from the dates of actual receipt of
the consideration. [S.54G (2), 54EC, 139 (1),139 (5)]
Dismissing the appeal of the revenue, the Tribunal held that; Deposit of unutilised capital gain
was made by assessee within time limit provided for filing of return under section 139 (5),
assessee would be entitled to exemption and also period of six months for making deposit under
section 54EC should be reckoned from the dates of actual receipt of the consideration, because if
the assessee receives part payment as on the date of transfer and receives part payment after six
months then it would lead to an impossible situation by asking assessee to invest money in
specified asset before actual receipt of the same. (AY. 2009-10)
DCIT v. Kilburn Engineering Ltd. (2017) 163 ITD 522/187 TTJ 487 /156 DTR 241 (Kol.)
(Trib.)
S. 55A : Capital gains - Reference to valuation officer – Capital gain – Valuation as on 1-04
- 1981 – Valuation was adopted on the basis of valuation done by registered valuer,
reference to DVO was held to be bad in law .[ S. 45, 55A (b) (ii) ]
Dismissing the appeal of the revenue the Tribunal held that; Valuation as on 1-04 - 1981 was
adopted on the basis of valuation report of the approved valuer; reference to DVO u/s 55A (b)
(ii) to find out fair market value of property, reference u/s 55A (b) (ii) was bad in law (AY. 2008 -
09)
204
DCIT v. Bombay Oxygen Corporation Ltd. (2017) 167 ITD 224 (Mum) (Trib.)
S. 55A : Capital gains - Reference to valuation officer – Reference can be made only when
the value declared by the assessee is less than the fair market value as on 01 April 1981 [ S.
45 ]
Reference can be made only when the value declared by the assessee is less than the fair market
value as on 01 April 1981 .On facts reference to valuation Officer was held to be in valid . (AY.
2008-09)
(Trib.)
S. 56 : Income from other sources-Income from house property— Building leased with
inseparable amenities is assessable as income from other sources—Depreciation though not
claimed deduction under section 57 (iii) is to be granted. [S. 22,24, 57 (iii)]
Dismissing the appeal of the assessee the Court held that; the rental income earned by the
assessee was to be treated as “income from other sources”. The entire income from the letting
was to be treated as “income from other sources” and the benefit of deduction under section 57
(iii) was to be granted by the Assessing Officer. (AY. 2009 - 10)
Jay Metal Industries P. Ltd. v. CIT (2017) 396 ITR 194/249 Taxman 450 (Delhi) (HC)
S. 56 : Income from other sources – Builder developer – Section applies only to individuals
and HUF and also, held that it seeks to tax the transferee of the property and not the
transferor. [S. 56 (2) (vii) (b)]
The assessee was a builder/developer following the project completion method of accounting.
During relevant assessment year, the assessee offered certain net profit on sale of flats as its
business income. AO took a viewalue of flats sold was to be determined by applying provisions
of section 56 (2) (vii) (b) (ii). High Court held that said section applies to individuals and Hindu
Undivided Family. It also held that it seeks to tax the transferee of the property for having given
consideration less than the stamp value by Rs. 50,000/ or more for purchase of the property. (AY.
2009-10)
CIT v. Neelkamal Realtors & Erectors India (P.) Ltd. (2017) 246 Taxman 274 (Bom.) (HC)
S. 56 : Income from other sources - Interest on convertible debentures and profit on sale of
units of mutual funds was held to be assessable as income from other sources and not as
business income and netting of income was directed to be allowed .[ S.28 (i)]
Tribunal held that the assessee company, incorporated to carry on business of setting up of new
hotels, earned interest on convertible debentures and profit on sale of units of mutual funds, since
it had never applied to RBI for getting a certificate of registration as NBFC, income earned from
aforesaid activities was to be taxed as income from other sources Tribunal also held that even if
the income is assessed under the head income from other sources, benefit of netting of income
cannot be denied. Accordingly the AO was directed to give the benefit of netting . . (AY. 2009 –
2010)
Samsara Hospitality (P.)Ltd. v. ITO (2017) 166 ITD 416 (Mum) (Trib.)
205
S.56 : Income from other sources - Rental income after discontinuing business activity could
not be treated as income from house property or income from business it has to be assessed
as income from other sources. Expenditure allowable as per S.57 and expenditure on
maintenance of the company was held to be allowable as deduction. [ S.22, 28 (i) ]
Assessee discontinued business of textile mills and leased out factory premises. Income from
leasing out of factory premises was offered as business income. The AO assessed said rental
income as income from house property. CIT (A) confirmed the order of AO. On appeal traibunal
held that, rentals from letting out of not only building structure but it was a factory premises
including all fittings and fixtures. As the factory building was neither acquired nor held by the
assessee for the purpose of letting out but it was held by the assessee for its textile business which
was discontinued, claim of business income cannot be accepted, therefore rental income is treated
as income from other sources. Tribunal also directed the AO to allow the deduction as per S. 57
as well as the expenditure on maintenance of the company . (AY. 2006-07)
T.R. Mills (P.) Ltd. v. ITO (2017) 166 ITD 109 (Bang) (Trib.)
S. 56 : Income from other sources – Advance receipt cannot be taxed as gifts or income
merely because the person who has paid the amount has not initiated any legal proceedings
to recover the amount . [S. 28 (i) ,56 (2) (vi) ]
Allowing the appeal of the assesse the Tribunal held that the Advance receipt cannot be taxed as
gifts or income merely because the person who has paid the amount has not initiated any legal
proceedings to recover the amount . (ITA No . 3738/Mum/2013/3739/Mum/2013 Bench “B”
dt.12-11-2017 (AY. 2008 - 09, 2009 - 10)
Nilesh Janardan Thkur v ITO (2018) 168 ITD 143/192 TTJ 786 (Mum) (Trib)
S. 56 : Income from other sources - Interest income wrongly taken due to clerical error -
actual interest income should be computed on basis of TDS certificate
Due to a clerical error, assessee wrongly considered interest income. The Tribunal held that actual
interest income should be verified from TDS certificate or return for purpose of computing
income chargeable to tax under provisions of Act. (AY. 2009 – 2010)
Ranjeet D Vaswani v. ACIT (2017) 164 ITD 551/187 TTJ 40 (UO) (Mum.) (Trib.)
S.56 : Income from other sources – Interest from short term deposits is assessable as income
from other sources. [S. 28 (i)]
Tribunal held that, deposit of unutilised borrowed funds in short term fixed deposits during
construction of power plant, interest earned on those deposits was taxable as income from other
sources. (AY 2012 – 2013)
Thermal Powertech Corporation India Ltd. v. DCIT (2017) 164 ITD 449/188 TTJ 462
(Hyd.) (Trib.)
S. 56 : Income from other sources - Agricultural Income – Failure to produce the evidence
in support of agricultural activities the gross receipts from agricultural income was
assessed as income from other sources.
Tribunal held that; Failure to produce the evidence in support of agricultural activities the gross
receipts from agricultural income was assessed as income from other sources . (AY.2010-2011,
2011-12)
206
S. 56 : Income from other sources-A HUF is a "group of relatives". Consequently, a gift
received from a HUF by a member of the HUF is exempt from tax as provided in the
Explanation to s. 56 (2) (vi). [S. 56 (2) (vi)]
Dismissing the appeal of the revenue, the Tribunal held that ;A HUF is a "group of relatives".
Consequently, a gift received from a HUF by a member of the HUF is exempt from tax as
provided in the Explanation to S.. 56 (2) (vi) (ITA no. 1906/Mum/2014, dt. 19.04.2017) (AY.
2010-11)
DCIT v. Ateev V. Gala (Mum.) (Trib.),www.itatonline.org
S.56 : Income from other sources – Gift-Gift was given by donor at time of illness, or it was
'occasioned' while donor was undergoing treatment, would not by itself make it a gift in
contemplation of death; same would be assessable. [S. 2 (24) (xv), 56 (2) (vii) ]
Tribunal held that, just because the Gift was given by donor at time of illness, or it was
'occasioned' while donor was undergoing treatment, would not by itself make it a gift in
contemplation of death; same would be assessable (AY. 2012-13)
F.Susai Raju v. ITO (2017) 163 ITD 533 /184 TTJ 780 /148 DTR 169 (Chennai) (Trib.)
S. 56 : Income from other sources - Interest on fixed deposits was held to be assessable as
income from other sources. [S. 44AD]
Dismissing the appeal of the assessee the Tribunal held that; there was no nexus between
interest receipts and works contracts executed by assessee, interest on fixed deposits was
separately assessable under head 'Income from other sources. (AY. 2009-10)
G. Raja Gopala Rao v. DCIT (2017) 163 ITD 46 (Visakha) (Trib.)
S.57 : Income from other sources—Interest—Interest from fixed deposit in bank—Interest

paid on loan against security of fixed deposit is not deductible. [S.57 (iii)]
Dismissing the appeal of the assessee the Court held that; the netting of the interest paid on loan
and the interest received from fixed deposit was not permissible under section 57 (iii) of the Act.
Jaipur Spinning And Weaving Mills Ltd. v.DCIT (2017) 394 ITR 490 (Raj.) (HC)
S.57 : Income from other sources-Interest on money borrowed for purchase of shares—
Interest was held to be deductible. [S.56, 57 (iii), IITA, 1922, S. 12 (2)]
Allowing the appeal the Court held that; Interest on money borrowed for purchase of shares was
held to be deductible. There was no evidence to demonstrate that the shares had been purchased
in order to gain control of company. (AY. 1997-1998)
Satish Bala Malhotra (Smt.) v. CIT (2016) 75 taxmann.com 42 (2017) 391 ITR 256 (P&H)
(HC)
S.57 : Income from other sources-Loan was taken for purchase of shares-Interest and
service charges was held to be deductible.[S. 37 (1), 56]
Dismissing the appeal of the revenue the Court held that; the expenditure clearly was not towards
acquisition of the capital nor was it an integral part of it, it was only the service alone. It was of a
similar kind that would otherwise have been permitted under section 37 of the Act. Since this
expenditure did not pertain to the stream of income covered by section 37 and was not excluded
by section 57 (iii), it had to be and was correctly allowed. (AY. 1993-1994 to 1996-1997)
CIT v. Virat Investment and Mercantile Co. (2017) 392 ITR 202 /148 DTR 161 (Delhi) (HC)
S. 57 : Income from other sources - Expenditure wholly and exclusively for purpose of
making or earning income — assessee taking housing loan from bank but utilising it for
207
investing in debentures — assessee’s predominant intention of investment in debentures to
obtain controlling interest in company —Expenditure was held to be allowable [S. 57 (iii)]
Dismissing the appeal of the revenue the Tribunal held that; The assessee’s predominant intention
in investment in the debentures was to obtain controlling interest in the company on the ground
that rate of interest to the bank was 10.5 per cent. Wherein the assessee earned interest at 8.18 per
cent. Therefore, the transaction carried out by the assessee could not be considered sham or
colourable. Res judicata does not apply to Income-tax proceedings. Each assessment year being a
unit what is decided in one year may not apply in the following year but where a fundamental
aspect permeating through the different assessment years had been found as fact one way or the
other, and the parties have allowed that position to be sustained by not challenging the order, it
would not be appropriate to allow the position to be changed in the subsequent year. In the
absence of any material change justifying the Department to take a different view of the matter,
there was no reason to take a different view in a subsequent year. The AO had allowed the claim
while completing the assessment for the assessment years 2003-04, 2004-05, 2006-07 and 2007-
08 and 2008-09 . Therefore the assessee’s claim was justified. (AY. 2005-06 2009-10).
S. 57 : Income from other sources-Setting up of business - Pre-operative expenses-Necessary

for maintaining corporate identity was held to be allowable. [S. 57 (iii)]
Expenditure incurred to maintain corporate identity was held to be allowable. (AY. 2008-2009)
ACIT v. L. S. Cable India P. Ltd. (2017) 55 ITR 232 (Delhi) (Trib.)
S. 61 : Revocable transfer of assets-Beneficiaries of trust identifiable and shares determined

by contributor’s agreement-Income derived by trust to be taxed in the hands of the
beneficiaries. [ S. 161 ]
The assessee, a trust set up by the Government of Tamil Nadu. The Assessing Officer without
accepting thecontention of the assessee brought the entire income at the maximum marginal rate
in thehands of the assessee. Objects of trust public utility and improvement of infrastructure
facilities for betterment of urban area and not business. On appeal, the Tribunal held that after
three years the contributors were free to call uponthe trustees to cancel any unit held by them and
whatever remained uncancelled wouldbe cancelled at the trust period and the money returned to
the contributors. The objects ofthe assessee clearly indicated public utility and improvement of
infrastructure facilities forthe betterment of the urban area and not for the purpose of business.
The assessee wasnot carrying on any business with commercial motive. The beneficiaries of the
assesseewere identifiable and the shares were determined by the contributors’ agreement and
thecontributors were free to call upon the trust to cancel any units held by them and returnthe
value.Therefore, the trust was a revocable trust and squarely covered by S. 61 and hence the
income derived by it was to be taxed in the hands of the beneficiaries in terms of section 61 and
161 (1). (AY. 2008-09, 2009-10)
Tamilnadu Urban Development Fund .v. ITO (2017)56 ITR 37 (Chennai) (Trib.)
S. 64 : Clubbing of income-Salary paid to spouse-Finding that spouse did not possess any
technical qualification, salary was includible in total income of assessee. [S.64 (1)]
Dismissing the appeal of the assessee, the Court held that; the contention of the assessee was that
the assessee had the imparted secret formula of his medicine to his wife. In other words, apart
from imparting the secret formula to his wife, even the assessee did not have a case that the wife
was earning her salary on account of her technical or professional knowledge or experience. In
such a case, the payment made by the assessee to his wife would not qualify for the benefit of
208
proviso to section 64 (1) (ii) of the Act. Addition of the amount paid as salary to the spouse in the
total income of the assessee was justified. (AY. 2004-2005)
S. Gopalkrishnan v. CIT (2017) 390 ITR 518 /77 taxmann.com 97 (Ker.) (HC)
S. 68 : Cash credits - Penny stocks - Capital gains – Aassessee had indulged in a dubious
share transaction meant to account for the undisclosed income in the garb of long term
capital gain. The gain has accordingly to be assessed as undisclosed credit [ S. 45 ]
Dismissing the appeal of the assesse the Court held that; The assessee has not tendered cogent
evidence to explain how the shares in an unknown company worth Rs.5 had jumped to Rs.485 in
no time. The fantastic sale price was not at all possible as there was no economic or financial
basis to justify the price rise. the assessee had indulged in a dubious share transaction meant to
account for the undisclosed income in the garb of long term capital gain. The gain has
accordingly to be assessed as undisclosed credit . . (ITA No. 18/2017, dt. 10.04.2017) (AY. 2006
- 07)
Sanjay Bimalchand Jain v. P CIT (Bom) (HC); www.itatonline.org
S. 68 : Cash credits – PAN card copy, Copy of return ,balance sheet and bank accounts of
creditor was produced – Addition was rightly deleted by Tribunal. [ S. 260A ]
Dismissing the appeal of the revenue, the Court held that ;the assesse has proved the genuineness
of loans by producing, PAN card copy, Copy of return ,balance sheet and bank accounts of
creditor was produced. Addition was rightly deleted by Tribunal. (AY. 2007 - 08)
CIT v. Haresh D. Mehta. (2017) 251 Taxman 346 (Bom) (HC)
S.68 : Cash credits - Advances towards booking of plots - Addition was held to be justified
as the details were not produced.
Dismissing the appeal of the assessee the Court held that; as the assessee has not furnished
details of advances received towards boking of plots ,addition was held to be justified. (AY.
2008-09)
Om Land Realty (P.) Ltd v. Dy.CIT (2017) 251 Taxman 115 (Guj) (HC)
S. 68 : Cash credits - Trade creditors in earlier years stood accepted in scrutiny

assessments, genuineness of expenses under consideration cannot be doubted.
Dismissing the appeal of the revenue the Court held that; Trade creditors in earlier years stood
accepted in scrutiny assessments, genuineness of expenses under consideration cannot be
doubted.
PCIT v. Kulwinder Singh (2017) 156 DTR 333 /298 CTR 389 (P&H) (HC)
S. 68 : Cash credits —Assessee must prove that credit was genuine, addition was held to be
justified . [ S. 251 ]
209
Court held that; the credit of Rs. 5 lakhs, by changing his version frequently and by producing
witnesses who inspired no confidence, the assessee did not discharge his primary burden. The
source of Rs. 5 lakhs one of the two deposits, remained unexplained, even prima facie the
Tribunal was in error in deleting the addition. On the deposit of the other Rs. 5 lakhs, the
Assessing Officer and the appellate authority found that Rs. 2 lakhs was unexplained. As the
Tribunal did not disturb this finding, the entire unexplained income of Rs. 7,00,000 was
assessable in the hands of the assessee. (AY. 1995-96)
CIT v. B.P. Sherafudin (2017) 399 ITR 524/(2018) 161 DTR 265 /252 Taxman 326 (Ker)
(HC)
S. 68 : Cash credits - Share application money - Amounts received through banks and
identity of applicants established – Addition was held to be not valid .
Allowing the appeal of the assesse the Court held that; the assessee-company had completely
explained the sources of investments received by it. It had also disclosed the identity of such
investors. The Assessing Officer traced out and reached all the four investors of the assessee. He
also found as a matter of fact that all the payments had been received through banking channels.
Hence, the burden cast on the assessee stood discharged. The assessee could not call upon its
investors to disclose all business transactions they carried on in the immediate past and as to how
much they made from their respective business enterprises. The assessee could not also call upon
its investors to prove their good business sense in investing in the assessee-company, as such the
investors could not gain any controlling stake. The amounts received on share applications were
not assessable under section 68 (AY. 2007-08)
Lalitha Jewellery Mart P. Ltd v. Dy. CIT (2017) 399 ITR 425 (Mad) (HC)
S. 68 : Cash credits - Not satisfactorily explained the source – Addition was held to be
justified – No question of law [ S. 147, 260A]
Dismissing the appeal of the assesse, the Court held that the assesse has not satisfactorily
explained the source hence addition was held to be justified (AY. 2005 - 06)
Arvind Kumar Chaudhary v. CIT (2017) 399 ITR 291 (All) (HC)
S. 68 : Cash credits – Capital account - Agricultural income - No evidence was furnished –

Addition was held to be justified .
Allowing the appeal of the revenue, the Court held that ;since assessee did not furnish any sort of
evidence with regard to alleged agricultural income addition was held to be justified . (AY. 2005-
06)
CIT v. Construction Engineers (2017) 249 Taxman 260 /297 CTR 220 /155 DTR 217 (J&K)
(HC)
S. 68 : Cash credits – Sale of shares - When purchase of shares were accepted as genuine in
the year of sale consideration cannot be assessed as cash credits .
Dismissing the appeal of the revenue, the Court held that; When purchase of shares were accepted
as genuine in the year of sale consideration cannot be assessed as cash credits . (AY. 2006-07)
PCIT v. Ramniwas Ramjivan Kasat (2017) 248 Taxman 484 (Guj.) (HC)
S. 68 : Cash credits – Amount credited in the books of account though cheque received
from various creditors were not presented for collection in banks addition was held to be
justified .
Dismissing the appeal of the assesse the Court held that; If the amount is credited in the books of
account though cheque received from various creditors were not presented for collection in banks
addition was held to be justified . (AY. 2003-04)
210
Vimal Organics Ltd. v. CIT (2017) 248 Taxman 457 /297 CTR 549 /152 DTR 223 (All.) (HC)
S. 68 : Cash credits – Share application amount - Amount received by cheque and

confirmation was filed – Addition was held to be not justified .
Allowing the appeal of the assesse, the Court held that; the share application money was received
by account payee cheque and the confirmation was filed, hence the addition was held to be not
justified . (AY. 1994 - 95)
Associated Transrail Structure Ltd v. ACIT (2017) 397 ITR 573 (Guj) (HC)
S.68 : Cash credits – Share premium - capital or revenue-Amendment is effective from 1-4-
2013 hence amount received as share premium can not be assessable for the AY. 2012-13
[S.2 (24) ]
Dismissing the appeal of the revenue the Court held that; the amounts received on issue of share
capital including premium were on capital account and could not be considered to be income. The
definition of income as provided under section 2 (24) of the Income-tax Act, 1961 at the relevant
time did not define income as any consideration received for issue of share in excess of its fair
market value. This came into the statute only with effect from April 1, 2013 and thus, would
have, no application to the share premium received by the assessees in the previous year relevant
to the assessment year 2012-13. Similarly, the amendment to section 68 of the Act by addition of
a proviso was made subsequent to previous year relevant to the subject assessment year 2012-13
and could not be invoked. The share premium could not be taxed. (AY. 2012-13)
PCIT v. Apeak Infotech (2017) 397 ITR 148 (Bom.) (HC)
PCIT v. Yogesh Infotech (2017) 397 ITR 148 (Bom.) (HC)
PCIT v. Amply Infotech (2017) 397 ITR 148 (Bom.) (HC)
PCIT v. Westline Trading Company (2017) 397 ITR 148 (Bom.) (HC)
PCIT v.Jasper Commerce (2017) 397 ITR 148 (Bom.) (HC)
PCIT v. Inex Infotech (2017) 397 ITR 148 (Bom.) (HC)
S. 68 : Cash credits — Share application money — Merely because, failure of the parties to
appear before the AO, additions cannot be made, when the assesse had produced other
documentary evidence to prove the genuineness of the transaction. [ S.260A ]
Dismissing the appeal of the revenue the Court held that; failure by the parties who had paid the
hare application money and to whom the share certificates were issued to appear before the
Assessing Officer and the fact that the summons could not be served at the addresses given, as
they were not traced and that in respect of some of the parties who had appeared before the
Assessing Officer it was found that just before the issuance of cheques, the amounts were
deposited in their account, did not negate the case of the assessee. The Assessing Officer could
not have added the share application money under section 68 only on that ground. The Appellate
Tribunal had considered the fact that the assessee had produced on record the documents, such as
the permanent account number of all the creditors along with the confirmation, their bank
statements showing payment of share application money, to establish the genuineness of the
parties. It had also recorded that the assessee had produced the entire records regarding the
allotment of shares to those parties, their share application forms, allotment letters and share
certificates and the profit and loss accounts of those parties disclosed that they had sufficient
funds in their accounts for investing in the shares of the assessee. No question of law arose.
CIT v. Orchid Industries P. Ltd. (2017) 397 ITR 136 (Bom.) (HC)
211
S. 68 : Cash credits — Sums outstanding against trade creditors for purchases —Addition
was held to be not justified .
Allowing the appeal the Court held that; the credit purchases of raw material shown in the books
of account of the assessee from petty dealers even if not confirmed would not mean that it was
concealed income or deemed income of the assessee, which could be charged to tax under
section 68 of the Act .. The finding of the Appellate Tribunal that it was possible that the assessee
paid them in cash from undisclosed sources without accounting for it and therefore, the amount
paid was to be added in the income of the assessee, was based on no material but on conjectures
and surmises. The purchases made by the assessee were accepted by the Assessing Officer and
the trade practice that payment in respect of the purchases of raw material was made
subsequently, was not disputed. Therefore, its finding was perverse. (AY. 2006 - 07)
Zazsons Export Ltd v. CIT (2017) 397 ITR 40 (All) (HC)
S. 68 : Cash credits – Capital account of partners - Once an unexplained credit is found in

the books of the assessee, a rebuttable presumption is drawn against the assessee that the
said credit is part of the income of the assesse.
Allowing the appeal of the revenue, the Court held that; once a credit is found in the books of the
assessee to be unexplained, a presumption is drawn against the assessee that the said credit is part
of the income of the assessee. The presumption is, however, rebuttable by the assessee by
producing relevant cogent evidence in that behalf other than a bald statement about the nature of
source of the credits in question.
CIT v. Construction Engineers (2017) 249 Taxman 260/297 CTR 222/155 DTR 217 (J& K)
(HC)
S. 68 : Cash credits – NRI gifts - Burden is on assessee - Though books of account is not
maintained addition was s held to be justified .
Dismissing the appeal of the assessee, the Court held that ;a argument that the assessee did not
maintain "books of account" and so S. 68 will not apply is not acceptable. It is incumbent on
every assessee doing business to maintain proper books of account. It may be in any form. If the
assessee has not done so, he cannot be allowed to take advantage of his own wrong. Burden lies
on the assessee to show from where he has received the amount and what is its nature. When even
after giving opportunities, the Appellant had failed to produce relevant documents and explain the
nature and source of the amount received by him hence the order of the Assessment officer and
the appellate authorities in respect of those amounts is justified. (AY. 1996 - 97)
Arunkumar J. Muchhala v. CIT (2017) 399 ITR 256/ 250 Taxman 362/158 DTR 387 (Bom.)
(HC)
S. 68 : Cash credits - Voluntary Disclosure of income — Certificate granted by

commissioner under Voluntary Disclosure of Income Scheme is binding on assessing officer
hence additions cannot be made [ Finance act, 1997 ]
Dismissing the appeal of the revenue, the Court held that; The Commissioner having issued the
certificate upon the declaration made under the Voluntary Disclosure of Income Scheme under
section68 (2) of the Finance Act, 1997, judicial discipline requires that the authorities entrusted
with administering law proceed on the basis that the certificate granted by the Commissioner
would indicate satisfaction of all the requisite conditions as required by the provisions of the
Scheme and it is not open to the subordinate authority to sit in judgment over the certificate
granted by the Commissioner. It is not open to the Assessing Officer to go behind the certificate
issued by the Commissioner and ignoring it, assess an income which has already borne tax under
the Scheme. [BP. 3-11-1996 to 20-10-1997 ]
CIT v. Rajiv Enterprise (2017) 396 ITR 364 (Guj) (HC)
212
S. 68 : Cash credits – Mere identity of lender is not sufficient to establish the genuineness of
the transaction, failed to prove the financial capacities there no collateral securities and
advance was without charging interest hence addition as unexplained cash credits was
held to be justified.
Allowing the appeal of the revenue the Court held that; the use of deceptive loan entries to bring
unaccounted money into banking channels plagues the legitimate economy of our country. The
mere fact that the identity of the lenders is established & payments are made by cheques does not
mean they are genuine. If the lenders do not have the financial strength to lend such huge sums
and if there is no explanation as to their relationship with the assessee, no collateral security and
no agreement, the transactions have to be treated as bogus unexplained credits. (AY. 2011-12)
PCIT v. Bikram Singh (2017) 399 ITR 407/250 Taxman 273 /158 DTR 369 (Delhi) (HC)
S. 68 : Cash credits-Peak credits – Accommodation entries—Burden is on assesse to prove

the source of deposits and corresponding payments, if the assesse is unable to prove the
theory of peak credits cannot be applied, addition as cash credit was held to be justified .
Allowing the appeal of the revenue, the Court held that ;unless the assessee able to show that
money has been transferred through banking channels from the bank account of creditors to the
bank account of the assessee, the identity of the creditors and that the money paid from the
accounts of the assessee has returned to the bank accounts of the creditors. The assessee has to
discharge the primary onus of disclosure in this regard. Peak credits theory cannot be applied .
Addition as cash credits was held to be justified (AY. 1995 - 96)
CIT v. D. K. Garg (2017) 250 Taxman 104/162 DTR 17 /(2018) 300 CTR 510 (Delhi) (HC)
Editorial : SLP was garnted to the assesse, D. K. Garg v.CIT (2018) 253 Taxman 1 (SC)
S. 68 : Cash credits – Share application – Permanent application no was produced ,deletion
of addition was held to be justified .
Dismissing the appeal of the revenue the Court held that; it had been found by the Tribunal that
the assessee had provided the permanent account numbers of the share applicants. The mode of
payment had also been explained. There was no direct or indirect relationship between the
assessee-company and the share applicants. The statements recorded during survey had no
evidentiary value without any supporting documents or evidence. The Tribunal was justified in
deleting the addition under section 68 .
CIT v. ARL Infratech Ltd. (2017) 394 ITR 383 (Raj.) (HC)
S. 68 : Cash credits – Identity, genuineness and creditworthiness of cash creditors were

proved, addition was held to be not justified.
Dismissing the appeal of the revenue, the Court held that; when identity, genuineness and
creditworthiness of cash creditors were proved just because AO found minor discrepancies in
statements of cash creditors recorded addition was held to be not justified. (AY. 2008-09)
CIT v. Deen Dayal Choudhary (2017) 293 CTR 468/148 DTR 275 (Raj.) (HC)
S. 68 : Cash credits – Firm – Capital contribution-All creditors are assessed to tax – Burden
is discharged addition was held to be not justified.
Allowing the appeal of the assessee the Court held that; Creditors from loan was borrowed by the
partners are assessed to tax for number of years, partners have paid interest on said loans, hence
capital contribution by partners cannot be assessed as cash credits.
Kailash Chand Agarwal v.ITO (2017) 394 ITR 771 (Raj.) (HC)
213
S.68 : Cash credits-Peak credit-Unexplained entry in bank statement-Claim for benefit of
peak credit-Implication after application of section 68 to opening balance of assessee vis-a-
vis further transactions-Matter remanded.
Allowing the petition the Court held that; the factual foundation for applying the theory of peak
credit was not laid by the assessee. The assessee might have impliedly done so, but expressly no
such attempt was discernible. The plea was not raised before the Assessing Officer. The
Appellate Tribunal had proceeded solely on the basis of the judgment in the case of Kale Khan
Mohammed Hanif v. CIT [1963] 50 ITR 1 (SC)which was not concerned with an identical set of
facts as in the case of the assessee. What would be the implication after application of section 68
of the Income-tax Act, 1961 to the opening balance of the assessee vis-a-vis the further
transactions was a question of fact which had to be considered. Entitlement of assessee to benefit
of peak credit theory was to be decided by the Appellate Tribunal on the basis of evidence, which
might be adduced by the assessee.Matter remanded.
Piyush Poddar v. CIT (2017) 393 ITR 381 (Cal.) (HC)
S. 68 : Cash credits-Gift from brother – Capacity of the brother to give gift was not
established – Addition was held to be justified. [ S. 56 (2) ]
Dismissing the appeal of the assessee, the Tribunal held that, the though the money was
transferred to him through banking channel from account of his brother from Dubai, the assessee
has not established the capacity of the brother to give gift the amount, hence the addition was held
to be justified. (AY. 2009-10)
Sunil Thomas v. ITO (2017)394 ITR 619/ 294 CTR 129 /248 Taxman 85/149 DTR 142 (Ker.)
(HC)
S. 68 : Cash credits-Failure by assessee to prove three essential requirements i.e.,identity of

creditor, genuineness of transactions and credit worthiness of creditor, addition was held to
be justified.
Allowing the appeal of revenue, the Court held that ,the Failure by assessee to prove three
essential requirements i.e.,identity of creditor, genuineness of transactions and credit worthiness
of creditor, addition was held to be justified.
CIT v. Universal Empire Educational Society (2017) 393 ITR 502/80 taxmann.com 44
(Ker.) (HC)
S.68 : Cash credits—Partner-Ability of partner to contribute amount in cash to assessee not

substantiated by supporting documents, liable to tax in hands of assesse.
Dismissing the appeals the Court held that, mere explanation was not sufficient to discharge the
onus of the assessee under section 68 of the Act. The explanation must also be supported by
documents in respect of its genuineness. Since the stand taken was that the cash had been derived
from the sale of agricultural land, the sale deed with regard to the sale was called for by the
Assessing Officer and the assessee had failed to produce it or any other cogent document or
evidence to satisfy the Assessing Officer that its partner was in a position to contribute such an
amount in cash to the assessee. The amount involved as capital contribution could be added as
unexplained income of the assessee in terms of section 68 of the Act. (AY. 2004-2005, 2005-
2006)
R.A. Himmatsinghka and Co. v. ACIT (2017) 392 ITR 587 (Patna) (HC)
S.68 : Cash credits - Share capital-Merely on the basis of report of investigating wing
additions cannot be made.
Dismissing the appeal of the revenue, the Court held that; Fact that the investigation wing’s report
alleged that the assessee was beneficiary to bogus transactions and that the identity of
shareholders, genuineness etc was suspect is not sufficient. The AO is bound to conduct scrutiny
214
of documents produced by the assessee and cannot rest content by placing reliance on the report
of the investigation wing. (AY. 2002-03)
PCIT v. Laxman Industrial Resources Pvt. Ltd (2017) 397 ITR 106 (Delhi) (HC)
S.68 : Cash credits-Subscriptions of share premium done through banks and recorded in
books of account-Genuine, identity of subscribers and capacity of subscribers proved -
Addition was held to be not justified .
Dismissing the appeal of the revenue, the Court held that the assesse has proved ,genuine, identity
of subscribers and capacity of subscribers hence addition was held to be not justified . (AY
.2011-2012)
CIT v. Green Infra Ltd. (2017) 392 ITR 7/292 CTR 233/146 DTR 262/78 taxmann.com 340
(Bom.) (HC)
S. 68 : Cash credits-Share application money—Failure by Assessing Officer to conduct

adequate and proper inquiry into materials, no addition can be made. [S. 147, 148, 151]
Dismissing the appeal of the revenue, the Court held that; assessee furnishing documents to
evidence genuineness of transactions and identity and creditworthiness of parties. Failure by
Assessing Officer to conduct adequate and proper inquiry into materials while invoking section
68, no addition can be made. (AY. 2001-2002)
CIT v. N.C. Cables Ltd (2017) 391 ITR 11 (Delhi) (HC)
S.68 : Cash credits-Bogus share capital/premium-The proviso to s. 68 (which creates an

obligation on the issuing Co to explain the source of share capital & premium) has been
introduced by the Finance Act 2012 with effect from 01.04.2013 and does not have
retrospective effect. if the AO regards the share premium as bogus, he has to assess the
shareholders but cannot assess the same as the issuing company's unexplained cash credit.
Dismissing the appeal of the Revenue, the Court held that;The proviso to s. 68 (which creates an
obligation on the issuing Co to explain the source of share capital & premium) has been
introduced by the Finance Act 2012 with effect from 01.04.2013 and does not have retrospective
effect. if the AO regards the share premium as bogus, he has to assess the shareholders but cannot
assess the same as the issuing company's unexplained cash credit . The Court relied on CIT v..
Lovely Exports (P)Ltd. 317 ITR 218 (SC). (ITA No. 1613 of 2017, dt. 20.03.2017) (AY.2008-
09)
CIT v. Gagandeep Infrastructure Pvt. Ltd (2017) 394 ITR 680/247 Taxman 245 (Bom.)
(HC)
S.68 : Cash credits – Share capital-Entries made in pay – in – slips cannot prevail over
entry in books of account, addition cannot be made as income from undisclosed sources.
Dismissing the appeal of the revenue the Court held that; the conclusion drawn by the Assessing
Officer that the amount received was compensation and the amount was undisclosed income of
the assessee could not be sustained since the treatment of the receipts in the books of account of
the assessee should prevail being maintained in the usual course of business. There was nothing
on record to establish that the entries made in the books of account could not be relied upon. No
material was brought on record indicating that the amount received by the assessee was by way of
compensation. The cross examination of the assessee in respect of the entries made in the pay-in
slips revealed that the narrations in the pay-in slips of the two cheques were made by them on
their own without any directions or instructions from the assessee. The entries made in the pay-in
slips could not prevail over the entries in the books of account since the books of account would
reflect the appropriate record wherein treatment of receipts would be found. The statements
recorded of the managing director of the assessee were not reliable. The Appellate Tribunal was
justified in holding that the amount could not be assessed as undisclosed income.
215
CIT v. Likproof India P. Ltd. (2017) 390 ITR 377 /291 CTR 493/245 Taxman 76/145 DTR
321 (Bom.) (HC)
S. 68 : Cash credits-Bogus capital gains-A transaction cannot be treated as fraudulent if the
assessee has furnished documentary proof and proved the identity of the purchasers and no
discrepancy is found-The AO has to exercise his powers u/s. 131 & 133 (6) to verify the
genuineness of the claim and cannot proceed on surmises. [S. 131, 133 (6)]
Dismissing the appeal of the revenue, the Court held that;The assessee has adduced the
documentary evidences in support of the transaction in question. The identity of the purchasers of
the shares was established as it was borne on the record of the Income Tax Department. The
purchasers have PAN card as well. Turning to the shares which were sold by the appellant as per
its version, there is no evidence or material to even suggest, as pointed out as on behalf of the
assessee, that the cheques directly or indirectly emanated from the assessee so that it could be
said that the assessee’s own money was brought back in the guise of sale proceeds of the shares.
Though, the purchasers of the shares could not be examined by the AO, since they were existing
on the file of the Income Tax Department and their Income Tax details were made available to
the AO, it was equally the duty of the AO to have taken steps to verify their assessment records
and if necessary to also have them examined by the respective AOs having jurisdiction over them
which has not been done by him. (ITA No. 43/2016 & 44/2016, dt. 18.01.2017) (AY. 2003-04)
PCIT v. Jatin Investment Pvt. Ltd. (Delhi) (HC); www.itatonline.org
S. 68 : Cash credits – Identity and credit worthiness was not established hence addition was
held to be justified .
Dismissing the appeal of the assessee the Tribunal held that; mere furnishing of a confirmation
letter by a creditor, does not prove credit; same was only established identity of creditors.
Therefore additions were justified. (AY. 2007-08)
Godwin Maria Visuvasam ITO (2017) 166 ITD 239 (Chennai) (Trib)
S. 68 : Cash credits – Share capital - Merely because its directors are not produced
personally before the AO, addition cannot be made unless the AO demonstrate with specific
evidence that the assesse has really obtained accommodation entries by showing cash
deposited liked to the investors .
Dismissing the appeal of the revenue the Tribunal held that; Merely because its directors are not
produced personally before the AO, addition cannot be made unless the AO demonstrate with
specific evidence that the assesse has really obtained accommodation entries by showing cash
deposited liked to the investors . Revenue alleged that the Companies are of the Mr Parvin
Kumar Jian . The Tribunal held that when the assesses representative attended for cross
examination the Directors were not present hence no cognizance can be taken as regard the
statement of Mr Pravin Kumar Jian before investigation wing . (ITANos 3754/3755/3756 /2017
dt 14 - 11-2017 Bench ‘ E.’ (AY. 2008 - 9 to 2012-13) (AY. 2008 - 09)
ITO v. Shreedham Construction Pvt LTD (Mum) (Trib) www.itatonline.org .
S. 68 : Cash credits – Cash deposited in bank account maintained and operated by assessee
—Explanation regarding nature and source of cash deposit was not explained satisfactorily
– Addition was held to be justified
The Tribunal held that when Cash deposited in bank account maintained and operated by assessee
. the assessee to satisfy identification of person, creditworthiness of person and genuineness of
216
transaction. On facts the assessee wasnot able to offer suitable explanation regarding nature and
source of cash deposits to satisfaction of assessing officer therefore addition was held to be
justified .
Narayan Meena v. ITO (2017) 59 ITR 403 (Jaipur) (Trib)
S. 68 : Cash credits – Shell companies – Failure to produce lenders - Addition was held to be
justified .
The Tribunal held that the assessee has not been able to produce the alleged lenders for
verification and could not rebut the allegation of revenue authorities that the said lenders are shell
entities, the loans cannot be accepted as genuine transactions and therefore the addition under
section 68 is upheld and consequently, deduction of interest on alleged borrowings is disallowed.
(AY. 2007 - 08)
Pavankumar M. Sanghvi v. ITO (2017) 165 ITD 260/187 TTJ 32 /152 DTR 201 / 59 ITR 189
(SMC) (Ahd.) (Trib.)
Editorial : Affirmed by High Court, Pavankumar M. Sanghvi v. ITO (2018) 301 CTR 265 (Guj)
(HC)
S. 68 : Cash credits – Unexplained investment – Share capital - Addition was held to be

justified as the assessee has not proved the source of investment by producing the evidences.
[S. 69, 69C]
Dismissing the appeal of the assessee the Tribunal held that; NDTV indulged in a clear cut case
of "abuse of organization form/legal form and without reasonable business purpose” and
therefore, no fault can be found with the order of the AO in charging to tax Rs. 642 crores by re-
characterizing the conditions according to its economic substance and imposing the tax on the
actual controlling Indian entity. There is no doubt that the transaction used principally as a devise
for the distribution/diversion of sum to the Indian entity. The beneficial owner of the money is the
assesse. Accordingly the addition was confirmed . Detailed observation P.No .385 of the order)
(AY. 2009-10)
New Delhi Television Ltd. v. ACIT (2017) 189 TTJ 1 /58 ITR 3 (SN) (Delhi) (Trib.)
S. 68 : Cash credits - Bogus sales - Cash sale of gold bars to undisclosed customers, sales
was held to be non genuine addition was held to be justified [ S. 131 ]
Dismissing the appeal of the assessee the Tribunal held that; the assessee never revealed
identity of persons who bought gold bars in such a huge quantity by paying cash. Further, partner
of firm, Padmavati Bullion though confirmed sale of gold bars to assessee in statement recorded
under section 131 but subsequently he never appeared before authorities below when he was
called upon to sought more information . Further, no proof of delivery of gold bar by assessee to
buyers was placed on record . On facts, there was no genuineness in sale transactions carried on
by assessee and, thus, additions was held to be justified . (AY. 2006-07)
Champalal Shah v. ITO (2017) 59 ITR 94 (SN)/86 taxmann.com 258 (Mum) (Trib)
S.68 : Cash credits-Unsecured loans received – No lenders produced - Lenders were found
to be shell companies – Documents submitted at fag end of assessment proceedings – Loan
transaction considered non-genuine.
It was held by the Tribunal that the level of turnover and the expenditure incurred on achieving
such high turnover do not match at all. The numbers did not add up and the details filed in respect
217
of the lenders did not show that the lenders are routine businesses. Given this background the
assessee's inability to produce the related persons or even give their current whereabouts makes
the story of genuine transactions even more unbelievable.
This situation, coupled with the fact that
(i) the assessee has not been able to produce these lenders for verification and;
(ii) The assessee has maintained stoic silence on being told about these lenders being alleged
to be shell entities, it cannot be believed that these are genuine business transactions.
As the things stood, genuineness of transactions was to be examined in the light of the prevailing
ground realities, and that is precisely what has been done. Thus, for the detailed analysis set out
earlier, the alleged loan transactions of the assessee cannot be held to be genuine on the peculiar
facts and circumstances of this case. (AY. 2007-08)
Pavankumar M Sanghviv.ITO (2017) 165 ITD 260/187 TTJ 32/152 DTR 201 /59 ITR 189
(Ahd) (Trib.)
S. 68 : Cash credits – Parties replied to the notices hence addition was deleted.
The Tribunal held that the addition sustained by CIT (A) on wrong assumption of factual position
that notices were not served on six parties whereas notices were served upon all the six parties
and replies were received from four of these, was liable to be deleted. (AY. 2004-05)
Espirit Finco (P) Ltd. v. ITO (2017) 185 TTJ 162/149 DTR 1 (Delhi) (Trib.)
S. 68 : Cash credits – Deposit in foreign bank accounts - Documents relied upon did not
contain signature of bank official and, moreover, requisite information was not received
from foreign banking authority, impugned addition was to be set aside. [S. 153A]
During assessment proceedings, AO noted that, assessee maintained an account with HSBC
Bank, Geneva, Switzerland. The AO asked complete statement of HSBC Bank account. assessee
denied maintaining any account in foreign bank. AO made addition in respect of amount standing
in credit of foreign bank account. Tribunal held that, documents relied by AO were copies of
copies which did not have any signature of bank official or name of bank or place or country
where branch was situated. Further AO admitted that requisite information from Swiss Banking
Authority had not been received. Matter set as side for disposal afresh. (AY. 2006 – 2007)
Shyam Sunder Jindal v. ACIT (2017) 164 ITD 470 /155 DTR 249 /188 TTJ 404 (Delhi)
(Trib.)
S. 68 : Cash credits-Bank deposits-A mere mention of advance for sale of property without
any supporting evidence, addition was held to be justified.
Assessee did not furnish any explanation with regard to nature and source of cash deposits in his
two bank accounts as well as that introduced in business during assessment. And it was only after
close of hearing that assessee for first time submitted that he had received 'some advance money'
for sale of property.
The ITAT held that, a simply mentioned regarding sale of property, without anything further,
much less substantiated could be regarded as an explanation. Addition was sustained. (AY. 2011
– 2012)
Kanniappan Murugadoss v. ITO (2017) 164 ITD 260 (Chennai) (Trib.)
S. 68 : Cash credits-Bank deposit – Bank statement could not be construed to be a books of

account maintained hence addition cannot be made as cash credits.
The AO on basis of information that assessee had made a 'cash deposit' in her saving bank
account treated same as unexplained cash credit . Tribunal held that, the assessee was not
maintaining any account books, bank statement could not be construed to be a book maintained
by assessee and thus, impugned addition was unsustainable.
Mehul V. Vyasv. ITO (2017) 164 ITD 296 (Mum.) (Trib.)
218
S. 68 : Cash credits - Proved the identity by filing confirmation and bank details, addition
was held to be not justified.
Tribunal heldthat the assessee explained the circumstances in which amount received in its bank
account and filed the Confirmations of accounts and bank statements supporting explanation of
assessee. Addition was held to be not justified . (AY. 2005-2006)
Loil Overseas Food Ltd.v. ITO (OSD) (2017) 55 ITR 544 (Chd.) (Trib.)
Dy. CIT v. Loil Overseas Food Ltd. (2017) 55 ITR 544 (Chd.) (Trib.)
S. 68 : Cash Credits – Share Application Money – No Explanation on Premium charged on

shares – Financials statements not justifying quantum of Share premium charged -
Addition was held to be justified .
Dismissing the appeal of the assessee, the Tribunal held that; merely furnishing PAN number
does not explain the source and creditworthiness of the party. The Tribunal observed that the
basis on which the premium was given was not explained and the financial statements did not
justify the quantum of premium charged. (AY. 2007-08)
Advance PowerInfra Tech Ltd. v. DCIT (2017) 59 ITR 10 (Kol.) (Trib.)
S.68 : Cash credits – Receipts and payments - Unexplained credits in bank account, only
income should be brought to tax.
Held that Only Income should be brought to tax and not the credits in the bank account.
Considering the transactions in the bank account, there were receipts as well as payments and
these could be treated as business transactions and the net profit could be brought to tax.
Accordingly, AO to estimate the profits on gross receipts at 8% or profit as declared by the
assessee in his own business whichever was higher. (AY .2009-10)
Katikaneni Prem Kumar v. ITO (2017) 55 ITR 49 (SN) (Hyd.) (Trib.)
S. 68 : Cash credits – Sale of shares - Long term capital gains cannot be assessed as cash
credits [ S. 45 ]
Allowing the appeal of the assessee the Tribunal held that; Where the Assessee has carried out
all the purchases and sales transaction through registered SEBI broker and the AO himself has
accepted purchases of shares in preceding previous year and all the transactions were evidenced
and supported with bills and vouchers, the AO could not make an addition u/s. 68 by rejecting the
long term capital gains shown by the Assessee on sale of shares. (AY. 2002-03 to 2006-07)
Anjali Pandit (Smt) . v . ACIT (2016) 188 TTJ 645/157 DTR 17 (Mum.) (Trib.)
Dharmesh Pandit (HUF) v . ACIT (2016) 188 TTJ 645/157 DTR 17 (Mum.) (Trib.)
Dharmesh Pandit v . ACIT (2016) 188 TTJ 645/157 DTR 17 (Mum.) (Trib.)
Rajendra Pandit v . ACIT (2016) 188 TTJ 645/157 DTR 17 (Mum.) (Trib.)
219
S. 68 : Cash credits - Statement recorded under duress, which is retracted later, cannot be
the sole basis for addition - When the assesse has given explanation of source addition
cannot be made only on the ground that lender has raised bogus share capital .
Allowing the appeal of the assessee the Tribunal held that; If the assessee has explained the
source of the loans received by it, the fact that the lender may have raised bogus share capital to
advance the funds to the assessee does not mean that the loan received by the assessee can be
treated as unexplained income. A statement recorded under duress, which is retracted later,
cannot be the sole basis for addition. (ITA No. 369/Mum/2017, dt. 13.04.2017) (AY. 2013-14)
Anil Chhaganlal Jain v. ACIT (Mum.) (Trib.),www.itatonline.org
Anil Chhaganlal Jain (HUF) v. ACIT (Mum.) (Trib.) ,www.itatonline.org
S. 68 : Cash credits-Share capital-Assessee is not required to prove the source of the

source.[S.153A ]
Allowing the appeal of the assessee the Tribunal held that; (i) The AO cannot ignore the
documentation produced by the assessee to show that the investors are genuine, (ii) A s. 132 (4)
statement cannot be relied upon if the assessee is not give right of cross-examination, (iii) Fact
that the shareholders did not respond to s. 133 (6) notices does not warrant an adverse inference,
(iv) Fact that the shareholders have low income does not warrant adverse inference, (v) Assessee
is not required to prove source of source. (I.T.A .No.-2523 to 2525/Del/2015, dt. 17.04.2017)
(AY. 2011-12)
Prabhatam Investment Pvt. Ltd. v. ACIT (Delhi) (Trib.) ,www.itatonline.org
Prabhatam Buildtech Ltd. v. ACIT (Delhi) (Trib.),www.itatonline.org
S.68 : Cash credits – Gift-Identity and capacity of the donor was established – Addition was
deleted - Source of the source need not be proved.
Allowing the appeal of the assessee, the Tribunal held that; assessee had discharged the onus of
proving identity of donor, capacity of donor as also genuineness of transaction, addition could not
be made by asking assessee to file their income tax return and bank statement, revenue was
verifying source of source which could not be done. (AY.2010-11)
Nirmal Rani v. DCIT (2017) 163 ITD 491 (Chd.) (Trib.)
S. 68 : Cash credits-Sundry creditors cannot be assessed as cash credits when the

corresponding purchases from them were admitted and payments to some sundry creditors
continuing from earlier years were accepted by AO as genuine payments. [S. 41 (1),133]
The AO issued notice to sundry creditors which could not be served on them. AO held them as
non-existing bogus sundry creditors and made addition to assessee's income as cash credits . On
appeal CIT (A) held that ,additions cannot be made either u/s 41 (1) or u/s 68 of the Act. On
appeal by the revenue, the Tribunal held that; ITAT held that when corresponding purchases were
admitted and payments made to many sundry creditors continuing from earlier years and same
were accepted by AO which means genuinity of payments to these creditors are proved hence
additions cannot be made as cash credits . (AY. 2010 – 2011)
ITO v. Standard Leather (P.) Ltd. (2017) 162 ITD 285 (Kol.) (Trib.)
S. 68 : Cash credits-Share capital-Identity, genuineness of subscriber was established,

addition cannot be made-AO is duty bound to investigate the creditworthiness of the
creditor/subscriber, the genuineness of the transaction and veracity of the repudiation -
Addition cannot be made without giving an opportunity of cross examination. [S. 131].
220
Allowing the appeal of the assessee the Tribunal held that; when identity, genuineness of
subscriber was established, addition cannot be made-AO is duty bound to investigate the
creditworthiness of the creditor/subscriber, the genuineness of the transaction and veracity of the
repudiation. Addition cannot be made without giving an opportunity of cross examination.
Andaman Timber Industries v. CCE 281 CTR 241 (SC) and Hon’ble jurisdictional High Court in
HR Mehta vs ACIT 387 ITR 561 (Bom.) (HC) (ITA No. 6492/Mum/2016, dt. 21.04.2017) (AY.
2007-08)
Arceli realty limited v. ITO (Mum.) (Trib.),www.itatonline.org
S. 68 : Cash credits-"On Money" received by an assessee for sale of agricultural land has to
be treated as "agricultural income" and exempted from tax if the facts show that the
assessee has no other source for the receipt. [S.2 (14), 56]
Dismissing the appeal of the revenue, the Tribunal held that; the assessee is an aged person, who
had settled down in his native place. He was engaged in agricultural activities on his retirement
and there is nothing on record to suggest that the assessee alongwith his wife were in a position to
generate unaccounted income of Rs.39 lakhs other than on-money on account of sale of
agricultural land. The payment of on-money is an unfortunate practice in most part of our
country, and none can deny this factual situation. It is the case of the assessee that the buyers
were insisting on reducing the sale consideration to be disclosed in the sale deed for the purpose
of reducing stamp duty payment. This contention of the assessee cannot be totally brushed aside.
I also place reliance on the order of the Cochin Bench of the Tribunal in the case of ITO v. Dr.
Koshy George wherein (2009) 317 ITR (AT) 116 (Cochin) (Trib), was held by the Tribunal that
any surplus money arising to an assessee on sale of agricultural land would partake the character
of agricultural income itself. (AY. 2013-14)
ITO v. Abraham Varghese Charuvil (2017) 151 DTR 209 /186 TTJ 528 (SMC) (Cochin)
(Trib.)
S. 68 : Cash credits-Penny stocks-A transaction evidenced by payment/receipt of share

transaction value through banking channels, transfer of shares in and from the D-mat
account, etc cannot be treated as a bogus transaction. [S.45]
Allowing the appeal of the assessee; the Tribunal held that; if the AO relies upon the statement of
a third party to make the addition, he is duty bound to provide a copy of the statement to the
assessee and afford the opportunity of cross-examination. Failure to do so vitiates the assessment
proceedings. A transaction evidenced by payment/receipt of share transaction value through
banking channels, transfer of shares in and from the D-mat account, etc cannot be treated as a
bogus transaction so as to attract s. 68. (ITA No. 6494/Mum/2014, dt. 02.01.2017) (AY. 2005-06)
Sunil Prakash v. ACIT (Mum.) (Trib.);www.itatonline.org
S.68 : Cash credits-Advances received from customers towards supply of products later
adjusted against subsequent sales cannot be assessed as cash credits.
Advances received from customers towards supply of products later adjusted against subsequent
sales cannot be assessed as cash credits. Assessee cannot force its customers to furnish their
permanent account numbers. In case advances not adjusted against subsequent sales assessee
should be provided with an opportunity to explain reasons .The Assessing Officer was directed to
decide in accordance with law. (AY.2005-2006, 2006-2007, 2008-2009)
ACIT v. Dow Agro sciences India Private Limited (2017) 53 ITR 590 (Mum.) (Trib.)
S. 68 : Cash credits – Share application-Share application money received from daughter of

one of director – Addition was held to be not valid .
221
Allowing the appeal of the assessee the Tribunal held that; share application money received from
daughter of one of directors of assessee-company, since bank account of share applicant showed
sufficient amount to make investment and, moreover, amount had been received from her through
banking channels addition was held to be not valid . (AY. 2010-11)
Namision Powertech (P.) Ltd. v. ACIT (2017) 167 ITD 483 (Ahd) (Trib .)
S. 68 : Cash credits – Gift by parents – Addition was deleted.

Allowing the appeal the Tribunal held that the, the assessee is owning the agricultural land hence
creditworthiness of donor to give gift cannot be completely ignored therefore declaration of gift
by mother cannot be treated as non-genuine. (AY.2009-2010)
Anandasayanam P. Pillai v.CIT (2017)54 ITR 607 (Mum.) (Trib.)
S. 68 : Cash credits – Genuineness of gift cannot be disbelieved simply because there was no
occasion to make gift .
The Tribunal held that the gift falls within the exception clause under section 56 (2) (v) as the
assessee has filed his bank statement reflecting the amount gifted to him by his co-brother, joint
IT return of the donor and his wife and the affidavit of the donor confirming the gift duly
notarized in USA, the genuineness of the gift cannot be disbelieved simply on the ground that
there was no occasion to make the gift. The Tribunal deleted the addition. (A.Y. 2005-06)
Dolarrai Hemani v. ITO (2017) 183 TTJ 433 (Kol.) (Trib.)
S. 69 : Unexplained investments – Gold ornaments – Burden is assessee to prove, addition

was held to be justified .[ S. 132, 158BC ]
Allowing the appeal of the revenue the Court held that ;Burden is assessee to prove, addition
was held to be justified .The fact that the assessee did not explain or produce any material
substantiating his contention that the gold was acquired outside the country or that the acquisition
was from out of his earnings. The Tribunal’s conclusions were perverse.
CIT v. Sudhir Gopi (2017) 398 ITR 657 (Ker) (HC)
Editorial : SLP is granted to the assesse Sudhir Gopi v.CIT (2017) 398 ITR 5 (St.)
S. 69 : Unexplained investments – Survey-Agreement to sell was not acted upon hence the
addition was held to be not valid . [ S.133]
Dismissing the appeal of the revenue the Court held that; Agreement to sell which was found in
the course of survey was not acted upon hence the addition was held to be not valid
CIT v. Khandelwal Shringi and Co. (2017) 398 ITR 420/159 DTR 59 /299 CTR 437 (Raj)
(HC)
S. 69 : Unexplained investments – Merely on the basis of seizure of diaries and files

additions cannot be made.[S. 132, 153A]
Dismissing the appeal of the revenue, the Court held that without cogent and credible material
that the bookings were made by the assessee for itself, the additions ought not to have been made.
Merely on the basis of seizure of diaries and files additions cannot be made . (AY. 1993 - 94,
1994 - 95)
CIT v. Ceramic Tablewate P. Ltd. (2017) 396 ITR 1 (Delhi) (HC)
S. 69 : Unexplained investments-Land - The assessee being retired from Govt service and
getting only pension addition was rightly deleted by the Tribunal.
222
Dismissing the appeal of the revenue the Court held that; the assessee being retired from Govt
service and getting only pension addition was rightly deleted by the Tribunal. (AY. 2006 - 07,
2007 - 08)
PCIT v. Prakash Kittur (2017) 251 Taxman 129 (Bom) (HC)
S. 69 : Unexplained investments - Physical verification of stock tallying with books of

account maintained by assessee— Verification made by bank is not relevant
evidence,deletion of addition is held to be justified.
Dismissing the appeal of the revenue the Court held that; Physical verification of stock tallying
with books of account maintained by assessee .Verification made by bank is not relevant
evidence,deletion of addition is held to be justified .Assessing Officer has not examined the
suppliers. (AY. 2008 - 09)
CIT v. Shib Sankar Das (2017) 396 ITR 39/83 taxmann.com 193 (Cal.) (HC)
S. 69 : Unexplained investments-Reduction of addition – Question of fact.

Dismissing the appeal of the revenue; the Court held that the Tribunal was right and justified in
reducing the addition of Rs.15,81,000 to Rs. 3,12,932 on renovation of the hotel and in allowing
the set off of Rs. 16 lakhs as lease payment and deleting the addition of Rs.1,73,600 and Rs.
4,82,065. Question of fact .
CIT v. Bhatnagar Hotels and Resorts. (2017) 394 ITR 497 (Raj) (HC)
S.69 : Unexplained investments - Unexplained deposits in bank, addition was held to be
justified.
Dismissing the appeal of the assessee, the Court held that; failure by assessee to prove
creditworthiness and genuineness of transaction and identity of depositors,addition made on
ground of unexplained deposits justified. Pure question of facts. (AY. 2009-2010)
Swarn Singh v. CIT (2017) 391 ITR 135 (P&H) (HC)
S. 69 : Unexplained investments – Purchase of shares – Accommodation entries - Addition

was held to be justified as the assessee did not discharge its primary onus to prove as to
why he deviated from the normal course of conduct while dealing in securities.
Information received from the investigation wing that the assessee was engaged in earning
commission income in lieu of providing these bogus accommodation entries. The shares were
claimed to have been purchased on the stock exchange and the value increased owning to bonus
shares and stock split. The intermediary was never registered on the stock exchange at the time of
the purchase of shares and there was no record of the transaction of purchase of shares on the
stock exchange. Further, the assessee could not explain the reason for delay of more than six
months in making the payment for purchase of shares during which the price of the shares
increased substantially. This was against the normal course of conduct of activities of share
transactions business on the stock market. The onus was on the assessee to prove as to why he
deviated from the normal course of conduct while dealing in shares which he failed to discharge
and hence the addition made by the AO was upheld. (AY. 2008-01)
Rohit Jayantilal Shah v. ITO (2017) 59 ITR 299 (Mum) (Trib.)
S. 69 : Unexplained investments – Cash deposits in the bank accounts – the AO was directed
to consider only peak credit in the bank account and the matter was remanded back to the
AO for the same [ S. 144 ]
223
Tribunal held that; the assessee was given more than enough opportunities by the lower
authorities to produce evidence for such business that too in two rounds of proceedings. The
assessee had failed to utilise any of these opportunities. Therefore the addition under section 69
was justified. However when cash deposited in a bank account was considered for addition, it was
only fair that withdrawals were also taken into account for set off. In other words, the AO should
have considered only the peak credit in the bank account for making an addition. The AO shall
consider for addition only the peak credit in the bank account of the assessee for the relevant
previous year (AY. 2008-09).
M. Saravana Kumar v. ITO (2017) 58 ITR 54 (Chennai) (Trib.)
S. 69 : Unexplained investments - Seized documents – Merely on the basis of seized

documents in third party premises, additions cannot be made - Addition can not be made
on estimation /extrapolation. Addition on the basis of seized document print out from
Blackberry mobile Digital was held to be not justified . [ S. 28 (i), 69C 132, 153A ]
Dismissing the appeal of the revenue, the Court held that; in the absence of any direct evidence
demonstrating that the assessee received cash payment, no addition can be made merely on
presumption and surmises and on estimate basis. For making the addition on account of cash
component, it is the duty of the AO to bring on record corroborative evidence to establish the fact
that the entries made in the seized document were correct. Tribunal also held that income cannot
be estimated on estimation/extrapolation. Addition on the basis of seized document print out
from Blackberry mobile Digital was held to be not justified (AY.2006-07, to 2010-11)
ACIT v. Katrina Rosemary Turcotte (Katrina Kaif) (2017) 160 DTR 113 /190 TTJ 681
(Mum) (Trib)
S. 69 : Unexplained investments – search – Disclosure made in the course of search and

seizure proceedings – Retraction of statement was held to be not valid – Addition was held
to be justified [ S. 132 (4), 133A, 153C. ]
Allowing the appeal of the revenue, the Tribunal held that; admission was made in the course of
search proceedings on the basis of loose sheet which was subsequently retracted can not be
accepted as valid retraction as the retraction was not based on any corroborative evidence. (ITA
No. 2525& 2526 /Mum/2015 Bench “H” dt. 15-1-2017 (AY. 2010-2011, 2011-12)
DCIT v. Studio Aethetic Health & Hospitality Pvt Ltd (Mum) (Trib)
S. 69 : Unexplained investments – Income from undisclosed sources - Premium money on

sale of cigarettes – In the absence of any conclusive material premium money collected by
the retailers or whole sale buyers towards advertisement and sales promotion addition was
held to be not justified. [ S.4, 145 (2) ]
Allowing the appeal of the assessee, the Tribunal held that; In the absence of any conclusive
material premium money collected by the retailers or whole sale buyers towards advertisement
and sales promotion addition was held to be not justified (AY. 1984 - 85 to 1986 - 87)
GTC Industries Ltd. v. ACIT (2017) 154 DTR 1/57 ITR 384/187 TTJ 389 (SB) (Mum.)
(Trib.)
S.69 : Unexplained investments-Addition unjustified where assessee had explained source of

investment but Commissioner (Appeals) failed to consider same - Matter remanded.
224
Allowing the appeal of the assessee,the Tribunal held that, addition was unjustified where
assessee had explained source of investment but Commissioner (Appeals) failed to consider
same-Matter remanded. (AY. 2006-07)
Kumud Gupta v.ITO (2017) 165 ITD 147 (Asr) (Trib.)
S. 69 : Unexplained investments - In absence of any evidence on record cash premium

collected by the distributors cannot be assessed as income of the assessee in the absence of
evidence that bank accounts were controlled by assessee addition was deleted .
Assessee company engaged in manufacturing of cigarettes. Distribution and sale of cigarettes was
made through chain of wholesalers, retail outlets and salesmen. Cigarettes under various brands
had different MRPs which were printed on packets. The AO noted that assessee was selling
cigarettes at a price higher than declared/printed MRP and, thus, generating cash premium in said
process. Premium was collected by wholesalers who deposited said amount in fictitious bank
accounts belonging to assesse, added amount of premium on sale of cigarettes to assessee's
taxable income. Tribunal held that without any corroborative material; it is difficult to appreciate
the stand of the revenue that the assessee was beneficiary of the premium money or relate the
flow back of the money to the assessee. The charging of premium amount over and above the
MRP by the retailers and wholesale buyers may be keeping the assessee in loop to co-ordinate for
meeting out certain expenses which also included advertisement and sales promotional expenses.
The entire scheme designed that the liability of sales and promotion expenses or advertisement
lies with the wholesale buyers and not on the assessee and assessee merely acts as a co-
ordinating/managing central agency. Such a managing and co-ordinating of advertisement does
not implicate the assessee that it is the sole beneficiary or owner of the entire premium money
MRP. Therefore, the said issue is restored to the AO. (AY. 1984 - 85 to 1086 - 87)
GTC Industries Ltd. v. ACIT (2017) 164 ITD 1/57 ITR 384 /187 TTJ 369 (SB) (Mum)
(Trib.)
S. 69 : Unexplained investments - Credit notes issued by Assessee to various business

constituents not reconciled with the accounts of other parties – Addition was held to be not
justified .
Tribunal held that there is fair possibility that some parties may not have accounted for the effect
of credit notes which may have been issued at the end of the year by the Assessee. The AO
without making any further inquiries with the said third parties and relying only on their balance
confirmation, made the impugned addition u/s. 69 of the Act. It was held by the Tribunal that,
where regular books of accounts are maintained and the same are not rejected by the AO, without
making any further inquiries with the parties involved and cross-verification of genuineness of
the transactions recorded by the Assessee, no addition could be sustained. Thus, the addition
made
u/s. 69 of the Act was deleted. (ITA No. 1602/Ahd/2013 dt. 13.02.2017) (A.Y. 2009-10)
ACIT v. Oracle Granito Ltd. (2017) 186 TTJ 661 (Ahd) (Trib.)
S.69 : Unexplained investments – Survey - Merely on the basis of stock found in the
premises additions cannot be made as undisclosed stock when proper explanation was
furnished with supporting evidence.[S. 133A]
In the course of survey stock was found in the premises, the explanation was furnished stating
that ,manufacturer keeping materials in possession of assessee by virtue of agreement between
manufacturer, assessee and contractors till dues payable to manufacturer cleared by contractors.
Assessee gaining commission which would compensate providing storage facilities to contractors
225
and enhance business prospects of assessee. Assessee and his brother conducting business in
same premises. Ownership of such property vested in assessee's brother therefore addition cannot
be made as undisclosed stock of assessee. (AY.2010-2011)
Niranjan Kumar Agrawal v. ITO (2017) 53 ITR 643 (Patna) (Trib.)
S. 69 : : Unexplained investments - Bogus purchases-Burden is on revenue to prove that the

transaction is of benami nature, addition was deleted.[S.132]
Allowing the appeal of the assesse the Tribunal held that, the Assessing Officer merely rejecting
explanation of assessee without bringing any evidence on record to support case of benami nature
of transaction. The concerns assessed separately to income-tax therefore the investment made in
concerns not proved to have been made by assessee. (AY. 2004-05 to 2008-09)
Ashok Nanda v.DCIT (2017) 54 ITR 54 (Indore) (Trib.)
S. 69A : Unexplained money – Cash seized from bed room of sister – Failure to explain the
source and contradiction in statement, addition was held to be justified . [ S. 132 ]
Dismissing the appeal of the assesse the Court held that; since there was nothing on record to
show that sister of assessee was in exclusive possession of bedroom in assessee's house from
where cash was seized and further, there was contradiction in statements of assessee and his sister
with respect to ownership of actual amount in cash, seized cash addition was held to be justified
in the hands of the assesse. (AY. 2006-07)
Ashokbhai H. Jariwala v. ACIT (2017) 399 ITR 181/80 taxmann.com 175 (Guj) (HC)
Editorial : SLP of assesse was dismissed, Ashokbhai H. Jariwala v. ACIT (2017) 397 ITR 10/
250 Taxman 14 (SC)
S. 69A : Unexplained money - Cash was seized from bank lockers of assessee company
during a search action which was disclosed by Director before Settlement commission and
paid taxes thereon .Addition cannot be made in the assessment of the Company [ S. 132,
245D (4) ]
Allowing the appeal of the assesse the Court held that, where the Cash was seized from bank
lockers of assessee company during a search action which was disclosed by Director before
Settlement commission and paid taxes thereon . The Department has not objected to the same
before Settlement Commission hence addition cannot be made in the assessment of the Company
. (AY. 2010-11)
B. Nanji Enterprise Ltd. v. Dy. CIT (2017) 249 Taxman 599 (Guj.) (HC)
S. 69A : Unexplained money – Failure to explain the source of gold ornaments recovered by
police from assesse, addition was held to be justified .[ S 132, 132B, Evidence Act, 1872,
S.110 ]
Dismissing the appeal of the assesse the Court held that; Failure to explain the source of gold
ornaments recovered by police from assesse, addition was held to be justified . (AY. 2007 - 08)
Karun Dutt Singh alias Rinku Singh v. CIT (2017) 398 ITR 374 /250 Taxman 419 (Ker)
(HC)
S.69A – Unexplained money – Cash withdrawal and deposit to bank was unable to link,
hence addition as unexplained income was held to be justified .
Dismissing the appeal of the assesse the Court held that; Cash withdrawals were made for
purpose of business and same was not available for redeposit and, assessee was unable to link
cash withdrawn from bank to cash deposit, same would be held to be assessee's unexplained
income (AY. 2007 - 08)
226
Kavita Chandra (Smt) v. CIT (A) (2017) 398 ITR 374 /248 Taxman 358 (P&H) (HC)
S. 69A : Unexplained money - Evidentiary value of documents found - Merely on the basis
of chart found in the possession of third party addition was held to be not justified. [S.
153C]
The Assessee is a part of a group of companies which were subject to search proceedings. In the
course of search, a chart was found in the possession of a director of the group containing names
with specified amounts. This chart formed the basis of the AO in assessing an amount as
undisclosed income.
On the basis of a remand report, the CIT (A) reduced the addition made by the AO. The ITAT
was of the opinion that the particulars and details of the cheques etc. reflected in the chart, which
formed the sole basis for addition, could not be attributed to it and accordingly deleted the
addition.
Aggrieved, the revenue appealed to the High Court which held that as the ITAT had correctly
observed that the evidentiary value of these charts, as far as the assessee was concerned, was not
conclusive given the fact that the assessee was neither the searched party nor was a party
receiving notice under Section 153C of the Act and therefore the deletion was upheld. (AY. 2009-
10)
PCIT v. Phonenix Datatech Services (P.) Ltd. (2017) 245 Taxman 209 (Delhi) (HC)
S. 69A : Unexplained money-Cash deposits in bank-No documentary proof in respect of

credit purchases linking sales-Addition was held to be justified.[S. 44AF, 147]
Dismissing the appeal of the assessee the Court held that the assessee has not produced any
documentary proof in respect of credit purchases linking sale hence addition as unexplained
money in respect of cash deposited in banks was held to be justified . (AY .2008-2009)
Naresh Kumar v. CIT (2017) 393 ITR 389 (P&H) (HC)
S. 69A : Unexplained money - Recurring deposit in joint names of assessee and his wife—
Addition of amount and interest was not justified.
Allowing the appeal of the assessee the Tribunal held that; the assessee's wife having taxable
income more than investment in deposits and assessee had sufficient source of income for
deposits, therefore addition of amount and interest thereon unsustainable. (AY.2009-2010)
Anandasayanam P. Pillai v.CIT (2017)54 ITR 607 (Mum.) (Trib.)
S.69B : Amounts of investments not fully disclosed in books of account-Difference between

stock statement furnished to bank for availing higher credit facilities and that in books of
account—Deletion of addition was held to be justified.
Dismissing the appeals of the revenue, the Court held that;the Appellate Tribunal was right in
deleting the addition made on account of the difference in stock statement as furnished to the
bank for availing higher credit facility as compared to that shown in the books of account by the
assessee. (AY .2002-2003, 2003-2004)
CIT v. Patel Proteins (P) Ltd. (2017) 393 ITR 274 (Guj.) (HC)
Editorial : SLP is granted to the revenue,CIT v. Patel Proteins (P) Ltd. (2017) 391 ITR 345 (St.)
S. 69B : Amounts of investments not fully disclosed in books of account – Sufficient cash
balance as per books of account - Addition was held to be not justified on the basis of cash
flow statement . Expenditure on aforesaid charges is held to be allowable as revenue
expenditure .[ S. 37 (1), 69C, 132 ]
227
Dismissing the appeal of the revenue the Court held that; where it is found that after verification
of books of account maintained, has sufficient cash on hand and assessee possessed cash balance
as per book sum then no addition can be made on account of undisclosed investment as money
lending on the basis of cash flow statement . As regards afforestation Charges was held to be
revenue expenditure. (AY.2010-11)
Dy.CIT v. R. Charuchandra (2017) 154 DTR 227/80 taxmann.com 182 (Karn) (HC)
S. 69B : Amounts of investments not fully disclosed in books of account – Set off of losses
was to be allowed - Amendment in sub-section (2) of s.115BBE by Finance act, 2016 is held
to be effective from 1-4-2017 [ S. 71, 158BBE ].
In course of survey, excess stock was declared. The AO added said amount to assessee's income
u/s.69B however he did not allow set off of business loss against value of excess stock by
applying provisions of s.115BBE. CIT (A) allowed the set off .On appeal by the revenue the
Tribunal held that; there is no restriction on set off of business losses against income brought to
tax u/s.69B of the Act ,in absence of any provisions in S. 71 falling under Chapter VI which
restricts such set off, as claimed by assessee, was to be allowed. Further, the amendment brought
in sub-section (2) of s. 115BBE by Finance Act, 2016, whereby set off of losses against income
referred to in s.69B was denied, would be effective from 1-4-2017 (AY. 2013 – 2014)
ACIT v. Sanjay Bairathi Gems Ltd (2017) 166 ITD 445 /189 TTJ 487/157 DTR 225 (Jaipur)
(Trib.)
S. 69C : Unexplained expenditure – Entire purchases shown on basis of fictitious invoices

were debited in trading account hence addition was held to be justified and not 25% of
total purchases .
Allowing the appeal of the revenue the Court held that ,Tribunal has given the finding that ,entire
purchases shown on basis of fictitious invoices were debited in trading account, hence entire
purchases to be added as un explained expenditure and not 25 % of total purchases .
N.K Industries Ltd v Dy.CIT (2016) 72 taxmann.com 289 (Guj) (HC)
Editorial : SLP of the assesse was dismissed ,N. K. Proteins Ltd. v. Dy. CIT (2017) 250 Taxman
22 (SC)
S. 69C : Unexplained expenditure - On Money-Once on money is considered as revenue

nature, then any expenditure out of such money cannot be treated as unexplained
expenditure, for that would amount to double addition in respect of the same amount. [S.
132 (4)]
Dismissing the appeal of the revenue, the Court held that; if the unaccounted expenditure incurred
is from the 'on money' received by the assessee, then, the question of making any addition u/s
69C does not arise because the source of the expenditure is duly explained. It is only the 'on
money' which can be considered for the purpose of taxation. Once the 'on money' is considered as
a revenue receipt, then any expenditure out of such money cannot be treated as unexplained
expenditure, for that would amount to double addition in respect of the same amount. (AY. 1990 -
91 to 1993-94
CIT v. Golani Brothers (2017) 250 Taxman 446 /160 DTR 24/2018) 300 CTR 245 (Bom.)
(HC)
228
S. 69C : Unexplained expenditure-Assessement of third person - An admission of the
assessee which is retracted cannot be the basis of addition - The addition cannot be
sustained in the absence of material which would conclusively show that huge amounts
revealed from the seized documents are transferred from one side to another - Notice was
held to be not valid . [S.132 (4), 153C]
Dismissing the appeal of the revenue, the Court held that; the addition cannot be sustained in the
absence of material which would conclusively show that huge amounts revealed from the seized
documents are transferred from one side to another and if the Revenue did not bring on record a
single statement of the vendors of the land in different villages and if none of the sellers has been
examined to substantiate the claim of the Revenue that extra cash has actually changed hands.
(AY. 2009-10)
CIT v. Lavanya Land Pvt. Ltd. (2017) 397 ITR 246/ 154 DTR 244 /249 Taxman 275 /297
CTR 204 (Bom.) (HC)
CIT v. Krishna Land Realty Pvt. Ltd (2017)154 DTR 244 /249 Taxman 275 /297 CTR 204
(Bom.) (HC)
CIT v. Arpit Land Pvt. Ltd (2017)154 DTR 244 /249 Taxman 275/297 CTR 204 (Bom.) (HC)
CIT v. Ganaraya Land Pvt. Ltd (2017)154 DTR 244 /249 Taxman 275 /297 CTR 204 (Bom.)
(HC)
CIT v. Hita Land Pvt. Ltd (2017)154 DTR 244 /249 Taxman 275/297 CTR 204 (Bom.) (HC)
CIT v. Dilp V.Derai (2017) 154 DTR 244 /249 Taxman 275 /297 CTR 204 (Bom.) (HC)
S.69C : Unexplained expenditure-Bogus purchases-Matter was set aside to the Assessing

Officer to decide considering the facts of the case – Counsel for both sides have agreed for
set aside of the matter.
The High Court had to consider whether the Tribunal was justified in deleting the addition made
by the AO with regard to bogus purchases allegedly made by the assessee. HELD by the High
Court allowing the appeal :
(i) Considering the law declared by the Supreme Court in the case of Vijay Proteins Ltd. Vs.
Commissioner of Income Tax, Special Leave to Appeal decided on 06.04.2015 whereby the
Supreme Court has dismissed the SLP and confirmed the order dated 09.12.2014 passed by the
Gujarat High Court and other decisions of the High Court of Gujarat in the case of Sanjay
Oilcake Industries Vs. Commissioner of Income Tax (2009) 316 ITR 274 (Guj) and N.K.
Industries Ltd. Vs. Dy. C.I.T., Tax Appeal No.240/2003 decided on 20.06.2016, the parties are
bound by the principle of law pronounced in the aforesaid three judgments.
(ii) We remit back the case to the Assessing Officer for deciding afresh on the factual matrix.
The authority will accept the law but the transaction whether it is genuine or not will be verified
by the Assessing Officer on the basis of the aforesaid three judgments. The issues are answered
accordingly. The appeal is accordingly disposed of. (ITA no. 170/2009, dt. 10.05.2017)
CIT v. Carpet Mahal (Raj.) (HC),www.itatonline.org
S.69C : Unexplained expenditure—Bogus purchases-No quantity details maintained-Failure

to produce sellers-Addition was held to be justified.
Allowing the appeal of the revenue, the Court held that; the findings of the Appellate Tribunal
were perverse. The purchases were bogus and all paper transactions were for the purpose of
taking benefit of export and tax benefits by the assessee. Mere vouchers of the import and export
challans of the customs clearance would not prove physical delivery of the material. There was
nothing on record to certify that the precious stones were verified by any valuer. The
Commissioner (Appeals) had confirmed the finding of the Assessing Officer and the supplier had
specifically contended that they were not transfer by them and were absconding. The Appellate
Tribunal had given its finding only on the statement of the power of attorney holder of the
229
supplier. The finding which had been arrived at by the Appellate Tribunal was not in consonance
with the provisions of law and therefore, was reversed.
CIT v. Bright Future Gems (2017) 392 ITR 580 (Raj) (HC)
S. 69C : Unexplained expenditure – Survey-Bogus purchases - Failure to produce parties

for verification and failure to furnish relevant purchase documents addition of 12% of
alleged bogus purchases was confirmed .[ S.133 (6), 143 (3), 147 ]
AO held that the parties from whom assessee made purchases were found to be hawala traders
and despite of being given opportunity, assessee had failed to produce said parties for verification
and also couldn't furnish relevant purchase documents he made addition u/s 69C of the Act,
which was confirmed by CIT (A) . On appeal the Tribunal Confirmed the addition of 12.5% of
the impugned purchases u/s 69C of the Act. (AY. 2007 - 08 to 2011-12)
PBA Infrastructure Ltd. v. ACIT (2017) 167 ITD 158 (Mum) (Trib.)
S. 69C : Unexplained expenditure – Marriage expenses of daughter - Additions can not be

made on the presumption that, the assessee came from affluent family and had big stature
– House hold expenses - Estimate on account of house hold expenses was held to be justified
considering large number of family .
Allowing the appeal of the assessee the Tribunal held that; Additions can not be made on the
presumption that, the assessee came from affluent family and had big stature however, Estimate
on account of house hold expenses was held to be justified considering large number of family .
(AY. 2010-11)
Ashok Kumar Gupta v. ITO (2017) 167 ITD 165 (Delhi) (Trib.)
S. 69C : Unexplained expenditure – Bogus purchases-If books of account is not rejected, no

addition can be made on presumptions.Merely returning of notices under S. 133 (6) sent to
those suppliers could not be sufficient to make additions u/s 69C. [S. 133 (6),145]
Allowing the appeal of the assessee the Tribunal held that; If the AO has not rejected the books of
accounts and has only doubted the genuineness of the suppliers but not the genuineness of the
purchases and if the payments are made by account payee cheques, s. 69C is not attracted. S. 69C
cannot be applied where all purchase and sales transactions are part of regular books of accounts.
The basic precondition for invoking s. 69C is that the expenditure incurred by the assessee should
be out of books of accounts. Merely returning of notices under S. 133 (6) sent to those suppliers
could not be sufficient to make additions u/s 69C. (ITA No. 1596,1597/Mum/2016, dt.
20.09.2017) (AY. 2010-11 and 2011-12)
Fancy Wear v. ITO (2017) 167 ITD 621 (Mum.) (Trib.)
S. 69C : Unexplained expenditure - Bogus purchases - Addition was restricted to 2 % of

purchases.
Allowing the appeal of the assessee, the Tribunal held that; (i) The AO is not entitled to treat the
purchases as bogus merely on the basis of information from the sales-tax dept. He has to make
independent inquiry, (ii) Fact that the vendors did not respond to s. 133 (6) notices & the assessee
did not produce them is not sufficient if the documentation is in order and payments are through
banking channels. The addition made by estimating further profit of 12.5% earned by the assessee
is not sustainable in law and facts. Keeping in view the totality of facts and circumstances of the
230
case, we are inclined to restrict the addition to the extent of 2% of such purchases. We direct
accordingly. (ITA No. 3699/Mum/2016,dt. 05.05.2017) (AY. 2009-10)
Geolife Organics v. ACIT (Mum.) (Trib.),www.itatonline.org
Vikram N.Chandan v. ACIT (Mum.) (Trib.),www.itatonline.org
Jabarsingh B.Daiya v.ACIT (Mum.) (Trib.),www.itatonline.org
Rajendra Nemichandji v.ACIT (Mum.) (Trib.),www.itatonline.org
S. 69C : Unexplained expenditure-Bogus purchases, Merely non-appearance of the supplier

in absence of any other corroborate evidence cannot be a basis to justify the stand of the
Revenue that the transaction of purchase is bogus.
Allowing the appeal the Tribunal held that;merely non-appearance of the supplier in absence of
any other corroborate evidence cannot be a basis to justify the stand of the Revenue that the
transaction of purchase is bogus. In the result the purchases made from M/s Mahaveer Textiles
have not been proved to be bogus by the Revenue and the said additions cannot be sustained in
the eye of law in absence of any conclusive evidence brought on record. (ITA No.
508/JP/2016,dt. 10.04.2017) (AY. 2007-08)
Beauty Tax v. DCIT (Jaipur) (Trib.); www.itatonline.org
S. 69C : Unexplained expenditure – Purchase of shares out of speculative income which

was accepted by revenue, addition cannot be made as unexplained expenditure
Allowing the appeal of the assessee the Tribunal held that; Assessee purchased shares in
preceding year mainly out of speculation income which was shown as short-term capital gains by
the Assessee in her return and assessed and accepted by AO in the assessment for that year,
hence, the impugned addition u/s. 69 c cannot be sustained. (ITA No. 3028 to 3023/Mum/2011
dt. 17.11.2016) (A.Y. 2002-03 to 2006-07)
Anjali Pandit (SMT) . v . ACIT (2016) 188 TTJ 645 (Mum.) (Trib.)
S.69C : Unexplained expenditure - Bogus purchases - Purchases of paddy recorded and

matched with report of Agricultural Marketing Committee (AMC) – No disallowance on
ground that failed to maintain proper books of account [ S. 145 ]
The AO held that the assessee was not maintained proper gate passes for recording purchases of
paddy, accordingly disallowed 5 per cent of purchases. CIT (A), deleted the addition. On appeal
the Tribunal held that; the assessee had reconciled quantity of paddy purchases from the order
passed by agricultural marketing committee (AMC) and its books of account and same were
matched with AMC reports. Since, revenue failed to controvert finding of facts therefore;
addition cannot be sustained as bogus purchase of paddy. (AY. 2009 – 2010)
S. 69C : Unexplained expenditure-Expenditure covered under FBT-Ad – hoc disallowances

of 10% expenses was held to be not justified. [S. 145]
231
The AO disallowed 10 per cent expenditure under head freight charges, travelling and
conveyance, administrative expenses, vehicle maintenance, repairs & maintenance expenditure on
ground that assessee had failed to substantiate those expenses with necessary bills & vouchers.
On appeal Tribunal held that expenditure was covered under FBT and AO while assessing the
same FBT had been accepted as expenditure as genuine in nature. Once expenditure had been
accepted as genuine, then no reason for disallowance of expenses . (AY.2009-10)
S. 69C : Unexplained expenditure-Bogus Purchases-Purchases cannot be treated as bogus

merely on the basis of the statements and affidavits filed by the alleged vendors before the
sales-tax department - Additions cannot be made without giving an opportunity of cross
examination. [S.133 (6)]
Dismissing the appeal of Revenue, the Court held that; purchases cannot be treated as bogus
merely on the basis of the statements and affidavits filed by the alleged vendors before the sales-
tax department. The said statements cannot be relied upon without cross-examination of the
parties. The fact that the parties did not respond to the s. 133 (6) notices is not relevant if the
assessee filed copies of purchase invoices, extracts of stock ledger showing entry/exit of
materials, copies of bank statements to evidence that payments for these purchases were made
through normal banking channels, etc to establish genuineness of the aforesaid purchases.
Addition cannot be made u/s 69C of the Act. (AY. 2010-11)
ACIT v. Mahesh K. Shah (2017) 148 DTR 1/184 TTJ 702 (Mum.) (Trib.)
S.69C : Unexplained expenditure-Bogus purchases-If the assessee has not discharged the
onus of producing the documentation and the suppliers, the AO is entitle to estimate the
gross profit.[S. 133 (6),145]
Tribunal held that ;If the assessee has not discharged the onus of producing the documentation
and the suppliers, the AO is entitled to estimate the gross profit. The GP estimate should be fair,
honest and rational and cannot be arbitrarily applied at the discretion of the AO. Industry
comparisons or other rational comparability vis-à vis preceding years GP ratio should be brought
on record. The books should be rejected. On facts, GP ratio of 12.5% as applied in Simit P Sheth
356 ITR 451 (Guj) is fair, reasonable and rational after giving credit for the GP already declared.
(ITA No. 4463/Mum/2016, dt. 04.04.2017) (AY. 2009-10)
Ratnagiri Stainless Pvt. Ltd. v. ITO (Mum.) (Trib.) : www.itatonline.org
S.69C : Unexplained expenditure-Bogus purchases-Additions to be made to make profit

comparable with that of preceding year.
Assessing Officer has made entire purchases u/s 69C of the Act In appeal CIT (A) restricted the
disallowance at 12.5% of the net profits. Department has accepted the order of CIT (A). On
appeal by the assessee, the Tribunal restricted the disallowance of net profit rate of 10.43 per
cent. Earned by the assessee in preceding year. (AY. 2010-2011)
Arun Shimpi v. ITO (2017) 53 ITR 151 (Mum.) (Trib.)
S. 70 : Set off loss - Surrender of undisclosed amount invested in ‘Build-Operate-Transfer’

Project undertaken by the assessee – Income surrendered during search and seizure
assessable under the head ‘Income from business and profession’ and can be allowed to be
set-off against the unabsorbed and current year business losses and depreciation. [ S. 32
,71,72 132 ]
Allowing the appeal, the Tribunal held that; undoubtedlythe surrender was on account of
investment in the business project of the assessee. Theassessee had explained the source of the
income as being on account of collections from the ”build-operate-transfer” project. Therefore the
income surrendered by the assessee ofRs. 1.75 crores was assessable under the head “Income
232
from business and profession”and set off of unabsorbed and current business losses and
depreciation was allowableagainst it under the provisions of sections 70 and 71. (AY. 2011-12).
Prashanti Surya Construction Co. Pvt. Ltd .v. DCIT (2017)56 ITR 202 (Chandigarh) (Trib.)
S. 70 : Set off of loss - One source against income from another source - Same head of
income - Loss arising on sale-purchase of shares on which STT was paid could be set off
against gains arising from sale purchase of shares on which STT was not paid [S.111A]
Dismissing the appeal of the revenue, the Tribunal held that; Loss arising on sale-purchase of
shares on which STT was paid could be set off against gains arising from sale purchase of shares
on which STT was not paid. (AY. 2009 - 2010)
Dy. CIT v. Diamond Co. Ltd. (2017) 162 ITD 131 (Kol.) (Trib.)
S.72 : Carry forward and set off of business losses-Long-term capital loss - Assessing
Officer to determine entitlement of assessee towards carry forward of loss.[S.45, 154]
That the Assessing Officer, according to section 154 (8), was under a statutory obligation to have
suo motu disposed of the application within a period of six months from the end of the month in
which the application was received by him, but had allowed a period of about one and half year to
lapse after the date of filing the application under section 154 and failed to dispose of the
application of the assessee. Despite a specific direction by the Commissioner (Appeals) to the
Assessing Officer on the basis of a circular issued by the Central Board of Direct Taxes, the
Assessing Officer had not cared to dispose of the application even till date. The Assessing Officer
was to determine the entitlement of the assessee towards carry forward of the long-term capital
loss so claimed by it according to law. (AY.2010-2011, 2011-2012)
S. 72A : Carry forward and set off of accumulated loss and unabsorbed depreciation –
Amalgamation – Income accrued to amalgamated company u/s 41 (1) had to be adjusted
and thereafter net loss is allowed to be set off.[S.41 (1)]
Affirming the decision of the High Court, the Court held that; the assessee was allowed to set off
the accumulated losses of HPL under the provisions of section 72A of the Act. The effect thereof
was that though these losses were suffered by the amalgamated company they were deemed to be
treated as losses of the assessee-company by virtue of section 72A of the Act. When the assessee
was allowed the benefit of the accumulated losses, while computing those losses, the income
which accrued to it had to be adjusted and only thereafter could the net losses have been allowed
to be set off by the assessee-company. The assessee could not claim to be entitled to take
advantage of the accumulated losses but while calculating these accumulated losses in the hands
of the amalgamated company, i.e., HPL, not account for the income accrued under section 41 (1)
of the Act in the hands of HPL. That had to be necessarily adjusted in order to see what the actual
accumulated losses were, the benefit whereof was to be extended to the assessee. (AY. 1983-
1984)
McDowell and Company Ltd v. CIT (2017) 393 ITR 570/247 Taxman 101 (SC)
Editorial : Decision in McDowell and Company Ltd v. CIT (Karn) (HC) I.T.R.C NO 12 0f 2002
dt .5 - 04-2005 was affirmed .
Amalgamation – BIFR has power to restrict benefit to amalgamated company. [ Sick
Industrial Companies [S. 32, Special provisions) Act, 1985, S. 15, 19 ]
233
Dismissing the appeals of the assesse the Court held that; the assessee exercised the discretion of
exhausting the business loss first, as a result of which, the claim for depreciation of Rs. 3,52,290
alone remained admissible. The Tribunal was right in confirming the disallowance of
depreciation amounting to Rs. 27,09,294 in respect of the assets of a company amalgamated with
the assessee-company in terms of the order dated May 6, 1992 passed by the BIFR. (AY. 1992 -
93, 1993-94))
Ballarpur Industries Ltd v. CIT (No.2) (2017) 398 ITR 145 /(2018) 301 CTR 116 / 162 DTR
274 (Bom) (HC)
S.72A : Carry forward and set off of accumulated loss and unabsorbed depreciation –
When only specific assets and liabilities transferred ,would not amount to demerger.
Accumulated loss and unabsorbed depreciation relating to transferred division would
remain with assessee-company and allowed to be adjusted. [S.2 (19AA), 2 (41A), Companies
Act, 1956, S.391 to 394 ]
Dismissing the appeal of the revenue, the Court held that ;when only specific assets and liabilities
transferred ,would not amount to demerger. Accumulated loss and unabsorbed depreciation
relating to transferred division would remain with assessee-company and allowed to be adjusted.
(AY. 2004-05])
DCIT v. NOCIL Ltd. (2017) 165 ITD 138/159 DTR 9 /190 TTJ 192 (Mum.) (Trib.)
Amalgamation - Merely because specified authority did not pass any order for obtaining
certificate u/s.72A, carried forward loss of amalgamating company could not be denied for
set off.
A company was amalgamated with assessee company vide order of High Court. Assessee applied
to specific authority u/s.72A to obtain certificate. Queries raised were duly replied by assessee
and further no correspondences were received from revenue. During the year the Assessee
claimed loss of amalgamating company to be carried forward. Subsequently, pursuant to an
amendment in s. 72A (2) (ii) requirement of obtaining certificate from specified authority was
done away with.
Since all the conditions of s.72A were duly complied with by assessee, merely because specified
authority did not pass any order on application by assessee for obtaining certificate, assessee
could not be said to have faulted. Amendment brought in s.72A was only procedural in nature to
cure unintended consequences to assessee; thus, same was to be applied retrospectively.
Therefore, same was applicable to relevant year and accordingly, loss of amalgamating company
should be eligible to be carried forward in hands of assessee-amalgamated company. (AY. 1996 –
1997)
ITO v. GKW Ltd. (2017) 164 ITD 621 /(2018) 164 DTR 54 /191 TTJ 457 (Kol.) (Trib.)
S.73 : Losses in speculation business-Loss in share transactions to be treated as speculative

loss-Loss cannot get settled as business income with other trading. [S.28 (i)]
Dismissing the appeal the Court held that; since the assessee was dealing in purchase and sale of
shares, the Explanation to section 73 of the Income-tax Act, 1961 would have a bearing on the
issue. Thus, the loss suffered by the assessee in share transactions was to be treated as a
speculative loss within the meaning of section 73 of the Act.
Ratnamani Seamless P. Ltd. v. ITO (2017) 393 ITR 339 (Guj.) (HC)
S. 73 : Losses in speculation business – Assessee carried out business of trading in shares as
member of stock exchange – Its transactions included both on proprietary account and on
behalf of tis clients – Proprietary share trading incurred loss and proprietary derivative
trading incurred profit – AO treated loss as speculation loss u/s 73 and did not allow setoff –
234
Tribunal held that it was a composite business and there was no loss from integrated
transaction after setting of loss from profits from other heads of share trading.
Assessee carried on business of trading and dealing in shares in its capacity as member of a
recognized stock exchange. The transactions entered into by the assessee were both in cash and in
derivative trading and were conducted both on proprietary account and on behalf of its clients.
The assessee earned profit in the proprietary derivative trading and incurred loss in share trading.
During the assessment proceedings, the Assessing Officer held that the said loss derived from
share trading was in nature of loss from speculation business under explanation to S.73 and
disallowed the same and made addition to the income of the assessee. On appeal, CIT (A) deleted
this addition on the ground that, the entire business of the assessee in both the cash and derivative
segment should be considered cumulatively and no segment can be treated in isolation and thus
income and loss cannot be artificially bifurcated. Hence two segments cannot be looked into as
speculative and non-speculative and thus explanation to S. 73 cannot be applied in the current
situation. The Tribunal confirmed the CIT (A)’s findings. It further held that even if the first limb
of explanation to S. 73 was invoked, the income from other sources as furnished in the return of
income of thee assessee was higher as compared to the income from speculation business and
thus the said explanation would also not be applicable on the given case. (ITA No.
2723/Kol/2013 dt.08-07-2016) (AY. 2010 – 2011)
Dy.CIT v. MPC Securities Ltd. (2017) 153 DTR 29 /160 ITD 199 /186 TTJ 677 /72
taxmann.com 209 (Kol) (Trib)
S. 73 : Losses in speculation business - loss incurred in trading of shares was to be treated

as speculation loss.
Assessee was engaged in business of property dealing and derived business income from sale of
properties. AO treated short term capital loss from trading in shares as speculation loss.Tribunal
held that,since gross total income of assessee mainly consisted of income from property business
and not income from house property or capital gain and other sources, Assessing Officer was
justified in invoking provisions of Explanation to section 73 and treating loss arising out of sale
of shares as speculation loss. (AY. 2008-09, 2010-11)
DCIT v. Mangal Tirth Estates Ltd. (2017) 163 ITD 705 /157 DTR 11 /189 TTJ 654
(Chennai) (Trib.)
S. 73 : Losses in speculation business-Future and options – Share transactions entered

electronically (screen based) in recognised stock exchanges loss there from would be
speculative in nature but could not be termed as sham. [S. 43 (5)]
Dismissing the appeal of the revenue, the Tribunal held that; Share transactions entered
electronically (screen based) in recognised stock exchanges viz. BSE, NSE, and said transactions
were intraday and no delivery of shares had taken place, loss therefrom would be speculative in
nature but could not be termed as sham. (AY. 2007-08)
ITO v. PKS Holdings (2017) 162 ITD 1/152 DTR 215 /187 TTJ 60 (Kol.) (Trib.)
S. 80 : Return for losses – Carry forward and set off—Delay due to audit-Matter set aside to
Assessing Officer to purse remedy with CBDT. [S. 119, 139,260A]
Allowing the petition the Court held that; the embargo in section 80 could not be treated as a
straitjacket one which could be applied without reference to the different provisions included in
section 139 and elsewhere to enlarge the time for filing the return. Ends of justice would be met if
the assessee was given an opportunity to file an appropriate application before the Assessing
Officer or the Central Board of Direct Taxes within the time prescribed in terms of the circulars
for relief. (AY. 2006 - 07)
235
Chhattisgarh State Civil Supplies Corporation v. CIT (2017) 396 ITR 440/159 DTR 142/299
CTR 142 (Chhattisgarh) (HC)
S. 80G : Donation – No stay order against the registration – Entitle registration u/s 80G (5)
of the Act. [ S. 10 (23C), 12A ].
Dismissing the appeal of the revenue, the Court held that; in view of the registration being
granted under section 12A of the Act with effect from April 1, 2008, the registration under
section 80G (5) of the Act of the assessee could not be a source of complaint. The Supreme Court
did not pass stay order against the order passed by the High Court. Moreover, the assessee would
be entitled to registration under section 80G (5) of the Act as its income would fall under
section 10 (23C) of the Act.
CIT v. Shri Shivaji Education Society (2017) 399 ITR 186 (Bom.) (HC)
S. 80G : Donation – Renewal of registration—Assessee is not maintaining regular accounts

of its receipts and expenditure is not entitled to registration [ S. 10 (23C) 80G (5)]
Allowing the appeal of the revenue the Court held that; the fact that cash discovered under search
and seizure operation belonged to the assessee and that the receipts relating to this cash were not
recorded in the account books, clearly established that the assessee was not maintaining regular
accounts of its receipts and expenditure. The fulfilment of conditions under section 10 (23C) of
the Act was only one of the conditions prescribed under section 80G of the Act but besides that
condition other conditions were also necessary to be satisfied for claiming benefit of
section 80G of the Act. Since, the assessee failed to fulfil one of the essential conditions for grant
of renewal of registration under section 80G of the Act, the assessee was not entitled to
registration under section 80G (5)of the Act.
CIT v. Rama Educational Society (2017) 396 ITR 16 (All) (HC)
S. 80G : Donation – Donation in kind is not eligible deduction.

Dismissing the appeal of the assesse, the Court held that; donation made by way of clothes as
they were in kind and not in cash, cheque or draft. According to the provision contained in
Explanation 5 to section 80G, once the donation was of goods, no deduction was admissible.
Nahar Spinning Mills Ltd. v. CIT (2017) 395 ITR 12/82 taxmann.com 154 (P&H) (HC)
S.80G : Donation-No requirement of renewal of registration in case of valid registration on

1-10-2009. [S. 11,263]
Court held that; in the case of both the petitioners their registration under section 80G was valid
till March 31, 2010. The position was even accepted by the Central Board of Direct Taxes in its
circular issued from time to time. Hence the orders of the Commissioner were illegal and invalid.
Imarat Shariah Educational and Welfare Trust v. CIT (2017) 392 ITR 301/245 Taxman
101/298 CTR 293 /157 DTR 305 (Patna) (HC)
Shri Mahavir Sthan Nyas Samiti v. UOI (2017) 392 ITR 301 /245 Taxman 101/298 CTR 293
/157 DTR 305 (Patna) (HC)
S.80G : Donation-Surplus funds utilised for setting up new institutions - Eligible for
approval[ S. 2 (15) 11 ]
Dismissing the appeal of the revenue, the Court held that; the assessee educational institution
which had shown surplus for previous three years and utilised them for setting up of two new
institutions and no surplus was distributed as profits amongst members of society, assesse was
entitle to be granted approval under section 80G of the Act.
CIT v. Dr. Virendra Swaroop Educational Foundation. (2017) 391 ITR 386/245 Taxman 68
(All) (HC)
236
S.80G : -Donation - Surplus income utilised for charitable purposes--Trust entitled to
approval for purposes of section 80G. [S. 10 (23C),11, 12AA]
Dismissing the appeal of the revenue, the Court held that; it was admitted that the assessee was
registered under section 12AA and that it has been held entitled to the grant of exemption under
section 10 (23C) (vi). The generated surplus having been ploughed back for expansion
purposes.The assessee was entitled to approval for purposes of section 80G. (AY. 2010-2011 to
2014-2015)
CIT v. Gulab Devi Memorial Hospital (2017) 391 ITR 73/245 Taxman 73/291 CTR 471
(P&H) (HC)
S. 80G : Donation - Object of propagating and inculcating religious feelings, brotherhood

and nationalism among Aggarwal community - Denial of approval was held to be not valid [
S. 2 (15) 11. 12, 80G (5) (iii) ]
Allowing the appeal of the assessee the Tribunal held that; object of the trust object being
propagating and inculcating religious feelings, brotherhood and nationalism among Aggarwal
community, only aimed at bringing together members of Aggarwal community and developing
feeling of nationalism amongst them which benefited society at large, same could not be said to
be either benefiting Aggarwal community only nor being in nature of religious purpose, assessee
could not be denied approval under S. 80G of the Act. (AY. 2016-17)
Maharaja Aggarsain Charitable Trust v. CIT (2017) 167 ITD 476 (Chd) (Trib.)
S.80G : Donation - Charitable activities carried outside India – No approval obtained in

terms of section 11 (1) (c) - Application seeking exemption u/s 80G (5) (vi) was to be
rejected, however No Charitable activities carried out cannot be sole ground for rejection
of application. [S.11, 12AA].
Tribunal held that on combined reading of section 80G (5) (vi) and section 11 (1) (c) of the Act,
the approval under section 80G is subject to grant of approval under section 11 (1) (c) of the Act.
In the instant case, since such approval is not in place, the requirement of section 80G (5) (vi)
cannot be said to be satisfied. Therefore, the application of the Assessee was rightly
rejected.Tribunal also held that the assessee had only been incorporated around an year back and
there were actions taken by the assessee towards achieving its charitable objectives which are not
doubted, the approval under section 80G cannot be denied solely on this ground and to this
extent, the order of Commissioner (E) could not be upheld. However, on the question that no
approval was taken, the Commissioner rightly rejected the Assessee’s application.
Barefoot College International v. CIT (2017) 165 ITD 213/157 DTR 1// 189 TTJ 336
(Jaipur) (Trib.)
S.80G : Donation-Contribution to Chief Minister's Relief Fund is held to be deductible.

Contribution to Chief Minister's Relief Fund is held to be deductible. (AY.2010-2011)
S.80HH : Newly established industrial undertakings-Back ward areas-Scientific research

expenditure-Expenditure on research not to be reduced from profits and gains of eligible
undertaking - Job charges - Allowable as deduction.[S.35 (1) (iv),80I]
Dismissing the appeal of the revenue, the Court held that; The research centre was an
independent centre and its main object was to conduct research for the business of the assessee.
Therefore, the research centre was not directly linked with the eligible undertaking and for the
purpose of computing deduction under sections 80HH and 80-I, the profits are not to be reduced
237
by the deductions under section 35 (1) (iv). That the deduction on account of job charges was
allowable.
(AY.1995-1996)
ITR 5 (St.)
S. 80HHC : Export business – Non furnishing of audit report of accountant whether

deduction is available is question of law – High Court is directed to decide the question of
law.[S. 260A]
The question whether the Tribunal was justified in law in holding that the claim of the assessee
under section 80HHC of the Income-tax Act, 1961 is justified even if it had not furnished the
report of an accountant along with the return of income is a substantial question of law which
arises for determination.Remanded the case to the High Court for decision of the question of law
after hearing the parties.
CIT v. Pix Transmission Ltd. (2017) 396 ITR 695/298 CTR 229/157 DTR 271 (SC)
Editorial : Decision in CIT v Pix Transmission Ltd ITA No. 245 of 2004 dt 10-01 - 2005 (Bom)
(HC) is set aside .
S. 80HHC : Export business - Amount received as commission had to be taken into

consideration while computing amount of deduction – Matter was set aside to High Court to
decide a fresh . [ S.260A ]
The High Court held that the amount of commission should not be taken into consideration while
calculating deduction u/s 800HHC. while giving the said finding the Court relied upon the
judgment in the case of CIT v. P.R. Prabhakar [2005] 276 ITR 176/148 Taxman 231 (Mad.). The
said judgment was reversed by the Supreme Court in P.R. Prabhakar v. CIT [2006] 284 ITR
548/154 Taxman 503 (SC). Accordingly, the Supreme Court set aside the matter to the High
Court to be decided afresh in accordance with law.
Veejay Marketing v. Dy. CIT (2017) 297 CTR 17/247 Taxman 151 /154 DTR 91 (SC)
S. 80HHC : Export business-Assess was entitled to reduce interest paid by it from interest
received by it, while calculating deduction - Delay of 3381 days in refiling the special leave
petition was not condoned. [S.80HHC (4A)]
Dismissing the appeal of the revenue, the Court held that assessee was entitled to reduce interest
paid by it from interest received by it, while calculating deduction .As regards delay of 3381 days
in refiling the special leave petition, the delay was not condoned, however stated that the
concerned authorities need to wake up.
CIT v. Krishna K. Aggarwal (2017) 245 Taxman 75 (SC)
Editorial : Refer, CIT v. Krishna K. Aggarwal (2008) 170 Taxman 23 (Delhi) (HC)
S. 80HHC : Export business – Amendment Act, 2005 is prospective in operation and would
apply to both categories of exporters having turnover below Rs. 10 crores and above Rs. 10
crores.
Dismissing the appeal of the Revenue the Court held that; S. 80HHC as amended by Taxation
Laws (Second Amendment) Act, 2005 is prospective in operation and the said section would
apply to both categories of exporters having turnover below Rs. 10 crores and above Rs. 10
crores. Followed CIT v Avani Exports (2015) 232 Taxman 357 (SC)
UOI v. Paliwal Overseas (P.) Ltd. (2017) 244 Taxman 195 (SC)
238
S. 80HHC : Export business – Interest on fixed deposits with bank for availing credit
facility for export - Interest income as specified is deductible. [ S.28 (i) ]
Allowing the appeal of the assesse the Court held that interest income as specified is deductible,
this would be in addition to the deduction permissible under S.80HHC (1) in respect of
computing the total income in relation to the export business. (AY. 1998-99)
Laxminarain Khetan v. ITO (2017) 155 DTR 276 /298 CTR 83 (All.) (HC)
S. 80HHC : Export business - Exporter furnishing disclaimer certificate with details of

export, supporting manufacturer is entitled to benefit of deduction
Dismissing the appeal of the revenue the Court held that; Exporter furnishing disclaimer
certificate with details of export, supporting manufacturer is entitled to benefit of deduction . The
mere non-grant of the renewal of the trading house certificate by the Director General of Foreign
Trade could not deprive the assessee as a supporting manufacturer of the deduction it was entitled
to under section 80HHC (1A) (AY. 1996 - 97)
CIT v. Arya Exports and Industries . (2017) 398 ITR 327 /157 DTR 292 (Delhi) (HC)
S.80HHC : Export business-Total Turnover from export business to be taken into

account—Amount written back to be excluded. [S. 41 (1)]
Court held that; Total Turnover from export business to be taken into account and the amount
written back to be excluded. (AY. 1994 - 95)
Rollatainers Ltd. v. CIT (2017) 394 ITR 512/148 DTR 129 (Delhi) (HC)
S.80HHC : Export business—Computation-Ninety per cent. of net interest or net rent

included in profits and not of gross interest or gross rent, to be deducted. [S.80HHC, Cl. 1,
Expln. (baa)]
Dismissing the appeal of the revenue, the Court held that; Ninety per cent. of the net rent or net
interest and not of the gross rent or gross interest, which had been included in the profits of
business of the assessee as computed under the head "profits and gains of business or profession"
was to be deducted under clause (1) of Explanation (baa) to section 80HHC for computing the
profits of the business.
(AY.1995-1996)
ITR 5 (St.)
S.80HHC : Export business-Hundred per cent. export oriented undertaking— Export

turnover-Deduction cannot be denied where assessee has availed of exemption under section
10B. [S.10B]
Allowing the appeal of the assessee the Court held that; section 80HHC of the Act did not
preclude the assessee from availing of the deduction thereunder in the event of the assessee
having availed of the benefit of section 10B. Wherever the Legislature intended to exclude the
benefit under a provision on account of an assessee having availed of a benefit under another
provision, it so provided. The fact that section 10B (4) (iii) did not refer to section 80HHC
indicated strongly that the Legislature did not intend to deny an assessee who had availed of the
benefit of section 10B the deduction under section 80HHC. The assessee manufactured the goods
exported by it and, therefore, clause (a) of sub-section (3) of section 80HHC applied to the
assessee's case. The proviso to definition of "total turn over" in Explanation (ba) excluded from
the expression "total turnover" sums referred to in section 28 (iiia), (iiib) and (iiic) but not section
10B. The definition of the expression total turnover did not warrant the exclusion of any benefit
under section 10B. The nature and benefits under section 80HHC and section 10B were also
239
entirely different. Circular dated December 16, 1988 issued by the Central Board of Direct Taxes
provided that section 10B was introduced to confer an additional benefit upon the assessee.
Section 80HHC defined the terms "export turnover", "total turnover" and "profits of business".
None of those definitions excluded the export turnover in respect whereof benefit had been
derived under section 10B. The Assessing Officer was to compute the assessee's income
accordingly. (AY. 1996-97)
Mahavir Spinning Mills Ltd. v. CIT (2017) 391 ITR 290 /151 DTR 303 (P&H) (HC)
S. 80HHE : Export business - Computer software – Export of television news software is

entitle to deduction .
Dismissing the appeal of the revenue, the Court held that; export of television news software is
entitle to deduction (AY. 1999-2000)
CIT v. New Delhi Television Ltd. (2017) 398 ITR 452 (Delhi) (HC)
S.80I : Industrial undertaking-Old machinery used in old unit and depreciation claimed on
it in earlier assessment year - Entitled to benefit of deduction on machinery.
The assesse was entitle to deduction on the machinery which was put to use by the assesse in its
old unit and on which it had claimed depreciation in the earlier assessment year.
CIT v. Popular Art Palace P. Ltd. (2017) 391 ITR 352 (Raj.) (HC)
S.80I : Industrial undertakings-Forklift truck used in old unit and ready for use in new
unit-Not plant and machinery-Assessee not entitled to benefit envisaged under section 80I
(2). [S. 80I (2)]
That the forklift truck, which was on the trial run in the old unit and was ready for use in the new
unit, could not be considered as plant and machinery and the assessee was not entitled to the
benefit envisaged under section 80I (2) of the Act.
S. 80IA : Industrial undertakings – Infrastructure development – Bottling of Liquefied

Petroleum Gas (LPG) Cylinders amounted to ‘production’ and the same was eligible for the
deduction .[ 80HH, 80I ]
.Assessees were engaged in the process of bottling Liquefied Petroleum Gas (LPG) Cylinders.
They claimed benefit of Sections 80HH, 80-I and 80-IA. The issue before the SC was as to
whether bottling of LPG amounted to ‘production’ or ‘manufacturing’. SC observed that LPG
obtained from the refinery undergoes a complex technical process in the assessees’ plants and is
clearly distinguishable from the LPG bottled in cylinders and cleared from these plants for
domestic use by customers. SC held that the activity of the assessee amounted to ‘production’.
CIT v. BPCL (2017)396 ITR 696 /155 DTR 97 /297 CTR 3// 250 Taxman 1 (SC)
CIT v. Hindustan Petroleum Corporation Ltd (2017) 396 ITR 696/155 DTR 97/297 CTR 3
/250 Taxman 1 (SC)
S. 80IA : Industrial undertakings-Depreciation had to be reduced for computing the profits

eligible for deduction, as section 80IA is a complete code by itself . Depreciation has to be
allowed for the year even though the assesse has exercised option not to claim depreciation.
[ S. 32, 30 to 43D ]
Dismissing the appeal the Court held that; main thrust of argument was predicated on the
judgment of this Court in Mahendra Mills (2000) 243 ITR 56, which according to us, cannot be
applied while interpreting Section 80-IA of the Act. It may be stated at the cost of the repetition
that judgment in Mahendra Mills was rendered while construing the provisions of Section 32 of
the Act, as it existed at the relevant time, whereas we are concerned with the provisions of
Chapter VI-A of the Act. Marked distinction between the two Chapters, as already held by this
240
Court in the judgments noted above, is that not only Section 80-IA is a code by itself, it contains
the provision for special deduction which is linked to profits. In contrast, Chapter IV of the Act,
which allows depreciation under Section 32 of the Act is linked to investment. This Court has
also made it clear that Section 80-IA of the Act not only contains substantive but procedural
provisions for computation of special deduction. Thus, any device adopted to reduce or inflate the
profits of eligible business has to be rejected. The assessees/appellants want 100% deduction,
without taking into consideration depreciation which they want to utilise in the subsequent years.
This would be anathema to the scheme under Section 80-IA of the Act which is linked to profits
and if the contention of the assessees is accepted, it would allow them to inflate the profits linked
incentives provided under Section 80-IA of the Act which cannot be permitted.) (AY. 1997-98 to
2000-01)
Plastiblends India Limited v. ACIT (2017) 398 ITR 568 /298 CTR 281/158 DTR 1 /251
Taxman 188 (SC)
S.80IA : Industrial undertakings-Manufacture or production-Any activity which brings a

commercially new product into existence constitutes production. The process of bottling of
LPG renders it capable of being marketed as a domestic kitchen fuel and, thereby, makes it
a viable commercial product. [S. 80HH, 80I]
Dismissing the appeal of the revenue, the Court held that; bottling of LPG, as undertaken by the
assessee, is a process which amounts to ‘production’ or ‘manufacture’ for the purposes of
Sections 80HH, 80I and 80IA of the Act. And the assessees are entitled to claim the benefit of
deduction under the aforesaid provisions while computing their taxable income. Court held that
,any activity which brings a commercially new product into existence constitutes production.
CIT v. Hindustan Petroleum Corporation Ltd. (2017) 396 ITR 696/155 DTR 97/297 CTR 3
/84 taxmann.com 215 (SC)
CIT v . Bharat Petroleum Corporation Ltd (2017) 396 ITR 696/155 DTR 97/297 CTR 3 /84
taxmann.com 215 (SC)
CIT v.BPCL (2017) 396 ITR 696/155 DTR 97/297 CTR 3 /84 taxmann.com 215 (SC) 297
CTR 3 /155 DTR 97 (SC)
Editorial : Decision in CIT v. Hindustan Petroleum Corporation Ltd (2014) 361 ITR 190 (Bom)
(HC)
S. 80IA : Industrial undertakings – Infrastructure development - Contract with

construction of bridges development of air ports and railway system is entitle to deduction.[
S.80IA (4) (i) (b)]
Dismissing the appeal of the revenue the Court held that ,assessee which entered in to Contract
with construction of bridges development of air ports and railway system is entitle to deduction.
(AY. 2003-04, 2006 - 07)
CIT v. TRG Industries (P) Ltd (2016) 76 taxmann.com 105/(2017) 297 CTR 58/155 DTR
109 (J& K) (HC)
Editorial : TRG Industries (P) Ltd v. Dy.CIT (2013) 59 SOT 64 (URO) (Amritsar) (Trib) is
affirmed
S. 80IA : Industrial undertakings – Infrastructure development-Person developing

infrastructure facility and person operating it may be different, both are entitled to
deduction [ S.80IA (4)]
Dismissing the appeal of the revenue the Court held that; the assessee having transferred the
facility for the limited purpose of maintenance and operation to RTIL, it would receive a fixed
payment of Rs. 328 lakhs per annum irrespective of the toll collection by RTIL. This profit
241
element therefore would be relatable to the infrastructure development activity of the assessee
and would qualify for deduction under section 80IA of the Act. RTIL would have a claim or
deduction on its profit arising out of maintenance and operation of infrastructure facility which
apparently would exclude the pay-out of Rs. 328 lakhs to the assessee. Both are entitle to
deduction . (AY. 2003-04)
PCIT v. Nila Baurat Engineering Ltd. (2017) 399 ITR 242 (Guj) (HC)
S. 80IA : Industrial undertakings – Infrastructure development-Assessee setting up

industrial park with more than thirty units in financial year relating to assessment year
2010-11, completion certificate dated 8-5-2013 is not relevant. Entitled to deduction .
Allowing the appeal the Court held that; it was the duty and responsibility of the assessee to
ensure that industrial activity was facilitated on the industrial park developed by it. It was not the
responsibility to ensure that industries do in fact set up their units and commence production. The
assessee had in the financial year 2009-10 relevant to the assessment year 2010-11, 34 plots
located in the industrial park. It therefore fulfilled the requirement of availing tax benefits as it
had the minimum number of plots located as per the scheme to avail of such tax benefits.
Therefore before the last date of the scheme the industrial park had provided the infrastructure
facilities. As a result of the specific finding that the assessee was deemed to have been eligible for
availing of tax deduction under section 80-IA (4) (iii) from the financial year 2009-10, the
assessment year 2010-11, the order dated March 17, 2017 rejecting the rectification application
deserved to be set aside. The condition in the Notification extending the benefit of availing of
deductions under section 80-IA (4) (iii) from the date of commencement of September 5, 2010
was a condition not found in any of the other notifications vis-a-vis other such projects, produced
in other such cases. Accordingly, the respondents had to delete Condition No. 7 in the
Notification of December 26, 2016. The assessee's claim to deduction at whichever stage pending
before the assessing authority or the appellate authority would be governed by this declaration
(AY. 2010-11)
Devraj Infrastructures Ltd v. Chairman/Member (Industrial Park) (2017) 399 ITR 331
(Guj.) (HC)
S. 80IA : Industrial undertakings - Income derived from container station is eligible for
deduction [ S.80IA (4) ]
Dismissing the appeal of the revenue, the Court held that; asessee is entitled to deduction under
section 80-IA (4) in respect of the income derived from the container freight stations. (AY. 2010-
11)
PCIT v. Seabird Marine Services P. Ltd. (2017) 398 ITR 436 /156 DTR 170 (Guj) (HC)
Editorial : SLP is granted to the revenue; PCIT v. Seabird Marine Services P. Ltd. (2017) 397
ITR 140 (St) (SC)
S. 80IA : Industrial undertakings – Only losses of the years beginning from the initial
assessment year are to be brought forward for set-off against profits of the eligible unit.
Losses of earlier years which are already set off against income cannot be brought forward
notionally for set-off. The fiction in s. 80-IA (5) is created only for a limited purpose and
cannot be extended [ S.80IA (5) ]
Dismissing the appeal of the revenue, the Court held that; only losses of the years beginning from
the initial assessment year are to be brought forward for set-off against profits of the eligible unit.
Losses of earlier years which are already set off against income cannot be brought forward
notionally for set-off. The fiction in S. 80IA (5) is created only for a limited purpose and cannot
be extended . (ITA No. 707 of 2014, dt. 14.06.2017) (AY. 2009 - 10)
CIT v. Herculer Hoists Ltd. (Bom) (HC); www.itatonline.org
242
S.80IA : industrial undertakings —Initial assessment-loss of earlier years already set off
against other income cannot be carried forward and set off against profits.
Dismissing the appeal of the revenue the Court held that; loss of earlier years already set off
against other income cannot be carried forward and set off against profits. (AY. 2000-01 to 2007 -
08)
CIT v. Leo Fasteners (2017) 398 ITR 462 (Mad) (HC)
S. 80IA : Industrial undertakings – Infrastructure development-Airport authority of India

- There is no requirement that agreement should be one entered into by airport which is
already functional, the Order of the Tribunal was sea side . [ S.80IA (4), Airports Authority
of India Act, 1994, S. 12 ]
Allowing the appeal the Court held that ;Memorandum of understanding and subsequent
comprehensive agreement for development of infrastructure, constitute agreement within
meaning of section and there is no requirement that agreement should be one entered into by
airport which is already functional. Accordingly, the findings of the Tribunal with reference to
clause (b) of sub-section (4) of section 80-IAwere set aside and its conclusion that the
memorandum of understanding and the subsequent agreement were not agreements could not be
upheld. The matter stood remitted to the Assessing Officer for fresh examination as ordered by
the Tribunal. (AY. 2005 - 06 to 2007 - 08)
Cochin International Airport Ltd v. Dy. CIT (2017) 398 ITR 400 /(2018) 162 DTR 79 (Ker)
(HC)
S. 80IA : Industrial undertakings – Infrastructure development - AO should give reasons to

reject the books of account, hence estimate of profit by the AO was held to be not justified [
S.80IA (8), 145 ]
Dismissing the appeal of the revenue the court held that the AO should give reasons to reject the
books of account, hence estimate of profit by the AO was held to be not justified . (AY.2006-07,
2007-08)
PCIT v. Harpreet Kaur (2017) 397 ITR 125 (Delhi) (HC)
S. 80IA : Industrial undertakings – Infrastructure development – Initial assessment year -

Once the requirements of the section are satisfied in the first year, the deduction cannot be
withdrawn in the subsequent years
Dismissing the appeal of the revenue the Court held that; eligibility to claim deduction u/s. 80-
IA had to be seen only in the first year. Therefore, once the assessee satisfied the requirements of
being a ‘small scale industrial undertaking’ in the first year, the deduction u/s. 80-IA could not be
denied in the subsequent years merely because there were fresh investments in those years.
CIT v. International Tractors Ltd. (2017) 155 DTR 243/297 CTR 119 (Delhi) (HC)
S. 80IA : Industrial undertakings – Interest on margin money to be included for the

computation of deduction. [ S. 56 ]
Dismissing the appeal of the revenue; the Court held that; the interest from bank had direct nexus
with the assessee’s business and therefore the interest was required to be considered as derived
243
from business for purposes of computation of deduction under section80IA of the Act. (AY.
2001-02 to 2004 - 05)
CIT v. Shah Alloys Ltd. (2017) 396 ITR 711/250 Taxman 131 (Guj.) (HC)
Editorial : SLP of revenue is admitted ,PCIT v. Shah Alloys Ltd. (2017) 250 Taxman 77 (SC)
S. 80IA : Industrial undertakings – Generation of power for captive consumption — rate of

power generation is to be taken at rate supplied by electricity board to its consumers not at
rate at which supplied to electricity board. [S. 80IA (4)]
Dismissing the appeal of the revenue, the Court held that; the deduction under section 80IA (4)of
the Act, was allowable to the assessee for generation of power for captive consumption and that
the rate of power generation at which the Electricity Board supplied power to its consumers,
rather than the rate at which the power generating company supplied its power to the Electricity
Board was to be taken as the price.
PCIT v. Gujarat Alkalies and Chemicals Ltd. (2017) 395 ITR 247 (Guj) (HC)
S. 80IA : Industrial undertakings – Initial assessment year is the year opted by assessee for
claiming deduction and not year of commencement of eligible business - Deduction
allowable without setting off losses or unabsorbed depreciation set off in earlier years
against other business income - CBDT was directed not to file appeals where the circular
was issued accepting the order of High Court. [S.80IA (5)]
Dismissing the appeal of the revenue, the Court held that; Initial assessment year would be year
opted by assessee for claiming deduction and not year of commencement of eligible business.
Deduction is allowable without setting off losses or unabsorbed depreciation set off in earlier
years against other business income.By the court : If an issue is covered by the judgment of the
High Court, it is always open to the Department to take it on appeal to the Supreme Court and get
the law settled once and for all. But, once a decision is taken at the level of the Board, why
repeated appeals should be filed only to meet with the same fate as that of a decision, on which a
circular has been issued. The Department shall take note of this for future guidance. (AY. 2011-
12)
CIT v. Best Corporation Ltd. (2017) 395 ITR 367 (Mad) (HC)
Editorial : SLP of the revenue was dismissed,CIT v. Best Corporation Ltd. (2016) 388 ITR 58
(St.)
S.80IA : Industrial undertakings-Loss in year prior to initial assessment year already

absorbed cannot be notionally brought forward and set off against profits of eligible
business.
Dismissing the appeal of the revenue, the Court held that ,it was not required that the losses
which had already been set off against the income of the previous year, should be reworked again
for computation of current income under section 80-IA of the Income-tax Act, 1961 for the
purpose of computing the admissible deductions there under. The Appellate Tribunal had not
erred in following the ratio laid down in the judgment. (AY. 2010-2011)
PCIT v. GRT Hotels and Resorts P. Ltd. (2017) 392 ITR 440 (Mad) (HC)
S.80IA : Industrial undertakings – Infrastructure development - Assessee involved in

generation of electricity - deduction claimed under 80IA – AO took tariff for sale of
Electricity from Captive Power Plants as per orders of Rajasthan Electricity Regulatory
Commission and M.P. Electricity Regulatory Commission – Disallowed deduction u/s 80IA
due to negative profits – computation of AO not correct – market price to be taken.
The assessee is engaged in the business of manufacture of cement and jute goods. It also derived
income from generation of power. The power generated by the Thermal Power Plant of the
244
assessee was consumed by the assessee in its cement manufacturing units and it also sold to
Power Grid and India Energy Exchange. The dispute between the revenue and the assessee was
with regard to the price to be adopted for the power generated by it and consumed by the
Assessee's cement manufacturing units. The AO was of the view that, the tariff for sale should be
fixed at a price which is determined by the Electricity Corporations of the respective states which
was significantly lower than the price considered by the assessee. The AO computed the profit for
the unit based on the said prices, as a result of which, the profits became negative and the
deduction u/s 80IA was denied. The assessee filed an appeal against the said order of the AO.
However the CIT (A) in its order directed the AO to adopt the weighted average basis of the
annual consumption as the tariff price. On further appeal to the ITAT, it was held that, when it
was permissible for the assessee to sell electricity to consumers at a rate higher than that paid by
it to the State Electricity Board, the price charged by the State Electricity Board was a good
indication of the market price and that the assessee was not incorrect in adopting such price for
working out the amount eligible for deduction u/s 80IA. The method adopted by the assessee,
viz., to take the average rate charged by the State Electricity Board for the previous month was
quite appropriate and reasonable for determining the market value for the month of supply. The
annual weighted average adopted by the CIT (A) would result in variations occurring during the
year at different times being made applicable uniformly for the whole year and therefore the
assessee’s method was more appropriate as it factors in variations as and when they take place.
(ITA No. 686 and 1101/Kol/2014 dt. 13-09-2017) (AY. 2010 – 2011)
Birla Corporation Ltd. v. Dy. CIT (2017) 59 ITR 59 (SN) (Kol) (Trib)
S. 80IA : Industrial undertakings - Liquidated damages - Power generation - Allowable as

deduction
Liquidated damages received by assessee from the supplier on account of short fall of minimum
guaranteed generation of power was held to be allowable as deduction. (AY. 2006-07 to 2009-10,
2011-12 to 2013-14)
S. 80IA : Industrial undertakings – Infrastructure development – develop, operate and

maintain the rail systems for smooth movement of goods from factory till nearest railway
station – Deduction was allowed in first year, and cannot be disallowed in subsequent year .
Assessee entered into agreements with the railway authorities to develop, operate and maintain
the rail systems for smooth movement of goods from factory till nearest railway station - Overall
profits of the Assessee have increased due to such commercial benefits and the same should have
been treated as revenue of the rail systems, thus eligible for benefit u/s. 80-IA – Deduction u/s.
80-IA was allowed in first year and in subsequent years, it cannot be disallowed on same ground.
(AY. 2009-10 ,2010-11)
Ultratech Cement Ltd. v. ACIT (2017) 153 DTR 153/186 TTJ 547 (Mum) (Trib.)
S. 80IA : Industrial undertakings – Infrastructure development-

– Merely trader hence not eligible to deduction.[ S.80IA (iv) ]
245
Tribunal held that, though the assessee company granted approval by FIPB to provide internet
connectivity and related services. On facts it was found that the assessee was a merely traded in
bandwidth and had not provided any bandwidth network and internet services deduction was
held to be not available, since the assessee failed to establish that it had provided broadband
network/internet services. (AY .2007 – 2008
Reach Network India (P.) Ltd.v. ACIT 166 ITD 461/189 TTJ 823 /157 DTR 257 (Mum)
(Trib.)
S.80IA : Industrial undertakings – Each eligible unit income to be computed separately-

Initial year option is with assessee - Unabsorbed depreciation and carry forward loss cannot
be notionally carry forward and taken in to for the purpose of computation of deduction.
[S. 261]
Dismissing the appeal of the revenue, the Tribunal held that; CIT (A) has followed the judgement
in Velayudhaswany Spg .Mills (P) Ltd v ACIT (2012) 21 taxmann.com 95 (Mad) (HC), and
mere filing of SLP against High Court’s judgment was not a valid ground for not following High
Court judgment. (AY. 2011-12)
DCITv. S.V.P.B. Spinners (P.) Ltd. (2017) 165 ITD 235 (Chennai) (Trib.)
S. 80IA : Industrial undertakings – Infrastructure development - Developing, operating

and maintaining infrastructural facility of toll road would be eligible for deduction,
ownership is not required. [S.80IA (4)]
Assessee was deriving income from developing, operating and maintaining infrastructural facility
of toll road. The assessee claimed deduction u/s 80IA of the Act. The AO denied the claim on
ground that assessee was merely executing job of civil construction on basis of works contract
awarded by Executive Engineer and he is not a 'owner' of facility and roads constructed were not
fall under expressway or highway category. Allowing the claim the Tribunal held that ;S. 80IA
(4) refer to ownership of enterprise by a company that carried on business and there was no
requirement that assessee should be owner of infrastructure facility to claimed the deduction.
When assessee engaged technically and administratively qualified team of persons and
shouldered out investment and technical risk in respect of development of infrastructure facility
and further where it was liable for liquidated damages, in case it would fail to fulfil obligation
laid down in agreement. Just because a contractor and not a developer deduction claimed
u/s.80IA (4) cannot be denied. (AY. 2011 – 2012)
BMW Industries Ltd. v. DCIT (2017) 162 ITD 650 (Kol.) (Trib.)
S.80IA : Industrial undertakings-Generation of electricity for captive consumption -

Market value-Assessing Officer to compute such profits and gains on such reasonable basis
as he may deem fit by objective satisfaction and not a subjective satisfaction. [S.80IA (8)]
For captive consumption, the Assessee computed the market value and recorded in its books of
account. Assessee taking rate charged by Electricity Board from customers whereas assessing
Officer applying tariffs determined by State Electricity Regulatory Commission. Tribunal held
that; assessing Officer to compute such profits and gains on such reasonable basis as he may
deem fit, by objective satisfaction and not a subjective satisfaction. (AY. 2003-2004 to 2011-
2012)
Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol.) (Trib.)
S. 80IAB : Industrial undertakings - Development of Special Economic Zone – Derived –

Interest derived from security deposit was held to be not derived from undertaking hence
not entitle to deduction .
246
Dismissing the appeal of the revenue the Court held that; Interest derived from security deposit
was held to be not derived from undertaking hence not entitle to deduction . (AY. 2009-10)
Cyber Pearl Information Technology Park P. Ltd. v.ITO (2017) 399 ITR 310 (Mad) (HC)
S. 80IAB : Industrial undertakings - Derived – Interest from fixed deposit from Bank was
not derived from business of developing Special Economic Zone hence not entitle to
deduction.
Dismissing the appeal of the assesse the Court held that; Interest free security deposit from
persons who had taken infrastructure set up in IT parks of assessee on lease, and, further invested
such amount in fixed deposits with banks, interest income derived from fixed deposits would not
amounted to an income derived from business of developing a Special Economic Zone. (AY.
2009-10)
Cyber Pearl Information Technology Park (P.) Ltd. v. ITO (2017) 248 Taxman 415 /148
DTR 345 (Mad.) (HC)
S. 80IB : Industrial undertakings-Initial assessment year – Small scale industrial

undertaking – Assessee is not entitled to benefit of exemption if it loses its eligibility as a
small scale industrial undertaking in a particular assessment year even if in initial year
eligibility was satisfied - Liberal construction does not mean ignoring conditions for
exemption .
Allowing the appeal of the revenue, the Court held that; the incentive meant for small scale
industrial undertakings cannot be availed by undertakings which do not continue as small scale
industrial undertakings during the relevant period. Each assessment year is a different assessment
year. The fact that the object of legislature is to encourage industrial expansion does not mean
that the incentive should remain applicable even where on account of industrial expansion, the
small scale industrial undertakings ceases to be small scale industrial undertakings. The fact that
in the initial year eligibility was satisfied is irrelevant. Accordingly the assessee is not entitled to
benefit of exemption if it loses its eligibility as a small scale industrial undertaking in a particular
assessment year even if in initial year eligibility was satisfied. (AY. 2005 - 06 - 2007 08)
DCIT v. Ace Multi Axes Systems Ltd (2017) 160 DTR 353 /299 CTR 441 /(2018) 400 ITR
141/252 Taxman 274 (SC)
CIT v Sunder Forging (2018) 400 ITR 141 (SC)
Editorial : Ace Multi Axes Systems Ltd. v.Dy CIT (2014) 367 ITR 266 (Karn) (HC) and CIT v
Sunder Forgings (2018) 400 ITR 145 (P&H) (HC) is reversed
S. 80IB : Industrial undertakings - Manufacture - Conversion of 24 carat gold in to gold
ornaments constitute manufacture and entitle to deduction [ S. 2 (29BA) ]
Dismissing the appeal of the revenue the Court held that; Conversion of 24 carat gold in to gold
ornaments constitute manufacture and entitle to deduction. (AY. 2010-11)
PCIT v. Lakesh Handa (2017) 399 ITR 305/158 DTR 332 /299 CTR 92/85 taxmann.com 6
(J&K) (HC)
S. 80IB : Industrial undertakings – Manufacture - Software was customised and modified

before loading it to hardware, said activity amounted to manufacture .
Dismissing the appeal of the revenue, the Court held that ;Assessee, engaged in manufacture of
voice and fax encryption systems, imported necessary hardware as well as corresponding
software and, thereupon software was customised and modified before loading it to hardware,
247
said activity amounted to 'manufacture' of an article or thing and entitle to deduction. (AY.
2001-02)
CIT v. Shoghi Communication Ltd. (2017) 398 ITR 683 /250 Taxman 57 /297 CTR 463/156
DTR 185 (HP) (HC)
S.80IB : Industrial undertakings —Substantial expansion of business with new capital and
labour is not a reconstitution of existing business hence eligible for deduction.
Dismissing the appeal of the revenue the Court held that; substantial expansion of business with
new capital and labour is not a reconstitution of existing business hence eligible for deduction.
(AY. 2000-01 to 2007 - 08)
CIT v. Leo Fasteners (2017) 398 ITR 462 (Mad) (HC)
S.80IB : Industrial undertakings – Allocation of research and interest expenses –

Calculation was held to be justified. [S. 260A ]
Dismissing the appeal of the revenue, the Court held that the Tribunal has followed the ratio of
jurisdictional High Court in Zandu Pharmaceuticals Works Ltd. v. CIT (2013) 350 ITR 366
(Bom) (HC) hence no question of law arise. (2006 - 07)
(HC)
S. 80IB : Industrial undertakings-Initial assessment year is the previous year relevant

assessment year in which business was commenced. [S.80IB (11A), 80IB (14) (c) (iv)]
Dismissing the appeal of the assessee the Court held that; although the provisions of section 80IB
(11A) of the Act ,were introduced with effect from April 1, 2005, since the assessee had begun
the business of processing, preserving and packaging of fruits and vegetables in the previous year
relevant to the assessment year 2002-03, that would be the initial assessment year for the
purposes of deduction and the assessee was entitled to 100 per cent. deduction only for the first
five years, i.e., up to the assessment year 2006-07. Therefore, the assessee was entitled to 25 per
cent. deduction for the assessment years 2007-08, 2008-09 and 2009-10. The fact that the units
like that of the assessee were included for entitlement to the benefit of deduction under
section 80IB (11A) of the Act, only with effect from April 1, 2005 did not change the “initial
assessment year” as defined under section 80 IB (14) (c) (iv) to mean the assessment year
relevant to the year in which the assessee commenced its business. (AY.2007-08 to 2009-10)
Anand Food and Dairy Products v. ITO (2017) 394 ITR 531 (Guj) (HC)
Editorial : SLP is granted to the assesse;Anand Food and Dairy Products v. ITO (2017)392 ITR
56 (St.)
S. 80IB : Industrial undertakings - Hotel business—When application by assessee for

approval pending decision with Director General (E), benefit cannot be denied for inaction
of prescribed authority.[S. 80A, 80IB (7) (a)]
Dismissing the appeal of the revenue the Court held that; When application by assessee for
approval pending decision with Director General (E), benefit cannot be denied for inaction of
prescribed authority. (AY.2006-07 to 2009-10)
CIT v. Shrikar Hotels Pvt. Ltd. v. (2017) 394 ITR 657 /298 CTR 365/157 DTR 129 (All.)
(HC)
S. 80IB : Industrial undertakings-Transport Subsidy is a part of operational profits and

therefore assessee entitled to deduction of transport subsidy.
248
Dismissing the appeal of revenue the Court held that; the transport subsidy has bearing on the
cost of production of the industrial undertaking of the assesse is a part of operational profits and
entitle to deduction. (AY.2009-10)
PCIT v. Shree Mahabir Foods Ltd. (2017) 146 DTR 189 /292 CTR 112 (Meghalaya) (HC)
S. 80IB : Industrial undertakings - Eligible deduction cannot be treated as inflated merely

because there are common customers-Matter was set aside to Tribunal. [S.80IB (8), 80 (IB)
(13) ]
Allowing the appeal, the Court held that; The profits of an undertaking eligible for deduction
cannot be treated as "inflated" in the absence of material on record to show that there is an
arrangement between the eligible unit and the non-eligible unit to generate more than ordinary
profits for the eligible unit. The mere fact that there are common customers of both the units does
not by itself indicate transfer of profits to the eligible unit. Matter was set aside to Tribunal to
decide according to law. (AY. 2009-10)
Malay N. Sanghvi v. ITO (2017) 391 ITR 382 (Bom.) (HC)
S. 80IB : Industrial undertakings – Assessee incurred research and development
expenditure - AO allocated based on turnover of units which claimed deduction u/s 80IB –
no nexus between the expenditure and the business of units – such adhoc allocation based
on turnover formula cannot be allowed.
The assessee had 3 production divisions. The AO observed that Assessee had incurred R&D
expenditure and he allocated the said expenses to the concerned divisions on the basis of the
turnover. The DRP confirmed the AO order. On further the Tribunal held that since there were no
R&D expenses incurred for Jammu unit, there could be no allocation to Jammu unit. (ITA No.
1117/Ahd/2012, AY 2004 – 2005 & ITA No. 848 & 918/Ahd/2016, dt.11-09-2017 (AY. 2011 –
2012,)
Cadila Pharmaceuticals Ltd. v Dy. CIT (2017) 59 ITR 68 (SN) (Ahd) (Trib)
S. 80IB : Industrial undertakings - Higher claim of deduction – Revised claim can be made
during the course of assessment before AO
Tribunal held that, AO having not disputed the correctness of revised figure, was not justified in
rejecting the same for the reason that assessee had not filed a revised return. Since no new claim
was made by assessee, AO ought to have allowed the revised claim of assessee. (ITA No.
1602/Ahd/2013 dt. 13.02.2017) (A.Y. 2009-10)
ACIT v. Oracle Granito Ltd. (2017) 186 TTJ 661 (Ahd) (Trib.)
S. 80IB (10) : Housing projects - Delay in issuance of completion certificate beyond control
of assessee — Deduction cannot be denied .
Dismissing the appeal of the revenue the Court held that; the construction was completed before
the stipulated date, i. e., March 31, 2010 and the certificate of completion was applied on March
29, 2010 and was issued to the assessee on December 31, 2011. The assessee in such
circumstances could not be denied the benefit of section 80-IB (10) (a)of the Act. (AY. 2010-11)
PCIT v. Ambey Developers P. Ltd. (2017) 399 ITR 216 (P&H) (HC)
S. 80IB (10) : Housing projects – land was less than one acre hence denial of exemption was
justified, however ;deduction cannot be denied if audit report is not filed along with the
return of income but only during the assessment proceedings.[ Form No 10CCB)
249
Court held that as the housing project was in a land which was less than one acre hence not
eligible of exemption. High Court also held that it was not mandatory and only directory and
assessee could not be made to suffer if it filed audit report in form 10CCB in the course of
assessment proceedings and not alongwith the return. Filing of audit report was held is not
mandatory . (AY. 2006 - 07, 2008 - 09)
CIT v. Fortuna Foundation Engineers & Consultants (P) Ltd. (2017) 152 DTR 236 /297
CTR 409 /81 taxmann.com 189 (All.) (HC)
S. 80IB (10) : Housing projects - Area of land being less than one acre at the time of
approval by local authority hence not eligible to claim deduction.
Area of land being less than one acre at the time of approval by local authority, assessee did not
satisfy the requirement of area of plot of land being one acre, assessee is not eligible to claim
deduction under S.80IB (10) of the Act. (AY. 2004-05 to 2007-08)
CIT v. Fortuna Foundation Engineers & Consultants (P) Ltd (2017) 152 DTR 236 (All)
(HC)
S.80IB (10) : Housing projects-Built-up area-assessee’s project approved prior to 1-4-

2005—Terrace or balcony to be excluded from built-up area – Conditions existing at the
time of approval of project has to be complied with-Matter remanded to Tribunal. [S.80IB
(10) (a) (i) (c) (d), 14 (a)]
On appeal by the revenue the Court held that;Assessee’s project approved prior to 1-4-2005hence
terrace or balcony to be excluded from built-up area and conditions existing at the time of
approval of project has to be complied with. The Tribunal relied on its order for the assessment
year 2007-08 to hold that the assessee was eligible for the deduction under section 80-IB (10) of
the Act. In respect of questions between the same parties, if a particular view was taken by the
Tribunal in one assessment year, in the absence of any relevant circumstances otherwise, it was
not appropriate for the Tribunal to re-examine the matter. The question as to whether or not the
assessee satisfied all conditions required for deduction under section 80IB (10) was not examined
by the Tribunal because it was under the impression that the entire amendment made by
the Finance Act, 2004 with effect from April 1, 2005 in section 80-IB (10) would be prospective
and, therefore, there was no discussion or finding recorded by the Tribunal whether the project of
the assessee was completed or obtained completion certificate. The Tribunal was to examine this
in the light of other questions answered by this court[Matter remanded. (AY.2006-07, 2007-08,
2011-12)
CIT v. Arif Industries Ltd. (2017) 395 ITR 102/80 taxmann.com 374 /152 DTR 201/297
CTR 178 (All) (HC)
S. 80IB (10) : Housing projects - Proportionate deduction is eligible in respect of area below
prescribed area .
The assessee is entitled to proportionate deduction under section 80IB (10) of the Act,to the
extent of profits attributable to units where the built-up area is below 1500 sq. ft. (AY. 2007-08,
2009-10, 2010-11)
PCIT v. Oceanus Dwellings P. Ltd. (2017) 395 ITR 376 (Karn) (HC)
PCIT v. Parkway Development (2017) 395 ITR 376 (Karn) (HC)
S. 80IB (10) : Housing projects - Each housing project completed independent of each other
on standalone basis, is entitle deduction on each housing project.
Dismissing the appeal of the revenue, the Court held that; each project developed was completed
independent of each other and on a stand-alone basis, the assessee would be entitled to deduction
under section 80IB on each housing project. (AY. 2007-08 to 2009-10)
CIT v. Omaxe Buildhome (P.) Ltd. (2016) 76 taxmann.com 104 (Delhi) (HC)
250
Editorial : SLP of revenue is dismissed; PCIT v Omaxe Buildhome (P.) Ltd. (2017) 245 Taxman
42 (SC)/(2017) 248 Taxman 325 (SC)
S. 80IB (10) : Housing projects - To claim a deduction there is no condition precedent that
the assessee must be owner of the land on which housing project is constructed.
Allowing the appeal the Tribunal held that the assessee has, satisfied all the conditions of S. 80-
IB (10) of the Act and there is no condition precedent that the assesse must be owner of the land
on which housing project is constructed. ( (AY. 2008-09)
Unique Star Developers v. DCIT (2017) 57 ITR463 /187 TTJ 682/156 DTR 25 (Mum) (Trib)
S. 80IB (10) : Housing projects - Proportion deduction is allowable in respect of eligible

units allotted and sold.
The Tribunal sent the matter back to the AO and directed to restrict the disallowance
proportionately in respect of transactions which have not complied with the conditions of section
80IB (10) and to allow the remaining deduction as claimed by the assessee for eligible units
allotted or sold by the assessee. (AY. 2010-11)
ITO v. Kuber Developers (2017) 163 ITD 323/54 ITR 616/185 TTJ 1 (Raipur) (UO) (Trib.)
S.80IB (10) : Housing projects-Not complying the conditions in respect of some units -
Entire deduction cannot be disallowed, only proportionate disallowance has to be made.
Tribunal held that ,for not complying the conditions in respect of some units, entire deduction
cannot be disallowed, only proportionate disallowance has to be made. (AY. 2010-11 to 2012-13)
ITO v. Kuber Developers (2017) 55 ITR 222/185 TTJ 1 (UO) (Raipur) (Trib.)
Kuber Developers v. ITO (2017) 55 ITR 222/185 TTJ 1 (UO) (Raipur) (Trib.)
S.80IB (10) : Housing projects—Interest income is not derived from the and part of
business income hence not eligible deduction – In respect of eligible business the assesse is
entitle to prorate deduction.
Tribunal held that the assesse has not demonstrating receipt of interest income derived from and
part of business receipts to claim de, hence not eligible deduction. As regards eligible income the
assesse is entitled to pro rata deduction on each of projects. (AY-2010-2011)
Bramha Corporation Ltd. v.ITO (2017)54 ITR 465 (Pune) (Trib.)
S. 80IB (10) : Housing projects-Interest income was held to be not entitle to deduction -
Entitled to pro rata deduction on each of projects.
Dismissing the assessee's appeal, that the Tribunal for the earlier years had held that the assessee
was unable to demonstrate that the interest was derived from and was part of business receipts in
order to enable it to claim deduction under section 80-IB (10).Dismissing the Department's
appeal, that the assessee pointed out that identical grounds of appeal were raised in the
assessment year 2008-09 and the Tribunal had directed the Assessing Officer to allow pro rata
deduction under section 80-IB (10). (AY.2010-2011)
ITO v. Bramha Corporation Ltd. (2017) 54 ITR 465 (Pune) (Trib.)
S.80IB (10) : Housing projects-Project was approved by Slum Rehabilitation Authority

before 1-4-2004-Not eligible for deduction-Proviso introduced by Finance Act, 2004 is not
retrospective.
Dismissing the appeal of the assessee, the Tribunal held that, the Housing project (Slum
Rehabilitation) project was approved prior to 1-4-2004 by slum Rehabilitation Authority, the
claim of deduction u/s.80IB (10) was not eligible as proviso introduced by Finance Act, 2004
clearly grants relief to slum redevelopment or reconstruction projects which approved by Board
251
and Board Notification clarifies that benefit available to projects approved on or after 1-4-2004,
and before 31-3-2008 therefore claim of 80IB (10) is not eligible to assessee. (AYs. 2006-07,
2007-08)
Bhavya Construction v. ACIT (2017) 162 ITD 352 (Mum.) (Trib.)
S.80IB (10) : Hosing projects-Additional evidences had a material bearing; the AO has to
decide issue afresh. [S. 254 (1)]
The AO denied benefit of s. 80IB (10) on ground that area of each unit was more than 1000
sq.ft.. Tribunal held that when certificate issued by the Municipal Corporation stating that none of
units was having area more than 1000 sq.ft. and the same was filed as additional evidences, AO
was directed to decide the issue giving an opportunity of hearing . (AY. 2008-09)
DCIT v. Siroya Developers (2017) 162 ITD 718 (Mum) (Trib.)
S. 80IB (10) : Housing projects – Deduction can be allowed only return of income filed on
or before the due date of filling return. [S.80AC, 139 (1)]
Tribunal held that the assessee has filed return belated to avail the benefit of deduction u/s.
80IB (10), the assessee has to file return within due date as prescribed u/s. 139 (1), read with
section 80AC of the Act . (AY. 2009-2010)
DCIT v. Siroya Developers. (2017) 162 ITD 718 (Mum.) (Trib.)
S. 80IC : Special category States - "initial assessment year" and "substantial expansion" –
There can be more than one initial assessment year - Substantial expansion is also eligible to
deduction – Circular explaining the provision is also relevant to interpretation of the section
.
After analysing the provisions the Court held that; Aappeals are allowed and orders passed by
the Assessment Officer as well as the Appellate Authority and the Tribunal, in the case of each
one of the assessees, are quashed and set aside, holding as under :
(a) Such of those undertakings or enterprises which were established, became operational and
functional prior to 7.1.2003 and have undertaken substantial expansion between 7.1.2003 upto
1.4.2012, should be entitled to benefit of Section 80-IC of the Act, for the period for which they
were not entitled to the benefit of deduction under Section 80-IB.
(b) Such of those units which have commenced production after 7.1.2003 and carried out
substantial expansion prior to 1.4.2012, would also be entitled to benefit of deduction at different
rates of percentage stipulated under Section 80-IC.
(c) Substantial expansion cannot be confined to one expansion. As long as requirement of
Section 80-IC (8) (ix) is met, there can be number of multiple substantial expansions.
(d) Correspondingly, there can be more than one initial Assessment Years.
(e) Within the window period of 7.1.20013 upto 1.4.2012, an undertaking or an enterprise can be
entitled to deduction @ 100% for a period of more than five years.
(f) All this, of course, is subject to a cap of ten years. [Section 80-IC (6)].
(g) Units claiming deduction under Section 80-IC shall not be entitled to deduction under any
other Section, contained in Chapter VI-A or Section 10A or 10B of the Act [S. 80 IB (5)]. (ITA
No. 20/2015, dt. 28.11.2017)
Stovekraft India v. CIT (2017) 160 DTR 378/(2018) 300 CTR 5 /400 ITR 225 (HP) (HC)
S. 80IC : Special category States - Scrap - Derived - Deduction is available on sale of scrap
which was generated in the course of manufacture and production process.
The AO denied benefit of deduction on the amount received the assessee of sales of scrap
generated on the ground that receipt on sale of scrap does not form part of the business income
since it is not derived from business activity of the industrial undertaking for the purpose of
deduction u/s 80IC.The ITAT held that, scrap has been generated in the course of manufacturing
252
and production process and therefore it is eligible for the benefit of deduction 80IC. (AY.2008-09
,2011-12)
Anchor Electricals (P.) Ltd. v. DCIT (2017) 164 ITD 510 /(2018) 191 TTJ 26 (UO) (Mum.)
(Trib.)
S. 80IC : Special category States-Production of electric bikes by assembling imported parts

amounts to manufacture and entitle to deduction.
The Tribunal held that activity of assembling the parts by the assessee amounted to manufacture
and, therefore, the assessee is entitled to deduction under section 80IC. (AY. 2008-09)
ACIT v. Accura Bikes (P.) Ltd. (2017) 183 TTJ 547 (SMC) (Ahd.) (Trib.)
S. 80JJAA : Employment of new workmen – Workmen has too work at least 300 days -
Casual workers and employed through contract are not covered .
Tribunal held that deduction has to be granted only when workmen had been employed for at
least 300 days during relevant previous year and that such workmen were not casual workmen or
workmen employed through contract labour. (AY. 2007 - 08. 2008 - 09)
S.80JJAA : Employment of new workmen – Engineers can be considered as workmen,

however number of workmen employed wad less than 100 workers, claim of assessee was
rejected.
Tribunal held that engineers can be considered as workmen; however isince number of regular
workmen, i.e., who were employed for 300 days or more during relevant previous years were less
than 100 as per assessee's own admission, assessee's claim for deduction under section 80JJAA
was to be rejected even though, in assessee's own case relating to earlier years, the view that
engineers could be considered as workmen as per provisions of section 80JJAA was upheld by
the Tribunal. (AY. 2006-07)
Texas Instruments (India) (P.) Ltd. v. Dy.CIT (2017) 165 ITD 111 (Bang.) (Trib.)
S. 80JJAA : Employment of new workmen – If some work men were employed for a period
less than 300 days in the previous year then no deduction is allowable and such workmen is
not a causal work men or workmen employed through contact labour .
The Tribunal held that if some work men were employed for a period less than 300 days in the
previous year then no deduction is allowable in respect of payment of wages to such workmen
because the deduction is allowable for three years including the year in which the employment is
provided, and such workmen is not a causal work men or workmen employed through contact
labour (AY. 2005-06 & 2006-07)
Bosch Ltd. v. ACIT (2017) 183 TTJ 215/150 DTR 345 (Bang.) (Trib.)
S. 80P : Co-operative societies – Mutuality - Nominal members - Depositors and borrowers

are quite distinct - Activity of finance business cannot be termed as co – operative society –
Benefit is not available.
Dismissing the appeal of the assessee the Court held that; an assessee cannot be treated as a co-
operative society meant only for its members and providing credit facilities to its members if it
has carved out a category called ‘nominal members’. These are those members who are making
deposits with the assessee for the purpose of obtaining loans, etc. and, in fact, they are not
253
members in the real sense. Most of the business of the assessee was with this category of persons
who have been giving deposits which are kept in Fixed Deposits with a motive to earn maximum
returns. A portion of these deposits is utilised to advance gold loans, etc. to the members of the
first category. It is found that the depositors and borrowers are quite distinct. In reality, such
activity of the appellant is that of finance business and cannot be termed as co-operative society.
Therefore the appellant cannot be treated as a co-operative society meant only for its members
and providing credit facilities to its members. We are afraid such a society cannot claim the
benefit of Section 80P of the Act. (AY. 2009 - 10)
The Citizens Cooperative Society Ltd. v. ACIT (2017) 397 ITR 1/ 156 DTR 1/297 CTR
225/250 Taxman 78 (SC)
Editorial : Review petition was dismissed The Citizens Cooperative Society Ltd. v. ACIT
(2018) 163 DTR 448 /301 CTR 396/252 Taxman 374 (SC)
S. 80P : Co-operative societies – Entire business income and profit is exempt,there was no
justification to apply any other provision under Chapter IV-A, Part D. [ S. 40A (7), 43B (f)
]
Dismissing the appeal of the revenue the Court held that; when entire business income and profit
is exempt,there was no justification to apply any other provision under Chapter IV-A, Part D..
(AY. 2010-11)
PCIT v. U.P. Co-op. Federation Ltd. (2017) 398 ITR 630 (All) (HC)
Editorial : SLP of revenue is dismissed PCIT v. U.P. Co-op. Federation Ltd. (2017) 398 ITR 2
(St)
S. 80P : Co-operative societies - Primary Agricultural co-operative credit society —Income

derived by way of interest on fixed deposits made by assessee with banks is entitled to
deduction.[ S.80P (2) (a) ]
Allowing the petition the Court held that the assessee which is primary Agricultural co-operative
credit society and income derived by way of interest on fixed deposits made by assessee with
banks is entitled to deduction. (AY.2010-11, 2013-14, 2014-15)
Buchireddy Palem Co-op. Rural Bank Ltd. v.CCIT (2017) 396 ITR 371 (T&AP) (HC)
Vavveru Co – Operative Rural Bank Ltd v CCIT2017) 396 ITR 371 (T&AP) (HC)
S. 80P : Co-operative societies —Interest received from investment of surplus funds is not
eligible deduction.[S. 80P (2) (d)]
Allowing the appeal of the revenue, the Court held that; the income by way of interest earned by
deposit or investment of idle or surplus funds would not change its character irrespective of the
fact whether such income or interest was earned from a schedule bank or a co-operative bank and
thus section 80P (2) (d) of the Act would not apply in the facts and circumstances of the case.
(AY. 2007 08 to 2011-12)
PCIT v. Totagars Co-op. Sale Society (2017) 395 ITR 611/83 taxmann.com 140 /154 DTR
25/297 CTR 158 (Karn) (HC)
S. 80P : Co-operative societies - co-operative society providing credit facilities to its

members not within exception and entitled to special deduction.
Dismissing the appeal of the revenue the Court held that; If the assessee is not a co-operative
bank carrying on exclusively banking business and if it does not possess a licence from the
Reserve Bank of India to carry on business, then it is not a co-operative bank. It is a co-operative
society which also carries on the business of lending money to its members which is covered
under section 80P (2) (a) (i) of the Income-tax Act, 1961, i.e., carrying on the business of banking
for providing credit facilities to its members. It is entitled to the special deduction under
section 80P of the Act. (AY. 2011-12)
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CIT v. Shree Mahila Credit Soudhardha Sahakari Ltd. (2017) 395 ITR 287 (Karn) (HC)
S.80P : Co-operative societies--Society providing credit facilities to members-Benefit of

exemption cannot be denied.[S. 80P (2) (a) (i)].
Dismissing the appeal of the revenue, the Court held that; that the appellate authorities had clearly
perceived that the assessee was not a co-operative bank and that the activities of the assessee were
not in the nature of accepting deposits, advancing loans, etc., but was confined to its members
only and that too in a particular geographical area. Exemption under section 80P (2) (a) (i) could
not be denied on the ground that the members of the assessee society were not entitled to receive
any dividend or have any voting right or right to participate in the general administration or to
attend any meeting etc., because they were admitted as associate members for availing of loans
only and were also charged a higher rate of interest. The assessee society was entitled to
deduction under section 80P (2) (a) (i) of the Act.
CIT v. S-1308 Ammapet Primary Agricultural Co-op. Bank Ltd. (2017) 392 ITR 55 (Mad.)
(HC)
S.80P : Co-operative societies - Co-operative society includes co-operative bank-Interest

earned from deposits in co-operative bank is deductible. [S. 80P (2) (d),Banking Regulations
Act, 1949 S. 56 (i) (ccv) ]
Dismissing the appeal of the revenue the Court held that;Co-operative society includes co-
operative bank. Interest earned from deposits in co-operative bank is deductible. Section 56 (i)
(ccv) of the Banking Regulations Act, 1949, defines a primary co-operative society/bank as the
meaning of co-operative society. Therefore, a co-operative society/bank would be included in the
words "co-operative society". Therefore under section 80P (2) (d) of the Income-tax Act, 1961
the amount of interest earned from a co-operative society/bank would be deductible.
PCIT v. Totagars Co-op. Sale Society (2017) 392 ITR 74 /78 taxmann.com 169 /154 DTR 25
(Karn.) (HC)
S. 80P : Co-operative societies – Interest received from members - Providing credit facilities
to only members hence not co – operative Bank eligible deduction. [80P (2) (a) (i)]
Dismissing the appeal of the Revenue, the Court held that; a co-operative credit society providing
credit facilities to its members alone, and not to general public at large, hence the assessee would
not be covered by description of term 'co-operative bank' and, thus, would be entitled to seek
deduction under section 80P (2) (a) (i).
CIT v. Nilgiris Co-operative Marketing Society Ltd. (2017) 244 Taxman 256/148 DTR 173
/293 CTR 367 (Mad.) (HC)
S. 80P : Co-operative societies-Where an employee co – operative society earned income

from investments in banks and other financial institutions, same was not eligible for
deduction - Matter remanded. [Multi – State Co – operative Societies Act, 2002,S. 63, 64]
The assessee was a co-operative credit society granting credit facility to its members. For the
assessment years 2003-04 and 2004-05, the Assessing Officer disallowed its claim to special
deduction under sub-section (2) of section 80P of the Act on the sum of interest received on
account of its investments of surplus funds and the disallowance was affirmed by the
Commissioner (Appeals). The Appellate Tribunal reversed the order and held that the assessee
was entitled to deduction of interest income. On appeal :
Held, that the Assessing Officer was to calculate the interest earned by the assessee under
sections 63 and 64 of the Multi-State Co-operative Societies Act, 2002 and to allow the benefit
under section 80P. The interest paid to the members to the extent for the purpose of earning the
sums on account of interest from investments was to be ascertained. Such interest was to be
255
deducted from the expenses of eligible business. Consequently the increased amount of profits of
eligible business was to be the amount of deduction available to the assessee under section
80P.Matter remanded.Income from investments in banks and other financial institutions, same
was not eligible for deduction. (AY. 2003-2004, 2004-2005)
CIT v. South Eastern Railway Employees Co-op Credit Society Ltd. (2016) 73 taxmann.com
123/(2017) 390 ITR 524 (Cal.) (HC)
S. 80P : Co-operative societies - Agricultural co-operative bank - Accepting deposits from

both members and public at large was considered as providing other banking services
hence deduction u/s. 80P (2) (a) was held to be not eligible, matter was seta side for giving
specific finding [ S.80P (2) (a) ]
On appeal by the revenue the Tribunal held that; accepting deposits from both members and
public at large was considered as providing other banking services hence deduction u/s. 80P (2)
(a) was held to be not eligible however the matter was seta side for giving specific finding .
(AY. 2009 – 2010)
ITO v. Kalapet Primary Agricultural Co-operative Bank Ltd. (2017) 166 ITD 250
(Chennai) (Trib.)
S.80P : Co-operative societies-Credit facility as well as housing facility - Not maintain

separate books of account - Assessing Officer to arrive at figure of profits and allow
deduction.[S.80P (2) (a)]
Tribunal held that the assessee providing credit facility as well as housing facility is entitled to
deduction to the extent of income relating to business of banking or providing credit facilities to
its members, however the assessee is not maintaining separate accounts to depict profits
attributable to both segments hence the Assessing Officer to arrive at figures of profit and allow
deduction accordingly . (AY.2009-2010)
ITO v. Vidarbha Premier Co-Operative Housing Society (2017) 55 ITR 28 /147 DTR 57 /184
TTJ 145 (Nag.) (Trib.)
S.80P : Co-operative societies - Co-operative federation-Entitled to deduction [S. 80P (2) (a)
(vi)]
Dismissing the appeal, of revenue the following the order of earlier year the assesse was held to
be entitle to deduction. (.AY.2010-2011)
ITO v. Nashik District Labour Societies Co-operative Federation. (2017) 54 ITR 253 (Pune)
(Trib.)
S. 90 : Double taxation avoidance agreement-Dividend income received by assessee from a

foreign country is exempt from taxation - DTAA - India-Malaysia [ Art, 10 ]
Dividend income received by assessee from a foreign country is exempt from taxation in terms
of India-Malaysia DTAA.
DCIT v. Tripti Trading & Investment Ltd. (2017) 247 Taxman 108 (SC)
S. 90 : Double taxation relief – Entitle to credit for deemed dividend tax - DTAA - India –
Sultanate of Oman. [S. 9 (1), 263, Art. 25]
256
Dismissing the appeal of revenue, the Court held that; the clarifications rendered by the Sultanate
of Oman in its letter to the effect that under the company income tax law of Oman, dividend
formed part of the gross income chargeable to tax and that the tax law of Oman provided income
tax exemption to companies undertaking certain identified economic activities considered
essential for the country’s economic development with a view to encouraging investments in such
sectors, were to be regarded as conclusive. If the tax authorities had any doubts, they could not
have proceeded to elevate them into findings, but addressed them to Omani authorities if not
directly, then through the Indian diplomatic channels. In not doing so, but proceeding to interpret
the laws and certificate of Oman authorities, the Department had fallen into error. Assessee is
entitle to credit for deemed dividend tax . Revision order was held to be not valid . AY. 2010-11,
2011-12)
PCIT v. Krishak Bharati Co-op. Ltd. (2017) 395 ITR 572/247 Taxman 317/295 CTR 181
(Delhi) (HC)
Editorail : SLP is granted to the revenue, PCIT v. Krishak Bharati Co-op. Ltd. (2018) 253
Taxman 242 (SC)
S. 90 : Double taxation relief – Dividend income from an Omani Company on which it was
not liable to pay any tax in Oman by virtue of exemption granted as per Omani Tax laws,
purpose of exemption being to promote economic developments, assessee would be entitled
to tax credit in respect of such deemed dividend tax foregone by Oman - DTAA-India –
Oman. [S.9 (1) (i), 263 ,Art. 25 ]
Dismissing the appeal of the revenue, the Court held that;assessee society received dividend
income from an Omani Company on which it was not liable to pay any tax in Oman by virtue of
exemption granted as per Omani Tax laws, purpose of exemption being to promote economic
developments, assessee would be entitled to tax credit in respect of such deemed dividend tax
foregone by Oman. Revision was held to be not valid . (AY. 2010-11, 2011-12)
PCIT v.Krishak Bharati Co-operative Ltd. (2017) 80 taxmann.com 326 /151 DTR 12/295
Editorial : Order of Tribunal in, Krishak Bharati Cooperative Ltd. v.ACIT (2016) 158 ITD 777
(Delhi) (Trib.) is affirmed.
Editorial : SLP is granted to the revenue, PCIT v.Krishak Bharati Co-operative Ltd. (2018) 253
Taxman 242 (SC)
S. 90 : Double taxation relief – Operation of ships - Assessee being a tax resident of

Singapore liable for taxation on its shipping income only in Singapore and not in India -
DTAA-India – Singapore. [Art.8, 24]
The Tribunal held that the assessee being a tax resident of Singapore liable for taxation on its
shipping income only in Singapore and not in India.
The Tribunal further held that even if the entire journey is undertaken by a shipping company
through and through charter arrangement or joint service arrangement, the benefit of Art. 8 of
India-Singapore DTAA cannot be denied as it would still fall within the ambit and scope of
operation of ships. (AY. 2008-09)
APL Co. Pte Ltd. v. ADIT (IT) (2017) 185 TTJ 305 (Mum.) (Trib.)
S. 90 : Double taxation relief - Consideration received from the assessee for the use of
software is not royalty but business receipts in the hand of NPL. Since, NPL does not have a
PE in India, the said business income cannot be taxes in India - DTAA-India – Singapore .
[S. 195, Art, 5, 7, 12]
The Tribunal held that under the agreement the assessee has only a right to use the computer
software. The consideration received from the assessee for the use of software is not royalty but
business receipts in the hand of NPL. Since, NPL does not have a PE in India, the said business
257
income cannot be taxes in India and consequently there was no obligation on the assessee to
deduct TDS under section 195. (AY. 2010-11)
I.T.C. Ltd. v. ADIT (IT) (2017) 185 TTJ 145 /150 DTR 273 (Kol.) (Trib.)
S.90 : Double taxation relief-Loan to subsidiary at Cyprus-Interest income at 10% - DTAA-

India Cyprus. [Art. 25 (4)]
Assessee entitled to tax relief at ten per cent. Assessing Officer to verify whether assessee paid
tax on interest in India and if so to allow deduction of tax admitted to have been paid. (AY.2007-
2008, 2008-2009)
S. 90 : Double taxation relief-where assessee-company receives certain amount from AEs

after deduction of tax at source, tax credit has to be allowed to it only to extent
corresponding income suffers tax in India.
Where assessee-company receives certain amount from AEs after deduction of tax at source, tax
credit has to be allowed to it only to extent corresponding income suffers tax in India and it is not
correct approach to take into account gross receipts for purpose of computing admissible tax
credit. (AY. 2009-10)
Elitecore Technologies (P) Ltd. v. Dy. CIT (2017) 146 DTR 77 /184 TTJ 166 /55 ITR 24 (SN)
(Ahd.) (Trib.)
S. 91 : Double taxation relief - Countries which no agreement exists – Section does not
differentiate between State and Federal taxes and provides for both types of Income taxes to
be taken into account for purpose of tax credits against Indian Income Tax liability-DTAA-
India – USA [S. 9 (1) (i), Art 2 ]
Allowing the appeal of the assesee the Tribunal held that; S.91 does not discriminate between
State and Federal taxes, and in effect provides for both types of Income taxes to be taken into
account for purpose of tax credits against Indian Income tax liability, an assessee is, in principle,
entitled to tax credits in respect of State income taxes paid abroad. however, credit for all taxes
paid abroad in any case cannot exceed Indian income tax liability in respect of same income. CIT
(A) Ccan not refuse to follow the judgement of earlier year on the ground that the appeal is
pending before High Court . (AY. 2010-11)
Dr. Rajiv I. Modi. v. DCIT (2017) 167 ITD 318 (Ahd) (Trib.)
S.92A : Transfer pricing-Associated enterprises – Purchase of rough diamonds from firm

'B', controlled by close relatives provision is not applicable. [S.92C]
The assessee firm made purchases of rough diamonds from firm 'B'. Assessee firm was controlled
by three brothers and Firm ‘B’ was controlled by the fourth brother. The department opined that
both the entities were being controlled by the same family and, thus, said entities were covered
under clauses (j), (k) and (m) of S.92A (2).
It was held by the High Court that Clause (i) of S.92A (2) states a case where goods or articles are
manufactured or transferred by one enterprise. Firm 'B' does not either manufacture or process
any articles. It merely purchased rough diamonds and supplied the, to the assessee. Clause (j)
would apply when an enterprise is controlled by an individual. In the present case, both the
enterprises are partnership firms. There is nothing to suggest that they are controlled by any
individuals. Clause (l) would apply in a case where there is an enterprise in the nature of a firm
and another enterprise who holds not less than 10 per cent interest in such firms. Such facts are
258
also not applicable in the present case. Hence S.92A would not be applicable in the present case.
(AY. 2008 - 09)
PCIT v. Veer Gems (2017) 249 Taxman 264 /298 CTR 98 /157 DTR 46 (Guj) (HC)
Editorial : ACIT v. Veer Gems (2017) 77 taxmann.com 127/183 TTJ 588 (Ahd) (Trib) is
affirmed
S. 92A : Transfer pricing-"associated enterprise"-The mere fact that an enterprise has de

facto participation in the capital, management or control over the other enterprise does not
make the two enterprises "associated enterprises" so as to subject their transactions to the
rigors of transfer pricing law.[S. 40A (2) (b), 92CA]
Dismissing the appeal of revenue; the Tribunal held that; The mere fact that an enterprise has de
facto participation in the capital, management or control over the other enterprise does not make
the two enterprises "associated enterprises" so as to subject their transactions to the rigors of
transfer pricing law. Accordingly the Tribunal held that; as these enterprises are not associated
enterprises, the ALP adjustments in respect of the transactions between these enterprises were
wholly unwarranted. For this short reason, and without going any further into the matter, we
approve the impugned deletion of ALP adjustment. The plea of the assessee, in cross objection, is
upheld and, for that reason, grievance of the Assessing Officer, in appeal, is dismissed as
infructuous. (AY. 2008-09)
ACIT v. Veer Gems (2017) 146 DTR 1 (Ahd.) (Trib.)
S. 92A : Transfer pricing-Associated Enterprises - Even if the conditions of S. 92A (2) (i) are
fulfilled, these enterprise cannot be treated as ‘associated enterprise’ if the requirements of
s. 92A (1) are not fulfilled.[S.92C]
Allowing the appeal of assessee the Tribunal held that; the fact that an enterprise can “influence
prices and other conditions relating to sale” does not make it an “associated enterprise” of the
assessee if it does not participate in the (a) capital, (b) management, or (c) control of the assessee
and thus does not fulfill the basic rule u/s 92A (1). S. 92A (2) (i) has to be read with s. 92 (A) (1).
Even if the conditions of s. 92A (2) (i) are fulfilled, these enterprise cannot be treated as
‘associated enterprise’ if the requirements of s. 92A (1) are not fulfilled. There is an inadvertent
omission, with respect to threshold application of Section 92A (2) (i), whether in terms of a
percentage of such sales or otherwise, in the statute .It is the apparent omission which is resulting
in wholly avoidable litigation on the applicability of section 92 (A) (2) (ITA No.
771/CHNY/2016, dt. 30.11.2016) (AY. 2011-12)
Orchid Pharma Limited v. DCIT (Chennai) (Trib.);www.itatonline.org
S.92A : Transfer pricing - Associated enterprises – Not a share holder but employee of US
company – Provisions of Chapter X could not be applied .
Allowing the appeal of the assesee the Tribunal held that the Assessing Officer proceeded on
premise that one Mr Satish Chwla and Stevan Elefant being a major shareholder in assessee-
company, was also a Director and major shareholder of US company and held that, thus, both
were AEs, but certificate of CA of US company revealed that Mr Satish Chwla and Stevan
Elefant was not shareholder and employee of US company, provisions of Chapter X were not
attracted (AY. 2010-11)
Elder Exim (P.) Ltd. v. DCIT (2017) 167 ITD 208 (Mum) (Trib.)
S. 92A : Transfer pricing-Associated enterprises-In cases of public sector companies, even

all or majority of shareholdings may be kept by Union or State Governments, these
companies, for that reason alone, cannot be said to be associated enterprises for purposes of
section 92A. [S.92C]
259
Dismissing the appeal of the assessee the Tribunal held that; in cases of public sector companies,
even all or majority of shareholdings may be kept by Union or State Governments, these
companies, for that reason alone, cannot be said to be associated enterprises for purposes of
section 92A. (AY.2009-10)
DCIT v. Hazira LNG (P.) Ltd. (2017) 163 ITD 223 / 184 TTJ 440 /147 DTR 1 (Ahd.) (Trib.)
S. 92A : Transfer pricing-Associated enterprises-Assessee being a partnership concern

could not be said to be controlled by an 'individual' hence, clause (j) of s.92A (2) has no
application in the present case. [S.92C]
A partnership concern cannot be said to be controlled by an 'individual' and, hence, as per section
92A (2) (j), cannot be an AE of another enterprise run by relative of partners even though it may
have a de facto participation in capital, management or control of other enterprise. (AY. 2008-09)
ACIT v. Veer Gems (2017) 146 DTR 1 (Ahd.) (Trib.)
S.92B : Transfer pricing-International transactions - Advertisement, marketing and

promotion expenditure-Whether outbound business constituted international transaction
for which arm's length price to be determined-Matter remitted to Appellate Tribunal.
[S.92C].
Court remanded the matter to the Tribunal to decide whether reporting of AMP expenditure in
regard to outbound business constituted an international transaction for which ALP determination
was necessary . (AYs.2009-2010, 2010-2011)
Le Passage to India Tour and Travels (P) Ltd v. Dy. CIT (2017) 391 ITR 207/245 Taxman
129/292 CTR 241/147 DTR 57 (Delhi) (HC)
Editorial : SLP of revenue is admitted ,Dy. CIT v. LE Passage to India Tours & Travels (P.) Ltd.
(2017) 250 Taxman 340 (SC)
S.92B : Transfer pricing-Transaction of assessee, Indian company with U S branch of an
Indian company could not be taxed under provisions of Chapter X of Act
Allowing the appeal of the assessee the Tribunal held that ;transaction of assessee, Indian
company with U S branch of an Indian company could not be taxed under provisions of Chapter
X of Act .Durian being an Indian tax resident, a company incorporated under Companies Act,
1956, provisions of Chapter X could not be applied with respect to transactions. (AY. 2008 - 09
to 2009 - 10)
Elder Exim (P.) Ltd. v. DCIT (2017) 167 ITD 208 (Mum) (Trib.)
S.92B : Transfer pricing – Receipt of foreign inward remittance from NRI director against
share premium - International transaction. [S.92E, 271BA]
It was held by the Tribunal that transactions of share investment, clearly fall within the ambit of
the provisions of section 92E since the international transaction of investment in share capital of
the assessee by the NRI Director of the assessee company falls within the ambit of section 92E.
(AY. 2011-12)
BNT Global (P.) Ltd. v. ITO (2017) 165 ITD 472 (Mum) (Trib.)
260
S. 92B : Transfer pricing – Matter remanded for re - adjudication to determine whether
AMP expenses amounted to international transaction or not. [ S.92C ]
Tribunal held that the TPO had referred to certain rulings of High Court on point in coming to
conclusion that there was a separate international transaction, yet, there were certain other
important judgments of High Court, delivered after passing of order by TPO, which could not be
considered as those were not existence at the point of time. Therefore, the said issue was
remanded back for fresh consideration. (AY. 2012 – 2013)
Perfetti Van Melle India (P.) Ltd. v. DCIT (2017) 166 ITD 229 (Delhi) (Trib.)
S.92B : Transfer pricing-AMP expenditure incurred by an assessee benefits AE indirectly –

Not covered under Transfer Pricing provisions – Would not constitute an International
transaction. [S.92C]
It was held by the Tribunal that there is no evidence to prove that the claim made by the assessee
that it had incurred the AMP expenditure for catering its own business needs. Until and unless
some-thing positive is brought on record about sharing/incurring AMP expenditure under the
head by an assessee on behalf of its AE, it cannot be held that it should have recovered some
amount from the AE, as the expenditure by it indirectly helped in augmenting the brand value
owned by its overseas AE. If the AMP expenditure incurred by an assesee benefits the AE
indirectly it would not mean that it was an International Transaction. The basic purpose of
introducing the various provisions of chapter X, as stated earlier, was to prevent tax evasion in the
transactions undertaken between an Indian entity and its overseas AE. In our opinion, a
perceived/notional indirect benefit to the AE, due to incurring of certain expenditure by an
assessee in India, is not covered by the TP provisions. (AY. 2008-09, 2009-10)
DCIT v. Mattel Toys (India) (P.) Ltd. (2016) 72 taxmann.com 86/(2017) 183 TTJ 81/152
DTR 287 (Mum.) (Trib.)
S.92B : Transfer pricing - Inter-company receivables from providing services, constitute a

separate international transaction. transaction. [S.92C]
The issue was whether inter-company receivable arising from the provisions of research and
information services constitute a separate international transaction under provisions of section
92B of the income tax act.
It was observed that non-charging or under-charging of interest on the excess period of credit
allowed to the AE for the realization of invoices amounts to an international transaction and the
ALP of such an international transaction is required to be determined.
Hence, it was held that inter-company receivable arising from the provisions of research and
information services constitute a separate international transaction. (AY. 2012-13)
McKinsey Knowledge Centre India (P.) Ltd. v. DCIT (2017)82 taxmann.com 25 (Delhi)
(Trib.)
McKinsey Knowledge Centre India (P.) Ltd. v. DCIT (2017) 77 Taxman .com 164 /183 TTJ
553 (Delhi) (Trib)
S. 92B : Transfer pricing - International transaction-Interest – Non-charging or under

charging of interest on excess period of credit allowed to AE for realization of invoices
amounts to an international transaction-Matter sent to AO for redetermination of working.
[S.92C]
Non-charging or under charging of interest on excess period of credit allowed to AE for
realization of invoices amounts to an international transaction. Matter sent to AO for
redetermination of working. (AY. 2011-12)
261
CPA Global Services (P.) Ltd. v. ITO (2017) 162 ITD 64 /151 DTR 385 /187 TTJ 172 (Delhi)
(Trib.)
S.92C : Transfer pricing - Comparable - Tribunal communicated and carried out a

functional and factual analysis, it could not be said that that it was a blind application of
precedent.
Dismissing the appeal of the revenue the Court held that; Tribunal communicated and carried out
a functional and factual analysis, it could not be said that that it was a blind application of
precedent. (AY.2007-08)
PCIT v. ST Microelectronics (P.) Ltd. (2017) 251 Taxman 484 /(2018) 300 CTR 213
(Delhi) (HC)
S.92C : Transfer pricing - Arm’s Length Price —Transactional net margin method —
Selection of comparables — Failure of Tribunal analyse properly – Matter remanded [ S.
254 (1) ]
Allowing the appeal the Court held that; the Tribunal failed to undertake the exercise regarding
the correctness of the inclusion and exclusion of comparables. Therefore, the remand order
passed by the Tribunal was to be set aside. The matter was to be remanded to the Tribunal for
disposal on the merits with regard to the issue concerning validity of the inclusion of the three
comparables and the exclusion of the three comparables as suggested by the assessee. (AY. 2008
- 09)
Corning Sas-India Branch Office. v. DIT (2017) 251 Taxman 42/(2018) 400 ITR 505/164
DTR 304/302 CTR 161 (Delhi) (HC)
S. 92C : Transfer pricing - Arms’ length price – Assessee entered into back to back
international transactions with AE in respect of contracts that AE had entered into with
independent entities – Services rendered were exactly same and hence prices charged can be
taken as CUP for determining ALP.
The assessee company had rendered software development services to its AE. There were three
different transactions. Two of these three transactions, were back to back transactions in respect
of contracts that US AE had entered into independent entities. These contracts were passed on to
the assessee company and entire amount was passed on to the assessee. In respect of third
transactions, the Assessee reported that identical services have been provided to an independent
enterprise at a lower price and therefore third services were also at arm’s length price. The TPO
held that CUP was not the most appropriate method stating that, the functions of the assessee and
its AE were different as the assessee is simply a software developer whereas the AE is a large
scale business entity, suggesting that the price at which the assessee should sell to AE cannot be
compared with the price at which AE sells its client. As far as third service, the TPO held that
services were not similar and hence not comparable. On appeal, the CIT (A) rejected the
contention of the TPO stating that when CUP input was available and TPO already accepted it as
most appropriate method in subsequent years, there was no reason to adopt any other method. On
further appeal by Revenue the ITAT held that since the services rendered were same for both the
262
assessee and its AE, CUP was the most appropriate method for benchmarking the transactions.
Further the FAR analysis should be conducted in respect of the transaction and not for the
enterprise as a whole. In respect of the third transaction the ITAT restored the matter back to TPO
for verification. (ITA No. 5023/Del/2012 dt. 30-05-2017) (AY .2007 – 2008)
Dy.CIT v. Calance Software (P.) Ltd. (2017) 160 DTR 227 /82 taxmann.com 390 (Delhi)
(Trib)
S. 92C : Transfer pricing - Arms’ length price – adjustment can be made only to controlled
international transaction and not entire transactions
Assessee was in the business of manufacturing and export of silk fabrics. In respect of the
international transaction entered into by the assessee, it selected TNMM as the most appropriate
method to benchmark its transaction and had chosen 9 comparables. The TPO however, during
assessment, rejected 8 comparables and derived operating profit to operating cost margin much
lower than the margin adopted by the assessee. The TPO took sakes at entity level and cost of
sales at entity level i.e. export sales as well as domestic sales. On appeal the CIT (A) deleted the
addition. The Tribunal dismissed the departmental appeal and held that only international
transaction has to compared with uncontrolled transaction and not the transaction undertaken by
the entity as whole. (ITA No. 201/Kol/2012 dt.12-05-2017) (AY. 2009 – 2010)
Dy. CIT v. J.J. Exporters Ltd. (2017) 187 TTJ 588 /154 DTR 142 /82 taxmann.com 8. (Kol)
(Trib)
S. 92C : Transfer pricing - Arms’ length price – A company providing support services to
Sogo Sosha companies cannot be considered to be a trading entity and the value of goods
sourced by the AE cannot be included in the operating cost.
The Assessee provided support services to its AEs, which were Sogo Sosha group entities. Sogo
Shosha means general trading companies. It is a form of industrial organization, a kind of
vertically integrated trading companies in Japan. Sogo Shosha structures are companies with
interlocking ownerships, dealing in all products. These structure transact in huge volumes,
however, operate on thin margins. Sogo Shosha structures also have direct subsidiaries which
specialize in certain types of business, such as rendering of business support services. Assessee’s
function was limited to identification of suppliers in India. The TPO, re-characterised the
Assessee as a trader and while computing the arm’s length price, included the free-on board
(“FOB”) value of goods sourced from India in the operating cost of the Assessee to compute the
Net Margin on Cost (NCP). The CIT (A) deleted the adjustment proposed by the TPO and the
Department filed an appeal before the ITAT. The ITAT held that the TPO failed to appreciate that
the Assessee did not undertake trading function. The TPO sought to artificially increase the cost
base and proposed a mark-up on the value of goods sourced by the AE, which did not correspond
to any of the methods prescribed in the Act. The ITAT also observed that the TPO was expecting
the Assessee to earn a margin of over 200%, which was practically impossible, despite the fact
that the TPO had himself accepted the Assesse’s stand in the subsequent years. (ITA No. 6287 &
6288/Del/2012 dt. 18.08.2017) (AY. 2007-08, 2008-09)
DCIT v. Itochu India P. Ltd. (2017) 58 ITR 61 (SN) (Delhi) (Trib)
S. 92C : Transfer pricing - Arms’ length price – CUP cannot be applied in case uncontrolled
transactions are with parties in a different country, which had different market condition
and quality norms.
The assessee was engaged in manufacturing of ‘Catalytic Converters’ for automobiles and
components of car A/C systems. It applied CUP method to benchmark the international
transactions entered into by it with its associated enterprises (AEs). The Assessee compared the
purchase price charged by the AE with the price charged by the AE to unrelated parties in
Europe. The TPO rejected CUP and applied TNMM, since the TPO alleged that the Assessee was
an independent entrepreneur as it had entered into transactions with third parties in India and
conducted R&D for its products, but had failed to renegotiate its purchase price in the impugned
263
year. The comparable transactions selected by the Assessee were rejected since they were based
in different geographical locations and there was difference in quantity, product and timing of
purchase. The CIT (A) held that CUP was the most appropriate method and the prices being
compared were FOB and hence geographical differences were removed therefrom. The ITAT
allowed the appeal of the Department. It was held that the pollution norms of India and Europe
were different and hence the quality of the product also differed with it. Further, the currencies of
both jurisdictions were different as well as the market conditions. Accordingly, the ITAT rejected
the application of CUP and upheld the application of TNMM by the TPO. (ITA No.
847/Del/2012 dt. 15.09.2017) (AY. 2007-08)
DCIT v. Ecocat India P. Ltd. (2017) 59 ITR 76 (SN) 76 (Delhi) (Trib)
S. 92C : Transfer pricing - Arms’ length price – Foreign Exchange Fluctuation was
operating in nature if it arose mainly from revenue transactions.
The assessee was engaged in manufacturing of ‘Catalytic Converters’ for automobiles and
components of car A/C systems. The Assessee had applied CUP, but the TPO had applied
TNMM to determine the arm’s length price of the international transactions entered into by the
Assessee. While applying TNMM, the TPO rejected the claim for an adjustment for foreign
exchange fluctuation and contended that it was operating in nature and hence had to be included
while computing the margins. The CIT (A) dismissed the contentions of the TPO and held that
foreign exchange fluctuation did not form part of operation income as the assessee was not a
dealer in foreign currency. The ITAT held that foreign exchange fluctuation loss arose mainly
due to revenue transactions and was hence operating in nature. It also dismissed the reliance on
Safe Harbour Rules as they were not applicable in the impugned year. (ITA No. 847/Del/2012 dt.
15.09.2017) (AY .2007-08)
DCIT v. Ecocat India P. Ltd. (2017) 59 ITR 76 (SN) (Trib) (Delhi)
S. 92C : Transfer pricing - Arms’ length price – Adjustment only with respect to
transactions with Associated Enterprises on proportionate basis
The Revenue raised an issue that transfer-pricing adjustment should be made to total turnover of
the Assessee and not just the international transaction. This ground was dismissed relying on the
decision of Hon'ble Bombay High Court in CIT v. ALSTOM Projects India Ltd. [ITA No.362 of
2014, dt. 14-9-2016]. (ITA no. 566 & 645/Pune/2013 and 2637/Pune/2016 dt. 21st April, 2017
(AY. 2001-02 ,2002-03)
Behr India Ltd. v. ACIT (2017) 188 TTJ 695 /81 taxmann.com 46 (Pune) (Trib)
S. 92C : Transfer pricing - Arms’ length price – TNMM – Once depreciation, duty
drawback and scrap sales has been included as part of operating cost of Assessee’s PLI then
it also should be included as part of operating cost of comparable’s PLI
The revenue adopted TNMM and accepted it be the most appropriate method. However while
computing assessee’s PLI included depreciation as part of total operating cost. However, while
working out the PLI of external comparables, depreciation was excluded from the operating cost,
by adding depreciation to the operating profit. Tribunal held that comparison made by the
revenue is incorrect since under transfer pricing provisions an apple is to be compared to an
apple. Relying on the Hon'ble Bombay High Court in the case of Welspun Zucchi Textiles Ltd.
(2017) 391 ITR 211 (Bom), the Tribunal held that depreciation was an operating expense to
determine the operating cost. When applying TNMM, while determining Assessee’s PLI
depreciation has been included as part of operating cost, then, while computing the PLI of the
comparables, depreciation should be included as part of operating cost of the comparables.
TPO had excluded both duty drawback and scrap sales from operating profits of the Assessee, as
well as external comparables. Relying on the Hon'ble Bombay High Court in the case of Welspun
Zucchi Textiles Ltd. (supra), the Tribunal held that duty drawback is to be included in the
operating profits while applying the transfer pricing provisions. Such an inclusion of duty
drawback benefit is to be made both in the hands of the Assessee and the external comparables.
264
(ITA no. 566 & 645/Pune/2013 and 2637/Pune/2016 dt. 21st April, 2017 (AY. 2001-02 2002-
03))
S. 92C : Transfer pricing - Arms’ length price – Assessee can argue that a comparable
which was initially selected by it to be functionally comparable, is in fact not comparable –
However opportunity to be granted to the TPO.
The assessee in the TP study report identified Banco Products (India) Ltd. to be comparable to it.
But before the Tribunal assessee claimed that the said concern is not comparable. The assessee
pointed out aspects which were not placed before the Assessing Officer/TPO, who had proceeded
on the ground that the assessee had picked up said concern to be functionally comparable.
Accordingly, the Tribunal remitted the issue back to the file of Assessing Officer/TPO to
determine whether the said concern Banco Products (India) Ltd. is functionally comparable to the
assessee or not. (ITA no. 566 & 645/Pune/2013 and 2637/Pune/2016 dt. 21st April, 2017) (AY.
2001-02, 2002-03,
S. 92C : Transfer pricing – Arm’s length price – Comparable - Selling software products
cannot be compared with software development.
The Tribunal held that a company which is also engaged in selling software products cannot be
considered as a comparable for bench marking the international transactions of provision of
software development services undertaken by the assessee. (AY. 2011-12)
Dy. CIT v. Ness Technologies (India) (P) Ltd. (2017) 188 TTJ 8 (UO) (Mum.) (Trib.)
S. 92C : Transfer pricing - Reimbursement of expenses by AEs - Addition cannot be made

on notional basis .
The Tribunal held that the reimbursement of expenditure incurred by the assessee from its AEs
has been made on cost to cost basis, no national mark up or profit element can be imputed in the
hands of the assessee qua the reimbursement of expenses in terms of section 92 (1). The addition
deleted by the Tribunal. (AY. 2011-12)
Dy. CIT v. Ness Technologies (India) (P) Ltd. (2017) 188 TTJ 8 (UO) (Mum.) (Trib.)
S. 92C : Transfer pricing - Arm’s length price - Comparable - A company engaged in e-

prescription and document management cannot be compared with the company engaged in
the business of software development .
265
Dismissing the appeal of the revenue, the Tribunal held that; A company engaged in e-
prescription and document management i.e., providing specified services or a company providing
technical services involving software testing, verification and validation of software or a
company providing engineering design and information technology services were not comparable
to assessee, engaged in business of software development and low end ITES back office services
to group companies (AY. 2011-12)
DCIT v. Infor (India) (P.) Ltd. (2017) 167 ITD 11 (Hyd) (Trib.)
S.92C : Transfer pricing - Arm's length price – Company engaged in the business of
software product cannot be compared with the company engaged in the business of
software consultancy .
Allowing the appeal of the assessee, Tribunal held that; company engaged in business of
software product and engaged in providing open and end to end web solutions software
consultancy and design and development of software using latest technology could be considered
as a comparable . (AY. 2009-2010)
Ariba Technologies India (P.) Ltd. v. ITO (2017) 59 ITR 124 /87 taxmann.com 76 (Bang.)
(Trib.)
S. 92C : Transfer pricing - Arm’s length price - Advance of loan and charge of interest -
interest charged at rate higher than LIBPOR reasonable and at arm’s length - Addition of
difference in arm’s length price as determined by Transfer pricing officer was held to be
not tenable.
Tribunal held that; advancing loans to its subsidiaries to improve brand image and charging
interest at 2 per cent - Loans advanced for purpose of business and not with an intention to earn
interest. No Borrowed funds utilised for purpose of advancing - Interest charged at rate higher
than LIBPOR reasonable and at arm’s length. Addition of difference in arm’s length price as
determined by Transfer pricing officer not tenable. (AY. 2011-12, 2012-13)
ACIT v. CCL Products (India) Ltd (2017) 59 ITR 141 (SN) (Visakh) (Trib)
S. 92C : Transfer pricing – Arm’s length price - Import of goods and sale of finished
products to AE - TNMM as most appropriate method
Tribunal held that; since the assessee is importing raw material from its AE and also making
exports of the finished goods to the AE, the import transactions as well as the export transactions
are interconnected and closely linked ,hence, it is appropriate to take the composite transaction
and then apply TNMM as most appropriate method. therefore, TNMM would be the most
appropriate method for determining the ALP of the international transactions entered into by the
assessee. (AY. 2002-03)
ACIT v. Gates India (P) Ltd (2017) 159 DTR 17/189 TTJ 473 (Delhi) (Trib)
S.92C : Transfer pricing - Arm's length price-Software development cannot be compared
with undertaking training activity of software professionals on online projects .
266
The Tribunal held that the assessee was rendering software development services to its AE and
functions performed by it included design of software and its development, a company
developing its own software products and undertaking training activity of software professionals
on online projects, can not be accepted as comparable. (AY. 2007-08)
Aircom International (India) (P.) Ltd v .Dy.CIT (2017)84 taxmann.com 41 /188 TTJ 633
(Delhi) (Trib.)
S 92C : Transfer pricing - Arm’s length price - Software company cannot be compared with
IT consulting company which is functionally dissimilar, matter is remanded .
Assessee had rendered software development services to its AEs. It had adopted TNMM to
benchmark its transactions with AE. TPO substituted his own comparables and determined
adjustment. It was found that some functionally comparable companies had been excluded by
TPO merely because it had gone under merger or had different accounting year ending. Further,
TPO had ticked up companies having functions of high end IT services, IT consulting, product
companies, business intelligence companies, etc., which were functionally dissimilar to assessee.
The Tribunal held that on facts, matter should be set aside to file of Assessing Officer to properly
apply comparables in accordance with objections raised by assessee. (AY. 2012-13)
Apollo Tyres Ltd. v. DCIT (2017) 84 taxmann.com 219 /(2018) 62 ITR 71 (Cochin) (Trib.)
S. 92C : Transfer pricing - Arm’s length price – Huge turnover, abnormal margin etc. ipso
facto does not lead to the conclusion that a company which is otherwise comparable on FAR
analysis can be excluded. Matter remanded [S. 10A ]
In light of the judgement of the Delhi High Court in the case of ChrsCapital Investment Advisors
India P. Ltd. v. DCIT (82 taxmann.com 167), the issue vis-à-vis application of turnover filter,
high profit filter or abnormal margins was restored back to the files of the TPO. On account of
25% RPT filter, several comparables will be available which were earlier deleted on account of
0% RPT filter. These comparables are required to be examined on the FAR analysis and hence
the entire TP issue was restored back to the files of the TPO (ITA No. 1519/Bang/2013 dt. 13-09-
2017) (AY. 2005-06).
Robert Bosch Engineering and Business Solutions Ltd. v. DCIT (2017) 59 ITR 281 (Bang)
(Trib)
S. 92C : Transfer pricing - Arms’ length price – Comparables-Functionally comparbles

could not be rejected – Burden is on assesse .
Assessee had picked up said concern to be functionally comparable not only in year under
consideration but also in earlier years. The said concern was excluded from final list of
comparables by Tribunal in AY 2007-08 on premise that said concern for said year had earned
abnormal profits. Before the Tribunal, the Assessee argued for the exclusion of the said concern
from the comparables.
The Tribunal observed that the onus was upon the assessee to establish that the said concern was
not functionally comparable. The assessee himself had picked up the said concern to be
functionally comparable not only in the year under consideration but also in the earlier years. The
said concern was excluded from the final list of comparables by the Tribunal in assessment year
2007-08 on the premise that the said concern for the said year had earned abnormal profits.
However, for the year under appeal, the plea of assessee was not of abnormal profits but of it
being functionally different. Accordingly the Tribunal held that, since the assessee has not
267
brought on record any evidence to prove that the nature of business undertaken by the said
concern, had changed during the year as against the activities carried on in the preceding year and
accordingly dismissed the plea of the assessee. (AY. 2008-09)
Honeywell Turbo Technologies (India) (P) Ltd. v DCIT (2017) 153 DTR 231/58 ITR 614
/187 TTJ 78 (Pune) (Trib)
S. 92C : Transfer pricing - AMP expense – Held, Bright line Test not an appropriate
yardstick in determining ALP – Held, mere fact that the assessee was allowed to use a
brand name, does not mean that the AMP expenses incurred was only to enhance the brand
– Held, onus on the Department to show existence of any arrangement or agreement
demonstrating international transaction – Held, no useful purpose would be served by
setting aside to TPO. [S .92C, 254 (1) ]
The TPO made an adjustment u/s 92 in respect of AMP expense by applying Bright Line Test.
Tribunal set aside the matter to the TPO to do the study afresh. The High Court held that, TPO
did not apply his mind to the existence of an International Transaction involving AMP expense
and he simply applied Bright Line Test to establish an international transaction and made the
adjustment. The Court held that mere fact that the assessee was allowed to use a brand name,
does not mean that the AMP expenses incurred was only to enhance the brand and that the onus
was on the revenue to demonstrate existence of any arrangement or agreement on the basis of
which it could be inferred that the AMP expense incurred by the assessee was not for its own
benefit but for the benefit of the assessee. Accordingly, the High Court held that no useful
purpose would be served by setting aside the matter to the TPO and therefore, the order of the
Tribunal was set aside to that extent. (AY .2010-11)
Valvoline Cummins (P) Ltd. v. Dy. CIT (2017) 156 DTR 97 /298 CTR 349 /84 taxmann.com
191 (Delhi) (HC)
S. 92C : Transfer pricing - Arm’s length price —Clubbing of two revenue streams and
determination of operating profit margin of 7.82 percent was held to be question of fact .
Dismissing the appeal of the revenue, the Court held that; Clubbing of two revenue streams and
determination of operating profit margin of 7.82 percent was held to be question of fact .
CIT (LTU) v. ESPN Software India Ltd. (2017) 399 ITR 554/(2018) 252 Taxman 171
(Delhi) (HC)
S.92C : Transfer pricing – Arm’s length price - Net margin method - Performing routine
back office services for its associated enterprises, hence transactional net margin method
more appropriate for assessee.
Dismissing the appeal of the revenue, the Court held that; Since the assessee performed routine
back office services for its associated enterprises without being assigned or carrying out any key
entrepreneurial function in relation to the offshore business of the associated enterprises, the
assessee could be characterised as a routine back office service provider. Hence, the approach
adopted by the assessee to benchmark such transactions using the transactional net margin
268
method as the most appropriate method by finding comparables engaged in providing similar
services was proper (AY. 2005 - 06)
PCIT v. Makemy Trip India P. Ltd. (2017) c /(2018) 252 Taxman 161 (Delhi) (HC)
S. 92C : Transfer pricing - Arms’ length price – TNMM-CUP-Tribunal had proceeded on

an erroneous assumption of fact, impugned order was to be set aside and order of
Commissioner (Appeals) was to be upheld
TPO declined to accept benchmarking of assessee adopting TNMM and he held that CUP method
was most direct and reliable method for import and export of semi-finished goods, and Resale
Price Method (RPM) was MAM for determining ALP of import of finished goods and advertising
material. On appeal CIT (A) disagreed with TPO and upheld contention of assessee that TNMM
was MAM. On appeal by revenue the Tribunal deleted order passed by CIT (A) but he observed
that CIT (A) had upheld application of CUP method and RPM for respective transactions . On
appeal allowing the appeal of the assesse, the Court held that; since Tribunal had proceeded on an
erroneous assumption of fact, impugned order was to be set aside and order of CIT (A) was
upheld. (AY. 2004-05)
Rayban Sun Optics India Ltd. v. CIT (2017) 249 Taxman 437 /297 CTR 381/155 DTR 147
(Delhi) (HC)
S.92C : Transfer pricing - Arm’s length price —Corporate guarantee is not to be

determined on basis of comparison with bank guarantee hence addition was held to be not
justified .
Dismissing the appeal of the revenue the Court held that; the arm’s length price of corporate
guarantee could not be determined on the basis of comparison with the bank guarantee hence
deletion of addition was held to be justified . (AY. 2008 09)
CIT v. Glenmark Pharmaceuticals Ltd. (2017) 398 ITR 439 /85 taxmann.com 349 (Bom.)
(HC)
Editorial : SLP was granted to the revenue, CIT v. Glenmark Pharmaceuticals Ltd. (2017) 250
Taxman 391 (SC)
S.92C : Transfer pricing – Arms length price - Outstanding receivable from debtors -
Deletion was held to be justified [ S.92B]
Dismissing the appeal of the revenue the Court held that; any further adjustment only on the basis
of the outstanding receivables would have distorted the picture and re-characterised the
transaction which was impermissible. The focus of the Assessing Officer was on just one
assessment year and the figure of receivables in respect of that assessment year could hardly
reflect a pattern that would justify the Transfer Pricing Officer to conclude that the figure of
receivables beyond 180 days constituted an international transaction by itself. (AY. 2010-11)
PCIT v. Kusum Healthcare P. Ltd. (2017) 398 ITR 66/(2018) 161 DTR 401 /300 CTR 343
(Delhi) (HC)
S. 92C : Transfer pricing – Arm’s length price – Comparison of activities are not similar
,Tribunal erred in remanding issue to transfer pricing officer. Interest in outstanding
receivable – CIT (A) is directed to analyse which transactions fell into category of
international transactions.
Allowing the appeal of the assesse the Court held that; Tribunal erred in remanding issue to
transfer pricing officer. As regards Interest in outstanding receivable – CIT (A) is directed to
analyse which transactions fell into category of international transactions. (AY. 2009 - 10)
Avenue Asia Advisors P. Ltd. v. Dy. CIT (2017) 398 ITR 120 /250 Taxman 539 /(2018) 161
DTR 404/300 DTR 346 (Delhi) (HC)
269
S. 92C : Transfer pricing — Net margin method - Order of Tribunal is affirmed . [ S. 260A
]
Dismissing the appeal of the revenue the Court held that; appropriate filter determines the
elements that are to be considered in transactional net margin method. Therefore, the costs, sales
and assets employed wherever relevant, are to be applied. From this perspective, the Revenue’s
contention that segmental data was available, could not be accepted. The mere availability of
proportion of the turnover allocable for software product sales per se could not lead to an
assumption that segmental data for relevant facts was available to determine the profitability of
the concerned comparable. No substantial question of law arose. (AY. 2011-12)
PCIT v. Saxo India P. Ltd. (2017) 397 ITR 160 (Delhi) (HC)
S. 92C : Transfer pricing - Arm’s length price – Broker’s quote based on price publications
including stock exchange and commodity market quotation can be used in the CUP method
AO rejected the Comparable Uncontrolled Price (CUP) method adopted by the assessee as the
price charged or paid was on the basis of a broker quote which was given taking into account the
prices prevailing in the market and the same did not reflect the price of an actual transaction.
ITAT reversed the order of the lower authority and held that Rule 10D (3) (c) of the Income Tax
Rules, 1962 envisages that the TPO should take into consideration price publications including
stock exchange and commodity market quotations. Therefore, such published data available from
stock or commodity exchanges could form the basis of the prices in both uncontrolled and
controlled transactions. HC held that the reasoning of the ITAT cannot be said to be perverse and
therefore no substantial question of law arose.
CIT v. Cargill Food India Ltd. (2017) 155 DTR 129 /297 CTR 380 (Delhi) (HC)
S.92C : Transfer pricing-Re-characterising the function as a merchant banker was held to

be not justified - Steps to be undertaken in identification of comparable transactions/entities
while fixing the ALP and the margin.
Allowing the appeal of the assessee the Court held that;Re-characterising the function as a
merchant banker was held to be not justified . Court also held that, though the TNMM method
allows broad flexibility tolerance in the selection of comparables, broad functionality is not
sufficient to find the comparable entity. There must be similarity with the controlled transaction.
(ITA No. 350/2016, dt 18.09.2017) (AY. 20091-10)
Avenues Asia Advisors Pvt. Ltd. v. DCIT (Delhi) (HC), www.itatonline.org
S.92C : Transfer pricing-Comparable - Functional profile may not be relevant for

comparison - Exclusion of comparable was held to be justified.
Dismissing the appeal of the revenue the Court held that; A giant risk taking company like
Infosys Technologies with huge significant intangibles and having huge assets leading to the
exorbitant turnover is not comparable with a captive unit which is subject to minimum/limited
risk. The fact that the functional profile of Infosys is similar to that of the assessee is irrelevant.
(ITA. No. 767/2017, dt. 25.09.2017) (AY. 2007 - 08)
CIT v. Ut. Starcom Inc. (India Branch) (Delhi) (HC),, www.itatonline.org
S.92C : Transfer pricing – Arm’s length price – Bench marking is to be done only with AE
transactions and not for entire turnover.
Dismissing the appeal of the revenue the Court held that;Bench marking is to be done only with
AE transactions and not for entire turnover. (AY. 2006 - 07)
270
(HC)
S. 92C : Transfer pricing – Arm’s length price – Rule of consistency must be followed, law
cannot be applied arbitrarily and inconsistently.
Dismissing the appeal of the revenue the Court held that; The transactions with non-associated
enterprises were presumed to be at arm’s length as there was no relationship which was likely to
influence the price. It would lead to artificial increase in the profits of transactions entered into
with non-associated enterprises by applying the margin at entity level which was not the object of
Chapter X. Absence of segmental accounting was not an insurmountable issue, as proportionate
basis could be adopted. Where separate accounts were not available, proportionate adjustments
were to be made only in respect of the international transactions with the associated enterprises.
Court also held that in the case of CIT v. Pedro Araldite Pvt. Ltd. (I.T.A. No. 1804 of 2013
rendered on November 24, 2015) the Department had accepted that even in the absence of
segmental accounts, the transfer pricing adjustment had to be done only in respect of the
international transactions with associated enterprises. Law must be applied equally to all and an
inconsistent position in law could not be taken, de hors the facts, applying different standards to
different assessees. The administration of the tax laws should not degenerate into an arbitrary and
inconsistent application of law dependent upon the assessee concerned. (AY. 2006 - 07)
CIT v. Alstom Projects India Ltd. (2017) 394 ITR 141 (Bom) (HC)
Editorial : Decision in Alstom Projects India Ltd. v. Add.CIT (26 ITR 322 (Mum) (Trib) is
affirmed.
S. 92C : Transfer pricing – Arm’s length price – Operating cost – Claim of assessee to
exclude cost of infrastructure to be allowed – Plea of perversity in findings neither specific
nor supported by documents hence not entertained. [S. 260A]
Dismissing the appeal of revenue, the Court held that; the Appellate Tribunal after examining the
agreement between the assessee and its associated enterprises had agreed with the assessee that
the reimbursement of the infrastructure cost had no mark-up. Unless there was a specific plea by
the Department to the effect that such a factual finding was perverse, on a general plea of
perversity, the appeal could not be entertained. Also it should be accompanied by a reference to
the relevant document which formed part of the record of the case before the Appellate Tribunal.
No question of law arose. (AY. 2011-12)
PCIT v. CPA Global Services Pvt. Ltd. (2017) 394 ITR 473/151 DTR 161 /295 CTR 345
(Delhi) (HC)
S. 92C : Transfer pricing – Adjustment made solely on the basis of assumption that
expenditure incurred for sales promotion was higher side was de hors provisions of
Chapter X of Act.
Dismissing the appeal of the revenue, the Court held that; where TPO had not followed
prescribed method under section 92C to benchmark international transaction and TP adjustment
was made solely on basis of assumption that expenditure incurred for sales promotion of parent
company was on higher side, said TP adjustment was de hors provisions of Chapter X of Act.
(AY. 2006-07)
CIT v. Johnson & Johnson Ltd. (2017) 247 Taxman 136 /150 DTR 142 /297 CTR 480
(Bom.) (HC)
S. 92C : Transfer pricing – Revenue authorities in remand proceedings could not issue a
show cause notice to assessee proposing to reject certain comparables and take into
consideration some new comparables. [S. 254 (1)]
271
Allowing the petition the Court held that; where Tribunal remanded matter back with a direction
to undertake fresh determination of ALP on basis of correct cost base of assessee, revenue
authorities in remand proceedings could not issue a show cause notice to assessee proposing to
reject certain comparables and take into consideration some new comparables. Accordingly show
cause notice issued by the TPO was quashed . (AY. 2007 - 08)
Li & Fung India Pvt. Ltd. v. ACIT (2017) 79 taxmann.com 451/150 DTR 217 /298 CTR 427
(Delhi) (HC)
S.92C : Transfer pricing – Arm’s length price – Functionally different company cannot be
compared - Data should be of same financial year and services rendered of KPO and
LPO cannot be compared with BPO.
Dismissing the appeal of the revenue, the Court held that; Assessing Officer as comparables were
either functionally or qualitatively different from the assessee’s business or the comparison was
with a different financial year of the comparable, which was not in consonance with the mandate
provided under rule 10B (4) of the Income-tax Rules, 1962 that the data used for comparability
analysis should be of the same financial year. (AY. 2007-08)
CIT v. PTC Software (I) P. Ltd. (2017) 395 ITR 176/75 taxmann.com 31 /(2018) 162 DTR
153 /300 CTR 533 (Bom.) (HC)
Editorial : SLP of revenue was admitted, CIT v. PTC Software (I) (P.) Ltd. (2017) 250 Taxman
74 (SC)
S. 92C : Transfer pricing-It is the duty of the TPO to only determine the ALP of the
transaction and not to ascertain whether the expenditure is allowable or not. [S. 37 (1)]
The High Court held that it is the duty of the TPO to ascertain only the ALP of the transaction
and not to ascertain whether the expenditure is allowable or not under section 37 of the Act,
which duty is that of the Assessing Officer. In fact, as found both by the Commissioner (Appeals)
as well as the Tribunal, neither the method selected as the most appropriate method to determine
the ALP was challenged nor the comparables taken by the assessee was challenged by the TPO.
Therefore, the ad hoc determination of ALP by the TPO de hors section 92C cannot be sustained.
(AY. 2003-04 to 2005-06)
CIT v. Lever India Exports Ltd (2017) 246 Taxman 133 /292 CTR 393 /147 DTR 233 (Bom.)
(HC)
S. 92C : Transfer pricing – Arm’s length price – The TPO’s fixation of the royalty @ 2%
instead of 3% as per the agreement, amounted to an arbitrary and unbridled exercise of
power hence not justified.
Dismissing the appeal of the revenue, the Court held that; where the Revenue admitted that the
assessee entered into a royalty agreement with AE and assessee claimed benefit from such
agreement, in form of increase in sales with no apparent increase in production, minimal product
recalls and low after sales maintenance cost, and consequently, paid royalty in terms thereof,
then, it was not for TPO to make TP adjustment in respect of royalty payment by reducing the
rate of payment. Relying on the decision in CIT v. Walchand & Co. (P.) Ltd. (1967) 65 ITR 381
(SC) the Court held that the TPO should not decide the best business strategy for the assessee.
Therefore, the TPO’s whimsical fixation of the royalty @ 2% instead of 3% as per the agreement,
amounted to an arbitrary and unbridled exercise of power. (AY. 2010-11)
PCIT v. R.A.K. Ceramics India (P.) Ltd. (2017) 246 Taxman 85 /293 CTR 361/148 DTR 146
(AP) (HC)
272
S. 92C : Transfer pricing - Arms’ length price - In an abnormal event like a strike,
adjustment needs to be made to the profit margin of comparable company and not to the
profit margin of the assessee.
During the TP assessment proceedings, the assessee had claimed for an adjustment in its profit
margin on account of a strike which had an adverse impact on its production/sales. The TPO,
however, was of the view that there was no effect of strike on manufacture and sale of the
assessee and thus, rejected the assessee's claim. This view was upheld by DRP. On appeal, the
Tribunal observed that in an abnormal event like a strike, adjustment needs to be made to the
operating profit margin of comparable company to bring both the international transactions and
comparable costs at the same pedestal and such adjustment was not to be made in the operating
profit margin of the assessee.
On appeal to HC, affirming the view of Tribunal, the HC held that in an abnormal event like a
strike, Rule 10 (1) (e) (ii) & (iii) of the Income Tax Rules, 1962 states that adjustment was to be
made to the profit margin of comparable company and not to the profit margin of the assessee.
Honda Motorcycle & Scooters India (P.) Ltd. v. ACIT (2017) 292 CTR 323 (P&H) (HC)
S. 92C : Transfer pricing - Comparables – A party is not barred in law from withdrawing
from its list of comparables a company found to have been included on account of mistake
of fact.
Dismissing the appeal of the revenue, the Court held that; A party is not barred in law from
withdrawing from its list of comparables a company found to have been included on account of
mistake of fact. The Transfer Pricing Mechanism requires comparability analysis to be done
between like companies and controlled and uncontrolled transactions by carrying out of FAR
analysis. The assessee's submission in arriving at the ALP is not final. It is for the TPO to
examine and find out the companies listed as comparables which are in fact comparable. (AY.
2008-09)
CIT v. Tata Power Solar Systems Ltd (2017) 245 Taxman 93 /298 CTR 197/157 DTR 142
(Bom.) (HC)
S.92C : Transfer pricing - Arm’s length price-If the advances are made to a AE situated
abroad, the LIBOR rate has to considered to determine the Arms Length interest and not
the interest rate in India (SBI PLR). This would be reasonable and proper in applying
commercial principles
Dismissing the appeal of the revenue the Court held that; If the advances are made to a AE
situated abroad, the LIBOR rate has to considered to determine the Arms Length interest and not
the interest rate in India (SBI PLR). This would be reasonable and proper in applying commercial
principles. Followed ,In CIT v. Tata Autocomp [2015] 56 taxmann.com 206, (Bom) (HC) The
Tribunal has directed the appropriate rate would be LIBOR plus 2% instead of LIBOR plus 3%
applied by the TPO. (ITA No. 1869 of 2014, dt. 09.06.2017) (AY. 2007-08)
CIT v. Aurionpro Solutions Ltd. (Bom.) (HC), www.itatonline.org
S. 92C : Transfer pricing - Arms length price - The contention that there is an error because
mere mathematical calculation shows that the arm's length purchase price as worked out by
the TPO falls beyond (+)/(-) 5% range and consequently falls outside the scope of the second
proviso to S. 92C (2) cannot be considered if it was not raised before the CIT (A) & ITAT.
[S. 260A]
Dismissing the appeal of the Revenue the Court held that; Assesssee adopting net margin
method . Operating margin calculated by assesse falling with in ambit and purview of arm’s
length . Finding of fact . The grounds which were never agitated before the Commissioner of
273
Income Tax (Appeals) and the Tribunal and those grounds based on the facts, cannot be agitated
in the present appeal.
CIT v. Mettler Toledo India Pvt. Ltd. (2017) 395 ITR 523 (Bom.) (HC)
S.92C : Transfer pricing-Arm's length price-Selection of comparables-Company

outsourcing major part of its business cannot be taken as comparable for company not
outsourcing major part of its business.
Dismissing the appeal of the revenue, the Court held that ,both the companies were not
appropriate comparables, since a major part of their business was outsourced, whereas the major
part of the assessee's business was not outsourced. Moreover, the company Vishal Information
Technologies Ltd had a low employee cost of 1.25 per cent. of operating revenue. The assessee's
wages to sales was 53 per cent. which was not comparable to Vishal Information Technologies
Ltd. Thus the exclusion of Nucleus Net soft and Vishal Information Technologies Ltd was
justified. (AY. 2006-07)
PCIT v. IHG IT Services (India) P. Ltd. (2017) 392 ITR 77 (P&H) (HC)
S. 92C : Transfer pricing-Arm's length price-Enabled services (ITES) to AE-Financial

aspects of dissimilar activities of two enterprises not comparable-Companies rendering
entirely different services not comparable-Company following different financial year can
be adopted as comparables if data for relevant period available.
Dismissing the appeal of the revenue, the Court held that; transfer pricing was not an exact
science. It was not capable of arithmetical precision. A minuscule difference could not result in
the rejection of the case, if it was otherwise comparable. There was no difficulty in permitting
reasonable deviation so long as the deviation did not render the case incomparable to the one in
question. The financial results of enterprises involved in dissimilar activities could not be
compared. Similarly the financial aspects of dissimilar activities of two enterprises could not be
compared. Only the similar activities of the two could be considered, provided they were
financially comparable. (AY. 2009-2010)
CIT v. Mercer Consulting (I) P. Ltd. (2016) 76 taxmann.com 153 /(2017) 390 ITR 615/292
CTR 42 / 146 DTR 108 (P&H) (HC)
S. 92C : Transfer pricing - Reference to Transfer Pricing Officer – Writ court will not
interfere with order of reference to Transfer Pricing Officer - Res Judicata-Principle not
applicable to income-tax proceedings. [Art. 226]
Dismissing the petition the Court held that Assessing Officer need not come to definite finding
that transactions were international. Opinion of Transfer Pricing Officer not binding on
Assessing Officer. Assessee has second opportunity to raise issue before Assessing Officer or
Dispute Resolution Panel - Prima facie material to infer international transaction. Writ court will
not interfere with order of reference to Transfer Pricing Officer. Res Judicata - Principle not
applicable to income-tax proceedings. (AY. 2009-2010, 2010-2011, 2011-2012)
Lovelock and Lewes v. CIT (2017) 390 ITR 356/291 CTR 121 /245 Taxman 1 /145 DTR 145
(Cal) (HC)
Price Waterhouse v. CIT (2017) 390 ITR 356/291 CTR 121 /245 Taxman 1 /145 DTR 145
(Cal) (HC)
S.92C : Transfer pricing--Arm's length price-DEPB includible in determining operating

profit and depreciation includible in determining total costs as in comparable companies -
Loss suffered in a particular year does not exclude a company from comparability analysis
274
Dismissing the appeal of the revenue, the Court held that; while determining the arm's length
price, DEPB includible in determining operating profit and depreciation includible in determining
total costs as in comparable companies. Loss suffered in a particular year does not exclude a
company from comparability analysis. (AY. 2008-2009)
CIT v. Welspun Zucchi Textiles Ltd. (2017) 391 ITR 211/245 Taxman 132/292 CTR 1 /146
DTR 128 (Bom) (HC)
S. 92C : Transfer pricing-Licensing of brand and supply of technical know-how-

TPO/DRP/Tribunal disaggregated transaction & benchmarked technical support
arrangement applying CUP method – Matter remanded for determining whether
aggregation is warranted or not
Tribunal disaggregated transaction & benchmarked technical support arrangement applying CUP
method. On appeal ;High court held that that aggregation of closely linked transactions are
permissible, therefore the matter was remanded back for fresh consideration. On the issue of
applicability of most appropriate method, the High Court did not give any definite ruling and
opined that it should be determined based on the aggregation/de-segregation of transactions.
(AY.2011-12)
Gruner India (P) Ltd. v. DIT (2017) 146 DTR 266 (Delhi) (HC)
S. 92C : Transfer pricing - Where the assessee applied more than one of permissible
methods, then qua each transaction, the TPO was required to give reasons as to why he
preferred one of such methods over others.
Allowing the appeal of the assesse the Court held that ;Where the assessee applied more than one
of permissible methods, then qua each transaction, the TPO was required to give reasons as to
why he preferred one of such methods over others. (AY.2006-07)
Honda Motorcycle & Scooters India (P) Ltd. v. ACIT (2017) 146 DTR 201 (P&H) (HC)
S. 92C : Transfer pricing - Arms length price - Where there was a strike in the assessee
company, the net profit margin was required to be adjusted on account of such abnormal
event .
Allowing the appeal of the Court held that ;where there was a strike in the assessee company, the
net profit margin was required to be adjusted on account of such abnormal event and further
directed TPO to make appropriate adjustment in the profit margin of comparable company.
(AY.2006-07)
Honda Motorcycle & Scooters India (P) Ltd. v. ACIT (2016) 76 taxmann.com 75 (2017) 146
DTR 206 /292 CTR 318 (P&H) (HC)
S. 92C : Transfer pricing - Arm's length price - When no adequate information of capacity
utilization of comparables was available , - adjustment on account of capacity utilization
cannot be claimed ..
Tribunal held that when the assessee failed to produce the relevant details regarding the level of
capacity utilization of each and every comparable company in comparison to the assessee's
capacity utilization. In absence of necessary details and evidences comparable rejected. (AY 2008
– 2009)
Tavant Technologies India (P.) Ltd.v.Dy. CIT (2017) 166 ITD 529 (Bang) (Trib.)
275
S. 92C : Transfer pricing - Arm's length price - Services provided being functionally
different would not be comparable
Allowing the appeal of the asseee the Tribunal held that; assessee was a software development
service provider to its AE also engaged in services in form of ACCEL IT and ACCEL animation
services for 2D and 3D animation and having related party transactions more than permitted
level, cannot be a comparable to assessee software development service provider. Further
rendering software services being functionally different would not be comparable. A giant
company in area of development of software assuming all risks, leading to higher profit would
not be comparable to assessee a captive unit of its parent company assuming only limited
currency risk. (AY. 2007 – 08)
Tavant Technologies India (P.) Ltd. v. DCIT (2017) 166 ITD 529 (Bang) (Trib.)
S. 92C : Transfer pricing - Arm’s length price – TNMM method - adjustment can be
madeeither in the case of the tested party (i.e. controlled transaction) or the comparables
(i.e.uncontrolled transactions) so that the difference which could materially affect the
amount of net profit margin is removed.
Tribunal held that, under TNMM method ,adjustment can be made either in the case of the tested
party (i.e. controlled transaction) or the comparables (i.e.uncontrolled transactions) so that the
difference which could materially affect the amount of net profit margin is removed. (AY. 2009-
10)
Pangea 3 and Legal Database Systems Pvt. Ltd. v. ITO (2017) 57 ITR 242 (Mum) (Trib)
S. 92C : Transfer pricing - Arm’s length price – abnormal loss on account of cancellation of
forward contracts absent in cases of Comparables — assessing officer to make Adjustment
in operating cost and rework profit level indicator
Foreignexchange gain or loss relatable to an international transaction is alwayspart and parcel of
such underlined transaction. Hedging loss or gain arising in the normalcourse of business has to
be generally given the same treatment as is givento the loss or gain in the underlined transactions.
It is imperative to see,firstly, whether the forex gain or loss are of trading nature that is,
exchangegain or loss is on a trade receivable or payable and whether or not thetested party is
responsible for them, that is, the foreign currency risk is thatof the tested party or not; and
secondly, whether the hedging of theforeign currency exposure on the underlined trade receivable
or payableneeds to be considered and treated in the same way in determining the netprofit. If
foreign exchange risk is borne by the tested party, then it needs tobe accounted for by the tested
party.Therefore abnormal loss on account of cancellation of forward contracts absent in cases of
Comparables, the assessing officer to make Adjustment in operating cost and rework profit level
indicator. (AY. 2009-10)
Pangea 3 and Legal Database Systems Pvt. Ltd. v. ITO (2017) 57 ITR 242 (Mum) (Trib)
S. 92C : Transfer pricing - Arm’s length price – Royalty – Restriction on rates waived by
authorities – Press Note no. 8 of 2008, dated 16 December, 2009 - Matter was remitted to the
Assessing Officer .
Tribunal held that payment under technologytransfer whereas the assessee had admittedly made
the payment on account of user oftrade mark or brand name and not on account of transfer of
technology. Therefore theserates were of no relevance or use for determination of the arm’s
length price on per sebasis or conclusively. The two legislations operated in different fields. The
rates allowedunder the automatic route by the Reserve Bank of India or the Foreign
InvestmentPromotion Board were meant to achieve objectives in different areas. The whole
thrustof the Income-tax proceedings and the transfer pricing regulations is to ensure that
thetaxable profits earned by an entity India are not shifted to foreign tax jurisdictions
276
withoutpayment of the legitimate share of tax due in India. Therefore, an independent exerciseof
determination of the arm’s length price is needed to find out if payment of royaltyhad been dome
in line with the arm’s length price. Thus the matter was remitted to theAssessing Officer, as had
been done by the Tribunal in the assessment year 2010-11in the assessee’s own case. (AY. 2012-
13)
A. W. Faber Castell (India) P. Ltd.v. DCIT (2017) 57 ITR 637 (Mum) (Trib)
S. 92C : Transfer pricing – Arm’s length price – Accounting period of comparable company
should be same as that of the assessee company – Where the functional profile of
comparable company &assessee company is same as in earlier years vis-à-vis current year,
then, in absence of any contrary evidence, and in order to maintain consistency, the
treatment given to the comparable company in the earlier should be given the current year.
[S. 92]
During the transfer pricing proceedings, the TPO considered Pfizer Ltd. and Celestial Labs Ltd.
as comparable to the assessee company to benchmark the international transaction entered with
its AE.
On appeal, the DRP excluded Pfizer Ltd. and Celestial Labs Ltd. as comparable companies.
On further appeal, the Tribunal held that Pfizer Ltd. is following a different financial year ending
and quarterly data for the difference period are also not available. Therefore, Pfizer Ltd. is not
comparable to the assessee company. As regards Celestial Labs Ltd., it was held that this
comparable was excluded in earlier year and there has been no change in the profile of this
comparable and the assessee company, in earlier year vis-à-vis current year. Also, no
contradictory evidences were presented by the department. Therefore, Celestial Labs Ltd. was
held to be not comparable to the assessee company. (AY. 2009-10)
Tevapharm India Pvt. Ltd. v. DCIT (2017) 57 ITR 301 (Mum) (Trib.)
S. 92C : Transfer pricing – Arm’s length price - Foreign Exchange loss on account of
cancellation of forward contracts should be eliminated from the operating cost as it is a
material difference and arisen to assessee due to abnormal feature – Comparable company
following different financial year may not be generally taken for comparability analysis,
however, if financial data for all the quarters is available, it would suffice comparability
criteria
The assessee renders Information Technology Enabled Services (‘ITeS’) to its associated
enterprises (‘AE’). To benchmark the international transaction, assessee selected TNMM as most
appropriate method. The TPO held assessee’s working of PLI to be erroneous and considered
foreign exchange loss on cancellation of forward contracts as operating expense. Ld. DRP upheld
the action of TPO/AO in treating foreign exchange loss on cancellation of forward contracts as
operating expense.
Tribunal further observed that in practical situations there may be absence of reliable data in the
case of uncontrolled transactions i.e. comparable companies for which such material differences
are to be examined. Thus, TRIBUNAL held that the PLI of the tested party alone can also be
accurately adjusted to eliminate the effect of difference between the international transaction and
the comparable uncontrolled transaction even if no adjustments are made to the PLI of
comparable companies due to absence of data in such cases. Thus, Tribunal held that the forex
loss amounting to Rs. 2.22 crores being a material difference affecting the cost or profitability of
the assessee due to abnormal feature shall be eliminated from the operating cost and resulting in
to reworking of the PLI of the assessee.
The next issue before the Tribunal related to inclusion and exclusion of certain comparable
companies. One of the comparable company namely R-systems International Ltd. was selected by
277
the TPO and DRP was contested by the assessee as not comparable because it was following
different financial year ending i.e. from January to December. It was held by the Tribunal that
though a comparable company following a different financial year may not be taken for
comparability analysis but if the financial data is available for all the quarters was available and it
is possible to determine the value of transaction as well as the profitability, then the company
suffices the comparability criteria and could not be rejected as comparable company. (AY. 2009-
10)
Pangea3 & Legal Database Systems (P.) Ltd. v. ITO (2017) 57 ITR 242 (Mum) (Trib)
S. 92C : Transfer pricing - Arms’ length price – Since actual services rendered by AE was
not brought on record, he addition made by the TPO to the assessee’s Arms’ length price
vis-à-vis receipt of management service fees was set aside to the files of the AO/TPO.
Since the actual nature of services rendered was not brought on record, the addition made by the
TPO to the assessee’s Arms’ length price vis-à-vis receipt of management service fees was set
aside to the files of the AO/TPO. Similarly, TPO determined the Arms’ length price at Nil vis-à-
vis the payment of management consultancy fess paid to the AE, however, since actual services
rendered by AE was not brought on record, he addition made by the TPO to the assessee’s Arms’
length price vis-à-vis receipt of management service fees was set aside to the files of the
AO/TPO. (AY. 2004-05 to 2006-07)
ACIT v. Sterlite Industries (India) Ltd. (2017) 56 ITR 377/81 taxmann.com 57 (Chennai)
(Trib.)
S.92C : Transfer Pricing – Arms’ Length Price – Comparison - company using its own
software and having copyrights is not comparable to a company engaged in business of
software solutions and consultancy services.
A company providing any consulting IT services, end-to-end solutions, having revenue from
software production addition to software development and a company using its own software and
having copyrights is not comparable to a company engaged in business of software solutions and
consultancy services. (AY. 2008-09)
Aircom International (India) Pvt. Ltd. v. DCIT (2017) 84 taxmann.com 218 /189 TTJ
682/159 DTR 160 (Delhi) (Trib.)
S.92C : Transfer pricing – Arms’ Length Price – Reselling of finished goods - RPM was the
most appropriate method.
Where Assessee was directly engaged in reselling finished goods purchased from its Associated
Enterprise (‘AE’), without making any value additions, RPM was the most appropriate method.
(AY. 2003-04, 2005 - 06)
ACIT v. Akzo Nobel Car Refinishes India (P.) Ltd. (2017)

84 taxmann.com 199 /189 TTJ 535/159 DTR 221 (Delhi) (Trib.)
S. 92C : Transfer pricing – Arms’ Length Price – Specific services cannot be specified as
stewardship services, charges paid were held to be Arm’s length price .
Where services rendered by the Associated Enterprise (‘AE’) were to meet specific need of the
Assessee ,it was erroneous to classify such services as stewardship services and the Assessee
278
evidenced with a number of documentary evidences, the receipt of services, charges paid for the
same were to be treated at arm’s length. (AY.2009-10)
DCIT v. Akzo Nobel India Ltd. (2017) 189 TTJ 715/57 ITR 596 (SN) (Kol.)Trib)
S. 92C : Transfer pricing – Arm’s length price – Transfer pricing provision will be
applicable Assessee carrying on insurance business [ S.44 ]
Tribunal held that, there being no specific reference to section 92 in section 44, provisions
relating to transfer pricing u/s. 92 would apply to Assessees carrying on insurance business. (AY.
2002-03)
ACIT v. Max New York Life Insurance Company Ltd (2017) 167 ITD 540 /190 TTJ 137/159
S. 92C : Transfer pricing-Corporate guarantee-Does not fall with in the purview of

international transaction . Other issues matter was remanded to the AO [ S.92B ]
Following the earlier year order in absence of any change in circumstances the Tribunal held
that, corporate guarantee-Does not fall with in the purview of international transaction . As
regards other issues following the earlier year order the matter was remanded to the AO. (AY.
2004-05, 2011-12) gards
Cadila Pharmaceuticals Ltd v. Dy. CIT (2017) 59 ITR 68 (SN) /85 taxmann.com 354 (Ahd)
(Trib)
S. 92C : Transfer pricing - Arm’s length price - Rendering software development services to
AE, companies having RPT of upto 15 per cent of total revenue could be considered as
comparable companies. Turnover of around Rs. 110 crores, companies having turnover in
excess of Rs. 200 crores, were not acceptable as comparables . Where segment information
was not available could not be accepted as comparables.
Tribunal held that; rendering software development services to AE, companies having RPT of
upto 15 per cent of total revenue could be considered as comparable companies, matter remanded
. Turnover of around Rs. 110 crores, companies having turnover in excess of Rs. 200 crores,
were not acceptable as comparables . Where segment information was not available could not be
accepted as comparbles. (AY. 2005-06)
Dell International Services India (P.) ltd v. DCIT (2017) 190 TTJ 545 (Bang. (Trib.)
S : 92C : Transfer pricing - Arm's length price - Advertisement, marketing and promotion
expenses - Matter was remanded .
Tribunal held that in determining ALP of AMP expenses and benchmarking, neither assessee nor
TPO had followed the judgment in case of Sony Ericsson (231 Taxman 113), matter was to be
remanded for fresh adjudication. (AY. 2010-11)
BMW India (P) Ltd. v. Dy. CIT (2017) 190 TTJ 717 (2018) 162 DTR 65 (Delhi) (Trib)
S.92C : Transfer pricing - Arm's length price-Interest - Quasi capital transaction cannot be
determined on basis of simple loan transaction for the purpose of ALP - Product
279
registration charges paid to AE with mark up of 10% ALP cannot be compared with
another intra transaction carried out in earlier point of time . Addition in respect of
commission on corporate guarantee furnished was held to be not sustainable .
Tribunal held that; Quasi capital transaction cannot be determined on basis of simple loan
transaction for the purpose of ALP - Product registration charges paid to AE with mark up of
10% ALP cannot be compared with another intra transaction carried out in earlier point of time .
Addition in respect of commission on corporate guarantee furnished was held to be not
sustainable . (AY. 2009-10, 2010-11)
Cadila Healthcare Ltd v. ACIT (2017) 186 TTJ 421 (Ahd) (Trib)
S. 92C : Transfer pricing - Arm’s length price - TP adjustment cannot be made if an
assessee avails only certain services out of bunch of services mentioned in an agreement
specially when TPO does not doubt arm's length price of availed services .
Allowing the appeal of the assessee the Tribunal held that ;TP adjustment cannot be made if an
assessee avails only certain services out of the bunch of services mentioned in an agreement
specially when TPO does not doubt arm's length price of availed services. (AY. 2010-11)
Dimension Data India P. Ltd v. Dy.CIT (2017) 58 ITR 51 (SN) (Mum) (Trib)
S.92C : Transfer pricing - Arm’s Length Price – Corporate guarantee given to AE not
involving any cost to the assessee and no bearing on profits, income, loss of assets is outside
the ambit of international transaction.
Corporate Guarantee given to AE not involving any cost to the assessee and no bearing on profits,
income, loss of assets is outside the ambit of international transaction. (AY. 2007-08 to 2011-12)
S. 92C : Transfer pricing - Arms’ length price – Loans advanced to AE situated in

Singapore - Corporate guarantee - Not charging any interest from AEs and nonAEs for
providing mobilization advances - Adjustment under TP provisions was not attracted. [
S.92B ]
Loans advanced to AE situated in Singapore. Rate of interest to be determined on basis of rate
prevailing in Singapore where loan had been consumed and not to be determined on basis of rate
prevailing in India . Corporate guarantee provided, covered within scope of term 'international
transaction' after insertion of Explanation to section 92B by Finance Act, 2012 . Guarantee
commission to be charged at 0.27 per cent - guarantee fee is upfront and one time fee paid at the
beginning – therefore, the rate is to be applied on the corporate guarantees provided during the
year. Not charging any interest from AEs and non AEs for providing mobilization advances
regarding an EPC contract and also not paying any interest on amounts received by it from main
contractor. Adjustment under TP provisions was not attracted. (AY. 2011-12)
DCIT .v. Lanco Infratech Ltd. (2017)56 ITR 525/81 taxmann.com 381/190 TTJ 200 (Hyd)
(Trib.)
S. 92C : Transfer pricing - Comparable-Exhibition and events could not be selected as

comparable to assessee rendering marketing support services.
280
Tribunal held that a company engaged in learning /Sale of stall space in exhibition and events
could not be selected as comparable to assessee rendering marketing support services.Tribunal
held that assessee engaged in providing software services to u/s AE, a product company being
functionally different could not be picked up as comparable.Tribunal held that when the DRP has
directed the TPO to Verify the RPT filler in respect of C Ltd. and in case it was greater than 25%,
then to exclude the same from list of comparables, no interference is called for. (AY. 2010-11)
TIBCO Software India (P) Ltd. v. Dy. CIT (2017) 187 TTJ 556 /78 taxmann.com 261 (Pune)
(Trib.)
S. 92C : Transfer pricing - Arm’s length price – Addition on account of transfer pricing
adjustment in advertisement, marketing & promotion - Matter was set aside .
The Tribunal sent the matter back to the AO/TPO for deciding this issue a fresh in the light of the
directing given by the Tribunal in its order for the immediately preceding year in the second
round and the assessee will be allowed a reasonable opportunity of hearing in the resulting fresh
proceedings. (AY. 2010-11)
ACIT v. Luxottica India Eyewear (P) Ltd. (2017) 187 TTJ 157 (Delhi) (Trib.)
S. 92C : Transfer pricing – Adjustment on account of location savings costs was directed to
be deleted .
Tribunal held that there neither any provision or any settled judicial principle that location costs
are required to be adjusted while allocating the profits of group entities /AES operating in
different tax jurisdictions. Location savings arise from the cost saving due to differences in the
cost of operations between high cost and low cost tax jurisdictions and further held that TP
adjustments cannot be on argue generalities. Accordingly, the adjustment made on account of
location saving is directed to be deleted. (AY. 2009-10, 2011-12)
Dy. CIT v. Syngenta India Ltd. (2017) 187 TTJ 271/77 taxmann.com 220 (Mum.) (Trib.)
S. 92C : Transfer pricing – Adjustment on account of environmental cost savings was

directed to be deleted .
The Tribunal held that the TPO has not demonstrated as to how and under what comparability
analysis he has found that assessee has got the benefit of environmental /green costs savings and
it is materially affected the price under arm’s length conditions. Accordingly, there are no reasons
and jurisdictions for such adjustment and same is directed to be deleted. (A.Y. 2009-10, 2011-12)
Dy. CIT v. Syngenta India Ltd. (2017) 187 TTJ 271/77 taxmann.com 220 (Mum.) (Trib.)
S. 92C : Transfer pricing – Working capital adjustmenthas to be contracted on the basis of

year end figures .
The Tribunal held that working capital adjustment has to be contracted on the basis of year end
figures, otherwise it will become impossible to arrive at working capital requirement on day to
day basis. (AY. 2005-06)
ITO v. Evalueserve.com (P) Ltd. (2017) 187 TTJ 317 (Delhi) (Trib.)
S. 92C : Transfer pricing - Comparable - Comparable which too had no foreign exchange
were rightly rejected by CIT (A).
Tribunal held that TPO rejected one comparable the ground that it had no foreign exchange
earnings, therefore comparable which too had no foreign exchange were rightly rejected by CIT
(A). (AY. 2005-06)
S. 92C : Transfer pricing - Comparable - Software development services cannot be

compared with IT enabled services .
281
The Tribunal held that the company engaged in providing software development services is not
comparable to the assessee which is primarily providing IT enabled services to its AEs and not
software development services.The Tribunal dismissed the appeal filed by the department. The
C.O. filed by the assessee does not servive. (AY. 2005-06)
S. 92C : Transfer pricing – Comparable - Absence of financial statement, TPO was directed
to exclude there companies from the list of comparbles.
The Tribunal held that in the absence of the financial statements for the relevant year, it is not
possible to find out the functions performed, assets employed and risk assumed by the company.
Therefore, TPO is directed to exclude all the three companies from the list of comparables. (AY.
2012-13)
Mckinsey Knowledge Centre India (P) Ltd. v. DCIT (2017) 187 TTJ 448 (Delhi) (Trib.)
S.92C : Transfer pricing – ALP determination-Turnover criteria-Valid in comparability

study.
It was held by the Hon’ble court that in so far as application of turnover filter is concerned, by
virtue of Hon'ble Bombay High Court judgment in CIT v. Pentair Water India (P.) Ltd. [Tax
Appeal No.18 of 2015, dt.16.09.2015], they opined that turnover is a relevant criteria for
choosing a company as comparable for TP study and could be adopted for inclusion or exclusion
of companies in a comparability study. (AY. 2008-09)
DCIT v. IGS Imaging Services (I) (P.) Ltd. (2016) 67 taxmann.com 148/(2017) 183 TTJ 359
(Bang) (Trib.)
S.92C : Transfer pricing-Distribution activity-Trader - Resale method (RPM) is most

appropriate.
Allowing the appeal of the asessee, the Tribunal held that; In the case of an assessee engaged in
distribution activity there is no value addition to the product in question even if the selling and
marketing expenses are borne by the assessee. Accordingly, the Resale Price Method is the most
appropriate method for bench marking the transaction and determining whether it is at arms'
length. The TPO is not entitled to thrust TNMM to evaluate the transaction. (ITA No.
235/Pun/2013, dt. 16.06.2017) (AY. 2008-09)
Freseniue Kabi India Private Limited v. DCIT (Pune) (Trib); www.itatonline.org
S.92C : Transfer pricing – IT enabled services (ITES) rendered to AE - Extraordinary

event of amalgamation during relevant year – Cannot be accepted as valid comparable for
ALP.
It was held by the Hon’ble Court that extra-ordinary event like merger and de-merger will have
an effect on the profitability of the company in the financial year in which such event takes place.
It is clear that during the previous year there were extra ordinary events that took place in the
company which warrants exclusion of the company as a comparable. Therefore the company
cannot be considered as a comparable. (AY. 2008-09)
DCIT v. IGS Imaging Services (I) (P.) Ltd. (2016) 67 taxmann.com 148/(2017) 183 TTJ 359
(Bang.) (Trib.)
S.92C : Transfer pricing – A credit rating company is functionally dissimilar to a

knowledge based research service provider.
It was held by the Tribunal that function of the assessee is of investment manager and risk
associated with the business also included incurring of huge expenditure which may go futile.
The Assessee carried on the activities of managing directly or indirectly investments, managing
mutual funds, venture capital funds, offshore funds, pension funds, provident funds, insurance
282
funds or any other funds. The accounting policy of fundraising expenses shows that the company
incurs fundraising expenses, which were recovered in the end after the fundraising exercises
completed and fund established. Therefore, it is apparent that it has a different risk profile too. It
cannot be stated that the functions performed by the assessee in research and information services
are anywhere similar to the functions of a fund manager. In view of our analysis of the functions
and risk profile of the assessee vis-a-vis comparable. (AY. 2012-13)
McKinsey Knowledge Centre India (P.) Ltd. v. DCIT (2017)82taxmann.com25 (Delhi)
(Trib.)
553 (Delhi) (Trib.)
S.92C : Transfer pricing – Foreign exchange gain/loss arising out of revenue transactions -
Operating revenue/cost – For both assessee as well as comparables.
The issue was w.r.t. whether gains/losses arising out of foreign exchange fluctuation while
computing operating margins of the comparable companies shall be considered as part of
operating profit or losses.
It was observed that if the foreign exchange gain/loss directly results from the trading items,
foreign exchange fluctuation loss cannot be considered as non-operating. It was also noted that
the relevant provision, i.e. 'Safe Harbour Rules' had not been notified for the concerned
assessment year and were, therefore, inapplicable.
It was thus held by the Tribunal that the amount of foreign exchange gain/loss arising out of
revenue transactions is required to be considered as an item of operating revenue/cost, both for
the assessee as well as the comparables. (AY. 2012-13)
McKinsey Knowledge Centre India (P.) Ltd. v. DCIT (2017)82taxmann.com25 (Delhi)
(Trib.)
553 (Delhi) (Trib)
S.92C : Transfer pricing - Purchase of components from AE - TNMM - Huge additions in

fixed assets made during relevant year - Depreciation exclusion before computed
corresponding profit level indicator accepted – Matter remanded.
It was held that since assessee's net profits to have seen a decline in view of its depreciation claim
arising from the addition in fixed assets, it was noticed that this tribunal in BA Continuum India
(P.) Ltd. v. Asstt. CIT [2013] 40 taxmann.com 311 (Hyd.) (Trib.) holds that such a depreciation
has to be excluded before computing the corresponding profit level indicator. Accordingly matter
was remanded to recomputed after excluding the Depreciation component. (AY. 2007-08, 2008-
09)
Erhardt + Leimer (India) (P.) Ltd. v. ACIT (2017) 78 taxmann.com 258/183 TTJ 25 (UO)
(Ahd.) (Trib.)
S.92C : Transfer pricing-Capacity under utilization-Adjustments in hands of comparable

entities – Matter remanded.
The Assessee contended that the authorities below have not granted it capacity underutilization
benefit in respect of the import of component transactions.
The department argued that such an adjustment in the hands of comparable entities is nowhere
provided either in the Act or Rules.
However, it was held that a co - ordinate bench decision in Dy. CIT v. EDAG Engineers &
Design India (P.) Ltd. [2014] 50 taxmann.com 332 (Delhi-Trib) quotes Rule 10B (1) (e) (3) to be
providing for adjustments for variation which could materially affect the net profit margins in
case of comparable uncontrolled transactions. Such capacity under utilization adjustments have to
be made only in the hands of comparable entities instead of that in case of tested party itself. In
283
view of the same the matter was remanded to the TPO to proceed afresh after taking the above
into consideration and affording the Assessee adequate opportunity. (AY. 2007-08)
Erhardt + Leimer (India) (P.) Ltd. v. ACIT [2017] 78 taxmann.com 258/183 TTJ 25 (UO)
(Ahd) (Trib.)
S.92C : Transfer pricing - Corporate guarantee provided to foreign bank - Fee @ 1% from
AE charged for guarantee provided on borrowal - ALP determined at 3.35% - Situations
held to be incomparable.
It was held that the considerations which weigh for raising of Bonds, that too in Indian market,
are quite distinct and incomparable with the instance of providing of Corporate Guarantee to a
bank abroad in connection with raising of loan from such bank by the AE of assessee outside
India. Therefore, the exercise carried out by the TPO to arrive at the arm's length rate suffered
from an inherent misconception as the benchmarking has been done between two incomparable
situations. (AY. 2009-10)
Grindwell Norton Ltd. v. ACIT (2016) 74 taxmann.com 249/(2017) 183 TTJ 681/147 DTR
185 (Mum.) (Trib.)
S.92C : Transfer pricing - Transaction services and medical transcription business - ITES
providers – Non-comparable.
It was held that an enterprise engaged in providing translation services and medical transcription
business is not a comparable to ITES providers. (AY. 2009-10)
VFS Global Services (P.) Ltd. v. DCIT (2016) 182 TTJ 301 /(2017)82taxmann.com110/145
DTR 119 (Mum) (Trib.)
S.92C : Transfer pricing – Activities outsourced – Non-comparable.

It is observed by the Tribunal that the reason for which the assessee seeked exclusion of the
company as a comparable was it had outsourced substantial part of its work to third party
vendors. The Tribunal has consistently held in a number of cases that having outsourced
substantial part of its business to third party vendors cannot be held as a comparable to a
company which does the work itself. (AY. 2009-10)
VFS Global Services (P.) Ltd. v. DCIT (2016) 182 TTJ 301 (2017)82taxmann.com110/145
DTR 119 (Mum.) (Trib.)
S.92C : Transfer pricing – Nature of services-Akin to ITES companies – Similar functioning

comparables to be found.
Assessee claimed that the business support service provided by the assessee to its A.E. cannot be
categorised/classified as ITES (BPO services) as the specific services provided by the assessee
are low end services in the nature of administrative services. Assessee is an Indian company
engaged in providing services relating to transfer documentation, passport and visa processing
facilitation and related services to tour operators, travel agencies and corporate, etc.
It was held by the Tribunal that the nature of services rendered by the assessee were akin to
services provided by ITES companies. Therefore, effort should be made to find out comparables
which are functionally similar within ITES segment. Hence the claim of the assessee that it
should be classified as a business support services provider is not acceptable. (AY. 2009-10)
VFS Global Services (P.) Ltd. v. DCIT (2016) 182 TTJ 301/(2017) 82taxmann.com110/145
DTR 169 (Mum) (Trib.)
S.92C : Transfer pricingArm’s length price-Supply of items to Associated enterprises at

lower price and higher price, adjustment was held to be not valid - where a company which
purchased more than 1/5th of total sales of assessee, would have a distinctly dominant
284
influence on pricing and could exercise a defacto control and, therefore, lower authorities
were justified in treating said company as AE of assessee. [S. 92A]
Whether where assessee had supplied a number of items to its Associated Enterprise abroad,
prices of some of which were lower than agreed price rates and some were higher than agreed
rates, then, adjustment to ALP could not be made only on basis of items for which there was a
deficient pricing . Where a company which purchased more than 1/5th of total sales of assessee,
would have a distinctly dominant influence on pricing and could exercise a defacto control and,
therefore, lower authorities were justified in treating said company as AE of assessee . (AY.2011-
12)
Hospira Healthcare India P. Ltd. v. Dy. CIT (2017) 55 ITR561 (Chennai) (Trib.)
S.92C : Transfer pricing – Segmental Accounting – Benchmarking of transactions – Profit

Level Indicator – Assessee producing tubes for pharmaceutical packaging and solar trail
activity exception to its regular business – Loss incurred in solar trial run-up – Excludible
in determining profit level indicator.
Assessee’s regular business was production of tubes for pharmaceutical packaging and the solar
trial activity was an exception to its regular business. Assessee has made provisions for
impairment of assets of Rs. 13.90 crs according to Accounting Standard - 28. Expenses were
exceptional. DRP directed the Transfer Pricing Officer to exclude the losses in the solar trial run-
up in computing the profit level indicator. Expenses and Income under the head ‘non-operating
transactions’ had to be excluded for arriving at the correct profit level indicator. Held by ITAT
that there was no need to interfere with the order of DRP with regard to computation of profit
level indicator. It had rightly held that the solar trial activity was an extraordinary item and was
not part of the regular business of the assessee and that there was impairment of assets. (AY.
2010-11)
ITO v. Schott Glass India Pvt. Ltd. (2017) 55 ITR 28 (SN) (Mum.) (Trib.)
S.92C : Transfer pricing – Arms length price – Benchmarking of Transactions – TPO

taking a contradictory stand in succeeding year in remand proceedings – TPO to make
fresh exercise for determining ALP
Held that TPO in succeeding year concluded that payments made for group services were for day-
to-day SAP running costs, payment for SAP licenses and maintenance & upgradation.
Transactions was aggregated with manufacturing and trading since it was closely linked and
hence was aggregated without any separate benchmarking. Since TPO had taken a contrary stand
in the succeeding year in remand proceedings he was to do a fresh exercise in the light of its
remand report in order to determine the ALP for international transaction. (AY. 2007-08)
Kennametal India Ltd. v. ACIT (LTU) (2017) 55 ITR 14 (SN) (Bang.) (Trib.)
S.92C : Transfer pricing-Transfer Pricing Officer does not reflect any justifiable factors for
selecting the RPM method in preference to the TNM method selected by the assessee as the
most appropriate method-Arm’s length rate of the corporate guarantee commission/fee was
estimated at 0.5% .
Tribunal held that ;considering the unsustainability of the approach of the Transfer Pricing
Officer in selecting the RPM can also be gauged if one takes into consideration the provisions of
Rule 10C of the Rules. As noted earlier, the computation of arm’s length price under section 92C
(1) of the Act is required to be made in terms of the most appropriate method prescribed therein.
Sub-section (1) of section 92C of the Act also enumerates the methods prescribed and Rule 10C
(1) of the Rules postulates that the most appropriate method shall be the method which is “best
suited to the facts and circumstances of each particular international transaction”, and which
provides the “most reliable measure” of an arm’s length price in relation to the international
transaction . Sub-rule (2) of Rule 10C provides the factors which shall be taken into consideration
285
while selecting the most appropriate method. Quite clearly, the entire discussion in the order of
the Transfer Pricing Officer does not reflect any justifiable factors for selecting the RPM method
in preference to the TNM method selected by the assessee as the most appropriate method.
Moreover, it is factually evident that assessee has undertaken similar international transactions of
sale of television programmes and film rights to its associated enterprises in the past as well as in
subsequent years and the same were benchmarked by considering the TNM method as most
appropriate method; and, such position has been accepted by the assessing authority in the
respective years. No doubt, the principles of res judicata are not strictly applicable to the
incometax proceedings, so however, if a qualitatively comparable situation exists in more than
one assessment year, then the rules of consistency cannot be given a go by. In the instant case, we
find that the impugned international transaction of sale to the associated enterprise, ATL
Mauritius is effected in terms of Memorandum of Understanding dated 01/10/2005, which clearly
shows that qualitatively similar transactions have been undertaken by the assessee in the past
year, wherein benchmarking done by selecting the TNM method as the most appropriate method
stands accepted. In the course of hearing, the Ld. Representative for the assessee had asserted that
similar fact situation prevails in the subsequent assessment years also, and such assertion has not
been controverted by the Revenue before us. Even otherwise, we find that the Transfer Pricing
Officer has not brought out any justifiable reasons to depart from adopting the TNM method,
which has otherwise been found to be applicable in the assessments of past as well as subsequent
assessment years upto to the assessment year 2012-13, as stated before us by the Ld.
Representative for the assessee before us. Therefore, on the principle of consistency also, we are
unable to uphold the selection of RPM method as the most appropriate method by the Transfer
Pricing Officer in preference to the TNM method selected by the assessee.
As regards corporate guarantee commission, considering the entirety of facts and circumstances,
Tribunal up held the rate of 0.5% for the purposes of determining arm’s length rate of the
corporate guarantee commission/fee and set aside the order of CIT (A). (ITA No.
3406/Mum/2014, dt. 05.05.2017) (AY. 2008-09)
Zee Entertainment Enterprises Ltd. v. ACIT (2017) 188 TTJ 65 (Mum) (Trib)
S. 92C : Transfer pricing-Arm's length price – Comparable - Functional difference - A

company engaged in rendering KPO services, and a company providing highly technical
engineering consultancy services, could not be accepted as comparables while determining
ALP.
Tribunal held that the,assessee Company was providing IT enabled services (ITES) to its AE. A
company in whose case extraordinary event of amalgamation took place during relevant year
which affected its financial results, could not be accepted as comparable. A company which
outsourced major part of its work resulting in very low employee cost, was also not acceptable as
comparable. Acompany earning revenue from sale of its own software products, could not be
accepted as comparable. A company engaged in rendering KPO services was also not acceptable
as comparable. A company providing highly technical engineering consultancy services was also
rejected as comparable on account of functional difference. (AY.2007 – 08)
TNS India (P.) Ltd. v. ACIT (2017) 162 ITD 556 (Hyd.) (Trib.)
S. 92C : Transfer pricing - Arm's length price - Working capital adjustment was remanded
back for disposal afresh.
Tribunal held that, when working capital adjustment was wrongly considered by considering
total receivables and arrivals including third party transactions and making a negative working
capital adjustment. TPO was directed to examine issue relating to working capital adjustment
afresh. (AY 2007 – 2008)
TNS India (P.) Ltd. v. ACIT (2017) 162 ITD 556 (Hyd.) (Trib.)
286
S.92C : Transfer pricing – Arm’s length price – Resale price method (RPM)was held to be
as most appropriate method to determine ALP of aforesaid international transactions-
Rejection of cup method was held to be justified.
Dismissing the appeal of the revenue, the Tribunal held that; in respect of purchase of Liquified
Natural Gas (LNG) from its foreign AEs and thereupon sold re-gasified LNG (R-LNG) to various
customers in India, RPM (resale price method) was to be adopted as most appropriate method to
determine ALP of aforesaid international transactions.Tribunal also held that Cup method cannot
be thrust upon the assessee. (AY.2009-10)
DCIT v. Hazira LNG (P.) Ltd. (2017) 163 ITD 223 / 184 TTJ 440 /147 DTR 1 (Ahd.) (Trib.)
S.92C : Transfer pricing – Arm’s length price-Resale price method (RPM) is best suited for
determining ALP of an international transaction in nature of purchase of goods from an
AE, which are resold as such to unrelated parties.
Assessee adopted RPM method where as the TPO has applied TNMM method, which was
confirmed by the CIT (A). On appeal allowing the appeal of the assesse, the Tribunal held that;
Resale price method (RPM) is best suited for determining ALP of an international transaction in
nature of purchase of goods from an AE, which are resold as such to unrelated parties. (AY.
2003-04)
Bose Corporation India (P.) Ltd. v. ACIT (2017) 163 ITD 186 (Delhi) (Trib.)
S. 92C : Transfer pricing-Arm's length price-Reimbursement costs should be excluded as

they do not involve any functions to be performed so as to consider it for profitability
purposes while computing operating cost.
Tribunal held that reimbursement costs should be excluded as they do not involve any functions
to be performed so as to consider it for profitability purposes while computing operating cost.
(AY.2011-12)
CPA Global Services (P.) Ltd. v. ITO (2017) 162 ITD 64 /151 DTR 385/187 TTJ 172 (Delhi)
(Trib.)
Editorial : Affirmed, PCIT v. CPA Global Services (P.) Ltd. (2017) 151 DTR 161 (Delhi)
(HC)
S.92C : Transfer pricing-Arm's length price-Service industry-Working capital adjustment

not to be denied on ground of non-matching of working capital adjustment with financials-
opportunity to be given to assessee to get financials corrected - Software development-
Selection of comparable--Functional comparability in current year only. [S .92CA]
Tribunal held that opportunity to be given to assessee to get financials corrected and assessing
Officer to examine assessee's claim for grant of working capital adjustment on merits. As regards
software development, selection of comparable, functional comparability in current year only.
Software Product Company having intellectual property rights over some of products developed
by it not comparable. Companies said to be functionally dissimilar was to be excludible from list
of comparable. (AY. 2008-2009)
Comverse Network Systems India P. Ltd. v. ACIT (2017) 54 ITR 158 (Delhi) (Trib.)
S.92C : Transfer pricing-The accretion of brand value, as a result of use of the brand name
of foreign AE under the technology use agreement, which has been accepted to be an
arrangement at an arm’s length price, does not result in a separate international
transaction hence a notional adjustment cannot be made in the hands of the Indian AE
towards compensation receivable from the foreign AE for “deemed brand
development”.[S.2 (24),92B]
287
Tribunal held that;the arrangement under the technology use agreement, which permits the
assessee and binds the assessee to use the brand name of the AE on the products manufactured by
the assessee, has been specifically held to be an arm’s length transaction. An aspect covered by
this agreement, therefore, cannot be subject matter of yet another benchmarking exercise. Every
benefit accruing to an AE, as a result of dealing with another AE, is not on account of service by
the other AE. That takes us to last component of definition of ‘international transaction’ under
section 92 B. This refers to a transaction in the nature of any other transaction having a bearing
on the profits, income, losses or assets of such enterprises. An accretion in the brand valuation of
a brand owned by the AE does not result in profit, losses, income or assets of the assessee
company, and it cannot, therefore, result in an international transaction qua the assessee. Unless
the transaction is such that it affects profits, losses, income or assets of both the enterprises, it
cannot be an international transaction between these two enterprises. If the assets of one of the
enterprises are increased unilaterally, without any active contribution thereto by the other
enterprise, such an impact on assets cannot, in our humble understanding, amount to an
international transaction. The accretion in brand value of the AE’s brand name is not on account
of costs incurred by the assessee, or even by its conscious efforts, and it does not result in impact
on income, expenditure, losses or assets of the assessee company. It is not, therefore, covered by
the residuary component of definition of ‘international transaction’ either.
As for the emphasis placed by the learned Departmental Representative, as also by the authorities
below, on the exhaustive definition of ‘intangibles’ in Explanation to Section 92B, Tribunal held
that,this definition would have been relevant only in the event of there being any transaction in
the nature of sale, purchase of lease of intangible assets but then, it is not even the case of the
revenue, that there was any sale, purchase or lease of intangibles. In view of these discussions, as
also bearing in mind entirety of the case, we are of the considered view that the accretion of brand
value, as a result of use of the brand name of foreign AE under the technology use agreement -
which has been accepted to be an arrangement at an arm’s length price, does not result in a
separate international transaction to be benchmarked. (AY. 2009-10 to 2011-12)
Hyundai Motor India Limited v. DCIT (2017) 153 DTR 41/187 TTJ 97 (Chennai) (Trib.)
S.92C : Transfer pricing-Arm’s length price-International transaction can be clubbed, if

such transactions are closely connected with each other, contention that when TNMM is
applied at the entity level, there was no necessity of separate bench marking in respect of
royalty transactions cannot be accepted.
An international transaction can be clubbed /aggregated with other international transactions if
such transactions are closely connected with each other. The onus is on the assessee to establish
the justification for clubbing the transactions. If the TPO has not applied TNMM at the entity
level and has bench marked the royalty payment on standalone basis and not subjected the cost of
production or other transactions to bench marking, the contention that when TNMM is applied at
the entity level, there was no necessity of separate bench marking in respect of royalty
transactions cannot be accepted. (IT (TP)A Nos. 159/Bang/2015, 132/Bang/2016 &
86/Bang/2017, dt. 21.04.2017) (AY. 2010-11 to 2012-13)
Kaypee Electronics & Associates Pvt. Ltd. v. DCIT (2017) 57 ITR 13 (S.N.) (Bag.) (Trib.);
www.itatonline.org
S.92C : Transfer pricing-Arm's length price-Royalty-Five per cent. on domestic sales and
eight per cent. on export sales to be considered as at arm's length rate.
Tribunal held that in respect of royalty payable to associated enterprise, five per cent. On
domestic sales and eight per cent. on export sales to be considered as at arm's length rate.
(AY.2005-2006, 2006-2007, 2008-2009)
ACIT v. Dow Agro sciences India Pvt. Ltd. (2017) 53 ITR 590 (Mum.) (Trib.)
288
S.92C : Transfer pricing - Arm's length price-Interest on loans - International interest rate
fixed being LIBOR linked interest rate to be applied.
Tribunal held that; Comparable uncontrolled price method is most appropriate method. Reserve
Bank of India approval cannot be considered as benchmark for arriving at arm's length price.
Transactions to be considered on commercial principles in international market. International
interest rate fixed being LIBOR linked interest rate to be applied. (AY.2007-2008, 2008-2009)
S.92C : Transfer pricing-Arm's length price-Interest-free loans to associated enterprise-

LIBOR rate applicable and not domestic rate.
DRP directed the TPO to compute the upward adjustment applying an arm’s length interest rate
of 11 percent. i.e. 8 percent .plus 3 percent (Credit spread) .On appeal the Tribunal held that
instead of the base rate of 8 percent. (based on lending rates of banks in India for commercial
borrowing), it would be appropriate to apply LIBIR rate and not the domestic lending rate. (AY.
2003-2004 to 2011-2012)
S.92C : Transfer pricing-Arm's length price-Giving guarantee on a loan availed of by its

associated enterprises is an international transaction, arm's length guarantee commission
at 0.5 per cent was directed to be adopted against at 2 percent adopted by DRP.
Giving guarantee on a loan availed of by its associated enterprises is an international transaction,
arm's length guarantee commission at 0.5 per cent was directed to be adopted against at 2
percent adopted by DRP. (AY. 2003-2004 to 2011-2012)
Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol.) (Trib.)
S. 92C : Transfer pricing – Arm’s length price-proportion to international transaction

bears to the total turnover.
The Tribunal held that CIT (A) was justified in directing the AO to make transfer pricing
adjustment of the expenses in the proposition which the international transactions bear to the total
turnover. (AY. 2004-05, 2005-06, 2006-07)
S.92CA : Transfer pricing - Reference to Transfer Pricing Officer — Assessing Officer must
give assessee opportunity to be heard before making reference . [S .92C, Art . 226 ]
Allowing the petition the Court held that; The Assessing Officer not having afforded any
opportunity of hearing to the assessee on the jurisdictional issue raised, it ought not to have
transferred the matter to the Transfer Pricing Officer. The Assessing Officer had acted in breach
of the principles of natural justice in doing so. The assumption of jurisdiction by the Transfer
Pricing Officer and subsequently the ultimate reference to the Dispute Resolution Panel were not
valid
PCM Strescon Overseas Ventures Ltd vs. Dy. CIT (2017) 399 ITR 302/157 DTR 265 /298
CTR 277 (Cal.) (HC)
S. 92CA : Reference to transfer pricing officer - Before making a reference to the TPO, the
assessee is required to be given an opportunity to show-cause why the reference may not be
made to the TPO and thereafter a speaking order is required to be passed by the AO.
[S.92C, Art. 226]
The assessee filed a Writ Petition, challenging the action of the AO in making a reference to the
TPO without disposing of the objection raised by the assessee as provided under the Instruction
No. 3/2016 dated 10th March 2016. The HC quashing the reference made by the AO, held that as
per the CBDT Instruction No. 3/2016 dated 10th March 2016, the AO before making a reference
289
to the TPO, is required to give an opportunity to the assessee showing cause as to why a reference
may not be made to TPO and thereafter, a speaking order is required to be passed disposing of the
objections so raised by the assessee. The HC remitted back the matter to AO to pass a speaking
order while making a reference to TPO after considering the objections raised by the assessee.
Alpha Nipon Innovatives Ltd. v. DCIT (2016) 76 taxmann.com 166 /(2017) 291 CTR 309
(Guj) (HC)
S. 92CA : Reference to transfer pricing officer - jurisdiction of TPO is extendable to other

international transactions which come to his notice during the course of proceedings before
him.
Even though original jurisdiction of TPO is confined to international transactions referred to him
by AO for determination of ALP, but, such jurisdiction is extendable to other international
transactions which comes to his notice during the course of proceedings before him. (AY. 2011-
12)
Nikon India (P) Ltd. v. Dy. CIT (2017) 146 DTR 107 (Delhi) (Trib.)
S.115A : Fees for technical services – Payments made to non-resident and TDS deducted -
Provision of Section 206AA cannot be applied on the contention that non-resident does not
have PAN. [S. 206AA]
Held allowing the appeal that the payment was made towards fees for technical services to a non-
resident not having PAN through banking channels as approved by RBI and payment was well
covered under provisions of section 115A (1) (b) and therefore special rate of tax i.e. 11.33% was
applicable and was rightly deducted by assessee. Provisions of section 206AA could not be made
applicable to that payment. Hence, claim towards short deduction to be deleted. (AY . 2011-12)
Quick Flight Ltd. v. ITO (2017) 55 ITR 31 (SN) (Ahd.) (Trib.)
S. 115BBC : Anonymous donations - No detail was available on record about donations

made to assessee-trust, same was to be treated as anonymous donations and to be included
in total income of assessee-trust for taxation [ S. 10 (23C ]
Tribunal held that; where no detail was available on record of donations made to assessee-trust,
same was to be treated as anonymous donation and included in total income of assessee for
taxation . (AY.2008 - 09)
ACIT v. Meenakshi Ammal Trust. (2017) 165 ITD 551/189 TTJ 524 /158 DTR 73 (Chennai)
(Trib.)
S.115BBC : Anonymous donations-Trust noting names and addresses of donors--Assessing

Officer failing to verify donors--Treatment of receipt as anonymous donation was not
justified. [ S.11, 80G (5) (vi) ]
Allowing the appeal the Tribunal held that the assessee had also furnished affidavits of organisers
of ad hoc committees through whom the assessee had organised yoga camps made available but
the Assessing Officer did not bother to verify the details even on test-check basis. In the absence
of such efforts by the Assessing Officer, the authorities below were not justified in making and
sustaining the treatment of receipt as anonymous donation. Undisputedly, in almost all donations
the names and addresses of the donors had been maintained and thus the bona fides of the
assessee could not be doubted where such detail had remained to be maintained in some cases.
(AY. 2009-2010)
Patanjali Yogpeeth (Nyas) v. ADIT (2017)/163 ITD 323 /54 ITR 616/151 DTR 114/185 TTJ
1 (Delhi) (Trib.)
290
S. 115BBE : Tax on income - Cash credits-Addition was made on the basis of information
received from the Bank, without giving an opportunity of hearing – Order was set a side. [S.
68 ,131 (1), Art 226]
On the basis of information received from the bank u/s 131 (1) of the Act the AO treated the
credit in the Bank as unexplained income and charged u/s 115BBE of the Act. As no opportunity
was given to the assessee, the assessee challenged the said order by fling writ petition . Allowing
the petition the Court held that; AO in the opening sheet of assessment order had simply written
‘various dates as per the assessment records’. This details does not explain the fact that any
opportunity of hearing was given to the assessee. Thus, the assessee’s writ was allowed and the
assessment order was set aside. Further, the AO was directed to pass fresh order after providing
opportunity of hearing to the assessee. (AY. 2014-15)
Lakshmanan Magendiran v. ITO (2017) 293 CTR 371/148 DTR 158 (Mad) (HC)
S. 115E : Non-residents - Capital gains – Bonus shares - Original shares having been
purchased in foreign exchange, bonus shares are also foreign exchange assets and eligible
for concessional rate of 10 percent. [ S.55 (2) (aa)]
Tribunal held that; original shares are purchased/acquired in foreign exchange, then same shall
also be attributed to bonus shares which have been allotted subsequently and, therefore, bonus
shares acquire nature of original shares, though cost of acquisition shall be 'nil' under section 55
(2) (aa). Tribunal also held that ,assets (bonus shares) acquired by way of foreign exchange fall
within the definition of foreign exchange asset under section 115E (b) and eligible for a
concessional rate of 10 per cent under section 115E. (AY. 2012-13)
Shashi Parvatha Reddy v. DCIT (IT) (2017) 167 ITD 587 (Hyd) (Trib.)
S. 115J : Book profits - Assessing Officer cannot go behind net profit shown except as
provided in Explanation to section 115J.
The matter stood decided against the Department between the assessee and the Department for
the assessment year 1988-89 and hence no question of law arose. Assessing Officer could not go
behind net profit shown except as provided in Explanation to section 115J.
PCIT v . J.K. Synthetics Ltd. (2017) 390 ITR 129 (All.) (HC)
Editorial : SLP of revenue was dismissed, PCIT v . J.K. Synthetics Ltd. (2016) 388 ITR 54 (St.)
S. 115JA : Book profits —Provision for doubtful debt - Provision for doubtful debt, but by
simultaneously obliterating provision from its accounts by reducing corresponding amount
from loans and advances on assets side of balance-sheet, actual write off is not hit by
amendment [ S. 15JB, 260A ]
Held, that there was no conflict between the two judgments CIT v. Deepak Nitrite Ltd. and CIT
v. Indian Petrochemicals Corporation Ltd. and both operated in different fields. By way of
culmination of the various judicial pronouncements discussed and the statutory provisions, the
situation that arose was that prior to the insertion of clause (i) of Explanation 1 to section 115JB,
the then existing clause (c) did not cover a case where the assessee made a provision for bad or
doubtful debt. With the insertion of clause (i) of Explanation 1 with retrospective effect, any
amount or amounts set aside for provision of diminution in the value of the asset made by the
assessee, would be added back for compensation of book profit under section115JA . However, if
that was not a mere provision made by the assessee by merely debiting the profit and loss account
and crediting the provision for bad and doubtful debt, but by simultaneously obliterating such
provision from its accounts by reducing the corresponding amount from the loans and advances
291
on the assets side of the balance-sheet and consequently, at the end of the year showing the loans
and advances on the assets side of the balance-sheet as net of the provision for bad debt, it
amounted to a write off and such an actual write off was not hit by clause (i) of Explanation 1 to
section 115JB . The judgment in the case of CIT v. Deepak Nitrite Ltd. fell in the former category
whereas the judgment in the case of CIT v. Indian Petrochemicals Corporation Ltd. fell in the
later category. (AY. 2003 - 04)
CIT v. Vodafone Essar Gujarat Ltd. (2017) 397 ITR 55/297 CTR 239/156 DTR 37 (FB)
(Guj) (HC)
S. 115JA : Book profits – Excess depreciation and made a provision towards land
development - In current year these were written back/withdrawn - In computation of book
profit under MAT provisions, reduction of provisions would be allowed only if book profit
of earlier year was increased by amounts claimed as provisions ,matter remanded to the
Assessing Officer.
Appeal by the Assessee The High Court held that; section 115JA permits the reduction from book
profit of any amount withdrawn from reserves or provisions and credited to the profit and loss
account upon condition that the book profits for the year in which such provisions or reserves had
been created had been correspondingly increased by such reserves or provisions. Therefore the
HC held that the downward adjustment in current year was conditional upon satisfaction of the
requirement whether the book profit of the earlier year when the reserve/provision was created,
was increased by the amounts credited to the profit and loss account in that financial year. It was
noted that there was no finding on this aspect in the lower authorities orders and hence remitted
the matter back to the AO. (AY. 1998-99,1999-00)
V.G.P. Housing Pvt. Ltd. v. ACIT (2017) 245 Taxman 199 (Mad.) (HC)
S. 115JAA : Book profits - Deemed income-tax credit – Surcharge and cess are part of
income tax credit hence deductible from gross tax payable. [S. 115JB]
Dismissing the appeal of the assessee, the Court held that both surcharge and cess were part of the
Income-tax though they were payable in addition to the Income-tax at the rate provided in
section115JB of the Act. The provisions contained in sub-section 115JB, second proviso to sub-
section 115JB, sub-section 115JB and sub-section 115JB of section 115JB of the Finance Act,
2008 provided for Income-tax being increased by the amount of surcharge and cess. The reason
behind the increase of Income-tax by the amount of surcharge and cess had been spelt out on the
basis whereof it could be said that the intention was that part of the amount realised by way of
Income-tax was earmarked for being spent on education and higher education. The Appellate
Tribunal was right in confirming the set-off of minimum alternate tax credit under
section 115JAAbrought forward by the assessee from earlier years against tax on the total income
including the surcharge and education cess. (AY. 2008 - 09)
SREI Infrastructure Finance Ltd. v. Dy.CIT (2017) 395 ITR 291 (Cal.) (HC)
S. 115JAA : Book profit - Deemed income-tax credit - Payment of entire taxes (including
surcharge and cess) is eligible for MAT credit ,while calculating interest on 'assessed tax'
u/s 234B of the Act. [ S. 234B ]
Allowing the appeal of the assessee the Tribunal held that; payment of entire taxes (including
surcharge and cess) is eligible for MAT credit under section 115JAA while calculating interest on
'assessed tax' under section 234B, of the Act . (AY. 2011-12)
Bhagwati Oxygen Ltd. v. ACIT (2017) 167 ITD 645 (Kol) (Trib.)
292
S. 115JB : Book profits - Disallowance of expenditure on exempt income - Amount
disallowed u/s 14A of the Act cannot be added to arrive at book profit for purposes . [ S.
14A, R.8D ]
Dismissing the appeal of the revenue the Court held that, the amount disallowed u/s 14A of the
Act cannot be added to arrive at book profit for purposes . (ITA No. 337 of 2013, dt.10.02.2015)
(AY. 2007-08)
CIT v. Bengal Finance & Investment Pvt. Ltd. (Bom) (HC); www.itatonline.org
S. 115JB : Book profits – Provision cannot apply to insurance companies as they are
required to prepare accounts as per Insurance Act and regulations of Insurance Regulatory
Development Authority (IRDA) [ Companies Act, 1956, Schedule VI ]
Allowing the appeal of the assesse the Court held that; provision relating to book profit does not
apply to insurance companies as they are required to prepare accounts as per Insurance Act and
regulations of Insurance Regulatory Development Authority (IRDA) and not as per Parts II and
III of Schedule VI of Companies Act. Considered, CBDT Circular No. 528, dated 16-12-1998
and Circular No. 5 of 2010, dated 3-6-2010. (AY. 2005-06)
Oriental Insurance Co. Ltd. v. Dy. CIT (2017) 250 Taxman 291 /160 DTR 104 (Delhi) (HC)
S. 115JB : Book profits – Insurance companies-Insurance companies are not taxed on

commercial profits but on profits as computed under the Insurance Act. Accordingly,
income earned on sale/redemption of investments is not chargeable to tax. [S.44]
Allowing the appeal of the assessee, the Court held that; as Insurance companies are required to
prepare accounts as per the Insurance Act and not as per Schedule VI to the Companies Act, S.
115JB does not apply. Insurance companies are not taxed on commercial profits but on profits as
computed under the Insurance Act. Accordingly, income earned on sale/redemption of
investments is not chargeable to tax. (ITA 372/448/2015, dt. 30.08.2017) (AY. 2005 - 06)
Oriental Insurance Co. Ltd. v. DCIT (2017) 160 DTR 104 (Delhi) (HC); www.itatonline.org
S. 115JB : Book profits-The AO is not entitled to add to the "book profits" the amounts
arising from sale of land which are directly credited to the Capital Reserve Account in the
balance sheet rather than routing it through Profit and Loss Account in the manner
provided as per Part II and Part III of Schedule VI to the Companies Act, 1956.
Dismissing the appeal of the Revenue, the Court held that ;The AO is not entitled to add to the
"book profits" the amounts arising from sale of land which are directly credited to the Capital
Reserve Account in the balance sheet rather than routing it through Profit and Loss Account in
the manner provided as per Part II and Part III of Schedule VI to the Companies Act, 1956.
Followed, Akshay Textiles Trading and Agencies Pvt. Ltd. (2008) 304 ITR 401 (Bom) (HC.).
(ITA No. 436 of 2015, dt. 18.07.2017) (AY. 2004-05)
PCIT v. Bhagwan Industries Ltd. (Bom.) (HC), www.itatonline.org
S. 115JB : Book profits-Amendment with retrospective effect providing for inclusion of

diminution in value of asset debited to profit and loss account is valid in law.
Dismissing the petition the Court held that; The insertion of clause (i) of Explanation 1 to
section 115JB (2) of the Income-tax Act, 1961, as amended by the Finance (No. 2) Act, 2009 is
not illegal, invalid or ultra vires the Constitution of India offending articles 14, 19 (1) (g) and 265.
No new levy has been proposed to be made by the amendment. The nature of the levy has been
changed. It merely cures a provision of its vice.
293
Peerless General Finance and Investment Co. Ltd. v. Dy.CIT (2017) 396 ITR 236/248
Taxman 113 (Cal.) (HC)
S. 115JB : Book profits-Books of account certified under companies Act to be accepted -

Capital receipt which was claimed as exemption for book profit was held to be not justified.
[S. 2 (24)]
Dismissing the appeal of the assesse the Court held that; when the provisions of section 115JB of
the Act have overriding effect upon other provisions of the Act and when the mechanism or
operation of the area is a complete code by itself, any deduction which was otherwise not
provided by the Explanation would be outside the scope of operation of section 115JB of the
Act.Books of account certified under companies Act to be accepted.Capital receipt which was
claimed as exemption for book profit was held to be not justified . (AY. 2005 - 06)
B and B Infratech Ltd v. ITO (2016) 76 taxmann.com 188/(2017) 396 ITR 420 (Karn.) (HC)
S. 115JB : Book profits - Deduction of accumulated unabsorbed depreciation of earlier

years was to be allowed. [S. 32]
Dismissing the appeal of the revenue, the Court held that; while computing book profit,deduction
of accumulated unabsorbed depreciation of earlier years was to be allowed . (AY 2012-13)
PCIT v. Surat Textile Mills Ltd. (2017) 246 Taxman 206 /155 DTR 67 (Guj.) (HC)
S. 115JB : Book profits--State Electricity Board-Provisions is not applicable. [Electricity

Duty Act, 1963, S. 3 (1)]
Dismissing the appeal of the revenue, the Court held that; Electricity Board collecting electricity
duty from customers as agent of State hence provisions is not applicable. (AY. 2008-2009)
CIT v. Kerala State Electricity Board (2017) 393 ITR 337 (Ker.) (HC)
Editorial : Order in A CIT v. Kerala State Electricity Board (2015) 38 ITR 458 (Cochin) (Trib)
is affirmed. SLP is granted to the revenue, CIT v. Kerala State Electricity Board (2016) 380
ITR 8 (St.)
S. 115JB : Book Profits – Any deduction which is otherwise not provided by Explanation
would be outside scope, provision have overriding effect upon other provisions of Act .
The assessee filed a NIL return of income as its Profit and Loss account contained a capital
receipt under the head ‘Other Income’ which was not taxable under the normal provisions of the
Act. However, the AO opined that ‘Book Profit’ was defined as per S. 115JB and was a self-
contained code and would apply notwithstanding any other provisions of the Act. Further, he also
opined that there was no scope for any deduction under any other head then provided by way of
Explanation u/s 115JB and took the book profit shown as per profit and loss account as the
income for applying the tax rate of 7.5%, The Order of AO was confirmed by CIT (A) and
Tribunal. On appeal affirming the order of Tribunal, the Court held that; the provisions of
S.115JB of the Act have overriding effect upon other provisions of the said Act and when the
mechanism or operation of the area was a complete code by itself, any deduction which was
otherwise not provided by the Explanation would be outside the scope of operation of S.115JB of
the Act. (AY. 2005-06)
B&B Infratech Ltd. v. ITO (2016) 76 taxmann.com 188 /(2017) 146 DTR 103 (Karn) HC)
S.115JB : Book profits-Computation under clause (f) of Explanation 1 to section 115JB (2) -
To be made without resorting to computation prescribed under section 14A read with rule
8D. [Matter Remanded] [S.14A, R.8D]
294
It was observed that even though the provisions may be similar, literal meaning cannot always be
followed logically, because sometimes it tends to defect the obvious intention of the Legislature
and results in producing a wholly unreasonable result.
Therefore, it was held by the tribunal that the computation under clause (f) of Explanation 1 to
section 115JB (2), is to be made without resorting to the computation as contemplated under
section 14A, read with rule 8D of the Income-tax Rules, 1962 (AY. 2008-09])
ACIT v. Vireet Investment (P.) Ltd. (2017) 165 ITD 27/154 DTR 241/188 TTJ 1 (SB)
(Delhi) (Trib.)
S. 115JB : Book profits - Disallowance u/s. 14A could not be imported into clause (f) of
Expl. 1 to s.115JB for purpose of computing book profit [ S.14A ]
Dismissing the appeal of the revenue, the Tribunal held that; disallowance u/s. 14A could not be
imported into clause (f) of Expl. 1 to S..115JB for purpose of computing book profit . (AY.
2009-10)
DCIT v. Reliance Natural Resources Ltd (2017)166 ITD 385 (Mum) (Trib.)
S. 115JB : Book profits – Excise duty and interest subsidy received by assessee in respect of
undertaking situated in notified area of Sikkim cannot be treated as income for the purpose
of computing book profits
Excise duty subsidy and interest subsidy received in respect of an undertaking situated in the
notified area of Sikkim cannot be regarded as income for the purpose of computing book profits
u/s. 115JB of the ITA even though the said were credited to the Profit & Loss A/c. (AY. 2007-
08).
S. 115JB : Book profits – AO cannot increase the book profits by the amount of additional
disallowance made u/s 14A [ S. 14A ]
Tribunal held that the, AO cannot increase the book profits by the amount of additional
disallowance made u/s 14A. Followed the SB in ACIT v. Vireet Investment P.Ltd (2017) 82
taxmann, com 415 (Delhi) (Trib) (ITA No. 1807 /Mum/2011 & 1812 /Mum/2011 Bench “A” dt.
16-11 - 2017 (AY. 2006 - 07, 2008 - 09)
ACIT v AF-taab Investment Company Ltd (Mum) (Trib) www.itatonline.org
S. 115JB : Book profits – Profit from sale of fixed assets cannot be included as part of book
profit.
The Tribunal held that profit on sale of fixed assets cannot be included as part of book profit for
the purpose of section 115JB. (AY. 2007-08)
Dy. CIT v. Gloster Jute Mills Ltd. (2017) 185 TTJ 339 /159 DTR 33 (Kol.) (Trib.)
S. 115JB : Book profits - Provision for warranty cannot be treated as provision for
diminution in value of any assets so as to be covered by Expl. 1 (i) to s. 115JB (2) - No
additions to book profit can be made in respect of said amount.
The adjustment in book profit u/s. 115JB is concerned, the provision for warranty cannot be
treated as provision for diminution in value of any assets so as to be covered by Explanation 1 (i)
to s. 115JB (2) and thus no additions to book profit can be made. Further, amount of provision
295
made on account of warranty expenses cannot be said to be unascertained liability. No addition
could have been made u/s 115JB. (AY. 2008-09, 2011-12)
Anchor Electricals (P.) Ltd. v. DCIT (2017) 164 ITD 510 /(2018) 191 TTJ 26 (UO) (Mum.)
(Trib.)
S.115JB : Book profits - Disallowance under section 14A r.w. rule 8D – not applicable for
MAT calculation. [R. 8D]
Held that disallowance u/s 14A read with rule 8D cannot be added while computing book profit
u/s 115JB. That the disallowance is only for purpose of computing taxable income of the assessee
in the normal course. (AY. 2012-13)
Powermatic Packaging P. Ltd. v. ITO (2017) 55 ITR 7 (SN) (Chennai) (Trib.)
S. 115JB : Book profits-Rent equalization reserve debited to profit and loss account was to
be added back while computing book profit. [AS.19]
Dismissing the appeal of the assessee the Tribunal held that; Rent equalization reserve debited to
profit and loss account was to be added back while computing book profit. (AY. 2008-09)
Stryker Global Technology Center (P.) Ltd v. ACIT (2017) 163 ITD 200 (Delhi) (Trib.)
S.115JB : Book profits-waiver of loan cannot be added while computing the book profit.
[S. 41 (1)]
Allowing the appeal of the assessee the Tribunal held that; A capital surplus thus, in respect of
waiver of loan amount cannot be regarded as being amount available for distribution through the
profit & loss account. This follows from the very definition of expression ‘capital reserve’ that it
must be accounted directly to the credit of the capital reserve account instead of being credited to
the profit & loss account so as to ensure that it is not left for being distributed through the profit
& loss account. Accordingly the waiver of a loan is a capital receipt which is part of the capital
reserve and cannot be reckoned as working result of the company and therefore, it does not form
part of the net profit as per the profit & loss account. Thus, such a capital receipt cannot be taxed
as ‘book profit’ as envisaged in terms of section 115JB. (ITA No. 923 & 930/Bang/2009, dt.
13.01.2017) (AY. 2004-05)
JSW Steel Ltd. v. ACIT (Mum.) (Trib.);www.itatonline.org
S.115JB : Book profits-Expenditure relatable to dividend income which was exempt. [S. 10
(38), 14A]
That though the assessee while computing the book profit had excluded the dividend income
credited in its profit and loss account, being exempt under section 10 (34) which was in
conformity with section 115JB (2), Explanation 1 (ii), it had objected to the addition of the
expenditure relatable to earning of such exempt income. The Assessing Officer while computing
the book profit under section 115JB had not erred in making an addition of the expenditure
relatable to exempt income so determined under section 14A. Guided by the provision as
contemplated in section 115JB (2), Explanation 1 (f), he had rightly made an addition being the
amount of expenditure relatable to the dividend income of Rs. 11,36,128 which being exempt
under section 10 (34) had duly been excluded by the assessee while computing the book profit
and accepted as such by the Assessing Officer. There was no infirmity in the addition by the
Assessing Officer, which thereafter had rightly been sustained by the Commissioner (Appeals).
(AY.2010-2011, 2011-2012)
S. 115JB : Book profits - While computing book profits AO was justified in making addition
of expenditure relatable to exempt income determined u/s. 14A. [S. 14A]
296
Dismissing the appeal of the assessee, the Tribunal held that; AO was justified in making addition
of expenditure relatable to exempt income so determined u/s. 14A. once 'profit' adopted by AO as
starting point for computing 'Book profit' u/s. 115JB, is amount before provision for dividend,
then there remains no occasion to make a separate addition in respect of provision for dividend.
(AY. 2010-11, 2011-12)
(Mum) (Trib.)
S. 115JB : Book profits-Provision for bad and doubtful debts not deductible.
Allowing the appeal of the revenue, the Tribunal held that; amount withdrawn from any reserve if
credited to profit and loss account. Reduction permissible only if such provision had gone to
increase book profits in year of creation of reserve. Assessee not satisfying condition hence
provision for bad and doubtful debts not deductible. (AY. 2008-2009, 2010-2011)
S.115JB : Book profits-Disallowance always a part of expenditure debited to profit and loss
account-Disallowance should be added to book profits for purpose of computing tax
liability-Amount of addition should be restricted to actual disallowance. [S.14A, R.8D]
Disallowance should be added to book profits for purpose of computing tax liability and the
amount of addition should be restricted to actual disallowance. (AY. 2008-2009, 2010-2011)
S.115JB : Book profits-Capital gains-Long-term capital gains-Benefit of indexed cost of

acquisition to be considered for purpose of computing tax liability. [S.45]
Benefit of indexed cost of acquisition to be considered for purpose of computing tax liability.
(AY. 2008-2009, 2010-2011)
S. 115-O : Domestic companies - Tax on distributed profits – Constitutionally valid - Tea

companies are liable for the tax on only 40% of the dividend shall be altering the provisions
of section 115-O for which there is no warrant .[ Constitution of India, Art. 246 ]
Allowing the appeal of revenue and dismissing the appeal of assessee the Court held that; The
provisions of Section 115O are well within the competence of Parliament. To put any limitation
in the said provision as held by the Calcutta High Court that additional tax can be levied only on
the 40% of the dividend income shall be altering the provision of Section 115O for which there is
no warrant. The Calcutta High Court having upheld the vires of Section 115O no further order
was necessary in that writ petition. (
UOI v. Tata Tea Co. Ltd. (2017) 398 ITR 260 /251 Taxman 10/159 DTR 65/299 CTR 105
(SC)
George Williamson (Assam) Ltd v UOI (2017) 398 ITR 260 /251 Taxman 10/159 DTR
65/299 CTR 105 (SC)
UOI v . Apeejay Surendra Corporate Service Ltd (2017) 398 ITR 260 /251 Taxman 10/159
DTR 65/299 CTR 105 (SC)
S. 115-O : Domestic companies - Tax on distributed profits - chargeability of Dividend

Distribution Tax on amount of dividend depends on when it is declared, or paid and not for
which year it is paid
297
Assessee company filed its return and shown a dividend of certain amount for assessment year
2010-11. Assessing Officer held that since dividend liability was declared for financial year 2009-
10, liability to pay DDT would arise in assessment year 2010-11. Allowing the appeal of the
assessee the Tribunal held that; though assessee had shown dividend liability in balance sheet for
financial year 2009-10 relevant to assessment year 2010-11; however, dividend was declared on
29-9-2010 and paid on 1-10-2010. As the instance of chargeability of dividend distribution tax
arose only on declaration of dividend on 29-9-2010; therefore, liability on account of DDT would
arise only in assessment year 2011-12 and not in assessment year 2010-11. (AY.2010-11, 2011-
12)
Drawmet Wires (P.) Ltd. v. ACIT (2017) 167 ITD 357 (Jaipur) (Trib.)
S. 115-O : Domestic companies - Tax on distributed profits – DDT being tax on dividend
Whether Article 10 of the India Switzerland would be applicable even if such dividend is
payable by a domestic company - matter remanded – DTAA - India - Switzerland [Art. 10
]
Assessee deducted tax at 15% u/s. 115-O on the dividend payable to its holding company located
in Switzerland. During the course of the appellate proceedings before the CIT (A), the assessee
raised an additional claim that DDT paid was in excess since the dividend income is taxable at
10% in terms of Article 10 of the India Switzerland DTAA. The CIT (A) held that the provisions
of DTAA are not applicable. On appeal the Tribunal while restoring the matter to the CIT (A)
held that the benefits of DTAA can be extended to DDT paid/payable by the assessee. Though the
reading of Article 10 prima facie gives an impression that it will apply only to non-resident
shareholder receiving the dividend, however, still it leaves a scope for examining the claim of the
assessee that DDT being tax on dividend, Article 10 would be applicable even if the dividend is
payable by a domestic company. (AY. 2008-09)
SGS India (P.) Ltd. v. ACIT (2017) 189 TTJ 398 /165 ITD 583 /156 DTR 286 (Mum) (Trib.)
S. 115O : Domestic companies-Tax on distributed profits-Paid dividend distribution tax

within stipulated time period of 14 days from date of declaration of dividend levy of interest
was set side.[S. 115P]
The AO levied interest for late payment of dividend distribution tax by assessee. On appeal
Tribunal held that, assessee has paid dividend distribution tax within stipulated time period of 14
days from date of declaration of dividend levy of interest was set side. (AY. 2010-11,2011-12)
(Mum.) (Trib.)
S.115P : Domestic companies-Tax on distributed profits – Interest - Assessee declaring

dividend on 25-9-2009 and paying tax on 6-10-2009-No interest could be levied.
The assessee had declared dividend on September 25, 2009 and the dividend distribution tax on
the dividend was paid within the stipulated time period of fourteen days, i.e., as on October 6,
2009. The assessee could not be held to have defaulted as regards making of the payment within
298
the stipulated time period of fourteen days as required under section 115-O (3). Thus no interest
under section 115P was liable to be imposed. (AY.2010-2011, 2011-2012)
Informed Technologies India Ltd. v. DCIT (2017) 54 ITR 397 (Mum.) (Trib.)
S. 115VG : Shipping business - Tonnage income - Debit and reversal of expenditure - ,

Provision written back could not have been excluded and taxed separately
Debiting of expenditure to profit and loss account and reversal of expenditure have no relevance
in computation of income under tonnage tax scheme, therefore, provision written back could not
have been excluded and taxed separately (AY. 2011-12)
Dredging Corporation of India Ltd. v. ACIT (2017) 167 ITD 485 /(2018) 191 TTJ 858
/163 DTR 217 (Visakha) (Trib.)
S. 115VG : Shipping companies - When computation of income of qualifying ships had been
computed under tonnage tax scheme, no separate addition made in respect of foreign
exchange gain allocated to those ships.[ S.43A ]
Assesseee engaged in shipping business, since income from its qualifying ships had been
computed under tonnage tax scheme, no separate addition was not justified in respect of foreign
exchange gain allocated to those ships. (AY.2010-11)
Svitzer Hazira (P.) Ltd.v. DCIT 166 ITD 396 (Mum) (Trib.)
S. 115VI : Shipping business - Shipping income - Interest on house building advances –

Liquidated damages – Interest on arbitration award [ S. 38 to 43C ]
Interest on house building advances are not from core activity of shipping operation, hence had
rightly been assessed separately as receipts from non-core activities. Liquidated damages are not
directly received from shipping activity but are compensatory in nature collected from contractors
for failure to execute contract; thus, though they may be incidental business income but they are
not profit from core activities of shipping; hence, could not be said to form part of computation of
tonnage tax. Interest on arbitration award is not from core activity as it is not directly from
shipping activity but is compensatory in nature akin to interest on deposits, hence, to be separated
from core activity and to be taxed separately. (AY. 2009-10 - 11)
Dredging Corporation of India Ltd. v. ACIT (2017) 167 ITD 485 /(2018) 191 TTJ 858// 163
DTR 217 (Visakha) (Trib.)
S. 115WA : Fringe benefits - Charge of tax – Fringe benefits deemed to have been provided,
clarification made by the Central Board of Direct taxes cannot be said to be contrary to the
provisions of the statute. [S. 115W, 119]
Question raised before the Court was “ whether the Appellate Tribunal has substantially erred in
deleting the addition of respective amounts to the value of fringe benefit despite the fact that these
expenses were deemed fringe benefit provided to the employees as per provisions of section
115W (2) clauses (A) to (Q) of the Income – tax Act, 1961 ? “.
Court held that, clarification made by the Central Board of Direct taxes .No. 8 of 2005 (2005)
277 ITR 20 (St.) cannot be said to be contrary to the provisions of the statute. Orders of the
Tribunal was up held . (AY. 2006 - 07 to 2008 - 09)
Gujarat Chamber of Commerce and Industry v. UOI (2017) 395 ITR 457/150 DTR 98 /295
CTR 66 (Guj.) (HC)
S. 115WA : Fringe benefits – Expenses incurred by partners is not liable to FBT.
299
The Tribunal held that partners cannot be said to be employees of the firm. Therefore,
expenditure incurred by the partners is not liable to FBT. Tribunal sent the matter back to the AO.
(AY. 2008-09, 2009-10)
GDPA Fasteners v. ACIT (2017) 185 TTJ 706/150 DTR 162 (Asr.) (Trib.)
S. 115WB : Fringe benefits— Constitutional validity-Provisions clear as to their range of

operation — Applicability depending on facts of each case hence provision cannot be read
down . [ Art . 226 ]
Dismissing the petition the Court held that; the question whether fringe benefits tax is attracted to
a given transaction or not has to be adjudged in the factual basis obtaining therein. Chapter XII-H
is clear as to its range of operation. Its provisions have to apply to an individual instance. The
legality, validity and sufficiency of its application in a given instance have to be adjudged on the
basis of the factual situation obtaining therein .Accordingly, that the Assessing Officer was yet to
arrive at a finding whether or not the assessee was liable to fringe benefits tax on any head. It
would not be prudent to enter into a discussion in the abstract, without any factual foundational
basis. Section 115WB could not be read down
Bengal Srei Infrastructure Development v. UOI (2017) 397 ITR 757 /159 DTR 215 (Cal)
(HC)
S. 119 : Central Board of Direct Taxes-Monetary limits - Appeal - CBDT has no power to
issue circular with retrospective effect .[ S.260A, 268A ]
Allowing the appeal of Revenue the Court held that; The CBDT cannot issue any circular having
retrospective operation - The fact that the CBDT itself vide Circular dated 10.12.2015 directed
that the instruction to withdraw low tax effect appeals will apply retrospectively to pending
appeals has no bearing. High Court was directed to hear the appeal on merits . Order of High
court, dated 2.11.2011 in ITA No.887/2006 is set aside.
CIT v. Gemini Distilleries (2017) 398 ITR 343/299 CTR 27/159 DTR 63/251 Taxman 324
(SC)
S. 119 : Central Board of Direct Taxes - Instructions – Attachment and sale of property -
Limitation - The CBDT has no jurisdiction to issue a Circular to amend the legislative
provisions set out in the Act. Such action is ultra vires and liable to be quashed. [R. 68B]
The Department filed an appeal to challenge the judgement of the Andhra Pradesh High Court in
S.V. Gopala Rao v. CIT (2004) 270 ITR 433 (AP) where it was held that the CBDT had no
jurisdiction under section 119 of the Act to issue a Notification [see [1996] 218 ITR (St.) 121] to
amend rule 68B of the Second Schedule to the Act. HELD by the Supreme Court dismissing the
appeal :
The Central Board of Direct Taxes (CBDT) issued a Circular under Section 119 of the Income
Tax Act,1961. In fact, it amended the provisions contained in Rule 68B of the IInd Schedule to
the Income Tax Act, 1961, which otherwise have statutory force. Such legislative provisions
cannot be amended by CBDT in exercise of its power under Section 119 of the Act. The High
Court has, therefore, rightly held the circular ultra virus and quashed the same.
CIT v. S. V. Gopala Rao (2017) 396 ITR 694/298 ITR 228 /157 DTR 291 (SC)
Editorial : Decision in S.V. Gopala Rao v. CIT (2004) 270 ITR 433 (AP) is affirmed.
S.119 : Central Board of Direct Taxes – Investigation against off shore bank account
holders-PIL was dismissed as
300
Dismissing the PIL the Court held that; where Government had constituted a Multi Agency
Group (MAG) consisting of officers of Central Board of Direct Taxes (CBDT), Reserve Bank of
India (RBI), Enforcement Directorate (ED) and Financial Intelligence Unit (FIU) to ensure
speedy and coordinated investigation in cases of persons whose names had appeared in 'Panama
Paper Leaks' and Special Investigation Team (SIT) had been constituted by Supreme Court, no
further direction were to be given to CBI for investigation against Indian offshore bank account
holders revealed in Panama Papers.
Manohar Lal Sharma v. CBI (2017) 205 COMP CASE 180 /(2018) 252 Taxman 22 (SC)
S 119 : Central Board of Direct Taxes - Condonation of delay – Ex parte order by the
Assessing Officer – Rejection of the application was set aside and directed the CBDT to
decide afresh . [ S. 139, Art 226 ]
Allowing the petition the Court held that; The CBDT misunderstood scope of proviso to section
119 (1) as discretion, if exercised, would merely result in enabling assessee to file a revised
return, no more, no less . Therefore order was to be set aside and directed the CBDT to decide a
fresh .
Anjalika Kriplani v. CBDT (2017) 248 Taxman 149 (Delhi) (HC)
S. 119 : Central Board of Direct Taxes-Circulars though inconsistent with provisions of

statutes is binding on authorities. [S. 4,43D 145]
Dismissing the appeal of the revenue, Circulars though inconsistent with provisions of statutes is
binding on authorities. (AY. 2010-11)
PCIT v. Shri Mahila Sewa Sahakari Bank Ltd. (2017) 395 ITR 324 (Guj.) (HC)
S. 120 : Income tax authorities – Additional ground on jurisdiction was admitted -

Additional Commissionerperform functions and exercise powers of an AO only if he is
specifically directed u/s. 120 (4) (b). [S. 2 (7A), 120 (4) (b), 127, 245 (1)]
Allowing the appeal of the assessee, the Tribunal held that; S.2 (7A), defines term AO to mean
Assistant or DY.CIT, however Board may direct Addl. CIT to exercise AO’s powers vide special
order u/.s 120 (4) (b). Where revenue had not been able to demonstrate that Addl. CIT who had
passed assessment order had valid authority to perform and exercise powers and functions of an
AO of assessee and to pass order. Assessment order had been passed without following the
procedure of law. 2 (7A)) (AY. 2001-02)
Tata Sons Ltd. v. ACIT (2017) 162 ITD 450 (Mum.) (Trib.)
S. 127 : Power to transfer cases – Transfer of case for administrative convenience was held
to be valid [ S. 132 ]
Dismissing the petition of the assesse, the Court held that, the assesse was intimated about
transfer and also given an opportunity to file his objections, therefore transfer case from Delhi to
Ludhiana was held to be valid .
Ravneet Takhar v. CIT (2016) 76 taxmann.com 210 (Delhi) (HC)
Editorial : SLP of assesse was dismissed as the petition was with drawn . Ravneet Takhar v. CIT
(2017) 250 Taxman 92 (SC)
301
S. 127 : Power to transfer cases - Shifting of registered Office – Corresponding address
remain unchanged - Transfer of assessment proceedings to Mumbai was held to be not valid
Allowing the petition the Court held that merely on the basis of letter addressed to revenue
informing that its registered office was shifted from Chennai to Mumbai, however, assessee
clarified that correspondence address remained unchanged and requested revenue to use Chennai
address for any communication, said letters could not be reckoned as request for transfer of
assessment proceeding to Mumbai . Directed to transfer case back to Chennai . (AY. 2015-16)
Aircel Ltd. v. DCIT (2017) 251 Taxman 517 (Mad) (HC)
S. 127 : Power to transfer cases – Transfer of case was done after giving a reasonable
opportunity of hearing and by passing reasoned order hence transfer of case was held to be
valid . [ S. 132 ]
Dismissing the petition of the assesse, the Court held that; transfer of case from Ahmedabad to
Moradabad was done after giving a reasonable opportunity of hearing and by passing reasoned
order hence transfer of case was held to be valid .
Genus Electrotech Ltd. v. UOI (2017) 250 Taxman 550 /(2018) 162 DTR 103 (Guj.) (HC)
S. 127 : Power to transfer cases – Assessment - Jurisdiction - Once order for transfer of case
is set aside by the High Court, subsequent notice issued u/s. 158BC is unjustified - Though
the assessee has taken part in the assessment procrrdimgs, waiver will not confer
jurisdiction on Assessing Officer hence the order passed was held to be not valid . [ S.
124,158BC ]
Assessee was being assessed at Madhya Pradesh. Search was carried out at the assessee’s place.
Thereafter, the assessee’s case was transferred u/s. 127 to Nagpur. High Court quashed the order
u/s. 127 and directed the Commissioner to pass a fresh reasoned order. Meanwhile, notice was
issued u/s. 158BC by the AO at Nagpur calling upon the assessee to file a return of income.
Thereafter, the Commissioner passed a fresh order upholding the transfer of case to Nagpur. High
Court held that the notice u/s.158BC was issued on 22.9.1999 i.e. after the order of transfer
dated 6.7.1999 was quashed and set aside. As the notice dated 22.9.1999 issued u/s.158BC of
the Act was issued by the DCIT, who was not the Assessing Officer of the assessee.
Consequently, the notice being without jurisdiction, all the proceedings subsequent thereto were
without authority of law. High Court further held that transfer of proceedings u/s.127 cannot be
retrospective so as to confer jurisdiction on a person who does not have it. Though the assessee
has taken part in the assessment procrrdimgs, waiver will not confer jurisdiction on Assessing
Officer hence the order passed was held to be not valid . (AY. 1989-90 1999-2000)
CIT v. Lalitkumar Bardia (2017) 155 DTR 1 /298 CTR 72 /(2018) 404 ITR 63 (Bom.) (HC)
S.127 : Power to transfer cases - Transfer of cases due to re-structuring of department was
held to be valid.
Dismissing the petition the Court held that; Transfer of cases due to re-structuring of department
was held to be valid. Merely on the ground of not providing any opportunity of being heard, the
decision taken by the authorities could not be said to be illegal, unless and until the party showed
how he had been prejudiced by not being provided an opportunity of being heard. Even if the
assessees had been provided with an opportunity of being heard before taking the decision, no
material change would have come. (AY.2008 - 09 to 2013 - 14)
Kanak Gardens Pvt. Ltd. v. CIT (2017) 394 ITR 627 (Ori) (HC)
Swayastuti Pattanayak v. CIT (2017) 394 ITR 627 (Ori) (HC)
302
Rajalaxmi Ray v. CIT (2017) 394 ITR 627 (Ori) (HC)
S. 127 : Power to transfer cases - Transfer of the case of the assessee from Delhi to
Ludhiana was valid as the case was transferred for the purpose of centralization of
assessments after the search and seizure operation.
The High Court held that the transfer of the case of the assessee from Delhi to Ludhiana was valid
as no fault can be found with the reason of transfer as stated in transfer order under section 127
which is for the purpose of centralization of assessment as a result of search and seizure operation
carried out and that following the decision of the Delhi High Court in the case of Surya
Pharmaceuticals Ltd. v. ITO [2007] 295 ITR 427/[2008] 171 Taxman 163 (Delhi), it was held
that the transfer which was made for the purpose of administrative convenience was valid.
Ravneet Takhar v. CIT (2016) 76 taxmann.com 210 / (2017) 145 DTR 435 (Delhi) (HC)
S. 127 : Power to transfer cases – Decision of transfer could not become illegal unless and
until assessee showed as to how assessee was prejudiced by not given an opportunity of
being heard.
The jurisdiction was transferred for the reason of restructuring of Department. Thereafter, an
order was passed directing the assessee to appear and to satisfy the authority with respect to the
aforesaid decision. The assessee challenged the decision/orders of the authorities of income-tax
by filing Writ Petition. The Court held that; that a notice is required to be given on the principle
that no man can be condemned without hearing him but merely on the ground of not providing
any opportunity of being heard, the decision taken by the authority cannot be said to be illegal,
unless and until the party shows as to how he has been prejudiced by not providing an
opportunity of being heard. Further, HC held that even if an opportunity of hearing was provided,
then would there be any change of the situation and if no, then order for transfer of case cannot be
challenged. In the present case, authorities have passed well reasoned order which was re-
structuring of the Income Tax Department in the area concerned and which did not cause any
prejudice to the assessee. Thus, Writ Petition to quash the transfer of cases was not maintainable.
Dr. Monu Pattanayak v. PCIT (2017) 146 DTR 55 /291 CTR 507 (Orissa) (HC)
S. 127 : Income tax authorities – Additional ground on jurisdiction was admitted-Power to

transfer cases – Assessment order passed without authority of law was held to be bad in
law.[S. 2 (7A), 120 (4) (b), 143 (3), 254 (1)]
During the hearing the assessee filed additional grounds raising jurisdictional issue for validity of
assessment order as the assessment order was passed by the Addl. CIT u/s.143 (3) who was not
competent under the law to discharge functions of the AO. Allowing the appeal the Tribunal held
that, Assessment proceedings were initiated by ACIT but were taken over in middle of
proceedings by Addl.CIT and completed by him without there being any valid transfer of
jurisdiction as required u/s. 127, therefore, assessment was illegal and had to be quashed. (AY.
2001 – 2002)
Tata Sons Ltd. v. ACIT (2017) 162 ITD 450 (Mum.) (Trib.)
S. 132 : Search and seizure – Block assessment - Reason to believe – Not disclosing of the
recording of reasons for search and seizure action, cannot be held to be invalid, in view of
amendment made in section 132A, by Finance Act, 2017. Contentions not taken before the
authorities are not permitted to be raised . [S. 132A, 158BD, 261]
Dismissing the petition the Court held that; the plea that the search proceedings initiated u/s 132
are invalid and that the block assessment proceedings are without jurisdiction cannot be
entertained because s. 132A provides that the 'reason to believe' or 'reason to suspect', as the case
may be, shall not be disclosed to any person or any authority or the Appellate Tribunal as
recorded by Income Tax Authority u/s 132 or 132A.In view of amendment made in section 132A,
303
by Finance Act, 2017, reason to believe or reason to suspect as the case may be is not required to
be disclosed to any person or any authority or Appellate Tribunal as recorded by revenue
authority under section 132 or section 132A. Court also held that Contentions not taken before the
authorities are not permitted to be raised .
N. K. Jewellers v. CIT (2017) 398 ITR 116/ 251 Taxman 7 /298 CTR 113 /157 DTR 238
(SC)
S. 132 : Search and seizure – Survey – Assessment-It is but natural that concealed income
found at the time of search and survey has to be distributed among all the family members
who were carrying on business. It is also a reasonable conclusion that the income had been
earned over a period of time and should be spread over various years.[S.133A, 260A]
Dismissing the appeal of the Revenue, the Court held that;the Department has failed to bring on
record any material to the contrary except the seized documents which, in our considered opinion,
could not absolve the Department or give any right to negate the view taken by the first Appellate
Authority and the Tribunal. So far as the income divided among the family members of the
assessee is concerned, we find that all of them were carrying on same business from the same
premises. Therefore, it is but natural that if any concealed income has been found at the time of
search and survey, it has to be distributed among all the family members who were carrying on
business. (AY.1988-89 to 1990-91)
CIT v. Rekha Bai (2017) 393 ITR 22 /150 DTR 49/246 Taxman 369 /294 CTR 16 (SC)
S. 132 : Search and seizure - Severe strictures passed to condemn the illegal practice of the
Dept of collecting undated cheques from taxpayers after search/survey without even
quantifying the extent of duty evasion. Attempt of the unscrupulous officers is to 'negotiate'
the evaded duty by threats and coercion. It is not rule of law but anarchy unleashed by
holders of public office. It is an abuse of law which has to be stopped-Central Vigilance
Commissioner (CVC) is directed to issue the guide lines. [ Central Excise Act, 1944 ]
Allowing the petition the Court held that ;practice of the Dept of collecting undated cheques from
taxpayers after search/survey without even quantifying the extent of duty evasion. Attempt of the
unscrupulous officers is to 'negotiate' the evaded duty by threats and coercion. It is not rule of law
but anarchy unleashed by holders of public office. It is an abuse of law which has to be stopped.
Central Vigilance Commissioner (CVC) is directed to issue the guide lines. (W.P. (C)
3070/2017 & CM No. 13393/2017, dt. 15.05.2017)
Digipro Import & Export Pvt.Ltd. v. UOI (Delhi) (HC), www.itatonline.org
S. 132 : Search and Seizure - Return of seized articles - Non returning of gold ornaments
seized as the prosecution was pending was held to be justified . [ S.276 (1), 277 ]
Dismissing the petition the Court held that; since gold ornaments had been seized as per
provisions relating to search and seizure, said ornaments could not be treated as muddamal
articles . Department raised an objection that since prosecution had been launched against
assessee under sections 276 (1) and 277, ornaments in question could not be treated as muddamal
articles therefore, assessee's application seeking release of gold ornaments, was to be rejected.
Chandulal Jethalal Jaiswal. v. ITO (2017) 251 Taxman 385 (Guj) (HC)
304
S. 132 : Search and seizure - Certain records were not produced in spite of constant
directions by Revenue, search was justified. [S. 153A, Art. 226]
Dismissing the petition the Court held that, certain records were not produced in spite of constant
directions by Revenue, search was justified. (AY. 2009-10)
Aditya Narayan Mahasupakar v. CCIT (2017) 246 Taxman 106 (Orissa) (HC)
S.132 : Search and seizure-Warrant of authorisation-Section did not compel him to give
reasons and non-mention of reasons in itself did not vitiate the order and the court would
never go into the adequacy of such reason-Writ petition is held to be not maintainable [ S.
153, 153A, Arts. 226, 227]
Dismissing the petition, the Court held that; Once there existed reasonable grounds for the
authority to form the above belief, that was sufficient to invoke the jurisdiction under section 132.
Whether the grounds were adequate or not was not a matter for the court to investigate. The
sufficiency of the grounds which induced the Income-tax Officer to act was therefore not a
justifiable issue, though he could not make a search or authorise any Officer to make a search
unless he had the reason to believe the existence of the facts mentioned in the section. The section
did not compel him to give reasons and non-mention of reasons in itself did not vitiate the order
and the court would never go into the adequacy of such reason. (AY.2009-2010 to 2014-2015)
Aditya Narayan Mahasupakar v. CCIT (2017) 392 ITR 131/246 Taxman 106 /293 CTR
73/147 DTR 373 (Orissa) (HC)
S.132 : Search and seizure-Notice u/s. 131 (1A) is not required to be issued prior to carrying
out search proceedings - Writ Petition is not maintainable [S. 131 (IA), 153A, Art. 226]
The assessee was engaged in export of iron ore. A search was carried out in assessee's premises
for relevant years and, thereupon, a notice was issued u/s. 153A requiring the assessee to furnish
return of income for assessment years covered within the block. The assessee filed a writ petition
contending that since no notice was issued u/s. 131 (1A), search and seizure conducted by
department itself u/s. 132 was illegal and thus, pursuant thereof notice issued u/s. 153A also did
not have any sanctity. The assessee also submitted that in absence of any reason which led the
authority to resort to the provision of section 132, the notice u/s. 153A was not tenable in the eye
of law. Dismissing the petition the Court held that, there is no requirement of issuance of notice
u/s. 131 (1A) of the Act before proceeding with the provision of section 132 as the whole purpose
of conducting search and seizure will vanish if assessee knows the fact that search is going to be
conducted u/s. 132 making the proceeding a futile exercise. It was further held that, where there is
alternate remedy available, the jurisdiction of this Court under article 226 of the Constitution of
India cannot be invoked. The HC also observed that search and seizure was well within the
knowledge of the assessee, but the jurisdiction was not challenged fairly for a period of more than
two years and it is only after the notice u/s. 153A was issued, this Writ Petition has been filed on
the basis of above reasons. On the basis of above reasons, the writ petition filed by the assessee
was dismissed. (AY.2009-10 to 2014-15)
Liberty Marine Syndicate (P) Ltd. v. PCIT (2017)394 ITR 277/146 DTR 1 /292 CTR 12/77
taxmann com 52 (Orissa) (HC)
Editorial : SLP of assesse was dismissed; Liberty Marine Syndicate (P.) Ltd. v PCIT (2017) 245
Taxman 269 (SC)
S.132 (4) : Search and seizure—Surrender of income - Onus on assessee to prove

genuineness, addition as unexplained income was held to be justified.[S. 132 ]
305
Tribunal held that the assessee accepting figure 40 representing Rs. 40 lakhs and accepting his
handwriting and there was no allegation that assessee pressurised to surrender that sum. Addition
was held to be justified. (AY. 2004-05 to 2008-09)
S. 132A : Powers - Requisition of books of account – Cash seized from two passengers in
car was release by Deputy Superintends of police was held to be valid .
Dismissing the petition of the revenue, the Court held that release of cash which was seized from
two passengers as the said amount was belongs to the firm was held to be valid . Court also
observe that, since department had not issued any requisition with respect to seized cash under
section 132A, Police authority had no business to withhold cash, particularly when same could
not have been withheld under provisions of Criminal Procedure Code.
ITO (Inv) v. Deputy Superintendent of Police (2017) 250 Taxman 254 (Guj.) (HC)
S. 132B : Application of seized or requisitioned assets – Refund of seized amount or part

thereof - Revenue is liable to pay interest and the assesse cannot be held liable to pay
interest for failure to pay advance tax . [ S.132B (4), 234B, 234C ]
Allowing the petition the Court held that; the Revenue had to adjust the advance tax liability on
the income of Rs. 70 lakhs of the assessee as requested by him in the letter dated March 29, 2012.
Resultantly, the liability to pay interest on the premise that such advance tax was paid late, would
not arise. Court also held that when there is conflict of views regarding provision, view of
jurisdictional high court to be followed.
Gordhanbhai Nagardas Patel v. Dy. CIT (2017) 398 ITR 307/249 Taxman 604 (Guj) (HC)
S. 132B : Application of seized or requisitioned assets – Person in respect of whom search

conducted was beneficial owner of monies in such account, hence restraint order and
direction for provisional attachment of such account was held to be valid. [S. 132, Art. 226]
Dismissing the petition the Court held that;Person in respect of whom search conducted was
beneficial owner of monies in such account, hence restraint order and direction for provisional
attachment of such account was held to be valid. It is not necessary for separate search warrant in
names of such persons .The Court also observed that the petitioners must state full facts with in
his knowledge when they approach the Court.
Strategic Credit Capital P. Ltd. v. Ratnakar Bank Ltd. (2017) 395 ITR 391 /81
taxmann.com 408 (Delhi) (HC)
Veena Singh v. DI (Inv) (2017) 395 ITR 391/81 taxmann.com 408 (Delhi) (HC)
S. 132B : Application of seized or requisitioned assets - Seized cash — Adjustment

permissible only towards tax dues already determined and not against amounts that might
become due in pending assessments. Department liable to return remaining cash to
assessees with statutorily provided interest [ S. 132, 132B (3) ,132 B (4)]
Allowing the petition the Court held that Adjustment of cash seized is permissible only towards
tax dues already determined and not against amounts that might become due in pending
assessments. Department liable to return remaining cash to assessees with statutorily provided
interest. (AY. 2002 - 03 to 2004 - 05)
Fatema Hussain v. UOI (2017) 396 ITR 163 /299 CTR 80 (Patna) (HC)
S. 133A : Power of survey – Statement is not conclusive – In absence of any contrary

evidence or explanation the same can be acted upon. [ S. 32 ]
On appeal the High Court held that a statement made under Section 133A of the Act is not bereft
of any evidentiary value. It may not be conclusive but in the absence of any contrary evidence or
306
explanation as to why the statement made under Section 133A of the Act is not credible, it can be
acted upon. As a result the High Court upheld the order of the AO and denying depreciation
allowance to the Assessee. (AY.1996 - 97)
Pebble Investment & Finance Ltd (2017) 156 DTR 247 (Bom) (HC)
S. 133A : Power of survey - Surrender of commission income – Burden on the assesse to

prove that the statement was wrong in fact - Statement recorded during survey an
important piece of evidence - Addition was held to be justified . [S 69]
The assessee had surrendered in the statement recorded during survey about undisclosed
commission income. For the first time the assessee contended that he was forced to give such
statement one day before the completion of the assessment. Such contention was without
anything to prove that the statement so recorded was wrong in fact. Held, the evidence recorded
was an important piece of evidence. Held, that the burden to prove that the statement was wrong
has not been discharged and therefore, the addition was to be sustained. (AY .2006-07)
Shree Supari & Spices (P) Ltd. v. CIT (2017) 160 DTR 433/(2018) 300 CTR 90 (All.) (HC)
S. 133A : Power of survey – Voluntary declaration of unaccounted money after two months
after survey – Retraction of statement after two years, addition as undisclosed income was
held to be justified. [S. 69A]
Allowing the appeal of the Revenue, the Court held that retraction made after two years was held
to be not bona fide and there was no satisfactory explanation was filed hence addition was
confirmed in respect of voluntary disclosure which was made after two months of survey . (AY.
2009-10)
PCIT v. Avinash Kumar Setia (2017) 395 ITR 235/153 DTR 57 /248 Taxman 106 (Delhi)
(HC)
S. 133A : Power of survey – Merely on the basis of statement during course of survey
without supporting evidence additions cannot be made.
Dismissing the appeal of the revenue the Court held that; Merely on the basis of statement during
course of survey without supporting evidence additions cannot be made . Decision in CIT v.
Ravindra Jain (2009) 33 SOT 251 (Delhi) (Trib.), approved and MAK Data Pvt Ltd v.CIT (2013)
358 ITR 593 (SC) is explained.
CIT v. Iibs Infonet Pvt. Ltd. (2017) 394 ITR 538 (Delhi) (HC)
S.133A : Power of survey – Statement was retracted - Statement in survey operations no

evidentiary value – Merely on the basis of statement, addition cannot be made .[ S.68 ]
Dismissing the appeal of the revenue, the Tribunal held that; statement of partner and consultant
disclosing unaccounted income. Duplicate set of books of accounts made by consultant for the
purpose of taking bank loan to assessee’s project . Statement later on retracted. No attempt made
by the Department either in the course of the survey or subsequent to survey to call and record
statement of consultant to extract truth and no inquiry made against the partner. No other
material or evidence against the assessee and hence printouts from duplicate set of accounts does
not represent undisclosed income. (AY. 2007 - 08, 2008 - 09)
ACIT .v. Shree Krishna Developers (2017)56 ITR 154 (Ahd) (Trib)
S.133A : Power of survey - Admission of addition of income-Rejection of books of account

was held to be justified - Gross profit could be telescoped to addition made on excess stock.
[S.145]
307
Tribunal held that the rejection of books of account was held to be valid. Officer was directed to
telescope the income added as gross profit. (AY. 2007-08)
Mamatha Silk Centre v. ITO (2017) 54 ITR 561 (Hyd.) (Trib.)
S. 139 : Return of income - Return of income filed with in time showing the taxable
income, can be revised showing the loss, Tribunal was justified in allowing the carry
forward of speculation loss [ S. 139 (1), 139 (5)
Dismissing the appeal of the revenue, the Court held that; once a return was revised under section
139 (5) within time prescribed, original return filed under section 139 (1) would not survive -
Accordingly, Tribunal was justified in allowing assessee's claim for carry forward of speculation
loss. (AY. 2005-06)
PCIT v. Babubhai Ramanbhai Patel (2017) 249 Taxman 470 (Guj.) (HC)
S.139 : Return of income – BIFR extending the period for filing of return, carry forward
and set off of loss and depreciation loss cannot be denied [ S. 32, 154 ]
Dismissing the appeal of the revenue the Court held that; when the Board for Industrial and
Financial Reconstruction had extended the period for filing the returns till March 31, 2001,
recognising the fact that a new management had taken charge in 1996 pursuant to the freshly
approved scheme and furthermore that the carry forward of losses and depreciation was an
important component and rehabilitation plan contemplated by the parties, carry forward and set
off of loss and depreciation loss cannot be denied for delay in filing of return . (AY. 2001-02)
PCIT v. Rajasthan Explosives and Chemicals Ltd. (2017) 398 ITR 736 (Delhi) (HC)
S. 139 : Return of income – Revised return - Return filed u/s 139 (1) or u/s 139 (4) with in
extend period of one year from the end of the relevant assessment year or before completion
of assessment, which ever is earlier can be revised – Amendment with effect from April 1
2017 is retrospective in nature . Matter set aside to Assessing Officer . [ S. 139 (1) 139 (4),
139 (5) ]
Allowing the appeal of the assesse the Court held that; Return filed u/s 139 (1) or u/s 139 (4)
with in extend period of one year from the end of the relevant assessment year or before
completion of assessment, which ever is earlier can be revised . Section 139 (5) was amended by
Finance Act, 2016, with effect from April 1 2017 . The amendment was intended to confer a
benefit on the assesssee and the retrospective application .
DIT (E)v. Medical Trust of the Seventh Day Adventists (2017) 398 ITR 721/298 CTR 58
/156 DTR 113 (Mad) (HC)
S.139 : Return of income - Return not filed electronically – Manual return filed within due
date - Benefit of set off and carry forward of losses allowed. Matter Remanded [ S.80 ]
The Assessing Officer considered the return filed electronically as the original return of income
and ignored the return filed by the assessee manually. It was held that simply because the
assessee could not file the return electronically within the provisions of section 139 (1), the
benefit of set off and carry forward of losses cannot be denied for the reason that the assessee did
file return of income manually within the due date specified under section 139 (1). The claim for
set off and carry forward of losses cannot be denied on an absolute technical reason that the
electronic return filed by the assessee is belated when the assessee filed return of income
manually within the due date specified under section 139 (1). (AY. 2011-12)
Luxury Goods Retail (P.) Ltd. v. DCIT (2017)165 ITD 490 (Mum) (Trib.)
308
S. 139 : Return of income - Revised returnwithin a period of one year from end of
assessment year is valid return. [S. 139 (9)]
Assessment was not completed and assessee filed a revised return within a period of one year
from end of assessment year, revised return being well within limitation period was a valid return
in terms of section 139 (9). (AY.2010 – 2011)
Pawa Industries (P.) Ltd. v. ITO (2017) 164 ITD 287 (Delhi) (Trib.)
S.139 : Return of income – Omission to consider conversion of capital asset to stock in trade
in Original return - Evidenced by minute book of Board - Tax auditor appears before AO -
Revision under S.139 (5) is valid. [S. 139 (5)]
Revised return of the assessee was rejected by the AO on the ground that the CA mentioned in the
Audit report that no converversion of capital asset to stock in trade took place during the year
however, in the notes to accounts he had mentioned that certain investments were converted. On
summons issued, the auditor clarified that there was conversion and the point stating non-
conversion was an inadvertent mistake. Even the minutes of the board were produced.
Held that if the surrounding circumstances suggest that the assessee converted investment into
stock-in-trade and also supported by the minutes produced by the assessee, still if he had the
doubt, he should have clarified it from Board of Directors who attended the meeting. Instead of
this, he rejected revised return of income itself, which is not appropriate. (AY. 2009-10)
Original Innovative Logistics India (P.) Ltd. v. JCIT (2016) 76 taxmann.com 364/(2017)183
TTJ 753 /147 DTR 89 (Chennai) (Trib.)
S. 139 : Return of income - Revised return - Belated return u/s 139 (4) cannot be revised
and claim that the income was wrongly shown in the return as taxable [ S. 139 (1), 139 (4),
139 (5)]
Tribunal held that; Belated return u/s 139 (4) cannot be revised and claim that the income was
wrongly shown in the return as taxable. (AY. 2008 - 09)
DCIT v. Dinesh Sharma. (2017) 165 ITD 684 (Delhi) (Trib.)
S. 139AA : Return of income - Quoting of Aadhar number – Legislative powers - Provision

is held to be valid - Proviso to s. 139AA (2) cannot be read retrospectively as it takes away
vested rights. It will only have prospective effect. [Art. 14, 19 (1) (g), 21 ]
Section 139AA of the Income Tax Act, 1961, inserted by the amendment to the said Act vide
Finance Act, 2017,which mandates quoting of Aadhaar number with the PAN is constitutionally
valid under Articles 14 and 19 (1) (g). The proviso to s. 139AA (2) (which deems the PAN void
ab initio if the Aadhaar number is not quoted) is also valid. However, as the challenge under
Article 21 is pending before the Constitution Bench, a partial stay is granted. Those who are
already enrolled under the Aadhaar scheme should comply with s. 139AA (2). Those who are not
enrolled need not do so for the time being and their PAN will not be treated as invalid. The said
proviso to s. 139AA (2) cannot be read retrospectively as it takes away vested rights. It will only
have prospective effect.
[The court made it clear that the validity of the provision upheld by it would be subject to its
passing muster on the basis of article 21 of the Constitution.]
Obiter dicta : “It is also necessary to highlight that a large section of citizens feel concerned
about possible data leak, even when many of those support linkage of permanent account number
309
with Aadhaar. This is a concern which needs to be addressed by the Government. It is important
that the aforesaid apprehensions are assuaged by taking proper measures so that confidence is
instilled among the public at large that there is no chance of unauthorised leakage of data
whether it is done by tightening the operations of the contractors who are given the job of
enrolment, they being private persons or by prescribing severe penalties to those who are found
guilty of leaking the details, is the outlook of the Government. However, we emphasise that
measures in this behalf are absolutely essential and it would be in the fitness of things that proper
scheme in this behalf is devised at the earliest.”
Binoy Viswam v.UOI (Adhaar Card Linkage with Pan) (2017) /396 ITR 66/249 Taxman
290/296 CTR 17 153 DTR 209 (SC)
S. 139AA : Return of income – Quoting of Aadhaar Number - Department was directed to

accept assessee’s return in hard copy .[ art . 21 ]
Allowing the petition the Court held that; by way of interim directions, the assessee was allowed
to file the return of income in hard copy, before the last date to avoid penal liabilities, for the
assessment year 2017-18, before the Department which might accept it without the assessee
linking his permanent account number card with the Aadhaar card or having to make a
declaration that he had applied for one. It would not be obligatory for the Department to process
the return and the assessment stood stayed. It was also clarified that the mere filing of the return
did not create any equity in favour of the assessee and would be subjected to further or final order
that might be passed in the petition (AY. 2017-18)
Bandish Saurabh Soparkar v. UOI (2017) 398 ITR 738/159 DTR 401 /299 CTR 304 /251
Taxman 391 (Guj) (HC)
S. 139AA : Return of income – Quoting of Aadhaar Number - Quoting of Aadhaar Number

as per the requirement under the 1961 Act, is the prerogative of Parliament to make a
particular provision directory in one statute and mandatory in another and that by itself
could not be a ground to question the competence of the Legislature. [ S.139 (5) (c) ]
Dismissing the petition, the Court held; provision for quoting of Aadhaar Number as per the
requirement under the 1961 Act is the prerogative of Parliament to make a particular provision
directory in one statute and mandatory in another and that by itself could not be a ground to
question the competence of the Legislature. The Supreme Court had not stayed the proviso to
sub-section (2) of section 139AA and the partial stay was applicable only to facilitate the other
transactions mentioned in rule 114B of theIncome-tax Rules, 1962, which pertained to
transactions in relation to which the permanent account number was to be quoted in all the
documents for the purposes of clause (c) of sub-section (5) of section 139AA. Therefore the plea
that the partial stay granted by the Supreme Court enured to the benefit of the assessee even for
filing tax return was not sustainable
Thiagarajan Kurnaraja v. UOI (2017) 398 ITR 740 /159 DTR 209 /299 CTR 192 (2018) 252
Taxman 164 (Mad) (HC)
S.142 (2A) : Inquiry before assessment – Special audit – For referring the matter to special
audit there need not be any books of account before Assessing Officer
Dismissing the petition of the assessee the Court held that; for forming an opinion to get
accounts audited by special auditor considering specialized nature of business activities of
assessee, there need not be any books of account before Assessing Officer. (AY.2009-10)
Takshashila Realities (P) Ltd v. DCIT (2017) 247 Taxman 156 (Guj) (HC)
310
S. 142 (2A) : Inquiry before assessment - Special audit – Audit fee-If audit report is of good
quality and inter alia, authored by a qualified professional having a fair number of years of
experience, then he/she may be entitled to ask for highest prescribed billing rate – High
Court directed the Commissioner to re-consideration of auditors fee. [R. 14B]
The Petitioners were appointed by Respondents as Special Auditors of M/s Micromax Informatics
Limited for AYs 2005-06 to 2011-12, wherein its team spent 1078 hours, further 237 hours were
also billed for time spent by the audit team at the petitioner's office. The attendance sheets of the
audit team were duly counter-signed by the Chief Finance Officer of the auditee were submitted
in terms of the Notification No.20/2008 dated 05.02.2008, which prescribes the guidelines for the
purposes of determining expenses for audit under Rule 14B of the Income Tax Rules, 1962. A
total bill for Rs. 1,10,81,505/- inclusive of service tax of Rs. 12,19,005/- was raised. However,
this amount was not paid by the AO, who alleged that the entire team was not qualified and time
for refreshments could not be included and accordingly proportionately discounted the bill raised
by the Petitioners. On writ High Court directed the CIT to re-determine the fee payable to the
petitioner in light of whether the special audit report was (i) within time, (ii) of the desired quality
(iii) the billing is commensurate to the nature of inquiry and the quantum of the records to be
looked into; etc. as CA’s are not automatons.Therefore, if the audit report is of good quality and
inter alia, authored by a qualified professional having a fair number of years of experience then
he/she may well be entitled to ask for the highest prescribed billing rate.
Rakesh Raj & Associates v. CIT (2017) 246 Taxman 331 (Delhi) (HC)
S.142 (2A) : Inquiry before assessment – Special audit – Amendment to S. 142 (2A) w.e.f. 1-
6-2013 adding new grounds on which assessing officer may direct special audit, amendment
is valid. [ Art 14 ]
Dismissing the petition the Court held that; In fiscal matters, the Legislature has the ability to
amend the law retrospectively. Moreover, section 142 (2A) of the Act does not confer any vested
right on the assessee, which could not be taken away by retrospective amendment. Therefore,
even if the amendments to section 142 (2A) were given retrospective effect, the same would be
within the powers of the Legislature, as per law laid down in the ruling of the Supreme Court.
The amendments are valid. (AY. 2007 - 08 to 2013-14)
Sahara India Financial Corporation Ltd v. CIT (2017) 399 ITR 81 /157 DTR 49 /298 CTR 15
(Delhi) (HC)
S. 142 (2A) : Enquiry before assessment – Special audit – Multiplicity of transactions in

accounts and specialized nature of business activities, order passed for special audit was
held to be justified .
Dismissing the petition the Court held that; Multiplicity of transactions in accounts and
specialized nature of business activities, order passed for special audit was held to be justified .
(AY. 2010-11)
Takshashila Realties (P.) Ltd. v. Dy. CIT (2017) 399 ITR 162/ 84 taxmann.com 172/295
CTR 406 /151 DTR 281 (Guj) (HC)
Editorial : SLP of assesse was dismissed, Takshashila Realties (P.) Ltd. v. Dy. CIT (2017) 250
Taxman 13 (SC)
S. 142 (2A) : Enquiry before assessment – Special audit - After preparing detailed
satisfaction note Principal Commissioner approved proposal for special audit and
opportunity was given to petitioner, hence there is any error or illegality in passing the
order of special audit
Dismissing the petition of the assesse the Court held that, considering voluminous papers and
cash found in the course of search, after preparing detailed satisfaction note Principal
311
Commissioner approved proposal for special audit and opportunity was given to petitioner, hence
there is any error or illegality in passing the order of special audit . (AY. 2009-10 to 2015-16)
Sant Asharamji Ashram v. Dy. CIT (2017) 402 ITR 448/248 Taxman 426 /(2018) 162 DTR
27 (Guj.) (HC)
S.142 (2A) : Inquiry before assessment – Special audit – Limitation - Power of AO to

extend time suo motu is only with effect from 1-4-2008 hence assessment order on basis of
audit report submitted beyond period specified was held to be not valid.[S. 143 (2), 153 (1)]
Dismissing the appeal of the revenue the Court held that ;Power of AO to extend time suo motu
is only with effect from 1-4-2008 hence assessment order on basis of audit report submitted
beyond period specified was held to be not valid . (AY. 2003-04)
PCIT v. Jindal Dyechem Industries Pvt. Ltd. (2017) 394 ITR 430/248 Taxman 123/295 CTR
501/152 DTR 140 (Delhi) (HC)
S.142 (2A) : Inquiry before assessment – Special audit – Assessing Officer can direct special
audit having regard to volume and multiplicity of transactions and nature and complexity
of accounts. [ S. 132, 153A, Art. 226]
Dismissing the petition the Court held that; Assessing Officer can direct special audit having
regard to volume and multiplicity of transactions and nature and complexity of accounts. Officer
can direct special audit only on basis of material discovered from assessee. Assessing Officer
statutorily empowered to seek such particulars as are necessary for completion of assessment.
Once conditions satisfied directions by Assessing Officer for special audit justified. (AY. 2008-
2009 to 2014-2015)
Sharad Kantilal Shah v. Dy. CIT (2016) 76 taxmann.com 129/(2017) 393 ITR 594 (Bom.)
(HC)
S.142 (2A) : Inquiry before assessment – Special audit - - Complexity of accounts - Assessee
given opportunity to be heard hence-Appointment of special auditor-Justified.
Dismissing the petition the Court held that; under the circumstances, when a large number of
papers were required to be considered and verified vis-a-vis the assessee and other persons whose
names figured in the requisitioned papers and when considering section 142 (2A) of the Act, the
Assessing Officer had thought it fit to exercise powers under section 142 (2A) of the Act, it could
not be said that the Assessing Officer had committed any error or illegality. The order had been
passed after giving an opportunity to the assessee and having been satisfied with respect to the
complexity and multiplicity of transactions. The order was valid. (AY. 2009-2010 to 2015-2016)
Ulhas Securities P. Ltd. v. DCIT (2017) 393 ITR 514/246 Taxman 231/148 DTR 369 /295
CTR 394 (Guj) (HC)
S. 142 (2A) : Assessment-Special audit – Limitation - Opportunity allowed by the superior

authority after proposal was made by the adjudicating authority does not absolve the non-
allowance of reasonable opportunity of hearing by the Assessing Officer. Assessment order
passed was beyond the period of limitation and the order was held to be invalid and bad in
law.
Tribunal held that; before submitting the proposal dated 11 September 2008 to the Commissioner
for conducting a special audit under Section 142 (2A), no opportunity of hearing was given to the
assessee. In the instant case, the adjudicating authority had failed to give any opportunity to the
assessee before making a proposal for special audit and the opportunity allowed by the approving
authority who had the duties of checking whether there was no arbitrariness in functioning of the
adjudicating authority had to be satisfied before giving approval. The opportunity allowed by the
superior authority after proposal was made by the adjudicating authority does not absolve the
non-allowance of reasonable opportunity of hearing by the Assessing Officer. Accordingly the
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assessment order passed in the facts of the present case was beyond the period of limitation and
the order was held to be invalid and bad in law. (AY. 2004-05 to 2006-07)
Vilsons Particle Board Industries Ltd. v. ITO (2017) 55 ITR 114 /184 TTJ 84 /158 DTR 33
(Pune) (Trib.)
S. 142A : Estimate of value of assets by Valuation Officer – Income from undisclosed

sources-Reference could have been made since proceedings was pending before the High
Court-Finding was not disturbed in view of finding of Tribunal that local PWD rates to be
applied and not CPWD rates.[S.69, 260A]
Reversing the judgment of High Court the Court held that; Reference could have been made since
proceedings was pending before the High Court-Finding was not disturbed in view of finding of
Tribunal that local PWD rates to be applied and not CPWD rates . BP. 1988-89 to 1997 - 98)
CIT v. Sunita Mansingha (2017) 393 ITR 121/152 DTR 249 /295 CTR 590/247 Taxman 93
(SC)
S. 142A : Estimate of value of assets by Valuation Officer – Reference to valuation Officer

was held to be not valid, unless there is some material before the Assessing Officer. [S.69]
Allowing the appeal of the assessee the Court held that; No doubt, it is true that section 142A can
be resorted to even during the assessment or after assessment but, at the same time, while making
said reference, the officer has to satisfy the conditions precedent which are be reflected in
relevant statutory provisions, which in the instant case are completely missing and therefore, no
such action is permissible in law. Upon considering the materials on records and the contentions
raised by respective parties and in view of the aforesaid proposition of law laid down, it is opined
that the action of making reference is not sustainable in the eye of law and therefore it is quashed
and set aside.) (AY. 2008-09)
Anand Banwarilal Adhukia v. DCIT (2017) 244 Taxman 243 /148 DTR 262 (Guj.) (HC)
S. 143 (1) (a) : Assessment - Even though there was a raging controversy amongst the High
Court’s on whether expenditure for raising capital is capital or revenue in nature, the
judgement of the jurisdictional High Court is binding on the assessee and any view contrary
thereto is a "prima facie" mistake that requires adjustment. [S.35D, 37 (1)]
On appeal by the department to the Supreme Court held; Even though there was a raging
controversy amongst the High Court’s on whether expenditure for raising capital is capital or
revenue in nature, the judgement of the jurisdictional High Court is binding on the assessee and
any view contrary thereto is a "prima facie" mistake that requires adjustment .Accordingly, the
order passed by the CIT (Appeals), the Income Tax Appellate Tribunal and also the order of the
Gujarat High Court impugned herein cannot sustain and are set aside as they have wrongly held
that the issue was debatable and could not be considered in the proceedings under section 143 (1)
of the Act. (AY. 1994-95)
CIT v. Raghuvir Synthetics Ltd. (2017) 394 ITR 1/151 DTR 153/295 CTR 143 /247 Taxman
393 (SC)
S. 143 (2) : Assessment – Notice – Notice served on the old address - Assessment was held to
be void. [S. 282,292BB, General Clauses Act, S. 27]
Dismissing the appeal of assessee the Court held that; the issue of a notice u/s 143 (2) bearing the
wrong (old) address of the assessee does not amount to a valid service of the notice u/s 282 r.w.s.
27 of the General Clauses Act. The non-service of a notice u/s 143 (2) before the expiry of 12
months from the end of the month in which the return was filed renders the assessment void. As
313
the assessee objected to the same before completion of proceedings, the assessment order is not
saved by s. 292BB.In the above view, as the position is self evident on a plain reading of Section
143 (2) of the Act read with Section 127 of the General Clauses Act, thus no substantial question
of law arises for our consideration. (ITA No. 1382 of 2014, dt. 07.02.2017) (AY.2006-07)
CIT v. Abacus Distribution Systems (India)Pvt. Ltd. (Bom.) (HC); www.itatonline.org
S. 143 (2) : Assessment - Notice-Return filed as individual and revised in the status of HUF
without variation in income – Participated in the proceedings – Cannot raise the plea that
no notice was issued in the name of HUF. Assessment cannot be held to be bad in law. [S.
292BB]
Allowing the appeal of the revenue, the Court held that; in the current case, the assessee had itself
filed a revised return with the status of HUF and not disputed the notice issued by AO and had
co-operated during the assessment proceedings. Thus the HC held that the assessee had himself
filed the return in the status of HUF coupled with provisions of Section 292BB of the Act, and
hence the Tribunal was not right in declaring the assessment order as non-est. Hence the HC held
in favour of the revenue and dismissed the assessee’s cross-objections. (AY . 2001-01)
CIT v. Mangal Singh (2017) 246 Taxman 226 (P&H) (HC)
S. 143 (2) : Assessment – Notice-if the Department fails to produce evidence relating to the
issue and service of the s. 143 (2) notice, an adverse inference has to be drawn as per s. 114
of the Evidence Act. The assessment order has to be held invalid and void ab initio. On
merit addition on account of share application money was deleted. [S. 68,143 (3)]
Dismissing the appeal of the revenue, the Tribunal held that; if the Department fails to produce
evidence relating to the issue and service of the s. 143 (2) notice, an adverse inference has to be
drawn as per s. 114 of the Evidence Act. The assessment order has to be held invalid and void ab
initio. On merit addition on account of share application money was deleted. (ITA
No.5626/DEL/2012 & CO 319/DEL/2016, (dt. 30.03.2017) (AY. 2004-05)
ITO v. Gravity Systems Pvt.Ltd. (Delhi) (Trib.), www.itatonline.org
S. 143 (2) : Assessment-Notice-Proper service of the notice u/s. 143 (2) is mandatory and its
failure renders the assessment order void. The fact that an unauthorized person appeared
on behalf of the assessee before the AO does not mean that the notice was properly served.
[S. 143 (3)]
Allowing the appeal the Tribunal held that;Proper service of the notice u/s 143 (2) is mandatory
and its failure renders the assessment order void. The fact that an unauthorized person appeared
on behalf of the assessee before the AO does not mean that the notice was properly served. (ITA
Nos. 181 & 426/Kol/2013, dt. 30.11.2016) (AY. 2008-09)
DCIT v. M. K. Enterprise (Kol) (Trib); www.itatonline.org
S. 143 (2) : Assessment-Notice – Affixture of notice in the first instance for the reason of that
otherwise limitation of service would have expired was held to be in valid. [S. 282, 292BB]
Allowing the appeal the Tribunal held that ,affixture of notice in the first instance for the reason
of that otherwise limitation of service would have expired was held to be in valid. S. 292BB
introduced w..e.f 1stApril 2008 was not applicable for the assessment year 2000-01 . (AY.2000-
01)
Heaven Distillery (P) Ltd. v.ITO (2017) 152 DTR 10 /185 TTJ 197 (Mum.) (Trib.)
S. 143 (2) : Assessment – Jurisdiction-Non – corporate assessee,income up to 15 lakhs

Scrutiny, notice issued by the Asstt.Commissioner instead of Assessing Officer was held to
be invalid
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Allowing the appeal of the assessee, the Tribunal held that; the notice under section 143 (2) was
issued by Assistant Commissioner of Incometax. In terms of the Instruction No. 1/2011 dated
3112011, the notice was to be issued by the Income tax Officer and not by the Assistant
Commissioner. Therefore in view of above the notice issued by the Assistant Commissioner is
invalid and consequently the assessment framed by the Incometax Officer became void. Now the
issue arises so as to whether the notice issued by the Assistant Commissioner under section 143
(2) is without jurisdiction in terms of the aforesaid instruction. As per the Instruction No.1 of
2011 dated 31 January,2011 the Incometax Officers were empowered to take up the case up to
the income of Rs. 15 lakhs for non-corporate assessees and Rs. 20 lakhs for corporate assessees
whereas the assessee had returned a total income of Rs. 12 lakhs. Therefore, the orders of the
revenue authorities were set aside by quashing the order of the assessment framed under section
143 (3) since the issue of notice under section 143 (2) was not done by the Incometax Officer as
specified in CBDT Instruction No. 1/2011 dated 3112011. (AY. 2010-11)
Krishnendu Chowdhury v. ITO (2017) 55 ITR 52 (Kol.) (Trib.)
S. 143 (2) : Assessment-As the notice was neither issued nor served before limitation
period, the order was held to be barred by limitation hence bad in law.[S. 144C]
Allowing the appeal the Tribunal held that; though service of the notice is not a condition
precedent to conferment of jurisdiction upon the AO to deal with the matter, it is a condition
precedent to making of the order of assessment. Accordingly, the s. 143 (2) notice has not only to
be issued before the expiry of the limitation period but has also to be served upon the assessee
before the expiry of the limitation period. Conflict between VRA Cotton Mills Ltd v. UOI (P&H)
(HC) 33 Taxmann.com 675 and CIT v.Lunar Diamonds (2006) 281 ITR 1 (Delhi) explained in
light of CBDT Circular No. 549 dated 31.10.1989. (ITA No. 2/JP/2014, dt. 27.07.2017) (AY.
2010-11)
Cameron (Singaore) Pte. Ltd. v. ADIT (Jaipur) (Trib.), www.itatonline.org
S. 143 (3) : Assessment —Non issue of notice u/s 143 (2), order is bad in law [ S. 143 (1), 143
(2) ]
Dismissing the appeal of the revenue the Court held that, Non issue of notice u/s 143 (2), order is
bad in law . (AY. 2007 - 08)
PCIT v. Ravnet Solutions P. Ltd. (2017) 399 ITR 567 (Delhi) (HC)
S. 143 (3) : Assessment – Notice – When there is no valid service of notice with in
prescribed period of limitation, order passed was set aside .[ S. 143 (2) ]
Dismissing the appeal of the revenue the Court held that ;here was nothing on record that notice
which was given to postal authority on 30-9-2009, was served upon assessee on or before 30-9-
2009 - Even said notice was served upon assessee or not was also not on record as
acknowledgement of notice under section 143 (2) was not available. On facts there was no valid
service of notice under section 143 (2) within prescribed period of limitation and, therefore,
impugned assessment order passed under section 143 (3) was to be set aside . (AY. 2008-09)
PCIT v. Nexus Software Ltd. (2017) 248 Taxman 243 /152 DTR 313 (Guj.) (HC)
S. 143 (3) : Assessment- – Amalgamation-Order passed in the name of non-existent

amalgamating company, cannot be treated as procedural irregularity hence bad in law .[
S.144C, 170 (2), 292B ]
Dismissing the appeal of the revenue the Court held that; The AO has passed the order in the
name of the amalgamating company SPIL. The amalgamated company MSIL filed an appeal
before the Appellate Tribunal on the ground that the assessment order was without jurisdiction as
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it had been passed in the name of an entity that had ceased to exist on the date of the assessment
order. (AY. 2011-12)
PCIT v. Maruti Suzuki India Ltd. (successor of Suzuki Powertrain India Ltd.) (2017) 397
ITR 681/250 Taxman 409 /(2018) 163 DTR 252 (Delhi) (HC)
S. 143 (3) : Assessment – Certified copies of assessment order - Assessing Officer must
provide the certified copies of assessment proceedings on payment of amount payable for
providing such copies. [S. 144, 153C, Arts. 226, 227]
Application for certified copies of the order was rejected by the Assessing Officer.On writ the
Court held that; every assessee to seek for the certified copies of the entire order sheet of any
assessment proceeding. While such copies were sought, even if the details had not been provided,
since the entire order sheet had been sought, it was open to the authorities to compute whatever
was the amount payable for providing such certified copies and issue a notice and demand the
assessee to deposit the amount. On deposit of the amount, the assessee was entitled to be handed
over the requested certified copies. (AY. 2010-2011 to 2015-2016)
Shankarlal Khaitan v. ACIT (2017) 393 ITR 484 (Orissa) (HC)
S.143 (3) : Assessment-Bogus purchases-Cross examination-A statement by the alleged

vendor that the transactions with the assessee are only accommodation entries and that
there are no sales or purchases cannot be relied upon by the AO unless the assessee is given
the opportunity to cross-examine the vendor. [S.131]
Dismissing the appeal of Revenue the, Court held that;the question raised in this appeal is,
whether the Tribunal was justified in deleting the addition on account of bogus purchases
allegedly made by the assessee from M/s. Thakkar Agro Industrial Chem Supplies P. Ltd.
According to the revenue, the Director of M/s. Thakkar Agro Industrial Chem Supplies P. Ltd. in
his statement had stated that there were no sales /purchases but the transactions were only
accommodation bills not involving any transactions. The Tribunal has recorded a finding of fact
that the assessee had disputed the correctness of the above statement and admittedly the assessee
was not given any opportunity to cross examine the concerned Director of M/s. Thakkar Agro
Industrial Chem Supplies P. Ltd. who had made the above statement. The appellate authority had
sought remand report and even at that stage the genuineness of the statement has not been
established by allowing cross examination of the person whose statement was relied upon by the
revenue. In these circumstances, the decision of the Tribunal being based on the fact, no
substantial question of law can be said to arise from the order of the Tribunal. The appeal is
dismissed with no order as to costs. (ITA No. 4299 of 2009, dt. 22.02.2011)
CIT v. Ashish International (Bom.) (HC); www.itatonline.org
S.143 (3) : Assessment-Ex-parte order not ordinarily be passed-Order was seta-side. [S.147,
148]
The Court held that, ex-parte proceedings and ex-parte orders are generally frowned at by the
Courts of law unless there are compelling reasons or good justification for the same.It is of
utmost importance that any proceedings which is likely to affect the civil rights of a party is
conducted strictly in accordance with the principles of natural justice.Audi alteram partem does
not enshrine a principle of mere formality.It embodies a very valuable right of a citizen, i.e.not to
be condemned unheard.Hence, to the extent possible, courts insist on the principles of natural
justice being observed in the matter of conducting proceedings which culminate in orders likely
to affect the rights of the party concerned. (AY. 2007-2008 to 2011-2012)
Korp Resources P. Ltd. v. DCIT (2017) 390 ITR 336/149 DTR 23 /293 CTR 571 (Cal.)
(HC)
316
S. 143 (3) : Assessment—Amalgamation-Appointed date mentioned in scheme in absence of
any specified date by court, company ceases to exist from such date hence not liable to
assessment for relevant financial year.
Dismissing the appeal of the revenue the Court held that; when the High Court had not specified
any other date from which the scheme of amalgamation would be effective, the appointed date
mentioned in the scheme would be the relevant date from which the amalgamation or transfer
took place. Since the company R stood dissolved and ceased to be in existence from that date
there was no liability to assessment for the relevant financial year. The Appellate Tribunal had
not committed any illegality in holding the appointed date as the effective date of amalgamation.
(AY. 2008-09)
CIT v. Reliance Media Works Ltd. (2017) 394 ITR 427 (All.) (HC)
S. 143 (3) : Assessment-Bogus purchases-Trader-Stock register is maintained and quantity

detailed provided, Tribunal restricted the addition to 2% of the bogus purchases.
Tribunal held that; if the AO has not disputed the genuineness of sales and the quantitative details
and the day to day stock register maintained by the assessee, a trader, he cannot make an addition
in respect of peak balance of the bogus purchases. He can only determine the element of profit
embedded in the bogus purchases. On facts, the addition is restricted to 2% of the bogus
purchases. (ITA No.880-882/Mum/2016, ITA No.1321-1323/Mum/2016, dt. 29.08.2017) (AY.
2009-10 to 20011-12)
ACIT v. Steel Line (India) (Mum.) (Trib.); www.itatonline.org
S. 143 (3) : Assessment - Scrutiny of cases-CIT in granting approval is held to be proper

internal instructions cannot be equated with the provisions of the Act, selection for scrutiny
was accordance with law and valid.[S. 119, 151]
Dismissing the appeal of the assessee the Tribunal held that; CIT in granting approval is held to
be proper internal instructions cannot be equated with the provisions of the Act, selection for
scrutiny was accordance with law and valid. (ITA No. 906/Kol/2015, dt. 08.09.2017) (AY.
2010-11)
Brother & Sisters Enterprise v. JCIT (Kol.) (Trib.); www.itatonline.org
S.143 (3) : Assessment - Amalgamation - Mere mentioning of PAN of merged company only
to differentiate between amalgamated and amalgamating companies for period when both
of them were in existence, would not make assessment order invalid
Allowing the appeal of the revenue the Tribunal held that; Mere mentioning of PAN of merged
company only to differentiate between amalgamated and amalgamating companies for period
when both of them were in existence, would not make assessment order invalid . (AY. 2009 - 10)
DCIT v. B.A. Continuum India (P.) Ltd. (2017) 167 ITD 640 (Hyd) (Trib.)
S. 143 (3) : Assessment – Jurisdiction - Order passed without jurisdiction only on the basis
pf PAN was held to be void ab-initio.[ S. 120,127 ]
Allowing the appeal of the assessee the where case of assessee was transferred under section 127
from Mumbai to Pune, subsequent assessment order passed by Assessing Officer, Mumbai
because PAN of assessee was still lying with ITO, Mumbai was unjustified and void ab-initio
(AY. 2010-11)
317
Capstone Securities Analysis (P.) Ltd. v. DCIT (2017) 167 ITD 1 /(2018) 192 TTJ 863/ 166
DTR 39 (Pune) (Trib.)
S. 143 (3) : Assessment - Reasonable cause for not appearing before the Assessing Officer,
matter was remanded.[S. 253]
Due to the unfortunate demise of the Chartered Accountant attending to the Income-tax matters,
the matter could not be represented properly. Only the accountant of the assessee appeared and
could not explain the case properly before the AO. The AO framed an ex parte assessment order
making several additions. The CIT (A) confirmed the Additions. Tribunal set aside the said
decision and restore matter to AO for de-novo determination of all issues. (AY. 2011-12, 2012-
13)
Pravin Viram Satra v. ACIT (2017) 164 ITD 533 (Mum) (Trib.)
S. 143 (3) : Assessment – Business income — Refund of entry tax — Crediting of amount in
P&L account itself would not be conclusive to say that corresponding income accrued to
assessee and same was liable for taxation. [S. 41 (1)]
Allowing the appeal of the assessee the Tribunal held that; crediting of amount in P&L account
itself would not be conclusive to say that corresponding income accrued to assessee and same
was liable for taxation.The tribunal held that what is required to be taxed is a real income not
hypothetical income and merely because the same has been entered in the books of account does
not mean the amount has accrued to the assessee and the same is liable to be taxed. (AY. 2006-
07)
Asian Paints Ltd. v. Dy. CIT (2017) 49 CCH 230 /147 DTR 333 /184 TTJ 275 (Mum.) (Trib.)
S. 143 (3) : Assessment-An addition towards income cannot be made merely on the basis of
the statement of a third party that an amount has been paid to the assessee in the absence of
conclusive evidence. [S. 131]
The AO made the addition on the basis of the statement of the seller of the land, who in his
statement before the DDIT (Inv.) has stated that the sale consideration was at Rs. 2,10,000/- per
bigha and he had received total sale consideration of Rs. 35,00,000/-. The Counsel has not refuted
the statement. However, he submitted that the statement was not bonafide but Shri Hanuman
Yadav was black mailing the assessee. He submitted that interestingly the Revenue has accepted
the sale consideration of the nearby vicinity. The CIT (A) affirmed the view of the AO in this
respect. Now the issue which requires our consideration is whether the addition can be sustained
solely on the basis of the statement of Shri Hanuman Yadav, when there is no material placed on
record that Shri Hanuman Yadav has made any claim against the assessee in any court of law
seeking cancellation of sale deed or filing a recovery suit. The Coordinate Bench of the Tribunal
after following the ratio laid down by Hon’ble Supreme Court under the similar circumstances in
Union of India vs. T. R. Verma 1957 SC 882 and Kishan Chand Chellaram vs. CIT, 125 ITR 713
(SC) has held in the case of Ghanshyam Das Agarwal vs. ITO in ITA No. 1161/JP/2010 that in
the absence of any conclusive evidence the document could not have been disbelieved. The D/R
could not point out any binding precedent wherein it has been held that the oral statement would
over ride the documentary evidence. Therefore, respectfully following the decision of the
Coordinate Bench in the case of Ghanshyam Das Agarwal vs. ITO in ITA No. 1161/JP/2010, we
are of the view that the AO was not justified to make addition solely on the basis of the statement
of Shri Hanuman Yadav when there was a registered sale deed and more particularly when the
maker of statement has not challenged the sale deed before any court of law. It is also not placed
on record whether the sale deed was executed under coercion. Therefore, considering the totality
318
of facts of the present case, we hereby direct the AO to delete the addition. (ITA No. 467/JP/2011
and 519/JP/2011, dt. 25.11.2016) (AY. 2007-08)
Sharad U. Mishra v. DCIT (Jaipur) (Trib.); www.itatonline.org
S.143 (3) : Assessment-Bogus purchases-One to one relationship/nexus between the

purchases and sales has not been established by the assessee, the purchases have to be
treated as bogus and 12% of the purchase cost is assessable as profits. [S.69C]
Dismissing the appeal of the assessee the Tribunal held that; the assessee has failed to place on
record any material evidence to controvert the findings of the CIT (A). In this view of the matter,
we uphold the order of the CIT (A) on this issue of bringing to tax in the assessee’s hands the
profits embedded in the bogus purchase @ 12% of the purchase cost i.e. Rs. 5,15,377, since the
direct one to one relationship/nexus between the said purchases and sales have not been
established by the assessee. (ITA No. 2601/Mum/2016, dt. 18.01.2017) (AY. 2009-10)
Kiran Navin Doshi v. ITO (Mum.) (Trib.); www.itatonline.org
S. 143 (3) : Assessment-Dumb documents – On money - Flats were sold at concessional rates
,additional was held to be not justified on mere suspicion. [S.145]
Allowing the appeal of the assessee, the Tribunal held that; Loose papers which do not have full
details are "dumb documents" and have no evidentiary value. The fact that the assessee sold the
flats at a concession does not mean that that the difference between sale value and market value
can be assessed as income. The onus is on the AO to make inquiries from the buyers and bring
incriminating evidence on record to show that the assessee sold flats at a higher rate. Accordingly
the addition made on a pure guess without any material or evidence was held to be not justified.
(ITA No. 1502/Ahd/2015, dt. 14.02.2017) (AY. 2011-12)
Nishant Construction Pvt. Ltd. v. ACIT (Ahd.) (Trib.) www.itatonline.org
S. 143 (3) : Assessment – Validity-Return selected for scrutiny in violation of CBDT

guidelines – assessment order passed is ab-initio-void.
Return filed by the assessee manually selected for scrutiny without obtaining prior approval of
Chief Commissioner of Income Tax being in violation of CBDT guidelines in F. No.
225/93/2009/IT.II, scrutiny assessment made by A.O. was without jurisdiction. (AY. 2008-09)
JCIT v. S. F. Chougale (2017) 146 DTR 213 (Pune) (Trib.)
S.143 (3) : Assessment-Addition made on basis of dumb paper was held to be not valid.[S.
132]
Tribunal held that the, Addition made on basis of dumb paper was held to be not valid. (AY.
2004-05 to 2008-09)
S.143 (3) : Assessment – Assessment was done without following the guidelines of scrutiny
and without taking the approval, the order was held to be bad in law. [S.133A, 143 (2)]
The issue in the appeal is that, the assessee claims that its case was not selected for scrutiny under
CASS but was selected manually. For selection of any return for scrutiny manually by the
Assessing Officer, the requirement of guidelines issued for this purpose for relevant assessment
year was that the same should be after obtaining approval of the CCIT/DGIT. Since no such
approval was received, the AO had no jurisdiction to proceed with the scrutiny assessment. After
the AO’s oder an appeal was filed before the CIT (A) wherein the AO’s order was upheld,
thereafter the assessee moved an application under the Right to Information Act, wherein a
specific question that whether its case was selected for scrutiny under CASS was asked by the
assessee and in case it was not selected under CASS, why the same was picked up for scrutiny.
The assessee also asked that under which norms the case was selected for scrutiny and whether
319
relaxation in selection of cases in which survey action was carried out on fulfilling the criteria
was available in the said norms or not. In reply it was stated that the guidelines/instructions were
followed but since the guidelines were confidential in nature, the copy of same could not be
provided. In reply to the next question whether the case was selected under CASS, the categorical
answer was ‘No’. The said RTI reply further stated that the case was selected for scrutiny in view
of the guidelines contained in F.No.225/93/2009/ITA.II. On appeal before the Tribunal it was
held that the AO had failed to follow the guidelines issued for selecting the cases for manual
scrutiny and as the case was selected manually and no previous approval of CCIT was obtained,
the AO lacked jurisdiction to carry out the scrutiny assessment and the assessment order passed
by AO was bad in law. (AY.2008 - 09)
S.F. Chougule v. Jt. CIT (2017) 183 TTJ 779 (Pune) (Trib.)
S. 144 : Best judgment assessment —Survey - Trading in foot wear - Failure to produce
supporting evidence for purchase and sales – Estimate of 7 % of net profit was held to be
valid. [ S. 133A, 142]
Dismissing the appeal of the assesse the Court held that; The Tribunal duly considered the
evidence, particularly the material provided by the Investigation Wing and affirmed the order of
the Commissioner (Appeals). It held that the assessee had failed to furnish any supporting
evidence regarding purchase and sales. (AY. 2006 - 07)
Raman Mahajan (Smt.) v. CIT (2017) 399 ITR 667 (All) (HC)
S. 144 : Best judgment assessment – There was no evidence on record indicating incorrect
entries in books of account hence rejection of books of account was held to be not valid [ S.
145 (3) ]
Dismissing the appeal of the revenue the Court held that; There was no evidence on record
indicating incorrect entries in books of account hence rejection of books of account was held to
be not valid .
CIT v. Pink City Developers (2017) 398 ITR 153 (Raj) (HC)
S.144 : Best judgment assessment—Rejection of books of account — Estimate of wastage

during survey proceedings—Report of ceramic research laboratory stating that quantum of
wastage variable —input /output ratio - deletion of additions was held to be justified. [S.
69C, 133A, 145 (3)]
Dismissing the appeal of the revenue, the Court held that, rejection of books of account merely on
the basis estimate of wastage during the survey was held to be not justified when the assesse has
produced the report of ceramic research laboratory stating that quantum of wastage variable
.Addition based on input /output ratio was held to be justified.
CIT v. Ceramic Industries (2017) 396 ITR 50 (Raj) (HC)
CIT v. Ceramic Tableware P. Ltd. (2017) 396 ITR 50 (Raj) (HC)
S. 144 : Best judgment assessment —Nothing on record to show satisfaction of assessing

officer that books incorrect, incomplete or unreliable hence best assessment is held to be not
justified.[S. 145 (3), 260A]
Dismissing the appeal of the revenue, the Court held that; the addition made to the income of the
assessee on estimate basis by the Assessing Officer under section 144 for certain projects had
been done without scrutiny and without rejecting its books of account. There was nothing on
record to show that the Assessing Officer came to the conclusion that the books of account
maintained by the assessee were incorrect, incomplete, unreliable and consequently had rejected
them. No question of law arose. (AY. 2012-13)
PCIT v. Marg Ltd. (2017) 396 ITR 580 /249 Taxman 521 (Mad.) (HC)
320
S. 144 : Best judgment assessment – Estimate of income was held to be proper – Court
cannot substitute its own reason - Deletion of addition as unexplained investment was held
to be proper – Estimate of interest on fixed deposit was held to be proper – Estimate of
interest was held to be not justified. [S. 62, 132, 153A, 158B]
Court held that ;estimate of income was held to be proper and Court cannot substitute its own
reason. Deletion of addition as unexplained investment was held to be proper. Estimate of
interest on fixed deposit was held to be proper. Estimate of interest was held to be not justified .
(AY. 2002-03 to 2008-09)
P.P. Bhaskaran v. CIT (2017) 394 ITR 258/151 DTR 133/295 CTR 513 (Ker.) (HC)
S. 144 : Best judgment assessment – When income is estimated other additions cannot be
made on the basis of entries in the books of account.
Allowing the appeal of the assesseee the Court held that; – When income is estimated other
additions cannot be made on the basis of entries in the books of account.
Malpani House of Stones v. CIT (2017) 395 ITR 385 (Raj.) (HC)
S. 144 : Best judgment assessment-Principle of telescoping-Assessee unable to show that

particular amount from particular bank account used for purchase of specific property--No
question of telescoping being permitted.[S. 142 (1), 271 (1) (b), 276CC]
Dismissing the appeal the Court held that; the source of income was being generated
continuously by the assessee and his other co-accused and further the assessee had been unable to
show before the authorities of the Department that a particular amount from a particular bank
account had been used for the purchase of specific property, movable and immovable, and in the
said circumstances, there could be no question of any telescoping being permitted. Liability to tax
remains so long as it is income of particular assessment year whether derived from legal or
illegal source .Attachment of properties under Criminal Law Amendment Ordinance, 1944 and
liability of forfeiture to State Government not material.
Gauri Shankar Prasad (Dr.) v. ITAT (2017) 393 ITR 635 (Patna) (HC)
S. 144 : Best judgment assessment – Rejection of books of account – Estimation must be

reasonable and not on presumptions-Premium money on sale of cigarettes – In the absence
of any conclusive material premium money collected by the retailers or whole sale buyers
towards advertisement and sales promotion addition was held to be not justified. [S.4, 145
(2)]
Allowing the appeal of the assessee, the Tribunal held that; In the absence of any conclusive
material premium money collected by the retailers or whole sale buyers towards advertisement
and sales promotion addition was held to be not justified . No material was unearthed or any
statement given that the assesse had control over the Bank accounts of the dealers . Tribunal held
that suspicion howsoever strong cannot be basis of addition . Ratio in CIT v. Durga Prasad More
(1971) 82 ITR 540 (SC) is referred. (AY. 1984 - 85 to 1986 - 870) (AY. 1984 - 85 to 1986-87)
GTC Industries Ltd. v. ACIT (2017) 154 DTR 1/57 ITR 384 /187 TTJ 389 (SB) (Mum.)
(Trib.)
S.144 : Best judgement assessment – Method of accounting – Trading in iron scrap-Failure

to produce books of accounts was held to be justified in rejecting the books of account
,however the AO was directed to apply GP at 5% of turnover. [S.145 (3)]
The assessee is in the business of trading in iron scrap. AO issued the notice u/s 143 (2) and
directed to produce the books of account. As the books of account was not produced he estimated
gross profit at 20 per cent of turnover. In appeal CIT (A) held that when books of account were
not produced, Assessing Officer could not reject same and make estimated addition. On appeal by
the revenue, allowing the appeal the Tribunal held that; Failure to produce books of accounts was
321
held to be justified in rejecting the books of account ,however the AO was directed to apply GP at
5% of turnover. (AY. 2009-10)
ITO v. Jayaben K. Ghelani (Smt.) (2017) 163 ITD 560 (Rajkot) (Trib.)
S. 144C : Reference to dispute resolution panel - Issuance of draft assessment orders by

assessing officer mandatory, without following the procedure the passing of the order was
held to be invalid and consequently demand notices and penalty proceedings also invalid.
[S. 156, 271 (1) (c)]
Allowing the petition the Court held that; failure by the Assessing Officer to adhere to the
mandatory requirement of section 144C (1)and pass draft assessment orders had invalidated the
final assessment orders, the consequent demand notices and penalty proceedings. The legal
position was unambiguous and the final assessment order stood vitiated for failure to adhere to
the mandatory requirements of first passing the draft order.. (AY. 2007 - 08, 2008 - 09)
Turner International India P. Ltd. v. Dy. CIT (2017) 398 ITR 177 /297 CTR 460 /152 DTR
303 (Delhi) (HC)
S. 144C : Reference to dispute resolution panel - Direction of DRP which would result in to
an assessment which is open to challenge as per the provisions of the Act, writ was held to
be not maintainable [ S.92C, Art .226 ]
Dismissing the petition the Court held that; Direction of DRP which would result in to an
assessment which is open to challenge as per the provisions of the Act, writ was held to be not
maintainable .
Hyundai Motor India Ltd. v. ITD (2017) 251 Taxman 504 /(2018) 163 DTR 430 (Mad.)
(HC)
S. 144C : Reference to dispute resolution panel – It is mandatory for the Assessing officer to
pass draft assessment order after receipt of report of transfer pricing officer, even if report
of transfer pricing officer has been made under order of remand of tribunal ,violation of the
provision the order is bad in law .[ S. 292B]
Allowing the petition the Court held that; It is mandatory for the Assessing officer to pass draft
assessment order after receipt of report of transfer pricing officer, even if report of transfer
pricing officer has been made under order of remand of tribunal ,violation of the provision the
order is bad in law .The final assessment order of the Assessing Officer in violation of the
condition would be vitiated not on account of mere irregularity but since it is an incurable
illegality. Section 292B of the Act would not protect such an order. Such an order would be
invalid (AY.2006 - 07 to 2008 - 09)
JCB India Ltd v. Dy. CIT (2017) 398 ITR 189/298 CTR 558/158 DTR 259 /251 Taxman 143
(Delhi) (HC)
S. 144C : Reference to dispute resolution panel – While giving effect to directions of dispute
resolution panel, Assessing Officer cannot make any other addition which was not
contemplated in draft order of assessment .[ S. 92CA ]
Dismissing the appeal of the revenue, the Court held that; While giving effect to directions of
dispute resolution panel, Assessing Officer cannot make any other addition which was not
contemplated in draft order of assessment . (AY. 2009 - 10)
CIT v. Sanmina SCI India P. Ltd. (2017) 398 ITR 645 /297 CTR 491 (Mad) (HC)
322
S. 144C : Reference to dispute resolution panel - Circular clarifying that requirement of
issuing draft assessment order applies to all orders passed after 1-10-2009 irrespective of
assessment year.
Dismissing the appeal of the revenue, the Court held that; the upward revision was made in the
income of the assessee on the basis of the order of the Transfer Pricing Officer and was done
without following the mandatory procedure laid down under section 144C . When the statute
permitted no ambiguity and required the procedure to be followed in case of any variation which
the Assessing Officer proposed to make after October 1, 2009 the assesse could not be made to
suffer on account of any inadvertent error which ran contrary to the statutory provisions. (AY.
2009-10)
CIT v. C-Sam (India) P. Ltd. (2017) 398 ITR 182 /298 CTR 552/158 DTR 253 (Guj) (HC)
S. 144C : Reference to dispute resolution panel – Limitation-Order rejecting objection on

ground that it was barred by limitation is to be considered as confirmation of draft order
passed by AO as contemplated u/s 144C (8); [ S.143 (3) ]
The High Court held DRP might confirm, reduce or enhance the variation proposed in draft order.
The present order was an order rejecting objections. High Court held that, the said rejection was
nothing but confirmation of draft order passed by AO, as contemplated u/s 144C (8).
Accordingly, it was held that the final order passed by the AO was certainly order passed u/s
144C (13). (AY .2012-13)
Inno Estates (P) Ltd v. DRP (2017) 154 DTR 112/297 CTR 88 (Mad) (HC)
S. 144C : Reference to dispute resolution panel – Natural justice - Order was passed
without considering the documents filed, the order of DRP is set aside. [Art. 226, 227]
Allowing the petition the Court held that; action of the DRP in granting time to the assessee till
24th July 2017 to submit documents but in still passing the order on the same day itself and that
too without taking on record the documents produced by the assessee is clearly unreasonable and
in violation of the principles of natural justice.The matters are remanded to the DRP to be taken
up from the stage at which they were when the impugned orders were passed. The documents
submitted by the Petitioner that are already with the DRP and any further documents that the
Petitioner may submit not later than 31st August, 2017 will be considered by the DRP and fresh
orders passed within a period of two weeks thereafter. (AY. 2013 - 14, 2014-15)
Systra SA Project Office v. DRP (2017) 397 ITR 555 (Delhi) (HC)
S. 144C : Reference to dispute resolution panel – Rejection of objection - Remedy of

assessee is by way of appeal — Writ would not issue to quash assessment order. [S. 92C,
Art. 226]
Dismissing the petition the Court held that; Rejection of objection by the Dispute Resolution
Panel, is appealable hence writ petition is not maintainable. (AY. 2012-13)
Inno Estates P. Ltd. v. DRP (2017) 396 ITR 295 /297 CTR 88 /248 Taxman 586/154 DTR
112 (Mad.) (HC)
S. 144C : Reference to dispute resolution panel - Transfer pricing - Arm's length price – AO
cannot make any addition and/or disallowance other than what is proposed by the TPO in
draft assessment order. [S. 10AA, 92C]
Dismissing the appeal of the revenue, the Court held that; AO cannot make any addition and/or
disallowance other than what is proposed by the TPO in draft assessment order. (AY. 2011-12)
PCIT v. Woco Motherson Advanced Rubber Technologies Ltd. (2017) 246 Taxman 377/151
DTR 111/295 CTR 161 (Guj.) (HC)
323
Editorial : SLP of revenue was dismissed; PCIT v. Woco Motherson Advanced Rubber
Technologies Ltd (2018) 252 Taxamn 373 (SC)
S.144C : Reference to dispute resolution panel-Forwarding of draft assessment order-

Actual service of copy of draft assessment order necessary-Time limit of nine months from
end of month in which draft order forwarded to assessee for Dispute Resolution Panel to
pass order-Receipt of draft assessment order dated 26-3-2014 on 22-8-2014-Jurisdiction of
Dispute Resolution Panel to pass order did not lapse on 31-12-2014. High Court can remand
case to Dispute Resolution Panel even though time limit would have expired.
Court held that ;Time limit of nine months from end of month in which draft order forwarded to
assessee for Dispute Resolution Panel to pass order. Receipt of draft assessment order dated 26-3-
2014 on 22-8-2014Jurisdiction of Dispute Resolution Panel to pass order did not lapse on 31-12-
2014.High Court can remand case to Dispute Resolution Panel even though time limit would
have expired.The order of the Dispute Resolution Panel, Bengaluru, dated June 22, 2015 was set
aside and the Dispute Resolution Panel, Bengaluru was directed to take up form 35A filed by the
assessee. (AY. 2008-2009))
Dy.CIT v. Rain Cements Ltd. (2016) 243 taxman 496 /(2017) 392 ITR 253 (T&AP) (HC)
Editorial : SLP of assessee was dismissed, Rain Cements Ltd. v.Dy.CIT (2017) 390 ITR 3
(St.)/245 Taxman 58 (SC)
S.144C : Reference to dispute resolution panel – No variation in returned income – Draft

assessment order not issued - Order u/s 143 (3) is valid. [S. 143 (3)]
Assessee contended that non-issuance of draft assessment order led to the impugned assessment
order being null and void.
The Tribunal held that since there is no variation in the income returned by the assessee which is
a condition precedent, the provisions of Section 144C cannot be invoked. (AY. 2010-11)
Mosbacher India LLC v. ADIT (2016) 76 taxmann.com 31/(2017) 183 TTJ 1 (Chennai)
(Trib.)
S.144C : Reference to dispute resolution panel-Assessment u/s. 143 (3) making certain
adjustment to ALP without passing draft assessment order was held to be invalid. [S.92C]
Allowing the appeal the Tribunal held that; AO passed the order along with issued the demand
notice and show cause notice for levy of penalty. The AO had issued covering letter where it says
that it is draft assessment order but in spirit, it had finalized the assessment, wherein the demand
was crystallized and demand notice was issued. The AO not followed the correct procedure as
provided in the Statute and has passed final assessment order without passing draft assessment
order which is against the provisions of the Act and hence, the same is invalid in law. Therefore
the same was set aside. (AY. 2010-11)
Soktas India (P.) Ltd. v. ACIT (2017) 162 ITD 366 (Pune) (Trib.)
S. 144C : Reference to dispute resolution panel-The lapse committed by the AO in passing

the assessment order without first passing a draft order, against which the assesee may file
objections with the DRP, seeking its directions to the AO was quashed .
Allowing the appeal of assessee the Tribunal held that;The lapse committed by the AO in passing
the assessment order without first passing a draft order, against which the assesee may file
objections with the DRP, seeking its directions to the AO, is only a procedural irregularity, which
does not impinge on the jurisdiction on the AO to pass the assessment order. The assessee has no
vested right against procedure. However, as the lapse was held to be fatal in Vijay Television 369
ITR 113 (Mad), the same has to be followed. Respectfully following the decision in Vijay
Television (P.) Ltd. (supra), we hold the assessment in the present case as bad in law. In
consequence, the assessee is only liable for tax on its’ returned income. CIT v. Shelly Products
324
(2003) 261 ITR 367 (SC). The assessment failing, we do not consider it relevant or necessary to
address the issue arising in quantum assessment on merits. (ITA No. 818/Mds/2015, dt.
30.12.2016) (AY. 2010-11)
Daewon Kang Up Co. Ltd. v. DDIT (2017) 147 DTR 201 /184 TTJ 426 (Chennai) (Trib.)
S.144C : Reference to dispute resolution panel - DRP has the power to entertain a new
claim even in absence of a revised return - Direction is binding on the Assessing
Officer.[S.139]
DRP has the power to entertain a new claim even in absence of a revised return . Direction issued
by Panel is binding on Assessing Officer. DRP directed to treat sales tax remission as capital
receipt. Assessing Officer reducing value of sales tax remission from block affixed assets which
is violation of the provision. (AY. 2003-2004 to 2011-2012)
Electrosteel Castings Ltd. v. DCIT (2017)53 ITR 5 (Kol.) (Trib)
S. 145 : Method of accounting – Valuation of stock-Not maintaining the stock register-

Consistent method was followed rejection of books of account was held to be not valid.
The assessee for the past 30 years, had been consistently was valuing the stock-in-trade at cost for
the purpose of statutory balance sheet, and for the income tax return, valuation was at the lower
of cost or market value. That practice was accepted by the Department in earlier years.
Preparation of the balance sheet in accordance with the statutory provision would not disentitle
the assessee in submitting income tax return on the real taxable income in accordance with a
method of account adopted by the assessee consistently and regularly. The high court held that
this could not be discarded by the departmental authorities on the ground that assessee was
maintaining balance sheet in the statutory form on the basis of the cost of the investments. There
is no question of following two different methods for valuing its stock-in-trade (investments)
because the Bank was required to prepare balance sheet in the prescribed form and it had no
option to charge it. For the purpose of income tax as stated earlier, what is to be taxed is the real
income which is to be deduced on the basis of the accounting system regularly maintained by the
assessee and that was done by the assessee in the present case.
CIT v Unique Builders & Developers (2017) 160 DTR 313/(2018) 300 CTR 455 (Raj) (HC)
S. 145 : Method of accounting - Gross Profit rate could not be computed with reference to
returns of subsequent assessment years
Allowing the appeal of the assessee the Court held that; the gross profit rate was computed with
reference to the returns of the subsequent assessment years i.e. 1989-90 to 1991-92. Thus, there
was no positive evidence before the CIT (A) to assess the gross profit rate. The returns of the
subsequent years i.e. 1989-90 to 1991-92 could not have been taken into account for computing
the gross profit rate in respect of assessment year 1986-87. Thus, the finding with regard to gross
profit rate was based on surmises and conjectures and thereby order passed by lower authorities
were quashed. (AY. 1986-97)
Nek Ram Sharma & Co. v. CIT (2017) 298 CTR 486 /158 DTR 58 (J&K) (HC)
S.145 : Method of accounting - Provision for damage was prepared company being
supported by factual evidences, claim of reduction from closing stock of packing material
and finished goods has to be allowed
Provision for damage was prepared company being supported by factual evidences, claim of
reduction from closing stock of packing material and finished goods has to be allowed. No
325
disallowance can be made in respect of claim of reduction from stock of packing material and
from stock of finished goods. (AY.2009 - 10)
S. 145 : Method of accounting - Eligible and non eligible divisions-Common expenses

related to both divisions were irrationally debited in books of division not eligible for
deduction, rejection of books of account was held to be justified . [ S.80HH, 80I ]
Dismissing the appeal of the assessee the Court held that; when there are eligible and non
eligible divisions, common expenses related to both divisions were irrationally debited in books
of division not eligible for deduction, rejection of books of account was held to be justified .
Court also observed that ,there is a clear observation by the Assessing Officer which shows that
he was not satisfied that the accounts are correct and complete. It is only a combined method
employed which resulted in non determination of income properly. Therefore the order of the
Tribunal was to be upheld. (AY. 1994 - 95, 1995-96)
Ema India Ltd. v DCIT (2017) 158 DTR 183 /81 taxmann.com 221 (All.) (HC)
S. 145 : Method of accounting – Rejection of books of account – day to day stock register is
not maintained – Applying the gross profit rate on basis of past history was held to be
justified .[ S.145 (3) ]
Dismissing the appeal of the revenue the Court held that; since the assessee was not maintaining
the day - to-day stock register and specific defects were also pointed out by the Assessing Officer
in the books of account, the Tribunal rightly confirmed the application of section 145 (3) of the
Act. The application of gross profit rate of 11.5 per cent. on the basis of the past history of the
assessee was also rightly confirmed.
CIT v. Sita Ram Sopra (2017) 399 ITR 463 (Raj) (HC)
S. 145 : Method of accounting – Where revenue had modified or substituted method of

valuation of closing stock in particular year, same methodology would also have to be
applied for valuation of opening stock for that year [S.154, 254 (2) ]
Allowing the petition the Court held that; Where revenue had modified or substituted method of
valuation of closing stock in particular year, same methodology would also have to be applied for
valuation of opening stock for that year. Court also held that rejection of the application for
rectification by the Tribunal on the ground that the said arguments was not raised was held to be
not justified, the Tribunal ought to have allowed the rectification application of the petitioner.
(AY. 2003-04)
Veera Exports v. ACIT (2017) 248 Taxman 478 (Guj.) (HC)
S. 145 : Method of accounting – Merely because the gross profit is low cannot be the ground
to reject the books of account .
Dismissing the appeal of the revenue the Court held that; Merely because the gross profit is low
cannot be the ground to reject the books of account. (AY. 2007-08)
PCIT v. Purshottam B. Pitroda (2017) 248 Taxman 118 (Guj.) (HC)
S. 145 : Method of accounting – Undervaluation of closing stock – Revenue has not brought
any evidence hence deletion of addition was held to be justified. [ S.260A ]
326
Dismissing the appeal of the revenue the Court held that; as the revenue has not brought any
evidence as regards the under valuation of closing stock, deletion of addition was held to be
PCIT v. Bandekar Brothers (P.) Ltd. (2017) 248 Taxman 251 /151 DTR 248 /(2018) 403 ITR
309 (Bom.) (HC)
S. 145 : Method of accounting – Books of account are genuine hence rejection of books of
account was held to be not justified . [ S. 80IA, 145 (3) ]
Dismissing the appeal of the revenue the Court held that; Books of account are genuine hence
rejection of books of account was held to be not justified .
S. 145 : Method of accounting – Income computation and disclosure standards (ICDS) has
to be read down to restrict power of the Central Government to notify ICDS that do not
seek to override binding judicial precedents or provisions of the Act. If S.145 (2) is not so
read down it would be ultra vires the Act and Article 141 read with Article 144 and 265 of
the Constitution. The ICDS which overrule the provisions of the Act, the Rules thereunder
and the judicial precedents applicable thereto, are struck down as ultra vires the Act. To
that extent, Notification Nos. 87 and 88 dated 29.09.2016 and Circular No. 10 of 2017 issued
by the CBDT are also held to be ultra vires the Act and struck down as such. [ S.44AB, 145
(2), Art ,14, 19, 141, 145, 265 ]
The High Court had to consider the following questions :
(i) Whether the amendments to Section 145 are an instance of delegation by the Parliament of
essential legislative powers to the Central Government?
(ii) Are the ICDS an instance of excessive delegation of legislative powers? Whether the
impugned ICDS are contrary to the settled law as explained in various judicial precedents and are,
therefore, liable to be struck down?
(iii) Whether the impugned amendments to Section 145 of the Act and the consequential ICDS
and Circular violate Articles 14, 19 (1) (g), 141, 144 and 265 of the Constitution?
HELD by the High Court :
(i) Section 145 (2), as amended, has to be read down to restrict power of the Central Government
to notify ICDS that do not seek to override binding judicial precedents or provisions of the Act.
The power to enact a validation law is an essential legislative power that can be exercised, in the
context of the Act, only by the Parliament and not by the executive. If Section 145 (2) of the Act
as amended is not so read down it would be ultra vires the Act and Article 141 read with Article
144 and 265 of the Constitution.
(ii) The ICDS is not meant to overrule the provisions of the Act, the Rules thereunder and the
judicial precedents applicable thereto as they stand.
(iii) The decision in J.K. Industries Ltd. v. Union of India (supra) is distinguishable in its
application to the case on hand.
(iv) ICDS I which does away with the concept of ‘prudence’ is contrary to the Act and binding
judicial precedents and is therefore unsustainable in law.
(v) ICDS II pertaining to valuation of inventories and eliminates the distinction between a
continuing partnership business after dissolution from one which is discontinued upon dissolution
is contrary to the decision of the Supreme Court in Shakti Trading Co. (supra). It fails to
acknowledge that the valuation of inventory at market value upon settlement of accounts of the
outgoing partner is distinct from valuation of the inventory in the books of the business which is
continuing. ICDS II is held to be ultra vires the Act and struck down as such.
(vi) The treatment to retention money under Paragraph 10 (a) in ICDS-III will have to be
determined on a case to case basis by applying settled principles of accrual of income. By
deploying ICDS-III in a manner that seeks to bring to tax the retention money, the receipt of
327
which is uncertain/conditional, at the earliest possible stage, irrespective of the facts, the
Respondents would be acting contrary to the settled position in law as explained in the decisions
referred to in para 68 and to that extent para 10 (a) of ICDS III would be rendered ultra vires.
(vii) Para 12 of ICDS III read with para 5 of ICDS IX, dealing with borrowing costs, makes it
clear that no incidental income can be reduced from borrowing cost. This is contrary to the
decision of the Supreme Court in CIT v. Bokaro Steel Limited (supra) and is therefore struck
down.
(viii) Para 5 of ICDS-IV requires an Assessee to recognize income from export incentive in the
year of making of the claim if there is ‘reasonable certainty’ of its ultimate collection. This is
contrary to the decision of the Supreme Court in Excel Industries (supra), and is, therefore, ultra
vires the Act and struck down as such.
(ix) As far as para 6 of ICDS IV is concerned, the proportionate completion method as well as
the contract completion method have been recognized as valid method of accounting under the
mercantile system of accounting by the Supreme Court in CIT v. Bilhari Investment Pvt. Ltd.
(supra) and this Court in CIT v. Manish Buildwell Pvt. Ltd and Paras Buildtech India Pvt. Ltd. v.
CIT (supra). Therefore, to the extent that para 6 of ICDS-IV permits only one of the methods, i.e.,
proportionate completion method, it is contrary to the above decisions, held to be ultra vires the
Act and struck down as such.
(x) Para 8 (1) of ICDS IV is not been shown to be contrary to any judicial precedent. There is
also no challenge to Section 36 (1) (vii) of the Act. Accordingly, para 8 (1) of ICDS-IV is held to
be not ultra vires the Act. Its validity is upheld.
(xi) ICDS-VI which states that marked to market loss/gain in case of foreign currency derivatives
held for trading or speculation purposes are not to be allowed, is not in consonance with the ratio
laid down by the Supreme Court in Sutlej Cotton Mills Limited v. CIT (supra), insofar as it
relates to marked to market loss arising out of forward exchange contracts held for trading or
speculation purposes. It is, therefore, held to be ultra vires the Act and struck down as such.
(xii) ICDS VII which provides that recognition of government grants cannot be postponed
beyond the date of accrual receipt, is in conflict with the accrual system of accounting. To that
extent it is held to be ultra vires the Act and struck down as such.
(xiii) ICDS VIII pertains to valuation of securities. For those entities not governed by the RBI to
whom Part A of ICDS VIII is applicable, the accounting prescribed by the AS has to be followed
which is different from the ICDS. In effect, such entities will be required to maintain separate
records for income tax purposes for every year since the closing value of the securities would be
valued separately for income tax purposes and for accounting purposes. To this extent Part A of
ICDS VIII is held to be ultra vires the Act and is struck down as such.
(xiv) Conclusion : To the extent the specific ICDS as noted hereinbefore have been struck down
as ultra vires the Act, the impugned notification Nos. 87 and 88 dated 29th September 2016 and
Circular No. 10 of 2017 issued by the CBDT are also held to be ultra vires the Act and struck
down as such. (W.P. (C) 5595/2017 & CM APL 23467/2017, dt. 08.11.2017) (AY. 2017-18)
The Chamber of Tax Consultants v. UOI (2017) 299 CTR 137 /159 DTR 313 /(2018) 400 ITR
178/252 Taxman 77 (Delhi) (HC)
S. 145 : Method of accounting-Cenvat credit —Exclusive method - Amount of unutilised

cenvat credit cannot be directly added to closing stock. [S. 4]
Dismissing the appeal of the revenue, the Court held that; the assessee got credit for the excise
duty paid on the raw materials purchased by it and utilised in the manufacture of excisable goods.
The assessee was adopting the exclusive method, i. e., valuing the raw materials on the purchase
price minus the Modvat credit and it was permissible. Merely because the Modvat credit was
irreversible credit offered to manufacturers upon purchase of duty paid raw materials, that would
328
not amount to income which was liable to be taxed under the Act. The amount of the unutilised
Cenvat credit could not be directly added to the closing stock. (AY. 2008 - 09)
CIT v. Diamond Dye Chem Ltd. (2017) 396 ITR 536 (Bom) (HC)
S.145 : Method of accounting-Method of accounting consistently followed and accepted by

Revenue in earlier years cannot be rejected.
Allowing the appeal of the assesse, the Court held that; the Tribunal was not right in law in
rejecting the project completion method which was followed consistently by the assessee and
instead applying the work-in-progress method. (AY. 2001-2002)
Manjusha Estate P. Ltd. v. ITO (2017) 393 ITR 644 (Guj.) (HC)
S. 145 : Method of accounting-Service charges from sister concern-uncertainty in realising

the receivable-Deletion was held to be not proper-Remedy is available of rectification. [S.4,
154]
Allowing the appeal of the revenue, the Court held that;with regard to the service charges from
the sister concern and students, even if it was later realised by the assessee that some of the
receivables in accordance with mercantile system were not actually realised, the remedy available
to the assessee was to seek rectification. It was not right to delete the addition made on this.
CIT v. Universal Empire Educational Society (2017) 393 ITR 502/80 taxmann.com 44
(Ker.) (HC)
S. 145 : Method of accounting – Valuation-Average price principle-Decision of Tribunal

after considering material on record that method of accounting could not be changed is a
question of fact. [S. 256 (2)]
Dismissing the application of the Revenue the Court held that; The Tribunal recorded a finding of
fact on the basis of the material on record that no fault could be found with the method of
valuation, by applying the "average price principle". The Tribunal found that in some years, by
adopting the method of average price principle, even the assessee would have been adversely
affected. The Tribunal found that during the last years where the said method of accounting had
affected the assessee, the assessee did not change the method of valuation and even the Revenue
did not point out the fact to the assessee. The Tribunal rightly held that merely because the
change of the method would help the Revenue in a particular year, the Assessing Officer was not
at liberty to change the method of valuation that was followed by the assessee for a considerably
long period. The findings of fact recorded by the Tribunal do not give rise to any substantial
question of law.
CIT v. Vidarbha Tobacco Products P. Ltd. (2017) 393 ITR 218/246 Taxman 262/294 CTR
103 /149 DTR 132 (Bom.) (HC)
S. 145 : Method of accounting - Valuation of closing stock--Assessee under obligation to

create stock of levy sugar at controlled levy price through public distribution system--
Closing stock of levy sugar cannot be valued at sale price of free sale sugar.
Dismissing the appeal of the revenue, the Court held that; the assessee was under an obligation to
create stock of levy sugar at the controlled levy price through the public distribution system,
therefore, closing stock of levy sugar cannot be valued at sale price of free sale sugar. (AY. 2006-
2007)
PCIT v. Kishan Sahkari Chini Mills Ltd (2017) 393 ITR 507/246 Taxman 293 (All.) (HC)
S. 145 : Method of accounting - If the AO has not rejected the books of account, it means
that the assessee has maintained the books of accounts in accordance with the prescribed
329
standards as per s. 145 of the Act. If so, the AO is not entitled to make any addition on
account of sale of goods out of books or for investment in stock out of undisclosed sources.
Dismissing the appeal of the revenue, the Court held that; If the AO has not rejected the books of
account, it means that the assessee has maintained the books of accounts in accordance with the
prescribed standards as per s. 145 of the Act. If so, the AO is not entitled to make any addition on
account of sale of goods out of books or for investment in stock out of undisclosed sources. (ITA
No. 165 of 2010, dt. 04.05.2017)
CIT v. Pashupatinath Agro Food Products Pvt. Ltd. (All) (HC) : www.itatonline.org
S. 145 : Method of accounting – Estimation of income on the basis of material on record and
on the basis of statement is a question of fact.[S. 132 (4), 260A]
Dismissing the appeal the Court held that; estimated income of the assessee was arrived at on the
basis of the material on record and on various statements made by the employees and directors
during the search and survey proceedings. The HC further observed that subsequent retraction of
statements was not found acceptable by the authorities and therefore, the findings of the
authorities below do not give rise to any substantial question of law. (AY. 2006-07, 2007-08)
Punjab Sind Dairy v. Dy.CIT (2017) 146 DTR 21 (Bom.) (HC)
S. 145 : Method of accounting – Project completion method – Justified in debiting costs

such as advertisements, interest, brokerage, incurred on account of agreement with the
purchasers - Writing off 45% of land which he is required to leave open for roads, parks,
schools, colleges, hospitals, clubs and community sites under HDRUA, is allowable .
Dismissing the appeal of the revenue; the Court held that; project completion method is a known
and recognised method of accounting. As regards allowability of expenses debited for writing off
of land, the HC confirming the Tribunal’s order, held that the assessee is required to keep 45% of
land vacant for government or community sites and thus, has complied with the law laid down by
HDRUA. Further, in the previous as well as subsequent assessment years, such claim has been
accepted in the original assessment proceedings. (AY. 1994-95)
CIT v. DLF Universal Ltd. (2017) 291 CTR 532/145 DTR 296 (Delhi) (HC)
S.145 : Method of accounting-Valuation of closing stock—Revised return-Tribunal finding

that method of valuation by Assessing Officer was correct, question of fact.[S.139 (5),260A]
Dismissing the appeal of the assesse the Court held that; there was no error in the approach of the
Assessing Officer as well as the Tribunal as no material to support assessee's plea of wrong
valuation of finished goods needing rectification in return. Assessing Officer was based on sales
that were quoted by the assessee in his return and not hypothetical and that normally the stock
was to be valued either at the market price or at the cost price and that the assessee had adopted
an unrealistic method of valuation. (AY. 1998-1999)
Pooja Rice and General Mills v. CIT (2017) 391 ITR 140 (P&H) (HC)
S.145 : Method of accounting-Rejection of accounts-Decline in gross profit-Suppression of

sales – Deletion of addition was held to be justified.
Dismissing the appeal of the revenue, the Court held that; Assessing Officer making addition on
account of suppressed sales due to decline in gross profit. Tribunal finding that there was
justification for decline in gross profit and deletion of addition as in earlier years. No question of
law. (AY. 2006-2007)
CIT v. Parth laboratories P. Ltd. (2017) 391 ITR 70 (Guj.) (HC)
330
S. 145 : Method of accounting-Gross profit rate-Estimate of 32 per cent. to be adopted
considering average profit of six years shown by assessee.
The Court held that; Assessing Officer estimating gross profit rate at 35 per cent.. Commissioner
(Appeals) and Appellate Tribunal abruptly deducting profit without assigning reasons. Court held
estimate of 32 per cent. to be adopted considering average profit of six years shown by assessee.
S.145 : Method of accounting – Weighted average cost of valuing stock is an accepted

method of accounting, which is approved by accounting standard issued by the ICAI. AO is
not entitle to disregard the method if the assessee has consistently followed the said method.
Dismissing the appeal of the Revenue, the Court held that, in the case of manufacture of jewelry,
weighted average cost of valuing stock is an accepted method of accounting, which is approved
by accounting standard issued by the ICAI. AO is not entitle to disregard the method if the
assesse has consistently followed the said method. (AY. 2009-10) (ITA No. 297 of 2014 dt 6-03-
2017)
CIT v. Uday M.Ghare (Bom.) (HC),www.itatonlne.org.
S. 145 : Method of accounting-Application of net profit rate of 9 % on gross receipt was

held to be justified.
Dismissing the appeal of the assessee the Court held that, the estimation of net profit rate at 9%
by the Tribunal was not arbitrary or unreasonable warranting interference and it had adopted a
plausible view. (AY.2005-2006, 2007-2008, 2008-2009)
S.P. Construction v. ITO (2016) 68 taxmann.com 334/(2017) 390 ITR 314 (P&H) (HC)
S.145 : Method of accounting – Low gross profit - Books of account could not have been
rejected merely on increase or decrease in GP/NP. [ S. 145 (3) ]
Tribunal held that; mere low profit by itself is no ground for rejection of books of account of the
assessee. There was no reason to reject the books of account u/s. 145 (3) of the Act. (AY. 2011-
12)
DCIT v. British Health Products (I) Ltd. (2017) 165 ITD 1 /188 TTJ 377 /155 DTR 153
(TM) (Jaipur) (Trib.)
S. 145 : Method of accounting – Sales-tax refund had to be taken into consideration while
determining the total business receipts/turnover and the estimation of net profit rate had to
be determined accordingly.[ S. 41 (1) ]
Where books of accounts are rejected and net profit rate had been estimated by the AO, the
receipt on account of sales-tax refund had to be taken into consideration while determining the
total business receipts/turnover and the estimation of net profit rate had to be determined
accordingly. The Tribunal, further upheld the net profit rate of 8% estimated made by the CIT (A)
as being reasonable. (AY. 2008-09)
ACIT v. Mohd. Construction Co. (2017) 187 TTJ 200 /152 DTR 148 (Jaipur.) (Trib.)
331
S. 145 : Method of accounting – Upfront expenditure - Held to be allowed though followed
amortization method in its books .[ S. 35D, 37 (1) ]
Expenditure claimed in return of income on accrual basis could not be denied by the AO on the
ground that the assessee, an NBFC, followed amortization method of accounting in its books in
line with the Reserve Bank of India (RBI) guidelines and therefore, expenditure should be
claimed as per books of accounts. (AY. 2013-14)
Magma Fincorp Ltd. v. DCIT (2017) 165 ITD 375 /57 ITR 321 /(2018) 163 DTR 65 (Kol)
(Trib.)
S. 145 : Method of accounting – Real estate business-Rejection of books of accounts and

estimate of income at the rate of 8 per cent on the gross receipts was held to be justified .
Where the books of accounts, supporting evidences are not produced by the assessee to
substantiate the expenditure claim and method of accounting, then the claim by assessee in the
books of account could not be held valid . Accordingly estimate of income at the rate of 8 per
cent on the gross receipts was held to be justified . Rate of 8% of the gross receipts was held to be
justified . (AY. 2010-11, 2011-12)
Vishranthi Sabari v. ITO (2017) 57 ITR 236 (Chennai) (Trib.)
S. 145 : Method of accounting – Non maintenance of stock register and decline in GP rate,
addition is held to be not justified.
The Tribunal held that the assessee had produced quantitative inventory of stock based on
physical stock taking and explained the decline in GP rate and also offered plausible explanation
for other defects pointed out by the AO, its books of account could not be rejected on the ground
of non-maintenance of stock register or the reduction in GP rate. Addition made by the AO by
applying a higher GP rate is not sustainable. (AY. 2009-10)
Fine Switchgears v. ACIT (2017) 185 TTJ 488 /150 DTR 40 (Asr.) (Trib.)
S : 145 : Method of accounting-Mercantile system of accounting - loss on account of

realization of export proceeds, which was outstanding at end of relevant year, allowable as
deduction though realised in subsequent year. [S. 5, 28 (i)]
Dismissing the appeal of the revenue, the Tribunal held that; loss on account of realization of
export proceeds, which was outstanding at end of relevant year, allowable as deduction though
realised in subsequent year. (AY. 2009-10)
ACIT v. Allied Gems Corporation (2017) 55 ITR198 (Mum.) (Trib.)
S. 145 : Method of accounting-Foreign company which has established place of business in

India, as per the provisions of Companies Act, 1956, AS-7 is applicable .[S. 44AA
(2),44BBB (1), AS-7, Companies Act, 1956, 227 (4A)]
Dismissing the appeal of the revenue, the Tribunal held that; Foreign company which has
established place of business in India, as per the provisions of Companies Act, 1956, AS-7 is
applicable hence rejection of books of account was held to be not justified to a foreign company.
(AY. 2009-10)
ADIT v. Shandong Tiejun Electric Power Engineering Co. Ltd. (2017) 163 ITD 94 (Ahd.)
(Trib.)
S. 145 : Method of accounting – Mercantile system of accounting - loss incurred on account

of short realisation of export proceeds at end of relevant year was held to be allowable
though realised in subsequent year. [S. 28 (i)]
332
Dismissing the appeal of the revenue, the Tribunal held that when assesse followed mercantile
system of accounting loss incurred on account of short realisation was held to be allowable,
though realised in subsequent assessment year. (AY. 2009-10)
ACIT v. Allied Gems Corporation (Bombay) (2017) 163 ITD 56 (Mum.) (Trib.)
S. 145 : Rejection of books of account & estimate business income was held to be not
justified, when the current years result was better than earlier years .[S. 44AE. 44E, 145 (3)]
The Tribunal held that all the details were submitted before the AO and no defect has been
pointed out in the books of account maintained by the assessee.
Therefore, AO was not justified in invoking the provision of section 145 (3). Further the assessee
has declared better results in the relevant year as compared to the preceding two years. Hence,
impuged addition is deleted.
The assessee having maintained separate books of account for its transportation business the
provisions of section 44AE cannot be applied. (AY .2012-13)
Agarwal Transport Service v. Dy. CIT (2017) 188 TTJ 33 (UO) (Jd) (Trib.)
S. 145A : Method of accounting-Valuation - Irrespective of the method of accounting

followed, the unutilized Cenvat credit does not constitute income and cannot be directly
added to the closing stock. The assessee is entitled to follow the exclusive method and value
the closing stock by excluding the modvat credit. [S. 145]
Dismissing the appeal of the revenue, the Court held that; (i) It is not disputed that the assessee
was liable to excise duty. The assessee got credit in the excise duty already paid on the raw
materials purchased by it and utilized in the manufacturing of excisable goods. The assessee was
adopting the exclusive method i.e. valuing the raw materials on the purchase price minus (-) the
Modvat credit. The same would be permissible. The Apex Court in the case of CIT v. Indo
Nippon Chemicals Co. Ltd. (2003) 261 ITR 275 while affirming the order of High Court, has
observed that the income was not generated to the extent of Modvat credit or unconsumed raw
material.
(ii) Merely because the Modvat credit was irreversible credit offered to manufacturers upon
purchase of duty paid raw materials, that would not amount to income which was liable to be
taxed under the Act. It is also held that whichever method of accounting is adopted, the net result
would be the same.
(iii) Considering the above, the amount of the unutilized Cenvat credit could not have been
directly added to the closing stock. The Tribunal has not committed any error. (ITA No. 146 of
2015, dt. 07.07.2017) (AY. 2008-09)
CIT v. Dimond Dye Chem Ltd. (Bom.) (HC), www.itatonline.org
S. 145A : Method of accounting-Valuation of closing stock-Unpaid excise duty on goods in

stock was not includible in valuing closing stock. [S.145]
Dismissing the appeal of the revenue, the Court held that; unpaid excise duty on goods in stock
was not includible in valuing closing stock. (AY. 2003-2004 to 2008-2009)
CIT v. Rajasthan State Beverages Corporation Ltd. (2017) 393 ITR 421 (Raj.) (HC)
CIT v. Rajasthan State Gangangar Sugar Mills Ltd. (2017) 393 ITR 421 (Raj.) (HC)
Ltd. (2017) 392 ITR 2 (St.)
S. 145A : Method of accounting – Valuation – No addition can be made if the effect to the
revenue is neutral.
The assessee had shown the amount receivable on account of unutilized/closing balance on
account of MODVAT/CENVAT credit under “Loans and Advances” and the same was not
333
included in the value of closing stock. An addition was made by the AO u/s 145A. The CIT (A)
deleted the addition following the order of the ITAT for an earlier assessment year. The ITAT
dismissed the appeal of the Department as the AO had verified the revenue neutral statement filed
by the Assessee and as held by CIT vs. Indo Nippon Chemicals Ltd 261 ITR 275, modvat
receivable is not income. (ITA No. 2544/Ahd/2014 dt. 26.09.2017) (AY. 2011-12)
DCIT (OSD) v. Voltamp Transformers Ltd. (2017) 59 ITR 101 (SN) (Ahd) (Trib)
S. 145A : Method of accounting – Valuation - Change of method — Assessee accepting 5%

as basis for valuing slow moving stock — No records to doubt bona fides of valuation —
Addition on account of slow moving, non-moving and obsolete stores written off to be
deleted
On appeals by the assessee, held, that once the engineering expert examined all the heads of stock
and valued them to the best of his judgment and in the absence of any finding that 5 % was not
relatable to such valuation without an alternative valuation or that it was a flawed method of
valuation, the AO could not have rejected what was offered as the reduced value of the slow-
moving stock. There was nothing on record to doubt the bona fides of the valuation. In the event
of likelihood of the stocks realizing a higher amount than the value shown, the same would be
reflected in the subsequent year in the income or profit of the assessee. Hence the addition made
on account of slow moving, non-moving and obsolete stores written off was to be deleted.
National Fertilizers Ltd. v. DCIT (2017) 59 ITR 378 (Delhi) (Trib)
S. 145A : Method of accounting – Opening and closing stock are valued exclusive of taxes -
Enhancing the value of semi-finished goods and finished goods in the closing stock not
warranted
Tribunal held that when opening and closing stock are valued exclusive of taxes and no negative
impact to the Revenue, enhancing the value of semi-finished goods and finished goods in the
closing stock not warranted. (ITA No. 1602/Ahd/2013 dt. 13.02.2017) (A.Y. 2009-10)
ACIT v. Oracle Granito Ltd. (2017) 186 TTJ 661/159 DTR 98 (Ahd) (Trib.)
S. 147 : Reassessment-Audit objections-If the AO disagrees with the information/objection

of the audit party and is not personally satisfied that income has escaped assessment but
still reopens the assessment on the direction issued by the audit party, the reassessment
proceedings are without jurisdiction. [S.148]
Allowing the appeal of the assessee the Court held that;If the AO disagrees with the
information/objection of the audit party and is not personally satisfied that income has escaped
assessment but still reopens the assessment on the direction issued by the audit party, the
reassessment proceedings are without jurisdiction. (AY.1991-92)
Larsen & Toubro Ltd. v. State of Jharkhand (SC) www.itatonline.org
S.147 : Reassessment-After the expiry of four years - No failure to disclose material facts -
Notice was held to be in valid [ S. 80IC, 148 ]
334
Allowing the petition the Court held that; he assessee had made full disclosures hence reopening
the assessments beyond a period of four years, i.e., with respect to the years 2007-08 and 2008-
09, was barred by limitation. (AY. 2006 - 07)
Altruist Technologies P. Ltd. v. Dy. CIT (2017) 399 ITR 492 (HP)
S. 147 : Reassessment – After the expiry of four years - No failure to disclose correct facts -
Reassessment was held to be bad in law . [ S. 10B, 14A, Industries Development &
Regulation Act, 1951 S. 14 ]
Allowing the petition the Court held that; Assessing Officer allowed assessee's claim for
exemption of income under section 10B while completing assessment under section 143 (3), he
could not initiate reassessment proceedings subsequently on ground that aforesaid claim was
wrongly allowed due to failure of assessee to receive requisite certificate from Board appointed
by Central Government under section 14 of Industries Development & Regulation Act, 1951. As
there was no failure to disclose correct facts . reassessment after the expiry of four years was
held to be bad in law . (AY. 2010-11)
E-Infochips Ltd. vs. DCIT (2017) 159 DTR 134/82 Taxmann.com 133 (HC)
S.147 : Reassessment-After the expiry of four years - Failure to deduct tax at source on
lease rent – Reassessment was held to be bad in law .[ S. 148 ]
Allowing the petition the Court held that, reopening after the expiry of four years for failure to
deduct tax at source on lease rent was held to be bad in law, when there is no finding or reason
that the assesse has failed to disclosure fully and truly all the relevant material facts necessary
for proper assessment . (AY. 2008 - 09)
Noida Power Company Ltd. v. CIT (2017) 154 DTR 10 (All.) (HC)
S.147 : Reassessment-After the expiry of four years - No failure to disclose material facts –
Reassessment was held to be not valid [ S.148 ]
Allowing the petition the Court held that; documents on record and the scrutiny previously
undertaken by the Assessing Officer it was clear that there was no failure by the assessee to
disclose material facts necessary for assessment. The notice of reassessment was not valid (AY.
2004 - 05)
Anupam Rasayan India Ltd. v. ITO (2017) 397 ITR 406 (Guj) (HC)
S.147 : Reassessment - After the expiry of four years - Deduction at source – No tangible
material was available with the revenue – Reassessment was held to be bad in law. [ S. 40
(a) (i), 195 ]
Allowing the petition the Court held that; The Assessee had raised objection that payment of
tanker hire charges was made to resident of Singapore and UK only and not to resident of France.
Objection was not considered by Assessing Officer and also no tangible material was available
with revenue to substantiate its ground. Accordingly the Court held that the assessment could
not be reopened beyond period of four years . (AY. 2009-10)
Transperk Industry Ltd. v. Dy. CIT (2017) 248 Taxman 331 (Guj.) (HC)
S.147 : Reassessment-After the expiry of four years - Reassessment was held to be bad in
law . [ S. 14A, 148 ]
335
Allowing the petition the Court held that; requirement for reopening of assessment was satisfied
hence reassessment was held to be bad in law . (AY. 2003 - 04)
HCL Technologies Ltd v. Dy. CIT (2017) 397 ITR 469 /158 DTR 110 (Delhi) (HC)
S.147 : Reassessment-After the expiry of four years - Absence of new material –

Reassessment was held to be not valid - Even on principle of rule of consistency,
reassessment was held to be not valid [S. 80IA ,148 ]
Allowing the appeal the Court held that; The mandatory jurisdictional requirement under the first
proviso to section 147 of theIncome-tax Act, 1961 will not be fulfilled if the reasons do not by
themselves indicate that there was a failure on the part of the assessee to make full and true
disclosure of all material facts. The reasons recorded have to explain what material has not been
disclosed by the assessee which the assessee ought to have disclosed and should be apparent from
a reading of the reasons themselves. The reasons have to go beyond merely repeating the
language of the provisions regarding the failure of the assessee to make a full and true disclosure
of material facts and should indicate in what manner there is such a failure. Court also held that;
even on principle of rule of consistency, reassessment was held to be not valid. (AY. 2003 - 04)
Oracle India P. Ltd. v. ACIT (2017) 397 ITR 480 /155 DTR 221 (Delhi) (HC)
S.147 : Reassessment-After the expiry of four years - No evidence of non-disclosure of

material facts necessary for reassessment hence the notice was held to be not valid [ S. 14A,
148 ]
Allowing the petition the Court held that; The questionnaire under section 143 (3) specifically
sought details of several incomes, which were submitted by the assessee. Even the proceedings
under section 263 of the Act did not raise the issue of disallowance of expenditure incurred for
earning exempt income under section 14A . In view of the fact that there was a full disclosure by
the assessee of all the material facts relating to the exempt income it could not be said that the
condition for reopening of the assessment was satisfied on this count. In fact, even the reasons
accompanying the notice did not say that there was any failure by the assessee to disclose fully
and truly all the material facts. The notice of reassessment was not valid. (AY. 2008 - 09)
Unitech Ltd v. Dy. CIT (2017) 397 ITR 547 /158 DTR 121 (Delhi) (HC)
S.147 : Reassessment-After the expiry of four years - No fresh material, hence the re
assessment was held to be not valid [ S. 10B,148 ]
Allowing the petition the Court held that; there was no fresh material which formed the reasons
to believe that income had escaped assessment under section 147 for reopening the assessment,
except the order passed by the Assessing Officer for the subsequent assessment year 2008-09. A
detailed analysis of the assessee’s accounts, financial statements and computation of income was
undertaken as part of the original assessment proceedings, during which the assessee had
discussed the existence of its Pune units and the exports undertaken therefrom. It had made a full
disclosure of the facts in respect of its Delhi unit and thus all the facts were within the knowledge
of the Assessing Officer since its inception. The notice issued under section 154questioning the
deduction claimed under section 10B on the same basis was not pursued further after the assessee
filed its submissions in response thereto. While the proceedings under section 143 (2) had
culminated in an order under section 143 (3), the issuance of notice under section 148 after a
period of four years required that there had to be failure on the part of the assessee to have
disclosed fully and truly all the necessary facts. (AY. 2007 - 08)
Swarovski India P. Ltd. v. DCIT (2017) 397 ITR 558 /158 DTR 136 (Delhi) (HC)
S.147 : Reassessment-After the expiry of four years - reassessment based on the assessment
order of subsidiary company – In case of subsidiary company, DRP set aside the assessment
336
order – Held, very basis of reopening of assessment has eroded – Held, reassessment bad in
law - DTAA - India - USA. [S. 9, 40 (a) (i), Art.12]
Assessee, a US based company, licensed its software products to its Indian subsidiary and
received royalty and interest on delayed payment of royalty. A notice u/s 147 was issued to
assessee on ground that assessee had failed to disclose/include to offer for tax an amount either
separately or as excess royalty income which had been paid and booked as an expense by
subsidiary to assessee on account of 'purchase of master copy' in its return of income. High Court
held that DRP had deleted said addition u/s 40 (a) (i) in hands of the subsidiary. Accordingly, it
was held that the very basis of reopening of assessment having been eroded, reassessment notice
and consequent order was to be set aside. (AY. 2007-08)
Oracle Systems Corporation v. Dy. DIT (2017) 248 Taxman 461 (Delhi) (HC)
S.147 : Reassessment-After the expiry of four years-Unexplained investments - There was

no failure by assessee to disclose material facts fully and truly — Notice for reassessment is
held to be in valid. [S. 69, 132, 148]
Allowing the petition the Court held that; there was nothing to show that there was any non-
disclosure of the full and true facts that were necessary for the assessment by the assessee, so as
to justify the invocation of the first proviso to section 147, while issuing notice under
section 148 to the assessee. (AY. 2008 - 09)
Parthas Info Park P. Ltd. v. ACIT (2017) 396 ITR 682/83 taxmann.com 210 /298 CTR
495/157 DTR 137 (Ker.) (HC)
S.147 : Reassessment-After the expiry of four years-There was no failure – Change of

opinion – Reassessment was held to be bad in law.[S. 148, 195]
Dismissing the appeal of the revenue the Court held that; Once the assessee had discharged the
burden of not only producing the account books and other documents, but also the specific
material relevant to the assessment, it was for the assessing authority to draw proper inferences of
fact and law and the assessee could not further be called upon to do so. The assessee had
discharged its burden of disclosing fully and truly all the material facts before the Assessing
Officer during the original assessments. There was no basis for the successor Assessing Officer to
conclude that “no opinion with regard to taxation” of the payments received for the services
rendered had been formed by the predecessor Assessing Officer. The assumption of jurisdiction
under section 148 was not valid. (AY. 1998 - 99 1999-2000 2001-02)
DIT v. Rolls Royce Industrial Power India Ltd. (2017) 394 ITR 547 (Delhi) (HC)
Editorial : Order in Rolls Royce Industrial Power India Ltd. v. ACIT (2010) 6 ITR 722 (Trib.)
(Delhi) affirmed.
S.147 : Reassessment-After the expiry of four years - Information from investigation

wing—No allegation of failure to disclose material facts necessary for assessment, notice
was held to be not valid [ S. 148]
Allowing the petition the Court held that ;merely on the basis of information from investigation
wing, reassessment was held to be not valid as there is no allegation of failure to disclose
material facts . (AY. 2009 10)
Harikishan Sunderlal Virmani v. DCIT (2017) 394 ITR 146 (Guj.) (HC)
S.147 : Reassessment-After the expiry of four years – No failure to disclose material facts –
Reassessment was held to be in valid. [S. 148]
That the assessee is a Cooperative Bank registered under the Gujarat Cooperative Societies Act.
After a detailed enquiries the AO passed an assessment order under section 143 (3).Thereafter
beyond the period of four years, the Assessing Officer has issued the impugned notice under
Section 148. The reasons stated that on perusal of the records, it was noticed that the assessee
337
bank has debited an amount to the P&L A/c on account of provision for overdue interest and this
being merely a provision should be disallowed.
In writ proceedings, the High Court observed that from the reasons recorded, it appeared that
there was no allegation whatsoever that there was any failure on the part of the assessee in
disclosing true and correct facts necessary for assessment. Following the decision of CIT v.
Kelvinator of India Ltd. [2010] 320 ITR 561the High Court quashed the notice under 148.
(AY.2009-10)
Sabarkantha District Central Co-operative Bank Ltd. v. DCIT (2017) 245 Taxman 96 (Guj.)
(HC)
S. 147 : Reassessment – After the expiry of four years – Exemption was allowed after
scrutinising the material – Reassessment was held to be bad in law.[S. 54B, 148]
Allowing the petition the Court held that; reopening was initiated merely on change of opinion
beyond a period of four years without there being any failure on part of assessee to disclose fully
and truly all material facts as required for assessment was unjustified. (AY.2009-10)
Parimal Sureshbhai Patel v. DCIT (2017) 246 Taxman 336 (Guj.) (HC)
S. 147 : Reassessment-After the expiry of four years - Depreciation - There was no failure
to disclose material facts, reassessment was held to be invalid. [S. 32, 43 (1), 148]
Allowing the petition the Court held that;there was no fresh or tangible material warranting
reopening of the assessments. The plea that the Assessing Officer inadvertently allowed the claim
for depreciation for the assessment years 2008-09 to 2010-11 was, in the circumstances,
unacceptable. The notices under section 148and consequential orders were set aside. (AY. 288-
09, 2009-10,, 2010-2011)
Avtech Ltd. v. Dy.CIT (2017) 395 ITR 434/82 taxman 389 /153 DTR 353 (Delhi) (HC)
S.147 : Reassessment – After expiry of four years – Notice on the basis of mere suspicion
was held to be bad in law . [ S. 148 ]
Allowing the petition the Court held that; an unsubstantiated complaint could not be the sole
basis for forming a belief that income of an assessee had escaped assessment. The material on the
basis of which reassessment proceedings could have been initiated must be credible material
which would have led to such belief. Since the Assessing Officer had failed to consider the
objections filed by the assessee, the order passed by him rejecting the objections and the notice
issued under section148 could not be sustained. (AY. 2008 - 09)
Rajiv Agarwal v. ACIT (2017) 395 ITR 255 (Delhi) (HC)
Vijay Laxmi Agarwal v .ACIT (2017) 395 ITR 255 (Delhi) (HC)
S. 147 : Reassessment-After the expiry of four years - Approval was granted on the basis of
quantum of income mentioned in proceedings - Reassessment was without application of
mind hence bad in law. [S. 148, 151 (1) ]
Allowing the petition, the Court held that; the initiation of the case for reopening of the
assessment was erroneous and without application of mind especially since the Assessing Officer
had not examined the return filed, which would have revealed that the assessee had filed regular
returns, had sufficient opening balance in his account and the withdrawals therefrom
substantiated the donation made. Therefore, the reopening of the assessment was unsustainable in
law and the notice issued under section 147 of the Act was to be quashed. (AY. 2010-11)
Shamshad Khan v. ACIT (2017) 395 ITR 265 /248 Taxman 152 (Delhi) (HC)
338
S. 147 : Reassessment – After the expiry of four years-Share application money-Notice was
quashed and guidelines are laid down and the Revenue is directed to adhere to them. [S. 68,
148]
Allowing the petition the Court held that the assesess has disclosed all relevant facts in the
original assessment proceedings. Merely relying on statement that the subscribers are paper
companies, without making any independent enquires, the reassessment notice was held to be
bad in law. Court also observed that;Before parting with the case, the Court would like to
observe that on a routine basis, a large number of writ petitions are filed challenging the
reopening of assessments by the Revenue under Sections 147 and 148 of the Act and despite
numerous judgments on this issue, the same errors are repeated by the concerned Revenue
authorities. In this background, the Court would like the Revenue to adhere to the following
guidelines in matters of reopening of assessments :
(i) while communicating the reasons for reopening the assessment, the copy of the standard
form used by the AO for obtaining the approval of the Superior Officer should itself be provided
to the Assessee. This would contain the comment or endorsement of the Superior Officer with his
name, designation and date. In other words, merely stating the reasons in a letter addressed by the
AO to the Assessee is to be avoided;
(ii) the reasons to believe ought to spell out all the reasons and grounds available with the
AO for re-opening the assessment – especially in those cases where the first proviso to Section
147 is attracted. The reasons to believe ought to also paraphrase any investigation report which
may form the basis of the reasons and any enquiry conducted by the AO on the same and if so,
the conclusions thereof;
(iii) where the reasons make a reference to another document, whether as a letter or report,
such document and/or relevant portions of such report should be enclosed along with the reasons;
(iv) the exercise of considering the Assessee’s objections to the reopening of assessment is
not a mechanical ritual. It is a quasi judicial function. The order disposing of the objections
should deal with each objection and give proper reasons for the conclusion. No attempt should be
made to add to the reasons for reopening of the assessment beyond what has already been
disclosed. (AY. 2008 - 09)
Sabh Infrastructure Ltd. v. ACIT (2017) 398 ITR 198 (Delhi) (HC)
S. 147 : Reassessment-After the expiry of four years - Disallow part of expenditure-No
allegation of failure to disclose material facts necessary for assessment, notice was held to be
not valid. [S. 37 (1),148]
Allowing the petition,the Court held that; there was no allegation that there was any failure on
the part of the assessee in disclosing the true and correct facts due to which, there was escapement
of income from the assessment. The notice for reassessment was not valid. (AY. 2009-2010)
Micro Inks P. Ltd. v. ACIT (2017) 393 ITR 366/246 Taxman 143 (Guj.) (HC)
S. 147 : Reassessment-After the expiry of four years-Nothing to show failure by assessee to

disclose true and correct facts, notice was held to be invalid. [ S.37 (1), 40 (a) (ia),148,
194H]
Allowing the petition, the Court held that; where during original assessment proceedings the
assesse has filed all necessary details, the reopening of assessment beyond the period of four
years was held to be in valid. (AY. 2009-2010)
Navkar Share and Stock Brokers P. Ltd v. ACIT (2017) 393 ITR 362/77 taxmann.com 152
(Guj.) (HC)
S. 147 : Reassessment-After the expiry of four years-Cash credits Notice on grounds that
loans were not genuine and cost of construction was inflated was held to be invalid as there
was no failure to disclose material facts necessary for assessment. [S. 68, 69,148]
339
Allowing the petition the Court held that; there was no failure to disclose material facts necessary
for assessment therefore notice issued after expiry of four years on the alleged ground that loans
were not genuine and cost of construction was inflated was held to be invalid. (AY.2009-2010)
Rajivraj Ranbirsingh Choudhary (Dr.) v. ACIT (2017) 393 ITR 650 /79 taxmann.152 /149
DTR 153 (Guj.) (HC)
S.147 : Reassessment - After the expiry of four years - Brokers client code modification -
Failure by assessee to substantiate loss by producing evidence-Assessee participating in
reassessment proceedings without pressing its earlier objections raised, reassessment was
held to be valid. [S.148]
Dismissing the petition, that the Assessing Officer had received credible information regarding
income escaping assessment for the relevant assessment year. He had applied his mind to it and
had informed the assessee of his intention to invoke section 148 of the Income-tax Act, 1961 and
had given his reasons for doing so. The assessee had objected to the reasons furnished by the
Assessing Officer for invoking section 148. The assessee had neither insisted upon disposal of its
objections filed prior to the reassessment nor had pressed its objections but had participated in the
reassessment proceedings. The assessee had also furnished the documents required by the
Assessing Officer in the proceedings under section 148 after raising the objections. The conduct
of the assessee allowed one to infer that it had waived its rights to have the objections disposed
of, or alternatively, the assessee had withdrawn its objections to the invocation of section 148.
From the reasons supplied by the Assessing Officer it could be inferred that he had applied his
mind to the issue. The assessee had not demonstrated any material to substantiate that the loss
from brokers by client code modification being booked in its accounts was placed before the
Assessing Officer for consideration and that, the Assessing Officer had taken a view after
production of the material facts by the assessee.
Rampuria Industries and Investments Ltd. v. Dy. CIT (2017) 391 ITR 18/149 DTR 148 /299
CTR 532 (Cal.) (HC)
S.147 : Reassessment-After the expiry of four years-On money-No new tangible material
available showing income escaped assessment-Reassessment notice not valid [S.69A, 143 (3),
148].
Allowing the petition the Court held that; the reopening was not permissible, more particularly in
the absence of any other tangible material available with the Assessing Officer that in the year
2005-06, the assessee had received any on-money and when the notice was issued beyond the
period of four years and more particularly when the original assessment was done under section
143 (3) of the Act. (AY. 2005-2006)
Sopan Infrastructure P. Ltd v. ITO (2017) 391 ITR 107/78 taxmann.com 170 (Guj.) (HC)
S. 147 : Reassessment – After expiry of four years - No material to show that claim was
wrongly allowed in original assessment - Reassessment was held to be not valid. [S.
80IB,148]
Court held that, the notice of reassessment had been issued after four years. The reason recorded
was that the profits shown by the assessee in comparison to other builders were very high and the
abnormal rate of profit declared by the assessee appeared to be influenced by 100% deduction
available under section 80-IB. No reasons were assigned by the respondent-authority to claim that
the earlier Assessing Officer had wrongly allowed the claim of the assessee. The notice was not
valid. (AY. 2003-2004)
Jalaram Developers v. ITO (2017) 390 ITR 83 (Guj.) (HC)
340
S. 147 : Reassessment – After expiry of four years - Audit report-There was failure on the
part of assessee to disclose fully and truly material facts – Reassessment was held to be valid
[ S. 10AA,148, 149 ]
Dismissing the petition the Court held that; there was failure on the part of assessee to disclose
fully and truly material facts as reagrds valuation of slow moving inventories .Reassessment was
held to be valid . (AY.2009 - 10)
Cummins Technologies India (P) Ltd v.ACIT (2017) 297 CTR 523/151 DTR 209/88
taxmann.com 526 (MP) (HC)
S. 147 : Reassessment – With in four years - Change of opinion - Order passed ignoring
the order of Dispute Resolution panel was held to be not valid – Reassessment was held to
be bad in law - DTAA - India – Mauritius [ S. 144C, 148 Art . 7 (1) ]
Allowing the petition the Court held that; Order passed ignoring the order of Dispute Resolution
panel was held to be not valid, therefore reassessment was held to be bad in law . (AY. 2008 -
09, 2010-2011)
ESS Advertising (Mauritius) S.N.C. ET Compagnie v. Asst. CIT (IT) (2017) 399 ITR
362/160 DTR 1 /299 CTR 209 /251 Taxman 369 /299 CTR 209 (Delhi) (HC)
ESS Distribution (Mauritius) S.N.C. ET Compagnie v. Asst. CIT (IT) (2017) 399 ITR 362
/160 DTR 1 /299 CTR 209 /251 Taxman 369 /299 CTR 209 (Delhi) (HC)
S. 147 : Reassessment – With in four years - AO has not examined the question of enhanced
compensation and an element of interest – Reassessment was held to be valid [ S.10 (37) 56
(2), 148 ]
Dismissing the petition the court held that; the AO had not examined the question whether the
enhanced compensation had an element of interest or not and accordingly the reassessment was
upheld. On the question of wrong figures in the notice, the Court held that even if the figures
were incorrect, still the assessee was entitled to part of the interest. On the other arguments on
merits, the Court refused to interfere and directed the AO to pass a detailed order on merits. (AY.
2011-12)
Ram Kumar v. ITO (2017) 251 Taxman 488 (Delhi) (HC)
S. 147 : Reassessment - Sanction - Sanction accorded despite mention of non-existent section

in the notice is prima facie evidence of non application of mind on the part of the
sanctioning authority. S. 292B cannot cure such defect, petition was admitted. [ S. 148,151,
292B ]
Admitting the petition against the reassessment notice the Court held that ;Sanction for issuing a
reopening notice cannot be mechanical but has to be on due application of mind. Sanction
341
accorded despite mention of non-existent section in the notice is prima facie evidence of non
application of mind on the part of the sanctioning authority. S. 292B cannot cure such defect .
Petition was admitted and ad .interim relief was granted . (WP No.3063 of 2017, dt. 22.12.2017)
(AY. 2014-15)
Kalpana shantilal Haria v. ACIT (Bom) (HC); www.itatonline.org
S. 147 : Reassessment – Notice served after limitation period - Notice was issued within
limitation period but all attempts to serve notice on assessee failed, and, notice was finally
served after limitation period, reassessment made to tax sale proceeds of agricultural land
was justified [ S.45, 148,149, 153, 292B, 292BB ]
Reopening notice was issued against assessee within limitation period, however, all attempts
made by revenue to serve notice on assessee failed and notice was finally served after limitation
period, reassessment order was justified . (AY.2008 - 09)
Rajee Rajkumar (Smt) v. ACIT (2017) 247 Taxman 353 (Ker) (HC)
S. 147 : Reassessment - Capital gains - Conversion of stock in trade - Entire issue of
conversion of stock-in-trade into capital asset was gone into and disposed of during regular
assessment, reopening of assessment on same issue was not permissible, interim stay was
granted [ S.45, 47 (iv) ]
Court held that, entire issue of conversion of stock-in-trade into capital asset was gone into and
disposed of during regular assessment, reopening of assessment on same issue was not
permissible accordingly interim stay was granted in terms of prayer (d). (AY.2009 - 10)
Shivalik Ventures (P) Ltd v. DCIT (2017) 247 Taxman 226 (Bom) (HC)
S. 147 : Reassessment – Order of Tribunal quashing the reassessment proceedings merely

on the basis of earlier notices without comparison with the relevant years was held to be not
valid – Matter was set aside [ S. 148 ]
Allowing the appeal of the revenue the Court held that, Order of Tribunal quashing the
reassessment proceedings merely on the basis of earlier notices without comparison with the
relevant years was held to be not valid .Matter was set aside (AY. 2001-02, 2002-03)
PCIT v. Sun Pharmaceuticals Industries Ltd. (2017) 251 Taxman 76 /153 DTR 39 (Guj)
(HC)
S. 147 : Reassessment – Absence of new or tangible material – Reassessment was held to be

not valid – Notice issued us143 (2) and assessment was not completed, cannot be the basis
for reassessment .[ S. 80IB, 143 (2), 148, 263 ]
Allowing the petition the Court held that ;that there was no “tangible material” which compelled
the Assessing Officer to issue the notices under section 148 for reassessment under section 147 .
The Department was indulging in fishing, by way of scrutinising again, something that had been
specifically gone into, i.e., the character of income and the extent of deductions claimed. If some
aspect, vital or important, was overlooked during the assessment, per se, the remedy was not
reassessment, but rather, the corrective jurisdiction under section 263. That such jurisdiction
could not have been exercised for some reason, did not entitle the Department to resort to
342
reassessment, which was an impermissible review in the case of the assessee. Considering that the
reassessment was premised on reasons which had been explicitly gone into, as evident from the
queries to the assessee during the original assessments, the notices were unsustainable (AY.
2001-02 to 2005 - 06)
Karamchand Appliances P. Ltd v. Dy. CIT (2017) 399 ITR 323 (Delhi) (HC)
S. 147 : Reassessment - Accommodation entries - Share application - Reassessment on the

basis of information received from PDIT (Inv) was held to be justified [ S. 69B, 148 ]
Dismissing the petition the Court held that; the reassessment initiated is valid as there was a
tangible material against the assessee to have a prima-facie opinion that the assessee is a
beneficiary in respect of the bogus investments/share application money operated by one Mr.PKJ
as a result of the search conducted in the case of Mr.PKJ and the said materials and information
were forwarded to the Assessing Officer of the assessee by the Principal Director (Investigation)
based on which reasons were recorded by the AO. (AY. 2011-12, 2012-13)
Aaspas Multimedia Ltd v DCIT (2017) 249 Taxman 568/ 154 DTR 161 (Guj) (HC)
S. 147 : Reassessment - No failure on the part of assesse - Reassessment was held to be not
valid [ S.80IC, 148 ]
It was held by the High Court that the reassessment initiated is not valid for the reason that there
was no failure on the part of the assessee to fully and truly disclose all material facts necessary for
the assessment when the original assessment took place insofar as the claim under section 80IC is
concerned and more so for the reason that the assessing officer considered the claim in the
original assessment order. (AY. 2009-10)
Akum Drugs and Pharmaceuticals Ltd v ITO (2017) 154 DTR 17 (Delhi) (HC)
S. 147 : Reassessment – Deemed dividend – Advance of the amount was financial

transaction and not loan hence reassessment was held to be not valid . [ S. 2 (22) (e),143
(1), 148 ]
Allowing the petition the Court held that; Advance of the amount was financial transaction and
not loan hence reassessment was held to be not valid . (AY. 2010-11)
Ghanshyambhai Ambalal Thakkar v. Dy. CIT (2017) 250 Taxman 248 (Guj.) (HC)
S. 147 : Reassessemnt - Change of opinion-Business income – Remuneration from firm was

claimed as exempt though disallowed in the assessment of firm - Reassessment was held to
be not valid [ S. 28 (v), 40 (b), 148 ]
Allowing the petition the Court held that; it found that Assessing Officer had raised queries
about said issue in original assessment proceedings and that claim was made in return with full
disclosures in statement of income and accounts maintained by assessee and claim was supported
by an addendum in partnership deed, therefore reassessment was held to be not valid. (AY.
2010-11)
Cadila Healthcare Ltd. v. ACIT (2017) 250 Taxman 374 (Guj.) (HC)
S. 147 : Reassessment - Survey-Voluntary disclosure in the statement - Allotment of shares

– Reassessment was held to be justified [ S. 69B, 131, 133A, 143 (1) ]
Allowing the appeal of the revenue, the Court held that; reassessment on the basis of voluntary
disclosure of statement in the course of survey towards allotment of shares was held to be
justified . The proviso to section 147 would apply only in a case where previously assessment
has been framed after scrutiny. In a case where the return is accepted under section 143 (1) the
additional requirement that income chargeable to tax had escaped assessment on account of the
343
failure on part of the assessee to disclose truly and fully all material facts, simply would not
apply. Matter was seta side to decide the issue on merits . (AY. 2009-10)
PCIT v. Laxmiraj Distributors (P.) Ltd. (2017) 250 Taxman 455/(2018) 162 DTR 132
(Guj.) (HC)
S. 147 : Reassesment - Cash credits – Share capital - Reliance on statements of third parties
who have not been subjected to cross examination is not permissible. Voluminous
documents produced by the assessee cannot be discarded merely on the basis of statements
of individuals contrary to such public documents - Reassessement was held to be not valid [
S. 68. 148 ]
Dismissing the appeal of the revenue the Court held that ;the 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. Reliance on statements of third parties who have not
been subjected to cross examination is not permissible. Voluminous documents produced by the
assessee cannot be discarded merely on the basis of statements of individuals contrary to such
public documents. Reassessment was held to be not valid (ITA No. 66 of 2016, dt.10.04.2017)
(AY. 2008 - 09)
PCIT v. Paradise Inland Shipping Pvt. Ltd. (2018) 400 ITR 439 (Bom) (HC)
S.147 : Reassessemnt - Accommodation entries - Unexplained expenditure – Reassessment

was held to be justified [ S. 69C, 148 ]
Dismissing the petition the Court held that; Substantial amounts were received by that concern
from various sources in bank accounts which were withdrawan in cash shortly after receipt.
Summons issued by department were not responded ,even entity was not found existing at given
address. Proprietor of concern could not be served since he was not found at address supplied,
therefore, Assessing Officer was justified in issuing reassessment notice. (AY. 2009-10)
Gujarat Ambuja Exports Ltd. v. Dy. CIT (2017) 250 Taxman 482 (Guj.) (HC)
S.147 : Reassessment - Change of opinion - Transferring of micro-finance business of trust

to another private company would not automatically imply that activities of trust were not
in nature of charitable purpose – Reassessment was held to be not valid [ S. 2 (15), 148 ]
Allowing the petition the Court held that; Transferring of micro-finance business of trust to
another private company would not automatically imply that activities of trust were not in nature
of charitable purpose. Since during original assessment, Assessing Officer did not hold activities
of trust as non-charitable, any attempt to re-examine said issue would be considered as change of
opinion hence reassessment was held to be not valid . (AY. 2009-10)
Friends of WWB, India v. DY. DIT (E) (2017) 249 Taxman 458 (Guj.) (HC)
S.147 : Reassessment - Depreciation – When block assessment proceedings are pending,

reassessment was held to be bad in law [ S. 32,148, 158BC ]
Allowing the petition the Court held that; When block assessment proceedings are pending,
reassessment was held to be bad in law . (AY. 1994-95 to 1996-97)
South Asian Enterprises Ltd. v. CIT (2017) 249 Taxman 143 (Delhi) (HC)
S. 147 : Reassessment-Capital gains - Reference to valuation officer – Value of land as on 1-

04-1981 – One of the Co – owner addition was confirmed by CIT (A), hence reassessment
proceedings was held to be valid [ S. 55A ]
344
Dismissing the petition the Court held that; One of the Co – owner addition was confirmed by
CIT (A), hence reassessment proceedings was held to be valid. Assessee may avail statutory
remedy available by way of appeal before the CIT (A). (AY. 2012-13)
Maheshchandra Chimanlal Raval (HUF) v. ITO (2017) 249 Taxman 160 (Guj.) (HC)
S.147 : Reassessemnt - Survey - Unexplained investments – Purchase of shares from sub-

broker from unaccounted cash and backdated contract note – Reassessment proceedings
was held to be justified [ S. 69,133A, 148 ]
Dismissing the petition of the assesse the Court held that, in the course of survey on sub-broker it
was noticed that the assesse purchased the shares from un accounted income and obtained back
dated contract note hence reassessment proceedings was held to be valid . (AY. 2008-09)
Nitesh Chajjed v. ITO (2017) 249 Taxman 153 (Mad.) (HC)
S.147 : Reassessment-Share capital - Information from PDIT (Inv.) that the assesse was one
of the beneficiary of accommodation entries by way of bogus share application from
various bogus companies – Reassessment proceedings was held to be valid [ S.69B, 132, 143
(1),148 ]
Dismissing the petition the Court held that; Reassessment notice on the Information from PDIT
(Inv.) that the assesse was one of the beneficiary of accommodation entries by way of bogus
share application from various bogus companies. Reassessment proceedings was held to be valid .
(AY. 2011-12 & 2012-13)
Aaspas Multimedia Ltd. v. Dy. CIT (2017) 249 Taxman 568 (Guj.) (HC)
S.147 : Reassessement-Solid Waste Management-Since Assessing Officer did not point out
deficiencies in treatment of waste that assessee was imparting, reassessment was unjustified
[ S.80IA (4), 148 ]
Allowing the petition the Court held that; since Assessing Officer did not point out deficiencies
in treatment of waste that assessee was imparting, his reference to assessee not fulfilling
conditions for claim of deduction was by itself vague and general reference and lacked clarity
and, thus, reassessment was unjustified . (AY. 2006-07)
Gujarat Enviro Protection & Infrastructure Ltd. v. Dy. CIT (2017) 249 Taxman 590 (Guj.)
(HC)
S. 147 : Reassessment — Non furnishing the copy of recorded reasons is not mere
procedural lapse, reassessment was held to be bad in law . There was no estoppel against an
assessee, on account of participating in the proceedings, as long as it had raised an objection
in writing regarding the failure by the Assessing Officer to follow the prescribed procedure.
[ s.148, 292bb (1)]
Dismissing the appeals of the revenue the Court held that; Non furnishing the copy of recorded
reasons is not mere procedural lapse, reassessment was held to be bad in law . According to the
proviso to section 292BB (1)there was no estoppel against an assessee, on account of
participating in the proceedings, as long as it had raised an objection in writing regarding the
failure by the Assessing Officer to follow the prescribed procedure. No question of law arose.
(AY.1999-2000 to 2004 05)
PCIT v. Jagat Talkies Distributors (2017) 398 ITR 13 (Delhi) (HC)
S.147 : Reassessemnt - Order passed without issue of notice u/s 143 (2) is held to be in valid
[ S.143 (2), 148 ]
345
Dismissing the appeal of the revenue the Court held that, order passed without issue of notice u/s
143 (2) is held to be in valid. (AY. 1999-2000,2000-01)
PCIT v. Paramount Biotech Industries Ltd. (2017) 398 ITT 701 (Delhi) (HC)
S. 147 : Reassessment — On the basis of documents seized in the course of search and
survey operation of third person, issue of notice u/s 148 was held to be valid .[ S. 132, 148 ]
Against the order of single judge order for quashing the notice issued u/s 148 the Revenue filed
an appeal before the division Bench . Allowing the appeal the court held that ;On the basis of
documents seized in the course of search and survey operation of third person, issue of notice u/s
148 was held to be valid . The documents referred to in the notice were also sufficient to show the
direct nexus between the information in his possession and the conclusion drawn by the
Assessing Officer. Though the Assessing Officer did not have fresh material for the purpose of
formation to believe that the income of any particular assessment year had escaped assessment,
with all bona fides he noticed that certain documents escaped consideration and that resulted in
escape of income chargeable to tax. The Assessing Officer had adequate reason to believe to issue
notice under section 148.
Dy.CIT v. Sambhav Energy Ltd. (2017) 398 ITR 626/152 DTR 49 (Raj) (HC)
S. 147 : Reassessment – With in four years - Change of opinion-Capital gains exemption

was allowed after scrutiny assessment – Reassessment to deny the exemption was held to be
not justified - [ S.40 (a) (ia) 45, 148 ]
Allowing the petition the Court held that; Capital gains exemption was allowed after scrutiny
assessment, hence reassessment to deny the exemption was held to be not justified . Court also
held that the assessee did not claim any interest under section 40 (a) (ia) of the Income-tax Act,
1961, and therefore, the Assessing Officer was not justified in reopening the assessment. (AY.
2011-12)
Sandip Bhikubhai Padsal v. ITO (2017) 397 ITR 391 (Guj) (HC)
S. 147 : Reassessment - When the assesse is made aware the issue to be answered and
sufficient opportunity of hearing was afforded non issue of notice u/s 143 (2) is immaterial,
hence the assessment is valid .[ S. 115JB, 143 (2), 148 ]
Dismissing the appeal of the assesse, the Court held that; When the assesse is made aware the
issue to be answered and sufficient opportunity of hearing was afforded non issue of notice u/s
143 (2) is immaterial, hence the assessment is valid . (AY. 2005 - 06)
Padinjarekara Agencies P. Ltd v. CIT (2017) 398 ITR 381 /159 DTR 348/(2018) 300 CTR
554 (Ker) (HC)
S. 147 : Reassessment —Jurisdictional requirement for reopening of assessment was not

fulfilled hence the notice was quashed . [ S.148 ]
Allowing the petition the Court held that; Tax evasion petition pertaining to another assessment
year cannot be looked into after recording reasons for reopening of assessment. Jurisdictional
requirement for reopening of assessment was not fulfilled hence the notice was quashed ..
(AY.2009 - 10)
Sky View Consultants P. Ltd. v. ITO (2017) 397 ITR 673 (Delhi) (HC)
S. 147 : Reassessment —Notice issued after order of court approving amalgamation in

name of non-existent transferor company was held to be invalid . [ S. 148 ]
Allowing the petition the Court held that the notice of reassessment was issued ,after order of
court approving amalgamation in name of non-existent transferor company was held to be
invalid . (AY. 2008 - 09)
346
BDR Builders and Developers P. Ltd v. ACIT (2017) 397 ITR 529 /158 DTR 129 (Delhi)
(HC)
S. 147 : Reassessment - Notice on basis of order of revision — Order of revision set aside
hence the notice for reassessment was held to be not valid.[ S.80IA, 263 ]
Dismissing the appeal of the revenue, the Court held that; the reopening of assessment under
section 147 of the Act was only on account of the orders passed by the Commissioner under
section 263 of the Act and for no other reason. As the order of revision was seta side the notices
for reassessment was held to be not valid . (AY. 1998-99, 2000-01 to 2002-03)
CIT v. International Tractors Ltd. (2017) 397 ITR 696 (Delhi) (HC)
S.147 : Reassessment - Notice would be without jurisdiction for absence of reason to believe
that income had escaped assessment even in case where assessment has been completed
earlier by intimation under section 143 (1) [ S.143 (1), 148 ]
Allowing the petition the Court held that; even in cases where no assessment order is passed and
assessment is completed by Intimation under Section 143 (1) of the Act, the sine qua non to issue
a reopening notice is reason to believe that income chargeable to tax has escaped
assessment.Accordingly, High Court held that where notice issued under section 148 of the Act
gave no reasons to indicate basis of coming to conclusion that share premium was excessive and
could be considered as income of the assessee, reopening of the assessment in this regard was
improper. Referred, Rajesh Jhaveri Stock Brokers (291 ITR 500 (SC) and in case of Zuari Estate
Development and Investment Co. Ltd. (373 ITR 661 (SC)
Khubchandani Healthparks (P) Ltd. v. ITO (2017) 154 DTR 93 (Bom) (HC)
S. 147 : Reassessment - Lease hold rights – Assessee has not brought any decision of High
Court or Tribunal in the objection filed by the assesse, hence the writ petition was
dismissed .[ S. 50C, 148 ]
Dismissing the petition the Court held that ;the Assessee has not brought any decision of High
Court or Tribunal in the objection filed by the assesse, hence the ratio in German Remedies Ltd
( ) 285 ITR 26 (Bom) (HC) can not be applied . In Greenfield Hotels & Estates Pvt Ltd. ( ()389
ITR 68 (Bom) (HC) The Court held that it did not independently rule appropriate interpretation of
section 50C of the Act and hence requires consideration. (AY. 2009-10)
Keki Bomi Dadiseth v. ACIT (2017) 154 DTR 141/299 CTR 89 (Bom) (HC)
S. 147 : Reassessment – Order was passed with in limitation - If the order is challenged the
Court has the power to remit matter back to the AO for passing fresh order of assessment .[
S.143 (2), 148 ]
Allowing the petition the Court held that; If AO passed order of assessment within prescribed
period of limitation and thereafter, if such order was put to challenge before Court of law and
consequently, was set aside on some reason, it was always open for Court to remit matter back
AO for passing fresh order of assessment. (AY. 2012-13)
Home Finders Housing Ltd. v. ITO (2017) 151 DTR 122/248 Taxman 133 (Mad) (HC)
S. 147 : Reassessment – Change of opinion - Sale of agricultural land - No specific reason –

Reassessment was held to be bad in law . [ S. 2 (14), 148 ]
Assessee furnished all information claiming that no capital gain arose as land sold was
agricultural land which was accepted ,but department treated said land as capital assets,
Reassessment was held to be bad in law . (AY. 2008 - 09)
Kutubuddin S.M. v. ACIT (2017) 398 ITR 236/155 DTR 20 (Mad) (HC)
347
S. 147 : Reassessment – With in four years-Interest expenditure-Failure to deduct tax at
source - Reassessment was held to be not valid [ S.40 (a) (ia), 148 ]
Allowing the petition the Court held that; on the ground that the interest expenditure had to be
disallowed for not deducting the tax at source. Having examined and rejected the claim, the
Assessing Officer might have relied on the order of assessment and could not have issued a notice
for reopening on the very same ground on which he had rejected the claim. When the reasons
were recorded and the notice for reopening was issued, his view on the issue had been confirmed
by the Commissioner (Appeals). Subsequently, the Appellate Tribunal had allowed the assessee’s
appeal on the issue; on the date on which the notice was issued, the order of the Commissioner
(Appeals) prevailed. On all the grounds, therefore, the notice could not be upheld. (AY. 2005 -
06)
Nirma Ltd v. Dy. CIT (2016) 242 Taxman 286 / (2017) 397 ITR 366 (Guj) (HC)
S. 147 : Reassessment – With in four years-Business expenditure – Liability for goods

returned – Reopening at instance of opinion of audit party was held to be not valid .[ S. 36
(1) (viii), 148 ]
Allowing the appeal the Court held that; the Assessing Officer had made partial disallowances of
the assessee’s claims of deduction of bad and doubtful debts only after detailed and minute
scrutiny of materials. Therefore, he could not be permitted to reopen the assessment as the
reopening would be based on mere change of opinion. Court also held that ;it was evident from
the Assessing Officer’s reasoning to the audit party that he did not agree with the view of the
audit party in respect of the claim of deduction on account of sales return that the claim was
irregularly granted and that he was of the view that when the company had recalled the sold
material, it was an ascertained liability and therefore, it could not be added back to the profit of
the company. The notice for reopening was unsustainable. (AY. 2010 - 11)
Sahjanand Medical Technologies P. Ltd v. ACIT (2017) 397 ITR 607 (Guj) (HC)
S. 147 : Reassessment – No fresh material – Enhanced fee - Reassessment was held to be in

valid [ S. 37 (1)145, 148 ]
Allowing the appeal the Court held that; in some of the assessment years after the date of the
Estate Officer’s order, the assessments were completed under section 143 (3) of the Act accepting
the claim for enhanced licence fee on the basis of accrued liability. There was therefore no fresh
tangible material that came to light for the first time for the Assessing Officer to form reason to
believe that income had escaped assessment. The reassessment proceedings were not valid. (AY.
1977-98 to 2002-03, 2004 - 05, 2009-10)
Jagdish Prasad Gupta v. CIT (2017) 397 ITR 578/250 Taxman 308/157 DTR 193 (Delhi)
(HC)
S. 147 : Reassessment —Objections not considered - Notice based solely on valuation report
without considering the objection and valuation report was held to be not valid . [ S. 148,
Art 226 ]
Allowing the appeal the Court held that; the order seeking to reopen the assessment already made
was without jurisdiction and without authority of law and the order disposing of the preliminary
objections was not in accordance with law. Consequently, the order finally passed making
reassessment was also contrary to law. The orders were liable to be quashed (AY. 2011-12)
Kamala Ojha (Smt.) v. ITO (2017) 397 ITR 197 / 160 DTR 265 /299 CTR 507
(Chhattisgarh) (HC)
348
S. 147 : Reassessment – AO having bona fide belief that certain documents escaped
consideration that resulted into escapement of income chargeable to tax notice issued is
valid. [ S. 148 ]
AO though was not having fresh material for the purpose of formation of belief that the income of
any particular assessment year has escaped assessment, but with all bona fides he noticed that
certain documents escaped consideration and that resulted into escapement of income chargeable
to tax; reopening is therefore sustainable. (AY. 2011-12)
DCIT v. Sambhav Energy Ltd (2017) 152 DTR 49 /295 CTR 460 (Raj) (HC)
S. 147 : Reassessment-Notice for reassessment by authority other than authority normally

assessing assessee is not mere irregularity or curable defect-Reassessment notice was
quashed.[S. 143 (1),148, 292BB]
Allowing the petition the Court held that; it was a defective issuance of notice and not a service
of notice as it was issued by an authority who was not competent. The Department ignored the
fact that the assessee had been regularly assessed year after year and originally was within the
jurisdiction of Income-tax Circle-9 and after restructuring, of the Assistant Commissioner, Circle
4 (2). Therefore, the Assistant Commissioner Circle 5 (2) had no jurisdiction to assess and issue
the notice for reassessment. It was not a mere irregularity or a defect which could have been
cured, but a question of jurisdiction of the authority to reopen the assessment. The notice was to
be quashed. (AY. 2008 - 09)
Shirishbhai Hargovandas Sanjanwala v. ACIT (2017) 396 ITR 167 (Guj.) (HC)
S. 147 : Reassessment - Assessment cannot be reopened once proceeded under section 153A,
without having any incriminating material was found against the assesse. [S. 132, 153A]
Dismissing the appeal of the revenue the Court held that; when the Department had chosen to
proceed under section 153A, there had to be some incriminating material qua the assessee to
justify the proceedings thereunder. No such circumstance being present the question whether the
Department could have validly initiated proceedings under section 147 need not be examined.
(AY. 2002-03 to 2004 - 05)
PCIT v. Vikas Gutgutia (2017) 396 ITR 691 (Delhi) (HC)
S. 147 : Reassessment —Within four years – Assessment u/s. 143 (1) - Reassessment notice is
held to be valid - Rule of consistency cannot be applied when the assessment was made u/s
143 (1). [S. 80P, 143 (1), 148]
Dismissing the petition the Court held that; since the return had been processed only under
section143 (1) and no scrutiny assessment was made, there was no formation of opinion on the
part of the Assessing Officer for the question of change of opinion to arise. Reassessment notice
was held to be valid.The rule of consistency presupposes a decision on identical facts and law in
an earlier assessment year. The notice under section148 for reopening the assessment was valid.
(AY. 2008 - 09)
Jolly Maker 1 Trust v. ITO (2017) 396 ITR 274 (Bom.) (HC)
Editorial : SLP of assessee is dismissed ;Jolly Maker 1 Trust v. ITO (2017) 394 ITR 13 (St.)
S. 147 : Reassessment – Within four years-Change of opinion - No change in law or fresh

material adduced — Reassessment was held to be bad in law. [S. 132, 133A, 147]
349
Dismissing the appeal of the revenue the Court held that; there was no change of law and no fresh
material had come on record enabling the Assessing Officer to invoke the powers under
S. 147 and that it was mere change of opinion which did not provide the jurisdiction to the
Assessing Officer to initiate proceedings under section147 . (AY. 1999-2000)
CIT v. Akshar Enterprises (2017) 396 ITR 317 (Guj.) (HC)
S. 147 : Reassessment —Information received from investigation wing per se not tangible
material there has to be link between material and formation of opinion that income has
escaped assessment —Reassessment is held to be invalid. [S. 143 (1), 148]
Dismissing the appeal of the revenue the Court held that; there is no link between the tangible
material and the formation of the reasons to believe that income had escaped assessment, could be
discerned. The information received from the Investigation Wing was not tangible material per se
without a further enquiry having been undertaken by the Assessing Officer, who had deprived
himself of that opportunity by proceeding on the erroneous premise that the assessee had not filed
a return for the assessment year, 2004-05, when in fact it had. Reassessment is held to be in
valid. (AY.2008 - 09)
PCIT v. RMG Polyvinyl (I) Ltd. (2017) 396 ITR 5 /249 Taxman 610/156 DTR 79 (Delhi)
(HC)
Editorial : Order in RMG Polyvinyl (I) Ltd v .Dy CIT (2016) 48 ITR 674 (Delhi) (Trib.) is
affirmed.
S.147 : Reassessment-Unexplained investments - Re-opening notice merely on basis of one
Sauda Chitthi seized from third party but not acted upon, was unjustified. [S. 69, 148]
Allowing the petition the Court held that; iIn absence of any tangible material available to prima
facie show that assessee had received any on money in cash on account of sale consideration of
land, re-opening notice merely on basis of one Sauda Chitthi seized from third party but not acted
upon, was unjustified. (AY. 2009-10)
Chintan Jadhavbhai Patel v. ITO (2017) 246 Taxman 361 /(2018) 404 ITR 76 (Guj.) (HC)
Editorial : SLP of revenue is dismissed ITO v. Chintan Jadhavbhai Patel v. ITO (2018) 254
Taxman 226/402 ITR 4 (St). (SC)
S. 147 : Reassessment — Change of opinion —Excess payment to sister concern —

Reassessment was held to be not valid.[S. 148]
Allowing the petition the Court held that; during the course of scrutiny assessment proceedings,
the Assessing Officer had already examined the details with respect to the purchases made from
the sister concerns and the price paid to those sister concerns. Specific queries raised by the
Assessing Officer were answered satisfactorily by the assessee and the assessee also justified the
purchases from the sister concerns and the purchase price paid to the sister concerns. The
subsequent re-opening on the very ground was a mere change of opinion by the subsequent
Assessing Officer. Therefore, the notices to reopen the assessment could not be sustained and
were to be quashed. (AY. 2005 - 06)
Jivraj Tea Company v.DCIT (2017) 394 ITR 422 (Guj.) (HC)
S. 147 : Reassessment—Passing reassessment order without disposing objection raised by

assessee against notice was held to be not valid – If income mentioned in reasons does not
forms part of reassessed income, reassessment was held to be bad in law .Alternative
remedy is not an absolute bar to challenge the jurisdictional issue. [S. 143 (1),148, Art. 226]
Allowing the petition the Court held that the objections filed by the assessee to the notice for
reopening of the assessment not having been disposed of, the assessment order could not be
sustained. If notice for reopening of the assessment was issued on one aspect, and in the course of
reassessment proceedings another aspect was discovered, the reassessment order would be valid,
only if the aspect which led to the reopening of assessment continued to form part of the
350
reassessed income. Alternative remedy is not an absolute bar to challenge the jurisdictional issue.
(AY . 2008 - 09)
Martech Peripherals P. Ltd. v. DCIT (2017) 394 ITR 733/295 CTR 528/81 taxmann.com 73
/151 DTR 313 (Mad) (HC)
S. 147 : Reassessment—Subsequent information that amounts shown as towards share

application was bogus—Notice to reassessment was held to be valid. [S.143 (1), 148]
Dismissing the petition the court held that; Subsequent information that amounts shown as
towards share application was bogus—Notice to reassessment was held to be valid . No scrutiny
assessment was done. (AY. 2007 - 08)
Pushpak Bullion P. Ltd. v. DCIT (2017) 394 ITR 65/250 Taxman 201 (Guj.) (HC)
S. 147 : Reassessment - Reassessment in respect of income other than that in respect of

which reason to believe recorded is permissible.[S. 148]
Court held that;Reassessment in respect of income other than that in respect of which reason to
believe recorded is permissible. (AY. 1996 - 97)
CIT v. Sun Engineering works P.Ltd. (1992) 198 ITR 297 (SC) and ITO v. K.L. Srihari (HUF)
(2001) 250 ITR 193 (SC) relied. (AY. 1996 - 97)
Ganpati Associates v. CIT (2017) 395 ITR 562 (All.) (HC)
S. 147 : Reassessment – Undisclosed investment – Addition on the basis of district valuation

report hence reassessment was held to be valid - Credit worthiness of creditors was not
established, addition was held to be valid. [S. 69, 148]
Dismissing the appeal of the assessee, the Court held that, reassessment was held to be valid and
addition was held to be justified as creditworthiness of the creditors was not established. (AY.
1992-93 to 1995-96)
Chhangur Rai (Dr.) v.CIT (2017) 394 ITR 611 (All.) (HC)
S. 147 : Reassessment – Order passed without disposing of objections was held to be bad in
law – Officer was directed to deposit cost of Rs 5000. [S. 148]
Order passed by the Assessing Officer without disposing the objection was held to be bad in law
and the Officer was directed to pay cost of Rs 5000. (AY. 2009 - 10)
Simaben Vinod Rai v.ITO (2017) 394 ITR 778 (Guj.) (HC)
S. 147 : Reassessment – Within four years – Where an issue has already been decided in
favor of the assessee in preceding and subsequent assessment years, reopening on such issue
is not permissible. [S.80IB, 148]
The petitioner claimed deduction u/s. 80IB of the Act in respect of its industrial undertakings
located in backward area. During the original assessment proceedings, the AO allowed the
deduction u/s. 80IB of the Act after recording a categorical finding with regard to the fulfilment
of requisite conditions prescribed u/s. 80IB of the Act.
Subsequently, notices u/s. 148 of the Act were issued wherein the AO proposed to disallow the
deduction already granted u/s. 80IB of the Act.
On a writ petition, the HC held that the issue of allowability of deduction u/s. 80IB of the Act, has
already been decided in favour of the assessee by the division bench of this court for preceding
and subsequent assessment years. Therefore, reopening of the same issue for another year, is not
justified.
PrabhadeviSinghvi (Smt.) v. UOI (2017) 294 CTR 139/149 DTR 69 (Raj.) (HC)
351
S. 147 : Reassessment-loose papers seized in search & seizure – Writ petition is filed to the
High Court challenging re-assessment after order was passed – Alternate remedy of appeal
to lower authorities was available – Writ petition was dismissed. [S. 148, Art. 226]
The assessee case was selected for re-assessment based on certain loose papers found at the time
of search & seizure. The re-assessment order u/s. 147 was passed pursuant to which assessee filed
a writ petition before the HC challenging the validity of re-assessment proceedings. The main
contention of the assessee was that a writ petition was pending before HC in some other case
which arised out of same search & seizure operation and the notice of demand issued after the
assessment was stayed in that case. Further, assessee placed reliance on recent judgment of SC in
the case of Common Cause vs. UOI (2017) 787 Taxman 245 (SC) and argued that assessment
undertaken based on some loose papers which are inadmissible evidence cannot be sustained in
law. Dismissing the petition the Court held that; case of Common Cause (supra) relied upon by
the assessee is with respect to the registration of FIR under Criminal Justice system and hence
cannot assist assessee in the present case. Further, High Court held that when a statutory remedy
of appeal was available to the assessee before the lower authorities, the High Court could not go
into various aspects of the matter and entertain writ petition.
Neeraj Mandloi v. ACIT (2017) 399 ITR 287/293 CTR 245 /148 DTR 23 (MP) (HC)
S. 147 : Reassessment-Objection raised by the Assessing Officer was not disposed by the
Assessing Officer, order was held to be bad in law, Alternative remedy is not a bar to
entertain the writ petition. [S. 142 (1),148, Art.226]
Allowing the petition the Court held that; Objection raised by the Assessing Officer was not
disposed by the Assessing Officer, order was held to be bad in law, Alternative remedy is not a
bar to entertain the writ petition .Since the notice under section 142 itself stood vitiated for failure
to issue a speaking order under section148 the further proceedings initiated by the Assessing
Officer to proceed to pass an assessment order were unsustainable and therefore quashed.
(AY.2011-12)
Goa State Co – operative Bank Ltd. v.ACIT (2017) 395 ITR 642 /151 DTR 273/295 CTR 369
(Bom.) (HC)
S. 147 : Reassessment – Borrowed satisfaction-Mere reproduction of investigation report in

reasons recorded is not sufficient, in the absence of tangible material and reasons recorded,
reassessment was held to be not valid. [S. 143 (1),148, 151]
Dismissing the appeal of the revenue, the Court held that, The “reasons to believe” recorded were
not reasons but only conclusions and a reproduction of the conclusion in the investigation report
received from the Director (Investigation). It was a “borrowed satisfaction”. The expression
“accommodation entry” was used to describe the information set out without explaining the basis
for arriving at such a conclusion. The basis for the statement that the entry was given to the
assessee on his paying “unaccounted cash” was not disclosed. Who was the accommodation entry
giver and how he could be said to be a “known entry operator” were not mentioned. The source
for all the conclusions was the investigation report. The tangible material which formed the basis
for the belief that income had escaped assessment must be evident from a reading of the reasons.
The reasons failed to demonstrate the link between the tangible material and the formation of the
reason to believe that income had escaped assessment. The Assessing Officer had not
independently considered the tangible material which formed the basis for the reasons to believe
that income had escaped assessment. Reassessment was held to be not valid . (AY. 2004 05)
PCIT v. Meenakshi Overseas P. Ltd. (2017) 395 ITR 677/82 taxmann.com 300/154 DTR 100
(Delhi) (HC)
S. 147 : Reassessment - Notice is deemed to be served if not returned as unserved -

Reassessment proceedings was held to be valid. [S. 148, 282]
352
Allowing the appeal of the revenue, the Court held that; the notice sent by post to the assessee at
his proper address would be deemed to have been delivered to him in the ordinary course, if not
returned undelivered and such service was sufficient for purposes of section 148 of the Income-
tax Act, 1961 . The assessee’s reply to the notice under section 142 (1), wherein it had claimed
that it had not received any notice under section 148revealed that it had knowledge of the notice
for reassessment. The proceedings were not vitiated.. Relied on Shimla Development Authority
v. Smt. Santosh Sharma [1997] 2 SCC 637 (para 14) andDr. Sunil Kumar Sambhudayal Gupta v.
State of Maharashtra [2010] 13 SCC 657 (para 14). (AY.1996-97)
CIT v. Privilege Investment P. Ltd. (2017) 395 ITR 147/154 DTR 293. (All.) (HC)
S. 147 : Reassessment – Within four years – Where an issue has already been decided in
favor of the assessee in preceding and subsequent assessment years, reopening on such issue
is not permissible. [S.80IB, 148]
The petitioner claimed deduction u/s. 80IB of the Act in respect of its industrial undertakings
located in backward area. During the original assessment proceedings, the AO allowed the
deduction u/s. 80IB of the Act after recording a categorical finding with regard to the fulfilment
of requisite conditions prescribed u/s. 80IB of the Act.
Subsequently, notices u/s. 148 of the Act were issued wherein the AO proposed to disallow the
deduction already granted u/s. 80IB of the Act.
On a writ petition, the HC held that the issue of allowability of deduction u/s. 80IB of the Act, has
already been decided in favour of the assessee by the division bench of this court for preceding
and subsequent assessment years. Therefore, reopening of the same issue for another year, is not
justified.
Prabhadevi Singhvi (Smt.) v. UOI (2017) 294 CTR 139 /149 DTR 69 (Raj.) (HC)
S. 147 : Reassessment-loose papers seized in search & seizure – Writ petition is filed to the
High Court challenging re-assessment after order was passed – Alternate remedy of appeal
to lower authorities was available – Writ petition dismissed. [S. 148, Art.226]
The assessee case was selected for re-assessment based on certain loose papers found at the time
of search & seizure. The re-assessment order u/s. 147 was passed pursuant to which assessee filed
a writ petition before the HC challenging the validity of re-assessment proceedings. The main
contention of the assessee was that a writ petition was pending before HC in some other case
which arised out of same search & seizure operation and the notice of demand issued after the
assessment was stayed in that case. Further, assessee placed reliance on recent judgment of SC in
the case of Common Cause vs. UOI (2017) 787 Taxman 245 (SC) and argued that assessment
undertaken based on some loose papers which are inadmissible evidence cannot be sustained in
law. Dismissing the petition the Court held that; case of Common Cause (supra) relied upon by
the assessee is with respect to the registration of FIR under Criminal Justice system and hence
cannot assist assessee in the present case. Further, High Court held that when a statutory remedy
of appeal was available to the assessee before the lower authorities, the High Court could not go
into various aspects of the matter and entertain writ petition.
Neeraj Mandloi v. ACIT (2017) 293 CTR 245/148 DTR 23 (MP) (HC)
S. 147 : Reassessment – Notices for reassessment for assessment years forming part of block
assessment period was held to be impermissible .[S. 132,148, 153A, 158BC]
Allowing the appeal of the assessee the Court held that, once proceedings are initiated under S.
158BC for the block assessment on the same material initiating parallel proceedings under section
147 was held to be bad in law hence quashed. (AY. 1994 - 95 to 1996 - 97)
353
South Asian Enterprises Ltd. v. CIT (2017) 398 ITR 387/154 DTR 1 /298 CTR 565 (Delhi)
(HC)
S. 147 : Reassessment – Share premium - Reassessment was held to be not valid.[S. 148]
The High Court quashed the reassessment proceedings initiated by the Assessing officer for the
reason that the assessee had proved that he had not received any share capital nor any premium as
alleged by the assessing officer and that the assessing officer merely brushed aside the
explanations filed by the assessee without even considering the same. There was no basis of
reopening the assessment and that therefore, it was held that the reopening is invalid.
(AY. 2008-09)
Sunbarg Tradelink (P) Ltd. v. ITO (2016) 74 taxmann.com 16 (2017) 292 CTR 222 (Guj.)
(HC)
S. 147 : Reassessment-Merger – Chnge of opinion - Issue which was subject matter of

appeal reopening of assessment was held to be bad in law. [S. 2 (47), 56, 148, 246]
Allowing the petition, the Court held that; if the subject matter of the reopening is also the subject
matter of appeal, the principle of merger would apply. There cannot be two separate
considerations to the same subject matter relatable to the income, one by the appellate authority
and another by the AO in fresh assessment. (SLP. No. 16644 of 2012, dt. 14.06.2017) (AY. 2010-
11)
Radhaswami Salt Works v. ACIT (2017) 83 taxmann.com 195 /(2018) 400 ITR 249 (Guj.)
(HC)
Editorial : SLP of revenue is dismissed ACIT v.Radhaswami Salt Works (2018) 255 Taxman
70 (SC)
S. 147 : Reassessment-Issue decided by High Court in earlier years – Reassessment was held
to be bad in law - Writ is maintainable.[S. 148, Art.226]
Allowing the appeal of the assessee the Tribunal held that ; when the issue was decided in
favour of assessee by High Court in earlier years, reassessment was held to be bad in law. Writ is
maintainable. (AY. 2006 - 07)
Prabhadevi Singhvi (Smt.) v.UOI (2017) 294 ITR 139 (Raj.) (HC)
S. 147 : Reassessment-Best judgment assessment-Failure to file return-Failure to comply

with notices issued— Reassessment was held to be valid.[S. 142 (1), 144,148]
Dismissing the appeal of the assesse the Court held that; Corroborative evidence and materials
including movable and immovable assets and statements of third parties was held to be sufficient
for reassessment.
Gauri Shankar Prasad (Dr.) v. ITAT (2017) 393 ITR 635 (Patna) (HC)
S.147 : Reassessment-Change of opinion—Cash credits-Reopening on mere change of

opinion by subsequent Assessing Officer is not permissible.[S. 68, 133, 148]
Allowing the petition the Court held that; the reasons on which the assessment was sought to be
reopened were already gone into in detail by the Assessing Officer while framing the scrutiny
assessment and after raising the specific queries and only thereafter the Assessing Officer framed
the assessment. Reopening was on a mere change of opinion by the subsequent Assessing Officer
and it was not permissible. The notice under section 148 of the Act was to be quashed. (AY
.2011-2012)
Orient News Prints Ltd. v. Dy. CIT (2017) 393 ITR 527/78 taxmann.com 108 (Guj.) (HC)
354
S.147 : Reassessment – Cash credits – Unsecured loans Subsequent information discovered
as bogus - Reassessment was held to be justified. [S. 68, 131, 133A, 143 (1), 148]
Dismissing the petition the Court held that the initial assessment was not subjected to scrutiny
and Subsequent information discovered that the unsecured loans was bogus, hence the
reassessment was held to be justified. (AY. 2012 - 13)
Virbhadra Singh v. Dy.CIT (2017) 291 CTR 439/146 DTR 65 (HP) (HC)
Vikramaditya Singh v. Dy.CIT (2017) 291 CTR 439/146 DTR 65 (HP) (HC)
Pratibha Singh v. Dy.CIT (2017) 291 CTR 439/146 DTR 65 (HP) (HC)
S.147 : Reassessment-Agricultural land-Information rendering genuineness of municipal

corporation certificate produced by assessee doubtful-Notice for reassessment was held to
be justified.[ S. 2 (14), 143 (3), 148]
Dismissing the petition the Court held that; The Assessing Officer had recorded that fresh
material was found which proved that the evidence submitted by the assessee regarding the
distance of land from the municipal corporation was incorrect. The retired executive engineer had
stated that he had never issued the certificate produced as evidence by the assessee and the Road
and Building Division of the Municipal Corporation had stated that the copy of such a certificate
was not found in their records. The information collected by the Department after the assessment
was over in the form of statement of the Additional Assistant Engineer and the certificate issued
by the Deputy Collector of the Municipal Corporation indicated that the distance between the two
limits was much shorter than 8 kilometres. The very foundation of the assessee's case of the land
being at a distance of more than 8 kilometres from the outer limit of the Municipal Corporation
failed. The notice issued under section 148 invoking section 147 for reopening was valid and
proper. (AY. 2008-2009)
Thakorbhai Maganbhai Patel v. ITO (2016) 74 taxmann.com 225; (2017) 393 ITR 612
(Guj.) (HC)
Editorial : SLP of assessee was dismissed,Thakorbhai Maganbhai Patel v. ITO (2017) 391 ITR
346 (St.) /245 Taxaman 333 (SC)
S.147 : Reassessment-Assessee was neither owner of land nor received any sale
consideration-Reassessment was held to be not valid. [S.148, 226]
Allowing the petition the Court held that; the assessee was never the owner of the land in
question and in fact the subsequent sale deeds were executed by the original land owners.It was
an admitted position that the respective assessee had never executed any sale deeds. Therefore,
nothing was on record to show that any sale consideration was received by the respective
assessee. The notice of reassessment was not valid. (AY. 2009-2010)
Vinodbhai Shamjibhai Ravani v. Dy.CIT (2017) 393 ITR 491/79 taxmann.com 237 /156
DTR 14 (Guj) (HC)
S.147 : Reassessment-Unexplained investment-CIT (A) holding that no addition was either

on the basis of report of valuation officer or of valuation of stamp duty - Reopening on the
basis of District valuation officer was held to be bad in law.[S. 69, 148]
Allowing the petition the court held that; an opinion given by the District Valuation Officer was
not per se information for the purpose of reopening an assessment under section 147. Once
having failed before the Commissioner (Appeals) to enhance the unexplained investment under
section 69, relying upon the District Valuation Officer's report, thereafter, it was not open for the
Assessing Officer to reopen the assessment under section 147 on the very same ground. Notice
issued under section 148 for reopening could not be sustained. (AY. 2005-2006)
Akshar Infrastructure P. Ltd. v. ITO (2017) 393 ITR 658 /246 Taxman 353 /160 DTR 258
/299 CTR 501 (Guj.) (HC)
355
S.147 : Reassessment—Bogus transactions-Statement of third person not having live link
with assessee's suspected income, the reassessment was held to be bad in law. [S.68, 133A,
148]
Allowing the petition the Court held that; the statement of third person not having live link with
assessee's suspected income, the reassessment was held to be bad in law . The material should
have a live link with the assessee`s suspected income or non-disclosure of a material fact. That
kind of live link was absent. Therefore the notice under section 148 read with section 147 of the
Act was to be quashed. (AY. 1997-1998 to 2001-2002)
AMSA India P. Ltd. v. CIT (2017) 393 ITR 157/248 Taxman 362 (Delhi) (HC)
S. 147 : Reassessment-Reassessment has to be based on "fresh material". A reopening based

on reappraisal of existing material is invalid. [S. 148]
Dismissing the appeal of the revenue,the Court held that;a reopening based on reappraisal of
existing material is invalid. Reassessment has to be based on "fresh material". (ITA
Nos.1058/2011, 1061/2011 & 1063/2011, dt. 18.05.2017) (AY. 1998-99, 1999-00, 2001-02)
DIT v. Rolls Royal Industries Power India Ltd (2017) 155 DTR 187 (Delhi)
(HC),www.itatonline.org
S.147 : Reassessment-Information received from Directorate of Revenue Intelligence

regarding bogus purchases by assessee-Existence of tangible material-Directed the Tribunal
to hear Department's appeals on merits. [S. 148]
Allowing the appeal of the revenue, the Court held that ;the notes disclosed the source of
information, the Directorate of Revenue Intelligence, which had sent information based upon the
Commissioner of Central Excise's investigations. To add further conditions to the nature of
discussions or reasons that the Officer authorising the notice would have to discuss in the note or
decision was beyond the purview of the courts and was not justified. The orders of the Appellate
Tribunal could not be sustained. The Appellate Tribunal was directed to hear the Department's
appeals on their merits. (AY .2003-2004 to 2005-2006)
PCIT v. Paramount Communication P. Ltd. (2017) 392 ITR 444 /79 taxmann.com 409
(Delhi) (HC)
Editorial : SLP of assesse was dismissed, Paramount Communications Ltd. v. P CIT (2017) 250
Taxman 100 (SC)
S.147 : Reassessment-Business income-Audit party-Assessing Officer reopened the

assessment considering the audit objections and independently considering other issues,
hence reassessment was held to be valid. [S. 28 (i), 148]
Dismissing the writ petition, that if the audit objections were compared to the reasons recorded
for reassessment it would be clear that the Assessing Officer had included all objections pointed
out by the audit party but had also included one more ground namely of the escaped capital gains
on sale of land by the assessee.This ground was not part of the audit objections. This would
indicate that the Assessing Officer had independently applied his mind and formed a belief that
on the grounds mentioned by the audit party in its objection letter and the additional ground
recorded in the reasons, income chargeable to tax in the case of the assessee had escaped
assessment. In all the issues except ground (2a) recorded by the Assessing Officer in the reasons,
there was detailed scrutiny during the original assessment. On such issues, therefore, the
reopening even within a period of four years would not be permissible. However, even if one
ground succeeds, as in the present case, reopening would have to be permitted. (AY. 2009-2010)
Elecon Engineering Co. Ltd. v. ACIT (2016) 76 taxmann.com 233/(2017) 392 ITR 404 (Guj.)
(HC)
356
S.147 : Reassessment-Wrong claim – reassessment was held to be valid. [S. 36 (1) (viia). 148,
Art. 226]
Dismissing the writ petition, the Court held that; the assessee had claimed deduction to which it
was not entitled which fact came to the notice of the Department only in 2010-11 when it was
verified whether the assessee had rural branches. This was a valid reason for reopening the
assessments. No prejudice had been caused to the assessee by the passing of the assessment order.
It could appeal against the orders. The notices of reassessment were valid. (AY. 2007-08, 2008-
09)
Palakkad Dist. Co-op. Bank Ltd. v. Addl. CIT (2017) 392 ITR 539 /293 CTR 328 /77
taxmann.com 349/147 DTR 236 (Ker.) (HC)
S. 147 : Reassessment-Information received from Investigation Wing - Reassessment was

held to be justified. [S. 131,148]
Dismissing the appeal, that the reasons to believe recorded by the Assessing Officer showed that
specific information with respect to the nature of the credit received by the assessee from known
entry operators had been shown to the Assessing Officer while recording his satisfaction in the
issuance of notice under section 148 of the Income-tax Act, 1961. In such circumstances
reassessment notice could not have been questioned. In the reassessment proceedings, the
assessee was unable to satisfactorily explain the correctness of the entries in question. The share
applicants appeared to be not in existence and did not answer the summons issued under section
131. Furthermore, given that the findings of the three lower authorities were concurrent, no
Paramount Intercontinental P. Ltd. v. ITO (2017) 392 ITR 505 (Delhi) (HC)
S.147 : Reassessment-Date of issue would be date on which notice is handed over to Postal
Department-Notice handed over to Postal Department before expiry of time hence notice
was not barred by limitation. [S. 148, 149]
Dismissing the petition the Court held that; the date of issue of notice under section 149 of the
Income-tax Act, 1961 would be the date on which it was handed over for service to the proper
officer, i.e., the Postal Department. The approval was granted by the Principal Commissioner of
the Income-tax also on March 30, 2015. The notice was valid. (AY. 2008-2009)
Rajesh Sunderdas Vaswani v. C.P. Meena, Dy.CIT (2017) 392 ITR 571 /149 DTR 49 (Guj.)
(HC)
Editorial : SLP of the assesssee was dismissed,Rajesh Sunderdas Vaswani v. C.P. Meena,
Dy.CIT (2016) 389 ITR 7 (St.)
S.147 : Reassessment-Notice under compulsion by audit party was held to be not valid.
[S.148]
Allowing the petition the Court held that, the Assessing Officer had acted under the compulsion
of the audit party which held a belief that on account of discrepancy in the turnover figures,
income chargeable to tax had escaped assessment. The Assessing Officer was inclined to believe
the assessee`s explanation that such discrepancy could be reconciled. The notice of reassessment
was not valid. (AY. 2010-2011)
Reckit Benckiser Healthcare India P. Ltd v. Dy. CIT (2016) 74 taxmann.com 260/(2017) 392
ITR 336 (Guj.) (HC)
S.147 : Reassessment—Notice issued solely on objections of audit party was held to be not
valid.[S. 148]
Allowing the petition, the Court held that; the allegation that the assessment was reopened solely
on the objection raised by the audit party and there was no independent formation of opinion by
357
the Assessing Officer that the income had escaped assessment, had not been denied or disputed
and hence the notice under section 148 of the Income-tax Act, 1961, could not be sustained. (AY.
2000-2001)
Torrent Power S.E.C. Ltd v. ACIT (2017) 392 ITR 330/77 taxmann.com 57 (Guj.) (HC)
S. 147 : Reassessment – Accommodation entries-Ex-parte assessment orders passed in

meantime set aside and permission granted to assessee to file objections – Cost was imposed
on the assessee-AO was directed to dispose the objections of the assessee. [S.148, Art. 226.]
During the pendency of the writ petition five ex parte assessment orders were passed. The
assesse filed the writ petition and contended that; since the Department had not complied with the
court's order dated December 18, 2014 the section 148 proceedings would stand dropped :
Court held that (i) the Department duly issued fresh communication dated January 15, 2015 and
along with it supplied certified copy of the enquiry report containing details of the investigation
conducted by the Department at the business premises of the assessee-company. The report made
it clear as to why the section 148 notices were issued for reassessment. The assessee should have
filed its objection to the reasons communicated by the Department and then it would have been
incumbent upon the Assessing Officer to pass an order dealing with such objection before
proceeding with the reassessment proceeding.
(ii) That although there was no impediment to the Assessing Officer proceeding with the
reassessment in respect of the assessee since there was no order of stay, yet, it would have been
proper for the Department to obtain leave of the court before proceeding ex parte against the
assessee since the writ petition was pending. Courts insist on the principles of natural justice
being observed in the matter of conducting proceedings which culminate in orders likely to affect
the rights of the party concerned. The assessee was permitted an opportunity to file its objections
to the reasons recorded by the Assessing Officer for issuing the notices under section 148 of the
Act so that the Assessing Officer might conduct the assessment proceedings afresh from that
stage and dispose of the objections by a reasoned order, before proceeding, if at all with the
reassessment in accordance with law and the principles of natural justice. If the assessee did not
file its objections within the time indicated, the assessment orders dated March 31, 2015 would
stand revived. The court imposed costs on the assessee and directed that in default of payment of
the cost, the writ petition was to stand dismissed. (AY. 2007-2008 to 2011-2012)
Korp Resources P. Ltd. v. DCIT (2017) 390 ITR 336/149 DTR 23 /293 CTR 571 (Cal.)
(HC)
S. 147 : Reassessment-Cash credits-Share application money - Genuineness of transactions

and creditworthiness of investors not established by assessee to satisfaction of Assessing
Officer - Reassessment notice was held to be valid. [S.68 ,133A, 148]
Dismissing the petition, the Court held that; that there was no full disclosure of material facts by
the assessee and the reassessment notice was valid. The reassessment notice brought out certain
aspects that information was received by the Department with respect to bogus entries made,
resulting in a survey and impounding of certain documents. On the basis of those, certain
inference were sought to be drawn. There could not be any denial that it amounted to tangible
material. Whilst the assessee, replied to the queries addressed to it, the materials on record
showed that there was no full disclosure. Therefore, the reassessment notice was valid. (AY.
2008-2009)
Aravali Infrapower Ltd. v. DCIT (2017) 390 ITR 456 /77 taxmann.com 322 (Delhi) (HC)
S. 147 : Reassessment-Deduction allowed after inquiry – Reassessment was held to be not

valid. [S.24, 148]
358
Since the entire claim of interest expenditure was before the Assessing Officer during the original
assessment proceedings on which the Assessing Officer had raised several queries with respect to
the interest paid by the assessee on the borrowed capital and deduction allowed after being
satisfied, any attempt on part of the Assessing Officer to reopen this issue would be based on
mere change of opinion. The notice was not valid. (AY. 2010-2011)
Aryan Arcade Ltd v. DCIT (2016) 72 taxmann.com 54/(2017) 390 ITR 67 (Guj) (HC)
S. 147 : Reassessment-Notice issued after three years of receipt of information from U. K.

tax authority-Exclusive reliance upon U. K. revenue authorities' information not sufficient
to attribute sum of money to assessee's income – Re assessment was held to be bad in law.
[S.148]
Dismissing the appeal of the revenue ,the Court held that; the exclusive reliance placed upon the
U.K. revenue authorities' information was not sufficient to conclude that the amount which was
attributed to the deceased assessee belonged to him. The materials showed that the amounts were
brought to tax in the hands of the assessee's relative. There were pointers to omissions, leads that
could have been developed by the Assessing Officer, such as queries to the bank for foreign
inward remittances and their source. Having received information the Department could have
proceeded through reassessment proceedings at the earliest opportunity. However, the
Department chose to wait for three years and sought to reopen a decade late completed
assessment and by then the assessee had died. The order of the Appellate Tribunal deleting the
additions was not perverse. (AY. 1982-1983)
CIT v. Late K.M. Bijli (2017) 390 ITR 402/(2017) 152 DTR 147 (Delhi) (HC)
S. 147 : Reassessment-Service of notice on accountant of assessee-company - Power of

attorney given to accountant to conduct assessment proceedings not including authority to
accept any fresh notice - Reassessment was not valid. [S. 148, 282 ]
Dismissing the appeal of the revenue the Court held that; the power of attorney had confined the
authority to representation to conduct the case. It did not include in it any authority to accept any
fresh notice. The person on whom the notice under section 148 was served was not the principal
officer of the assessee nor was there any material to show that he had been authorised by the
assessee to accept any notice. The Appellate Tribunal was correct in concluding that the
reassessment proceedings were vitiated. (AY. 1996-1997)
CIT v. Kanpur Plastipack Ltd. (2017) 390 ITR 381 (All) (HC)
S. 147 : Reassessment-Client code modification by assessee's stock broker not showing any
link to conclude income of assessee escaped assessment-Reason to suspect and not reason to
believe-Notice without jurisdiction - Interim relief granted. [S. 148]
On a writ petition : the court held that prima facie, the notice under section 148 of the Act was
without jurisdiction as it lacked reason to believe that income chargeable to tax had escaped
assessment. The reasons did not indicate the basis for the Assessing Officer to come to a
reasonable belief that there had been any escapement of income on the ground that the
modifications done in the client code was not on account of a genuine error, originally occurred
while punching the trade. The material available was that there was a client code modification
done by the assessee's broker but there was no link from there to conclude that it was done with a
view to escape assessment of a part of the assessee's income. Prima facie, it was a case of reason
to suspect and not reason to believe that income chargeable to tax had escaped assessment.
Interim relief was granted. (AY. 2009-2010)
Coronation Agro Industries Ltd. v. DCIT (2017) 390 ITR 464 (Bom.) (HC)
359
S. 147 : Reassessment – Depreciation - Truck terminus-Material giving rise to belief must
be mentioned in notice - Material not appearing in notice – Notice was held to be not valid.[
S.32, 43 (3), 148 ]
The reason to believe to conclude that income had escaped assessment was not reflected in the
order passed by the Assessing Officer. The Assessing Officer had not said that income from
collection of parking fee from the trucks was attributable to building and not to the parking
facility provided for the trucks. Even if the order recorded by the Assessing Officer were liberally
construed, the requisite material or the nexus on the basis of which, the reasonable belief was
reached did not exist for ordering the reassessment proceeding. Therefore the action initiated
against the assessee under section 148 was without jurisdiction. (AY .2004-2005)
Guwahati Metropolitan Development Authority v. CIT (2017) 390 ITR 137 /291 CTR
297/77 taxmann.com 116/145 DTR 194 (Gauhati) (HC)
S.147 : Reassessment – Merely because the assessee's income is "shockingly low" and others
in the same line of business are returning a higher income. The invocation of the
jurisdiction on the basis of suspicions and presumptions cannot be sustained . [S.148]
Allowing the petition, the Court held that; though Explanation 2 of s. 147 authorizes the AO to
reopen an assessment wherever there is an "understatement of income", the AO is not entitled to
assume that there is "understatement of income" merely because the assessee's income is
"shockingly low" and others in the same line of business are returning a higher income. The
invocation of the jurisdiction u/s 147 on the basis of suspicions and presumptions cannot be
sustained. (WP. No. 36483/2016, dt. 13.02.2017) (AY. 2012-13)
Rajendra Goud Chepur v. ITO (AP&T) (HC);www.itatonline.org
S. 147 : Reassessment – Within four years – Loss on sale of share Misrepresentation of

facts - Reassessment was held to be valid. [S. 73,148]
Allowing the appeal of the revenue, the Court held that; where during the original assessment
proceedings, assessee misrepresented the facts relating to loss on purchase and sale of shares and
explanation was accepted by AO, action of AO in allowing such loss based on incorrect facts
would constitute reason to believe . Reopening to reassess such loss was permissible. (AY. 2001-
02)
CIT v. Eureka Stock & Share Broking Services Ltd. (2016) 74 taxmann.com 114/(2017) 291
CTR 313 (Cal.) (HC)
Editorial : SLP of assesse was dismissed, Eureka Stock and Share Broking Services Ltd. v. CIT
(2017) 248 Taxman 81 (SC)
S. 147 : Reassessment - Change of opinion – Reassessment was held to be not valid. [S.148]
Dismissing the appeal of the revenue, the Court held that;where during the original assessment
proceedings, the Assessing Officer raised query and sought information/materials which were
supplied by the assessee, reopening of assessment was merely a reappraisal of the assessment
records. A mere change of opinion did not constitute a “reason to believe” to reopen a concluded
assessment. (AY. 2007-08)
PCIT v. Anil Nagpal (2017) 291 CTR 272/145 DTR 209 (P&H) (HC)
S.147 : Reassessment – Within four years – Query was raised in the assessment proceedings
which were responded, non consideration of same in the assessment order, does not give
raise to reassessment proceedings. [S.148]
360
Dismissing the appeal of the revenue, where a query raised by the AO during the regular
assessment proceedings was responded by the Assessee, then non-consideration of the same in
the assessment order by the AO could not be an evidence of non-satisfaction and thus subsequent
reopening was not justified. Followed Aroni Commercials Ltd. v DCIT (2014) 367 ITR 405
(Bom) (HC). (AY. 2005-06)
CIT v. Aroni Commercial Ltd. (2017) 393 ITR 673 /146 DTR 145 /292 CTR 229 (Bom.)
(HC)
S. 147 : Reassessment – Share premium-No material to suggest that the assesse had received
any share premium - Reassessment was quashed.[S.148]
Allowing the petition the Court held that ;where the AO had no material to suggest that the
assessee had during the relevant period, received any share capital or share premium or any other
sum from the companies controlled and managed by another individual, notice for reassessment
was liable to be quashed. (AY. 2008-09)
Sunbarg Trdelink P Ltd. v. ITO (2017) 146 DTR 182 (Guj) (HC)
S. 147 : Reassessment-A question relating to jurisdiction which goes to the root of the
matter can always be raised at any stage - Issue of notice or service of notice in the setaside
appeal can be raised - Matter was set aside to Tribunal to decide the jurisdictional issue of
reassessment. [S.148]
Allowing the petition the Court held that; (i) a question relating to jurisdiction which goes to the
root of the matter can always be raised at any stage, be in appeal or revision, (ii) initiation of
proceedings under section 147 of the Act and/or service of notice are all questions relating to
assumption of jurisdiction to assess escaped income, (iii) if an issue has not been decided in
appeal and the matter has simply been remanded, the same can be raised again notwithstanding
with the fact that no further appeal has been preferred, (iv) in the reassessment proceedings, relief
in respect of item which was not originally claimed cannot be claimed again as the reassessment
proceedings are for the benefit of the Revenue and (v) relief can only be claimed in respect of the
escaped income.The principles laid down by the Apex Court in the case of Sun Engineering
Works P. Ltd. would not apply as the appellant is not claiming any deduction or relief on the
taxability of any item in the reopened assessment proceedings which had not been claimed in the
original assessment. (ITA No. 87 of 2009, dt. 30.03.2017) (AY. 1997-98).
Teena Gupta (Kum.) v. CIT (2017) 154 DTR 213/(2018) 400 ITR 376 (All.) (HC)
S. 147 : Reassessment – Unabsorbed depreciation - Reassessment was held to be not

permissible. [S. 32 (2), 148]
Allowing the petition the court held that; in the absence of any tangible material which alone
could be the basis, for reopening of a completed assessment. The Department could not have
issued the notice. The benefit of carrying forward the depreciation was limited by the pre-
existing ruling that, it could be done for eight years . All that the amendment by the Finance, Act,
2002 did, with effect from April 1, 2002, was to remove the cap which meant that the previously
limited benefit was subjected to such restrictions.The notice was unsustainable and the
reassessment was quashed. (AY. 2010-11)
Motor and General Finance Ltd. v. ITO (2017) 393 ITR 60 (Delhi) (HC)
S. 147 : Reassessment – Audit information-Reopening of assessment when the AO is acting

on the dictates of the audit party and is not applying his own mind was held to be bad in
law.[S. 148]
Allowing the petition the Court held that;Reopening of assessment when the AO is acting on the
dictates of the audit party and is not applying his own mind was held to be bad in law . (SCA No.
8343 of 2013.dt, 19.06.2017) (AY. 2007-08)
361
Mehsana District Central Co-op Bank Ltd. v. ACIT (Guj.) (HC), www.itatonline.org
S. 147 : Reassessment – Special category of States - On merit the allowability of claim was
not doubted, however merly on the ground that there was dely of 46 days in filing of return
reassessment was held to be not valid .[ S.80IC, 148 ]
Allowing the petition the Court held that when allowability of claim on merit was not doubted
merely on the ground that, there was dely of 46 days in filing of return reassessment was held to
be not valid . (AY.2011-12)
Fiberfill Engineers v. Dy.CIT (2017) 299 CTR 173 /157 DTR 330/85 taxmann.com 27 (Delhi)
(HC)
S. 147 : Reassessment – After the expiry of four years - No new tangible material - Payment
of TDS before the due date of filing of returns – Reassessment was held to be bad in law. [S.
40 (a) (ia)]
The assessee has challenged the reopening of assessment whereas the revenue is in appeal against
deleting the disallowance /addition made under section 40 (a) (ia) of the Act by the CIT (A).The
Tribunal held that the payment of TDS can be deposited in the State exchequer on or before the
last date of filing of return under section 139 (1) of the Act and the deduction has to be allowed
and no disallowance can be made under section 40 (a) (ia). The appeal of the assessee allowed on
the basis that the AO has not discovered any new tangible material while resorting to section 147.
Therefore no action could be initiated under section 147 after the expiry of four years from the
end of the relevant assessment year. (AY. 2005-06)
ACIT v. Crescent Construction Co. (2017) 188 TTJ 497 (Mum.) (Trib.)
S. 147 : Reassessment – Amortisation - Reassessment was held to be valid.

The Tribunal held that the AO has not considered the issue of allowability of the amortization of
mining land and leasehold land. He had simply, without making any enquiry, allowed the claim
of the assessee. Therefore, the order of the CIT (A) is affirmed and the appeal by assessee is
dismissed. Accordingly reassessment is valid. (AY. 2006-07 to 2009-10, 2011-12 to 2013-14)
S. 147 : Reassessment – After the expiry of four years – No failure to disclose material facts
– Reassessment was held to be in valid . [ S.10B, 148 ]
Deduction under S. 10B continuously claimed, examined and allowed by department in previous
assessment years. There has been no change in business activity of assessee from inception and
there is no failure on part of assessee to disclose fully and truly all material facts necessary for
assessment. Therefore, reassessment was invalid. (AY. 2007-08 to 2010-11).
ACIT v. Nikkamal Jewellers (2017) 59 ITR 116 (Chd.) (Trib)
S.147 : Reassessment-After the expiry of four years-Details were examined in the original
assessment proceedings – Reassessment is held to be in valid. [S. 148]
The Tribunal held that in earlier year the claim of the assessee was examined in detail and
thereafter only the benefit of deduction was allowed. Similarly in this year also the query was
362
raised by the AO which was replied by the assessee. It is well settled law that reopening based
upon change of opinion of the AO is not permissible in the eyes of law. Thus, the reopening was
not valid. (AY. 2002-03)
ACIT v. Tata Chemicals Ltd. (2017) 185 TTJ 123 (Mum.) (Trib.)
S.147 : Reassessment - After the expiry of four years – Export of business – Reassessment
on the basis that only job worker - Change of opinion – Reassessment was held to be invalid
[ S.1OB, 148 ]
Where the Assessee had claimed exemption u/s. 10B since inception and the Department had
accepted the same in earlier years, reopening of assessment for withdrawal of exemption was not
permissible as would amount to change of opinion. (A.Y. 2007-08 to 2010-11)
ACIT v. Nikkamal Jewellers (2017) 59 ITR 116 (Chd.) (Trib.)

S. 147 : Reassessment-After the expiry of four years - Full particulars were furnished in the
course of original assessment proceedings-Reassessment was held to be not valid. [S.40 (a)
(ia), 148]
Allowing the appeal of the assessee the Tribunal held that, full disclosure was made in the course
of original assessment proceedings and tax deducted was deposited before due date of filing of
return, Reassessment was held to be bad in law. (AY. 2005-06)
Crescent Construction Co. v. ACIT (2017) 188 TTJ 497 (Mum.) (Trib.)
S. 147 : Reassessment – Notice – Reopening of assessment not valid in case reasons are
vague and general and the notice is issued in a mechanical manner without any application
of mind. [ S.143 (1), 148 ]
The Assessee’s return of income was processed u/s 143 (1). A survey u/s 133 (1) was conducted
and consequently, the AO reopened the assessment u/s 147. The AO made additions relating to
estimation of collections and recasting of income and expenditure account under various heads.
The CIT (A) quashed the notice u/s 148 issued by the AO. The ITAT held that the reassessment
was not valid since the AO had recorded very vague and general reasons for reopening the
assessment. The AO neither referred to any specific material, which indicated escapement of
income, nor did he mention any defect in the books maintained by the Assessee. Further, the
notices for both the assessment years were the same, without stating the assessment year and the
same reasons were recorded in the case of the Assessee as well as another individual. The ITAT
held that there cannot be reopening of assessment based on mere surmises and suspicion and the
notice issued u/s 148 should show that there has been application of mind and must not be in a
mechanical manner. (ITA No. 299 & 300/Vizag/2013 dt. 18.08.2017) (AY 2007-08, 2008-09)
Also ITA Nos. 296, 297 and 298/Vizag/2013 order dt. 18.08.2017) (AY. 2006-07, 2007-08,
2008-09)
DCIT v. Dr. M.J. Naidu (2017) 59 ITR 13 (SN) (Vishakha) (Trib)

DCIT v. M. Madhavi (Smt) (2017) 59 ITR 13 (SN) (Vishakha) (Trib)
S. 147 : Reassessment – With in four years - Reassessment not valid if it based on the same
reason on which the AO had already made an addition in the original proceedings. [ S.148 ]
The Assessee filed its return of income and offered to tax income from sale of shares as short
term capital gain. The AO, in his order u/s 143 (3), held that the said income was business
income. Further, the AO also made an addition u/s 14A r.w. Rule 8D. The action of the AO was
dismissed by the CIT (A). During the pendency of appeal before the ITAT, the AO issued a
notice u/s 148 to reopen the assessment, on the basis that the Assessee did not disclose its full and
true income while calculating the disallowance u/s 14A. This reassessment notice was quashed by
363
the CIT (A). The ITAT upheld the action of the CIT (A) in quashing the notice for reopening and
it held that initiation of reopening proceedings on the very same issue which had already been
appealed against by the Assessee before the CIT (A) and ITAT, bars the AO to initiate reopening
proceeding on the same subject matter. (ITA No. 818/Kol/2015 dt. 13.09.2017) (AY. 2007-08)
DCIT v. BNK Capital Markets Ltd. (2017) 59 ITR 79 (SN) (Kol) (Trib)
S. 147 : Reassessment – With in four years-Notice u/s 143 (2) was not issued before passing
of the order – Re assessment was held to be bad in law ,even though the assessee has
participated in the proceedings [ S.143 (2), 148, 292BB ]
Allowing the appeal of the assessee the Tribunal held that; when notice was not issued by
Assessing Officer under section 143 (2) before passing assessment order under section 143 (3)
read with section 147, assessment made by him was bad in law and, in such a case, even through
assessee had participated in assessment proceedings, section 292BB would not come to rescue of
revenue . (AY.2008 - 09)
Alok Mittal v. DCIT (2017) 167 ITD 325 /(2018) 162 DTR 13 (Kol) (Trib.)
S. 147 : Reassessment – Within four years – Where an issue regarding allowance of loss has
already been decided in favor of the assessee by the AO by proper application of mind
while, reassessment is not valid as no tangible material is available to form different
opinion
Allowing the appeal the Tribunal held that ;the AO had examined the expenditure claim of the
assessee and that the AO had applied his mind while allowing the loss claimed in the original
assessment. Accordingly the Tribunal held that, for reopening an assessment the AO should have
a tangible material to form a different opinion. Since in the present case, the AO failed to bring on
record any new tangible material based on which he changed his opinion, the reassessment
proceedings were bad in law and the order u/s 147 r.w. 143 (3) deserved to be quashed.
(AY.2006-07)
United States Pharmacopiea India Pvt.Ltd. v. DCIT (2017) 57 ITR 312 (Hyd. Trib.)
S. 147 : Reassessment – Change of opinion - No failure on part of assessee to submit related

documents — Initiation of reassessment proceedings invalid [ S.11 (5), 148 ]
Reassessment solely on basis of material already examined during first round of assessment
proceedings was held to be not valid only on the ground that the AO has not passed speaking
order . There was no failure on part of assessee to submit related documents. (AY. 2004-05 &
2005-06)
Muniwar Abad Charitable Trust v. ACIT (E) (2017) 59 ITR 204 Mum) (Trib)
364
S.147 : Reassessment – Within four years – Mere production of the balance-sheet, profit
and loss account or account books - Not disclosure - Reassessment was held to be valid .
[S.5, 148 ]
Mere production of account books from which material evidence could have been discovered by
the Assessing Officer will not necessarily amount to disclosure within the meaning of the proviso.
Hence reopening of assessments is perfectly in accordance with law hence same is upheld. (AY.
2008-09)
ACIT v. M.P. Laghu Udyog Nigam Ltd. (2017) 165 ITD 446 (Indore) (Trib.)
S. 147 : Reassessment – Change of opinion-Additional depreciation – Reassessment was

held to be bad in law. [S. 32, 148]
Dismissing the appeal of the revenue, the Tribunal held that, the additional depreciation was
allowed after verification of facts hence reassessment was held to be bad in law . (AY. 2008-09
,2009-2010)
ACIT v. Mangalam Cement Ltd. (2017) 55 ITR651 /148 DTR 329 (Jaipur) (Trib.)
S. 147 : Reassessment - Transfer of information – No opinion was formed in the original

assessment – Reassessment was held to be valid [ S. 2 (22) (e), 148 ]
Tribunal held that; mere transfer of information by the Additional Commissioner in the capacity
of an Assessing Officer of another assessee could not be termed as direction issued by the
Additional Commissioner to the Assessing Officer. Therefore it could not be said that the
Assessing Officer had recorded reasons to believe on the direction of the superior authority is
rejected. The Assessing Officer had noted the quantum of payment as also the accumulated
profits in the hands of the company and thereafter recorded satisfaction that income had escaped
the assessment. The reasons had been recorded after due application of mind. In the original
assessment the Assessing Officer had not framed any opinion on the issue of deemed dividend. It
was not brought on record that all the requisite conditions for making the loans and advances
liable for deemed dividend were fully disclosed to the Assessing Officer. Thus the reopening was
not based on change of opinion. The reassessment had been validly initiated., (AY. 2009-10)
ACIT v. G.D. Goenka Pvt Ltd (2017) 59 ITR 109 (SN) (Delhi) (Trib)
S. 147 : Reassessment – Mandatory notice u/s. 142 (2) was not issued-Re assessment was
held to be invalid. [S. 139 (9),148, 292BB]
Allowing the appeal, the Tribunal held that; the main provision of section 148 do not provide any
time limit for filing of returns, but states that returns are to be filed within such period as may be
specified in the notice. It further states that for returns filed under section 148 all the provisions of
section 139 will be applicable. The relevant sub-section which would be applicable is Section 139
(9) which deals with defective returns and states that the Assessing Officer considers the return of
income to be defective after giving an opportunity to the assessee to rectify the defect. In the
instant case, the Assessing Officer did not find any defect in the returns of income filed by the
assessee and therefore, these returns cannot be treated as invalid returns. Following the ratio in
CIT v. Salarpur Cold Storage P. Ltd. [2014] 50 taxmann.com 105 (All) (HC), Tribunal held that
assumption on jurisdiction without issuing of notice under section 143 (2) cannot be cured by
taking recourse to deeming fiction under section 292BB of the Act. The issue of notice under
section 143 (2) is a mandatory requirement which cannot be cured even after the insertion of
section 292BB of the Act as held in various judicial pronouncements. (AY.200405, 200506)
365
Anil Kumar v. ITO (2017) 55 ITR97 (Asr.) (Trib.)
ITO v. Anil Kumar (2017) 55 ITR 97 (Asr.) (Trib.)
S.147 : Reassessment – Reassessment solely made on the basis of information received from
investigation wing as assessee was beneficiaries of accommodation entries was held to be not
valid when no cross examination allowed to the assesse. [S. 148]
Held that during the course of assessment proceedings all the details like loan confirmations,
PAN, bank statements, Form 16, balance sheet & profit and loss a/c including ledger and income
tax returns filed. Also, loan creditors appeared before AO in response to notice issued u/s 133 (6).
Assessing Office merely relied on the information received from the Investigation wing that
assessee was one of the beneficiaries of the accommodation entries without bringing any material
against the assessee on record contrary to the defence put up by the assessee. Further, no cross
examination was allowed to the assessee and information was used against the assessee in
violation of natural justice. Reopening held not valid. (AY. 08-09, 2010-11,2012-13)
ITO v. Reliance Corporation (2017) 55 ITR 69 (SN) (Mum.) (Trib.)
S.147 : Reassessment-On the basis of information from investigation wing in order to verify
the genuineness of transaction in modification of clients code, reassessment was held to be
bad in law. [S. 45,143 (3)]
Allowing the appeal the Tribunal held that; Reassessment, On the basis of information from
investigation wing in order to verify the genuineness of transaction in modification of clients
code, reassessment was held to be bad in law. (ITA No. 501 & 502/Ahd/2016, dt. 09.03.2017)
(AY. 2008-09)
Sunita jain (Smt) v. ITO (Ahd.) (Trib.);www.itatonline.org
Rachna Sachin jain (Smt.) v. ITO (Ahd.) (Trib.);www.itatonline.org
S.147 : Reassment - Capital gains Penny stocks - Statement of third party cannot be the sole
basis for disallowing the claim of the assesse in respect of cpital gains-Failure to give
opportunity of cross examination - Addition was deleted.[S. 45, 131, 148 ]
Statement of third party cannot be the sole basis for disallowing the claim of the assesse in
respect of cpital gains .
The s. 131 statement implicating the assessee is not sufficient to draw an adverse inference
against the assessee when the documentary evidence in the form of contract notes, bank
statements, STT payments etc prove genuine purchase and sale of the penny stock. Failure to
provide cross-examination is a fatal error. Additions made by the AO was deleted .Reassessment
was held to be invalid . (AY. 2006-07)
Kamla Devi S. Doshi v. ITO (2017) 57 ITR 1 (Mum.) (Trib)
Jaswantraj Bhutaji Shah HUF v. ITO (2017) 57 ITR 1 (Mum.) (Trib.)
Rajmal M .Sanghvi v. ITO (2017) 57 ITR 1 (Mum.) (Trib.)
S.147 : Reassessment-Deemed dividend - Advance for anticipated sale of land - Genuineness

of agreement was doubled as the agreement was un registered - Reassessment was held to
be valid, and addition as deemed divided was held to be justified [ S. 2 (22) (e), 148 ]
Dismissing the appeal of the assessee the Tribunal held that; the Agreement to sell was
unregistered; there is no reflection of transaction in Books of Company. The agreement to sell
was merely an arrangement tailored by assessee with sole intent to wriggle out of ramifications of
having received impugned amount from company, which as per law was liable to be assessed as
deemed dividend. Accordingly the reassessment was held to be valid . (AY 2004 – 2005)
Kapil N. Shah v. ITO (2017) 166 ITD 572 (Mum) (Trib.)
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S. 147 : Reassessment - Reasons recorded for reopening of the assessment based on factual
error and finding based on the said recorded reason is held to be null and void – Refusal of
exemption was held to be not justified. [S. 10 (23C), 148]
Allowing the appeals of the assessee the Tribunal held that; reasons recorded for reopening of the
assessment based on factual error and finding based on the said recorded reason is held to be null
and void . Tribunal also held that, merely because governing body of school had objects of
religious nature and school did not have any objects of its own, it could not be said that objectives
of assessee were also partly religious in nature, therefore refusal of exemption under section 10
(23C) was not justified. (AY. 2007-08, 2008 - 09)
KMV Collegiate Sr. Sec. School v. ITO (2017) 163 ITD 653 /186 TTJ 777/156 DTR 59 (Asr.)
(Trib.)
S.147 : Reassessment-Share application money-Reopening of assessmentto make roving

inquiry is impermissible and negative burden that purchasers not relatives cannot be put to
assessee-Reasons of reopening recorded by Assessing Officer not sustainable. [S. 68, 148]
Allowing the appeal of the assessee the Tribunal held that; the assesse introduced own
unaccounted capital through share capital and premium nowhere mentioned in assessment order.
There is no material to prima facie indicate assessee's unaccounted income invested in share
capital and there is no live nexus between reasons recorded and income sought to be reassessed.
Reopening of assessment to make roving inquiry is impermissible. Negative burden that
purchasers not relatives cannot be put to assesse hence reasons of reopening recorded by
Assessing Officer not sustainable. (AY.2009-2010)
Laxmiraj Distributors Pvt. Ltd. v. ACIT (2017) 53 ITR 376 /188 TTJ 543 (Ahd.) (Trib.)
S.147 : Reassessment – Disclosing lower sale consideration – Reassessment was held to be

valid.[S.45, 50C, 148]
Dismissing the appeal the Tribunal held that; the reasons recorded gave clear picture that the
Assessing Officer had got material evidence to form his opinion for taking recourse to section
147 read with section 148 .The reasons recorded by the Assessing Officer clearly speaks for the
under assessment of tax hence, the conditions stood fulfilled in so far as the reassessment
proceedings were concerned .In so far as the reasons recorded, the Assessing Officer has “reasons
to believe“, that income had escaped assessment. This fact confers jurisdiction on him to reopen
the assessment. (AY. 2006-07)
Nitin R.Bhuva v.ITO (2017) 54 ITR 14 (Chennai) (Trib.)
S.147 : Reassessment – Mutuality-Commissioner (Appeals) presuming assessee did not

claim mutuality factually incorrect--Receipts other than interest and rental income from
members of assesse, would fall within ambit of mutuality. Order enhancing income not
sustainable. [S.4,11, 148]
Allowing the appeal the Tribunal held that; Commissioner (Appeals) presuming that the assessee
did not claim mutuality factually incorrect--Receipts other than interest and rental income from
members of assessee, would fall within ambit of mutuality. Order enhancing income not
sustainable. (AY. 2006-2007 to 2012-2013)
Sports and Cultural Club (Regd.) v. JCIT (2017) 53 ITR 160 (Delhi) (Trib.)
367
S.147 : Reassessment-Information from Investigation Wing--No valid notice served upon
assessee either through registered post or through affixture, reassessment was held to be not
valid. [S.148]
Allowing the appeal the Tribunal held that; no valid notice served upon assessee either through
registered post or through affixture, reassessment was held to be not valid. (AY.1996-1997)
Auram Jewellery Exports P. Ltd. v. ACIT (2017) 54 ITR 1 (Delhi) (Trib.)
S.147 : Reassessment-Undated reasons—Reopening on borrowed satisfaction was held to be

impermissible. [S. 148]
Allowing the appeal the Tribunal held that; the reasons recorded, it was clear that the reasons
were undated, which itself proved that the Assessing Officer had not applied his mind. Nothing
appeared in the reasons recorded suggesting that the Assessing Officer had made any positive
enquiry before coming to the conclusion that the income chargeable to tax had escaped
assessment. The Assessing Officer had reopened the case on the basis of borrowed satisfaction,
which was not permissible under the law. The reassessment proceedings were invalid. (AY. 2004-
2005)
Charanjiv Lal Aggarwal v. ITO (2017) 54 ITR 349 (Amritsar) (Trib.)
S. 148 : Reassessment – Once writ petition was withdrawn without liberty to file fresh
petition on same ground second writ petition was held to be not maintainable [ S. 147,
260A, 271 (1) (b), Art . 226 ]
Dismissing the second writ petition the Court held that, Once writ petition was withdrawn
without liberty to file fresh petition on same ground second writ petition was held to be not
maintainable. (AY. 2002-03)
Kamal Galani v. ACIT (2017) 250 Taxman 159/159 DTR 185 /(2018) 301 DTR 568 (Bom.)
(HC)
S. 148 : Reassessment – Jurisdiction to issue notice was challenged after limitation period
prescribed under S.124 (3) – Reassessment was held to be valid . [S. 124, 147 ]
Assessee having not challenged territorial jurisdiction of AO issuing notice under section 148
within 30 days as required under section 124 (3) of the Act, belated challenge cannot be accepted.
The court further held that the contention of the assessee that objection is raised when it came to
know about the CBDT notification regarding jurisdiction is not tenable as absence of knowledge
of notification will not suspend running of limitation. (AY. 2012-13 to 2014-15)
Elite Pharmaceuticals v. ITO (2017) 152 DTR 226/297 CTR 428 (Cal) (HC)
S. 148 : Reassessment – Notice – Writ against notice of reassessment was held to be not
maintainable. [S. 147, Art. 226]
The High Court held that the writ petition filed challenging the notice under section 148 cannot
be entertained as it was found that none of the family members had disclosed any income prior to
the date of issuance of notice under section 148 and it was not a case where theauthority has
exceeded its jurisdiction or the action is not based on any new material or that no reasons were
recorded by the Assessing Officer or that reasons assigned are absolutely irrelevant or based on
extraneous factors/circumstances. (AY.2009-10)
Vikramaditya Singh v. Dy. CIT (2017) 146 DTR 65 (HP) (HC)
Virbhadra Singh v. Dy. CIT (2017) 146 DTR 65 (HP) (HC)
S. 148 : Reassessment-Notice-Writ against notice of reassessment was held to be not

maintainable. [S.147, Art. 226]
368
The High Court held that the writ petition filed challenging the notice under section 148 cannot
be entertained as the contentions based on which the proceeding is challenged can be raised
before the Assessing Officer and that it is not the case of the assessee that the Officer has not
proceeded as per relevant provisions of the Act or is proceeding in the mater in defiance of the
fundamental principles of judicial procedure, or has not/is not providing proper opportunity of
hearing to the petitioner. (AY. 2009-10)
Maruti Sah & Brothers v. ITO (2017) 291 CTR 409 /145 DTR 406 (Uttarakhand) (HC)
S. 148 : Reassessment – Officer who issued notice u/s. 148 and officer who had subsequently
issued notice u/s.143 (2) were having concurrent jurisdiction over assessee, reassessment
proceedings could not be challenged on ground that notice u/s. 148 was not validly issued.
[S. 147 ]
The Assessee challenged validity of reassessment proceedings on ground that notice issued u/s.
148 was by an officer who did not have jurisdiction over him. Further, officer who issued notice
u/s. 148 and Officer who had subsequently issued notice u/s. 143 (2) were both under same
Commissioner and both were having simultaneous jurisdiction over assesse.
The ITAT held that objection of the Assessee for jurisdiction was not proper hence set aside the
issue. (AY. 2009 – 2010)
Anasuya Mekala (Smt.) v. DCIT (2017) 164 ITD 498/187 TTJ 363/153 DTR 220 (Hyd.)
(Trib.)
S.148 : Reassessment – Notice – Where Assessing Officer has issued notice for reopening u/s
148 only against amalgamating company and not against assessee company which was
amalgamated/successor company, assessment made in name of assessee company was void.[
S.147 ]
In the given case, the assessee company was a successor company. The Assessing officer having
reasons to believe that income had escaped assessment in earlier assessment years of the
amalgamating company, issued notice u/s 148 for reopening in the name of the said
amalgamating company. In reply to the notice, the assessee company submitted that the notice
was without jurisdiction since it was in the name of an entity which does not exist. The Assessing
Officer ignoring the submission, completed the assessment u/s 148 making the additions. On
appeal the CIT (A) held that the said notice was bad in law and thus the addition were deleted. On
further appeal, the Tribunal held that the assessment made is void because, even after the AO
came to know about the amalgamation he did not care to issue 148 and 143 (2) notices to the
assessee company which is sine qua non and therefore, the omission in following law goes to root
of the matter and makes the order null in the eyes of law. Section 292B cannot be relied upon for
curing a jurisdictional defect in the notice but can be resorted only in case of procedural
irregularity. The Tribunal further observed that assessee had gone before the settlement
commission which was admitted by passing order u/d 245D (1) and hence exclusive jurisdiction
was with Settlement commission and not the assessing officer. Thus the departmental appeal was
dismissed. (ITA No. 1052, 1053/Kol/2015 order dt. 15-11-2017) (AY 2006 – 2007)
Dy.CIT v. Mani Square Ltd. (2017) 190 TTJ 742 /88 taxmann.com 77 (Kol) (Trib)
S. 150 : Assessment-Order on appeal - Observation of Tribunal in AY. 1990-91 is not a

finding or direction u/s. 150 and thus re-assessment proceedings are not sustainable.[S. 45
(4),147, 148, Art. 226]
In appeal for the assessment year 1991-92 held that if at all the issue of capital gains arises, it
shall arise in A.Y.1990-91 and not under A.Y.1991-92 which was the year under consideration
before the Tribunal. Based on the observation AO issued notice u/s. 148 for re-opening of
assessment of A.Y.1990-91. On writ allowing the petition the Court held that, the observation of
369
Tribunal is not a finding or direction u/s. 150 and thus re-assessment proceedings are not
sustainable. (AY. 1990-91)
Kala Niketan v. UOI (2016) 293 CTR 178/148 DTR 121 (Bom.) (HC)
S. 151 : Reassessment - Sanction-After the expiry of four years - Approval granted by

Director instead of Joint Commissioner —Notice and proceedings thereunder was held to
be invalid as the statutory requirement was not fulfilled . [ S. 143 (1), 148, 151 (2)]
Allowing the petition the Court held that; the mandatory requirement under section 151 (2) as it
stood at the relevant time, had not been fulfilled and therefore, the reopening of the assessment
under section 147 was illegal. Where the original assessment was made under section 143 (1)and
it was sought to be reopened after the expiry of four years, from the end of the relevant
assessment year, the mandatory requirement under section 151 (2) was that the approval for
reopening was to be granted by an officer of the rank of the Joint Commissioner, who was the
Additional Director in the assessee’s case and not other officer including a superior officer. (AY.
2005 - 06, 2006 - 07)
Yum ! Restaurants Asia Pte Ltd v. Dy. DIT (No.1) (2017) 397 ITR 639 (Delhi) (HC)
Yum ! Restaurants Asia Pte Ltd v. Dy. DIT (No.2) (2017) 397 ITR 665 (Delhi) (HC)
S. 151 : Reassessment-Sanction for issue of notice-The mere appending of the word

"approved" by the CIT while granting approval to the reopening is not enough - He has to
record satisfaction after application of mind. The approval is a safeguard and has to be
meaningful and not merely ritualistic or formal. [S. 68,147, 148]
Dismissing the appeal of revenue the Court held that; the mere appending of the word "approved"
by the CIT is not sufficient.While the CIT is not required to record elaborate reasons, however, he
has to record satisfaction after application of mind. The approval is a safeguard and has to be
meaningful and not merely ritualistic or formal. (AY. 2001-02)
PCIT v. N. C. Cables Ltd. (2017) 391 ITR 11/149 DTR 90 (Delhi) (HC)
S. 153 : Assessment - Time limit - When the assessment was set a side the same has to be
completed with in limitation period, it is not necessary that entire assessment order is set
aside - Order passed was held to be beyond period of limitation hence quashed .[ S. 153 (2A)
]
Allowing the appeal of the assessee the Court held that; when the assessment was set a side the
same has to be completed with in limitation period, it is not necessary that entire assessment order
is set aside. Accordingly order passed was held to be beyond period of limitation hence quashed .
(AY. 2007-08)
Nokia India (P) Ltd (2017) 251 Taxman 85 /298 CTR 334/157 DTR 169 (Delhi) (HC)
S. 153 : Assessment – Reassessment – Limitation Period between vacation of stay and

receipt of order by income-tax department is not excluded hence the order of reassessment
passed is barred by limitation.[ S. 147, 148 ]
Allowing the petition the Court held that; the Revenue could not take advantage of the fact that it
received a copy of the order dated November 9, 2016 of the court only on December 2, 2016 to
contend that the assessment order having been passed on January 30, 2017 within 60 days of the
date of the receipt of the order of the High Court, was not issued beyond the period stipulated
under section153 (2) of the Act read with the proviso to Explanation 1 thereof. The order dated
November 9, 2016 was passed in the presence of counsel for the Revenue and, therefore, the
370
Revenue clearly was aware of the order on that date itself. The order dated January 30, 2017 was
time-barred. (AY. 2006-07)
Saheb Ram Om Prakash Marketings P. Ltd v. CIT (2017) 398 ITR 292/160 DTR 281
(Delhi) (HC)
S. 153A : Assessment – Search-Assessment can be made only on the basis of incriminating

evidence found during search, whether assessment u/s143 (1) or 143 (3) does not make any
difference [ S. 132 ,143 (1), 143 (3) ]
Dismissing the appeal of the revenue the Court held that; the scope of assessment under
section 153A was limited to the incriminating evidence found during the search and no further.
Section153A of the Income-tax Act, 1961 did not make any distinction between the assessment
conducted under section143 (1) and section 143 (3) . (AY. 2002 - 03, 2003 - 04)
CIT v. SKS Ispat and Power Ltd. (2017) 398 ITR 584 (Bom.) (HC)
S. 153A : Assessment – Search - Amalgamation of companies — warrant of authorisation

and panchnama in name of transferor company after it ceased to exist was held to be void
ab-initio.[ s.132 ]
Allowing the petition the court held that, warrant of authorisation and panchnama in name of
transferor company after it ceased to exist was held to be void ab-initio. (AY.2008 - 09)
EDR Builders and Developers P. Ltd v. ACIT (2017) 397 ITR 529 /158 DTR 129 (Delhi)
(HC)
S. 153A : Assessment – Search - Addition can be made only on the basis of material found in
the course of search [ S. 132 ]
Dismissing the appeal of the revenue ,the Court held that, Addition can be made only on the basis
of material found in the course of search . (AY.2000-01 to 2004-05).
PCIT v. Dipak Jashvantlal Panchal (2017) 397 ITR 153 (Guj) (HC)
S. 153A : Assessment – Search - No notice was sent u/s 143 (2), hence the presumption is
return was accepted, therefore notice was held to be bad in law [ S. 143 (1), 143 (2)
Allowing the appeal the Court held that ;No notice was sent u/s 143 (2), hence the presumption is
return was accepted, therefore notice was held to be bad in law, therefore the Tribunal was in
error in holding that the assessment for the assessment year 2008-09 should be treated as
“pending” whereas in terms of the circular it should be treated as final in respect of which no
scrutiny was to be started. The assessment under section 153A was not valid for the assessment
year 2008-09. (AY. 2008-09, 2009-10, 2010-11)
Chintels India Ltd v. Dy. CIT (2017) 397 ITR 416/249 Taxman 630 /297 CTR 574/156 DTR
317 (Delhi.) (HC)
S. 153A : Assessment – Search-warrant of authorisation —Cash seized by police authorities

from accused subsequent to murder of assessee —No information available with
department as to what documents or books of account to be requisitioned — Order of
requisition untenable and notices were quashed [ S. 132A, 153C ]
Allowing the petition the Court held that; mere possession of an amount by a person was not
sufficient for the purpose of issuing a requisition under section 132A of the Act . No requisition
could have been made under section 132A to the Police Department for producing the cash which
was recovered from one of the accused and had become the case property which could not be
produced before the taxing authorities without the leave of the concerned court. The documents
or the books of account in respect whereof the requisition was said to have been issued had not
been disclosed either in the requisition order or in any other supportive material which meant that
371
the requisitioning authority had no intimation whatsoever as to the documents or the books of
account which he had proposed to requisition, which led to the inference that no satisfaction or
any reason to believe was validly recorded for issuing the requisition. Accordingly, the order and
the notices issued under section 153A read with section 153Cwere quashed. (AY. 2005 - 06 to
2010-11)
Rewati Singh (Smt) (Late) v. ACIT (2017) 397 ITR 512 (All) (HC)
S. 153A : Assessment – Search-Additions can be made only if incriminating material is

found – Additions were rightly deleted by the Tribunal. [S. 14A, 68,132, 153C]
Dismissing the appeal of the revenue, the Court held that; argument of the Dept that the law laid
down in Continental Warehousing/All Cargo Global Logistics Ltd. (2015)374 ITR 645 (Bom.)
that assessment u/s 153A can be made only on the basis of incriminating material found in the
search and no other issue can be taken is per incuriam in view of ACIT v. Rajesh Jhaveri Stock
Brokers Pvt. Ltd. (2007) 291 ITR 500 (SC) is not correct. Bhola Shankar Cold Storage Pvt. Ltd.
v. JCIT (2004) 270 ITR 487 (Cal.) distinguished Referred CIT v. SKS Ispact & Power Ltd.ITA
No. 1874 of 2014 dt. 12-7 - 2017) (AY. 2002 - 03, 2004 - 05 , 2005 - 06))
CIT v. Deepak Kumar Agarwal (2017) 398 ITR 586/299 CTR 62/251 Taxman 22/158 DTR
100 (Bom.) (HC)
PCIT v. Nikki Agarwal (2017) 398 ITR 586 /299 CTR 62/251 Taxman 22 (Bom.) (HC)
CIT v. Govind Agarwal (2017) 398 ITR 586 /299 CTR 62 /251 Taxman 22 (Bom.) (HC)
CIT v. Manidevi Agarwal (2017)398 ITR 586 /299 CTR 62 /251 Taxman 22 (Bom.) (HC)
PCIT v Govind Agarwal (HUF) (2017)398 ITR 586 /299 CTR 62 (Bom.) (HC)
S. 153A : Assessment – Search-Share application and share premium - Statement do not
constitute incriminating material - If the statement is retracted and/or if cross-examination
is not provided, the statement has to be discarded. The onus of ensuring the presence of the
deponent cannot be shifted to the assessees. The onus is on the Revenue to ensure his
presence, without any incriminating materials found completed assessment additions
cannot be made on presumptions.[S. 68,132 (4)]
Dismissing the appeal of the revenue, the Court held that; statements recorded u/s 132 (4) do not
by themselves constitute incriminating material. A copy of the statement together with the
opportunity to cross-examine the deponent has to provided to the assessee. If the statement is
retracted and/or if cross-examination is not provided, the statement has to be discarded. The onus
of ensuring the presence of the deponent cannot be shifted to the assessees. The onus is on the
Revenue to ensure his presence. Although Section 153 A does not say that additions should be
strictly made on the basis of evidence found in the course of the search, or other post-search
material or information available with the AO which can be related to the evidence found, it does
not mean that the assessment “can be arbitrary or made without any relevance or nexus with the
seized material. Obviously an assessment has to be made under this Section only on the basis of
seized material. Completed assessments can be interfered with by the AO while making the
assessment under Section 153 A only on the basis of some incriminating material unearthed
during the course of search or requisition of documents or undisclosed income or property
discovered in the course of search which were not produced or not already disclosed or made
known in the course of original assessment. (AY. 2005 - 06 to 2009-10)
PCIT v. Best Infrastructure (India) Pvt. Ltd. (2017) 397 ITR 82 /159 DTR 257 (Delhi) (HC)
PCIT v. Best City Realtors (India) Pvt. Ltd. (2017) 397 ITR 82/159 DTR 257 (Delhi) (HC).
PCIT v. Best Realtors (India) Pvt. Ltd. (2017) 397 ITR 82/159 DTR 257 (Delhi) (HC)
PCIT v. Best City Developers India P. Ltd. (2017) 397 ITR 82 /159 DTR 257 (Delhi) (HC)
PCIT v. City Projects (India) Pvt. Ltd. (2017) 397 ITR 82 /159 DTR 257 (Delhi) (HC)
372
S. 153A : Assessment – Search - Assessee can claim deduction for first time before Appellate
authorities even if it was not raised before the Assessing Officer at the time filing of return
or by filing revised return.[S. 139, 254 (1)]
Dismissing the appeal of the revenue, the Court held that; Assessee can claim deduction for first
time before Appellate authorities even if it was not raised before the Assessing Officer at the time
filing of return or by filing revised return . (AY. 2003-04, 2006-07 to 2008-09)
CIT v. B.G. Shirke Construction Technology P. Ltd. (2017) 395 ITR 371/246 Taxman
306/293 CTR 505/149 DTR 33 (Bom.) (HC)
S. 153A : Assessment – Search-Assessment was completed onthe date of search, no

incriminating material was found pertaining to earlier assessment years, assessment was
held to be in valid - Material disclosed prior to search addition cannot be made. [S. 69,132,
133A]
Dismissing the appeal of the revenue, the Court held that, Assessment was completed on the
date of search, no incriminating material was found pertaining to earlier assessment years,
assessment was held to be in valid - Material disclosed prior to search addition cannot be made.
(AY. 2001 02 to 2004 - 05)
PCIT v. Meeta Gutgutia Prop. M/s. Ferns `N’ Petals (2017) 395 ITR 526 /295 CTR 466/248
Taxman 384 /152 DTR 153 (Delhi) (HC)
S.153A : Assessment – Search - No incriminating material was found, assessment completed

on the date of search, assessment u/s. 153A was held to be invalid. [S. 80HHC,132]
Dismissing the appeal of the revenue, the Court held that when no incriminating material was
found, assessment completed on the date of search, assessment u/s 153A was held to be invalid.
(AY. 2000-2001, 2001-02)
PCIT v. Ram Avtar Verma (2017) 395 ITR 252 (Delhi) (HC)
S. 153A : Assessment – Search-Assessment of third person – Documents which were

disclosed cannot be considered as incriminating documents hence assessment was held to be
bad in law. [S. 153C ]
Allowing the petition the Court held that ;Documents which were disclosed cannot be considered
as incriminating documents hence assessment was held to be bad in law. (AY. 2007-08 to 2012-
13)
ARN Infrastructure India Ltd.v. ACIT (2017) 394 ITR 569/81 taxman com 260/153 DTR
185 (Delhi) (HC)
S. 153A : Assessment – Search-Assessment must be on the basis of discovery of

incriminating material during search.
Dismissing the appeal of the revenue, the Court held that; at the time of search, no incriminating
material was found with respect to the assessment year 2001-02 to 2003-04. Only undisclosed
income and undisclosed assets detected during the search could be brought to tax. Therefore, the
Assessing Officer was not justified in making addition. With regard to the assessment year 2004-
05, the assessment for that year was framed on the basis of the material already on record much
prior to the search conducted on February 10, 2006. It was a scrutiny assessment and the
assessment was framed for the assessment year 2004-05 on the basis of the material on record. In
the absence of any specific incriminating material detected for the assessment year 2004-05, the
Assessing Officer was not justified in making any addition. (AY. 2000-01 to 2004-05)
PCIT v. Devangi Alias Rupa. (2017) 394 ITR 184 (Guj) (HC)
S. 153A : Assessment - Search or requisition – Assessment u/s 153A r.w.s. 143 (3) for the
year in which search took place bad in law as S. 153A allows preceding 6 years and not the
current year. [ S.143 (3) ]
373
The assessing officer conducted search in the premises of the assessee on 10-08-2006. He framed
assessment u/s 153A r.w.s. 143 (3) for AY 2007 – 2008 and made several additions to the
returned income. The assessee challenged the validity of the assessment order. The CIT (A)
upheld the order on the ground that assessment order also mentions section 143 (3) and hence
even if the contention of the Assessee is accepted the assessment could have been set to be made
u/s 143 (3). On appeal, the Tribunal quashed the order on the ground that the Assessing Officer
had himself mentioned that the order was framed u/s 153 r.w.s. 143 (3) and that the notice was
issued u/s 153. Further, on reading provisions of Sec 153C, an inference can be drawn that
assessment under the said section can be framed only for 6 previous assessment years. (ITA No.
5023/Del/2012 dt. 30-05-2017) (AY. 2007 – 2008)
Dy.CIT v. Arora S.L. (2017) 186 TTJ 522 /152 DTR 233 (Chd) (Trib)
Dy. CIT v. Karan Empire (P) Ltd (2017) 188/186 TTJ 522 /152 DTR 233 (Chd) (Trib)
S. 153A : Assessment – Search - Unabated assessment no addition can be made without any
incriminating documents [ S. 132 ]
Allowing the appeal the Tribunal held that ;in case of an unabated assessment no addition in
absence of any incriminating material emerging during course of search and seizure proceedings
conducted under section 132 (1) can be made in hands of assessee. (AY. 2007 - 08, 2011-12,
2012-13)
S. 153A : Assessment – Search - Name of assessee subsidiary company was not mentioned in
search warrant, issue of notice under section 153A and consequent assessment framed
against assessee were void ab Initio. [ S. 132, 143 (3) ]
Allowing the appeal of the assessee the Tribunal held that; since name of assessee subsidiary
company was not mentioned in search warrant, issue of notice under section 153A and
consequent assessment framed against assessee were void ab Initio. (AY. 2004 - 05 to 2008 - 09)
Dorf Ketal Chemicals LLC v. DCIT (2017) 167 ITD 25 (Mum) (Trib.)
S. 153A : Assessment - Search – Assessment framed for assessment year relevant to

previous year covering the search period is not valid and void ab initio, assessment can be
framed only for six assessment years relevant to the previous year in which the search was
conducted or requisition was made
Assessment u/s. 153A can be framed for six assessment years immediately preceding the
assessment year relevant to the previous year in which the search was conducted or requisition
was made. In the instant case, the search took place on 10-08-2006 i.e. relevant to AY.2007-08
and hence assessment u/s. 153A could have been framed for the 6 assessment years which
precedes AY. 2007-08 i.e. AY. 2001-02 to 2006-07. Since the assessment for the year under
consideration i.e. AY. 2007-08 was also framed u/s. 153A, the same was not valid in law and was
void ab initio . (AY. 2007-08).
Sohan Lal Arora v. ACIT (2017) 186 TTJ 522 /152 DTR 233 (Chd.) ( Trib)
374
S. 153A : Assessment – Search - When no incriminating material was found during search
completed assessment cannot abate hence no addition cannot be made on the basis of books
o account maintained [ S. 132 ]
Allowing the appeal of the assessee the Tribunal held that; When no incriminating material was
found during search completed assessment cannot abate hence no addition cannot be made on
the basis of books o account maintained . (AY. 2009-10)
Jai Lokenath Oil Extractions (P.) Ltd. v. DCIT (2017) 166 ITD 161 (Kol) (Trib.)
S. 153A : Assessment - Search - No warrant of authorization on the assesse hence entire

assessment proceedings was held to be bad in law. [ S. 132, 132A ]
Dismissing the appeal of the revenue, the Tribunal held that; the notice under section 153A was
issued withoutany jurisdiction and all the proceedings flowing from such invalid notice including
theresultant assessment order were bad in law and hence liable to be quashed. (AY. 2004-05)
ACIT v. K. G. Finvest P. Ltd. (2017) 57 ITR 62 (Delhi) (Trib)
S.153A : Assessment – Search – In order to initiate assessment proceedings u/s. 153A of the
Act, the premises of the assessee has to be searched and panchanama has to be specifically
drawn in the name of the assessee. Further, availability of incriminating material is also a
pre-requisite for framing an assessment [S. 132]
A joint warrant was issued u/s. 132 (1) of the Act in the name of assessee-AOP and its members.
A search was conducted at the residential premises of members of the AOP and panchanama was
also drawn in the name of the members of the AOP and certain documents were seized. Based on
the search warrant, the AO completed the assessment u/s. 143 (3) r.w.s. 153A of the Act wherein
the claim of deduction u/s. 80-IB (10) of the Act was disallowed. On appeal, the CIT (A)
confirmed the findings of the AO. On further appeal, the Tribunal, quashing the assessment
framed u/s. 153A of the Act, held that though search warrant was issued on the assessee-AOP,
however, no search was conducted on the premises of the AOP whereas the search was conducted
on the premises of members of AOP with no incriminating material relating to assessee was
found. Further, no panchanama was drawn in the name of assessee. Therefore, the limbs and
contents to be satisfied for initiation of assessment proceedings u/s. 153A of the Act were not
satisfied. (AY.2008 - 09)
Unique Star Developers v. DCIT (2017) 57 ITR 463 /187 TTJ 682/156 DTR 25 (Mum)
(Trib)
S. 153A : Assessment – Search-Cost adopted by the assessee accepted in regular assessments

for earlier years-Downward revision of cost of acquisition not justified where no
incriminating material found during search. [S. 45, 48]
Tribunal held that; when cost adopted by the assessee accepted in regular assessments for earlier
years ,downward revision of cost of acquisition not justified where no incriminating material
found during search. (AY. 2007-2008)
Dy. CIT v. Ramesh Batta (2017) 55 ITR 612 (Delhi) (Trib.)
S. 153A : Assessment – Search-Search being declared void, consequential assessment based

on the void search was held to be in valid - Revenue was directed to pay cost of Rs. 10,000.
[S.132]
375
Allowing the petition the Court held that; search conducted on Locker No. 4979 by issuing an
authorization dated 27th February, 2012 under Section 132 of the Act against the Petitioner was
invalid. The said authorisation is hereby quashed. Consequently, question (b) is also answered in
the negative by holding that there was no legal justification for the issuance of the impugned
notice dated 22nd October, 2012 to the Petitioner under Section 153 A of the Act for the AYs
2006-2007 to 2011-2012. The said notice is also hereby quashed. All consequential actions of the
Respondents are hereby declared invalid. Revenue was directed to pay cost of Rs 10000. (AY.
2006-07 to 2011-12)
Ameeta Mehra v. ADIT (2017) 395 ITR 185 /152 DTR 278/248 Taxman 308/295 CTR 592
(Delhi) (HC)
S. 153A : Assessment – Search-Concluded assessment cannot be reopened in the absence of

incriminating material found during the search - Statement cannot be construed as
incriminating material. [S. 132]
Dismissing the appeal of the revenue, the Court held that; Concluded assessment cannot be
reopened in the absence of incriminating material found during the search . Statement cannot be
construed as incriminating material (ITA Nos. 306, 307, 308, 309 & 310 of 2017, dt. 25.05.2017)
(AY. 2001-01 to 2004-05)
PCIT v. Meetu Gutgutia, Prop Ferns ’N’ Petal (Delhi) (HC),www.itatonline.org
S.153A : Assessment – Search-Absence of seizure of any new material during search, fresh
examination was held to be unjustified.[S.132, 260A]
Dismissing the appeal of the revenue, the Court held that;in the absence of any material seized
during the search proceeding a fresh examination of the valuation issue was not justified. No
PCIT v. Anita Rani (Smt.) (2017) 392 ITR 501 (Delhi) (HC)
S. 153A : Assessment-Search – Though no incriminating material was found in the course of

search, notice in pursuance of search and assessment thereafter was held to be valid. [S.132]
Dismissing the appeal of the assessee, the Court held that; Though no incriminating material was
found in the course of search, notice in pursuance of search and assessment thereafter was held to
be valid
E.N. Gopakumar v. CIT (2017)390 ITR 131/ 244 Taxman 21 /148 DTR 296 (Ker.) (HC)
S. 153A : Assessment-Search – Statement in the course of search could be relied upon to

make addition and rejection of books of account was held to be justified . [S.132 (4), 145,
260A]
Dismissing the appeal of the assessee the Court held that;Statement in the course of search could
be relied upon to make addition. The findings of the Appellate Tribunal did not reveal any
fundamental error calling for interference. Court also held that rejection of books of account and
estimate of income was held to be justified .
Ajay Gupta v. CIT (2016) 290 CTR 361 (2017) 390 ITR 496/245 Taxman 293 (Delhi) (HC)
Dayawanti (Smt.) v. CIT (2016) 290 CTR 361 (2017) 390 ITR 496/245 Taxman 293 (Delhi)
(HC)
Editorial : SLP of assesse is admitted ,Dayawanti v. CIT (2017) 250 Taxman 75 (SC)
S.153A : Assessment-Search-Discovery of incriminating material during search not pre-

condition to issue of notice. [S. 132]
Dismissing the appeal of the revenue the Court held that; the issuance of notice under section
153A (1) (a) of the Act it was not necessary that the search on which it was founded should have
376
necessarily yielded any incriminating material against the assessee or the person to whom such
notice was issued.
E.N. Gopakumar v. CIT (2017) 390 ITR 131 /244 Taxman 21 /293 CTR 450 /148 DTR 296
(Ker.) (HC)
S. 153A : Assessment – Search - When the Addl. CIT records that he is granting
“mechanical approval” u/s 153D to the draft assessment order for want of time to have
meaningful discussion, the assessment order is bad in law and has to be annulled. [S. 153C,
153D]
The Addl. Commissioner has showed his inability to analyze the issues of draft order on merit
clearly stating that no much time is left, inasmuch as the draft order was placed before him on
31.12.2010 and the approval was granted on the very same day. Considering the factual matrix of
the approval letter, we have no hesitation to hold that the approval granted by the Addl.
Commissioner is devoid of any application of mind, is mechanical and without considering the
materials on record. In our considered opinion, the power vested in the Joint Commissioner/Addl
Commissioner to grant or not to grant approval is coupled with a duty. The Addl
Commissioner/Joint Commissioner is required to apply his mind to the proposals put up to him
for approval in the light of the material relied upon by the AO. The said power cannot be
exercised casually and in a routine manner. We are constrained to observe that in the present case,
there has been no application of mind by the Addl. Commissioner before granting the approval.
Therefore, we have no hesitation to hold that the assessment order made u/s. 143 (3) of the Act
r.w. Sec. 153A of the Act is bad in law and deserves to be annulled. (ITA No. 167,168,321,322 &
192/Lkw/2016, dt. 28.04.2017) (AY. 2010-11)
AAA Paper marketing Ltd. v. ACIT (Lucknow) (Trib.),www.itatonline.org
Sidhibhoomi Alloys Ltd v. ACIT (Lucknow) (Trib.),www.itatonline.org
DCI v. Appurva Goel (Lucknow) (Trib.),www.itatonline.org
S. 153A : Assessment – Search-Unexplained investment-Surrendered income during search

and explanation thereafter, explaining the source-AO was directed to verify.
Allowing the appeal the Tribunal held that; the claim that part of sum surrendered during search
covered by purchase by cheque and the Bank account showing assessee paying certain sum for
purchasing jewellery. Tribunal held that an opportunity given to assessee to submit details to
Assessing Officer to substantiate claim that jewellery purchased were included in jewellery found
during search. (AY.2011-2012)
P. Rama Devi v. DCIT (2017) 54 ITR 30 (Hyd.) (Trib.)
S. 153A : Assessment – Search-No incriminating material found at time of search and when
original assessment was completed additions cannot be made in pursuance of search
proceedings . [S.143 (3)]
Where the assessment proceedings were completed prior to date of search on basis of original
return and no incriminating documents were found for the relevant year, the Assessing Officer
could not and ought not to have examined in assessment proceedings under section 153A. Claim
to treat as capital receipt sales tax remission brought to tax in original assessment, cannot be
subject matter of determination of total income under section 153A. (AY.. 2003-2004 to 2011-
2012)
S. 153A : Assessment – Search - on money – Noting in seized papers – Additions cannot be

made as undisclosed income - Additions cannot be made on the basis of estimate and
extrapolation theory - Accounting Standard-7 is not applicable when sale of flats on
377
ownership basis - Receipt is taxable only in the year when possession of flats or occupation
certificate is given where assessee follows projection certificate.[S. 132, 145A]
Dismissing the appeal of the revenue, the Tribunal held that ;merely on the basis of noting in
seized papers additions cannot be made as undisclosed income, when purchasers have denied
making any cash to the assessee. Additions cannot be made on the basis of estimate and
extrapolation theory. Affidavits filed by assessee not to be rejected on ground that he produced no
documentary evidence. Accounting Standard-7 prescribing method of accounting of construction
contracts in books of contractors is not applicable when the assessee carrying on construction
activity on ownership basis and not in pursuance of any contract with a contractee. When assesse
follows project completion certificate, receipts taxable only in year in which project completed
and possession of flat or occupancy certificate given for flat . (AY.2004-2005 to 2011-2012)
ACIT v. Layer Exports P. Ltd. (2017) 53 ITR 416 /184 TTJ 469 (Mum.) (Trib.)
S. 153A : Assessment - Search - Assessing officer has no jurisdiction to assess the long term
capital gains as income from other sources as no incriminating material qua long term
capital gain was found during search. [ S. 132 ]
Allowing the appeal of the assessee the Tribunal held that ;assessment year was not pending on
the date of search and no incriminating material qua long term capital gains was found during the
search, AO had no jurisdiction to assess the long term capital gains as income from other sources
in the assessment u/s. 153A of the Act. (AY. 2002-03 to 2006-07)
Anjali Pandit (Smt) . v . ACIT (2016) 188 TTJ 645 /157 DTR 17 (Mum.) (Trib.)
S. 153B : Assessment - Search – Time limit – Assessment order passed beyond the time
limit prescribed was barred by limitation and therefore, liable to be quashed. [ S.
153A,158BC, 158BE ]
Search and Seizure operation were carried out at the premises of the Kamdhenu group. During the
course of search operation, certain documents relating to assessee were found and seized, which
were subsequently handed over the AO of the assessee. The AO after recording satisfaction
issued a notice u/s. 153C of the Act on the assessee. The AO completed the assessment in
accordance with the provision of s. 153C of the Act which was confirmed by CIT (A).On appeal
before the Tribunal, the assessee raised additional ground to content that the order passed u/s.
153C of the Act was barred by limitation since they were passed beyond the time limit provided
u/s. 153B of the Act. The Tribunal, admitting the additional ground, observed that as per second
proviso to s. 153B, the time limit provided for passing order u/s. 153C of the Act was 21 months
from the end of the financial year in which the last of the authorization for search u/s. 132 or the
requisition u/s. 132A was executed or 9 months from the end of the financial year in which books
or documents were handed over u/s. 153C to the AO of the assessee (s). In the instance case,
admittedly the orders u/s. 153C were passed beyond the time limit and therefore, were barred by
limitation and liable to be quashed. (AY. 2003-04 to 2008-09)
Anil Agarwal and sons (HUF) v.ITO) 2017) 57 ITR 491 (Jaipur) (Trib.)
Kamlesh Rani (Smt.) v. ITO (2017) 57 ITR 491 (Jaipur) (Trib.)
Kulwant Rai v. ITO (2017) 57 ITR 491 (Jaipur) (Trib.)
Rani Yogita (Smt.) v. ITO (2017) 57 ITR 491 (Jaipur) (Trib.)
Shakuntala Devi (Smt.) v. ITO (2017) 57 ITR 491 (Jaipur) (Trib.)
Suman Agarwal (Dr.) v. ITO (2017) 57 ITR 491 (Jaipur) (Trib.)
378
S. 153C : Assessment - Income of any other person – Search-Seized documents must have
co-relation, document wise ,with assessment year and money bullion or jewellery or other
valuable articles or things etc requisitioned belong to other person - Assessment was held
to be bad in law. [S. 153A]
Dismissing the appeal of the revenue, the Court held that; the seized incriminating material have
to pertain to the AY in question and have co-relation, document-wise, with the AY. This
requirement u/s 153C is essential and becomes a jurisdictional fact. It is an essential condition
precedent that any money, bullion or jewellery or other valuable articles or thing or books of
accounts or documents seized or requisitioned should belong to a person other than the person
referred to in S. 153A. Kamleshbhai Dharamshibhai Patel 31 TM.com 50 (Guj) approved. SSP
Aviation (2012) 346 ITR 177 (Del) distinguished. (AY. 2000 - 01 to 2003 - 04)
CIT v. Sinhgad Technical Education Society (2017)397 ITR 344 /156 DTR 161/297 CTR
441/250 Taxman 225 (SC)
Editorial : Decision in CIT v. Sinhgad Technical Education Society (2015) 378 ITR 84 /278
CTR 144/120 DTR 79 (Bom) (HC) is affirmed
S. 153C : Assessment - Income of any other person - Search – Before issue of notice the
Assessing Officer is required to arrive at a conclusive satisfaction, mere mention of
satisfaction or I am satisfied is not sufficient [ S. 132 ]
Allowing the petition the Court held that ;before issue of notice under section 153C, Assessing
Officer is required to arrive at a conclusive satisfaction that documents belongs to a person other
than searched person. Mere mention of satisfaction or I am satisfied is not sufficient in order to
meet requirement of concept of satisfaction as used in S. 153C of the Act. (AY. 2006-07 to
2011-12)
Pepsi Foods (P.) Ltd. v ACIT (2015) 231 Taxman 58 (Delhi) (HC)
Editorial : SLP of revenue was dismissed, ACIT v. Pepsi Foods (P.) Ltd. (2018) 252 Taxman
372 (SC)
S.153C; Assessment - Income of any other person - Search - Trial balance and balance sheet
seized, could not be said to be incriminating therefore assumption of jurisdiction was held
to be not justified [ S. 132 ]
Dismissing the appeal of the revenue the Court held that; the essential jurisdictional requirement
for assumption of jurisdiction under section 153C (prior to its amendment with effect from
1.6.2015) qua the 'other person' is that the seized documents forming the basis of the satisfaction
note must not merely 'pertain' to the other person but must ‘belong to’ the 'other person'. In the
present case, the documents seized were trial balance and balance sheets of the assesse. The
documents were seized not from the respective assessee but from the searched person. In other
words, although the said documents might 'pertain' to the assessee, they did not belong to them.
Therefore, one essential jurisdictional requirement to justify the assumption of jurisdiction under
section 153C was not met in the case of the assessee.
PCIT v. Index Securities (P) Ltd. (2017) 157 DTR 20/86 taxman .com 84 (Delhi) (HC)
379
S. 153C : Assessment - Income of any other person - Search – When there is no nexus
between additions made and seized material, order is unsustainable .[S. 132, 153A ]
Dismissing the appeal of the revenue, the Court held that; When there is no nexus between
additions made and seized material, order is unsustainable. (AY. 2007 - 08 to 2009 - 10)
PCIT v. Rajeev Behl (2017) 398 ITR 615 (Delhi) (HC)
S. 153C : Assessment - Income of any other person – Search - Satisfaction notes recorded by
Assessing Officer of assessee and Assessing Officer of searched person were identically
worded - Proceeding initiated against assessee was unjustified.[ S. 132 (4A) ,292C ]
Allowing the petition the Court held that; Satisfaction notes recorded by Assessing Officer of
assessee and Assessing Officer of searched person were identically worded therefore proceeding
initiated against assessee was unjustified. (AY. 2006-07 to 2011-12)
Canyon Financial Services Ltd. v. ITO (2017) 399 ITR 202 /249 Taxman 493 /155 DTR 73
(Delhi) (HC)
Editorail : SLP of revenue was dismissed ITO v. Canyon Financial Services Ltd (2018) 253
Taxman 341 /254 Taxman 124/403 ITR 311 (St.) SC)
S. 153C : Assessment - Income of any other person - Search – Dateto be reckoned from date
of handing over of assets and documents to assessing officer of third person - Amendment
with effect from april 1, 2017 that six previous years to be reckoned from date of search is
prospective. [ S. 153A ]
Dismissing the appeal of the revenue, the Court held that; the amendment in section 153C of the
Act by the Finance Act, 2017 with effect from April 1, 2017 to the effect that the block period for
the person in respect of whom the search was conducted as well as the “other person” would be
the same six assessment years immediately preceding the year of search is prospective.
Accordingly; the notice issued to the assessee under section 153C of the Act for the assessment
year 2006-07, was without jurisdiction since the assessment year was beyond the purview of
issuance of notice in terms of the provision under section 153C of the Act.
PCIT v. Sarwar Agency P. Ltd. (2017) 397 ITR 400 (Delhi) (HC)
S. 153C : Assessment - Income of any other person - Search – Survey – Merely on the basis
of statement in the course of survey addition was held to be not justified, however if the
maker of the statement him self reaffirm the statement addition was held to be justified [
S. 132, 133A]
On appeal to the High Court the assessee contended that the entire assessments were based on
statements of a salesman of the assessee recorded under section 133A and that in absence of any
corroborative evidence, the assessments were illegal. Dismissing the appeal the Court held that;
the statement under section 133A of the salesman of the assessee was recorded during the survey
conducted and it is also true that an assessment made entirely relying on such a statement cannot
be sustained. However, there is force in the submission of the revenue that the assessments made
is not based only on the statement under section 133A. On the other hand, the assessment order
itself reveals that the revenue has placed reliance on the proceedings initiated against the
appellant for imposition of penalty under section 67 of the Kerala VAT Act (‘KVAT’) based on
an inspection held on 17-8-2006. It is seen that the revenue relied on letter dated 18-9-2007
issued by salesman of the assessee to the Assistant Director of Income Tax (Investigation)
clarifying his statement under section 133A. This shows that the maker of the statement himself
has re-affirmed the statement and nothing has been produced by the assessee to show that the
contents of the statement are incorrect.In such a situation, the contention now raised by the
380
assessee is unacceptable and the assessments cannot be held to be illegal. Therefore, the
assessment were confirmed.
Kottakkal Wood Complex v. DCIT (2017) 154 DTR 259/297 CTR 323 (Ker) (HC)
S. 153C : Assessment-Income of any other person-Search - No proceedings can be initiated

against a person unless the seized material is belong to that person – Satisfaction recorded
must also refer the documents seized.[S. 132]
Dismissing the appeal of the revenue, the Court held that; proceedings can be initiated against a
person only if the seized materials "belongs" to that person. It is not sufficient for the Revenue to
urge that the seized document "pertains" to the person. Sinhgad Technical Education Society
[2017] 84 Taxmann.com 290 (SC) followed. Court also observed that; as far as ITA No.
499/2011 is concerned, the Court finds that there is an additional ground to reject the appeal of
the Revenue. The satisfaction note recorded by the AO in that case does not even refer to the
seized documents. (ITA No. 499 of 2011, dt. 06.09.2017) (AY. 2002-03)
CIT v. Renu Constructions Pvt. Ltd (2017) 399 ITR 262/ 298 CTR 11 /157 DTR 86 (Delhi)
(HC)
CIT v. Ankit Gupta (2017) 399 ITR 262 /298 CTR 11 /157 DTR 86 (Delhi) (HC)
CIT v. Ankit Gupta, L/H Manoj Kumar (2017) 399 ITR 262 /298 CTR 11/157 DTR 86
(Delhi) (HC)
S. 153C : Assessment-Income of any other person-Search – Person from the documents was
seized denied that the documents belongs to the assesse – Precondition was not satisfied
hence assessment was held to be bad in law .Burden is on department – Addition was held
to be on conjectures and held to be bad in law.[S. 132, 153A]
Dismissing the appeal of revenue the Court held that;Person from the documents was seized
denied that the documents belongs to the assessee.There was no material whatsoever placed on
record by the Department hence basis for initiation of proceedings was not satisfied. Court also
held that ;the interrogation of the person in respect of whom search was conducted had revealed
that he was not the author of the document but he had suggested that it was a proposal given by
some other broker and that had not been enquired into further by the Assessing Officer. The
additions made, proceeding on conjectures as regards what the document had stated without
considering the internal contradictions and inconsistencies, merely on the basis of the seized
document without further investigation, were unsustainable. (AY. 2010 - 11)
PCIT v. Vinita Chaurasia (2017) 394 ITR 758/248 Taxman 172/154 DTR 145 (Delhi) (HC)
S. 153C : Assessment-Income of any other person-Search - Satisfaction-Statement of

director constitute material for issue of notice. [S. 132 (4)]
Allowing the appeal of the revenue the Court held that, where assessee’s director stated that some
cash seized at his residential and office premises belonged to the assessee, then such statement
constitutes material for completion of proceedings u/s 153C because, it was made during the
course of search u/s 132 (4). (AY. 2008-09)
PCIT v. Nau Nidh Overseas (P.) Ltd. (2017) 293 CTR 567/148 DTR 381 (Delhi) (HC)
S. 153C : Assessment-Income of any other person – Search – Statement and seizure of cash
constitutes sufficient satisfaction. [S. 132 (4) 153A]
Allowing the appeal of the revenue the Court held that; in the course of search of the director’s
residential and other premises, he had stated that some of the cash seized in those premises
belonged to the assessee. For the purposes of section 153C of the Act, the satisfaction of the
Assessing Officer recorded was sufficient. The Assessing Officer had considered the totality of
the statement to conclude that the cash seized belonged to the third party, the assessee. Such
381
statement also constituted as material because it was made in the course of the search under
section 132 (4) . The order of the Appellate Tribunal was to be set aside.
CIT v. Nau Nidh Overseas Pvt. Ltd. (2017) 394 ITR 753 (Delhi) (HC)
S. 153C : Assessment - Income of any other person-Search-Same Assessing Officer having

jurisdiction over persons in respect of whom search conducted and assessed-Satisfaction of
Assessing Officer recorded-Finding of Appellate Tribunal that proper satisfaction not
recorded unsustainable-Matter remanded.[S. 132, 153A]
The Appellate Tribunal quashed the assessment order on the ground that there was no proper
recording of satisfaction by the Assessing Officer to issue notice under section 153A, that
proceedings under section 153C were to be undertaken or drawn up. On appeals, the Court held
that; the finding of the Appellate Tribunal with regard to absence of any satisfaction being
recorded under section 153C of the Income-tax Act, 1961 was unsustainable. The appeals were
remitted to the Appellate Tribunal for consideration on the merits.
PCIT v. Satkar Fincap Ltd. (2017) 393 ITR 378 (Delhi) (HC)
S. 153C : Assessment-Income of any other person-Search-The requirement that the

documents found during search should “belong” to the assessee is a condition precedent and
a jurisdictional issue - The non-satisfaction of the condition renders the entire proceedings
was held to be null and void. [S. 69C, 132]
Dismissing the appeal of the revenue, the Court held that;the requirement that the documents
found during search should “belong” to the assessee is a condition precedent and a jurisdictional
issue. The non-satisfaction of the condition renders the entire proceedings null and void. The fact
that the searched person and the assessee are alleged to be “hand in glove” is irrelevant.In view of
the above reasons and particularly the finding of fact that seized document which forms the basis
of the present proceedings, do not belong to the petitioner and the same not being shown to be
perverse, the question as raised does not give rise to any substantial question of law and thus not
entertained. (AY.2007-08, 2008-09)
CIT v. Arpit Land Pvt. Ltd (2017) 393 ITR 276/154 DTR 241 /297 CTR 200 (Bom.) (HC)
CIT v. Ambit Reality Pvt. Ltd. (2017) 393 ITR 276/154 DTR 241 /297 CTR 200 (Bom.) (HC)
S. 153C : Assessment-Income of any other person – Search - Satisfaction note-Quashing of

order on hyper technical ground was held to be in valid – Matter remanded. [S. 132,133A]
Allowing the appeal of the revenue the Court held that; where the Assessing Officer had issued a
satisfaction note u/s. 153C after satisfying himself with contents of documents seized, Tribunal
could not declare it as invalid on hyper technical ground of incorrect terminology used in said
note. Matter was set aside to Tribunal to decide on merit . (AY. 2005-06 to 2010-11)
PCIT v. Super Malls (P) Ltd. (2016) 76 taxmann.com 267 /(2017) 291 CTR 142/(2017) 393
ITR 557 (Delhi) (HC)
S. 153C : Assessment - Income of any other person – Search - Re-assessment proceedings

initiated on a third person on the basis of the information received based on the material
found during the course of search from the premises of a medical college run by a trust are
invalid and void ab initio [S. 143 (3),147,148 ]
The AO issued notice u/s. 148 and recorded reasons for reopening the assessment of the assessee
on the basis of the information received during the course of the search conducted on the
premises of a medical college. Thus, the provisions of section 153C were applicable for framing
an assessment and excludes the application of section 147. Hence notice issued u/s. 148 was
382
invalid and the assessment order passed u/s. 143 (3) r.w.s 147 was void ab initio (ITA No. 1500
& 1501/Del. 2017 dt. 08-08-2017) (AY. 2007-08)
Shelly Agarwal v. ITO (2017) 58 ITR 57 (SN) (Delhi) (Trib)
S. 153C : Assessment - Income of any other person – Search - No recording of satisfaction –

Assessment was held to be bad in law. [S. 153C]
The Tribunal dismissed the appeal filed by the department on the basis that the jurisdiction under
section 153C has been acquired only on the basis of same satisfaction note which has been
recorded by the AO of the assessee and not by the AO of the searched person during the course of
assessment or search proceedings of the searched person. Accordingly for all the years the
assessment orders are quashed. (AY. 2003-04 to 2008-09)
Jay Dee Securities & Finance Ltd. v. ACIT (2017) 156 DTR 73 /188 TTJ 593 (Delhi) (Trib.)
S. 153C : Assessment - Income of any other person – Serach - In absence of any document
belonging to assessee having been seized during search, assumption of jurisdiction by AO
by referring to seized documents, was unjustified. [ S. 132, 153A ]
Tribunal held that the seized documents neither make any reference of assessee, nor of any
transaction entered into by it. In absence of any document belonging to assessee having been
seized during search, assumption of jurisdiction by AO u/s.153C by referring to aforesaid seized
documents, was unjustified. (AY. 2005-06 to 2010-11)
DCIT v. National Standard India Ltd (2017) 166 ITD 426 (Mum) (Trib.)
S. 153C : Assessment - Income of any other person – Serach Search-Mere mentioning of

wrong section 153A, instead of S.153C would not invalidate assessment.[S.292B ]
Allowing the appeal of the revenue the Tribunal held that, when assessee has actively
participated in assessment proceedings and was given due opportunity of meeting case, merely
mentioned wrong section, i.e., S.153A instead of S. 153C would not invalidate assessment in
view of S. 292B of the Act. (AY 2005-06 to 2007-08)
DCIT v. K.M. Nagaraj (2017) 166 ITD 53/189 TTJ 598 /158 DTR 25 (Bang) (Trib.)
S. 153C : Assessment - Income of any other person - Search – Delay of 200 days in filing the
appeal on jurisdictional issue was condoned - Satisfaction to be recorded only by the AO of
the person against whom search was conducted at the time of analysing the document seized
and found during the course of search, accordingly initiation of proceedings u/s 153C was
held to be without jurisdiction [ S.153A, 254 (1) ]
Allowing the cross appeal of the Assessee, the Tribunal condoned the delay of 200 days in in
filing the appeal on jurisdiction point was condoned . Tribunal also held that, satisfaction to be
recorded only by the AO of the person against whom search was conducted at the time of
analysing the document seized and found during the course of search, accordingly initiation of
383
proceedings u/s 153C was held to be without jurisdiction. Since the very assessment order and
the proceedings under section 153C have been declared as null and void and in valid, the appeals
of the revenue become infructuous and accordingly, the same are dismissed . (AY .2003-04 to
2008-09)
ACIT v Jay Dee Securities and Finance Ltd. (2017) 57 ITR 681/156 DTR 73 /188 TTJ 593
(Delhi) (Trib)
S. 153D : Assessment - Search and seizure – Approval – No such requirement of granting an

opportunity of hearing to the assessee by the JCIT prior to giving the approval as per
Section 153D of the Act hence the order is valid [ S.153A ]
Assessee challenged validity of assessment framed u/s 153A of the Act due to non-offering
opportunity of being heard to assessee before approving assessment order. The Tribunal held that
the plain reading of the provisions of section 153D revealed that there is a requirement of taking
approval by AO below the rank of JCIT before passing an assessment order under Section 153A
of the Act from JCIT. The condition mandated under Section 153D of the Act did not indicate
that such approval must be given after hearing the assessee on the issue of approval and
accordingly there was no such requirement of granting an opportunity of hearing to the assessee
by the JCIT prior to giving the approval as per Section 153D of the Act. (AY 2005-06 to 2009-
10)
Gopal S. Pandith v DCIT (2017) 153 DTR 253 /186 TTJ 64 (Bang) (Trib)
S. 154 : Rectification of mistake – Limitation - Assessee cannot take advantage of extension
of limitation to seek rectification of order passed by assessing officer pursuant to remand.[
S. 154 (7) ]
Dismissing the appeal the Court held that; The order of remand passed by the Tribunal was only
confined to determination of “long-term capital gains” and not for any other purpose. Therefore,
in the remand in relation to some other aspect, the assessee could not have taken advantage of
extension of limitation by seeking commencement thereof from the order passed by the Assessing
Officer on the issue on which the remand was made. (AY. 2003-04)
Shree Nav Durga Bansal Cold Storage and Ice Factory v. CIT (2017) 397 ITR 626/ 82
taxmann.com 148 /160 DTR 291 (All) (HC)
S. 154 : Rectification of mistake – Review petition was rejected – order cannot be rectified
by the AO. [S.10 (23C) (vi), 253 (1)]
Review petition filed by the assessee was rejected by the CCIT on the ground that there is no
provision under the Act to review an order passed under section 10 (23C) (vi) of the Act. On
appeal by the assessee against the said order, dismissing the appeal the Tribunal held that; order
passed under section 10 (23C) (vi), on which review petition was filed, had specifically stated
that application was being rejected for non-mentioning of non-profit nature of institutions run by
assessee in its trust deed, accordingly rectification application was rightly rejected. (AY.2010-
11,2011-12)
PKD Trust v. ITO (2017) 163 ITD 502 /57 ITR 214 (Chennai) (Trib.)
S. 158BB : Block assessment – Undisclosed income – Merely on the basis of valuation report
addition was held to be not justified . [ S. 132 ]
Dismissing the appeal of the revenue, the Court held that; Merely on the basis of valuation report
addition was held to be not justified.
CIT v. Naresh Kumar Agarwal (2017) 397 ITR 355 (Guj) (HC)
384
S. 158BB : Block assessment – Undisclosed income – Addition only on the basis of disclosure
was held to be not permissible.
It has been held by the Hon’ble High Court that if a disclosure of undisclosed income is made
during the course of search proceedings, there may be reasonable presumption that the disclosure
is not made voluntarily. Therefore, any addition is made only on the basis of disclosure without
bringing out material /evidence cannot be sustained.
DCIT v. Ghanshyam M. Tamakuwala (2017) 153 DTR 99 (Guj) (HC)
S. 158BC : Assessment – Block assessment-Once return is filed the AO is bound to issue a

notice u/s 143 (2) [ S. 143 (2) ]
Dismissing the appeal of the revenue, the Court held that; where assessee, in response to notice
issued under section 158BC, filed a return after long delay, however, said return was not
discarded as invalid, in such a case, if Assessing Officer wanted to frame assessment at higher
income, he was bound to issue a notice under section 143 (2).
PCIT v. Devendranath G. Chaturvedi (2017) 249 Taxman 49 /155 DTR 125 (Guj.) (HC)
S.158BC : Block assessment – Medical practioner - Deduction of relief of 42% on gross

receipt without any evidence was held to be not proper.[ S. 132 ]
Allowing the appeal of the revenue the Court held that; deduction of 42% on gross receipt which
was allowed by the Tribunal was without any evidence, hence the order of Tribunal was seta side
and directed the Tribunal to decide according to law. (AY. 1997 - 98 - 2002 - 03)
CIT v. Dr. Hakeem S.A. Sayed Sathar (2017) 398 ITR 345/250 Taxman 208 (Mad) (HC)
S. 158BC : Block assessment-Natural justice – Contention was not raised before any
authority - Assessee was aware of the document, there is no violation of principle of natural
justice-Unaccounted receipts and assets were found - Validity of search cannot be
questioned-Order cannot be held to be BIAS only because the Assessing Officer was part of
search party. [S. 132]
Court held that contention of natural justice was not raised before any authorities and the assessee
was aware of the document hence there is no violation of principle of natural justice.Documents
seized revaling unaccounted receipts and assets hence the validity of search cannot be
questioned Assessing Officer was part of the search party cannot be basis to hold that the order
was biased . (BP.1985-95)
Anuj Chawla v. CIT (2017) 395 ITR 52/247 Taxman 264/295 CTR 235/151 DTR 33 (Delhi)
(HC)
S. 158BC : Block assessment – Foreign fund transfer – Failure to furnish credible evidence,
addition was held to be justified. [S. 69A, 132]
Court held that; failure to furnish credible evidence of foreign fund transfer addition was held to
be justified (BP. 1985-95)
Anuj Chawla v. CIT (2017) 395 ITR 52/247 Taxman 264/295 CTR 235 /151 DTR 33 (Delhi)
(HC)
S. 158BC : Block assessment-Amounts neither disclosed in the return nor in the block
return, additions which are based on documents seized was held to be justified. [S. 132]
Court held that, amounts neither disclosed in the return nor in the block return, additions which
are based on documents seized was held to be justified. (BP. 1985-95)
(HC)
385
S. 158BC : Block assessment-Loose papers – Revaluation of property – Addition was held to
be not justified. [S. 132]
Court held that randomly scribbled loose paper is not sufficient to warrant revaluation hence
deletion of additions was held to be proper. (BP. 1985-95)
(HC)
S. 158BC : Block assessment – Cash and jewellery seized from bank lockers – Family
members claiming ownership – Failure to prove the capacity to earn income, addition was
held to be justified - Deletion of agricultural income as income from undisclosed source was
held to be justified. [S. 69A]
Allowing the appeal of the revenue,the Court held that; failure of assesse to prove the capacity of
family members to earn income cash and jewellery seized from bank lockers addition was held to
be justified. As regards deletion of agricultural income as income from undisclosed source was
held to be justified. (BP. 1-4-97 to 24-4-2003)
CIT v. G. G. Dhir. (Dr.) (2017) 394 ITR 164/247 Taxman 121/295 CTR 291/151 DTR 171
(All) (HC)
S.158BC : Block assessment-Issue of notice under section under section 143 (2) is
mandatory for the purpose of assessment under Chapter XIV-B. [S. 143 (2)]
The High Court held upheld the order of the Tribunal quashing the block assessment order passed
under section 158BC of the Income-tax Act, 1961 for the reason that the issue of notice under
section 143 (2) is mandatory for block assessment proceedings following the decision of the
Honourable Apex Court in the case of ACIT v. Hotel Blue Moon (2010) 321 ITR 362 (SC).
CIT v. Monga Steels Pvt. Ltd. (2017) 146 DTR 1134 (All) (HC)
S. 158BC : Block assessment-No incriminating material found during search-Additions

made on basis of evidence gathered from extraneous source and on basis of statement or
document received subsequent to search-Assessing Officer has no jurisdiction to make
additions. [S. 132, 158BB (1)]
Dismissing the appeal of the revenue the Court held that if no incriminating material was found in
the course of search proceedings, additions cannot be made on basis of evidence gathered from
extraneous source and on basis of statement or document received subsequent to search.-
Assessing Officer has no jurisdiction tomake additions.
CIT v. Pinaki Misra (2017) 392 ITR 347 /148 DTR 219 /293 CTR 377 (Delhi) (HC)
CIT v. Sangeeta Misra (2017) 392 ITR 347/148 DTR 219/293 CTR 377 (Delhi) (HC)
S.158BC : Block assessment--Tribunal quashing notice on ground that warrant of

authorisation not issued in name of assessee - Findings required to be revalued and
reappreciated after verifying documents--Matter remanded. [S.132, 176 (3)]
Allowing the appeal of the revenue, the Court held that; the findings arrived at by the Tribunal
that the search was at the only residential premises of one of the partners which was not
supported by the original form. The Tribunal was required to arrive at a finding after
reappreciation of the evidence by calling for the original documents and after giving opportunity
to both sides for inspecting the documents and offering their comments. Therefore, the matter was
remitted to the Tribunal only on the one point. It was required to be revalued and reappreciated
after verifying the documents. Matter remanded.
CIT v V.K. Rana (2017) 392 ITR 449/148 DTR 362/297 CTR 598 (Raj.) (HC)
CIT v. Ratan Mandir (2017) 148 DTR 362/297 CTR 598 (Raj.) (HC)
Dharmendra Kumar Rana v CIT (2017) 148 DTR 362/297 CTR 598 (Raj.) (HC)
386
S.158BC : Block assessment-Assessing Officer issuing notice to file return "within 15 days"-
Assessment on basis of invalid notice was held to be illegal. [S.132]
Allowing the appeals the court held that, under section 158BC of the Income-tax Act, 1961 by the
Assessing Officer to file returns "within 15 days" violated the provisions of the section which
required to issue a notice providing time of "not being less than 15 days" and hence the
assessments made on the basis of such notices were bad in law. Assessments made on the basis of
illegal and invalid notice were bad in law.
Bhawana Batwani v. CIT (2017) 392 ITR 369 /149 DTR 105 /293 CTR 559 (Raj.) (HC)
Jaipal das v. CIT (2017) 392 ITR 369/149 DTR 105 /293 CTT 559 (Raj.) (HC)
Surya Dev Kumawat v. CIT (2017) 392 ITR 369/149 DTR 105/293 CTR 559 (Raj.) (HC)
Rajpal Das v. CIT (2017) 392 ITR 369 (Raj.) (HC)
Rajkumar Batwani v. CIT (2017) 392 ITR 369 /149 DTR 105/293 CTR 559 (Raj.) (HC)
Tek Chand Batwani v. CIT (2017) 392 ITR 369/149 DTR 105 /293 CTR 559 (Raj.) (HC)
S. 158BC : Block assessment - Merely on the basis of statement addition was held to be not
justified. [S. 132 (4)].
Dismissing the appeal of the revenue, the Court held that; a mere statement without there being
any corroborative evidence, should not be treated as conclusive evidence against the maker of the
statement.
CIT v. Jayalakshmi Ammal (2017) 390 ITR 189 (Mad.) (HC)
S.158BC : Block assessment-Undisclosed income-Additions to income based on facts-Merely

because a protective assessment had been made in the hands of asseees’s wife did not ipso
facto mean that the assessment of such items of assets at hands of assessee was
unsustainable. [S.158BD]
Dismissing the appeal the Court held that; additions to income was confirmed on facts hence the
order was justified . Merely because a protective assessment had been made in the hands of
asseees’s wife did not ipso facto mean that the assessment of such items of assets at hands of
asseee was unsustainable
R. Ramachandran Nair v. Dy. CIT (2017) 391 ITR 343/292 CTR 72/78 taxmann.com
110/146 DTR 193 (Ker.) (HC)
S. 158BC : Block Assessment – Jurisdictional defects cannot be cured-Notice was not

addressed in accordance with provision and status and block period was not mentioned,
block assessment was illegal and void.[S.282]
Dismissing the appeal of the revenue, the Court held that;where a notice was not addressed in
accordance with provisions of S. 282 of the Act and also, where status of the person and proper
block of period were not mentioned, the block assessment was illegal and void. Chapter XIV-B
was a self-contained code and would get attracted as a result of search proceedings initiated by IT
authorities u/s. 132 of the Act. Further, it held that, the language of the section was mandatory
and thus a jurisdictional defect could not be cured. (AY. 1993-94 to 1997-98)
CIT v. Monga Metals (P.) Ltd. (2017) 146 DTR 134/292 CTR 81 (All.) (HC)
S.158BC : Block assessment-Commissioner (Appeals) upholding assessment relying on

Supreme Court decisions on different subjects and holding decision in ACIT v. Hotel Blue
Moon [2010] 321 ITR 362 per incuriam—On writ the court held that order of CIT (A) was
held to be untenable,orderwas set aside [S. 143 (2), Art, 226 ].
On a writ petition against an order passed by the Commissioner (Appeals) in an appeal against a
block assessment, recording a finding that notice under section 143 (2) of the Income-tax Act,
1961 was not issued, but holding that the judgment of the Supreme Court in Asst. CIT v. Hotel
Blue Moon [2010] 321 ITR 362, wherein it was held that block assessment could not be framed
387
until notice under section 143 (2) had been served upon the assessee, was per incuriam in view of
the two Supreme Court judgments in Govt. of A.P. v. J.B. Educational Society [2005] 3 SCC 212
and State of Punjab v. Shamlal Murari [1976] 1 SCC 719 :
Held, allowing the petition, that the finding recorded by the Commissioner (Appeals) was not
tenable as neither of the two Supreme Court judgments referred to or dealt with the case of block
assessment and of not serving a notice under section 143 (2) of the Income-tax Act, 1961 which
issue was raised and decided in Asst. CIT v. Hotel Blue Moon [2010] 321 ITR 362 (SC). The
Commissioner (Appelas) had committed a grave illegality in holding that such judgment was per
incuriam.
Kiran Prakashan v. Dept. of Income tax (2017) 391 ITR 31 (Patna) (HC)
S. 158BD : Block assessment-Undisclosed income of any other person - Search and seizure-
The fact that the search was invalid because the warrant was in the name of a dead person
does not make the proceedings invalid if the assessee participated in them. [S. 132,158BC]
Dismissing the petition of the assesse, the Court held that; The fact that the search was invalid
because the warrant was in the name of a dead person does not make the proceedings invalid if
the assessee participated in them. The issue of invalidity of the search warrant was not raised at
any point of time prior to the notice under Section 158BD. In fact, the petitioner had participated
in the proceedings of assessment initiated under Section 158BC of the Act. The information
discovered in the course of the search, if capable of generating the satisfaction for issuing a notice
under Section 158BD, cannot altogether become irrelevant for further action under Section
158BD of the Act.
Gunjan Girishbhai Mehta v. DIT (2017) 393 ITR 310 /150 DTR 65 /294 CTR 14 /247
Taxman 22 (SC)
S. 158BD : Block assessment - Undisclosed income of any other person - Satisfaction note
can be prepared even after assessment of person against whom search conducted. [S.
158BC ]
The satisfaction note could be prepared at either of the following stages : (a) at the time of or
along with the initiation of proceedings against the person in respect of whom search was
conducted under section 158BC of the Act; (b) along with the assessment proceedings under
section 158BC of the Act; and (c) immediately after the assessment proceedings are completed
under section 158BC of the Act of the person in respect of whom search was conducted (BP. 1-4-
1986 to 1-8-1996)
CIT v. Bipinchandra Chimanlal Doshi (2017) 395 ITR 632/79 taxmann.com 211 (Guj.)
(HC)
Editorial : SLP of assesse was dismissed; Bipinchandra Chimanlal Doshi v. CIT (2017) 250
Taxman 93 (SC)
S. 158BD : Block assessment - Undisclosed income of any other person – Recording of

satisfaction by AO is mandatory - Order is held to be bad in law - The notice was issued
beyond two years hence the order was held to be barred by limitation. [ S. 158BC, 158BE]
Court held that the AO must be “satisfied that any undisclosed income belongs to any person,
other than the person with respect to whom search was made under Section 132.” The AO has
recorded no satisfaction that the disclosed income at the hands of person searched actually
belongs to the Assesssee. Neither the notice nor the assessment order whispers about anything
obtained in the premises searched under S. 132 of the Act. Accordingly, the assessment order is
vitiated .Notice u/158BC was issued beyond period of two years, therefore whole assessment wa
barred by limitation. Search was conducted on 4-11-2000 notice u/s158BC was issued on 8 - 06-
2001 .proceedings were concluded on 28-07-2005; when the AO has passed the order. As the
388
notice was issued beyond two years, order was held to be bad in law . [BP . 1991-92 to 4 th Nov,
2000]
CIT v P. Premkumar (2017)87 Taxmann.com 268/160 DTR 302 /(2018) 300 CTR 74 (Ker)
(HC)
S. 158BD : Block assessment - Undisclosed income of any other person — Satisfaction

recorded - Opportunity to be given to assessee to explain both credit and debit entries in
bank account with supporting evidence
The Assessing Officer had made additions taking into account only the credit entries appearing in
the bank account while completely ignoring the debit entries. The assessee deserved an
opportunity to explain both credit and debit entries in the bank account with supporting evidence.
The assessee was directed to respond to the statutory notices to be issued by the Assessing Officer
in this regard and co-operate in finalising the proceedings. In case of failure on the part of the
assessee to respond to the notices or appearing before the Assessing Officer, the Assessing
Officer would be at liberty to complete the assessment on the basis of material on record and in
accordance with law. (BP - 1988 – 98).
Nirmal C. Jhurani v. ACIT (2017) 59 ITR 438 /190 TTJ 1 /158 DTR 150 (Mum) (Trib)
S. 158BE : Block Assessment – Time limit – Where Assessee had not applied for extension
of time for submission of the Special Audit Report, then the AO did not have the power to
suo-moto extend the time limit for completion of block assessment proceedings. [ S. 132, 142
(2A) ,158BC, ]
The AO undertook search operation on the assessee u/s 132 of the Act and the proceedings were
to be completed u/s 158BC of the Act. The AO made a reference u/s 142 (2A) of the Act to
conduct a special audit and submit a report within 90 days. Further, the AO suo-moto extended
the period of submission of the special audit report.On appeal before the Tribunal, it observed
that the power of the AO to suo-moto extend the time for special auditor was conferred w.e.f
1.4.2008 and so the AO was not empowered to ‘suo-moto’ extend the time limit before that.
Further, the Tribunal relied on the Delhi HC decision in the case of CIT vs. Bishan Saroop Ram
Kishan Agro Pvt. Ltd. (ITA No 1775 of 2010) and held that the AO did not have the power to
suo-moto extend the time limit for submission of the special audit report without the applying for
the same. Therefore, when the Assessee had not applied to the AO for extension of time limit for
submission of the special audit report, then the AO was not empowered to suo-moto extend the
time limit and accordingly, the Assessment Order passed u/s 158BC of the Act was barred by
limitation and void in the eyes of the law. (AY. 1997-98 to 2002-03)
Sita Saraf (Smt.) v. ACIT (2017) 57 ITR 590 (Patna) (Trib.)
S. 158BE : Block assessment - Time limit – Special audit – Period of limitation for passing
order would be extended by taken by special Audit . [ S.142 (2A)
Allowing the appeal of the revenue, the Court held that, Period of limitation for passing order
would be extended by taken by special Audit . Mere irregularities in order of audit would not in
validate proceedings .
CIT v. Shyamal Sarkar (2017) 84 taxmann.com 146 (Cal) (HC)
Editorial : SLP of assesse was dismissed, Shyamal Sarkar v. CIT (2017) 250 Taxman 18 (SC)
389
S. 158BE : Block assessment - Time limit - Search of factory completed in may 1997 and last
panchnama drawn on 14-8-1997. subsequent restraint orders for purpose of seizure hence
the order passed on 16-8-1999 was held to be barred by limitation [ S. 132, 158BC ]
Allowing the appeal the Court held that; the search proceeding continued up to August 16, 1997,
but the subsequent restraint orders were only for the purpose of seizure, no further search material
was found and specifically the panchnama drawn on that date, and therefore, the assessment order
passed under section 158BC on August 16, 1999 was barred by limitation. The order passed by
the Tribunal and the Assessing Officer were set aside.
Mohd. Yasin v. CIT (2017) 398 ITR 33/84 taxmann.com 292 /159 DTR 361 (Raj.) (HC)
Editorial : SLP is granted to the revenue; CIT v. Mohd. Yasin (2017) 250 Taxman 73 (SC)
S. 158BE : Block assessment - Time limit – Panchanama – when nothing new is found in
second panchnam limitation cannot be extended [ S. 153A,153B ]
Dismissing the appeal of the revenue, the Court held that; when nothing new is found merely
visiting the premises on the pretext of concluding the search but not actually finding anything
new for being seized could not give rise to a second panchnama. In such event, there would be no
occasion to draw up a panchnama at all. The second visit by the search party to the A premises on
May 15, 2007 did not result in anything new being found that belonged to any of the searched
parties. The second visit and the panchnama drawn up on that date could not lead to
postponement of the period for completion of assessment with reference to section 153B (2) (a) .
The assessments were barred by limitation (AY. 2001-02 - 2006 - 07)
PCIT v. J.H. Business India P. Ltd. (2017) 398 ITR 71 (Delhi) (HC)
PCIT v. PPC Business and Products P.Ltd (2017) 398 ITR 71 /155 DTR 289/299 CTR 29
(Delhi) (HC)
PCIT v. Surya Vinayak Industries Ltd (2017) 398 ITR 71 (Delhi) (HC)
PCIT v. Sanjay Jain (2017) 398 ITR 71 (Delhi) (HC)
S. 158BE : Block assessment - Time limit - Special Audit —Limitation period commences on
date of service on assessee not on date of order under section 142 (2A) [ S. 142 (2A), 158BC
]
Dismissing the appeal of the revenue the Court held that ;Limitation period commences on date
of service on assessee not on date of order under section 142 (2A), therefore, the period which
was required to be excluded in computing the period of limitation was the period from January
23, 2001 to July 17, 2001 as from January 18, 2001 to January 23, 2001 it was only a decision
and not a direction.
CIT v. Amar Nath Arora (No.1) (2017) 398 ITR 108 (Raj.) (HC)
CIT v. Amar Nath Arora (No.2) (2017) 398 ITR 114 (Raj) (HC)
S. 158BFA : Block assessment – Interest - Delay in filing the return was due to delay in
furnishing the supply of seized documents - Interest cannot be charged for period of delay
attributable to department – Duty of the department to supply the copies of seized
documents and allow the inspection as expeditiously as possible . S. 132, 158BC]
Allowing the appeal the Court held that; a bare reading of section 158BFA (1)did not provide for
any discretion to waive or reduce the interest imposable on account of late filing of the return.
Section 158BFA (1)provides for grant of copies of the documents seized or inspection of the
record as expeditiously as possible, so as to enable the assessee to file his return. That not having
been done as was expected under the statute, the assessee could not be made to pay for the
negligence of the authorities. The delay between February 26, 2001 and January 3, 2002
attributable to the Department had to be excluded for the purposes of computing the period on
which interest could be levied under section158BFA (1) (BP. 1-4-1990 to 4-8 - 2000)
390
Mahavir Manakchand Bhansali v. CIT (2017) 396 ITR 226 /154 DTR 185 (Bom.) (HC)
S. 158BFA : Block assessment – Penalty – Mutual understanding - Undisclosed income

partly assessed in the hands of assesse and partly in hands of director – Levy of penalty was
held to be not justified. [S. 132 (4), 158BC]
Dismissing the appeal of the revenue the Court held that; the understanding arrived at between
the Department, the assessee and the director had not been disproved nor had that finding been
assailed hence the cancellation of the penalty was justified. (BP 1-4 1996 to 5-7 - 2002)
CIT v. Saraf Agencies Ltd. (2017) 394 ITR 444 (Cal) (HC)
S. 158BFA : Block assessment – Non levy of interests – If the delay in filing the return due
to non furnishing of copies of the documents and not giving inspection of the seized
documents, levy of interest was not justified, provision pre, 2002 [ S. 119 ]
Allowing the petition, the Court held that; if the delay in filing the return is completely
attributable to the revenue for non-furnishing of copies of the documents and not giving
inspection of the documents seized within a reasonable time after making the demand, the interest
has to waived. Though s. 158BFA (1) does not (pre 2002) confer the power to waive interest, it
has to be read in on equitable construction because the subject cannot be made to pay for the
negligence of the Officers of the State (CIT v.J. H. Gotla (1985) 4 SCC 343 followed).At the
relevant time when the assessment orders were passed under the Act, Section 158BFA of the Act
was not a part of Section 119 (2) (a) of the Act which empowered C.B.D.T.
Mahavir manakchand Bhansali v. CIT (2017) 154 DTR 185/297 CTR 38 (Bom.) (HC)
S. 159 : Legal representatives - Proceeding initiated against - assessee in respect of his

father (deceased) who was declared defaulter by TRO was held to be valid though he had
severed all relationship with deceased 1999, legal representative means a person who in
law represents the estate of deceased person. [ S. 2 (2A) ,2 (29), Civil Procedure Code, 1908,
S. 2 (11) ]
Dismissing the writ petition of the assesse the Court held that .; legal representative means a
person who in law represents estate of a deceased person and includes any person who
intermeddles with estate of deceased and it includes heirs as well as persons who represent estate
even without title either as executors or administrators in possession of estate of deceased.
Though the assesse had severed all relationship with deceased in 1999 and he had not succeeded
to estate of deceased, since petitioner was a member of HUF along with deceased father till death
of father and there were share transactions between them, petitioner was heir and legal
representative of his father. Court alos observed that Writ Court is not a second Appellate
Authority .
Arvind Kayan v. UOI (2017) 250 Taxman 387 /(2018) 162 DTR 181 /300 CTR 597 /403 ITR
36 (Cal.) (HC)
S. 163 : Representative assessees – Agent - Appellate Tribunal-Damages awarded to
Caribjet was held to be taxable in India by holdng that it was representative assessee –
Order was passed without affording an opportunity of being heard was seta side .[ S.254
(1)]
Allowing the appeal of the assessee the Court held that Tribunalpassed the order holding that
damages awarded to Caribjet was held to be taxable in India by holdng that it was representative
assessee howvver the order was passed without affording an opportunity of being heard hence
the said order was seta side . (AY.2000-01)
Air India Ltd v. Dy.CIT (2017) 245 Taxman 372 (Bom) (HC)
391
S. 164 : Representative assessees – Charge of tax – Beneficiaries unknown – Where names
of beneficiaries /contributors were not available in the trust deed and also, individual share
of such beneficiaries /contributors was not ascertainable on date of institution of trust, in
such case, benefit of determinative trust would not be available and income would be
taxable in the hands of trust as representative assessee. 50% of maintenance fee was held to
be allowable . [S. 10 (23FB), 37 (1) ]
The assessee trust, was formed to receive contributions from High Net worth individuals
(‘contributory’) towards the capital amount committed by them and to provide return on such
capital contributions. Subsequently, TVS Shriram Growth Fund (‘TSGF’) was formed as SEBI
registered venture capital fund and capital contributions received from 639 out of total 656
contributories, were transferred to TSGF. During the year, the assessee trust, out of its earnings
on total contributions received, recognised the income only in respect of the 17 contributories and
the balance earnings pertaining to 639 contributories, were transferred to TSGF, thereby, not
offered to tax.
The AO held that the assessee trust, is neither determinative nor non-discretionary trust and
therefore, cannot be extended the benefit of S. 164 of the Act. Further, the AO also brought to tax
the entire interest income on the ground that the interest income was transferred after it had
already accrued in the hands of the assessee trust and therefore, such transfer is only an
application of income. Further, the AO also disallowed 50% of management fee paid to M/s. TVS
Capital Funds Limited. On appeal, the CIT (A) confirmed the findings of the AO. On further
appeal, the Tribunal held that the names of the beneficiaries were not specified in the trust deed
and also, the individual shares of the beneficiaries were also not ascertainable on the date of
institution of the trust. Therefore, assessee cannot be categorized as a determinative trust and
benefit of S. 164 would not be available. Further, the Tribunal also held that the transfer of 639
contributories was effected subsequent to the interest earning period and therefore, interest
income would be taxable in the hands of assessee trust only. In respect of allowability of
management fee, the Tribunal held that by shifting of substantial portion of the contributions to
TSGF, TSGF has been equally benefited. Therefore, in all fairness, 50% of management fee only
is allowable. (AY. 2009-10)
TVS Investment iFund v. ITO (2017)164 ITD 524 /57 ITR 133 /187 TTJ 579 /154 DTR 232
(Chennai) (Trib.)
S. 164 : Representative assessees-Charge of tax – Beneficiaries unknown-Whether shares

are determinable even when even or after the Trust is formed or may be in future when the
Trust is in existence, the income is to be taxed of that respective sharer or the beneficiaries
and not in the hands of the trustees. [S. 161]
From the order of the ITAT Bangalore in DCIT vs. India Advantage Fund-VII, the High Court
had to consider the following question at the instance of the department :
“Whether, the Tribunal, on the facts and in the circumstances of the case was right in holding that
the assessee trust cannot be assessed as on AOP even though the requirements of section 164 (1)
were not met, inasmuch as the shares of the beneficiaries were indeterminate/unknown and hence
the assessing officer was justified in invoking the provisions of section 164 (1) of the Act and
make the assessee liable to be assessed at the maximum marginal rate in the status of AOP. Hence
it is not relevant whether the necessary ingredients for formation of an AOP are fulfilled by the
assessee or not?”
392
HELD by the High Court dismissing the appeal : the Court held that once shares are found to be
determinable. the income is to be taxed of that respective sharer or the beneficiaries and not in
the hands of the trustees which has already been shown in the present case. (AY. 2008-09)
CIT v. India Advantage Fund - VII (2017) 148 DTR 241 (Karn.) (HC)
CIT v. ICICI Emerging Sectors Fund (2017) 148 DTR 241 (Karn.) (HC)
CIT v. ICICI Econet Internet & Technology Fund (2017) 148 DTR 241 (Karn.) (HC)
S.164 : Representative assessees-If the trust deed provided that benefits amongst
beneficiaries were to be shared proportionate to their investments, shares of beneficiaries
were determinate and levy of tax on trustees at maximum marginal rate treating them as
AOP was not proper - Order of the Tribunal was not perverse [S.260A]
Dismissing the appeal of the revenue, the Court held that; If the trust deed provided that benefits
amongst beneficiaries were to be shared proportionate to their investments, shares of beneficiaries
were determinate and levy of tax on trustees at maximum marginal rate treating them as AOP was
not proper.In an appeal to the High Court the finding of fact by the Tribunal is final unless
perverse. Perversity can be tested in two ways : (a) if any finding of fact is not supported by
record and is on some hypothesis or surmises, (b) that the finding arrived at which any person
with reasonable prudence may not record. Then it can be said that such finding is perverse. On
the facts the finding of the Tribunal was held to be not perverse.
CIT v. ICICI Emerging Sectors Fund (2017) 392 ITR 209 /246 Taxman 149/293 CTR
510/148 DTR 241 (Karn.) (HC)
CIT v. ICICI Econet Internet & Technology Fund (2017) 392 ITR 209 /246 Taxman 149/293
CTR 510/148 DTR 241 (Karn.) (HC)
CIT v. India Advantage Fund – I (2017) 392 ITR 209 /246 Taxman 149/293 CTR 510 /148
CIT v. India Advantage Fund – VII (2017) 392 ITR 209 /246 Taxman 149/293 CTR 510/148
Editorial : Orders in Dy. CIT v. India Advantage Fund-VII [2014] 36 ITR 304 (Bang.) (Trib.)
and ITO v. India Advantage Fund-I [2015] 39 ITR 360 (Bang.) (Trib.) is affirmed
S. 167A : Firm - Charge of tax - Association of Persons —Individual shares of members of

association of persons are indeterminate hence tax to be charged at maximum marginal
rate [ S. Partnership Act, 1932, S.4 ]
On a reference court held that; the members of the association of persons specifically denied
knowledge of their share in the assessee, i.e., association of persons. In terms of section 167B of
the Act, during the subject assessment year where individual shares of the members of an
association of persons in the whole or in part was indeterminate, then tax would be charged on
such association of persons at the maximum marginal rate. In the assessee’s case, the share of the
members of the association of persons were indeterminate at least in part due to the unequivocal
statement of partners. In such case the whole of the income of such an association of persons was
to be taxed at the maximum marginal rate, as being an association of persons with indeterminate
share (AY.1984 - 85 to 1987 - 88)
Laxmi Fruit Company v. CIT (2017) 399 ITR 125 (Bom.) (HC)
S. 171 : Partition – Assessment - Hindu undivided family - Partial partition - Order of
Tribunal was set aside to reexamine the issue .[ S.254 (1) ]
Allowing the appeal of the assessee the Court held that the Tribunal has not applied the mind
while passesing the order with the reference to S.171 of the Act . Accordingly the order of
Tribunal was set side and matter is remitted back to the Tribunal to re-examine the matter . (AY.
1992-93 to 1995-96)
393
Prahalad Rai & Sons v.CIT (2017) 158 DTR 393 (MP) (HC)
S. 172 : Shipping business-Double taxation avoidance - Shipping corporation in Singapore

earning income from operations in India-Certificate by Internal Revenue of Singapore that
income accrued and was taxable in Singapore-Fact that freight receipts were remitted to U.
K. not relevant – DTAA-India - Singapore [ S.90, 264,Arts. 8, 24.]
The Assessing Officer held that ST was not entitled to the benefit of article 8 of the Double
Taxation Avoidance Agreement by virtue of the provisions contained in article 24 therein. He
held that the freight receipts were remitted to London and not to Singapore. The assessee filed a
revision petition which was dismissed. On a writ allowing the petition the Court held that; in the
absence of any rebuttable material produced by the Revenue, one would certainly be guided by
the factual declaration made by the Internal Revenue Authority of Singapore in the certificate and
this declaration was that the income would be charged at Singapore considering it as an income
accruing or derived from business carried on in Singapore. In other words, the full income would
be assessable to tax on the basis of accrual and not on the basis of remittance. The amount was
not taxable in India. (AY. 2011-2012)
M.T. Maersk Mikage v. DIT (IT) (2017) 390 ITR 427/291 CTR 184 (Guj.) (HC)
S. 172 : Shipping business - Non-residents - Income earned by Singapore based shipping

company through shipping business carried out at Indian ports was held to be not taxable
in Singapore but on basis of accrual - DTAA - India - Singapore [ Art, 8, 24 (1)]
AO demanded tax on the amount received for each voyage u/s. 172 (4) which was affirmed by the
CIT (A). On appeal Tribunal held that; as per certificate issued by Inland Revenue Authority of
Singapore, entire income earned by assessee, a Singapore based shipping company, from
shipping business carried out at Indian ports was not taxable at Singapore on basis of remittance
but on basis of accrual, clause (1) of article 24 could not be applied to deny benefit of article 8 to
assessee. (AY. 2014-15)
Far Shipping (Singapore) Pte. Ltd. v. ITO (IT) 166 ITD 321 (Hyd.) (Trib.)
S. 172 : Shipping business - Non-residents – Whether exempt income would also be eligible
to get treaty protection in source State - DTAA - India – Singapore – Matter remanded to
CIT (A)[ Art 8. 24 ]
Tribunal held that ;on facts, an important aspect to be considered was whether even if income
was actually exempt from tax in residence jurisdiction, given unambiguous thrust of treaty on
income being subjected to tax in one contracting State to be able to claim treaty protection in
other contracting State, and avoidance of double non-taxation being a clear objective of the Indo
Singapore tax treaty, such an exempt income would also be eligible to get treaty protection in
source State Since revenue authorities failed to consider aforesaid aspect of case, impugned order
was to be set aside and matter was to be remanded back to Commissioner (Appeals) for
adjudication de novo in light of evidence adduced by assessee. (AY.2015-16)
BP Singapore Pte Ltd. v. ITO (IT) (2017) 160 DTR 169 /190 TTJ 875 (Rajkot) (Trib)
S. 179 : Private company - Liability of directors – Attachment of bank account of director

and recovery without issue of show cause notice was held to be not permissible .
Allowing the petition the Court held that; there was no notice on record issued to any of the
directors why an order under sub-section (1) of section 179 should not be passed for whatever
394
reasons that may be available at the command of the Income-tax authority. The notices were all
issued to the company. None of these notices contained even a reference to any recoveries being
made personally from the directors for the failure of the company to discharge its tax dues. The
statute did not, in any manner, provide for a deeming fiction, a natural and inevitable
consequence or an irrebuttable presumption. A director of a company could discharge his
responsibility of establishing necessary facts only when he was put to notice that the authority
proposes to pass order under section 179 (1) of the Act. The orders were to be set aside and the
consequential attachments would not survive. However the proceedings would be placed back at
the stage where the defect was detected.
(AY. 2004 - 05)
Susan Chacko Perumal v. ACIT (2017) 399 ITR 74 (Guj) (HC)
S. 179 : Private company - Liability of directors Without giving an opportunity to prove

that non-recovery of tax due against company could not be attributed to any gross
negligence, misfeasance or breach of duty on her part in relation to affairs of company
provision could not be invoked against directors.
Allowing the petition the Court held that; without giving an opportunity to prove that non-
recovery of tax due against company could not be attributed to any gross negligence, misfeasance
or breach of duty on her part in relation to affairs of company provision could not be invoked
against directors. (AY. 2004-05)
Susan Chacko Perumal v. ACIT (2017) 249 Taxman 501 (Guj.) (HC)
S. 179 : Private company – Liability of directors – The principle of corporate veil can be
lifted if the company is used a means to evade tax or to circumvent the tax obligation and in
that case, an individual shareholder may also be liable to pay the income-tax.
The company named Hirak Biotech Limited, a public limited company was incorporated with
three directors. On 20 March 2005, the petitioner was introduced as director and continued till 05
September 2005. The petitioner was also holding 98.33% of the shares of the company.
An order u/s. 179 of the Act was passed on the petitioner on the ground that he has failed to prove
that non-recovery of taxes cannot be attributed to any gross neglect, misfeasance or breach of
duty on his part in relation to the affairs of the company. On special civil application, the HC,
upholding the legality and validity of the impugned order, held that when the people starts
misusing the veil of corporate personality, then it becomes necessary for the courts to pierce the
corporate veil and look who are the real beneficiaries. The HC also negated the petitioner’s
contention that the affairs of the company were managed by other directors, by holding that the
statue does not permit a director of a company to assign his office to be left to others and
therefore, consequences he must suffer on account of such negligence. Further, even though the
words ‘private limited’ are not used in the name of the company and therefore, contended to be
out of S. 179, the HC held that a closer look at the affairs of the company, the manner in which
the affairs proceeded with, all indicate that in actual terms the company has not acted as a public
limited company in true sense.
Ajay Surendra Patel v. DCIT (2017) 394 ITR 321 /(2017) 293 CTR 249/148 DTR 177 (Guj.)
(HC)
395
S.184 : Firm – Notice on partner personally - For omission of non-deduction of tax as
partner in firm was held to be void ab initio. [S.201 (1), 201 (IA), Partnership Act ,1932,
S.18, CPC 1908, O. XXX.]
A partner of a firm purchased land from NRI on behalf of the firm and did not deduct tax at
source. A notice was issued to the partner in his individual capacity for non-deduction of tax.
It was held by the Tribunal that notices issued in the name of a firm and served on any of its
partners are validly served. However, the converse is not the law. That is, notices issued to and
served on an individual in his capacity as such, and not in his capacity of a partner of a firm, are
not notice to be construed as notices issued to the firm. (AY. 2006-07)
Rajan Chopra v. DIT (IT) (2017) 165 ITD 361 (Asr) (Trib.)
S. 192 : Deduction at source – Salary-Leave travel concession - Foreign travel – Leave travel
concession is exempt only if employee undertakes journey to any place in India hence liable
to deduct tax at source. [S. 10 (5)]
Assessee bank provided benefit of Leave Travel Concession (LTC) to its employees. AO held
that LTC benefit was not available to employees of corporate office as foreign destination was
involved and places of travel were not situated in India. Tribunal held that ,as per provisions of s.
10 (5), only that reimbursement of travel concession or assistance to an employee is exempted
which was incurred for travel of individual employee or his family members to any place in India.
S. 10 (5) r.w. rule 2B no way provides that assessee is at liberty to claim exemption out of his
total ticket package spent on his overseas travel and part of journey within India. Therefore, LTC
paid by assessee to employees involving foreign travel as well would not qualify for exemption
u/s.10 (5).) hence liable to deduct tax at source . (AY. 2013-14, 2014-15)
State Bank of India v. ACIT (2017) 164 ITD 645 /156 DTR 306 /188 TTJ 713 (Jaipur)
(Trib.)
S. 192 : Deduction at source – Salary - Payment made to Radio Jockeys is professional

income hence correctly deducted the tax at source as professional income.[S. 194J]
The Tribunal held that the payments have been shown as part of professional income by the RJs
in their respective returns and the same have been accepted as such by their respective AOs.
There was no justification on the part of AO to change the relationship of the assessee and RJs
from professional consultant to employee by any inappropriate reading of terms of the agreement.
Tribunal further held that RJs having shown such payment as professional income and also
charged service tax from the assessee, assessee was obliged to deduct TDS under section 194J
and not under section 192. (AY. 2011-12, 2012-13)
ITO v. Entertainment Network (I) Ltd. (2017) 185 TTJ 178 /151 DTR 1 (Mum.) (Trib.)
S. 192 : Deduction at source-Salary-Leave travel concession given to employees for foreign

Travel was held to be not entitled to exemption, liable to deduct tax at source. [ S.10
(5),Rule, 2B ]
As per S. 10 (5), only reimbursement of expenses which were incurred on travel of employees
and his family to any place in India subject to certain conditions would be exempt. Leave travel
396
concession given to employees for foreign Travel was held to be not entitled to exemption,
liable to deduct tax at source. (AY. 2011 – 2012)
Syndicate Bank v. CIT (2017) 164 ITD 319 (Beng) (Trib.)
S. 192 : Deduction at source – Salary - 'TIPS' from guests on behalf of its

employees,assessee was not required to deduct tax at source while paying said amount to its
employees .[ S.15, 17 ]
Allowing the appeal of the assessee the Tribunal held that; Assessee collecting 'TIPS' from guests
on behalf of its employees is not liable to deduct tax at source as the contract of employment was
not a proximate cause for receipt of 'TIPS', it would be outside dragnet of sections 15 and 17 of
the Act. (AY. 2007-08)
EIH Ltd. v. ITO (2017) 163 ITD 413 (Delhi) (Trib.)
S.194A : Deduction at source-Interest on compensation-Motor accident claim-Interest so

computed in hands of each claimant was, below threshold limit of Rs 50000 per year,
considering the smallness of the amount the appeal was dismissed and the question of law is
left open.
Dismissing the appeal of the revenue, the Court held that; Interest so computed in hands of each
claimant was, below threshold limit of Rs 50000 per year, considering the smallness of the
amount the appeal was dismissed and the question of law is left open.
CIT v. Hansaguri Prafulchandra Ladhani and Ors. (2017) 383 ITR 82/152 DTR 288 /297
CTR 238 (SC)
CIT v Aruna Begum & Ors (2017) (2017) 383 ITR 82 /152 DTR 288 /297 CTR 238 (SC)
CIT v. Mani Gopal & Ors (2017) (2017) 383 ITR 82 /152 DTR 288/297 CTR 238 (SC)
S. 194A : Deduction at source - Interest other than interest on securities – Workmen’s

compensation-Insurance company should spread over interest on compensation from date
of accident till date of actual realization and insurance company should refund claimant
workman amount deducted as TDS.
Workmen's compensation Commissioner issued decree to pay compensation and interest from
date of accident till date of actual payment/realization. Insurance company did not spread over
interest accrued which resulted in deduction of tax at source; while spreading over would not
have invited TDS obligation . Court held that, insurance company should spread over interest on
compensation from date of accident till date of actual realization and insurance company should
refund claimant workman amount deducted as TDS.
New India Assurance Co. Ltd. v. Bhupatsinh @ Falji Gopalji Vaghela (2017) 246 Taxman
96 (Guj.) (HC)
S. 194A : Deduction at source - Interest other than interest on securities - Since payee-
university's application for retrospective registration under section 12AA was pending
before CBDT, assessee bank could not be regarded as assessee-in-default. [S.10 (23C, 12AA,
119 (2) (b), 201]
Allowing the appeals of the assesse the Tribunal held that; since payee-university's application
for retrospective registration under section 12AA was pending before CBDT, assessee bank could
not be regarded as assessee-in-default, just because the exemption was withdrawn later on. (AY.
2011-12 to 2015-16)
State Bank of Mysore v. ITO (2017) 163 ITD 566 (Panaji) (Trib.)
S. 194C : Deduction at source – Contractors – Broadcasting of Television channels,

placement charges, subtitling editing etc cannot be considered as fees for technical services
397
. Deduction of tax at source as contractor was held to be justified [ S. 133A, 194J, 201 (1),
201 (IA)]
Dismissing the appeal of the revenue the Court held that; Broad casting of Television channels,
placement charges, subtitling editing etc cannot be considered as fees for technical services .
Deduction of tax at source as contractor was held to be justified . (FY. 2007 - 0 to, 2010-11)
CIT (TDS) v. UTV Entertainment Television Ltd. (2017) 399 ITR 443 (2018) 164 DTR 146
(Bom) (HC)
S. 194C : Deduction at source – Contractor-Deployment of technical personnel not for and

on behalf of customer but for and on behalf of contractor for execution of contract,
amounts to works contract and not fees for technical services. [S.194J]
Dismissing the appeal of the revenue ,the Court held that; the contract entered into between the
assessee and each of the contractors did not involve supply of professional or technical services at
least within the meaning of section 194J. Therefore, the considerations paid under the contracts
were not for professional or technical services rendered by the contractors to the assessee and
section 194J was not applicable. The technical personnel were deployed not for and on behalf of
the customer, but for and on behalf of the contractor itself with a view to ensuring that the
contractor supplied the equipment in accordance with the contractual specifications. The nature of
human intervention was reflected in the terms and conditions of the agreement itself. (AY. 2012-
2013)
PCIT (TDS) v. Senior Manager (Finance), Bharat Heavy Electricals Ltd. (2017) 390 ITR
322/291 CTR 161 /77 taxmann.com 269 (P&H) (HC)
S. 194C : Deduction at source – Contractors – Annual Maintenance of medical equipments

being made for routine and normal maintenance would be covered by S.194C and not S.
194J [ S. 194J, 201 ]
Dismissing the appeal of the revenue the Tribunal held that; payments for annual maintenance of
medical equipments being made for routine and normal maintenance would be covered by section
194C; same was not in nature of professional for technical services (AY. 2007 - 08 to 2012-13)
ITO v. Dr. Balabhai Nanavati Hospital. (2017) 167 ITD 178 /190 TTJ 795 /(2018) 161 DTR
67 (Mum) (Trib.)
S. 194C : Deduction at source – Contractors - Annual maintenance

contracts is covered under work works contract and not under category of technical
services [ S. 194J ]
Allowing the appeal of the assessee the Tribunal held that; Annual maintenance contracts is
covered under work works contract and not under category of technical services . (AY. 2011-12)
DHL Air Ltd. v. DCIT (2017) 167 ITD 258 (2018) 191 TTJ 884 163 DTR 140 (Mum)
(Trib.)
S.194C : Deduction at source – Contractors – As per works awarded equipments were

supplied as per specification it was sale of equipment and cannot be categorised as 'work'
hence not liable to deduct tax at source [ S. 194J, 201 ]
398
Dismissing the appeal of the revenue the Tribunal held that; On the basis of works awarded
equipments were supplied as per specification it was sale of equipment and cannot be
categorised as 'work' hence not liable to deduct tax at source . (AY.2011-12)
ITO v. Mahanagar Telephone Nigam Ltd. (2017) 166 ITD 631/(2018) 162 DTR 287 (Delhi)
(Trib.)
S. 194C : Deduction at source – Contractors - Hire charges paid to truck owners fall with
the purview of section 194C however labour charges paid to a person who is engaged for
labour work on a daily wages basis does not attract provisions of section 194C
Payment made to truck owners for hire charges would attract provisions of section 194C. Labour
charges paid to a person who was engaged for the labour work on daily wages as and when his
services were required and hence tax u/s. 194C was not required to be deducted on the same
(AY. 2007-08)
Silver Salt Industries v. ITO (2017) 58 ITR 46 (Rajkot) (Trib)
S.194C : Deduction at source – Contractors – Purchase of printed packing material-

Contract of ‘sale’ and not ‘work’ is not liable to deduct tax at source.
Revenue claimed that the transaction towards obtaining the packing material from the suppliers
was in the nature of contract rather than in the nature of purchase of material and hence S.194C
would be applicable.
Dismissing the appeal of the revenue, the Tribunal held that; it was held that from the invoices
raised by the supplier it is noted that the printed packing material so supplied to the assessee are
subjected to various taxes viz. excise duty, VAT, and CST on the sale price. Thus, in the totality
of the circumstances, the transaction on account of supply of printed packing material to the
assessee was in pursuance of a contract for a 'sale' and not a contract for 'work' as alleged.
Consequently, provisions of section 194C do not get triggered in the facts of the case. (AY. 2012-
13)
DCIT v. Aroma De France (2017) 165 ITD 1 (Ahd) (Trib.)
S. 194C : Deduction at source – Contractors - Merely debiting the expenses under the head,
the assesse cannot be held liable to deduct tax at source. [S.40 (a) (ia)]
Assessee car-dealer made payments to parties under the head 'advertisement and publicity
expenses'. Assessee submitted that, in fact, payment was made towards purchase of kits for
vehicles sold by it but wrongly booked under head 'advertisement and publicity expenses'.
Tribunal held that, merely because bill date and date of making payment as well as amount
mentioned in bill and actual payment made was different, it could not be ground to reject
assessee's claim that it did not make payment towards advertisement and publicity, and, therefore,
there is no question to attract TDS liability to the asssessee. (AY.2009 – 2010)
Shimla Automobiles (P.) Ltd. v. ITO (2017) 164 ITD 9/187 TTJ 206/154 DTR 305 (Chd.)
(Trib.)
S. 194C : Deduction at source – Contractors - Even if aggregate payment made in a year to

parties which did not exceed Rs.50,000, but onetime payment exceeded Rs.20,000, its
required to deduct TDS on it. [S. 40 (a) (ia)]
399
Assessee dealer made one time payments to parties as advertisement and publicity expenses
which exceeded Rs.20,000. Assessee claimed that such aggregate payment did not exceed
Rs.50,000, therefore, no TDS was to be deducted. Tribunal held that even if aggregate payment
did not exceed Rs.50,000 in a year, but the onetime payment exceeded Rs.20,000, then assesse
would liable to deduct TDS . (AY.2009 – 2010)
Shimla Automobiles (P.) Ltd. v. ITO (2017) 164 ITD 9 /187 TTJ 206/154 DTR 305 (Chd.)
(Trib.)
S. 194C : Deduction at source – Contractors – Payment made to individual labourers is not

liable to deduct tax at source as there exists, employer-employee relationship. [S.40 (a) (ia)]
Assessee was engaged in business of civil construction work, claimed deduction on account of
labour charges. The AO disallowed payment made by assessee to labourers on ground that TDS
was not deducted u/s. 194C. Tribunal held that, the payment was made to individual labourers
and not to labour contractor and labourers were working under direct supervision of assessee, and
thus, there existed an employer and employee relationship between assessee and labourers. Such
payments were not liable for TDS . (AY. 2008 – 2009)
Tapas Paul v. ACIT (2017) 164 ITD 590 (Kol.) (Trib.)
S.194C : Deduction at source – Contractors - Prints of final negative of film is not technical
or professional service hence S.194J is not applicable. [S.194J].
The assessee-company, engaged in the business of film production and distribution, made
payments to Adlab for taking out multiple prints of the final negative and to Kodak for negative
processing for the film produced by the assessee.It was observed that the negative processing
involves specific tasks of editing, enhancement of quality of film, etc. However, the contract for
making multiple prints of the final negative was given to Adlabs, on which the TDS is liable to be
deducted only as per the provisions of Section 194C of the Act, as work does not involve any
technical or professional services, but it is restricted to making copies of the original print.It was
held that such payments would be covered under sub-clause (e) of Explanation to Section 194C
of the Act and may not be covered u/s. 194J of the Act, as no specialised job was to be done, nor
any technical services have been rendered to the assessee. (AY. 2005-06, 2008 - 09)
DCIT v. Yash Raj Films (P.) Ltd. (2016)160 ITD 626/(2017) 184 TTJ 741 (SMC) (Mum)
(Trib.)
S.194C : Deduction at source-Fees for technical services— Floating tender, tax was to
deducted under section 194J whereas for maintenance work tax was to deducted u/s 194C
[S. 194J]
Assessee floating tender for marine geotechnical investigation for rock excavation. Tender mainly
towards rendering of technical services and technical in nature, tax was deductible at source
under section 194J and where as payment for maintenance work of air-conditioners, lifts,
electrical fittings, fire hydrants and pest control, no technical expertise required tax was
deductible u/s194C. (AY. 2008-2009, 2011-2012)
ITO v. Mumbai Metropolitan Regional Development Authority (MMRDA) (2017) 54 ITR
580/152 DTR 185/186 TTJ 718 (Mum.) (Trib.)
S. 194C : Deduction at source – Contractors-Payments for production of films liable to

deduction at source as contractor and not as fees for professional or technical services.
[S.194J].
Assessee was engaged in business of celebrity endorsement, events promotion and management,
production of telefilms, ad films and promotion of motion pictures . Assessee made payments of
certain amount to several parties for production of complete film, against which tax was deducted
at source by assessee under section 194C. AO held that payments were in the nature of payments
400
for professional or technical services and liable to deduction at source u/s194J and raised the
demand u/s201 (IA). CIT (A) held that the provision of section 194C is applicable . On appeal the
Tribunal held that; since legislature had widened scope of section 194C vide Finance Act, 1995,
with effect from 1-7-1995, by incorporating 'Production of programmes for such broadcasting or
telecasting' within sweep of section 194C, assessee had rightly deducted tax at source under
section 194C at time of making payments for production of films. (AY. 2008-09)
Alliance Media & Entertainment Ltd. v. ITO (2017) 163 ITD 627 /154 DTR 291 /187 TTJ
46 (Mum.) (Trib.)
S. 194H : Deduction at source – Commission or brokerage – Principal to principal –

Discount did not amount to a payment hence not liable to deduct tax at source . [ S. 201,
201IA, 271 Contract Act S. 182 ]
An obligation to deduct tax at source arises only if the relationship is that of "principal and
agent" and if a "payment" is made. As the relationship between the assessee and the distributor
was that of "principal to principal" and as the "discount" did not amount to a "payment", there
was no liability to deduct TDS. Contention regarding provisions of Section 271 of the Act,in view
of our answer in favour of assessee, this issue is also required to be answered in favour of
assessee. Even otherwise as rightly held by the Supreme Court in CIT Vs. Eli Lilly & Co. (India)
P. Ltd. the penalty could not have been levied in all the appeals filed by assessee Coca Cola. (ITA
No. 205/2005, dt. 11.07.2017)
Hindustan Coca Cola Beverages Pvt. Ltd. v. CIT (2018) 402 ITR 539 (Raj) (HC)
S. 194H : Deduction at source – Commission or brokerage – Payment of premium made to
RMCs is on principal-principal basis and thus not does not require deduction of tax at
source..
The assessee apart from tours & travels business, was engaged in trading foreign currency.
During assessment, Assessing Officer made an disallowance u/s 40 (a) (ia) on the ground that
assessee had not deducted any tax at source on the amount paid to the Restricted Money Changers
(RMCs). The CIT (A) upheld the decision of the Assessing Officer. The Tribunal observed that
assessee had a foreign exchange division approved by the RBI and was authorised to buy foreign
exchange and travellers cheques from RMCs and others and sell them to persons in need of them.
Similarly RMCs are also authorised by RBI to buy foreign currency from non residents visiting
various places in India. The RMCs are not agents of the assessee but are appointed by RBI.
Though, the assessee buys foreign currency from RMCs depending upon the needs, however,
there is no principal agent relationship between the assessee and the RMCs. Both the RMCs as
well as the assessee have shown foreign currency as their stock in trade. Merely because in the
financial statement assessee has debited the amount as commission it cannot be treated so without
looking at the real nature of the transaction. Hence the disallowance was deleted. (ITA No. 5440
& 5583/Mum/2015, C.O. No. 117/Mum/2017 dt. 06-10-2017) (AY. 2007 – 2008)
DCIT v. Cox & Kings (I) Ltd. (2017) 160 DTR 201 /190 TTJ 785 (Mum) (Trib)
S. 194H : Deduction at source – Commission or brokerage – Discount to broad caster is no

liable to deduct tax at source .
The Tribunal held that no TDS is required to be deducted in respect of the discount allowed by
the assessee (broadcaster) to the advertising agency out of the payments received by it on the sale
of air time. (AY. 2011-12, 2012-13)
ITO v. Entertainment Network (I) Ltd. (2017) 185 TTJ 178 /151 DTR 1 (Mum.) (Trib.)
401
S. 194H : Deduction at source – Commission or brokerage – Recharge of coupons and SIM
cards – Discounts – Not liable to deduct tax at source . [S. 201 (1) ]
Allowing the appeal of the assessee, the Tribunal held that; in the present case relied on the
decision of the Hon’ble Karnataka High Court in the case of Bharti Airtel Ltd. Vs. DCIT reported
in 372 ITR 33 wherein it was held that sale of SIM cards/recharge coupons at discounted rate to
distributors is not commission and therefore not liable to TDS u/s.194H on the ground that the
condition precedent for attracting Section 194H of the Act is that there should be an income
payable by the assessee to the distributor. The relationship between the assessee and the
distributor is that of principal to principal and, therefore, when the assessee sells the SIM cards to
the distributor, he is not paying any commission; by such sale no income accrues in the hands of
the distributor and he is not under any obligation to pay any tax as no income is generated in his
hands. Once it is held that the right to service can be sold then the relationship between the
assessee and the distributor would be that of principal and principal and not principal and agent.
Thus it was held that since the facts of the instant case were identical to the case before Hon’ble
Karnataka High Court, therefore, following the decision of Hon’ble Karnataka High Court it was
held that sale of SIM cards/recharge coupons at discounted rate to distributors is not commission
and therefore not liable to TDS u/s.194H of the I.T. Act. (AY. 2007-08 to 2012-13)
Vodafone Cellular Ltd. v. Dy. CIT (2017) 49 CCH 261 /185 TTJ 245 /55 ITR 589 (Pune)
(Trib.)
S. 194I : Deduction at source – Rent – Payment made to the Airport Authority as ‘royalty’
for obtaining the right to operate an Executive Lounge falls within the expanded definition
of ‘rent’ u/s. 194I and therefore requires tax deduction at source
Assessee was awarded the contract for running an Executive Lounge at the Indira Gandhi
International Airport, New Delhi by the Airports Authority of India (AAI). License Agreement
(LA) was entered into between the AAI and the assessee in terms of which 'lounge premises' were
given on license basis to the assessee for the purpose of operating an Executive Lounge. Licensee
was to pay fees which had two components – royalty and license fee for space allotted. AO held
that the assessee failed to deduct tax at source from the rent payments made to the AAI and the
assessee was deemed to be an assessee-in-default. HC held that the payment made for the use of
space was inseparable from the payment of royalty for the right to operate the lounge. Therefore,
the payment of the sum by the assessee to the AAI falls within the expanded definition of 'rent'
under Section 194-I. The certificate issued by the AAI stating that the payment of licence fee for
the space is different from the payment of royalty would not make a difference to the legal
position.
CIT v. I.T.C. Ltd. (2017)397 ITR 214 /154 DTR 81/297 CTR 47 /249 Taxman 415 (Delhi)
(HC)
S. 194I : Deduction at source – Rent - Passenger service fees collected by airline operators
for use of land and building cannot be termed as rent and hence not liable to deduct tax at
source as rent . [S. 201 (IA)]
Dismissing the appeal of the revenue, the Court held that; hat the assessee collected passenger
service fees only from its embarking passengers for and on behalf of the airport operator. The
payment of passenger service fees was for use of secured building and furniture. Therefore, the
use of land or building in this case was only incidental. As the substance of the passenger service
fees was not for use of land or building but for providing security services and facilities to the
embarking passengers the payment could not be considered to be rent within the meaning of
section 194I . Tax was not deductible at source on the payment. (AY. 2010-11)
CIT (TDS) v. Jet Airways (India) Ltd. (2017) 395 ITR 230/146 DTR 124 (Bom.) (HC)
402
S.194I : Deduction at source – Rent-Lease premium-Amounts paid as premium capital
payments not subject to deduction of tax at source-Interest on lump sum lease premium was
held to be exempt from deduction of tax at source-Annual lease rent subject to deduction of
tax at source-Directions issued to Noida authority to make payments in compliance with
provisions of law. [S.10 (20)]
On writ petitions : the Court held that; (i) that the Greater Noida Industrial Development
Authority was not a municipality and therefore, not entitled to the benefit of section 10 (20) of the
Income-tax Act, 1961.
(ii) That the payments made towards lease did not constitute "rent" so as to attract section 194-I.
Part of the payments were capital in nature. A small percentage of the agreed amounts were paid
as part of the lease premium and were towards the acquisition of the asset and consequently fell
in the capital stream and were not "rents". The balance of such premium payments were spread
over a period of 8 to 10 years, in specified annual or bi-annual instalments.
(iii) That in respect of the amounts reserved as rent (generally 1 per cent. of the total
consideration, payable annually) the payments were rent and not capital and the assessees were
liable to deduct tax at source from the payments made to the Noida authority. Since the assessees
could not make the deductions at the insistence of the Authority, a direction was issued to the
Authority to comply with the provisions of law and make all payments, which were otherwise
part of the deductions, for the period in question, till the end of the date of the judgment. All
payments to be made to it, henceforth, should be subjected to deduction of tax at source.
(iv) That the amounts which were payable towards interest on the payment of lump sum lease
premium, in terms of the lease which were covered by section 194A were covered by the
exemption under section 194A (3) (iii) (f) and therefore, not subjected to deduction of tax at
source and any payments of interest that had accrued in favour of the Authority by the bank
towards fixed deposits were also exempted from deduction of tax at source.
Rajesh Projects (India) P. Ltd. v. CIT (TDS)-II (2017) 392 ITR 483/293 CTR 121/78
taxmann.com 263/148 DTR 33 (Delhi) (HC)
Editorail : SLP ofassessee is admitted, Greater Noida Industrial Development Authority v. ACIT
(2017) 250 Taxman 98 (SC)
S.194I : Deduction at source – Rent-Payment towards 'premium' for the lease (even if paid
annually) is a capital payment and is not subject to deduction of tax at source.[S. 201, 201
(IA)Transfer of Property Act. S.105]
In all the cases the petitioners received notice from the income-tax authorities, alleging that they
were assessed in default in as much as they had failed to deduct tax at source from the interest
component paid to the lessor /authority.The Revenue was prima facie of the opinion that these
interest amounts resulted income in the hands of the authority which is facially taxable and that
the failure of the assessees, in deducting amounts mandated under section 194I is without legal
foundation. The petitioners were served with the notice u/s 201, 201 (IA) of the Act. Allowing the
petitions of the assessees, the Court held that,Payment towards 'premium' for the lease (even if
paid annually) is a capital payment and is not subject to deduction of tax at source . Referred
Circular No .35/2016 dated 13-10-2016. (WP. (C) 8085/2014, C.M. Appl. 18876/2014, dt.
16.02.2017)
Rajesh Project (India) Pvt. Ltd. v. CIT (Delhi) (HC); www.itatonline.org
Ajay Enterprises Pvt. Ltd. v ACIT (Delhi) (HC); www.itatonline.org
IITL-Nimbus, the Hyde Park, Noida v.UOI (Delhi) (HC); www.itatonline.org
Exotica Housing Pvt. Ltd. v CIT (Delhi) (HC); www.itatonline.org
Gulshan Homes & Infrastructures Pvt. Ltd. v.CIT (Delhi) (HC); www.itatonline.org
United Bank of India v.ITO (Delhi) (HC); www.itatonline.org
403
Civitech Developers Pvt.Ltd. v.CIT (Delhi) (HC); www.itatonline.org
S. 194J : Deduction at source - Fees for professional or technical services - Payments made
by Hospital to retainer Doctors are subject to tax deduction at source u/s 194J and not u/s
192 as salary [ S. 192 ]
Allowing the appeal of the assesse the Court held that; Payments made by Hospital to Doctors are
subject to tax deduction at source u/s 194J and u/s 192 as salary .
Escorts Heart Institute & Research Centre Ltd. v. DCIT (2017) 251 Taxman 401 (Raj)
(HC)
S. 194J : Deduction at source - Fees for professional or technical services – Licence fee paid
to IRCTC was not liable to deduct tax at source.
Dismissing the appeal of the revenue, the Court held that; Licence fee paid to IRCTC was not
liable to deduct tax at source.
CIT v. Hakmichand D. & Sons (2017) 250 Taxman 494 (Guj.) (HC)
S. 194J : Deduction at source - Fees for professional or technical services – Reimbursement

of an expense incurred by HRTC was not required to deduct tax at source .
Dismissing the appeal of the revenue, the Court held that, Reimbursement of an expense incurred
by HRTC was not required to deduct tax at source . (AY. 2009-10 to 2012-13)
PCIT v. H.P. Bus Stand Management & Development Authority (2017) 250 Taxman 496
/159 DTR 77 /299 CTR 200/(2018) 400 ITR 451 (HP) (HC)
S. 194I : Deduction at source – Rent – Passenger Service Fees not liable for deduction of tax
u/s 194-I as it is not in the nature of rent.
The Assessee, an airline company, paid passenger services fees to airport operators, which was
charged by operators but collected from the passengers by the airline. The AO alleged that such
payment to operators was in the nature of rent and tax ought to have been deducted u/s 194-I.
Accordingly, the assessee was considered to be in default u/s 201. The CIT (A) deleted the
addition and upheld the contention of the Assessee that no tax was to be deducted on such
payment. On appeal, the ITAT held that passenger service fee was not liable for tax deduction at
source, based on the order of Tribunal for the earlier assessment years, which was upheld by the
Bombay High Court, and the circular issued by CBDT. (ITA No. 2355/Mum/2016 dt.
25.09.2017) (AY. 2012-13)
DCIT (TDS) v. Jet Lite (India) Ltd. (2017) 59 ITR 88 (SN) (Mum) (Trib)
S. 194I : Deduction at source - Rent – Recipient income was exempt from tax and also
obtained certification for non deduction of tax at source, hence the assessee was not liable to
deduct tax at source .[ S.12A, 197 ]
Dismissing the appeal of the revenue the Tribunal held that; TTD Board was an entity governed
by section 12A and, thus, exempted from tax, since recipient, TTD Board had obtained certificate
u/s. 197 from department for non-deduction of TDS on said rental payments; assessee was not
obliged to deduct TDS on impugned payments. (AY. 2009 10 to 2011-12)
DCIT v. Sudalagunta Hotels Ltd (2017) 166 ITD 135 (Visakha) (Trib.)
404
S. 194J : Deduction at source - Fees for professional or technical services – Payments made
to doctors for availing services was rightly deducted the tax at source u/s 194J, provisions
of S. 192 cannot be applicable [S. 192, 201 (1) 201 (IA) ]
Dismissing the appeal of the revenue the Tribunal held that; Payments made to doctors for
availing services was rightly deducted the tax at source u/s 194J, provisions of S. 192 cannot be
applicable . (AY. 2007 - 08 to 2012-13)
ITO v. Dr. Balabhai Nanavati Hospital. (2017) 167 ITD 178 /190 TTJ 795 /(2018) 161 DTR
67 (Mum) (Trib.)
S. 194J : Deduction at source - Fees for professional or technical services – Cargo Handling
Charges is not technical in nature and hence tax ought not to be deducted .
The Assessee, an airline company, paid cargo handling charges to airport operators. The AO
alleged that such charges included payment for technical services and included x-ray charges,
loading & unloading charges etc., which was performed by technically competent person.
Accordingly, the assessee was considered to be in default u/s 201. The CIT (A) deleted the
addition and upheld the contention of the Assessee that tax u/s 194C was to be deducted on such
payment and not u/s 194-I. On appeal, the ITAT held that cargo handling charges was not liable
for tax deduction at source u/s 194-I, based on the order of Tribunal for the earlier assessment
year. (ITA No. 2355/Mum/2016 dt. 25.09.2017) (AY. 2012-13)
DCIT (TDS) v. Jet Lite (India) Ltd. (2017) 59 ITR 88 (SN) (Mum) (Trib)
S.194J : Deduction at source-Fees for professional or technical services - Provision for

'payments to be made to artists', assessee company couldn't ascertain identity of payees and
amount to be paid to them was also not crystalised and was subject to negotiation, assessee
had no liability to deduct tax at source in respect of provision so made. [S. 201 (IA)]
Allowing the appeal of the assessee, the Tribunal held that; Provision for 'payments to be made
to artists', assessee company couldn't ascertain identity of payees and amount to be paid to them
was also not crystalised and was subject to negotiation, assessee had no liability to deduct tax at
source in respect of provision so made. (AY.2008-09)
Alliance Media & Entertainment Ltd. v. ITO (2017) 163 ITD 627 /154 DTR 291/187 TTJ 46
(Mum.) (Trib.)
S. 194LA : Deduction at source-Compensation on acquisition of certain immoveable

property-“Agriculture” and “Agricultural purposes” — words to be construed as in
common parlance.[S. 2 (14) (iiia), 195, 197]
Allowing the appeal the Court held that; the Appellate Tribunal was wrong in holding that the
question whether a particular land was agricultural land or not was to be determined with
reference to the definition in section 2 (14) and not with reference to the tenure of the land as
shown in the revenue records. The Income-tax Officer while determining whether the land was
agricultural land or not, ought to have considered the words “agriculture” and “agricultural
purposes” in the manner in which they were normally understood. Matter was set aside to decide
after considering the evidence on record. (AY. 2005 - 06)
Land Acquisition Collector, Improvement Trust v. Addl. CIT (2017) 396 ITR 410 (P&H)
(HC)
S. 194LA : Deduction at source-Compensation on acquisition of certain immoveable

property – No tax should be levied on award except in case of purchase of land by person
405
other than specified person through private negotiations [ Right to fair compensation and
transparency in land acquisition, rehabilitation and resettlement Act, 2013, 46, 96]
Allowing the petition the Court held that; Section 194LAof the 2013 Act mandated that no
Income-tax should be levied on awards made under that Act except under section 194LA of the
2013 Act. Section 194LA dealt with the purchase of land by a person other than a specified
person through private negotiations. The benefit of section 194LA of the 2013 Act was not
available when the land was purchased through private negotiations by a person other than a
specified person under section 46 (1) of the 2013 Act. Therefore, in cases other than those
covered by section 194LA of the 2013 Act, the levy of Income-tax was barred by
section 194LA of the 2013 Act and as a consequence, the deduction or collection under
section 194LA of the Act was impermissible. The Department was directed not to deduct tax at
source, whenever any compensation was paid for the acquisition of a land under the 2013 Land
Acquisition Act, except those covered by section 194LA of the 2013 Act.
P.B. Mangathayar v. UOI (2017) 396 ITR 21 (T&AP) (HC)
C.Nanda Kumar v. UOI (2017) 396 ITR 21 /157 DTR 155 /298 CTR 454 (T&AP) (HC)
S.195 : Deduction at source-Non-resident-Assessee carrying on business in India through

permanent establishment - Payments made to assessee under race promotion contract -
Business income and chargeable to tax - Liable to deduct tax at source – DTAA-India –
United kingdom.[Art. 5 (5), 13 ]
Court held that; since the assessee carried on business in India through a permanent
establishment, the payments made to the assessee, under the race promotion contract were
business income and accordingly chargeable to tax, according to the rates applicable in India at
that time. JS was bound to make appropriate deductions from the amounts payable to the assessee
under section 195.
CIT v. Formula One World Championship Ltd. (2017) 390 ITR 199 /291 CTR 24 (Delhi)
(HC)
Jaiprakash Associated Ltd. v. CIT (2017) 390 ITR 199 /291 CTR 24 (Delhi) (HC)
S. 195 : Deduction at source - Non-resident - Other sums – Assessee remitted certain
amount to its member concerns which was in the nature of reimbursement of cost to enable
them in discharging its function within the terms of membership agreement – Held same
would not be subjected to TDS on the basis of doctrine of mutuality-DTAA - India -
Switzerland [ Art.12. (2) ]
The assessee was an Indian member firm of KPMG International. M/s KPMG international is
registered in Switzerland and having its head office at Netherlands. Assessee made payments to
KPMG International towards reimbursement of cost for enabling it to discharge its function
within terms of membership agreement. During assessment proceedings, the Assessing Officer
concluded that expenses incurred by the assessee on account of alleged reimbursement of cost is
in the nature of royalty as laid down under u/s 9 (1) (vi). He relied on DTAA between India &
Switzerland Article 12 (2), thus mandating withholding of tax. The CIT (A) upheld the
assessment order. The assessee then filed an appeal before the ITAT wherein the assessee
submitted that it had not withheld any tax due to the applicability of the mutuality principle. The
Tribunal restored it back to the CIT (A) to adjudicate on ground of mutuality. The CIT (A) in the
second round held that M/s KPMG International is a mutual concern and its receipt would not
constitute income chargeable to tax. Revenue filed an appeal against the said order of CIT (A).
On appeal, ITAT held the concept of mutuality postulates that all contributors to the common
fund must be entitled to participate in the surplus and that all the participators in the surplus are
contributors to the common fund. There must be complete identity between the contributors and
the participators. The essence of the doctrine of mutuality lies in the principle that what is
returned is what is contributed by a member. A person cannot trade with himself is the basic idea
in the principle of mutuality. In the facts of the case, there was complete identity between the
406
contributors and participators; the actions of the participators and contributors are in furtherance
of the mandate of association and there seems no profit element from the fund. Thus ITAT
decided the case in favour of the assessee and the order of the Assessing Officer was quashed.
(ITA No. 2493/Mum/2012 C.O. No.97/Mum/2013 dt. 07-04-2017) (AY .2001 – 2002)
Dy.CIT v. KPMG (2017)186 TTJ 401 /164 ITD 421 /81 taxmann.com 118 (Mum) (Trib)
S.195 : Deduction at source - Income deemed to accrue or arise in India – Royalty -

Payment to googly Ireland is taxable as royalty hence liable to deduct tax at source - DTAA
– India – Ireland [ S.9 (1) (vi), 201 (1), Art, 12 ]
The Google Adwords advertisement module is not merely an agreement to provide advertisement
space but is an agreement for facilitating the display and publishing of an advertisement to the
targeted customer using Google's patented algorithm, tools and software. Google Adwords uses
data regarding the age, gender, region, language, taste habits, food habits, etc of the customer so
as to maximize the impression and conversion to the ads of the advertisers. Consequently, the
payments to Google Ireland are taxable as "royalty" and the assessee ought to have deducted TDS
thereon u/s 195. (ITA No. 1511/Bang/2013, dt. 23.10.2017) (AY. 2007-08 to 2012-13)
Google India Private Ltd. v. ACIT (2017) 190 TTJ 409 (Bang) (Trib), www.itatonline.org
S. 195 : Deduction at source - Non-resident - Failure to deduct tax at source from fee for
technical services, assesse was held liable to pay interest .[ S.91 (1) (vii) 201 (1), 201 (1A)]
The Tribunal dismissed the appeal filed by the assessee and held that the CIT (A) was right in
holding that the payment to non-resident as fee for technical services within the meaning of
section 9 (1) (vii) as also Art. 12 of Indo-Swiss DTAA.The Tribunal held that the appeal can be
dismissed on the basis of the following decision of jurisdictional High Court CIT & Others v.
Samsung Electronic Co. Ltd. & Ors. (A.Y. 2008-09)
Avesthagen Ltd. v. Dy. CIT (IT) (2017) 187 TTJ 13 (UO) (Bang.) (Trib.)
S.195 : Deduction at source - Non-resident - Commission paid to non resident agents is not
liable to deduct tax at source. [S. 40 (a) (ii)].
The assessee was engaged in the business of developing software products. Assessee paid
commission for procuring the business to non-resident agents. However, no tax was withheld
from the payments made to non-resident commission agents. In appeal CIT (A) held that ,that
non-resident agents did not carry on any activity in India and no portion of commission was
attributable to the Indian operations. He thus concluded that since the payment of foreign
commission was not taxable in India, the provisions of section 195 were not applicable.
Accordingly, the disallowance made by AO was deleted. Tribunal up held the order of CIT (A).
Followed Dy. CIT (IT) v. Welspun Corpn. Ltd. [2017] 77 taxmann.com 165 (Ahd.) (Trib.). (AY.
2012-13)
(Ahd) (Trib.)
S. 195 : Deduction at source-Since payment made was held to be liable to be taxed in India
as salaries, there was no liability to deduct tax at source - DTAA-India – USA. [S. 9 (1)
(ii),195 Art.5, 12]
Assessee was a subsidiary of a US company; US Company seconded certain employees at control
of assesse. The AO was of view that pay remittances by assessee to US company was in fact in
nature of payment for services rendered by these employees, therefore AO held that work done by
407
employees had resulted in creation of a service PE and entire amount paid to US company being
attributable to PE, was taxable on gross basis. The ITAT held that. Payment made by Indian
subsidiary in pursuance to secondment agreement with US-company had been charged to tax in
India under head 'income from salaries, the assesse was not liable to deduct tax at source . (AY.
2008-09 to 2011-12)
Burt Hill Design (P.) Ltd. v. DIT (2017) 164 ITD 697/186 TTJ 662/152 DTR 1 (Ahd.) (Trib.)
S.195 : Deduction at source - Income deemed to accrue or arise in India - Mere credit of
royalty is not liable to deduct tax at source - DTAA - India – Italy [S. 201 (IA), Art. 13]
Tribunal held that ,merely an Indian resident credits amount of royalty payable to an Italian
resident doesn’t trigger taxability under article 13 of Indo-Italian DTAA; it is only at point of
time when payment takes place, that income embedded in payment becomes taxable. (AY. 2011
– 2012)
Saira Asia Interiors (P.) Ltd. v. ITO (2017) 164 ITD 687 /185 TTJ 713 (Ahd.) (Trib.)
S. 195 : Deduction at source - Non-resident - Advance tax – If payer who made payments to
non-resident has defaulted in deducting TDS on such payments ,payment of advance tax
does not arise. [S. 201,234B]
Payer who made payments to non-resident, has defaulted in deducting tax at source from such
payments, department can take action against payer under provisions of s. 201 and compute
amount accordingly and further non-resident is not absolved from payment of taxes thereupon but
question of payment of advance tax would not arise. Further department is not permissible to
charge any interest u/s. 234B. (AY. 1992 - 93)
ADIT (IT) v. White Industries Australia Ltd. (2017) 164 ITD 391 (Kol.) (Trib.)
S. 195 : Deduction at source — Non-resident —Royalty - Adoption of lower rate under

domestic law non-resident is not liable to pay interest, when as per DTAAA provisions,
non-resident could not have been taxed, in respect of accrual of said income, in India. –
DTAA – India – Italy [ S. 201 (IA),Art. 12 (3)]
Tribunal held that when income embedded in payment was not taxable at that point of time of
crediting amount, there could not be any occasion for deduction of withholding tax on such
income. It was only at point of time when payment takes place, that income embedded in
payment became taxable under the DTAA as also under domestic law, but then rate of tax
prescribed in domestic law being lower, vis-a-vis rate prescribed in domestic law, assessee had
option of adopting lower rate under domestic law. Adoption of lower rate under domestic law, did
not imply that non-resident recipient could have been saddled with tax liability at point of accrual
when, under DTAAA provisions, non-resident could not have been taxed, in respect of accrual of
said income, in India as a result appeal of the assessee was allowed. (AY. 2011-12)
Saira Asia Interiors (P) Ltd. v. ITO (2017) 164 ITD 687 /49 CCH 289 /150 DTR 169 /185
TTJ 713 (Ahd.) (Trib.)
S. 195 : Deduction at source—Non-resident—Person making payment to a non-resident

would be liable to deduct tax only if such sum was chargeable to tax in India and not
otherwise - DTAA-India – Canada. [S. 40 (a) (ia), 197, Art.7, 12]
The assessee is a firm of Chartered Accountants, during the course of the assessment proceedings,
the Assessing Officer noted that the assessee has made payments towards subscription and fees to
Swiss Verein, ‘Deloitte Touche Tohmatsu International’ (DTTL). The assessee was required to
furnish the details of TDS deducted on such payment and also specify the nature of payment.
Regarding non-deduction of TDS it was submitted that assessee firm is associated with Deloitte
Touche Tohmatsu (DTT) a Swiss Verein (i.e., association), which is a global organization of
Professional Services Firms. The purpose of Verein is to further the international co-operation
408
and cohesion among the member firms; to assure that practices of the Members shall conform to
professional standards of highest quality; to advance the international and national leadership of
the Member firms in rendering professional services, etc. Each Member contributes towards the
budgeted operating expenses of Verein in such proportion which has been allocated to them. The
amount allocated to the each Member firm is based on aggregate revenues and other factors as
illustrated therein. The operational expenditure of DTT is shared by its member firms. DTT
recovers the amount of their operating expenditure from its member firms. Thus, it was submitted
that assessee was not required to deduct tax at source on assessee’s share of DTT’s operational
expenditure, because, it was in the nature of reimbursement of expenditure. It was held by the AO
that since assessee had not made any application u/s.195 or 197 therefore, the payment made
without deduction of tax was to be disallowed u/s.40 (a) (i). The Commissioner of Income-tax
CIT (A) confirmed the disallowance made by AO. On appeal the Tribunal held that While
making the said payment, the assessee had not deducted the TDS inter alia on the ground that,
firstly, the relationship between the DTT and its Member is based on ‘principle of mutuality’,
therefore, the Verein itself does not earn any income or render any kind of professional services
and the expenses are made through contribution by its members; and secondly, the reimbursement
of expenses is based on allocation made by the DTT which in turn is on the basis of actual
expenses. Therefore person making payment to non-resident would be liable to deduct tax u/s.195
only if such sum was chargeable to tax in India and not otherwise, thus order passed for
disallowing payment of subscription fees was set aside. (AY. 2003-04, 2004-05, 2005-06)
Deloitte Haskins & Sells v. ACIT (2016) 48 CCH 463 /184 TTJ 801 /79 taxmann.com
175/152 DTR 154 (Mum.) (Trib.)
S. 197 : Deduction at source - Certificate for lower rate - - Assessee not having made an
application for a certificate under section 197 (1) cannot be precluded from contending that
it is not bound to deduct tax at source and to pay over same in assessment proceedings -
Agricultural land is not defined under Income – tax Act hence has to be considered as they
are normally understood . [ S. 2 (14) (iii) (a), 194L, 194LA ]
Allowing the appeal the Court held that; Assessee not having made an application for a certificate
under section 197 (1) cannot be precluded from contending that it is not bound to deduct tax at
source and to pay over same in assessment proceedings . Court also held that the ,Tribunal
proceeded on the incorrect basis that the words 'agricultural land' are to be determined with
reference to the definition in section 2 (14). The Income-tax Act, 1961 does not define the words
'agricultural land'. Section 2 (1A) defines agricultural income. The section uses the word
'agricultural'. For instance, sub-section 2 (1A) (a) defines agricultural income to mean any rent or
revenue derived from the land used for agricultural purposes. Sub-section (1A) (b) defines
agricultural income to mean any income from such land by agriculture. However, the words
'agricultural' and 'agriculture' and the words 'agricultural purposes' are not defined. The Income-
tax Officer indeed had to determine whether the land is agricultural land or not but in doing so he
ought to have considered these words in the manner in which they are normally understood.
Land Acquisition Collector, Improvement Trust, Jalandhar v. Addl. CIT (2017) 152 DTR
40 /295 CTR 548 (P&H) (HC)
S. 197 : Deduction at source-Certificate for lower rate-Statutory provision of deduction of

tax at source at lower rate is 'person specific' and cannot be restricted to amount specified
by recipient of payment while making an application for grant of certificate. [S. 194A, 201
(IA)]
Allowing the appeal of the assesse the Tribunal held that; Statutory provision of deduction of tax
at source at lower rate is 'person specific' and cannot be restricted to amount specified by
recipient of payment while making an application for grant of certificate .Therefore, the assessee
could not be treated as a person who has not deducted tax at source on the difference between the
409
amounts specified in the certificate issued under section 197 of the Act and the amounts actually
paid by it. Consequently, the levy of interest under section 201 (1A) could not be sustained and
the same is directed to be deleted. (AY. 2008-09, 2009-10)
Twenty First Century Securities Ltd. v.ITO (2017) 163 ITD 270 /152 DTR 305/187 TTJ 225
(Kol.) (Trib.)
S. 199 : Deduction at source - Credit for tax deducted - Hindu undivided family entitled to
benefit of tax deducted at source — Erroneous mention of permanent account number of
karta of family — Revenue has discretion to grant benefit to family.[S. 201, 264]
Allowing the petition against the order u/s 264 of the Act; there was no dearth of power with the
Department to grant credit of tax deducted at source in a genuine case. In the present case, many
years had passed since the event. The facts were not seriously in dispute. The assessee - had
already offered the entire income to tax. The Department had also accepted such declaration and
taxed the assessee. In view of such special facts and circumstances, the Department had to give
credit of the sum of Rs.5,42,800 to the assessee deducted by way of tax at source upon N filing an
affidavit before the Department that the sum invested by the Reserve Bank of India did not
belong to him, the income was also not his and that he had not claimed any credit of the tax
deducted at source on such income for the said assessment year (AY. 2012-13)
Naresh Bhavani Shah (HUF) v. CIT (2017) 396 ITR 589/156 DTR 140 /249 taxman 507
/(2018) 301 CTR 433 (Guj.) (HC)
S. 199 : Deduction at source - Credit for tax deducted – since other co-owners had not
availed any tax credit out of TDS on rental income, assessee-company would be entitled to
enjoy benefit of tax deducted at source in its entirety. [S.194I]
Dismissing the appeal of the Revenue, the Court held that ;since other co-owners had not availed
any tax credit out of TDS on rental income, assessee-company would be entitled to enjoy benefit
of tax deducted at source in its entirety . (AY. 2005-06)
CIT v. Ganesh Narayan Brijlal Ltd. (2017) 244 Taxman 14 /147 DTR 136 /292 CTR 518
(Cal.) (HC)
S.199 : Deduction at source - Credit for tax deducted – Tax deducted at source
corresponding to unrealised rent allowable as credit. [ S. 23, 198 ]
The AO restricted the allowances of TDS credited to the extent of actual amount of rent received.
Allowing the appeal of the assessee the Tribunal held that ,unrealized rent is deduction which is
claimed under section 23 (1), read with rule 4 of the rules, from the total rental income offered
during the year. The unrealized rent is not an exempt income. As the total rental income
(including unrealized rent) is duly offered to tax under the head 'Income from House Property',
corresponding TDS credit needs to be allowed. (AY. 2010-11)
Shri Rangji Realties (P.) Ltd. v. ITO (2017) 165 ITD 428/59 ITR 1 1 (Mum) (Trib.)
S. 199 : Deduction at source-Credit for tax deducted-Matter was remanded to AO - DTAA-

India – USA. [Art. 10]
Assessee, earned dividend income from securities in USA. The AO declined Tax credit in respect
of tax deducted from his dividend earning. It was found that tax credit claim was almost 30 per
cent of amount of related dividend earnings, much more than 25 per cent which is maximum
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permissible tax withholding under article 10. Since amount eligible for tax credit would remain
confined to amount computed on basis of rate prescribed under treaty, therefore matter remanded
back to AO for characterization of income as dividend and ensuring eligible amount of tax
deduction. (AY. 2009 – 2010)
Bhavin A. Shah v. ACIT (2017) 164 ITD 610 /186 TTJ 328 /151 DTR 97 /151 DTR 97 (Ahd.)
(Trib.)
S.199 : Deduction at source - Credit for tax deducted – Identity of the payee was not
possible while making the provision for expenditure under several heads of income, assesse
was not required to deduct tax at source. [S. 194C]
Allowing the appeal of the assesse the Tribunal held that; When the identity of the payee was not
possible while making the provision for expenditure under several heads of income, assessee was
not required to deduct tax at source . (AY.2010-11, 2011-12)
Apollo Tyres Ltd. v.DCIT (2017) 163 ITD 177 (Delhi) (Trib.)
S. 199 : Deduction at source-Credit for tax deducted – Once certificate for deduction at
source is issued ,only deductee can claim benefit of deduction of tax at source and in no
circumstances deductor can claim any refund out of excess amount of tax deducted at
source on behalf of deductee – Surcharge and educational cess was held to be not leviable –
Excess paid was liable to be refunded - DTAA – India – USA [ S. 206A, Art, 12 ]
Tribunal held that; Once certificate for deduction at source is issued, only deductee can claim
benefit of deduction of tax at source and in no circumstances deductor can claim any refund out
of excess amount of tax deducted at source on behalf of deductee. Surcharge and educational cess
was held to be not leviable. Withholding tax was at 15% and not 25 % as determined by the
Assessing Officer. (AY. 2014-15)
Computer Sciences Corporation India (P.) Ltd. v. ITO (2017) 163 ITD 151 (Delhi) (Trib.)
S. 201 : Deduction at source - Failure to deduct or pay – Limitation - Delay in passing order
– Matter remanded to Tribunal [ S. 195, 201 (1), 201 (IA ]
Allowing the appeal of the revenue, the Court held that; Tribunal was wrong in summarily
dismissing the order passed by the Commissioner (Appeals) sustaining levy of interest under
section 201 (1) and 201 (1A) of the Income-tax Act, 1961 on the ground of limitation only and in
applying limitation period of four years to hold that the order under section 201 (1)/201 (1A)
passed by the Assessing Officer was beyond the period of limitation. Whether the delay that
occurred in passing the order under section 201 (1) and 201 (1A) was justified or not, was a
question of fact which had to be examined independently on the basis of facts. The Tribunal was
to consider whether the delay was justified or there was such unexplained delay so as to vitiate
the order under the provisions, and pass fresh order accordingly. Matter remanded. (AY. 1994 -
95)
CIT v. Indo Gulf Corporation Ltd. (2017) 399 ITR 266 (All) (HC)
S. 201 : Deduction at source - Failure to deduct or pay – Interest – There was no short fall
hence levy of interest was not justified . [ S. 206 ]
Dismissing the appeal of the revenue the Court held that; the revenue has not established that
there was no failure on the part of the assesee to deduct tax at source hence levy of interest was
not justified . (AY. 2007 - 08)
CIT v. Modiluft Ltd. (2017) 397 ITR 375/249 Taxman 252/154 DTR 233 (Delhi) (HC)
S. 201 : Deduction at source - Failure to deduct or pay – Payment to non-resident -
Limitation - Department was continuously pursuing matter giving effect to order of
411
appellate tribunal —Delay in issuing notices of demand and penalty was held to be not
barred by limitation - Writ was held to be not maintainable . [ S. 201 (IA), 271C, Art, 226 ]
Dismissing the petition the Court held that; while exercising power of judicial review under
article 226 of the Constitution, it would be appropriate to consider whether power had been
exercised by the competent authority within a reasonable period and whether delay was unjust,
arbitrary, whimsical or it was for valid reasons. If the delay in exercise of power was for valid and
bona fide reasons, delayed exercise of power could not be held to be invalid. A fixed time could
not be imposed and a period of limitation could not be prescribed, which had not been prescribed
by the Legislature in its wisdom. Such legislative action, by way of judicial precedent, would not
be appropriate exercise of judicial review under article 226 . If a time period was not prescribed
for exercise of power, a reasonable time would depend upon the facts of each case and could not
be quantified or prescribed like a period of limitation. (AY. 2003 - 04 to 2006 - 07)
Mass Awash P. Ltd. v. CIT (IT) (2017) 397 ITR 305/155 DTR 34/249 Taxman 532/(2018)
300 CTR 299 (All) (HC)
S. 201 : Deduction at source - Failure to deduct or pay - No liability to deduct tax when
amount held not taxable by appellate authorities and court, assesse cannot be held in
default.[S. 194, 201 (1), 201 (IA)]
The sum paid as share application money by the assessee was held deemed dividend under
section 2 (22) (e) of the Act and the assesse was in default for not deducting tax at source under
section 194 of the Act . In appeal the Tribunal held that addition cannot be made as deemed
dividend . Based on the quantum order ,order passed assessing the assess as deemed defukater for
failure eto deduct tax at source was deleted . On appeal by the revenue, dismissing the appeal the
Court held that; when the sum in question had been held not taxable, the very basis for holding
the assessee liable for failure to deduct tax did not subsist. The order of the Assistant
Commissioner (TDS) was tentative in nature and its existence depended upon the nature of
receipt in the hands of the recipient and subject to the orders passed in respect thereof by the
appropriate court. The orders passed in respect of the character of the payment made under the
Income-tax Act, 1961 were binding upon him. No question of law arose. (AY. 2006-07)
CIT (TDS) v. Oberoi Constructions Pvt. Ltd. (2017) 394 ITR 508 (Bom.) (HC)
Editorial : SLP is granted to the revenue ;CIT (TDS) v. Oberoi Constructions Pvt. Ltd. (2017)
393 ITR 75 (St.)
S. 201 : Deduction at source - Failure to deduct or pay - Collection at source – Toll Plaza -
licensor is not absolved of liability for interest even if concessionaire has paid tax or filed
nil return. [ S. 201 (IA), 206C (7), 271C ]
Allowing the appeals of the revenue the Court held that, licensor is not absolved of liability for
interest even if concessionaire has paid tax or filed nil return.The Appellate Tribunal should
permit the assessee to raise before it, the main contention that it was not be liable under
section 206C (1C) to collect tax at source. (AY.2008-09 to 2010-11)
CIT (TDS) v. Punjab Infrastructure Development Board (No. 3) (2017) 394 ITR 216 /150
DTR 359 (P&H) (HC)
S. 201 : Deduction at source - Failure to deduct or pay - Tax paid by recipients of interest
hence failure to deduct tax deductor is liable only to interest confined to period from date
on which tax deductible to date of payment of tax. [S. 201 (1), 201 (IA), 221]
Court held that; when the recipients of interest has paid the tax for failure to deduct the tax
deductor is liable only to interest confined to period from date on which tax deductible to date of
payment of tax . (AY. 2001-02, 2002 - 03)
412
Ghaziabad Development Authority v. UOI (2017) 395 ITR 597 /(2018) 162 DTR 85 (All)
(HC)
S. 201 : Deduction at source - Failure to deduct or pay – Interest – Penalty - Even if the
deductee assessee has paid the tax dues, it would not alter the liability to charge interest
under Section 201 (1A) till the date of payment of taxes by the deductee /assessee. Further,
the same would not even affect the liability for penalty under Section 271C. [ S.2 (43), 194C
,201 (IA), 271C ]
The Assessing Officer held that the assessee was liable to deduct tax at source under section 194C
and having failed to doso levied interest under section 201 (1A).The assessee submitted that it
was not liable to pay interest under section 201 (1A) as the payee of theamounts in respect of
which the tax was allegedly to be deducted at source had filed their returnsdeclaring a nil income
and on account of which no tax was in fact paid or payable by them. The CIT (A) and the
Tribunal accepted the assessee’s stand ad accordingly held that the assessee was not liable to pay
interest under section 201 (1A).
On appeal, the High Court held that even if Even if the proviso to sub section (1) is not
retrospective, it would make no difference to the assessee'scase in view of the judgment of the
Supreme Court in Hindustan Coca Cola Beverage (P.) Ltd. v. CIT[2007] 293 ITR 226 (SC) from
which it was clear that even if the deductee assessee has paid the tax dues, it would not alter the
liability to charge interest under Section 201 (1A) till the date of payment of taxes by the
deductee /assessee. Further, the same would not even affect the liability for penalty under Section
271C. Thus, even prior to the amendment on 1st July, 2012, the liability to pay interest under
Section 201 (1A) was there even in cases where the deductee assessee had paid the tax dues. (AY.
2007-08)
CIT (TDS) v Punjab Infrastructure Dev. Board (No 1) (2017)394 ITR 195 /245 Taxman
183/297 CTR 582 (P&H) (HC)
S. 201 : Deduction at source - Failure to deduct or pay – Issue of notice – Limitation -

Petition was allowed . [ S. 195 ]
The AO issued the show cause notice dated 31.03.2011, for the period F.Y. 2001-2002 to2010-
2011, to the Assessee asking it to show cause as to why it should not be deemed to be anassessee-
in-default as it made payments on account of interconnection charges to various foreignentities
without deduction of tax under Section 195 of the Act.
The in writ proceedings, High Court held that the entire issue was covered by the decision of
Vodafone Essar Mobile Services Ltd. v Union of India2016 (385) ITR 436 (Del) where it was
held that a reasonable period was read into the Act, in relation to exercise of powers. Further, the
only reason cited by the respondent, i.e. administrative convenience, could not outweigh the harsh
nature of the consequence, which would expose resident payers to theonerous responsibility of
maintaining books and documents for an uncertain period of time. Petition of the assesse was
allowed . (AY. 2002-2003 to 2011-2012)
Bharti Airtel Ltd. v UOI (2017) 245 Taxman 80 /291 CTR 254/145 DTR 177 (Delhi) (HC)
S. 201 : Deduction at source - Failure to deduct or pay – Matter was setaside for
verification. [S. 191]
Allowing the appeal of the revenue, the Court held that ;it was an important aspect to be
examined whether the recipient-assessee had directly paid tax or has no liability of tax at all.
Since this aspect was not examined by the assessing authority, therefore, the Tribunal had rightly
remanded the matter to the assessing authority to examine this aspect. The Explanation to
section 191 has to be read into section 201 (1) . The deductor who fails to deduct Income-tax at
source shall be deemed to be an assessee in default only when the assessee has also failed to pay
413
such tax directly. Thus, it flows that there is no occasion to treat the deductor as an assessee in
default unless the assessee has not paid the tax directly (AY. 2003-04 to 2007 - 08)
CIT (TDS) v. Sahara India Commercial Corpn. Ltd. (2017) 395 ITR 734 (All) (HC)
S. 201 : Deduction at source - Failure to deduct or pay – Survey

Levy of interest is automatic and mandatory [ S. 133A,194J, 201 (IA) ]
For failure to deduct tax at source u/s 194J, the Assessing Officer levied penalty under section
201 (1A) of the Act. On appeal the assessee contended that interest under section 201 (1A) is
compensatory in nature and since deductee's income was below taxable limit and it need not pay
any advance tax, there was no loss to revenue and interest need not be charged under section 201
(1A) Dismissing the appeal of the assessee the Tribunal held that; tax liability in hands of
deductee has no relation or connection for charging interest under section 201 (1A) and mere
non-deduction of tax at source and non-remittance to Government of India account attracts
interest under section 201 (1A)of the Act. (AY. 2013-14, 204-15)
Aayush NRI LEPL Health Care (P.) Ltd. v. ACIT (2017) 167 ITD 432 /(2018) 191 TTJ
1003/161 DTR 308 (Visakh) (Trib.)
S. 201 : Deduction at source - Failure to deduct or pay - Interest on account of delay in

payment of tax deducted at source cannot be levied if such delay is due to system and
connectivity issues at the Banker’s end [ S. 201 (1), 201 (IA)]
Allowing the appeal the Tribunal held that; it was shown by the assessee that the amount was
debited from its account on October 7 itself and that the delay in deposit of such tax by a day was
on account of the system and connectivity issues at the Banker’s end which was beyond the
control of the assessee. Tribunal allowing the appeal of the assessee, held that the levy of such
interest was not justifiable as the delay in payment of tax was beyond the control of assessee.
(AY. 2010-11)
Nokia Siemens Networks P. Ltd. v. ACIT (2017) 57 ITR 382 (Delhi) (Trib)
S. 201 : Deduction at source - Failure to deduct or pay - Explanation for delay in depositing
the tax deducted at source must be considered, matter was setaside. [S. 133A ]
Assessee public sector bank, its TDS aspects taken care of by Centralised Core Banking System,
which would automatically deduct TDS as per provisions of Act and, thus, issue of delay in TDS
remittance into Central Government account should be considered afresh, particularly when
assessee explained reasons for such mistakes . (AY. 2012 – 2013)
State Bank of India v. ITO (2017) 164 ITD 36 (Visakha) (Trib.)
S. 201 : Deduction at source - Failure to deduct or pay - without deducting TDS payee had
offered receipt as income and paid, assessee could not be treated as an assesse in default. [ S.
194J ]
Assessee made certain payments towards market research activities. The AO found that assessee
did not deduct TDS while making payments, he disallowed the same. The Tribunal held that,
amendment was brought w.e.f. 1-7-2012 inserting proviso to S.. 201 (1), would apply
retrospectively. Therefore, payee had offered receipt as income and paid tax thereon, assessee
could not be treated as an assessee in default for non-deduction of tax in respect of such payment.
(AY. 2011 – 2012)
Radeus Advertising (P.) Ltd. v. ACIT (2017) 164 ITD 384 (Mum) Trib.)
S. 201 : Deduction at source - Failure to deduct or pay – When the
414
ITO (TDS) had not ascertained as to whether taxes had been paid or not by recipient of
income, he could not initiate proceedings to declare deductor as assessee-in-default [ S. 10
(10AA),191, 192, 201 (IA) ]
The Assessing Officer treated the assessee as an assessee in default under section 201/201 (1A)
for short deduction of tax due to allowing the exemption under section 10 (10AA) (i) beyond the
maximum limit of Rs. 3 lacs. Tribunal held that, ITO (TDS) had not ascertained as to whether
taxes had been paid or not by recipient of income, he could not initiate proceedings to declare
deductor as assessee-in-default, therefore the invocation of the jurisdiction is null and void ab
initio. Such invocation of jurisdiction is, accordingly, cancelled. (AY. 2015-16)
Aligarh Muslim University v. ITO (2017) 165 ITD 652/189 TTJ 794 /158 DTR 19 (Agra)
(Trib.)
S.201 : Deduction at source - Failure to deduct or pay - Shortfall in remittance on interest

payments to term depositors to government account – Assessee using CBS software – No
liability if assessee able to establish shortfall in remittance .
Held that assessee was using CBS software. If the assessee was able to establish that short
remittance was only a notional provision which would reverse afterwards then no tax deducted at
source liability could be imposed on the assessee. Matter remitted to the AO for fresh
consideration. (AY.2012-13)
StateBank of India v. ITO (2017) 55 ITR 62 (SN) (Bang.) (Trib.)
S. 201 : Deduction at source-Failure to deduct or pay-Recipient having no taxes payable and

claiming refund-Question of "withholding any tax money" belonging to Department did not
arise-Levy of interest not warranted.[S. 197,201IA]
Allowing the appeal, that where the recipient had no taxes payable at all and had claimed refund
of taxes, no interest was to be charged from the defaulting deductor since the Department was
required to refund of tax along with due interest. Accordingly the company which gave loan to
the assessee included the income from the assessee in the return filed for the subject assessment
years paid taxes on the amount and had claimed refund of taxes. It was not liable to pay any tax
and hence the question of "withholding any tax money" belonging to Department did not arise.
Therefore, it could not be said that the assessee had withheld/enjoyed the tax amount belonging to
the Government to warrant the levy of interest under section 201 (1A). (AY.2005-2006 to 2009-
2010)
ITO v. Right Address Ltd. (2017) 54 ITR 287 (Kolk.) (Trib.)
S.201 : Deduction at source-Person to whose account credit for such tax deducted at source
to be given is not identifiable, provisions of tax deduction at source not applicable-
Assessing Officer to verify whether payee identifiable and amount payable to him
ascertainable. [S.201 (1A)]
Allowing the appeal, the Tribunal held that; Person to whose account credit for such tax deducted
at source to be given is not identifiable, provisions of tax deduction at source not applicable--
Assessing Officer to verify whether payee identifiable and amount payable to him ascertainable .
(AY. 2010-2011, 2011-2012)
Apollo Tyres Ltd. v. Dy. CIT (2017) 163 ITD 177 /54 ITR 1 (Delhi) (Trib.)
S. 206 : Collection of tax at source —Difference between toll and octroi — No obligation to
collect tax at source from agent who collected octroi.
Dismissing the appeal of the revenue the Court held that; there is no obligation to collect tax at
source from agent who collected octroi.
415
The Legislature when it brought in section 206C (1C) of the Act has not authorised the collection
of tax at source in respect of octroi. It specifically restricted its obligation to only three categories
namely parking, toll plaza, mining and quarrying. (AY. 2006 - 07, 2007 - 08)
CIT (TDS) v. Commissioner, Akola Municipal Corporation (2017) 397 ITR 226 (Bom) (HC)
S.206AA : Requirement to furnish Permanent Account Number - Limiting correction to

four digits of permanent account number of deductee is held to be not justified [ S. 200 ]
Allowing the petition the Court held that; the Revenue should verify the assessee’s claim of
actual deduction of tax at the prescribed rate in the case of Star (India) Pvt Ltd verify that the
permanent account number sought to be corrected by the assessee belonged to that agency and
that the tax was actually deposited in the case of such deductee. If these questions were answered
in favour of the assessee, the Department should not insist on raising a higher demand from the
assessee for failing to deduct tax at source in terms of sub-section (1)of section 206AA
Purnima Advertising Agency P. Ltd. v. Dy. CIT (2017) 396 ITR 526 /297 CTR 77 /249
Taxman 426/154 DTR 217 (Guj.) (HC)
S. 206AA : Requirement to furnish Permanent Account Number – Non-resident - Provision

cannot override the provision of DTAA - Assessee is not liable to deduct tax at higher rate,
i.e., 20 per cent., when DTAA benefit is available to the assessee – DTAA-India-France [S.
4,5, 90, 195 Art. 13 ]
Dismissing the appeal of the revenue the Tribunal held that; the provisions of s. 206AA cannot
override the provisions of charging S.4 and S.5 and u/s. 90 (2), it is provided that DTAAs would
override domestic law, in cases where the provisions of DTAAs are more beneficial to the
assessee. Therefore, where the tax has been deducted on the strength of beneficial provisions of
DTAA, provisions of s. 206AA cannot be invoked to insist that the tax deduction should be
higher i.e. 20 per cent. (AY. 2011 – 2012)
DCIT v. Calderys France (2017) 166 ITD 307 (Pune) (Trib.)
S.206AA : Requirement to furnish Permanent Account Number - Tax has to be deducted at

source at fixed rate of 20 per cent, surcharge and education cess cannot be levied.
Tribunal held that, in terms of clause (iii) of section 206AA (1), tax has to be deducted at source
at fixed rate of 20 per cent and surcharge and education cess was held to be not leviable. (AY.
2014-15)
Computer Sciences Corporation India (P.) Ltd. v. ITO (2017) 163 ITD 151 (Delhi) (Trib.)
S.206AA : Requirement to furnish Permanent Account Number - AO rightly raised demand

on deductor on its failure to apply 20 per cent TDS rate when payee had furnished wrong
PAN.
Assessee payer having failed to discharge its obligation to verify the PAN submitted by the payee
which has been eventually found to be incorrect by the department at the time of processing of
416
the TDS return, A.O. was justified in raising demand for the differential tax that the assessee
should have deducted in terms of S.206AA on account of submission of incorrect PAN by the
payee. (AY.2011-12)
Office of Xen, PHED v. ITO (2017) 146 DTR 19 (Jaipur) (Trib.)
S. 206AA : Requirement to furnish Permanent Account Number – Deduction at source-In

case where payments have been made to deductees on the strength of the beneficial
provisions of S. 115A (1) (b) of the Act or as per DTAA rates r.w.s. 90 (2) of the Act, the
provisions of s. 206AA cannot be invoked by the AO insisting to deduct tax @ 20% for non-
availability of PAN [ S.90 (2), 115A (1) (b), 195, 200A ]
Allowing the appeal of assessee the Tribunal held that; In case where payments have been made
to the deductees on the strength of the beneficial provisions of section 115A (1) (b) of the Act or
as per DTAA rates r.w.s. 90 (2) of the Act, the provisions of section 206AA cannot be invoked by
the Assessing Officer insisting to deduct tax @ 20% for non-availability of PAN. (ITA No.
1204/Ahd/2014, dt. 04.01.2017) (AY. 2011-12)
Quick Flight Limited. ITO (Ahd.) (Trib.); www.itatonline.org
S. 206AA : Requirement to furnish Permanent Account Number - Section does not have an
overriding effect over the other provisions of the Act. Consequently, the payer cannot be
held liable to deduct tax at higher of the rates prescribed in s. 206AA in case of payments
made to non-resident persons in spite of their failure to furnish the PAN. [S.90 (2)]
Special Bench was constituted to decide the following questions involved.
“Whether on the facts and circumstances of the case,provisions of section 206AA, of the Act will
have a overriding effect for all other provisions of the Act, and that being the case, assessee is
required to deduct tax at the rate prescribed therein in case of persons having taxable income in
India, including non-residents, who do not furnish their Permanent account number“
Special Bench held that; section does not have an overriding effect over the other provisions of
the Act. By virtue of s. 90 (2), the provisions of the Treaty override s. 206AA to the extent they
are beneficial to the assessee. Consequently, the payer cannot be held liable to deduct tax at
higher of the rates prescribed in s. 206AA in case of payments made to non-resident persons in
spite of their failure to furnish the PAN (AY. 2011-12, 2012-13)
Nagarijuna Fertilzers and Chemicals Ltd. v. ACIT (2017) 149 DTR 137 /185 TTJ 569 (Hyd.)
(Trib.) (SB)
S. 206C : Collection at source – Section does not cover octroi collected within its ambit
Assessee, a Municipal Corporation, entered into an Agency Agreement by virtue of which it
appointed an agent to provide services of collecting octroi on its behalf. Octroi was collected at
the rates fixed by the assessee. The entire amount collected by the agent was remitted to the
assessee and the agent was entitled to a commission depending upon the quantum of octroi
collected during the year. The issue was whether the amount collected by the agent as 'octroi' and
handed over to the assessee was subject to tax collection at source. High Court held that section
206C (1C) only obliges a person to collect tax from its agents/licensee who collects a toll on its
behalf. The obligation to collect tax under Section 206C (1C) of the Act cannot be extended to
collection of octroi.
CIT v. Commr. Akola Municipal Corporation (2017) 155 DTR 119 (Bom.) (HC)
S. 206C : Collection at source – Trading - Forest produce – Where assessee was engaged in
importing timber and thereupon selling it to registered dealers in the country, assessee was
required to collect tax at source from purchasers in terms of s. 206C at the time of sale.
417
The assessee was a timber merchant, mainly importing timber from other countries and were
selling it to dealers in India. Since the assessee did not collect tax at source in terms of s. 206C of
the Act from the purchasers to whom the imported timber was sold, the AO treated him to be
assessee in default. In response to this, the assessee filed a writ petition before the HC.Dismissing
the petition the Court held that; where assessee was engaged in importing timber and thereupon
selling it to registered dealers in the country, assessee was required to collect tax at source from
purchasers in terms of s. 206C at the time of sale . (AY.2009-10 to 2013-14)
Excellent Timber Imports & Exports (P) Ltd. v. ITO (2017) 293 CTR 201/148 DTR 1
(Ker.) (HC)
S. 206C : Collection at source – Toll Plaza — Build-Operate-Transfer agreement between

assessee and third party — liability is to be determined only in light of contract, matter
remanded to Tribunal.
Allowing the appeal of the revenue the Court held that ;liability is to be determined only in light
of contract, matter remanded to Tribunal. (AY.2009-10 to 2011-12)
CIT (TDS) v. Punjab Infrastructure Development Board (No. 2) (2017) 394 ITR 213 (P&H)
(HC)
S. 206C : Collection at source – Cotton wastage – Writ is not maintainable, as the buyers
can seek refund by filing returns. [Constitution of India, Art. 226]
Petitioner filed a writ petition praying for mill owners from collecting TCS on purchase of
cotton waste Dismissing the petition the Court, held that there was uncertainty regarding
applicability of section 206C to cotton waste hence, no direction could be issued to restrain mill
owners, to stop collecting TCS on purchase of cotton waste. Further, it was always open to
petitioners to seek refund by filing appropriate returns and hence remedy under Act itself was
available, thus instant petition would not be maintainable .
Amarjeet Beeton v. CIT (2017) 391 ITR 124/244 Taxman 240 (P&H) (HC)
S. 206C : Collection at source – Scrap – Sale of old machinery under buy back arrangement
scheme cannot be categorised as scrap sale hence not liable to deduct tax at source . [ S.
201, 201 (IA)]
Dismissing the appeal of the revenue the Tribunal held that ; Sale of old machinery by the
hospital, under buy back arrangement scheme cannot be categorised as scrap sale hence not liable
to deduct tax at source . (AY. 2007 - 08 to 2012-13)
ITO v. Dr. Balabhai Nanavati Hospital. (2017) 167 ITD 178 /190 TTJ 795/(2018) 161 DTR
67 (Mum) (Trib.)
S.206C : Collection of tax at source – Ship breaking - Liable to deduct tax at source .
Declaration at appellate stage in prescribed format by disclosing all information under
Form 27 read with rule 37 of rules, for non - collection of TCS, benefit of declaration was to
be given to assessee [R.37, Form 27]
Tribunal held that material/goods came from breaking of ship and these goods were sold to
manufacturer/rerolling mills as scrap and goods sold by assessee could not be used as such
without any modification by buyer, assessee was liable to deduct tax at source on sale of scrap.
Since appeal is continuation of assessment proceedings, thus, where assessee had filed declaration
at appellate stage in prescribed format by disclosing all information under Form 27 read with rule
37 of rules, for non - collection of TCS, benefit of declation was to be given to assessee -
Provision of sub-section (1A) of section 206C does not prescribe consequences of delayed filing
418
of declaration and, therefore, assessee could not have been penalized for delay in filing
declaration . (AY.2008-09, 2009-10)
Chandmal Sancheti v. ITO (2017) 157 DTR 65 (Jaipur) (Trib)
S. 215 : Advance tax - Interest - Liable to pay interest for short or non payment of advance
tax .
Assessee is Liable to pay interest for short or non payment of advance tax. (AY. 1976-77)
E.Merck (India) Ltd. v.CIT (2017) 393 ITR 91 (Bom.) (HC)
S. 220 : Collection and recovery - Assessee deemed in default – High Court was directed to
dispose the petition at the earliest.
Allowing the petition the Court held that;since writ petition was pending before High Court, it
was not necessary for Court, at this stage, to go into various disputed contentions raised by parties
on merits. in peculiar facts and circumstances of case, High Court was to be directed to dispose of
writ petition expeditiously; in case writ petition was dismissed, assessee shall, subject to order
passed by High Court and subject to order attaining finality, deposit amount as ordered by High
Court.
State of Andhra Pradesh v. CCIT (2017) 391 ITR 302/244 Taxman 287/149 DTR 67 /294
CTR 29 (SC)
S. 220 : Collection and recovery-Stay of proceedings – Pendency of appeals before CIT (A) -
Direction to Commissioner (Appeals) to decide pending appeals within one month and
Department not to attach any other accounts of assessee or take coercive steps till disposal
of appeal by Commissioner (Appeals)-Matter was remanded. [S. 225, 226]
Supreme Court directed the Commissioner (Appeals) to decide pending appeals within one
month, Department to withdraw Rs. 400 crores approximately already attached. Term deposit of
Rs. 1000 crores to be kept by assessee as security till disposal of appeal and Department not to
attach any other accounts of assessee or take coercive steps till disposal of appeal by
Commissioner (Appeals).Matter was remanded . (AY. 2007-2008 to 2012-2013)
Maharashtra Industrial Development Corporation v. CIT (E) (2017) 393 ITR 315/247
Taxman 10 /154 DTR 297/297 CTR 19 (SC)
S. 220 : Collection and recovery - Assessee deemed in default – Stay was granted till the
disposal of appeal by CIT (A) as the order of the Assessing Officer was ex parte order . [ S.
252 ]
Court has granted the stay till the disposal of the appeal by CIT (A) as the order of the Assessing
Officer was ex parte order .
GMV Projects & Systems v. ACIT (2017) 249 Taxman 468 (Mad.) (HC)
S. 220 : Collection and recovery - Assessee deemed in default – Non compliance of Rule, sale
and the sale certificate was held void, the appeal filed by the defaulter as against the
revenue is fully maintainable impugning the sale as the sale was void. [ R.57 (1) ]
In an auction, defaulter’s property was sold. The bidder paid 25% of the bid amount in
compliance with Rule 57 (1) of the Second Schedule. The defaulter then sought for an
intervention of the High court and accordingly, the sale was stayed till 18/2/2005. After the
vacation of stay, the balance amount was to be paid within 15 days. However, the same was not
419
paid by the bidder. As a result, the High Court held that the sale is void as well as the sale
certificate. Further, it cannot be contented that the defaulter cannot file an appeal against the
impugned sale under Rule 86. The legal proceedings by the defaulter impugning the sale was
fully maintainable.
Somasundaram v. CCIT (2017) 159 DTR 121 /299 CTR 272 (Ker.) (HC)
S. 220 : Collection and recovery – Stay – When first appeal is pending the AO cannot ask to
pay more than 15% of disputed demand.
AO rejected application on ground that at time of submitting stay application, assessee had not
deposited 15% of demand as pre-deposit. And directed to pay 100% tax in dispute . On writ
allowing the petition the Court held that ;ore the Gujarat High Court. High Court held that the
action of the AO was absolutely based on misinterpretation and/or misreading of modified
Instructions. High Court observed that Clause-4 provided that the AO may/shall grant stay of
demand till disposal of first appeal on payment of 15% of disputed demand. Further, it was held
that the impugned decision of rejecting stay application and consequently directing assessee to
deposit 100% of disputed demand on ground that assessee had not deposited 15% of disputed
demand as a pre-deposit before his application for stay could not be sustained and same deserved
to be quashed and set-aside.
Jagdish Gandabhai Shah v. P CIT (2017) 247 Taxman 414 (Guj) (HC)
S. 220 : Collection and recovery - Assessee deemed in default – waiver of interest – Held,
since in comparison to profitability of the assessee over years, amount paid by it towards
interest u/s 220 (2) was very low, conclusion arrived at by CIT that no 'genuine hardship'
had been caused to petitioner could not be said to be erroneous – Held, accordingly, CIT
rightly dismissed the application for waiver of interest.
Assessee was a branch office of a US company and was engaged in contract research activities
and cultivation of parent seeds. From year 1993-94 it had been claiming exemption by treating its
entire income as agricultural income. AO treated entire income of assessee as 'business income'
and attributed deemed income from research activity holding assessee to be a Permanent
Establishment of its US Company. Assessment was finalized and taxes along with interest were
paid by assessee u/s 220. Thereafter, assessee filed an application before CIT u/s 220 (2A) for
waiver of interest levied u/s 220 (2). CIT dismissed application on ground that no genuine
hardship had been caused to assessee. High Court held that since in comparison to profitability of
assessee over years, amount paid by it towards interest u/s 220 (2) was very low, conclusion
arrived at by CIT that no 'genuine hardship' had been caused to assessee could not be said to be
erroneous. (AY . 1997-98)
Pioneer Overseas Corporation USA (India Branch) v. CIT (IT) (2017) 153 DTR 337 /248
Taxman 186 (Delhi) (HC)
S. 220 : Collection and recovery - Assessee deemed in default – Stay of demand was granted
subject to 15% of amount demanded after adjusting it from refund of previous year .
Allowing the petition the Court held that; stay of demand was granted subject to 15% of amount
demanded after adjusting it from previous year. (AY. 2012-13)
420
Andrew Telecommunications India (P) Ltd v .PCIT (2017) 152 DTR 80/295 CTR 557 (Bom)
(HC)
S. 220 : Collection and recovery - Assessee deemed in default – Priority of claim - Secured
creditor had priority over the demands of tax department as per provisions of SARFAESI
Act. [ S. 220, 293, SARFAESI Act, 2002 .S. 2 (1) (zd), 13, 35 ]
Allowing the petition the Court held that; petitioner, a secured creditor had priority over the
demands of Income tax department as per the provisions of SARFAESI Act. Therefore the tax
department was wrong in issuing notice attaching the immoveable properties of borrower , which
are already mortgaged with the banks earlier and now with petitioner .
State Bank of India & Anr v. ITO (2017) 147 DTR 187 /292 CTR 438 (Orissa) (HC)
S. 220 : Collection and recovery - Assessee deemed in default – Where TRO stayed the
recovery of demand raised by the AO, subject to the petitioner making a monthly deposit
till the date of CIT (A) Order, the HC directed to make the monthly deposit only till the
date of CIT (A) Order or 31st March 2017, whichever was earlier.
The AO passed the Assessment Orders and raised tax demand of Rs. 141.76 crores. Against the
said AO Order, the assessee filed appeal before the CIT (A) and parallelly, the TRO stayed the
recovery of tax of Rs. 141.76 crores subject to the payment of 21 crores in installment of Rs. 1.75
crores per month beginning from 25.01.2017 till the disposal of CIT (A) appeals.
On filing writ against the TRO Order, the HC held that, as the CIT (A) has commenced the
hearing, there should not be a delay in disposing of the appeal before 31st March 2017. Further,
the HC observed that there are doubts that the appeal would be specifically delayed with an
ulterior object of collecting the revenue and thus held that, the petitioner would deposit an amount
of Rs. 1.75 crores every month only till the date of CIT (A) Order or 31st March 2017, whichever
was earlier. (WP No. 1515 of 2017) (AY. 2008-09 to 2014-15)
Sinhgad Technical Education Society v. TRO (2017) 246 Taxman 26 /293 CTR 109/147
DTR 361 (Bom) (HC)
S. 220 : Collection and recovery - Assessee deemed in default – Curtailment of period for
payment of tax, order giving effect to grant refund was not exercised will amounts abuse of
power .[ S.44, 271 (1) (c)]
Allowing the petition the Court held that; the additions were made on account of a highly
contentious and entirely debatable issue. The assessee had succeeded in past assessment years and
at least in one year the penalty imposed was deleted. Hence the exercise of discretion under the
proviso to section 220 (1) of the Act was unwarranted. The Department was entirely motivated in
ensuring that the refunds due to the assessee were somehow not given effect to and that the
demand was made so as to ensure that all other periods available to the assessee were shortened.
This was plain case of abuse of power under section 220 (1) of the Act which no court could
countenance. (AY. 2011-12)
Oriental Insurance Co. Ltd. v. DCIT (2017) 394 ITR 58/248 Taxman 61 (Delhi) (HC)
S.220 : Collection and recovery - Waiver of interest-Enforcement of law not a hardship--

Assessee not co-operating in assessment or recovery proceedings, interest cannot be waived.
[S.220 (2A), 222]
Dismissing the petition the Court held that the assessee has not co operated with the department
and not shown any hardship hence the condition for waiver of interest was not satisfied.
421
Mookambika Associates v. ACIT (2016) 76 taxmann.com 333 (2017) 391 ITR 26 (Karn.)
(HC)
S. 220 Collection and recovery-Assessee deemed in default - stay - The AO and CIT cannot
straightaway demand payment of 15% of the dues but have to grant complete stay if the
assessment is “unreasonably high pitched” or the demand for depositing 15% of the
disputed demand leads to "genuine hardship" to the assessee”. [S.220 (6)]
Allowing the petition the Court held that;CBDT Circular dated 29.2.2016 does not supersede
Instruction No.1914 but modifies it. Both have to be read together. The AO and CIT cannot
straightaway demand payment of 15% of the dues but have to grant complete stay if the
assessment is “unreasonably high pitched” or the demand for depositing 15% of the disputed
demand leads to "genuine hardship" to the assessee”. Commissioner was directed to decide the
Review petition filed by the assessee with in a period of two weeks. (AY. 2014-15)
Flipkart India Private Ltd. v. ACIT (2017) 396 ITR 551/149 DTR 75 /295 CTR 149/248
Taxman 555 (Karn.) (HC)
S. 220 : Collection and recovery-Assessee deemed in default - If the AO demands 15% to be

paid, the assessee is entitled to approach the Pr CIT for review of the AO's decision. [S.220
(6)]
Allowing the petition, the Court held that; CBDT's instruction dated 29.02.2016 on stay of
demand by the AO does not require the assessee to make a pre-deposit of 15% of the disputed
demand. As per the Instruction, if the AO requires the assessee to pay less, or more, than 15% of
the demand, the sanction of the Pr. CIT is required. If the AO demands 15% to be paid, the
assessee is entitled to approach the Pr CIT for review of the AO's decision.
Jagdish Gandabhai Shah v. PCIT (2017) 154 DTR 272 /297 CTR 68 (Guj.) (HC)
S. 220 : Collection and recovery – Stay - Assessed income more than seventy times the
returned income – Stay was granted . [ S. 14A]
Assessee was a domestic private limited company, and it had disclosed total income. However,
income as finally assessed by AO more than returned income. Huge difference between returned
income and assessed income had arisen on account of additions on account of arm's length price
adjustment on termination of call options, depreciation on goodwill, as disallowed, disallowance
u/s. 14A and disallowance of entrance fees to club and subscription fees.
Before the ITAT Assessee contested impugned additions and sought for stay on
collection/recovery of disputed tax and income tax demands. The ITAT held that where assessed
income was more than seventy times returned income, and impugned additions were in respect of
contentious points, stay on collection/recovery of disputed demands for a period of six months
was granted. (AY. 2012 – 2013)
Vodafone India Services (P.) Ltd. v.DCIT (2017) 164 ITD 402 (Ahd) (Trib.)
S. 220 : Collection and recovery - Stay-Assessee’s income assessed was ten times more than
the returned income, demand is to be stayed till the disposal of appeal.
Where assessee, a non-resident, received management fee from its Indian subsidiary but
Assessing Officer made assessment at sum 10 times higher to returned income and raised
demand, stay on said demand should be granted to assessee in view of CBDT Instruction No. 96
dated 21/08/1969. (AY. 2011-12)
Dimension Data Asia Pacific Pte. Ltd. v. Dy. CIT (IT) (2017) 146 DTR 89 (Mum.) (Trib.)
S. 221 : Collection and recovery – Penalty - Tax in default - Delay in depositing amount on
account of lack of proper understanding of Indian tax laws and compliance required
thereunder, hence deletion of penalty was held to be justified [ S. 200, 201, 260A ]
422
Dismissing the appeal of the revenue the Court held that ;the Department had not been able to
show any illegality or perversity in the findings recorded by the Commissioner (Appeals) which
had been affirmed by the Appellate Tribunal. No question of law arose. (AY. 2009-10)
PCIT (TDS)-II v. Mitsubishi Heavy Industries Ltd. (2017) 397 ITR 521 (P&H) (HC)
S. 221 : Collection and recovery – Penalty - Tax in default – Tax in arrears would not
include the interest payable - Penalty can be imposed on arrears of tax excluding interest
under section 220 (2). [S. 2 (43),, 156 220 (2), 234A, 234B, 234C ]
Dismissing the appeal of the revenue, the Court held that; on reading the provisions of
section 221 conjointly with the definition of “tax” as detailed under section2 (43) of the Act, the
irresistible conclusion that could be drawn was that the phraseology “tax in arrears” as envisaged
in section 221 of the Act would not take within its realm the interest component. The Assessing
Officer could impose penalty for default in making the payment of tax, but it should not exceed
the amount of tax in arrears. Tax in arrears would not include the interest payable under
section 220 (2) of the Act.
CIT v. Oryx Finance and Investment P. Ltd. (2017) 395 ITR 745 /249 Taxman 115 /155
DTR 210/297 CTR 284 (Bom) (HC)
S. 221 : Collection and recovery – Penalty - Tax in default – Self assessment tax-Failure to
pay self assessment tax while filing the return though taxes are paid while filing the revised
return, the assessee is liable to pay the penalty . [ S. 140A ]
The Special Bench had to consider the following important question of law :
“Whether an assessee is liable to penalty under section 221 (1) of the Act in a case in which
though the assessee has not paid the self assessment tax under section 140A, while filing the
return of income, but revises the income, by filing revised return of income, and pays the tax on
the revised return of income at the time of filing the revised return of income?”
After detailed discussion the Tribunal held that; in our considered view, the assessee is, in
principle, covered by the scope of the penalty under section 221 (1) of the Act in a case in which
the though the assessee has not paid the admitted tax liability under section 140A, while filing the
original return of income, the assessee subsequently pays the tax on the revised return of income,
at the time of filing the revised return of income. We, therefore, answer the question referred to
the special bench in affirmative and against the assessee. However, whether the penalty under
section 221 (1) r.w.s. 140A (1) is actually leviable on the facts of a particular case or not will
depend on the facts of that case and depending on, inter alia, the factual finding as to whether or
not the default of the assessee was for good and sufficient reasons - something with which we are
not really concerned at this stage due to inherently limited scope of the question before the special
bench. The matter was set aside to the division Bench to decide the issues on merit . (AY. 2008-
09)
Claris Life Sciences Limited v. DCIT (2017)167 ITD 1/157 DTR 153 /189 TTJ 409 /59 ITR
450 (SB) (Ahd) (Trib)
S. 221 : Collection and recovery – Penalty-Tax in default – Failure to pay self assessment
tax due to Financial crunch, levy of penalty was held to be not justified. [S. 140A, 221 (1)]
Allowing the appeal of the assessee the Tribunal held that; failure to pay self assessment tax due
to Financial crunch, levy of penalty was held to be not justified. (AY. 2010-11)
Life Time Realty (P.) Ltd. v. DCIT (2017) 163 ITD 553 /187 TTJ 7 (UO) (Mum.) (Trib.)
S. 221 : Collection and recovery - Penalty - Tax in default – Financial difficulties – levy of
penalty was held to be not justified, matter remanded.[S.140A]
423
Tribunal held that unless it could be shown that loans had been raised with mala-fide intent,
deliberately, carelessly and irresponsibly to avoid paying just and due taxes to State, plea of the
assesse cannot be rejected. Therefore penalty order was remanded back for afresh. (AY. 2011 –
2012)
Orbit Resorts (P.) Ltd. v. Addl. CIT (2017) 162 ITD 477 /185 TTJ 418/150 DTR 178
(Chand.) (Trib.)
S. 222 : Collection and recovery - Certificate to Tax Recovery Officer - TRO was not
permitted to bring property for sale because of limitation period, it would be assessee's duty
to pay tax.[ Schedule II Rule 68B ]
Allowing the petition the Court held that; since there was an order of attachment in year 2003, but
property was not sold within 3 years from date of attachment, same could no more be sold by
Revenue. Therefore the order of attachment passed by TRO and consequential proceeding of
Sub-Registrar were to be quashed and Sub-Registrar was to be directed to remove encumbrance
made in respect of said property. Court also held that since the TRO was not permitted to bring
property for sale because of limitation period, it would be assessee's duty to pay tax .
T. Subramanian v. TRO (2107) 249 Taxman 170 (Mad.) (HC)
S. 222 : Collection and recovery - Certificate to Tax Recovery Officer - When application
for extension of time for payment of demand is pending before Settlement Commission,
order is not conclusive, hence time limit specified under rule 68B for sale of attached
property of tax defaulter can be computed only from date when order of Settlement
Commission becomes conclusive [S. 245C, 245D, 245-I,Schedule II, Rule 69B ]
Dismissing the petition of the petitioners the Court held that; When application for extension of
time for payment of demand is pending before Settlement Commission, order is not conclusive,
hence time limit specified under rule 68B for sale of attached property of tax defaulter can be
computed only from date when order of Settlement Commission becomes conclusive . The
payment by instalments was a direction incorporated in the order of the Settlement Commission.
It is that main order, which has not attained finality, particularly in the light of the application
made by the assessee. Therefore the writ petition fails. (AY. 2002-03, 2008-09)
Rajiv Yashwant Bhale v. PCIT (2017) 249 Taxman 82 /153 DTR 129/299 CTR 225 (Bom.)
(HC)
S. 222 : Collection and recovery - Certificate to Tax Recovery Officer - Attachment of

property – Original assessee has already deposited/paid the entire amount due and payable
under certificate along with the interest payable under section 220 (2) - The order of TRO is
bad in law. [S. 220 and R. 48 and 60 of Second Schedule]
An order of attachment of property jointly owned by four persons including original assessee was
passed by TRO, for an amount due and payable by original assessee in respect of certificate and
interest payable under section 220 (2) . Despite order of attachment, original assessee along with
co-owners transferred property in favour of assessee's wife. After a period of 7 years of the sale
transaction, TRO declared the sale deed as null and void. Court held that the original assessee has
already deposited/paid the entire amount due and payable under certificate along with the interest
payable under section 220 (2), therefore, the order of TRO is bad in law.
Nitaben Harishbhai Shah v. TRO (2017) 246 Taxman 346 (Guj.) (HC)
424
S. 222 : Collection and recovery-Certificate to Tax Recovery Officer - Attached property
was not sold within three years, attachment order of said property would be deemed to be
vacated [Second Schedule, Rule 68B]
Allowing the petition the Court held that; Sub rule (4) of Rule 68B of II Schedule further
clarifies that where the sale of immoveable property has not been made within three years as
required under Rule 68B to Second Schedule to the Act, the effect would be attachment order of
the said property deemed to be vacated .Accordingly the attachment of immoveable properties
stands vacated.
K. Venkatesh Dutt v. TRO (2017) 244 Taxman 1 (Karn.) (HC)
S.222 : Collection and recovery-Attachment of property-Property jointly owned by four co-

owners including assessee-Sale of property during pendency of recovery proceedings-
Assessee paying entire amount of tax due along with interest-Transaction of sale cannot be
declared null and void. [S.220 (2), Sch. II, RR. 16, 48, 60 ]
Allowing the petition,the Court held that;
according to rule 60 of the Second Schedule to the Income-tax Act, 1961, even in a case where
the property was already sold by the Department in an auction for the dues of the original
assessee, the defaulter, or the person interested in the property could submit an appropriate
application to set aside the sale on payment of the entire amount due and payable by the
assessee/defaulter with other amounts as mentioned in rule 60. No further proceedings were
initiated against the assessee by the Department and the property was not put to auction and
before that, the assessee had paid the entire amount due with the interest under section 220 (2)
under the certificate for which the property was attached. Under these circumstances the order
declaring the transaction in favour of the petitioner as null and void was unsustainable. The order
of attachment under rule 48 could be issued only with respect to the certificate issued for the
amount due and payable by the defaulting assessee. The contention of the Department that the
attachment order dated January 4, 2005 could be continued with respect to the amount due and
payable under the penalty order dated March 17, 2006 could not be accepted as the penalty order
had been subsequently passed and was not even in existence when the attachment order was
passed.
Nitaben Harishbyhai Shah v. TRO (2017) 392 ITR 619/246 Taxman 346 /150 DTR 210
(Guj.) (HC)
S. 222 : Collection and recovery - Certificate to Tax Recovery Officer - Since entire tax
liability of assessee was wiped off pursuant to order of Tribunal, in such a case, even if
revenue's appeal was entertained by High Court, that by itself would not make assessee as
an assessee-in-default - Tax recovery Officer was directed to lift the attachment of the
immoveable property. [S.225]
Allowing the petition the Court held that; Since entire tax liability of assessee was wiped off
pursuant to order of Tribunal, in such a case, even if revenue's appeal was entertained by High
Court, that by itself would not make assessee as an assessee-in-default. Tax Recovery Officer is
directed to pass appropriate orders for lifting the order of attachment of the immovable property
of the assessee. (AY. 2009-10 to 2011-12)
Coromandel Oils (P.) Ltd. v. TRO (2017) 244 Taxman 165 /291 CTR 600 (Mad.) (HC)
S. 225 : Collection and recovery - Stay of proceedings – Direction to pay the demand with in
period of four weeks does not suffer from any illegality or perversity [ S. 226 ]
Dismissing the paetition the Court held that the Addl.CIT directing the assesse to pay 15% of the
disputed demand I five equal installments with in period of four weeks does not suffer from any
illegality or perversity . (AY. 2011-12, 2008 - 09 to 2013-14)
425
Madhya Pradesh Audhyogik Kendra Vikas Nigam Ltd v. Addl. CIT (2017) 299 CTR 72
/158 DTR 156 (MP) (HC)
Madhya Pradesh Audhyogik Kendra Vikas Nigam Ltd v. Addl. CIT (2017) 299 CTR 75
/158 DTR 75 (MP) (HC)
S. 225 : Collection and recovery - Stay – When appeal is pending before CIT (A) demand
for more than 15 % of tax in dispute only in executional cases . Before rejecting the stay
application principle of natural justice must be followed .
Allowing the petition the Court held that, when the assesse has filed the application for stay the
same should be considered on merit . Court also held that, when appeal is pending before CIT (A)
demand for more than 15 % of tax in dispute only in executional cases . Before rejecting the stay
application principle of natural justice must be followed .
Ladhabhai Damjibhai Panara v. PCIT (2017) 399 ITR 539/250 Taxman 502 /(2018) 161
DTR 364 (Guj) (HC)
S. 225 : Collection and recovery – Stay - Pending appeals before CIT (A) would not by itself
in may manner fetter the rights of the revenue to adopt such proceedings as are available
to it in law, to recover its taxes in terms of the impugned orders .
Dismissing the petition the Court held that, when the petitioner have accepted the conditional
stay order of demand of payment of 15 % of demand in four installments commencing from 30
th Nov, 2016 however the petitioner sought on adjournment which was refused . CIT (A) was
directed to decide the appeal without waiting for deposit of tax in dispute . Revenue to adopt the
recovery proceedings as are available to it in law, to recover its taxes in terms of the impugned
orders . (AY. 2007 - 08 to 2010-11, 2012-13)
Maharashtra Industrial Development Corporation v CIT (2017) 154 DTR 299 /297 CTR
21/81 taxmann.com 171 (Bom) (HC)
S. 225 : Collection and recovery - Stay – Guidelines - Stay of demand pending appeal —
Order of rejection was held to be not valid. [ S. 226 ]
Allowing the petition the Court held that; no reasons had been mentioned while rejecting the case
of the assessee for stay of demand during the pendency of the appeal. The assessee had been set
up and was maintained by the State Government. The object of the assessee was advancement of
scientific knowledge aimed at enhancing the quality of patient care. The case of the assessee
against the assessment for the year2011-12 had already been decided in its favour and it was
stated to be entitled to refund of Rs. 5.87 crores..The assessee had also been able to make out a
prima facie case. The case of the assessee fell in exceptional circumstances which would warrant
stay of demand without any pre-deposit during the pendency of the appeal.
Punjab Institute of Medical Sciences v. Dy. CIT (2017) 397 ITR 273 /248 Taxman 162 /297
CTR 535/154 DTR 285 (P&H) (HC)
S. 225 : Collection and recovery - Stay of proceedings - Tribunal directed assessee to deposit
50% of tax demand-On writ, High Court directed assessee company to deposit 30% of
total tax demand disputed before Tribunal [ S. 220 ]
426
ITAT directed assessee to deposit 50% of tax demand; out of the said 50% of tax demand,
assessee was directed to deposit 20% of tax demand within seven days of said order and balance
amount shall be paid within 180 days in six equal instalments. On writ High Court directed the
assesse to deposit 30 % of tax demand. (AY. 2013-14)
Google India (P) Ltd. v. ACIT (2017) 155 DTR 185/297 CTR 434/252 Taxman 27 (Karn)
(HC)
S. 225 : Collection and recovery - Stay of proceedings - Coercive tax recovery by the
Assessing Officer was stayed by the Tribunal [ S. 220, 254 (2A)]
The AO wanted to pre-empt the Tribunal from dealing with the Stay application. Tribunal held
that,The entire act ion was directed at rendering the Tribunal and the assessee helpless so that no
relief can be granted in favour of the assessee. The Tribunal could not be silent spectator of the
arbitrary and illegal act ion on the part of the Assessing officer so as to frustrate the legal process
provided under the Act. The grant of refund of the amount that has been coercively recovered by
the department was in the exercise of the tribunal’s inherent powers to ensure that the assessee is
not left high and dry only on account of illegal and highhanded actions on the part of revenue and
the assessing officer . Recovery proceedings were stayed. (AY. 2009-10, 2013-2014)
Greater Mohali Area Development Authority v. DCIT (2018)161 DTR 341/191 TTJ 594
(Chd. (Trib)
S. 226 : Collection and recovery – Recovery of the amount is disputes as soon as the order
passed by the Appellate Authority, though the limitation period for filing an appeal was not
over cannot be said to be illegal, though it may not be proper .[ S . 226 (3) ,237, 240 ]
Dismissing the petition the Court held that; Recovery of the amount is disputes as soon as the
order passed by the Appellate Authority, though the limitation period for filing an appeal was not
over cannot be said to be illegal, though it may not be proper . Appeal was disposed of was
communicated on 30-3-2017.Demand was recovered from bank account of assessee on very next
day i.e., 31-3-2017. Court also held that although assessee's appeal was pending before Tribunal,
it was not entitled for refund of amount recovered at this stage, as a matter of right, since neither
section 237 nor section 240 would come to their rescue as on date . (AY. 2009-10, 2010-11,
2013-14)
Chennai Central Cooperative Bank Ltd. v. ACIT (2017) 248 Taxman 366. 158 DTR 294 /299
CTR 44 (Mad.) (HC)
LIC Employees Co - Operative Bank Ltd v. ACIT (2017) 248 Taxman 366/158 DTR 294
/299 CTR 44 (Mad.) (HC)
S. 226 : Collection and recovery - Modes of recovery – Requirement of garnishee

proceedings is that only that copy of notice should be forwarded to assessee and need not be
served on assessee in advance or simultaneously. [ S. 156, 220, 226 (3) ]
Dismissing the petition the Court held that; that requirement under section 226 (3) (iii) was only
that a copy of the notice should be “forwarded to the assessee” and not that a copy should be
served on the assessee in advance or simultaneously. Hence, there was no illegality committed by
the Department in not issuing to the assessee a notice under section 226 (3) (iii)of the Act
simultaneously with or prior to the notice issued to its bank under section 226 (3) (i) of the Act
for recovery of the tax demand from its account (AY. 2014 - 15)
GECAS Services India P. Ltd. v. ITO (2017) 396 ITR 305/249 Taxman 615/154 DTR 265
(Delhi) (HC)
427
S. 226 : Collection and recovery - State government with which non-resident entered into
contract not party to earlier proceedings is not entitled to seek rectification of order of
Tribunal or file writ petition. For consistency of law parties should be continuously joined
all throughout proceedings. [ S. 254 (2), Art 226 ]
The Investigation, Design and Research Division of the Irrigation Department of the Government
of Rajasthan, which had entered into a contract with TCE, filed an application for rectification of
the Tribunal’s order and also filed a writ petition claiming that it was a representative of the non-
resident, TCE : Dismissing the appeal and the petition the Court held that; the Investigation,
Design and Research Division of the Irrigation Department of Government of Rajasthan was
entitled to enter into contract with a foreign firm and the assessment of the earlier year was made
in the name of TCE and proceedings were initiated by it and concluded in the name of TCE. The
substitution of the Department of the State Government after three years for TCE under the
Income-tax Act was not permissible inasmuch as the precedent of the previous year was required
to be accepted. The Department of the State Government was never a party to the earlier
proceedings. TCE ought to have preferred the appeal and not the Department of the State
Government. The Tribunal observed that TCE was not entitled for refund to come in the
proceedings at a belated stage. If the imposition of tax was not referred to in the taxing statute, it
should not apply even in the case of refund. For the consistency of law, the parties should be
continuously joined all throughout the proceedings.
Chief Engineer I D And R Irrigation Department v. ACIT (2017) 394 ITR 720/151 DTR
297 /295 CTR 442 (Raj) (HC)
State of Rajasthan v. ACIT (2017) 394 ITR 720/ 151 DTR 297/295 CTR 442 (Raj.) (HC)
S. 226 : Collection and recovery - Modes of recovery - Assessing Officer cannot review
previous order, order to extent of directions to pay unsustainable however adjustment of
refund upheld [ S. 237, 245 ]
Court held that; Assessing Officer cannot review previous order, order to extent of directions to
pay unsustainable however adjustment of refund against the recovery was upheld . (AY. 2014-
15)
Telenor (India) Communications Pvt. Ltd. v. ACIT (2017) 394 ITR 153/150 DTR 155/295
S. 226 : Collection and recovery - Modes of recovery – Argument of the assessee that
seeking relaxation ,15% of predeposit of tax must be considred by the Assessing Officer
and should pass appropriate order .
Allowing the petition the Court held that; argument of the assessee that seeking relaxation of
condition of 15% of predeposit of tax must be considred by the Assessing Officer and should
pass an appropriate order . (AY.2014-15)
Telenor (India) Communications Pvt. Ltd. v. ACIT (2017) 150 DTR 153/295 CTR 118/88
taxmann.com 585 (Delhi) (HC)
S. 226 : Collection and recovery – Auction - Purchaser was held to be deemed defaulter-
Person in possession of property permitted to retain title to property after making due
payment with interest - Department entitled to proceed for auction and sale of properties if
person in possession of property fails to deposit amount. [Sch. II, r. 58.]
428
Allowing the petition the Court held that; till date, neither the purchaser nor the legal heirs had
cared to deposit the balance sale consideration. In such circumstances, rule 58 of Schedule II to
the Act would come into operation and the predecessor-in-interest would have to be deemed to be
a defaulter. The sale in favour of the predecessor in interest would stand set aside. The petitioner
had been in possession of the property prior to the date of sale. The petitioner had, in fact, filed a
claim petition at the relevant time, which was rejected. The petitioner, admittedly, was in
possession of the cashew factory in the property purchased by him. A licence was issued in the
name of the petitioner`s father. In such circumstances, equity demanded that the petitioner be
given a chance to settle the entire dues under the Act created by the fourth respondent, which also
occasioned the charge being created on the property purchased by the petitioner. Therefore, the
petitioner could retain title to the property after making the due payment with interest. If the
petitioner failed to deposit the amount, the Department would be entitled to proceed for auction
and sale of the properties, in which event any amounts remaining after satisfaction of the dues
would be paid to the petitioner and the legal heirs or assignees of the fourth respondent, in
proportion to the extent of their respective holding.
Mohammed Niyas v. CIT (2017) 390 ITR 13 (Ker.) (HC)
S. 226 : Collection and recovery-Garnishee proceedings - Seizure of fixed deposit receipt

from the bank was held to be illegal, order was quashed .
Allowing the petition the Court held that; on the date on which the notice was issued under
section 226 of the admittedly in view of the correspondence which had come on record, and
complete documentary evidence, it was clearly established that the petitioner was a creditor and
the fixed deposit receipt lien was with the petitioner-bank. The Department had seized the fixed
deposit receipt, which was not proper. Therefore, the bank was a creditor and notice under section
226 of the Act and recovery pursuant thereto was misconceived and not proper. The order was
liable to be quashed.
Kalupur Commercial Co-op Bank Ltd v. UOI (2017) 390 ITR 115 (Guj.) (HC)
S. 226 : Collection and recovery – Mortgaged property – Dispute between bank and the
Revenuewill not affect the purchaser of the property.
The petitioner purchased the mortgaged property. The Tax Recovery Officer issued an order of
attachment on property for outstanding tax dues of the directors. On allowing the petition the
Court held that; mere communication to the bank by the Income-tax Department conveying that
Income-tax Department had to recover huge amount of tax from the Director, its HUF and
company would not take shape of the attachment of the property which can be so in terms of rule
48 of the procedure for recovery of tax long after the property was sold to 'A' who in turn, sold
part of it to the petitioner. Even if the bank had disregarded such a communication of the income-
tax department and not shared with the department proceeds of the sale of such property, at best
may be a dispute between the income tax department and the bank and in any case, cannot harm
the petitioner who was the subsequent purchaser for consideration without notice. On such
grounds, petition is allowed. Impugned attachment is lifted qua the properties in question.
Prajakta M. Shah v. TRO (2017) 244 Taxman 183 /148 DTR 101 /293 CTR 197 (Guj.) (HC)
S. 234A : Interest - Default in furnishing return of income - Advance tax – Waiver of

interest - Taxes were paid after reassessment - Condition prescribed as per circular is not
satisfied hence waiver cannot be made . [ S. 234B, 234C ]
Allowing the appeal of the revenue against the single judge the Court held that; the assessment
made in the usual and normal course was reopened under section 148 . The reassessed tax was
paid only after the Revenue had passed the reassessment order. For the assessment year 2001-02,
at the assessment stage itself, the deduction claimed under section 80HHC qua the local sales was
denied to the assessee. The matter was carried in appeal, and the Commissioner (Appeals), in his
429
order dated August 27, 2004, had affirmed this. Therefore, in a sense, at that stage itself, the
assessee was made aware that section 80HHCdeduction was not available. The case did not fall in
any of the circumstances adverted to in paragraphs 2 (a) to 2 (d) of the Circular NO. F. NO.
400/29/2002-IT (B), DATED 26-6-2006 dated June 26, 2006. The judgment was not justified.
The assessee was not entitled to waiver of interest. (AY. 1997 - 98 to 2000-01, 2003 - 04)
CCIT v. Rajanikant and Sons (2017) 396 ITR 171/249 Taxman 122/298 CTR 479/155 DTR
337 (Mad) (HC)
S. 234A : Interest - Failure to file return and failure to pay advance tax - Levy of interest is
mandatory [ S. 132 (5),139, 234B ]
Dismissing the appeal of the assesse the Court held that; admittedly drafts were purchased in the
name of the assessee by depositing cash and no source of availability of cash was explained. The
additions to income was fully justified. The assessee failed to furnish the return and had also not
deposited the advance tax as required under the law, therefore, the assessee was liable to pay
interest u/s s 234A and 234B of the Act
Mahabeer Prasad Jain v. CIT (2017) 399 ITR 600/(2018) 161 DTR 223 /253 Taxman 152
(All) (HC)
S. 234B : Interest - Justified in directing to compute the interest u/s.234B (2A) of the Act -
Interest is mandatory - Relevant date is when the settlement Commission determines and
passing the order u/s 245D (4)-S.234B (2A) is applicable to all pending proceedings as on 1-
6-2015 [ S.245C (1), 245D (4) ]
Dismissing the petition the Court held that ,levy of interest or computation of interest should arise
only at stage of order u/s 245D (4) and when actual amount was determined, after following due
procedure u/s.245. Therefore, relevant date would be date on which Settlement Commission
passed order u/s 245D (4). Provision of S.234B (2A) would apply to all pending proceedings
pending as on 01.06.2015. Where the amount determined u/s 245D (4) exceeded the amount
disclosed, Settlement Commission is justified in charging the interest . (SCA No .4325, 7112,
7124 of 2017 dt 19 - 07 - 2017 (AY.2010-11 to 2014-15)
Devdip Malls Developers (P) Ltd. v. ITSC (2017) 158 DTR 161 /85 taxmann.com 47 (2018)
301 CTR 85 (Guj) (HC)
S. 234B : Interest - Advance tax - Interest cannot be charged beyond date of order passed
by Settlement Commission under section 245D (1)[ S. 245D (1)
Allowing the petition the Court held that, interest under section 234B cannot be charged beyond
date of order passed by Settlement Commission under section 245D (1). (AY.1989-90 to 1996-97
)
Hotel Hamilton Complex v. ITSC AB (2017) 251 Taxman 339 (Karn) (HC)
S. 234B : Interest - Advance tax – Book profit - Subsequent retrospective amendment -

Interest cannot be levied - Rectification order levying interest was held to be not levied .[ S.
115JB, 154, 234B ]
430
Dismissing the appeal of the revenue, the Court held that; where the advance tax is based on the
law prevailing on the date on which tax was due and payable, any liability created by way of
amended provisions subsequently incorporated would not attract payment of interest as there was
no default on the date of payment of advance tax. Rectification order levying interest was held to
be not levied. (AY. 2004-05)
CIT v. NHPC Ltd. (2017) 399 ITR 275 (P&H) (HC)
S. 234B : Interest-Book profits - Interest under sections 234B and 234C cannot be charged,
if total income is assessed to tax under section 115J . [ S.115J, 234C ]
Dismissing the appeal of the revenue, the Court held that, Interest under sections 234B and 234C
cannot be charged, if total income is assessed to tax under section 115J
Dy. CIT v. Sabarmati Paper Udyog Ltd. (2017) 250 Taxman 415 (Guj.) (HC)
S. 234B : Interest - Advance tax - Assessee was under no obligation to pay advance tax and
the liability arose only on account of retrospective amendment to the law after the
conclusion of the previous year relevant to the subject assessment year.
Dismissing the appeal of the revenue the Court held that; the Tribunal was right in deleting the
interest charged under section 234B of the Income-tax Act, 1961 on the basis that at the time of
making the payment of advance tax the assessee was under no obligation to pay advance tax and
the liability arose only on account of retrospective amendment to the law after the conclusion of
the previous year relevant to the subject assessment year. (AY. 2008 09)
CIT v. Glenmark Pharmaceuticals Ltd. (2017) 398 ITR 439/85 taxmann.com 349 (Bom)
(HC)
Editorial : SLP is granted to the revenue CIT v . Glenmark Pharmaceuticals Ltd. (2017) 397 ITR
30 (St.)/250 Taxman 391 (SC)
S. 234B : Interest - Advance tax - Assessee becoming liable to pay advance tax subsequent to
amendment in statute with retrospective effect — No shortfall according to provisions
prevailing at relevant point of time,interest cannot be charged.[ S. 43 (6), 234C ]
Dismissing the appeal of the revenue, the Court held that; under section 207, advance tax was
payable in respect of the total income of the assessee, which would be chargeable to tax in the
assessment year immediately following the financial year in question. Thus, the computation of
advance tax was made in advance and deposited with the Government according to the provisions
contained in Chapter XVII. In the absence of the amendment in section 43 (6) at the relevant time
no liability to pay tax in the case of the assessee had existed. Such liability arose on account of
the subsequent amendment brought into the statute with retrospective effect. Therefore, at the
relevant time when the liability to pay advance tax arose, there was no shortfall according to the
prevailing statutory provisions. No interest could be charged (AY. 2008 - 09)
CIT v. National Dairy Development Board (2017) 397 ITR 543 /249 Taxman 61 (Guj) (HC)
S. 234B : Interest - Advance tax—Income computed under section 115J prior to section
115JA, 115JB assesse is not liable to pay interest .[ S. 115J, 115JA, 115JB, 234C ]
431
Allowing the appeal of the assesse the Court held that; for the assessment year 1989-90 when
neither of the twosections 115JA and115JB of the Act were in-existence. The provision of
section 115J of the Act was inserted with effect from April 1, 1988 and it remained in force up to
March 31, 1991. At that time there was neither section 115JA nor section 115JB of the Act. The
provisions under sections 115JA and 115JB were enforced by theFinance Act of 1996 with effect
from April 1, 1997 and by the Finance Act, 2000 with effect from April 1, 2001 respectively.
Therefore, income computed under section 115J of the Act for the period prior to enforcement of
sections115JA and 115JB, would not attract interest under sections 234B and 234C of the Act.
(AY. 1989 - 90)
J.K. Synthetics Ltd v. CIT (2017) 395 ITR 647/82 taxmann.com 23 (All) (HC)
S. 234C : Interest-Advance tax-Shortfall due to unanticipated income - Interest is leviable.

Dismissing the appeal the Court held that; levy of interest u/s. 234C was valid even if the
shortfall to pay advance tax was due to unanticipated income. (AY. 2007-2008)
MRF Ltd v. DCIT (LTU) (2016) 76 taxmann.com. 282 /(2017) 390 ITR 18/293 CTR 151/148
DTR 58 (Mad) (HC)
S. 234C : Interest - Advance tax – Interest is not leviable if the income was not predictable
and the assessee could not have anticipated its receipt e.g. the receipt of a gift.
Allowing the appeal of assesse the Tribunal held that ;though levy of interest for deferment of
advance-tax is mandatory and cause & justification for the deferment are irrelevant, the same is
not leviable if the income was not predictable and the assessee could not have anticipated its
receipt e.g. the receipt of a gift was on 17-12-2011. (ITA No. 7661/Mum/2013, dt. 13.07.2016)
(AY. 2012-13)
Kumari Kumar Advani v. ACIT (Mum.) (Trib.); www.itatonline.org
S. 234C : Interest - Advance tax - Interest is applicable in respect of income returned under
section 139 as well as income returned in response to notice under section 148. [S. 139,148]
Dismissing the appeal of the assessee the Tribunal held that; interest under section 234C is
chargeable in respect of income returned under section 139 as well as income returned in
response to notice under section 148. (AY. 2009-10)
V. Umayal v.ITO (2017) 163 ITD 278 (Chennai) (Trib.)
S. 234E : Fee-Default in furnishing the statements-Provision is valid – As multiple agencies

are involved in every transaction in Government offices, longer period for Government to
file a return of deduction of tax at source is neither unreasonable nor discriminatory [
200A ]
Dismissing the petition the Court held that; section 200A is a machinery provision providing
mechanism for processing a statement of deduction of tax at source and for making adjustments,
which are, arithmetical or prima facie in nature and does not create any charge in any manner.
However ,a charging provision creating a charge for levying fee for certain defaults in filing
statements and fee prescribed under section 234E could be levied even without a regulatory
provision being found in section 200A for computation of fee . As multiple agencies are involved
in every transaction in Government offices, longer period for Government to file a return of
deduction of tax at source is neither unreasonable nor discriminatory.
Rajesh Kourani v. UOI (2017) 249 Taxman 402/297 CTR 502 /156 DTR 129 (Guj.) (HC)
S.234E : Fee-Default in furnishing the statements - Section cannot be said to be

unreasonable and arbitrary inasmuch as it is on account of additional work burden which
has fallen upon department due to fault of deductor to file statement within time, that a fee
has been levied. [Art. 226 ]
432
The Assessee is a lower primary school. It was making salary payments to the teaching staff of
the school after deducting tax at source and amount so collected was credited to the account of
Income tax department. The assessee did not filed statement in Form 24Q within the time
prescribed in the relevant section. The department demanded late fee under section 234E for
delay in filing TDS statement.
On filing Writ before the HC, the assessee challenged the validity of section 234E. Dismissing
the petition the Court held that,section cannot be said to be unreasonable and arbitrary inasmuch
as it is on account of additional work burden which has fallen upon department due to fault of
deductor to file statement within time, that a fee has been levied.
Sree Narayana Guru Smaraka Sangam Upper Primary School v. UOI (2017) 292 CTR 296
/77 Taxman.com 244 (Ker) (HC)
S.234E : Fee-Default in furnishing the statements - Provision is valid - Right of appeal is

provided.[Art. 226]
The provision is not onerous even in the absence of a right of appeal as it is always open for the
aggrieved person to approach the High Court under article 226 of the Constitution of India.
However, section 200A was amended by the Finance Act, 2015 incorporating clause (c) and an
order passed under section 200A is made appealable under section 246A. This benefit of appeal is
available only after the commencement of the Finance Act, 2015. Section 234E is valid.
Sree Narayana Guru Smaraka Sangam Upper Primary School v. UOI (2017) 392 ITR 457
/147 DTR 108/245 Taxman 312 /292 CTR 296 (Ker.) (HC)
S. 237 : Refunds – Delay in granting refund, department was directed to pay cost to assesse.
Allowing the petition, the court held that, delay in granting refund, department was directed to
pay cost to assesse.
Arjun Das v. ITO (2017) 251 Taxman 526 (Delhi) (HC)
S. 237 : Refunds – If the assesse is entitled for any other benefits the same must be granted
though he has not claimed, similarly the Assessee is entitled to have refund of excess
amount as State could not recover tax more than what was due to it.
Allowing the petition the Court held that; if assesse is entitled for other benefits which he has not
claimed, the same be granted to him i.e. after the proceedings if it found that the assessee is
entitled for refund, the same should be refunded as the State cannot recover the tax more than
what is due to it.
Kalindee Rail Nirman (Engineers) Ltd. v. CIT (2017) 150 DTR 239 (Raj) (HC)
S. 237 : Refunds – Non availability of record cannot be the ground to reject the claim of
refund - The CIT (A) is required to conduct a discreet inquiry – Matter was restored to the
file of CIT (A)
On appeal the Tribunal held that the CIT (A) required not only to dispose of the appeal but to
conduct a discreet inquiry by summoning the concerned officer and requisite record from the
quarter concerned or to reconstruct the record, if need be, in compliance with the order passed by
the High Court in order to adjudicate the controversy at hand once for all. The matter was
restored to the CIT (A) to decide the issue afresh after providing opportunity of being heard to the
assessee
433
Roop Chand Ram Narain HUF v. ITO (2017) 59 ITR 98 (Delhi) (Trib)
Roop Chand Laxmi Narain HUF v. ITO (2017) 59 ITR 98 (Delhi) (Trib)
S. 241A : Refunds - With holding of refund in certain cases - Issuance of notice under S.143
(2) claiming extended period for processing refund under S.143 (1), would not be sufficient
to withhold refund. [ S. 143 (1), 143 (ID), 143 (2) ]
Allowing the petition the Court held that; issuance of notice under S.143 (2) claiming extended
period for processing refund under S.143 (1), would not be sufficient to withhold refund. (AY.
2015-16, 2016-17)
Corrtech International (P.) Ltd. v. Dy. CIT (2017) 251 Taxman 48/401 ITR 355 (Guj.) (HC)
S. 244 : Refunds - Party depositing sum after deduction of tax at source — Company
claiming and receiving refund of tax and utilising it — violation of order — direction to
secure amount and not to operate account without leave of court is not proper.
On appeal, allowing the appeal the Court held that; what the court in its order dated February 23,
2011 was called upon and intended to do was to protect the compensation amount. Merely
because it went through the Income-tax Department, it did not cease to be part of compensation.
Even the company had submitted before the court at the time of passing the order dated February
23, 2011 that the compensation amount needed to be protected and it was willing to protect it
subject to the order of the court. Therefore, the company, while handling the compensation
amount, ought to have sought orders from the court going by the way it understood the
proceedings. The company should not have appropriated the refund received from the Income-tax
Department. There was nothing wrong in claiming the refund. The problem was in utilising the
refund received. The appropriation of the refund amount received from the Income-tax
Department was in violation of the order dated February 23, 2011. The Division Bench should
not have interfered with the order dated June 26, 2015 passed by the single judge. However,
taking note of the fact, an amount of Rs. 2,23,00,000 had been kept in fixed deposit towards lien
for issuance of bank guarantee, the company was directed not to operate the bank accounts of the
company after April 3, 2017 without securing an amount of Rs. 8,32,60,331. The fixed deposit of
Rs. 2,23,00,000 with the bank was also not to be withdrawn without leave of the High Court.
However, it would be open to the company to apply for appropriate clarification or modification
of the order dated June 26, 2015 after making the deposit. (AY. 2013-14)
Baranagore Jute Factory Plc. Mazdoor Sangh (BMS) v.Baranagore Jute Factory Plc.
(2017) 394 ITR 6 (SC)
S. 244A : Refunds – Interest on refunds – Partial waiver of interest by Settlement

Commission the assesse was entitled to interest – When the amount is due to the assesse,
there is statutory obligation of the department to refund the amount with interest .[ S.
234A, 234B, 234C, 245D (4) ]
Allowing the petition the Court held that, When the amount is due to the assesse, there is
statutory obligation of the department to refund the amount with interest . Contention of the
revenue that the refund became due to partial waiver of interest by the Settlement hence the
assesse is not entitle to interest was rejected . (AY. 1993 - 94 to 1994 - 95)
K. Lakshmanya and Co. v. CIT (2017) 399 ITR 657/299 CTR 97/159 DTR 289 /(2018) 252
Taxman 13 (SC)
434
Editorial : Decision in CIT v. K. Lakshmanya and Co (2010) 323 ITR 617 (Karn) (HC) was
reversed .
S. 244A : Refunds – Interest on refunds – Self assessment tax - Decision of High court
dissenting from decision of co-ordinate Bench — Order was seta side and matter to be
decided by larger Bench [ S. 14A ]
Question before the High Court was whether the assesse was entitle to interest under S.2AAA of
the Act on excess amount paid . Disagreeing with an earlier decision of the court in CIT v. Sutlej
Industries Ltd. (2015) 325 ITR 331 (Delhi) (HC), the Court held that the assesse was not entitle to
interest On appeal the Court held that; the appropriate course of action for the High Court would
have been to refer the matter to a larger Bench. Since subsequently, in another case pending
before the High Court on the same question, the High Court had referred the matter to a larger
Bench, the judgment of the High Court was to be set aside and the appeal remanded to the High
Court for decision afresh along with the decision in the other case by the larger Bench. (AY. 2006
- 07)
Engineers India Ltd v. CIT (2017) 397 ITR 16/250 Taxman 19 /298 CTR 115 /157 DTR 235
(SC)
Editorial : Order in CIT v Engineers India Ltd (2015) 55 taxmann.com 1 (Delhi) (HC) was set
aside .
S. 244A : Refunds – Interest on refunds - Delay in claim for refund condoned by CBDT –
Assessee is entitled to interest on refund however the assesse is not entitled to interest on
interest. [ S 193, 237 ]
Allowing the petition the Court held that; the facts on record showed that tax was deducted at
source on the interest income arising out of the deposits made in the Central Government
securities, the State Government securities and trustee securities. It was not the case of the
Department that the assessee had not made such deposits or had not earned interest income or
there was any doubt about the genuineness of the certificates of tax deduction at source submitted
by the assessee. There was no reason for refund of the amount of Rs. 11,44,821 being denied to
the assessee in the assessment orders dated December 30, 2013. The claim of the assessee in this
regard deserved to be allowed. That there had been considerable delay on the part of the assessee
in making the claim for refund and then, in filing the petition for condonation of delay. There was
no reason to award any further interest over the statutory interest to the assessee. (AY. 2000-01 to
2003 - 04)
Meghalaya Co-op. Apex Bank Ltd v. CBDT (2017) 396 ITR 459 /249 Taxman 65/298 CTR
318/157 DTR 340 (Meghalaya) (HC)
Editorial : SLP of revenue is dismissed, CBDT v. Meghalaya Co-op. Apex Bank Ltd (2018) 255
Taxman 69 (SC)
S. 244A : Refunds – Interest on refunds - The relief with interest which even otherwise was
not due to the assessee could not be granted.[ S. 245, Art, 226 ]
Dismissing the petition the Court held that ;On the request of the assessee, the Department
deleted the protective assessment for the assessment year 1997-98 and adjusted the refund for the
assessment years 1997-98 and 1998-99 against the tax demand. Under no circumstances, the
assessee could resile from such position and claim that the entire royalty income should be
deleted for the assessment year 1996-97. Quite apart from the principle of estoppel acting against
the assessee, the writ petition which was a discretionary remedy. The assessee had no basis for
contending that the royalty income could not be taxed for the assessment year 1996-97, merely
because the Assistant Commissioner passed an order which was not what the Appellate Tribunal
435
had directed. The relief with interest which even otherwise was not due to the assessee could not
be granted. (AY. 1996 - 97)
Ajanta Transistor Clock Mfg. CO. v. DCIT (2017) 394 ITR 436 (Guj.) (HC)
Editorial : SLP of assesse is dismissed Ajanta Transistor Clock Mfg. CO. v. DCIT, (2016) 389
ITR 8 (St.)
S.244A : Refunds—Waiver of interest - Refundable to assesse due to waiver of interest, the

assesse is entitled to payment of interest on such refund . “In any other case” and “As the
case may be” - wider interpretation of expression. [ S. 220 (2), 220 (2A)]
Allowing the petition the Court held that ; assesse is entitled to payment of interest on refund of
interest due to waiver of interest . Even if there was no express statutory provision for payment of
interest, the Government could not avoid its obligation to reimburse the lawful monies together
with accrued interest for the period of undue retention. The words “any other case” were not to be
interpreted restrictively and could include situations such as in the assessees’ cases. Clause (b) of
section 244A (1) stipulated that “in any other case” the interest payable should be calculated at
the rate of one-half per cent. for every month or part of a month comprised in the period or
periods from the date “or, as the case may be” dates of the “tax or penalty” to the date on which
refund was granted. This had to be read with the expression “refund of any amount that becomes
due” occurring in section 244A (1) . When the entire sub-section (1) of section 244A (1) was read
as a whole, the legislative intent did not appear to limit the expression “any amount becomes due”
occurring in section 244A (1) or the expression “in any other case” occurring in section 244A (1)
(b) only to tax and penalty. The words “as the case may be” referred to the period for which the
interest became payable and that the period was said to be the dates of payment of tax or penalty
to the date on which the refund was granted. That did not mean that an amount other than tax or
penalty could not be included in the expression “in any other case”. It was only reflective of the
periods for which such interest became payable. The disjunctive “or” between the words “period”
and “periods” indicated that “in any other case” interest would be calculated for every month or
part of a month comprised in the period or periods from the date on which the refund was
granted. The Explanation under clause (b) of section 244A (1) clarified the expression “the dates
of payment of the tax or penalty”. It was not intended to and did not whittle down the ambit of
section 244A (1) (b) . There was nothing in the provision which prohibited the payment of
interest on the amounts of refund due to the assessees as a result of the waiver of interest under
section 220 (2A) . The assessees were entitled to interest under section 244A (1) (b) on the
amount of interest refunded, from the date of recovery till the date of payment. (AY.1992-93,
1993-94 to 1996-97, 2002-03, 2004-05, 2006-07)
Brisk Capital Market Services Ltd. v. CIT (2017) 394 ITR 557/248 Taxman 281/295 CTR
349 /151 DTR 257 (Delhi) (HC)
Naresh Kumar Aggarwal v CCIT (2017) 394 ITR 557 /248 Taxman 281/295 CTR 349/151
DTR 257 (Delhi) (HC)
Preeti N.Aggarwal v CCIT (2017) 394 ITR 557 /248 Taxman 281/295 CTR 349 /151 DTR
257 (Delhi) (HC)
S. 244A : Refunds – Interest on refunds – Assessee is entitle to interest on unpaid interest .

The Tribunal held that the assessee was entitled to interest on unpaid interest. The High Courtin
the assessee’s case for the same assessment year, i. e., 2002-03 had upheld theorder of the
Assessing Officer granting interest under section 244A. The subsequentrectification proceedings
and the consequent appellate orders thereon had been reversedby the High Court in the assessee’s
case. Hence the Department should not have anygrievance in the instant appeal as the
Commissioner (Appeals) had addressed the entireissue in the same lines in which the High Court
had addressed the issue. If the Departmentwas aggrieved by the decision of the High Court it
should have preferred a special leavepetition before the Supreme Court. (AY. 2002-03)
436
DCIT v. Peerless General Finance and Investment Co. Ltd. (2017) 57 ITR 536 (Kol) (Trib)
S. 245 : Refunds - Set off of refunds against tax remaining payable – Tax dues for
subsequent years can be adjusted [ S. 237 ]
Dismissing the petition the Court held that; the demand having been raised against the assessee
for the assessment years 2013-14 and 2014-15 and the intimation having been sent to the
assessee, the mandate of section 245 had been satisfied by the Department before making the
adjustment from the refund due to the assessee, for the assessment year 2012-13, of the tax dues
from the assessee for the subsequent years. (AY. 2012-13, 2013-14)
Northern Coal Fields Ltd v. ACIT (2017) 398 ITR 508/81 taxmann.com 9 (MP) (HC)
Editorial : SLP of the assesse was dismissed ;Northern Coal Fields Ltd v. ACIT (2017)396 ITR
75 (St.)/250 Taxman 155 (SC)
S. 245 : Refunds - Set off of refunds against tax remaining payable – Adjustment of refund
without giving an opportunity of hearing was held to be breach of principles of natural
justice hence bad in law. [ Art. 226]
Allowing the petition, the Court held that; Adjustment of refund without giving an opportunity of
hearing was held to be breach of principles of natural justice hence bad in law. (AY. 1994 - 95)
S. Narayanan v. CIT (2017) 395 ITR 271/299 CTR 285 /159 DTR 387 (Mad) (HC)
S. 245C : Settlement Commission - Law does not require that assesse to demonstrate that
there is a fresh source of income which was not disclosed earlier .
Allowing the petition the Court held that, law does not require assessee to demonstrate that there
is a fresh source of income which has not been disclosed earlier. Therefore, where an income
which is not earlier offered to tax like an excessive claim for depreciation, is subsequently
withdrawn and, as a result, additional income is offered to tax before Settlement Commission, it
would satisfy requirement of section and, in such a case, Settlement Commission could not
decline to proceed on assessee's application. Settlement Commission was directed to hear the
application on merts.
Unitech Wireless (Tamil Nadu) (P.) Ltd. v. PCIT (2017) 250 Taxman 265/157 DTR 268
(Delhi) (HC)
S. 245C : Settlement Commission – Search and seizure - Off market commodity

transactions – Hedging – Failure to prove that the assessee was acting only as broker,
rejection of application was held to be justified .[ S. 69A, 245D ]
Dismissing the petition the Court held that; the Settlement Commission was justified in rejecting
assessee’s application where the assessee could not substantiate his claim that off market
commodity transactions/hedging transactions found in seized documents were entered into by
him only in capacity of a broker and entire unaccounted income from such transactions did not
belong to him
Manoj kumar Babulal Agarwala v. CIT (2017) 159 DTR 219/83 taxmann.com 139 (Guj)
(HC)
S. 245C : Settlement Commission - Settlement of cases – Conditions-Search and seizure

action was for ten group companies – Settlement Commission accepting six companies
petitions and rejecting four companies Applications was held to be not proper, there was no
437
rational criteria for distinguishing – Order of settlement Commission was setaside .[S. 132,
153A, 245D ]
Allowing thepetitions the Court held that; the Settlement Commission did not give any rational
criteria for distinguishing between the six companies in the group and the four assessees while
rejecting the settlement applications, on a ground that was not urged by the Department, viz., the
failure to disclose the manner of earning the undisclosed income.. The differential treatment of
the four assessees forming part of the same group was not warranted. The order of the Settlement
Commission was unsustainable. (AY. 2008-09 - 2015-16)
Bindals Dupex Ltd v. PCIT (2017) 395 ITR 128/153 DTR 321 (Delhi) (HC)
Brina Gopal Traders P. Ltd. v. PCIT (2017) 395 ITR 128/153 DTR 321 (Delhi) (HC)
Swabhiman Vyapaar P. Ltd. v PCIT (2017) 395 ITR 128/153 DTR 321 (Delhi) (HC)
Tehri Pulp and Pape Ltd v. Pr. CIT (2017) 395 ITR 128/153 DTR 321 (Delhi) (HC)
S. 245C : Settlement Commission - Settlement of cases – Conditions - Settlement

Commission can admit application for settlement when additional income and additional
tax liability is disclosed for some years and there is no additional income/additional tax for
remaining years as long as additional tax payable on income disclosed in application
exceeds threshold limits specified in proviso to section 245C (1).
The Special Bench of the Settlement Commission was to consider a question ‘whether in an
application for settlement under section 245C (1) covering more than one assessment year, the
applicant must mandatorily disclose additional income not disclosed before the Assessing Officer,
for each assessment year covered by the application and on such additional income there must be
a liability to pay tax for each such year especially in view of amendments brought about in
proviso to section 245C (1), read with section 245A (b) by Finance Acts 2007 and 2010, thereby
rendering decision of Special Bench in Airtech (P.) Ltd. v. Income Tax Settlement Commission
[1994] 20 ITR (AT) 21 (ITSC), no longer good law?’. The Bench, by a majority view, concluded
that Settlement Commission can admit an application for settlement when additional income and
additional tax liability is disclosed for some years and there is no additional income/additional tax
for remaining years as long as additional tax payable on income disclosed in application exceeds
threshold limits specified in proviso to section 245C (1). The Bench held that there is no specific
condition laid down in law that there should be additional income disclosed in every assessment
year or that there should be additional tax liability on such additional income disclosed in every
year, covered by the application and that the amendments made in proviso to section 245C (1),
read with section 245A (b) by Finance Act 2007 and 2010, have no direct bearing on the above
conclusions.
Neptune Developers & Construction (P.) Ltd., In re (ITSC-Mum.) (2017) 248 Taxman 500
/55 ITR 484 (Mum) (Trib) (SB) (ITSC)
S. 245C : Settlement Commission – Merely on the basis of confidential information

disclosed in settlement application addition cannot be made only on the ground that the
application was rejected at the stage of admission . [ S.245D (1)]
Allowing the appeal of the assessee the Tribunal held that, when no incriminating material was
found during course of search,,only because assessee had offered additional income before
Settlement Commission u/s. 245C no addition can be made . (AY. 2007-08, 2009-10)
Anantnadh Constructions and Farms (P.) Ltd. v. DCIT (2017) 166 ITD 83 (Mum) (Trib.)
S. 245D : Settlement Commission - Books of accounts - Entries in loose papers/sheets are

irrelevant and inadmissible as evidence - Offences and prosecution - Settlement
commission. [S.2 (12A), 132, 143 (3) 245D, Evidence Act, S.34]
438
Entries in loose papers/sheets are irrelevant and inadmissible as evidence. Such loose papers are
not “books of account” and the entries therein are not sufficient to charge a person with liability.
Even if books of account are regularly kept in the ordinary course of business, the entries therein
shall not alone be sufficient evidence to charge any person with liability. It is incumbent upon the
person relying upon those entries to prove that they are in accordance with facts. Finding of
Settlement Commission disregarding such evidence as in admissible and unreliable . The
materials in question were not good enough to constitute offences to direct the registration of a
first information report and investigation therein . (C.B.I. v. V.C. Shukla (1998)3 SCC 410 (SC)
followed)
Common Cause (A Registered Society) v. UOI (2017) 394 ITR 220/245 Taxman 214 (SC)
S. 245D : Settlement Commission - Failure to make full and true disclosure - Builder - On
money estimate of income - Burden is on revenue to prove that non - dosclosure of primary
facts and not mere non-acceptance of ceratin claims by the assessee. [ S. 37 (1),40 (A)
(3),245C, 245D (4)]
Revenue has filed petition before the Court on the ground that the assessee had not made a full
and true disclusre of its income while filing the application and the order of Settlemement
Commission has ignored thae stutory provisions viz. S.37 and 40A (3) of the Act while allowing
the estimated expenditure to detrermine the assesses ‘s taxable income .Dismissing the petition
the Court held that, burden is on revenue to prove that non - dosclosure of primary facts and not
mere non-acceptance of ceratin claims by the assessee. (WP No.2562 of 2016 dt. 12-02 2017)
PCIT v. ITSC (2017) 292 CTR 363 /79 taxmann.com 186 (Bom) (HC)
S. 245D : Settlement Commission – Failure to disclose fully and truly – Not considering the
provision of S.37 (1) and 40A (3) of the Act - Unless there was evidence found contrary to
disclosure made, the statement made on oath by Applicant, could not be dis-believed on
mere whim and fancy. Mere fact that Tribunal mistakenly records that respondent was not
entitled to grant immunity from levy of penalty under S 271D and 271E would not make the
order bad in law - Petition of the revenue is dismissed.[ S.37 (1), 40A (3), 245C ]
Dismissing the petition of the revenue the Court held that, not considering the provision of S.37
(1) and 40A (3) of the Act cannot be held that the disclosure was not proper ,unless there was
evidence found contrary to disclosure made, the statement made on oath by Applicant, could not
be dis-believed on mere whim and fancy. Mere fact that Tribunal mistakenly records that
respondent was not entitled to grant immunity from levy of penalty under S 271D and 271E
would not make the order bad in law. WP No .562 of 2015 dt. 14-02-2017 (AY. 2005-06 to
2012-13)
PCIT v. ITSC (2017) 292 CTR 363 (Bom) (HC)
439
S. 245D : Settlement Commission – Cash credits-Real estate business-On money -
Reassessment - Rejection of intervention application by the Settlement Commission was
held to be valid - Reassesment was held to be justified [ S.68, 147, 148, 245C ]
Dismissing the petition the Court held that, while deciding the case of related party had not given
any finding in respect of taxability or unaccounted receipts /income in respect of the assessee and
had held that the department is free to complete proceeings initiated under section 148 on bais of
information /evidence available and after following provisions of law, its order could not be held
to be in valid for not giving an opportunity of hearing to assessee.Accordingly the reassessment
proceedongs was held to be valid . (AY.2010-11, 2011-12)
Goyal Developers v.ITSC (2017) 292 CTR 425/88 taxmann.com 519 (MP) (HC)
S. 245D : Settlement Commission – Advance tax – Interest under S.234B to be charged only
up to stage of order u/s 245D (1)[ S. 220, 234B,234C 245D (4) ]
Allowing the petition the Court held that; the interest u/s234B to be charged only up to stage of
order u/s 245D (1). The interest payable u/s 220 has to be reworked . (BP.1990-91 to 2000-01)
N. Chellakutty (HUF) v. ITSC (2017) 399 ITR 31/251 Taxman 388 (Mad) (HC)
N. Chellakutty (Individual) v. ITSC (2017) 399 ITR 31 (Mad) (HC)
Vignesh Real Estate v. ITSC (2017) 399 ITR 31 (Mad) (HC)
S. 245D : Settlement Commission – Undisclosed in vestment – Full and true disclosure was
not made hence rejection of petition was held to be justified [ S. 69B, 131 .245C ]
Dismissing the petition of the assesse the Court held that; Settlement Commission has found that
there was no full and complete disclosure of income so as to entertain an application for
settlement. Based on the report of the Principal Commissioner of Income Tax, it was found that
though the applicant sought to disclose the income of Rs. 32 crores through the application, in
fact the income that ought to have been disclosed was Rs. 85 crores (rounded off). The finding of
fact was arrived at by the Commission holding that in absence of full and true disclosure at the
hands of the assessee, the application did not merit consideration. (AY. 2013-14)
Baldevbhai Bhikhabhai Patel v. ITSC (2017) 250 Taxman 346 /(2018) 161 DTR 52 (Guj.)
(HC)
S.245D : Settlement Commission – Currency notes were recovered hence peak theory could
not be applied, however the matter was set side to Settlement Commission to decide the
decoding issue [ S.69, 132 (4A) ]
On writ the Court held that; Currency notes were recovered hence peak theory could not be
applied .However the preliminary objection raised by the respondent/s as regards maintainability
of writ petition, cannot thus be accepted, rather, they had earlier challenged the order of the
Settlement Commission before this Court by maintaining a writ. Matter is remanded back to the
Settlement Commission to decide the issue of decoding afresh. It is while maintaining the finding
regarding involvement of the assessee in money lending and other issues, thus interference in the
order is made limited to the issue of decoding.
Prakash Chand Dhadda v. ITSC (2017) 249 Taxman 131/298 CTR 467/158 DTR 14 (Raj.)
(HC)
S. 245D : Settlement Commission – Declaration of additional income during pendency of

settlement proceedings – Order of settlement commission is held to be valid [ S.245C ]
440
Income disclosed in the original petition was Rs 1 crore which was revised to Rs 50 lakhs during
pendency of proceedings . Settlement Commission passed an order accepting disclosure made by
assessee . Revenue has filed the petition against the order of the Settlement Commission .
Dismissing the petition the Court held that; having regard to fact that in case additional disclosure
was considered for entire period of settlement, there was no substantial rise in undisclosed
income, impugned order passed by Settlement Commission did not require any interference .
(AY. 2012-13 to 2014-15)
PCIT v. ITSC (2017) 249 Taxman 54 (Guj.) (HC)
S. 245D : Settlement Commission – Rejection of petition was held to be not justified on

account of failure to answer questionnaire issued by the Assessing Officer, minimal
difference worked by the Assessing authority and the petitioner and Contradiction stand by
the assesse before the Assessing Authority and settlement commission [ S.132, 153A, 245C,
245F (2) ]
Allowing the petition the Court held that; Rejection of petition was held to be not justified on
account of failure to answer questionnaire issued by the Assessing Officer, minimal difference
worked by the Assessing authority and the petitioner and Contradiction stand by the assesse
before the Assessing Authority and settlement commission . The applications filed by the
assessee were to be proceeded with. (AY. 2005 - 06 to 2011-12)
Radico NV Distilleries Maharashtra Ltd v. CIT (2017) 398 ITR 410 /(2018) 166 DTR 57
(Delhi) (HC)
S.. 245D : Settlement Commission - Settlement Commission taking particular view to arrive
at quantum of tax liability of assesse, order of settlement commission was held to be
proper. [ Art . 226 ]
Dismissing the petition the Court held that; The Settlement Commission was called upon to arrive
at the quantum of tax liability of the assessee in the settlement proceedings and it took a particular
view. The writ court need not enter into the factual aspect of the matter to reappraise itself and act
as an appellate authority against an order passed by the Settlement Commission.. (AY. 2001-02 to
2006-07)
Swamina International P. Ltd v. ITSC (IT & WT) (2017) 398 ITR 103 (Cal) (HC)
S. 245D : Settlement Commission – Order of Settlement commission holding that

transactions did not attract tax in India is based on appraisal of evidence hence writ
petition of revenue was dismissed . [ Art . 226 ]
Dismissing the petition of the revenue the Court held that ;Order of Settlement commission
holding that transactions did not attract tax in India is based on appraisal of evidence hence writ
petition of revenue was dismissed .The court was not called upon to reappraise the evidence
produced before the Settlement Commission, as an appellate court and arrive at a finding contrary
thereto. The order of the Settlement Commission did not call for any interference. (AY. 2004 - 05
to 2009-10) (WP No. 742 of 2013 dt 12-09 - 2017)
DIT (IT v. ITSC (2017) 398 ITR 23 (Cal) (HC)
441
S.245D : Settlement Commission – As the Settlement Commission failed to disclose the
reasons for arriving at the figures which to its best judgment were the figures to be added to
the income of the assessee, the order of the Settlement Commission was to be set aside and
the matter was to be remanded for fresh consideration.
Allowing the petition of the revenue; It was obliged to give reasons for arriving at a particular
figure. It was open to the Settlement Commission to use best judgment in arriving at the figure.
None the less the Settlement Commission had to explain the manner in which the best judgment
figure was arrived at. Since, the Settlement Commission failed to disclose the reasons for arriving
at the figures which to its best judgment were the figures to be added to the income of the
assessee, the order of the Settlement Commission was to be set aside and the matter was to be
remanded for fresh consideration. Matter remanded.
ACIT v. Emta Coal Ltd. (2017) 398 ITR 1/250 Taxman 527 (Cal) (HC)
S. 245D : Settlement Commission — Abatement of proceedings —Order was not passed

with in six months as per direction of the Court – Court extended the time and directed to
three more months to pass the order . [ S. 245D (4A),245HA ]
Allowing the petition the Court held that; if December 27, 2016, as per computation made by the
Settlement Commission, was the date up to which proceedings were to be concluded, there was
no occasion for the Settlement Commission to declare the proceedings to have abated one week
before that date, i.e., on December 19, 2016, the date on which the order was passed. Besides, the
facts would show that though the assessees to some extent were also responsible for the delay in
completion of the proceedings, it could not be said that they alone were guilty of causing such
delay because the Department was also contributory in prolonging the proceedings for one reason
or the other, particularly when it demanded a period of one and a half months. Therefore, the ends
of justice would be met, if the time to conclude the proceedings were extended by a further three
months.
Kailash Chand Manoj Kumar Sarraf P. Ltd. v. ACIT (2017) 397 ITR 286/247 Taxman 233
(Raj) (HC)
Kailash Chnd Jain v. ACIT (2017) 397 ITR 286/247 Taxman 233 (Raj) (HC)
S. 245D : Settlement Commission – Order of settlement commission is being not perverse –

Revenue has failed to prove in respect of illegal payments made to various officials and
politicians hence no addition could be made . The Order is held to be valid . [S. 132 (4),
133A, 153A, Art . 226]
Dismissing the petition of the revenue the Court held that ;Revenue has failed to prove in respect
of illegal payments made to various officials and politicians hence no addition could be made .
Order of settlement commission is being not perverse . Order is held to be valid. The findings of
the Commission therefore could not be faulted as contrary to law. The Commission's findings
were not contrary to law or unreasonable. The order of the Settlement Commission was valid.
(AY. 2000-01 to 2006 - 07)
CIT v. Radico Khaitan Ltd. (2017) 396 ITR 644/249 taxman 384/155 DTR 130 (Delhi) (HC)
S. 245D : Settlement Commission – When the assesse has not full and true disclosure
rejection of application was justified, there was no judicial error in the proceedings .Finding
was not proved to be perverse . When the assesse participated in proceedings, procedural
irregularities cannot be argued first time in writ petition. [S. 245C, Art . 26].
442
Dismissing the petition the Court held that; When the assesse has not full and true disclosure
rejection of application was justified, there was no judicial error in the proceedings .Finding was
not proved to be perverse . When the assessee participated in proceedings, procedural
irregularities cannot be argued first time in writ petition . Court also held that ;even though a
provision of law is mandatory in its operation, if the provision is one which deals with the
individual rights of the person concerned and is for his benefit, such person can always waive
such a right.
ABC Dubash Mining v. ITSC (2017) 396 ITR 427 (Cal) (HC)
S. 245D : Settlement Commission – Procedure - Limitation provided in section 245D (4A) is

mandatory and, thus Settlement Commission has to pass order within time period specified
in aforesaid section. [S. 245D (4A)]
A search was carried out at the premises of the assessee pursuant to which the assessee filed an
application before the Settlement Commission offering additional undisclosed income.The
assessee filed an application before the Settlement Commission on 6-2-2014. The Settlement
Commission allowed application on 3-4-2014 u/s. 245D (2C) of the Act by holding that the
application filed by the assessee was valid. Pursuant to such order, department filed a writ
petition challenging the order passed by the Settlement Commission. The writ petition was
disposed by the HC vide order dated 18.1.2016. No stay of Settlement Commission proceedings
was given by the HC. The Settlement Commission passed an order on 27-5.2016 determining
total income for relevant years and imposing penalty under relevant section.On writ petition filed
by the assessee against the Settlement Commission order, the HC held that, the impugned order
dated 27-5-2016 was passed beyond the limitation period prescribed under section 245D (4A) i.e.
18 months from the end of the month in which the application is made. HC further held that the
proceedings before Settlement Commission were not stayed and that the delay caused in the
passing the order was also not attributable to the assessee, hence impugned order passed by the
Settlement Commission is not sustainable in the eye of law. (AY. 2006-07 to 2012-13)
RNS Infrastructure Ltd. v. ITSC (2017) 292 CTR 195 /147 DTR 21 /(2017) 77 Taxman.com
103 (Karn.) (HC)
S. 245D : Settlement Commission - Applicant cannot be punished for inability of settlement

commission to dispose of its application within period specified in section. [S.245D (4A),
245HA (1) (iv)]
Court held that ;since the Settlement Commission had already disposed of the application in this
matter, no further direction need to be issued and the writ petition was to be treated as having
been rendered infructuous.
Bajaj Polyset P. Ltd. v. UOI (2017) 394 ITR 316 (All) (HC)
S. 245D : Settlement Commission – Speed money – Suppression of facts - Petition

challenging order passed by Commission was dismissed as non-disclosure was deliberate
and possibly made with a view to present a picture different than what existed before
Commission. [S. 245C]
Assessee filed an application before Settlement Commission as per section 245C. Commission
found that assessee had claimed certain expenditure as 'speed money' for getting clearances from
different authorities since assessee failed to offer any explanation regarding nature of said
expenses. High Court held that the Commission rightly rejected assessee's application on ground
that assessee had not come with clean hands as non-disclosure was deliberate to portray a
different picture. Further there were suppression of facts material to issues and therefore, the
impugned order passed by Commission did not require any interference. (AY. 2007-08 to 2012-
13)
443
Rashmi Infrastructure Developers Ltd. v. ITSC (2017) 396 ITR 210/ 246 Taxman 342/156
DTR 84 (Bom.) (HC)
S. 245D : Settlement Commission-Settlement Commission could not accept additional

income declared by assessee at stage of hearing, merely on ground that it was difficult to
ascertain nature of undisclosed income on basis of impounded documents. [S. 133A, 245C]
The AO conducted a survey under section 133A upon the assessee. There upon the assessee filed
an application before the Settlement Commission requesting for settlement of cases for the
assessment years 2011-12 to 2013-14 and declared a sum of Rs. 34 lakhs as undisclosed income.
Later on, the assessee, at the stage of hearing of the application under section 245D (4), with the
permission of the Settlement Commission, declared additional income of Rs. 56 lakhs, over and
above what was already declared in the application for settlement which was accepted by the
Settlement Commission. The Revenue filed a writ before the HC, contending that the assessee
cannot revised such income by a further declaration which would go to show that the initial
disclosure of income itself was not accurate.
The HC observed that the initial disclosure of undisclosed income of the assessee along with the
application for settlement was total of Rs. 34 lakhs and later on, at the stage of hearing of
application under section 245D (4), assessee made a substantial revision by offering an additional
income of Rs. 56 lakhs to tax which was allowed by the Settlement Commission. The HC
observed that the revision is not minor adjustments in the earlier disclosure as it can been seen
that the further declaration was more than 150% of the initial disclosure. Therefore, HC held that
the assessee’s plea that the revised declaration was allowed in spirit of settlement cannot be
accepted. Further the HC held that the prime requirements of application under section 245C is to
provide full and true disclosure of his income and if the assessee fails to do so then the
application would be rejected. In the instant case as the revised declaration is far greater than the
original declaration, it shows that the assessee had not made full and true disclosure and the
application should be rejected. HC also observed that there is no stipulation for revision of an
application filed under section 245C. In the result, the order of Settlement Commission was set
aside. (AY. 2011-12 to 2013-14)
PCIT v. Shree Nilkanth Developers (2016) 73 taxmann.com 76 (Guj.) (HC)
Editorial : SLP is granted to the assesse ;Shree Nilkanth Developers v. PCIT (2017) 245 Taxman
74 (SC)
S. 245D : Settlement Commission - Income disclosed did not belong to assessee-Rejection of

application was held to be justified - Writ is not maintainable. [S. 132,245C, Art. 226].
Settlement Commission dismissed the petition on the ground that income declared by the
petitioner did not belong to him but were unaccounted money which was collected by another
entity. Against the said order the Assessee filed the writ petition, .Dismissing the petition the
Court held that ,unless there was a manifest unreasonableness or perversity in the Settlement
Commission’s order, the court could not substitute its reasoning for that of the Settlement
Commission whose findings were based upon an analysis of the facts. It had found that the
assessee’s concern ABC was unknown and was an amorphous entity and not a legal entity. It had
also found that no evidence was brought in to substantiate the claim that the unaccounted money
was in respect of “special and specific requirements of the customers/investors in the projects”
and held that the money belonged to the group companies concerned. The findings of fact could
not be reviewed like in an appellate court. The findings of fact rendered by the Settlement
Commission could not be set aside or interfered with.
Vishwa Nath Gupta v. PCIT (2017) 395 ITR 165/249 Taxman 27 /152 DTR 55 (Delhi) (HC)
444
S. 245D : Settlement Commission – Survey – Revised enhanced offer made by the assessee
must be considered in the nature of sprit of the settlement Commission, order of Settlement
Commission was up held . [S. 245C]
Dismissing the petition of the Revenue against the order of settlement Commission, the Court
held that; during course of proceedings, if revised enhanced offers are made by assessee, then in
nature of spirit of settlement, same is to permitted to be considered by settlement commission.
(AY. 2011-12, 2012-13)
CIT v. ITSC (2017) 244 Taxman 156 (Guj.) (HC)
S. 245D : Settlement Commission - Finding that there had been no full and true disclosure
of income and manner in which it was earned, rejection of applications was held to be
justified, high court cannot interfere on finding of fact. [S. 153A, 245D (2C), 245D (4), Art.
226]
Dismissing the petition the court held that, though the applications allowed and order passed
under section 245D (2C). Subsequent inquiry under section 245D (3) if it was found that hat there
had been no full and true disclosure of income and manner in which it was earned, the rejection
of applications under section 245D (4) was justified. High Court under Writ jurisdiction has
limited power.
Bharat Singh v. UOI (2016)76 taxmann.com 239/(2017) 391 ITR 305 (Patna) (HC)
Kumbh Nath Singh v. UOI (2016) 76 taxmann.com. 239 /(2017) 391 ITR 305 (Patna) (HC)
Lal Bahadur Singh v. UOI (2016) 76 taxmann.com. 239 /(2017) 391 ITR 305 (Patna) (HC)
S.245D : Settlement Commission-Commissioner filing report before Settlement Commission

does not have any adjudicatory role and is entitled to file writ petition against order of
Settlement Commission-Settlement commission had not properly considered issue of
addition or genuineness of claim of advances from others, matter was remanded to
Settlement Commission. [S. 245C,245D (4), 245I, Art. 226]
Allowing the Writ petition filed by the Commissioner, the Court held that; Commissioner filing
report before Settlement Commission does not have any adjudicatory role and is entitled to file
writ petition against order of Settlement Commission - Settlement commission had not properly
considered issue of addition or genuineness of claim of advances from others, matter was
remanded to Settlement Commission.
CIT v. ITSC (2017) 391 ITR 374/291CTR 433/146 DTR 97 /77 taxmann.com 167 (Ker.)
(HC)
S. 245H : Settlement Commission-Payment of tax was made before filing special leave
petition-Payment to be taken to have been made within time. [S. 245C]
Assesse could not make the payment with in time granted by the Settlement Commission. On
writ the High Court refusing to extend time. The assessee filed SLP and payment was made
before filing of the SLP. Allowing the petition the Court held that, the payments to be taken to
have been made with in time . (AY. 2004-05 to 2010-11)
Sandeep Singh v.UOI (2017) 393 ITR 77/147 DTR 305 /292 CTR 361 /245 Taxman 336
(SC)
S. 245HA : Settlement Commission - Abatement of proceedings - Application would abate

only with respect to years for which payment was not made and not for other years .[ S.
245C, 245D ]
Allowing the petition the Court held that; in cases where the assesse was not able to pay the
additional tax and interest for some of the years but paid for other years the application would
abate only with respect to years for which payment was not made and it would not abate for other
years. (AY. 2001-02 to 2007 - 08)
445
Ashish Prafulbhai Patel. v. ISSC (2017) 251 Taxman 441 /(2018) 301 CTR 195/403 ITR
318/161 DTR 235 (Guj) (HC)
S. 245HA : Settlement Commission - Abatement of proceedings -

Assessing officer was not right in treating earlier assessment order as valid and serving
demand notice ,earlier assessment order, there is no distinction between the assessment
order passed earlier or pending on date of application before Settlement commission
accordingly proceedings for recovery of demand to be set aside . [ S. 245C, 245HA (2) ]
Allowing the petition the Court held that; notwithstanding that the Assessing Officer passed
assessment orders on March 28, 1995, in respect of which a demand notice was served on the
assessee, the proceedings before the Assessing Officer should be held to have revived on the date
of the abatement of the assessee’s application before the Settlement Commission, i.e., March 31,
2008. The Assessing Officer was bound thereafter to pass fresh orders disposing of the
assessment proceedings in accordance with the law. Such order was passed only in respect of one
assessment year, i.e. 1993-94 and for the other assessment years a demand notice was served
treating the assessment orders dated March 28, 1995 as still being valid. That was plainly a
mistake and was impermissible in terms of section 245HA (2) of the Act. Therefore, the
assessment orders dated March 28, 1995 passed in respect of the assessment years 1986-87 to
1989-90 and 1992-93 and the proceedings for recovery of demand raised on the basis of such
assessment orders were to be set aside. (AY.1986-87 to 1989-90, 1992-93)
Chain Roop Bhansali v. UOI (2017) 394 ITR 703 /248 Taxman 577 (Delhi) (HC)
S. 245HA : Settlement Commission - Abatement of proceedings – Sub-section (3) which

allows AO to use all the material produced before the Commission in case of abatement has
been earlier held to be constitutionally valid – Held, therefore, the direction of the
Commission to complete the assessment in accordance with section 245HA (3) was valid. [S.
245C, 245D]
The Settlement Commission passed an order by which it declared that the proceedings had abated
due to non-compliance by the assessee with the provisions of section 245D (2D) and the
Assessing Officer was directed to dispose of the case in accordance with the provisions of sub-
sections (2), (3) and (4) of section 245HA. The assessee filed a petition challenging the said order
of Commission. It was also prayed that the material produced before the Commission should not
be allowed to be used by the revenue authorities. The High Court held that request of preventing
the revenue authority from using the material on record before Settlement Commission cannot be
accepted in terms of section 245HA (3), whose constitutional validity has been upheld. (AY.
1997-98 1998 - 99)
Vikas Shipping Corporation . v. UOI (2017) 251 Taxman 258 /161 DTR 253 /(2018) 301
CTR 213 (Guj.) (HC)
S. 246 : Appeal-Commissioner (Appeals)-Levy of interest - Where levy of advance tax was

disputed only levy of interest was held to be not maintainable. [S. 215, 246A ]
On reference the Court held that; where levy of advance tax was disputed only levy of interest
was held to be not maintainable . Assessee can seek waiver or reduction before Assessing Officer
Authority. (AY. 1976-77)
E. Marck (India) Ltd. v. CIT (2017) 393 ITR 91 /155 DTR 201 (Bom.) (HC)
446
S. 249 : Appeal - Commissioner (Appeals)-Form of appeal and limitation-Tax on returned
income was paid before passing of order by CIT (A), order refusing to admit appeal was set
aside. [S. 139 (5)]
A search was carried out in case of assessee, In response to notice issued u/s.153A, assessee filed
a return declaring certain taxable income. The AO enhanced amount. Against the same Appeal
filed by assessee was not admitted by CIT (A) as referring to clause (a) of S..294 (4) due to non-
payment of tax on income declared in return. Tribunal held that; since assessee had paid tax on
returned income before passing of aforesaid order by CIT (A) therefore order was to be set aside
for disposal afresh on merits. (AY. 2008 - 2009,2009 – 2010)
Mohammed Farooque Sarangv. DCIT (2017) 164 ITD 573 (Mum) (Trib.)
S. 251 : Appeal - Commissioner (Appeals) – Powers – CIT (A) can enhance an assessment
but not assess a new source of income .[ S. 68 ]
Dismissing the appeal of the revenue, the Court held that; the Tribunal was right in deleting the
enhancement of Rs.22,15,116 and cancelling the order of the Commissioner (Appeals) . CIT (A)
can enhance an assessment but not assess a new source of income (AY. 1995-96)
CIT v. B.P. Sherafudin (2017) 399 ITR 524 /(2018) 161 DTR 265 /252 Taxman 326 /301
CTR 123 (Ker) (HC)
S. 251 : Appeal - Commissioner (Appeals) – Powers – Additional evidences filed under rule
46A if it is relevant for calculation of real income same has to be admitted. [S.250, R.46A ]
Additional evidences filed under rule 46A if it is relevant for calculation of real income of
assessee, same has to be admitted in view of the substantial justice. (AY.2007 - 08)
PCIT v. Daljit Singh Sra. (2017) 247 Taxman 240 (P & H) (HC)
S. 251 : Appeal - Commissioner (Appeals) – Powers – Stay-Directed to pay 15% of tax in
dispute and CIT (A) was directed to hear the appeal with in six months.
Allowing the petition the Court granted the stay of recovery by deposition 15% of tax in dispute
and directed the CIT (A) to hear the appeals with in six months .
Teleradiology Solutions (P) Ltd. v. Dy. CIT (2017) 295 CTR 147/149 DTR 73 (Karn) (HC)
S. 251 : Appeal - Commissioner (Appeals) – Powers - When relevant material on record, the
appellate authorities have to consider the claim though the claim was neither made in the
return nor revised return was filed. [S.80IB (10), 254 (1) ]
Dismissing the appeal of the revenue, the Court held that; Tribunal, was justified in allowing the
claim, when relevant material on record, the appellate authorities have to consider the claim
though the claim was neither made in the return nor revised return was filed. (AY.2011-12)
CIT v. Abhinitha Foundation P. Ltd. (2017) 396 ITR 251 /249 Taxman 37/154 DTR 57
(Mad.) (HC)
S. 251 : Appeal-Commissioner (Appeals) – Powers-Additional evidence-Cash credits-

Deliberate attempt to defraud the revenue hence refusal to admit additional evidence was
held to be justified. [R. 46A]
Dismissing the appeal the Court held that; the conduct of the assessee was a deliberate attempt to
defraud the Department. The relief, which the assessee had claimed explaining the two
447
transactions which pertained to the creditors, could not be examined in isolation in the absence of
other entries in the books of account, which could not be explained by the assessee at the time of
assessment as the queries raised by the Assessing Officer were not responded to and complete
books of account were not produced. Accordingly refusal to admit additional evidence was held
to be justified. (AY. 2009-2010)
Rishi Sagar v. CIT (2017) 393 ITR 214 (P&H) (HC)
S. 251 : Appeal-Commissioner (Appeals) – Powers-The CIT (A) has no power to enhance by

discovering a new source of income which is neither discussed in the assessment order nor
mentioned in the return of income filed by the assessee [ S. 2 (22) (e), 250]
Allowing the appeal of the assessee the Tribunal held that; It is well settled law laid down by the
Hon’ble Apex Court in CIT v. Shapoorji Pallonji Mistry, (1962) 44 ITR 891 (SC) and CIT v.
Rai Bahadur Hardutroy Motilal Chamaria (1967), 66 ITR 443 (SC) and subsequently followed by
the Hon’ble Delhi High Court in CIT v. Sardari Lal & Co. (2001) 251 ITR 864 (Delhi) (FB) that
the CIT (A) is not competent to enhance assessment in appeal by discovering new source of
income not mentioned in return or consider by the Assessing Officer in assessment. We hold that
the Commissioner of Income Tax (Appeals) has exceeded his jurisdiction in making addition u/s.
2 (22) (e) of the Act as there is no reference of such income either in the return of income or in
the assessment proceedings. (ITA No. 746/PN/2013, dt. 30.12.2016) (AY. 2009-10)
Ram Infrastructure Ltd. v. JCIT (Pune) (Trib.)www.itatonline.org
S. 251 : Appeal - Commissioner (Appeals) – Powers - Additional evidence-For admission of

additional evidence, application under rule 46A is not mandatory. [R. 46A]
Allowing the appeal of the assessee the Tribunal held that; For admission of additional evidence,
application under rule 46A is not mandatory. As the assesse could not produce the evidence due
to the assessee’s wife's illness was prevented from producing evidences before AO, CIT (A)
could not refuse to admit such evidences merely for want of an appropriate application under rule
46A. The matter was set aside to the CIT (A) to admit the additional evidence and decide the
matter after obtaining the remand report from the AO. (AY.2011-12)
Padam Lal Dua v.ITO (2017) 162 ITD 524 (Delhi) (Trib.)
S. 253 : Appellate Tribunal - Assessee can defend the order appeal against any grounds
against him by CIT (A), whose order otherwise is in favour [ R. 27, Rule 22 Order XLI of
the Civil Procedure Code. ]
Court held that; an assessee can defend the order appeal against any grounds against him by CIT
(A), whose order otherwise is in favour . (AY. 2001, 2002-03)
PCIT v. Sun Pharmaceuticals Industries Ltd. (2017) 251 Taxman 76 /153 DTR 39 (Guj)
(HC)
S. 253 : Appellate Tribunal – Delay of 1631 days - Chartered Accountant engaged in the
matter, was unaware of the fact that an appeal could be filed against the order of the
Commissioner to the Tribunal - Delay was condoned [ S.12AA, 254 (1) ],
Allowing the petition the Court held that; Chartered Accountant engaged in the matter, was
unaware of the fact that an appeal could be filed against the order of the Commissioner to the
Tribunal hence the delay of 1631 days, was condoned. Tribunal was directed to decide the issue
on merits .
United Christmas Celebration Committee Charitable Trust v. ITO (2017) 249 Taxman 372
(Mad.) (HC)
448
S.253 : Appellate Tribunal - Delay of 1902 days – Non – advice on the part of professional
and ignorance of law was held to be a reasonable cause hence the delay was condoned
.Matter was remanded to Tribunal . [ S. 12AA ]
Allowing the appeal the Court held that; it is only the reason of either non-advise on the part of
the professional, who has been engaged by the assessee or the ignorance of law by the assessee
itself. In view of these reasons, the order impugned of the Tribunal rejecting the appeal of the
assessee mainly on the ground of delay, the High Court remitted the matter back of the ITAT for
deciding the issue on merits.
Hosanna Ministries v. ITO (2017) 152 DTR 8 (Mad) (HC)
S. 253 : Appellate Tribunal-Jurisdiction – With reference to the location of the Assessing

Officer.[ ITATR. 4 (1)]
That jurisdiction was not to be determined with reference to the place where order under appeal
was passed, but in accordance with rule 4 (1) of the Income-tax (Appellate Tribunal) Rules, 1963,
with reference to the location of office of the Assessing Officer. Since the assessing authority of
the assessee was at Gautam Budh Nagar, the Delhi Bench had jurisdiction to entertain the appeal.
CIT (E) v. Greater Noida Industrial Development Authority (2017) 395 ITR 18/152 DTR
105/298 CTR 127 (All) (HC)
CIT (E) v. New Okhla Industrial Development Authority (2017) 395 ITR 18 /152 DTR
105/298 CTR 127 (All) (HC)
CIT (E) v. Yamuna Expressway Industrial Development Authority (2017) 395 ITR 18 /152
DTR 105/298 CTR 127 (All) (HC)
S. 253 : Appellate Tribunal - Withdrawal – Tribunal cannot refuse to give permission to

withdrawal of appeal to the appellant .
Allowing the appeal the Tribunal held that; Petitioner/Plaintiff is the ‘dominus litis’ and it is open
to him to pursue or abandon his case. Withdrawal cannot be denied except when the person
making the prayer has obtained some advantage/benefit which he seeks to retain (ITA No.
189/Mum/2011, dt. 18.11.207) (Ay. 2007-08)
Sainath Enterprises v. ACIT (TM) (Mum) (Trib)
www.itatonline.org
S. 253 : Appeal – Condonation of delay – Reasonable cause – Delay was condoned [ S. 253
(5) ]
The Tribunal condoned the delay in filing the appeal on the basis that the CIT (A) had allowed
the relief to the assessee on most of the grounds and it could be presumed that the assessee was
under bonafide belief that no further appeal is required. (AY. 2003-04 to 2008-09)
Jay Dee Securities & Finance Ltd. v. ACIT (2017) 156 DTR 73 /188 TTJ 593 (Delhi) (Trib.)
S.253 : Appellate Tribunal - Amounts not deductible - Deduction at source – Disallowance

of expenses for failure to deduct tax at source being revenue neutral as being entire income
being exempt, such appeals need not be pursued by the revenue [S. 10A, 40 (a) (ia) ]
Dismissing the appeal of the revenue, the Tribunal held that; Disallowance of expenses for
failure to deduct tax at source being revenue neutral as being entire income being exempt, such
appeals need not be pursued by the revenue. (AY. 2009-10)
DCIT v. Ascendum Solutions India (P.) Ltd. (2017) 167 ITD 233 (Ahd) (Trib.)
449
S. 253 : Appellate Tribunal – Delay of 300 days was condoned.
Delay took place due to various casualties/deaths and medical contingencies of connected persons
who were appointed one after another to represent the case before relevant authorities. Assessee
further executed supporting affidavit before the authority. Delay condoned. (AY. 2011-12)
Pravin Viram Satra v. ACIT (2017) 164 ITD 533 (Mum) (Trib.)
S. 253 : Appellate Tribunal – Cross objection - Cross objection cannpt be filed agisnt the
order of Assessing Officer [ S. 92B, 92C ]
Dismissing the Cross objection of the Assessee, the Tribunal held that, schme of the Act, does not
permit filing of cross – objection gainst the order of the Assessing Officer. Cross objection can
only be filed aginst the order of CIT (A). (AY. 2009-10 to 2011-12)
Hyundai Motor India Limited v. DCIT (2017) 153 DTR 41 /187 TTJ 97 (Chennai) (Trib.)
S.254 (1) : Appellate Tribunal-Business expenditure – Year of allow ability - Matter

remanded to Tribunal [ S. 37 (1) ]
Allowing the appeal of the revenue, the Court held that; (1).The need to remand the case to the
Tribunal, has occasioned because firstly, the question as to whether the fixation of rent and its
payment is statutory or contractual and, if so, its effect while claiming deduction under the
Income Tax Act and, if so, in which year of assessment is a mixed question of law and fact.
Secondly, it was neither decided by any of the authorities below and nor by the Tribunal and the
High Court. It may be that since the Revenue itself did not raise it before the authorities below
and raised it for the first time before this Court by simply placing reliance on the provisions of the
Act and the two Rules mentioned above, this Court cannot decide the same in this appeal, for the
first time for want of factual material and legal issues attached to it.
(ii) In our considered opinion, in order to decide the issue of deduction, the nature of fixation of
rent, its payment, recovery etc. and whether it is statutory or contractual, has some bearing over
the question. It is also clear that the respondent did not get any chance to meet this submission
before the courts/authorities below. It is for these reasons, we are of the view that the matter
needs to be remanded to the Tribunal for its proper adjudication.
(iii) The Tribunal being the last adjudicatory authority in hierarchy on facts would be in a better
position to decide the issue after taking into account the documents filed by the parties in support
of their respective contentions. Depending upon the decision of the Tribunal, the parties can carry
the matter to the higher Courts. (AY. 1992 - 93)
CIT v. Travancore Cochin Udyoga Mandal (2017) 156 DTR 25 /297 CTR 329 /250 Taxman
149 (SC)
S. 254 (1) : Appellate Tribunal - Powers—Additional grounds-Tribunal was justified in

admitting the additional grounds which as raised for the first time before the Tribunal on
the issue of jurisdiction . [ S. 153A, 153C ]
Dismissing the appeal of the revenue, the Court held that; Tribunal was justified in admitting the
additional grounds which as raised for the first time before the Tribunal on the issue of
jurisdiction . (AY. 2001-01 to 2003 - 04))
CIT v. Sinhgad Technical Education Society (2017) 397 ITR 344/156 DTR 161 /297 CTR
441 /250 Taxman 225 (SC)
Editorial : Decision in CIT v. Sinhgad Technical Education Society (2015) 378 ITR 84 278
CTR 144/120 DTR 79 (Bom) (HC) is affirmed
450
S. 254 (1) : Appellate Tribunal – Duties - Order passed on incorrect factual premises being
foundation of order, such an order must be seta side [ S. 254 (2) ]
Allowing the appeal of the revenue, the Court held that, any judicial or quasi-judicial authority
would have inherent powers to correct an error which is plainly that of clerical, typographical,
arithmetical or factual nature if Tribunal had proceeded on factual basis which was wholly and
concededly erroneous, Tribunal even in absence of specific provision of sub-section (2) of section
254, had power to recall order. Therefore Order of Tribunal was passed on clearly incorrect
factual premise and such factual premise being very foundation of order, such order must be set
aside.
PCIT v. Chartered Logistics Ltd. (2017) 250 Taxman 385 (Guj.) (HC)
S. 254 (1) : Appellate Tribunal – Duties - Unexplained expenditure – Order of Tribunal was
set aside for not following the earlier year order .[ S.69C ]
For one year the ITAT deleted the additions completely, however for the other three years
sustained part of additions and, thus, chose not to follow its own order for the first year .
Allowing the petition the Court held that; since there was no change in the factual matrix of
remaining three years the orders of the ITAT were to be set aside and restored for fresh
adjudication. (AY 2007-08 to 2009-10)
True Zone Buildwell (P.) Ltd. v. PCIT (2017) 251 Taxman 242 (Delhi) (HC)
S. 254 (1) : Appellate Tribunal – Power - Additional evidence – Revision – Tribunal was
justified in admitting the additional evidence placed by revenue while deciding the appeal of
assesse against revision order [ S. 263 ]
Before the ITAT, revenue placed reliance upon additional evidences. Tribunal accepted the
additional evidences . dismissing the appeal of the revenue the Court held that; the Tribunal was
within its right in accepting and considering additional evidence placed on record by revenue
while deciding an appeal against 263 order. (AY. 2010 - 11)
Virbhadra Singh (HUF) v. PCIT (2017) 158 DTR 66 /251 Taxman 150 /298 CTR 393 (HP)
(HC)
S.254 (1) : Appellate Tribunal - Powers-Cash credits – When subject matter of appeal
before the Tribunal was whether gift received was to be assessable as cash credit, Tribunal
could not have sustained the addition u/s 69A [ S. 68, 69A ]
Allowing the appeal of the assesse the Court held that; When subject matter of appeal before the
Tribunal was whether gift received was to be assessable as cash credit, Tribunal could not have
sustained the addition u/s 69A and as the same was not subject matter before it . (AY. 2001-02)
Sarika Jain (Smt.) v. CIT (2017) 249 Taxman 625 (All.) (HC)
S.254 (1) : Appellate Tribunal – Duties - Transfer pricing - Arms’ length price - Tribunal
was not justified in remanding the matter to TPO for re-determination. Matter was
remanded [ S.92C]
Allowing the appeal of the assesse the Court held that; where all details of comparables relevant
for determination of ALP of international transactions in various segments were already available
on record, Tribunal ought not have remanded said matter to TPO for de novo determination and
this exercise should have been performed by Tribunal itself. (AY. 2011-12)
Bechtel India (P.) Ltd. v. Dy. CIT (2017) 249 Taxman 594 /(2018) 161 DTR 453 (Delhi)
(HC)
451
S. 254 (1) : Appellate Tribunal – Duties-Adopting a short-cut in rendering order, large
portions were lifted verbatim from order of Assessing Officer as well as from remand order
of High Court setting out facts, reasoning and conclusion was held to be not proper, matter
was once again set aside to the Tribunal .
Allowing the petition the Court held that; Adopting a short-cut in rendering order, large portions
were lifted verbatim from order of Assessing Officer as well as from remand order of High Court
setting out facts, reasoning and conclusion was held to be not proper, matter was once again set
aside to the Tribunal .
Arun Malhotra v. P CIT (2017) 248 Taxman 317 (Delhi) (HC)
S. 254 (1) : Appellate Tribunal – Duties - New evidence produced before CIT (A),remand
report was submitted after the order of CIT (A), matter was seta side . [S. 10B ]
Allowing the appeal of the revenue the Court held that; the Assessing Officer had submitted the
remand report to the Commissioner (Appeals) after his decision in the appeal. Therefore, the
Commissioner (Appeals) could not have taken into consideration the remand report. The order of
the Commissioner (Appeals) and the Tribunal were set aside. (AY. 2010-11)
PCIT v. Vertex Infosoft Solutions P. Ltd. (2017) 398 ITR 704 (P&H) (HC)
S. 254 (1) : Appellate Tribunal - Powers—Revision - Tribunal has the power to consider
alternative claim of the assesse.[ S. 10A, 263 ]
Dismissing the appeal of the revenue, the Court held that; even if the power conferred on the
Commissioner under section 263 only authorised him to examine whether the order passed by the
Assessing Officer was erroneous and prejudicial to the interests of the Revenue, that restriction of
power could not affect the powers of the Tribunal which was bound to exercise under
section 254 of the Act. . (AY.2010-11)
CIT v. Flytxt Technology P. Ltd. (2017) 398 ITR 717 (Ker) (HC)
S.254 (1) : Appellate Tribunal – Tribunal had not correctly appreciated the facts of the
assessee’s case, the order of the ITAT was quashed and matter sent back for fresh
adjudication [ S. 12A]
Assessee’s application for registration u/s. 12A was dismissed and registration refused by the
Commissioner against which an appeal was preferred to the ITAT. At the time of hearing, ITAT
clubbed other matters on this issue and ultimately held in favour of the assessee. On appeal by the
revenue, allowing the appeal the Court held that; the ITAT had wrongly considered the factual
aspects and wrongly allowed the appeal. High Court held that there was an application for
renewal of the registration was factually incorrect as also the fact that previously the registration
was granted under Section 12AA. High Court quashed the ITAT’s order and remanded the
matter back for fresh consideration.
CIT v. Bharadwaj Sewa Trust (2017) 295 CTR 566/152 DTR 1 (Jharkhand) (HC)
S.254 (1) : Appellate Tribunal - Reassessment – Jurisdictional issue - Even in ex-parte order
the Tribunal ought to have called the records and decided the issue . High court set aside
order of ITAT as TAT failed to decide jurisdictional issue, . [ S. 147, 148 ]
452
Assessee challenged initiation of re-assessment proceedings on account of lack of jurisdiction.
CIT (A) decided issue of initiation of re-assessment proceeding against assessee and ITAT
proceeded to decide appeals and cross objections ex-parte against assessee. On appeal, the High
Court held that ITAT had clearly gone completely wrong in observing that ground as to validity
of initiation of reassessment proceedings did not arise from order of CIT (A). As for material and
evidence having allegedly not produced by assessee, High Court held that it was for the ITAT to
call for such record and examine whether initiation of reassessment proceedings was valid or not.
As ITAT completely failed to decide jurisdictional issue that went to root of matter and
accordingly, the High Court set aside the ITAT order.
Javed Akhtar (Dr) v. CIT (2017) 150 DTR 288 (All) (HC)
S. 254 (1) : Appellate Tribunal – - Additional evidence – Tribunal was not justified in
rejection the revenue records as additional evidence . [ S. 2 (14) (iii) (a) ,197 ]
The decision of the Tribunal, therefore, rejecting the application for admission of additional
evidence in the form of revenue records is incorrect and based on incorrect findings of law and of
fact. Even assuming that the revenue records do not conclusively establish the assessee's case that
the land was agricultural land, it cannot by any stretch of imagination be held that they are
irrelevant. Accordingly, the assessee is entitled to establish in the assessment proceedings
whether the land is agricultural land or not.
Land Acquisition Collector, Improvement Trust, Jalandhar v. Addl. CIT (2017) 152 DTR
40/295 CTR 548 (P&H) (HC)
S. 254 (1) : Appellate Tribunal - Principle of consistency — View accepted in earlier order,
different view cannot be taken . [ S. 68 ]
Allowing the appeal the Court held that; in order to maintain consistency, a view, which had been
accepted in an earlier order ought not to be disturbed unless there was any material to justify the
Department to take a different view of the matter. In respect of the earlier assessment year, 2005-
06, the Department had accepted the decision of the Appellate Tribunal that the trade amount due
to the trade creditors in the books of account of the assessee could not be added to the income of
the assessee. There was nothing on record to show that any appeal had been filed by the
Department against that order, which had become conclusive. (AY. 2006 - 07)
Zazsons Export Ltd v. CIT (2017) 397 ITR 40 (All) (HC)
S. 254 (1) : Appellate Tribunal - Additional grounds - Cross objection - Assessee can
advance arguments before tribunal even though no cross objection filed against finding. [ R.
27 ]
Dismissing the appeal of the revenue the Court held that ;the assessee could advance arguments
before the Tribunal even though it had not filed cross objections against the finding.
S. 254 (1) : Appellate Tribunal – Delay of 1050 days - No sufficient cause was shown by the
assesse, hence not condoning the delay was held to be justified .[ S. 260A ]
Dismissing the appeal the Court held that; the assessee failed to point out any error in the findings
recorded by the Tribunal or to controvert the applicability of the decisions given by the Supreme
Court. The explanation tendered by the assessee did not satisfy the test of sufficient cause as
453
required under section 5 of the 1963 Act. Consequently, no substantial question of law arose.
(AY. 2009 - 10)
Subodh Parkash v. Jt. CIT (2017) 397 ITR 384 (P&H) (HC)
S. 254 (1) : Appellate Tribunal – Delay of 2984 days in filing the appeal due to wrong advice
of Chartered Accountant was condoned – Cost was imposed of Rs 50000. Strictures by
ITAT against ICAI deprecated. [S.80-O, 253 ]
Allowing the petition the Court condoned the delay of 2984 days in filing appeal before the
Tribunal due to wrong advice of the Chartered Accountant. Court also imposed the cost of Rs
5000. Court also observed that it is very unfortunate that the Tribunal, out of sheer desperation
and frustration and agitated by the fact that the Revenue is not opposing the request for
condonation of delay blamed the assessee's Chartered Accountant and the ICAI on how they
should conduct themselves. The Tribunal completely misdirected itself by taking irrelevant
factors into account. Delay of 2984 days in filing the appeal caused by wrong advice of a
professional is capable of condonation. However, even if the assessee has acted bona fide, he can
be held liable for payment of costs to balance rights and equities. Court also observed that; to
render substantial justice and not to enrich the Revenue that the costs have been imposed. It is
not, therefore, a case where the State has been allowed to retain any benefit or has been benefited
by any directions. It is the Court which in its discretion has imposed this condition. We do not
find any basis to alter it. The request in that behalf is refused. ( (AY.1994 - 95, 1996 - 97)
Vijay Vishin Meghani v. DCIT (2017) 398 ITR 250 /160 DTR 33 /251 Taxman 270 /299 CTR
463 (Bom) (HC)
Editorial : Vijay V.Meghani v . Dy .CIT (2014) 35 ITR 320/165 TTJ 289/(2015) 153 ITD 687
(Mum) (Trib) is reversed . Also refer Vijay V.Meghani v. ACIT (2015) 155 ITD 623/125 DTR
274 /173 TTJ 502 (Mum) (Trib)
S. 254 (1) : Appellate Tribunal-Order was set aside as the Tribunal has not passed a
speaking order.[S. 40 (a) (ia),40 (ba), 194C]
Allowing the appeal of the revenue, the Court; expressed the displeasure and unhappiness
expressed at the manner in which the Tribunal approached the matter insofar as the applicability
of s. 40 (ba) is concerned. Tribunal cautioned that it should not use abbreviations in the order
without indicating what the terms stand for as it causes confusion - Matter was set aside to
Tribunal . (AY. 2008 - 09)
CIT v. ITD CEM India JV (2017) 160 DTR 17/(2018) 300 CTR 442 (Bom.) (HC)
S. 254 (1) : Appellate Tribunal – Non application of mind-Remanding the matter to AO

without any discussion is held to be not proper - The Tribunal failed to perform its duty of
rendering a complete decision. It is obliged in law to examine the matter, reappraise and
reappreciate all the factual materials. Matter was remanded to Tribunal.
Allowing the appeal of the asseeee the Court stated that; it is “most unhappy” with the manner
in which the Tribunal has decided the appeal. The Tribunal remanded the matter to the AO
without any discussion as to why the order of the CIT (A) is perverse or is contrary to law. It also
did not pint out infirmities or errors of fact and law in the order of the CIT (A). The Tribunal
failed to perform its duty of rendering a complete decision. It is obliged in law to examine the
matter and reappraise and reappreciate all the factual materials. (AY. 2009 - 10, 2010-11)
Thyrocare Technologies limited v. ITO (TDS) (2017) 398 ITR 443 /(2018) 162 DTR 193
(Bom.) (HC)
Thyrocare Technologies limited v. Asst . Registrar Representing The Income – tax
Appellate Tribunal (2017) 398 ITR 443 /(2018) 162 DTR 193 (Bom.) (HC)
454
S. 254 (1) : Appellate Tribunal – Additional evidence - Tribunal was not justified in not
admitting the revenue records as additional evidence. [S. 190, 195, 197]
Allowing the appeal the Court held that; The Appellate Tribunal’s order rejecting the application
for admission of additional evidence in the form of revenue records was incorrect and was based
on incorrect findings of law and of facts. The revenue records were relevant to the issue whether
the lands referred to therein were agricultural lands or not. The letter sent by the Department in
response to the application under section 197 was only in respect of the compensation paid to the
non-resident Indian land owners under section 195 and no application was made under
section 197 in respect of the land owners who were the residents of India. Therefore, the order of
the Appellate Tribunal proceeded on a factually incorrect basis. The statement made by the
Patwari that he had not seen the crops on the lands was not conclusive of the question as to
whether the lands were agricultural or not. The Department had not verified whether any
agricultural activity was conducted on the lands or not. The appellant was entitled to establish in
the assessment proceedings whether the land was agricultural land or not. The revenue records
were to be permitted to be tendered as evidence and considered if the assessee satisfied the
genuineness thereof. (AY. 2005 - 06)
Land Acquisition Collector, Improvement Trust v. Addl. CIT (2017) 396 ITR 410 (P&H)
(HC)
S. 254 (1) : Appellate Tribunal - Powers—Deduction in respect of donation was not made in
return or revised return, Tribunal has power to allow deduction [ S.80GGB ].
Dismissing the appeal of the revenue, the Court held that; The Tribunal has the powers to direct
the Assessing Officer to accept a claim of the assessee, though it had not been made in the
original return nor claimed in the revised return. Accordingly, that the Tribunal was justified in
allowing the deduction under section 80GGBof the Act in respect of donations made to political
parties though such deduction had not been claimed in the return or revised return. (AY. 2005 -
06)
CIT v. Britannia Industries Ltd. (2017) 396 ITR 677/83 taxmann.com 365 (Cal) (HC)
S. 254 (1) : Appellate Tribunal—Powers - Tribunal can grant refund. [S. 237]
Allowing the appeal the Court held that; The power of the Tribunal in dealing with appeals is thus
expressed in the widest possible terms. The purpose of the assessment proceedings before the
taxing authorities is to assess correctly the tax liability of an assessee in accordance with law.
Accordingly the Tribunal has power to grant the refund.
Kalindee Rail Nirman (Engineers) Ltd. v. CIT (2017) 394 ITR 684/150 DTR 239 /297 CTR
514 (Raj) (HC)
S.254 (1) : Appellate Tribunal - During pendency of appeal before the Tribunal subsequent
development of search conducted on the premises of the assesse was not brought to the
notice of Tribunal, hence the order of Tribunal was setaside. [S.153A]
Tribunal has confirmed the order of Assessing Officer who has rejected the books of account and
estimated the income. However when the appeal was pending before the Tribunal , subsequent
development of search conducted on the premises of the assesse was not brought to the notice of
Tribunal, hence the order of Tribunal was setaside . (AY. 2002 - 03)
Skyline Builders v.CIT (2017) 394 ITR 768 (Ker) (HC)
Editorial : Refer ACIT v. Skyline Builders (2010) 4 ITR 48 (Cochin) (Trib)
S.254 (1) : Appellate Tribunal-Tribunal is justified in remanding case to Assessing Officer.

[S. 28 (i)]
455
Dismissing the appeal of the revenue the Court held that; the approach adopted by the Tribunal in
sending the matter back to the Assessing Officer for determination of the question as to whether
or not benefit or privilege in the form of advance licence allotted to the assessee was taxable was
a practical approach having regard to the facts and circumstances of the case. In these
circumstances, it was not possible to state that the order passed by the Tribunal suffered from any
legal infirmity so as to warrant interference.
ITO v. Maitry Exports (2017) 395 ITR 153 (Guj) (HC)
S. 254 (1) : Appellate Tribunal – Tribunal has the power to direct the Commissioner to
grant registration.[S. 12A ]
Dismissing the appeal of the revenue the Court held that; S. 254 of the Act, empowered the
Tribunal to pass such orders as it deemed fit. Therefore, in all the matters, where an appeal was
provided to the Tribunal, its power was co-extensive with that of the authorities whose orders
were appealed against before the Tribunal. There was no such restriction under the statute and on
the contrary, the statute conferred widest power upon the Tribunal. Thus the Tribunal rightly
exercised the power conferred upon it, by directing the Commissioner to grant registration.
CIT (E) v. Greater Noida Industrial Development Authority (2017) 395 ITR 18 (All) (HC)
CIT (E) v. New Okhla Industrial Development Authority (2017) 395 ITR 18 (All) (HC)
CIT (E) v. Yamuna Expressway Industrial Development Authority (2017) 395 ITR 18 (All)
(HC)
S. 254 (1) : Appellate Tribunal – Powers – Direction of Tribunal to CIT (A) to hear the
appeal on merit as the admitted tax was paid by assesse on later on was held to be
justified.[S. 249]
Dismissing the appeal of the revenue, the Court held that ;Tribunal had held that in view of the
admitted tax liability paid by the assessee later on, the dismissal of the appeal on the ground of
non-payment of the admitted tax liability at the point of time of filing of the appeal was not
justified and the appeals were thus restored on the file of the Commissioner (Appeals) for
considering the appeals on the merits. (AY. 2005-06,2007-08 to 2009-10,2011-12)
PCIT v.Abdul Zahid M. (2017) 394 ITR 727 (Karn) (HC)
S. 254 (1) : Appellate Tribunal – A fresh claim can be made before the Appellate
authorities even if such claim was not made in the original /revised return of income. [S.
139, 153A]
Dismissing the appeal of the revenue, the Court held that; the assessee has a right to raise fresh
claim before appellate authorities irrespective of the fact that such claims were not made in the
original /revised return of income. The HC also held that the return furnished in response to
notice u/s. 153A of the Act, is be treated as return filed u/s. 139 of the Act and all the provisions
of the Act which are applicable to return filed u/s. 139 (1) of the Act, would also continue to
apply to a return filed in response to a return u/s. 153A of the Act. (AY. 2007-08, 2008-09)
CIT v. B.G. Shirke Construction Technology (P.) Ltd. (2017) 293 CTR 505 / 246 Taxman
300 (Bom.) (HC)
S. 254 (1) : Appellate Tribunal-Additional evidence-Natural justice-Sufficient opportunity

was provided to argue the matter hence there is no violation of principle of natural justice –
Not necessary to pass a separate order.[S. 54F, R. 29]
Dismissing the appeal the Court held that; Tribunal by not passing the separate order either
accepting or rejecting the application for additional evidence did not cause any injustice to
assessee - Sufficient opportunity was provided to argue the matter hence there is no violation of
principle of natural justice. It is not necessary to pass a separate order. (AY 2006-2007)
Rasiklal M. Parikh v. ACIT (2017) 393 ITR 536 / 150 DTR 73 /295 CTR 373 (Bom.) (HC)
456
S.254 (1) : Appellate Tribunal-Additional evidence-Ordinarily an application seeking
admission of additional evidence under Rules 18 and 29 of ITAT Rules requires an order to
be passed. If the ITAT rejects the application, reasons thereof have to be stated. Chamber
summons to admit arbitral award as additional evidence was not allowed [ITATR.18, 29]
Court held that;ordinarily an application seeking admission of additional evidence under Rules 18
and 29 of ITAT Rules requires an order to be passed. If the ITAT rejects the application, reasons
thereof have to be stated, however in the present case no injustice is done to the assessee, hence
the Tribunal has not committed any error by not passing a separate order on the additional
evidence filed before the Tribunal. Chamber summons to admit arbitral award as additional
evidence was not allowed (AY. 2006-07)
Rasiklal M. Parikh v. ACIT (2017) 391 ITR 395/80 taxmann.com 22 (Bom.) (HC)
S.254 (1) : Appellate Tribunal-Powers-Matter remanded by Tribunal with directions at par

with order for earlier year-Tribunal has no power to issue further orders regarding mode in
which its directions are to be complied with. [S.92C]
Allowing the appeal the Court held that; the further observations made by the Tribunal after
recording the finding that the matter was required to be remanded to the Transfer Pricing
Officer/Assessing Officer with identical directions as given in case of the assessee for the
assessment year 2007-08 was not justified. Resultantly, the order passed by the Tribunal making
observation exceeding the identical direction given in case of the assessee for the assessment year
2007-08 would no more operate. The Transfer Pricing Officer/Assessing Officer would be
required to consider the matter in the same manner as was considered earlier and at par with the
direction issued in case of the assessee for the assessment year 2007-08.
Fosroc Chemicals (India) P. Ltd. v. Dy. CIT (2017) 392 ITR 172 /246 Taxman 278 (Karn.)
(HC)
S.254 (1) : Appellate Tribunal – Additional grounds – Assessee must satisfy the appellate
authority that the ground now raised was bona fide and the same could not have been
raised earlier for good reasons.[S.80IA]
Dismissing the appeal, the Court held that, an additional ground cannot be permitted to be raised
if the necessary evidence that the assessee is entitled to the claim is not on record. The fact that
claim has been allowed by the AO in a subsequent year and that there is no reason why the claim
should not be allowed in the present year is irrelevant. Also, the assessee must satisfy the
appellate authority that the ground now raised was bona fide and the same could not have been
raised earlier for good reasons. (ITA No. 1060 of 2014, dt. 18.04.2017) (AY. 2008-09)
Ultratech Cement v. ACIT (2017) 81 taxmann.com 74 /298 CTR 437 /157 DTR 253 (Bom.)
(HC)
S. 254 (1) : Appellate Tribunal – Powers-Tribunal has no power to enhance assessment.
Allowing appeal the Court held that ;the Tribunal has no power under the Act to enhance the
assessment in appeal in view of the statutory provisions. Mcorp Global P. Ltd. v. CIT [2009] 309
ITR 434 (SC) followed. (AY. 1989-1990)
Fidelity Shares and Securities Ltd. v. DCIT (A) (2017) 390 ITR 267 ITR (Guj.) (HC)
S. 254 (1) : Appellate Tribunal – Additional evidence – Question of fact [S. 68, 69, 260A,
ITR, 1962, r. 29.]
Dismissing the appeal of the assesse the Tribunal held that; the view adopted by the Appellate
Tribunal was a plausible view based on appreciation of material on record and therefore, did not
warrant interference. The assessee was not successful in demonstrating that the findings recorded
by the Appellate Tribunal were based on either misreading or misappreciation of material on
record. No question of law arose. (AY. 2008-2009)
457
Sanjeev Bajaj v. CIT (2017) 390 ITR 478 (P&H) (HC)
Editorial : SLP of assesse is dismissed; Sanjeev Bajaj v. CIT (2016) 389 ITR 39 (St.)
S.254 (1) : Appellate Tribunal - Additional evidence – Transfer pricing - Matter was
remanded back to TPO to decide it afresh [ S.92CA ]
The TPO to adopt cost relevant for international transaction – The assessee filed additional
evidence before the Tribunal to substantiate cost allocation. Some filters adopted by the TPO not
proper and some comparables considered by him not relevant to the assessee .Matter remanded
back to TPO to decide it afresh . (AY. 2007-08 to 2009-10).
DCIT .v. Monster.Com India Pvt. Ltd. (2017)56 ITR 1 (Hyd) (Trib.)
S.254 (1) : Appellate Tribunal – Power - Interim order - -Transfer cases – Tribunal directed
the Department to produce records including copy of the order passed, department has to
comply with the requisition [S. 124, 127 )
The Tribunal directed the Department on several hearings prior to the Order requiring production
of the file and especially the order made under section 127 of the Income-tax Act, 1961. The
Department also rejected a right to information query that was filed on behalf of the assessee. The
Department also objected to the admissibility of the additional ground raised by the assessee
challenging the jurisdiction of the AO. The Tribunal held that the admissibility or otherwise of
the additional ground could be decided only after examining the record. The orders of the
Tribunal on variousdates demonstrated that the Department was adopting delay tactics as regards
theproduction of records and was procrastinating which showed that there was no Order passed
u/s. 127 giving the jurisdiction to the AO. Any document or record can be requisitioned by
theTribunal, if it is of the opinion that the said document is required for the disposal of theappeal.
The assessee also submitted that his application under the Right to Information Actwas rejected
by the Department. Thus only on being convinced of the necessityof examining the records were
the records and jurisdictional orders called for. TheDepartment was directed to comply with the
interim orders of the Tribunal. (AY. 2008-09, 2009-10).
Consulting Engineering Services (India) Pvt. Ltd .v. ACIT (2017)56 ITR (Trib.) 28 (Delhi)
(Trib.)
S. 254 (1) : Appellate Tribunal-Additional ground was admitted which was raised by way
of covering letter
Tribunal held that since all the facts relating to the issue raised in the additional ground are on
record and the same is a legal issue, additional ground is admitted. (AY. 2005-06)
S. 254 (1) : Appellate Tribunal - Additional ground - Transfer pricing – Selecting by

comparable – Additional ground was admitted and the matter was set back for verification .
[S. 92C]
The Tribunal admitted the additional ground of appeal raised by the assessee and sent the matter
back to AO /TPO for ascertaining the correct functional profile of the assessee for this year
without being influenced by the order of the co-ordinate bench for A.Y. 2007-08 to carry out
examination of comparability analysis and then determine ALP of the international transactions.
(AY. 2006-07)
Evalueserve.com (P) Ltd. v. ITO (2017) 187 TTJ 331 (Delhi) (Trib.)
458
S. 254 (1) : Appellate Tribunal - An additional ground with respect to additional evidence is
admissible - Transfer pricing - If it is discovered that assessee is not liable to tax the revenue
cannot have grievances [S. 92C].
Allowing the appeal the Tribunal held that ;The approach of the Tribunal in matters where the
revenue seeks to fasten liability should be different, The Tribunal is the last fact-finding authority
and the assessee has no other avenue to raise its grievances so far as facts are concerned.
Ultimately if it is discovered that assessee is not liable to tax the revenue cannot have grievances
Ultratech Cement vs. ACIT (2017) 81 Taxmann.com 74 (Bom) (HC) distinguished. Thus,
considering the material available on record and the factual and legal discussion as referred
above, we admit the additional ground of appeal raised by assessee, and are inclined to restore
this issue raised in the additional ground to the file of assessing officer/transfer pricing officer for
examining issue afresh. The AO/TPO shall decide the issue after considering all the material
available on record in accordance with the law. (ITA No. 121/M/2013, dt. 21.08.2017) (AY.
2007-08)
Nivea India Private Ltd. v. DCIT (2017) 158 DTR 62 /189 TTJ 422 (Mum.) (Trib.);
www.itatonline.org
S. 254 (1) : Appellate Tribunal - Additional evidence – The evidence was available at the
stage of assessment proceedings, hence the evidence was not admitted. [ITATR. 29]
Mere fact that evidence sought to be produced is vital and important does not provide a
substantial cause to allow its admission at appellate stage, especially when evidence was available
to party at initial stage and had not been produced by him. Further the Assessee did not furnish
any explanation with regard to nature and source of cash deposits in his two bank accounts as
well as that introduced in business during course of hearing before AO. After close of hearing,
assessee for first time submitted that he had received 'some advance money' for sale of property.
Even before CIT (A), assessee raised claim sans any details leading to its rejection by him. ITAT
held that admission of additional evidence was to be rejected as it was available with assesse at
the initial stage. (AY. 2011 – 2012)
Kanniappan Murugadoss v. ITO (2017) 164 ITD 260 (Chennai) (Trib.)
S. 254 (1) : Appellate Tribunal - Additional evidence – Tribunal has not admitted the
additional evidence which was produced after two and half years.
Held that assessee brought on record the additional evidence after lapse of two and half years.
Additional evidence could have been submitted before the AO to substantiate his claim, so that
department could have initiated proper proceedings. At this juncture, it was inappropriate for the
Tribunal to consider the additional evidence. (AY .2009-10)
Katikaneni Prem Kumar v. ITO (2017) 55 ITR 49 (SN) (Hyd.) (Trib.)
S. 254 (1) : Appellate Tribunal-The Respondent is entitled to raise an objection under Rule
27 even in respect of fresh issues. It is not necessary that the ground should have been
decided against the by the CIT (A). [ITAT Rule, 27]
R Tribunal held that; A cursory look at the language of rule 27 transpires that a respondent has
been empowered to support the order appealed against on any of the grounds `decided against
him.’ In other words, the challenge can be made by a respondent only in respect of a `ground
decided against him’. In such circumstances, a question arises that if there is no decision at all of
the CIT (A) on a particular aspect, which is otherwise germane to the overall issue decided in
favour of the respondent, can the respondent espouse such aspect under rule 27 in an appeal filed
by the plaintiff ? If we go by the literal interpretation of the Rule, then the answer is in negative
that unless the ground is not `decided against’ the respondent, he cannot take recourse to this
provision. However, it is of paramount importance to keep in mind the fundamental object of
enshrining rule 27, being giving an opportunity to the respondent to support the impugned order
459
in an appeal filed by the plaintiff. A pragmatic approach on consideration of the object of such
Rule, in our considered opinion, necessitates the adoption of liberal interpretation that when a
particular issue is decided in favour of the respondent and the plaintiff has come up in appeal
against such decision on the issue, then all the relevant aspects having bearing on the overall
issue, even though not specifically decided against the plaintiff, should be open for challenge by
the respondent under the rule. If the respondent is debarred from raising that aspect of the issue,
which was not taken up before the first appellate authority or taken up but remained undecided,
and the appeal of the plaintiff is allowed, the respondent would be rendered without remedy. It
has been noticed above that a respondent is not entitled to file cross objection on such aspects of
the issue u/s 253 (4) of the Act, the scope of which provision is circumscribed to challenging the
ultimate unfavourable conclusion drawn by the CIT (A). In common parlance, when an issue is
decided in favour of one party whether on one aspect or the other, it is not expected of such a
party to challenge the order by asserting that the decision should have been given in his favour on
that issue on all the aspects and not on that particular aspect on which it was given. When an
appeal is filed against such favourable decision on the issue by the other party, and suppose the
impugned order is not sustainable on that aspect of the issue on which it was decided, but on
some other aspect which was not decided by the first appellate authority and the respondent is
restrained from taking up such aspect on the reasoning that Rule 27 is not applicable on such
aspect, the respondent would stand nowhere. In view of the foregoing discussion, it is clear that
hyper technicalities of rule 27 cannot come in the way of the deciding such aspects of the issue
taken up by the respondent before the tribunal which were germane to the main issue but were not
contested or decided provided no fresh investigation of facts is required for rendering decision on
such aspects. (ITA No. 167,168,321,322 & 192/Lkw/2016, dt. 28.04.2017) (AY. 2010-11)
AAA Paper marketing Ltd. v. ACIT (Lucknow) (Trib.), www.itatonline.org
Sidhibhoomi Alloys Ltd. v. ACIT (Lucknow) (Trib.), www.itatonline.org
DCI v. Appurva Goel (Lucknow) (Trib.),www.itatonline.org
S. 254 (1) : Appellate Tribunal-Additional evidence - Foreign allowance was received

outside India – Additional evidence was filed before the Tribunal – Matter was send back to
AO to decide a fresh-DTAA-India – UK. [S. 5, 9 (1) (ii), Art. 16]
The Tribunal held that, additional evidence filed before Tribunal for his claim that salary income
received was not taxable in India, since said evidence were not available before authorities below,
matter was send back for to decide afresh. (AY. 2011 – 2012
Ravishankar Rajendran v. ITO (2017) 162 ITD 503 (Chennai) (Trib.)
S.254 (1) : Appellate Tribunal-Admission of additional evidence by the CIT (A) was held to
be justified. [R. 46A]
The Tribunal held that the CIT (A) has rightly admitted additional evidences which were
necessary for arriving at justice. The learned CIT (A) has passed a reasoned and speaking order
and has passed the order after obtaining remand report from the AO. The appeal of the revenue is
dismissed. (AY. 2009-10)
ACIT v. Saraswati Builders (2017) 183 TTJ 13 (UO) (Asr.) (Trib.)
S. 254 (1) : Appellate Tribunal – Additional ground – Additional ground cannot be raised
on a factual issues .
If a ground of appeal was not raised initially, then such ground cannot be urged as an additional
ground - Additional ground cannot be raised on a factual issue. (AY. 2008-09, 2009-10)
460
ADIT v. Flt. Lt. Ranjan Dhall Charitable Trust (2017)
58 ITR 47 (Delhi) (Trib.)
S. 254 (2) : Appellate Tribunal-Rectification of mistake apparent from the record – Non
consideration of paper book filed is a mistake apparent from the record, Tribunal was
directed to hear the appeal of the assessee afresh on the basis of documents which have been
already found to be filed by the assesee.
Allowing the petition the Court held that, Non consideration of paper book filed is a mistake
apparent from the record, Tribunal was directed to hear the appeal of the assessee afresh on the
basis of documents which have been already found to be filed by the assesee. (AY.1996-97)
Nisha Synthetics Ltd. v. CIT (2017) 145 DTR 345/291 CTR 328 (SC)
Editorial : Judgment of Bombay High Court in Nisha Synthetics Ltd v. ITAT (2017) 145 DTR
346/291 CTR 329 (Bom.) (HC) is set aside.
S. 254 (2) : Appellate Tribunal – Rectification of mistake apparent from the record –
Mutuality - While accepting an assessee's rectification applications, Tribunal should not
undertake elaborate consideration of very same issues and very same facts to come to a
contrary conclusion .
Appeal of the assesse was dismissed and Tribunal held that principle of mutuality is not
applicable .On miscellaneous petition filed by the assesse the Tribunal ,allowed the rectification
application and held that the principle of mutuality would apply and the same would not be
taxable in the hands of the assessee. On Writ by the Revenue, allowing the petition the Court held
that; while accepting an assessee's rectification applications, Tribunal should not undertake
elaborate consideration of very same issues and very same facts to come to a contrary conclusion
. The Tribunal committed a serious error in allowing the assessee's rectification applications and
recalling its earlier order of rejection of appeals. However, if the assessee is aggrieved by the
order of the Tribubal, it will always be open for the assessee to file tax appeals. (AY. 2006-07 to
2011-12)
CIT (E) v. Gujarat Institute of Housing
Estate Developers (2017) 249 Taxman 586/(2018) 162 DTR 253 (Guj.) (HC)
S. 254 (2) : Appellate Tribunal-Rectification of mistake apparent from the record – Where
an application for rectification was rejected, second application cannot be made on same
grounds.
Dismissing the appeal of the revenue, the Court held that ,where an application for rectification
was rejected, second application cannot be made on same grounds. (AY. 2006 - 07, 2007 - 08)
PCIT v. Navjivan Roller Flour and Pulse (2017) 398 ITR 62 (Guj) (HC)
S. 254 (2) : Appellate Tribunal-Rectification of mistake apparent from the record – For
purposes of filing a rectification application, the period of limitation of six months
commences from the date of receipt of the order sought to be rectified by the assessee and
not from the date of passing of the order. [Central Excise Act, 1944, S. 34C, 35C, 37C]
The assessee filed a rectification application and claimed that it was maintainable as it was filed
within six months from the date of service of notice of the order, which was sought to be
rectified. However, the learned CESTAT dismissed the said application considering the starting
point of limitation of rectification as the date of the order sought to be rectified. Allowing the
petition the Court held that;for purposes of filing a rectification application, the period of
limitation of six months commences from the date of receipt of the order sought to be rectified by
the assessee and not from the date of passing of the order. Followed the ratio inD. Saibaba v. Bar
Council of IndiaAIR 2003 SC 2502. (TA No. 915 of 2016, dt. 25.01.2017)
461
Liladhar T. Khushlani v. Commissioner of Customs (Guj) (HC), www.itatonline.org
S. 254 (2) : Appellate Tribunal-Rectification of mistake apparent from the record –

Limitation period - The amendment to S. 254 (2) w.e.f. 01.06.2016 to curtail the period
available to file rectification applications from four years to six months cannot apply to
appellate orders passed prior to that date because that would take away a vested right. [S.
254 (1)]
Allowing the petition of the assessee the Court held that ;The amendment to S. 254 (2) w.e.f.
01.06.2016 to curtail the period available to file rectification applications from four years to six
months cannot apply to appellate orders passed prior to that date because that would take away a
vested right.The amendment has been made effective virtually in case of assessee with
retrospective effect though the amendment does not show that it is applicable with retrospective
effect, however, the existing right has been extinguished with retrospective effect in case of the
assessee. In the considered opinion of this Court, the legislature should have granted some time to
the assessees who could have filed an appeal within a period of four years and the same has not
been done till the amendment came into force extinguishing the right to file an appeal. In the
considered opinion of this Court, application preferred by the assessee should not have been
dismissed by the Tribunal on account of the amendment which has reduced the period of
limitation of four years to six months. Resultantly, the impugned order passed by the respondent
on 23/12/2016 is hereby quashed and the writ petition stands allowed. The Income Tax Appellate
Tribunal is directed to decide the application preferred under Section 254 (2) on merits within a
period of three months from the date of receipt of certified copy of this order. (AY. 2010-11)
District Central Co-op. bank Ltd. v. UOI (2017) 398 ITR 161 /251 Taxman 122 (MP) (HC)

Limitation - There was no averment in the petition when the order was served, hence the
application was dismissed on the ground that the petition was filed beyond period of
limitation. [ ITAT R. 24, 25]
When the matter came up for hearing before the Tribunal, here was no appearance on behalf of
the assessee. The JCIT appeared for the Revenue and argued the case. The Tribunal passed its
order in favour of the Revenue vide order dated18-07-2011. Aggrieved by the dated 18-7-2011
passed by the Tribunal, the assessee filed an appeal which was stated to have been filed with
delay.While matter stood, the assessee filed a miscellaneous to recall the ex-parte order and to set
aside and restore the same.
The Tribunal finding that rectification application had been filed after expiry of period of
fouryears from date of order, rejected same being barred by limitation.
The High Court held that even if the period for filing an application for recalling the ex parte
order had to be computed from the from the date of service of the order, no averments had been
made in the miscellaneous petitionas to when the order was served on the appellant. Accordingly
the High Court dismissed the petition. (AY. 2007-08)
S.P. Balasubrahmanyam v ACIT (2017)394 ITR 366 /245 Taxman 146 /152 DTR 25 (Mad)
(HC)
Editorial : SLP of assesse is dismissed ;S.P. Balasubrahmanyam v ACIT (2017) 394 ITR 1 (St.)
S. 254 (2) : Appellate Tribunal-Rectification of mistake apparent from the record – If the
assessee voluntarily withdraws the appeal, he cannot seek restoration on the ground that
the withdrawal was an apparent mistake.
Dismissing the petition the Court held that; plea that the appeal was mistakenly withdrawn on the
advice of Counsel and that the same should be restored should be backed by evidence. If the
assessee voluntarily withdraws the appeal, he cannot seek restoration on the ground that the
withdrawal was an apparent mistake.
462
Jayant D. Sanghavi v. ITAT (2017) 147 DTR 370/295 CTR 229 (Bom.) (HC)
S. 254 (2) : Appellate Tribunal – Rectification of mistake apparent from the record -
Tribunal is duty bound to pass necessary consequential orders even without alternative
submission, if situation warrants - Tribunal is directed to allow miscellaneous application
and consider alternative plea made by assessee. [S.254 (1)]
On reference the Court held that ;the Tribunal is bound by the law to consider the alternative plea
raised by the assessee at the hearing of the appeals. The miscellaneous application taken out
before the Tribunal by the assessee brought out an error apparent on record insofar as the original
order passed by the Tribunal was concerned. Therefore, the miscellaneous application was to be
allowed and the Tribunal was to consider the alternative plea made by the assessee in the light of
the decision of the Bombay High Court which stated that the Tribunal was duty bound to pass
necessary consequential orders even without an alternative submission, if the situation warranted.
Referred Ciba of India Ltd. v. CIT [1993] 202 ITR 1 (Bom) and CIT v. Mahalakshmi Textile
Mills Ltd. [1967] 66 ITR 710 (SC) .[Since the final order of the Tribunal on the appeal could only
be crystallised after the plea was so considered by the Tribunal, the reference made was returned
unanswered. (AY. 1987-1988, 1988-1989)
Parmanand Builders P. Ltd. v. CIT (2016) 76 taxmann.com 283/ (2017) 390 ITR 40/292
CTR 382 /147 DTR 248 (Bom.) (HC)
S. 254 (2) : Appellate Tribunal-Rectification of mistake apparent from the record – The
mere placing of a case law in the paper book does not mean that it was cited before the
ITAT and non-consideration thereof is not a mistake apparent from the record. [ S.254 (1) ]
Dismissing the petition the Court held that; Facts recorded by the ITAT have to be accepted as
correct and conclusive and cannot be contradicted by affidavit or otherwise. The mere placing of
a case law in the paper book does not mean that it was cited before the ITAT and non-
consideration thereof is not a mistake apparent from the record. A MA to rectify such alleged
mistake of non-consideration of a judgement must be filed as quickly as possible. (WP. 2844 of
2016, dt. 12.01.2017) (AY. 2002-03)
Ashish Gandhi Builders & Developers P. Ltd. v. ITAT (Bom.) (HC); www.itatonline.org
S.254 (2) : Appellate Tribunal-Rectification of mistake apparent from the record - Order
was passed beyond period of 90 days – Tribunal was directed to pass fresh order. [S. 254
(1), ITATR, 34 (5) (c), 34 (8)]
Allowing the petition the Court held that; Tribunal while rejecting the rectification application
did not dispute the fact that the order dated February 3, 2016 was passed beyond the period of 90
days from the date of conclusion of its hearing. However, it recorded that administrative
clearance had been taken to pass such an order beyond the period of 90 days. The meaning of
"administrative clearance" was not clear in the face of rule 34 (5) (c) read with rule 34 (8) of the
Income-tax (Appellate Tribunal) Rules, 1963. The provisions mandated the Tribunal to
pronounce its order at the very latest on or before the 90th day, after the conclusion of the
hearing. Therefore, the order was not sustainable. The Tribunal was to consider the rectification
application afresh. (AY. 2009-2010)
Otters Club v. DIT (E) (2017) 392 ITR 244 (Bom.) (HC)
S. 254 (2) : Appellate Tribunal-Rectification of mistake apparent from the record – Non
consideration of alternative contention and additional ground was held to be mistake
apparent from record. [ S.40 (a) (ia), 194H, 201 ]
463
Allowing the petition the Tribunal held that, Non consideration of alternative contention and
additional ground was held to be mistake apparent from record. (AY.2007-08)
Bharti Airtel Ltd. v. ACIT (2017) 166 ITD 179 (Delhi) (Trib.)
S.254 (2) : Appellate Tribunal - Rectification of mistake apparent from the record -
Rectification petition filed beyond expiry of 6 months was held to be not maintainable .
Tribunal has passed an order dt.04-01-2016,dismissing the appeal for non-prosecution and non-
appearance. The assessee filed a miscellaneous petition on 10-3-2017 seeking to rectify the
Tribunal's order. The Tribunal held that the time for rectification had been reduced from 4 years
to 6 months by the amendment vide Finance Act, 2016 with effect from 1-06 - 2016. On facts
rectification application was filled beyond 6 months of the Tribunal’s decision was barred by
period of limitation. It was not maintainable as per law. (AY. 2008-09)
Padma K. Bhat (Smt.) v. ACIT (2017) 166 ITD 172 (Bang) (Trib.)
S. 254 (2) : Appellate Tribunal-Rectification of mistake apparent from the record - Petition
for recalling Tribunal's order was filed beyond period of six months from date of Tribunal's
order was dismissed .
The assessee's appeals were dismissed in limine on 7-4-2016 by the Tribunal for non-prosecution.
The assessee filed rectification application before the Tribunal after a period of six months on 13-
1-2017 for recalling the said order. The time period within which the mistake apparent from
record can be rectified has been reduced from 4 years to 6 months by the amendment videFinance
Act, 2016 with effect from 1-6-2016. Thus, after the substitution of this provision with effect
from 1-6-2016, the limitation period for rectification of mistake apparent from record is provided
only for 6 months from the end of the month in which the order was passed. In the case in hand,
the impugned order was passed by the Tribunal on 7-4-2016 and after the amendment in section
254 (4) with effect from 1-6-2016, these miscellaneous petitions were required to be filed before
31-12-2016. In the absence of any provision to condone the delay under the Act, it may be a case
of omission in the provision of the Act which cannot be supplied when there is no ambiguity in
the provisions of section 254 (2). Followed Bharat Petroleum Corp .Ltd v. ITAT (2013) 359 ITR
371 (Bom) (HC) (AY. 2008 - 09)
Shamsunissa Begum (Ms.) v. DCIT (2017) 165 ITD 557 (Bang) (Trib.)

Limitation - 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.
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. The contrary view in Lavanya Land (Mum) (Trib)
is not good law in view of K. Ravindranathan Nair (SC). (MA No.411/Mum/2016 to
414/Mum/2016 (Arising out of ITA No.7001/Mum/2010), dt. 09.10.201) (AY. 2003-04)
Lucent Technologies GRL LLC v. ADIT (Mum) (Trib), www.itatonline.org
464
Tribunal cannot recall the entire order and pass a fresh order. [ S.40 (a) (ia) ]
Dismissing the petition the, the Tribunal after taking, due care and considering all relevant
material on record had taken a conscious decision and decided issue raised by the assessee, order
of Tribunal could not be recalled . (AY. 2004 - 05, 2006-07)
Technip India Ltd. v. ACIT (2017) 166 ITD 42 (Chennai) (Trib.)
period of limitation for filing a rectification application is six months from the end of the
month in which the “order is passed” and not from the date of “receipt of the order”. Liber
la view is taken it can be considered from the date of uploading of the order.
Dismissing the appeal of the assesse the Tribunal held that; the period of limitation for filing a
rectification application is six months from the end of the month in which the “order is passed”
and not from the date of “receipt of the order”. Even if a liberal view is taken, it can be
considered as the date of uploading of the order on the ITAT website. The uploaded orders can be
accessed by the assessee and constitutes service of the order upon the assesse. Application was
dismissed as barred by limitation. (M.A.no. 05/Hyd/2017, dt. 12.07.2017) (AY. 2007-08)
Srinivas Sashidhar Chaganty v. ITO (Hyd) (Trib), www.itatonline.org
amendment by the Finance Act 2016 w.e.f. 01.06.2016 to specify the time limit of 6 months
to file a rectification application applies even to applications filed with respect to appeal
orders passed prior to the date of the amendment. The Tribunal has no power to condone
the delay in filing a Miscellaneous Application.
Dismissing the rectification application of the Revenue the Tribunal held that; (i) The date of
order passed by the Tribunal is 22/03/2013 and the revenue has filed these applications on
28/02/2017 which are clearly beyond a period of six months as provided in Section 254 (2). At
this juncture, it would be prudent to reproduce the relevant provisions as contained in Section 254
(2) of the Income Tax Act, 1961 : -
Orders of Appellate Tribunal.
254. (1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of
being heard, pass such orders thereon as it thinks fit.
(1A) [***]
(2) The Appellate Tribunal may, at any time within six months from the end of the month in
which the order was passed, with a view to rectifying any mistake apparent from the record,
amend any order passed by it under sub-section (1), and shall make such amendment if the
mistake is brought to its notice by the assessee or the Assessing Officer :
(ii) It is to be noted that the earlier period of ‘four years’ has been substituted with ‘six months’
by the Finance Act, 2016 with effect from 01/06/2016. However, we find that no distinction has
been made in this section between orders passed before 01/06/2016 and orders passed after
01/06/2016. Moreover, the Tribunal order was dated 22/03/2013 and therefore, the Revenue had
ample time to go through the same and pin point the mistakes in the order but it has failed to do
so. Therefore, we find no force in these miscellaneous petitions primarily because of the reason
that the Statute does not authorize us to entertain any petition which has been filed u/s 254 (2) at
any time beyond a period of six months from the date of the order. The Tribunal has been given
power to admit an appeal after the expiry of the relevant period, if it is satisfied that there was
sufficient cause for not presenting it within that period as per Section 253 (5). However, this
Tribunal is not enshrined with such powers in respect of a miscellaneous petition filed u/s 254 (2)
of the Income Tax Act. If we are not given that power, then it is not expected from us to exercise
such power which is not provided in the Act. The Tribunal, being creation of law, is bound by the
465
statutory provisions and our jurisdiction is simply to interpret and follow the Statute. There is no
scope for us to import any word into the Statute which is not there. Such importation would be
nothing but to amend the Statute. We therefore hold that the condonation of delay of these
petitions is beyond our jurisdiction, hence rejected. Similar view has been taken by the Mumbai
Tribunal in the cited order. Hence, finding the petitions time barring, we dismiss the same.
(M.A.No.103 to 108/Mum/2017 Arising out of ITA Nos. 8247,8249,8177,8229,8242
&8228/Mum/2011, dt. 25.04.2017) (AY. 2009-10)
DCIT v. Hita Land Private Limited (Mum.) (Trib.), www.itatonline.org
S. 254 (2A) : Appellate Tribunal – Stay - Appeal for earlier years pending before High
Court and the assessee proposing to file miscellaneous application cannot be the ground to
stay the recovery . [ S. 220, 254 (1)]
Dismissing the petition the Tribunal held that; assessee is proposing to file appeal against orders
of Tribunal before High Court and also intends to file miscellaneous application before Tribunal,
same cannot be a valid ground for stay of demand (AY. 2013-14)
Google India (P.) Ltd. v. DCIT (2017) 167 ITD 567 (Bang) (Trib.)
S. 255 : Appellate Tribunal – Third member - Third member has to decode specific points
referred for his opinion and he cannot sit in appeal over entire matter and take decision
independently. [ S. 255 (4) ]
Allowing the appeal of the revenue, the Court held that; Third member has to decode specific
points referred for his opinion and he cannot sit in appeal over entire matter and take decision
independently. Accordingly the order and approach of the Third Member was patently erroneous,
illegal, impermissible and constitutionally unsustainable in law rendering the order passed by the
Regular Bench, unsustainable. The President of the Tribunal was to nominate another Bench to
take a decision on the matter.
CIT v. Sahara India Ltd. (2017) 398 ITR 301 (All) (HC)
S. 255 : Appellate Tribunal – Jurisdiction — Single Member Bench —Income of assessee

computed under minimum alternate tax provisions above Rs. 50 lakhs . Amendment
effective from 1-6-2016 on date of deciding appeal —Matter to be heard by division Bench
of Tribunal, matter remanded. [S. 255 (2), 255 (3)]
Allowing the appeals the Court held that the income of the assessee was assessed by the
Assessing Officer at Rs. 12,74,720 but was computed under the minimum alternate tax provisions
at Rs. 96,28,336 under section 115JB of the Act which was much above the limit prescribed
under section 255 (3) 50,00,000 as the provision of section of the Act. The appeal was decided
on June 1, 2016 on which date the limit for hearing the appeal by a single Member of the Tribunal
would be taken at Rs. 255 (3) of the Act as amended by the Finance Act, 2016 was made
operative from June 1, 2016 itself. The order passed by the single Member of the Tribunal was to
be set aside and the matter was to be remanded to the Tribunal to be heard and decided afresh by
a Division Bench of the Tribunal in accordance with section 255 (2) of the Act. (AY. 2008-09)
Gee City Builders P. Ltd v. CIT (2017) 395 ITR 160 (P&H) (HC)
S. 255 : Appellate Tribunal – Precedent – Software payment - Royalty-Reference to special

Bench - Taxability of software payments as royalty - If there are two possible views, the
view favourable to the assessee must be adopted - Prayer of revenue to refer the matter to
Special Bench was declined .[ S.9 (1) (vii) ,255 (3), Art, 12 ]
466
Dismissing the application of the Revenue to refer the matter to Special Bench, the Tribunal held
that; the fact that there is a conflict of judicial opinion on whether payments for software are
assessable as royalty or not does not entitle the Dept to seek a reference to the Special Bench. The
Tribunal has to follow judicial discipline. Also, if a reference is made to the Special Bench it will
violate the principle in CIT v. Vegetable Products Ltd (1973) 88 ITR 192 (SC) that if there are
two possible views, the view favourable to the assessee must be adopted. (ITA No. 4672
/M/2007, dt. 03.01.2018)
DDIT v. Reliance Communication Ltd (2018) 161 DTR 281 /191 TTJ 505 (Mum) (Trib)
DDIT v. Reliance BPO Ltd (2018) 161 DTR 281/191 TTJ 505 (Mum) (Trib)
DDIT v. Reliance Communication Infrastructure Ltd (2018) 161 DTR 281/191 TTJ 505
(Mum) (Trib)
DDIT v. Reliance Telecom Ltd (2018) 161 DTR 281 /191 TTJ 505 (Mum) (Trib)
S. 260A : Appeal - High Court — Additional evidence was raised before the Court ,however
which was not taken in to consideration hence the proper course is to seek review before
the High Court .[S. 251, R. 46A ]
Court held that; if the issue of powers of the Commissioner (Appeals) had come in appeal under
rule46A and was specifically raised before the High Court and it had not been taken into
consideration by the High Court, the appropriate remedy for the appellant would be to file an
application before the High Court for review of its order. If such an application was filed, it was
to be considered in accordance with law without raising the question of limitation.
Mathur Marketing Pvt. Ltd. v. CIT (2017) 251 Taxman 3/299 CTR 461/160 DTR 377
(2018) 400 ITR 26 (SC)
S.260A : Appeal – High Court-Mesne profits – High Court was directed to decide the issue
on merits[ S. 4 ]
Allowing the appeal of revenue, the Court held that; High Court's approach of dismissing the
Dept's appeal only because the Tribunal relied on Narang Overseas 111 ITD 1 (Mum) (SB) and
the appeal against which had been dismissed for non-removal of defects is not correct. The High
Court ought to decide the question on merits. The impugned judgment and order passed by the
High Court and remand the matter back to the High Court for deciding the same on merits
expeditiously and in accordance with law. (CA l No. 19944/2017, dt. 29.11.2017)
CIT v. Goodwill Theatres Pvt. Ltd (2017) 160 DTR 371 /299 CTR 457 (SC)
Editorial : Order in CIT v. CIT v. Goodwill Theatres Pvt. Ltd. (2016) 386 ITR 294 (Bom) (HC)
is set aside .
S. 260A : Appeal-High Court - Court fee - Right of appeal is not a matter of procedure. It is
a substantive right.Court fee payable shall be the one which was payable on the date of such
assessment order.[Kerala Court Fees and Suit Valuation Act, 1959, S. 52A]
Allowing the appeal the Court held that; in the present case when Section 260A of the IT Act
was introduced by way of amendment with effect from October 01, 1998, it contained provision
in the form of clause (2) of sub-section (2) thereof relating to payment of court fee as well. As per
that provision, fixed court fee of Rs.2,000/- was provided. This provision was, however, omitted
with effect from June 01, 1999. The court fee became payable as per Section 52 of the 1959 Act.
The amendment in question in the 1959 Act, i.e. Section 52A, was made effective from March
06, 2003. This provision has not been made retrospective.
467
Court accordingly held that; wherever assessee is in appeal in the High Court which is filed under
Section 260A of the IT Act, if the date of assessment is prior to March 06, 2003, Section 52A of
the 1959 Act shall not apply and the court fee payable shall be the one which was payable on the
date of such assessment order. In those cases where the Department files appeal in the High Court
under Section 260A of the IT Act, the date on which the appellate authority set aside the
judgment of the Assessing Officer would be the relevant date for payment of court fee. If that
happens to be before March 06, 2003, then the court fee shall not be payable as per Section 260A
of the IT Act on such appeals. Court held that right of appeal gets vested in the litigants at the
commencement of the lis and such a vested right cannot be taken away or cannot be impaired or
imperilled or made more stringent or onerous by any subsequent legislation unless the subsequent
legislation said so either expressly or by necessary intendment. An intention to interfere with or
impair or imperil a vested right cannot be presumed unless such intention be clearly manifested
by express words or by necessary implication.
K. Raveendranathan Nair v. CIT (2017) 156 DTR 30 /297 CTR 334 /250 Taxman 401/(2018)
403 ITR 180 (SC)
CIT v. A.M.Habeeb (2017) 156 DTR 30 /297 CTR 334 /250 Taxman 401/(2018) 403 ITR 180
(SC)
S.260A : Appeal-High Court—Limitation-Delay of fourteen days condoned and High Court

was directed to hear the appeal on merits.
Where the High Court refused to condone a delay of fourteen days in filing the appeal under
section 260A of the Income-tax Act, 1961 on the ground that there was no such power given to
the High Court, on appeal :
Held, allowing the appeal, that subsequently, sub-section (2A) of section 260A of the Act was
inserted which empowers the High Court to condone the delay. Whether it had effect
prospectively or retrospectively, the High Court had inherent jurisdiction to condone such delay
of fourteen days. The Supreme Court condoned the delay of fourteen days and directed the High
Court to decide the appeal on the merits in accordance with law..
CIT v. Pheroza Framroze and Co. (2017) 392 ITR 626/247 Taxman 100/152 DTR 139/295
CTR 459 (SC)
S. 260A : Appeal - High Court - Administrative reasons cannot be the ground for filing
defective appeal — Repetitive notice of motions cannot be filed for recall of speaking
orders. - Dismissal of appeal was held to be justified . [ Bombay High Court (Original side)
Rules, 1980, R. 986 ]
The Department’s appeal to the High Court for setting aside an order of the Appellate Tribunal
dated November 19, 2015, was rejected by the Prothonotary and Senior Master under rule 986 of
the Bombay High Court (Original Side) Rules, 1980. The first notice of motion taken out by the
Department was dismissed on April 22, 2016, after hearing the parties and passing a speaking
order. Thereafter, the Department took another notice of motion to recall the order dated April 22,
2016, which was rejected by a speaking order dated August 19, 2016. On the third notice of
motion : Dismissing the notice of motion, the Court held that ;the Department failed to remove
the office objections which had resulted in the appeal itself being rejected by the Prothonotary
and Senior Master. Administrative difficulties could not be a reason for filing an appeal which
was defective. It was not the case of the Department that any new evidence was discovered after
the passing of the order or that there was any mistake apparent on record which justified the
review of the order. Repeated applications for recall of speaking orders passed after hearing the
parties could not be filed.
CIT (E) v. Maharashtra Industrial Development Corpn. (2017) 398 ITR 29 (Bom.) (HC)
468
Editorial : SLP of revenue is dismissed; CIT (E) v. Maharashtra Industrial Development Corpn.
(2017) 397 ITR 1 (St)
S. 260A : Appeal – High Court - review - Where petition was filed below tax effect as
mentioned in Circular then Revenue could not seek review of order passed by Division
Bench in tax appeal and review petition should not be maintainable.[S.260A (7) ]
Court held that, where petition was filed below tax effect as mentioned in Circular then Revenue
could not seek review of order passed by Division Bench in tax appeal and review petition should
not be maintainable . No cascading effect, with in 20lakh limits . (AY.2000-01)
CIT v. Velingkar Brothers (2017) 150 DTR 281 (Bom) (HC)

S. 260A : Appeal-High Court – Monetary limit - Review petition—No cascading effect –
Review petition was held to be not maintainable.
Dismissing the review petition the Court held that The circular has retrospective effect. The
exception to this is an issue of substantial nature or an issue which has a cascading effect : Held,
that even the notional tax effect was not more than Rs. 20 lakhs. The issue raised was not of a
substantial nature nor would it have a cascading effect. The review petition and appeal were not
maintainable. Circular No. 21 of 2015 and Instruction No. 5 of 2014, dated July 10, 2014. (AY.
2000-01)
CIT v. Velingkar Brothers (2017) 396 ITR 659/157 DTR 40 (Bom.) (HC)
S.260A : Appeal - High Court – When Chief Justice assigns judicial work to a Bench, it is
not open to a litigant to call upon judges of said Bench to recue themselves from judicial
work, merely levelling allegation that he has no faith in integrity or partiality of one of
judges of Division Bench .
Once Chief Justice assigns judicial work to a Bench, then, unless there is power exercised
otherwise, it is not open to a litigant to call upon Judges of said Bench to recuse themselves from
judicial work, by merely levelling allegation that he has no faith in integrity or impartiality of one
of Judges of Division Bench
CIT v. M.H. Patel. (2017) 251 Taxman 248 (Bom) (HC)
S. 260A : Appeal - High Court - Review petition is not to be barred even when SLP
preferred against order of which review is sought has been dismissed as withdrawn .
The assessee preferred SLP against the judgment of the High Court.After some arguments, the
assessee sought permission to withdraw the special leave petition with liberty to move the High
Court in a review petition.The respondent raised a preliminary objection to the very
maintainability of the review petition on the ground that the Special Leave Petition (SLP)
preferred against the order of which review was sought having been dismissed, the Court could
not review its judgment. Dismissing the objection the Court held that, Review petition is not to be
barred even when SLP preferred against order of which review is sought has been dismissed as
withdrawn .
Kanoria Industries Ltd. v. UOI (2017) 249 Taxman 267 (Delhi) (HC)
469
S. 260A : Appeal - High Court – Question of law – Noting in the file of the revenue to
challenge appeal on merits cannot be the reason for appellate Court to accept the question
of law without hearing the parties . [ S. 145 ]
Dismissing the appeal of the revenue the Court held that; there are endorsements made by
department on assessee's file to challenge appeal on merits, that cannot be reason for Appellate
Court to accept question of law without hearing parties . AY. 2006-07)
PCIT v. Bandekar Brothers (P.) Ltd. (2017) 248 Taxman 251 /151 DTR 248/(2018) 403 ITR
309 (Bom.) (HC)
S. 260A : Appeal - High Court - Grounds which was neither raised before the Tribunal nor
considered by the Tribunal, cannot be raised or considered by the High Court .
Grounds which was neither raised before the Tribunal nor considered by the Tribunal, cannot be
raised or considered by the High Court . (AY. 2005-06)
DIT (IT) v. Vanenberg Facilities BV (2917) 397 ITR 425/297 CTR 291 (T & AP) (HC)
S. 260A : Appeal - High Court – Issue not raised before Appellate Tribunal, cannot be
raised for the first time before the High Court. [ S.254 (1) ]
Issue raised but given up by AO and neither raised before the CIT (A) or the Tribunal could not
be permitted to be raised for the first time before the High Court. (AY. 2005-06)
DIT (IT) v. Vanenberg Facilities BV (2017) 155 DTR 153 (AP) (HC)
S. 260A : Appeal – High Court – Delay of 1128 in filing the appeal was not condoned and
Severe strictures passed against the department for filing a 'patently false' affidavit.
Dismissing the notice of motion of revenue for condoning the dely of 1128 days, the Honourable
Court has passed severe strictures passed against the department for filing a 'patently false'
affidavit with regard to the failure to remove office objections. The cause shown is not sufficient
and lacks in bona fides. It is a case of gross negligence and utter callousness on the part of the
Revenue/Department. Tendency of the Revenue to either blame its' Advocate or the procedural
rules for the dismissal of their Appeals deprecated. (NM. No.1672 of 2017 in ITA No. 448 of
2014, dt. 28.08.2017.)
CIT v. Parle Biisleri Ltd. (Bom) (HC); www.itatonline.org
S. 260A : Appeal - High Court-Reassessment – Issue which was not raised before the
Tribunal cannot be raised before High Court. [S. 143 (1), 147]
Dismissing the appeal of the revenue the Court held that; the issue in regard to assessments not
being made under section 143 (3) and that therefore assessments were “pending” was not raised
before the Appellate Tribunal cannot be raised before the High Court as the said issue was not
raised before the Tribunal. (AY. 2002-03 to 2004 - 05)
PCIT v. Vikas Gutgutia (2017) 396 ITR 691 (Delhi) (HC)
S. 260A : Appeal - High Court – Business expenditure - Issue not raised before appellate
tribunal cannot be raised in appeal before court. [S. 37 (1)]
Dismissing the appeal of the revenue the court held that; the issue of allowability of deduction of
the entire expenditure on account of machinery repairs had not been raised before the Appellate
Tribunal and therefore, could not be raised for the first time in the appeal before the court (AY.
1995 - 96)
CIT v. Raj Kumar Singh and Co. (2017) 396 ITR 569 (All) (HC)
470
S. 260A : Appeal - High Court – Common order - Revenue is not permitted to refer records
relating to assessment in the matter of withdrawal of registration . [ S. 12AA, 143 ]
Dismissing the appeal of the Revenue, the Court held that when common order is passed by the
Tribunal ,revenue is not permitted to refer records relating to assessment in the matter of
withdrawal of registration, unless the said order is challenged before the Court . (AY. 2009-10)
DIT (E) v. Shree Nashik Panchvati Panjrapole (2017) 397 ITR 501 /248 taxman 67 / 295
CTR 214/150 DTR 249 (Bom.) (HC)
S. 260A : Appeal – High court - Tax effect below prescribed limit hence the appeal is not
maintainable.
Tax effect below prescribed limit hence the appeal is not maintainable. Circular No. 21 of 2015,
dated December 10, 2015 ([2015] 379 ITR 107 (St.) .
CIT v. Unique Mercantile Services P. Ltd. (2017) 395 ITR 429 (Guj.) (HC)
S. 260A : Appeal – High court – Limitation - Delay of 190 days - Assessing officer busy in
other assessments not ground for condo nation, delay was not condoned .
Dismissing the appeal of the revenue, the Court held that ;the reasons given for the delay in filing
the appeal were unsatisfactory. The mere fact that the Assessing Officer was busy in other
assessments could not be an excuse, particularly when the prescribed period under
section 260A of the Income-tax Act, 1961 for filing an appeal was 120 days. There was no
explanation for every day’s delay. The delay of 190 days was not a routine.
PCIT v. Usha International Ltd. (2017) 395 ITR 151 (Delhi) (HC)
S. 260A : Appeal-High Court - Activities of gymnasium, cafeteria and pharmacy whether

fall under the ambit of charity of hospital is question of law.[S. 10 (23C0 (via)]
That the appeal was admitted on the question whether the Appellate Tribunal was right in
allowing the assessee’s claim for exemption under section 10 (23C) (via) of theIncome-tax Act,
1961 since the assessee did not maintain separate books of account for its other business activities
of gymnasium, cafeteria and pharmacy which did not fall under the ambit of charity of hospital.
CIT (E) v. Saifee Hospital Trust (2017) 395 ITR 225 (Bom.) (HC)
S.260A : Appeal – High Court - Deduction at source - Short deduction at source - Question
of law is admitted [ S. 40 (a) (ia), 194C (2) ]
On appeal by revenue, that the appeal was admitted on the issue of deletion, by the Appellate
Tribunal, of the disallowance of expenditure under section 40 (a) (ia) read with section194C
(2) made by the Assessing Officer on account of short deduction of tax. (AY. 2006 - 07)
CIT v. Hindustan Unilever Ltd. (2016) 72 taxmann.com 325 /(2017) 394 ITR 73 (Bom) (HC)
S.260A : Appeal – High Court – Tribunal has no power to review, against the dismissal of
miscellaneous application to file writ petition and not appeal. [S. 254 (2), Art. 226]
Dismissing the appeal of the revenue, the Court held that;where the Tribunal dismissed the
Department’s miscellaneous application, as well as a second application ,the review applications
were not maintainable and the appropriate remedy was to file a writ petition.
CIT v. Singhal Industries (2017) 395 ITR 264 (Raj) (HC)
S.260A : Appeal – High Court – Transfer pricing-The contention that there is an error
because mere mathematical calculation shows that the arm's length purchase price as
worked out by the TPO falls beyond (+)/(-) 5% range and consequently falls outside the
scope of the second proviso to S. 92C (2) cannot be considered if it was not raised before the
CIT (A) & ITAT. [S.92C]
471
Dismissing the appeal of the Revenue the Court held that; The grounds which were never
agitated before the Commissioner of Income Tax (Appeals) and the Tribunal and those grounds
based on the facts, cannot be agitated in the present appeal.
CIT v. Mettler Toledo India Pvt. Ltd. (2017) 395 ITR 523 (Bom.) (HC)
S. 260A : Appeal-High Court-Issue concluded by decisions of High Courts, appeal is not

maintainable - No substantial question of law.
Dismissing the appeal of the revenue, the Court held that; when both the issues were covered by
the decisions of two High Courts no substantial question of law arose and the appeal was not
maintainable. (AY. 2009-2010)
CIT v. Brindavan Beverages P. Ltd. (2017) 393 ITR 261 (Karn.) (HC)
S.260A : Appeal - High Court-Limitation-Appeal by department - Receipt of the order by

any of the Officer of the department including Commissioner (Judicial) is to be considered
for computing the period of limitation – Administrative instructions cannot override the
statute. [S.260A (2) (a)]
Assessee contended that for computing the period of limitation the copy of order was available
with the Commissioner (Judicial) to be considered and with the Commissioner (Central). The
Department contended that limitation would start to run from the date of service of the order of
the Tribunal on the concerned Commissioner having jurisdiction over the assesse. On appeal the
Court held that; the word “ received “ occurring in section 260A (2) (a) of the Income – tax Act,
1961, would mean received by any of the named officers of the Department, including the
Commissioner (Judicial). The provision names four particular officers, i.e., the Principal
Commissioner, Commissioner, Principal Chief Commissioner, and the Chief Commissioner of
Income Tax . These were the only designated officers who could receive a copy of the order of
the Tribunal by any of those officers in the Department including the Commissioner (Judicial)
would trigger the period of limitation. The statute was not concerned with the internal
arrangements that the Department might make by changing the jurisdiction of its officers.The
limitation would begin to run when a certified copy was received first by either the Commissioner
(Judicial) or one of the officers of the Department and not only when the Commissioner
“concerned” received it. Administrative, instructions are for the administrative convenience of the
Department and would not override the statute, in particular, section 260A (2) (a) of the Act.
CIT v. Odeon Builders P.Ltd. (2017) 393 ITR 27/150 DTR 1/294 CTR 30/247 Taxman 184
(FB) (Delhi) (HC)
CIT v. Gulbarga Associates P.Ltd (2017) 393 ITR 27 /150 DTR 1 /294 CTR 30 (FB) (Delhi)
(HC)
S. 260A : Appeal-High Court - Delay of 335 days in filing the appeal by 335 days was not
condoned.
Dismissing the appeal, the Court held that; Government departments are under a special
obligation to ensure that they perform their duties with diligence and commitment. Condonation
of delay is an exception and should not be used as an anticipated benefit for Government
departments. The mere fact that the AO was busy in other time-bearing assessments is not an
excuse for delay particularly given the fact that s. 260A provides a long time period of 120 days.
Every day’s delay has to be explained. On facts delay in filing appeal by 335 days was not
condoned. (ITA No. 409/2017, dt. 19.05.2017)
CIT v. Historic Infracon (Delhi) (HC),www.itatonline.org
S.260A : Appeal – High Court - Additional evidence - Amounts not deductible – Deduction
at source - - Documents showing payment of tax on sums in question by payee produced
472
before court--Matter remanded to Assessing Officer to consider documents and dispose of
matter. [ S. 40 (a) (ia)].
In an appeal to the High Court arising out of disallowance of expenditure under section 40 (a) (ia)
of the Income-tax Act, 1961, the assessee filed an application for permission to produce
additional evidence showing payment of income-tax by the deductee on the amount paid by the
assessee, Court held that, the additional evidence produced by the assessee were relevant
accordingly the court remanded the matter to the Assessing Officer to examine the veracity,
authenticity and relevancy of the documents adduced as additional evidence and adjudicate the
matter in respect of the issue regarding section 40 (a) (ia) of the Act. (AY. 2006-2007)
Gopal Cotton Industries P. Ltd. v. CIT (2017) 392 ITR 276 /78 taxmann.com 266 (P&H)
(HC)
S.260A : Appeal – High Court – Delay of 448 days in filing of appeal was not condoned and
strictures passed regarding the "standard excuses" of the department for delay in filing
appeals, namely, budgetary constraints, lack of infrastructure to make soft copies, change
of standing counsel etc.
Dismissing the appeal of the revenue, the Court held that ;there is an inordinate delay of 448 days
in re-filing the appeal. The Court finds that the standard excuse that the Department is putting
forth in all such applications for condonation of delay in re-filing the appeal is two-fold. The first
is regarding the budgetary constraints of the Department which delayed payment of the
differential court fees as a result of the Court Fees Delhi Amendment Act, 2012 which came into
force on 1st August 2012. The second is regarding the practice directions issued by the Court
pertaining to filing of soft copies of the paperbooks in tax matters. (ITA no. 934 of 2016, dt.
17.04.2017)
PCIT v. Diana Builders & Contractors Pvt. Ltd. (Delhi) (HC); www.itatonline.org
S.260A : Appeal - High Court - Substantial question of law – Share premium - Question
admitted. [S.68]
High court admitted the question as to whether the Tribunal was justified in holding that an
amount of Rs 490 per share received by the assesse constituted share premium of the assessee is a
question of law. (AY. 2011-12)
CIT v. Green Infra Ltd. (2017) 292 CTR 233 (Bom.) (HC)
S.260A : Appeal-High Court-Territorial jurisdiction - Assessment was at Surat and Appeal

was decided by Appellate Tribunal at Punjab-Punjab and Haryana High Court lacks
territorial jurisdiction to adjudicate appeal from order of Tribunal.[S. 254 (1)]
Assessment proceedings initiated and final assessment framed at Surat. Appeal filed before
Appellate Tribunal in Gujarat but transferred to and disposed of by Tribunal in Punjab because
assessee's head office transferred . Dismissing the appeal the Court held that; since the initial
process of assessment was started at Surat and the final assessment was framed by the Assessing
Officer at Surat, the Punjab and Haryana High Court lacked territorial jurisdiction to adjudicate
the matter. (AY. 2001-2002)
CIT v. Balak Capital P. Ltd. (2017) 391 ITR 112 (P&H) (HC)
S. 261 : Appeal - Supreme Court – Observation of the High Court against department was
expunged [ S. 260A, 262 ]
On appeal by the revenue, adverse observation of the High Court to department and imposing
costs for making assesse contest case in tree forums and wasting tax payers money was held to be
uncalled and expunged .
CIT v. Deutsche Software Ltd. (2017) 399 ITR 570 (SC)
473
Editor : Decision in CIT v DSL Software Ltd (2013) 351 ITR 385 (Karn) (HC) is affirmed
S. 261 : Appeal - Supreme Court – Substantial question of law – Appeal is maintainable

though the revenue has not filed against orders of same point in favour of assesse. [ S. 260A
]
Court held that department’s appeals are maintainable if substantial question of law or issue
impacting public interest or having potential of recurrence in future is involved, though the
reavnue has not filed against orders of same point in favour of assesse.
CIT v. Modipon Ltd. (2017) 160 DTR 73 /299 CTR 306 /(2018) 400 ITR 1 /252 Taxman 123
(SC)
CIT v. Paharpur Cooling Towers Ltd (2017) 160 DTR 73 /(2018) 400 ITR 1 (SC)
S. 261 : Appeal - Supreme Court – Argument not raised before authorities below or High
Court, could not be entertained before Supreme Court . [ S. 262]
Dismissing the appeal of the revenue, the Court held that argument that existence of permanent
establishment should be presumed based on non – disclosure of documents called for, was not
raised before the lower authorities . The Court held that, Argument not raised before authorities
below or High Court, could not be entertained before Supreme Court . (AY. 2001-02 to 2007 -
08)
ADIT v. E - Funds IT Solution Inc (2017) 399 ITR 34/298 CTR 505 (SC)
Editorial : Decision in DIT v. E - Funds IT Solution Inc (2014) 364 ITR 256 (Delhi) (HC) is
affirmed
S. 261 : Appeal - Supreme Court – Delay-Supreme Court issues strictures against the
income-tax department stating that it is "extremely unhappy" with the delay of 3381 days
in refiling the SLP and demands that "The concerned authorities need to wake up".
Learned Solicitor General says that in view of the decision of this Court in ACG Associated
Capsules (P) Ltd. v. Commissioner of Income Tax (Central-IV), Mumbai [ (2012) 3 SCC 321],
this petition be dismissed on merits.
We are extremely unhappy with the delay of 3381 days in refiling the special leave petition but
make no other comment. The concerned authorities need to wake up.The special leave petition is
dismissed both on the ground of delay as also on merits. (SLP No. 871/2017, dt. 16.01.2017)
CIT v. Krishan K. Agarwal (SC),www.itatonline.org
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Share capital - CIT is

entitled to revise the assessment order on the ground that the AO did not make any proper
inquiry while accepting the explanation of the assessee insofar as receipt of share
application money is concerned cannot be interfered with. [ S. 68 ]
Dismissing the appeal of the assessee the Court held that; CIT is entitled to revise the assessment
order on the ground that the AO did not make any proper inquiry while accepting the explanation
of the assessee insofar as receipt of share application money is concerned cannot be interfered
with. Law laid down in Subhlakshmi Vanijya Pvt. Ltd vs. CIT 155 ITD 171 (Kol), Rajmandir
Estates 386 ITR 162 (Cal) (HC) is affirmed . (SLP no. 23976/2017, dt. 10.04.2017)
Daniel Merchants Private Limited v. ITO (SC); www.itatonline.org
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Dissolution of firm -

Valuation of closing stock at cost price – Assumption that business comes to an end is not
474
applicable where the business is continued after dissolution of firm – View of the Assessing
Officer is possible view, hence revision is not permissible [S. 145 (4), 145 ]
Dismissing the appeal of the revenue, the Court held that, valuation of closing stock at cost price
is possible view. Assumption that business comes to an end is not applicable where the business
is continued after dissolution of firm . View of the Assessing Officer is possible view, hence
revision is not permissible. (AY. 1993-94)
CIT v. Kwality Steel Suppliers Complex (2017) 395 ITR 1/157 DTR 1/297 CTR 553/250
Taxman 23 (SC)
Editorial : Kwality Steel Suppliers Complex v.CIT (2004) 191 CTR 94 (Guj) (HC)
S.263 : Commissioner-Revision of orders prejudicial to revenue-Additional depreciation-

Estimated downward revision of sales--Revision on these two points set aside by High Court
- - Subsequent events obviating need to go into justification for revision. [S.32 (1) (iia)]
Dismissing the appeal of the revenue, the Court held that; This court is of the opinion that the
question of law framed in this appeal has to be answered in favour of the assessee. The
Commissioner acted erroneously in exercising revisional power under section 263. The orders of
the Commissioner and the Income-tax Appellate Tribunal are hereby set aside. The order of the
Assessing Officer dated November 27, 2006 is restored. However, the merits of that order, on
aspects other than what has been discussed here and pending in appeal, are not being touched
upon. The appeal is allowed in the above terms. (AY. 2005-2006)
CIT v. NTPC Ltd. (2017) 392 ITR 426/153 DTR 296 /297 CTR 18 (SC)
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Error of assessment

can be corrected - Revision of order after giving an opportunity of hearing was held to be
valid .
Dismissing the appeal the Court held that; in the light of the amendment with effect from 1989,
by the insertion of Explanation (c) to section 263 (1) the non-consideration of the larger claim of
depreciation and the consideration of only a part of it by the Assessing Officer, who did not go
into the issue with respect to the whole amount, was an error, that could be corrected under
section 263 (AY. 2010-11)
BSES Rajdhani Power Ltd v. PCIT (2017) 399 ITR 228 (Delhi) (HC)
S.263 : Commissioner - Revision of orders prejudicial to revenue - Initial assessment years -

No requirement of maintaining separate books of account - Relevant material was placed
before the AO - revision was held to be not valid . S.80IB (3) ]
Allowing the appeal the Court held that; thee is no requirement of maintaining separate books of
account and the assessee has placed relevant material before the AO in the original assessment
proceedings . Court also held that, if Assessee was not confronted with material, which was
available with DIT, which had caused him to exercise revisional power, exercise of
jurisdictional would be irregular. On facts there was nothing on record which would suggest that
DIT had confronted Assessee with any material, in particular, with regard to conclusion that he
reached which was that two units, hence, not eligible to claim deduction u/s. 80IB. Record did not
show that revisional authority had not given opportunity to Assessee to controvert, facts on basis
of which it had concluded that order of AO was erroneous and prejudicial to interest of Revenue.
(AY.2004 - 05)
Cairn India Ltd. v DIT (IT) (2017) 160 DTR 233 /87 taxmann.com 310 /(2018) 300 CTR 366
(Mad) (HC)
475
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Business expenditure –
Capital gains - AO has applied his mind hence revision was reassessment was held to be not
valid . [S. 50A ]
Dismissing the appeal of the revenue the Court held that; the AO has applied his mind and passed
the order the view of the AO being a possible view, revision was held to be not valid . (AY.
2007-08)
CIT v. Paville Fashions P. Ltd. (2017) 398 ITR 603 (Bom) (HC)
Editorial : Order in Paville Fashions Pvt Ltd v CIT (2014) 35 ITR 352 (Mum) (Trib) is affirmed .
S. 263 : Commissioner - Revision of orders prejudicial to revenue - Income from house

property - Deductions of interest second borrowings - View of Assessing Officer being
plausible, it was not open for Commissioner to take such order in revision .[ S.24 (b) ]
On writ against the notice u/s 263 ,allowing the petition ,the Court held that ,allowing the interest
on second borrowings was plausible view hence revision was held to be not valid .Accordingly
the notice was seta side . CBDT circular No. 28 dt. 20 - 08 1969 was referred. (AY. 2011-12)
Aryan arcade Ltd. v. CIT (2017) 250 Taxman 138 (Guj.) (HC)
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Agricultural income -

AO had not conducted such inquiry, case in hand being that of no inquiry, Commissioner
was right to pass an appropriate order of remission .
Dismissing the petition the Court held that; investment of huge amount was carried out by
assessee himself without reference thereof in original returns, as a result of the above, the AO
ought to have conducted complete and proper inquiry and only thereafter, assessed income so
declared by assessee . On facts AO had not conducted such inquiry, case in hand being that of
no inquiry, Commissioner was right to pass an appropriate order of remission . (AY. 2010-11)
Virbhadra Singh (HUF) v. CIT (2017) 158 DTR 66 /251 Taxman 150 /298 CTR 393 (HP)
(HC)
S. 263 : Commissioner - Revision of orders prejudicial to revenue - – Gratuity – Assessee

has not claimed any deduction during the relevant year hence revision was held to be not
valid [ S. 40A (7) ]
Dismissing the appeal of the revenue, the Court held that; Since the assessee has not claimed any
deduction during the relevant year hence revision was held to be not valid . (AY. 2010-11)
PCIT v. Gujarat State Fertilizers & Chemicals Ltd. (2017) 248 Taxman 566 (Guj.) (HC)
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Order passed by the AO

following the order of Tribunal cannot be revised . [ S. 11, 12,12A,13 ]
476
Dismissing the appeal of the revenue, the Court held that; order passed by the AO following the
order of Tribunal cannot be revised . (AY.2001-02, 2003-04 to 2005-06)
CIT (E) v. Allahabad Agricultural Inst. (2017) 397 ITR 655 (All) (HC)
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Initial assessment year-

Correct interpretation of the provision was open for debate, revision was held to be not
justified [ S.80IA ]
Dismissing the appeal of the revenue the Court held that, when the interpretation of provision
was open for debate, revision was held to be not justified . (AY. 1998-99, 2000-01 to 2002-03)
CIT v. International Tractors Ltd. (2017) 397 ITR 696 (Delhi) (HC)
S. 263 : Commissioner - Revision of orders prejudicial to revenue – CIT has power to

revise the order of the AO where the AO had not conducted proper inquiries but had
merely referred to the explanations given by the assessee
Assessee had earned interest on Fixed Deposit receipts. Assessee had used the same as margin
money for borrowing funds for setting up industry. Assessee did not offer the interest to tax and
the same was accepted by the AO. CIT passed an order u/s. 263 and held that the order of the AO
was erroneous and prejudicial to the interest of the revenue. HC upheld the action u/s. 263 and
observed that the AO did not examine the provision under which the assessee claimed deduction
or set off of his income from other sources against interest payable on the borrowed fund. HC
observed that the interest earned was nothing but income through other sources and the same was
taxable. High Court has upheld the action u/s. 263 as the AO had not conducted proper and
adequate any inquiry. The AO’s order did not reflect about any enquiry said to be made but only
referred the explanation given by the assessee.
CIT v. Bhawal Synthetics (India) (2017) 248 Taxman 127 /152 DTR 273 /297 CTR 104 (Raj)
(HC)
S. 263 : Commissioner – Revision of order prejudicial to the interest of revenue - The

failure to issue notice on any particular issue does not vitiate the exercise of power as long
as the assessee is heard and given opportunity. The CIT has power to consider all aspects
which were the subject matter of the AO’s order, if in his opinion, they are erroneous,
despite the assessee’s appeal on that or some other aspect
Dismissing the appeal the Court held that; the failure to issue notice on any particular issue does
not vitiate the exercise of power u/s 263, as long as the assessee is heard and given opportunity.
The lack of opportunity at the revisional stage does not vitiate the entire order, or the proceedings.
It is a curable defect. The CIT has power to consider all aspects which were the subject matter of
the AO’s order, if in his opinion, they are erroneous, despite the assessee’s appeal on that or some
other aspect. (ITA 387/2017, dt. 08.11.2017) (AY. 2010-11)
BSEC Rajdhani Power Ltd. v. PCIT (Delhi) (HC), www. itatonline.org
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Lack of inquiry vs.

Inadequate inquiry - Revision on the ground that the AO did not conduct a detailed inquiry
on account of paucity of time is unfair to the assessee and invalid. [S. 153A]
Dismissing the appeal of the revenue, the Court held that; revision on the ground that the AO did
not conduct a detailed inquiry on account of paucity of time is unfair to the assessee and invalid
CIT v.Amitabh Bachhan (2016) 384 ITR 200 (SC) &CIT v. Maithan International (2015) 375
ITR 123 (Cal) distinguished. (ITA No. 637/2017, dt. 21.08.2017) (AY. 2008-09 to 2011-12)
PCIT v. Mera Baba Reality Associates Pvt. Ltd. (Dehi) (HC); www.itatonline.org
477
S. 263 : Commissioner-Revision of orders prejudicial to revenue – Sending entire matter
back to Assessing Officer without making any inquiry is held to be bad in law. [S. 32]
Dismissing the appeal of the revenue, the Court held that; for the purposes of exercising
jurisdiction u/s 263, the conclusion of the CIT that the order of the AO is erroneous and
prejudicial to the interests of the Revenue has to be preceded by some minimal inquiry. If the
PCIT is of the view that the AO did not undertake any inquiry, it becomes incumbent on the PCIT
to conduct such inquiry. The second option available u/s 263 (1) of sending the entire matter back
to the AO for a fresh assessment can be exercised by the PCIT only after he undertakes an inquiry
himself and not otherwise. (AY. 2011-12)
PCIT v. Delhi Airport Metro Express Pvt. Ltd (2017) 398 ITR 8 (Delhi) (HC)
Editorial : Order in Delhi Airport Metro Express Pvt. Ltd v PCIT (2017)54 ITR 358 /146 DTR
189/184 TTJ 32 (Delhi) (Trib.) is affirmed .
S. 263 : Commissioner-Revision of orders prejudicial to revenue - Assessing officer not

specifically mentioning particular claim does not mean that assessing officer passed
assessment order without making enquiry in respect of allowability of claim—Order is not
erroneous.[S. 37 (1)]
Allowing the appeal of the assessee the Court held that; that the Assessing Officer applied his
mind to the claims made by the assessee and wherever the claims were disallowable they have
been discussed in that assessment order and there was no discussion or reference in respect of the
claims that were allowed. It could not be said that merely because the Assessing Officer had not
specifically mentioned about the claim in respect of the corporate social responsibility, the
Assessing Officer had passed the assessment order without making any enquiry in respect of the
allowability of the claim of corporate social responsibility. The query pertaining to corporate
social responsibility was exhaustively answered and the assessee had provided the data pertaining
to the expenditure under each head of the claim in respect of corporate social responsibility, in
detail. The Assessing Officer was not expected to raise more queries, if he was satisfied about the
admissibility of claim on the basis of the material and the details supplied. The provisions of
section 263 of the Act could not have been invoked by the Commissioner. (AY. 2009 - 10)
MOIL Ltd. v. CIT (2017) 396 ITR 244/81 taxmann.com 420 (Bom.) (HC)
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Capital gain - Specific

queries in respect of transaction raised by assessing officer and replied by assessee —0rder
not erroneous or prejudicial to revenue [ S. 45 ]
Dismissing the appeal of the revenue, the Court held that; Specific queries in respect of
transaction raised by assessing officer and replied by assesse. 0rder not erroneous or prejudicial to
revenue . (AY. 2010-11)
PCIT v. Ginger Properties P. Ltd. (2017) 396 ITR 496 (Guj) (HC)
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Capital gains - Take

over of proprietory concern by company - Sole proprietor could not borrow from his
proprietary concern – Revision was held to be justified .[ S. 45, 47 (xiv), 55 (1) (b), 55 (2) (b)
]
Allowing the appeal of the revenue the Court held that; Sole proprietor could not borrow from
his proprietary concern .Proprietor was allotted shares only to the extent of Rs 1.52 cr. out of net
assets worth Rs 5.17 crore taken over by company and balalnce amount was lying in assesse’s
current account . Revision was held to be justified .The finding and reasoning given by the
Tribunal was per se wrong and unsustainable in all respects. (AY. 2001-02)
CIT v. K.V. Mohammed Zakir (2017) 396 ITR 180 /157 DTR 366 (Ker) (HC)
478
Editorial : SLP of assessee is allowed K.V. Mohammed Zakir v.CIT (2018) 254 Taxman 391
(SC)
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Sales tax was not
excluded from sales – Revision was held to be not justified . [ S.37 (1) ]
Dismissing the appeal of the revenue, the Court held that; once the assessee had shown that the
sales as shown in the balance-sheet were inclusive of sales tax, there was no occasion to disallow
the claim of expenditure made by the assessee in respect of the payment of sales tax on the basis
of the compound levy scheme. Once the Department was unable to produce any material on
record to substantiate that the assessee had excluded the amount of sales tax from the sales, the
order sought to be revised was not erroneous or prejudicial to the interests of the Revenue. Both
the conditions required to exercise jurisdiction under section 263 were not satisfied. Assumption
of revisional jurisdiction under section 263 by the Commissioner was not justified. No question
of law arose (AY. 2004 - 05)
PCIT v. Vardhman Industries Ltd. (2017) 396 ITR 34 (P&H) (HC)
S. 263 : Commissioner-Revision of orders prejudicial to revenue – Capital gain exemption

for purchasing two flats and combining them in to one - Revision was held to be not valid .
Alternative remedy is not absolute bar and writ is maintainable.[S. 54F, Art. 226.]
Allowing the petition the Court held that, when the Tribunal has allowed the claim of the assesee
which was affirmed by the Tribunal, which was not challenged by the Tribunal, the revision was
held to be bad law . On facts the assesse combined the two flats in to one after obtaining the
permission from the society . Court also held that, a alternative remedy is not absolute bar and
writ is maintainable . (AY. 2008 - 09)
Abhijit Bhandari v. PCIT (2017) 396 ITR 499/(2018) 161 DTR 349 (Mad.) (HC)
S. 263 : Commissioner-Revision of orders prejudicial to revenue – Gross profit ratio –

Disallowance of purchase from one party – Revision was held to be not valid. [S. 143 (3),
147]
On writ petitions allowing the petition the Court held that; the order of assessment was neither
erroneous nor prejudicial to the Revenue on the sole ground that the disallowance by the
Assessing Officer of the entire expenses of purchases from FHR concern would have
automatically and directly reflected in increasing the gross profit from the one claimed by the
assessee in the original return. There was no further material with the Assessing Officer or even
possible avenue for inquiry on record whether or not any remaining purchases of the assessee
were genuine. There was no further scope for making addition by adjusting the gross profit ratio.
The notice issued by the assessee did not suggest that the Assessing Officer could have inquired
into the genuineness of the remaining purchases also. Without there being any further material
suggesting that the other purchases were also not genuine, further increase of the gross profit ratio
was not an option simply available to the Assessing Officer. The notice and final order of revision
were set aside. (AY. 1993-94, 1995 - 96)
Synbiotics Ltd. v. UOI (2016) 76 taxmann.com 280/(2017)394 ITR 179 (Guj) (HC)
S. 263 : Commissioner - Revision of orders prejudicial to revenue - order covering issues

not mentioned in show-cause notice is not permissible – Order passed by Assessing office
after making enquiries cannot be said to be erroneous . [ S.90, 143 (3) ]
Dismissing the appeal of the revenue, the Court held that; order covering issues not mentioned in
show-cause notice is not permissible and Order passed by Assessing office after making
enquiries cannot be said to be erroneous, though no discussion in the order. Order of Assessing
Officer granting double taxation relief was held to be justified. (AY. 2010-11, 2011-12)
479
PCIT v. Krishak Bharati Co-op. Ltd. (2017) 395 ITR 572/247 Taxman 317/295 CTR 181
(Delhi) (HC)
S. 263 : Commissioner-Revision of orders prejudicial to revenue – Cash credits - Share

capital premium – Lack of proper enquiry - Revision was held to be valid.[S. 68,147, 148 ]
Dismissing the appeal of the assessee the Court held that; where reassessment was made for
purpose unconnected with issue of share capital/premium but issue of share capital at premium
had also been examined by Assessing Officer in reassessment proceeding, revisional proceeding
initiated by Commissioner alleging lack of proper enquiries as to issue of share capital/premium
in course of reassessment proceedings was valid. Mere fact that assessment year in question is
year of commencement of business cannot insulate it from an inquiry directed towards steps
contemplated under section 68 . (AY. 2008 - 09)
Success Tours & Travels P. Ltd. v. ITO (2017) /394 ITR 37 /247 Taxman 109/295 CTR
430/150 DTR 185 (Cal.) (HC)
S. 263 : Commissioner - Revision of orders prejudicial to revenue – AO after examination

and enquiry allowed assessee's claim for additional depreciation on windmills and write-off
of obsolete spares and other items – Revision was held to be not justified .[S. 32 (1) (iia), 37
(1)]
Dismissing the appeal of the Revenue the Court held that; AO after examination and enquiry
allowed assessee's claim for additional depreciation on windmills and write-off of obsolete spares
and other items therefore revision was held to be not justified . (AY 2009-10)
PCIT v. Gujarat State Fertilizers& Chemicals Ltd. (2017) 246 Taxman 415 (Guj.) (HC)
S. 263 : Commissioner-Revision of orders prejudicial to revenue – Merger - Order of AO

merged with that of CIT (A) and therefore revision is bad in law.[S. 11, 12, 12AA,13]
Dismissing the appeal of the revenue, the Court held that; the order of AO merged with that of
CIT (A) and therefore, revision jurisdiction cannot be assumed. (AY. 2001-02 to 2005-06).
CIT (E) v. Allahabad Agriculture Institute (2017) 246 Taxman 252/152 DTR 193 (All.)
(HC)
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Assessing Officer

assessed the income by making the addition, Commissioner cannot revise the order to
increase the addition.
Dismissing the appeal of the revenue, the Court held that; where the Assessing Officer while
dealing with the matter at the first instance conducted proper proceedings and arrived at a
conclusion based on cogent reasons that had been placed on record. The only reason given to hold
the order of the Assessing Officer to be erroneous and prejudicial to the interests of the Revenue
was that once the amount received from certain parties was considered the addition to income
was not proper. Merely because a different view was possible interference under section263 on
this count could not be made. The order of revision was not valid.
CIT v. Narottam Mishra (2017) 395 ITR 138 (MP) (HC)
S. 263 : Commissioner-Revision of orders prejudicial to revenue - Failure by Assessing

Officer to examine actual price of land purchased by assessee-Revision by Commissioner
was held to be justified.[S. 40A (3), 132]
Allowing the appeal of the revenue, the Court held that; failure by Assessing Officer to examine
actual price of land purchased by assessee, revision by Commissioner was held to be justified .It
would, however be open to the assessee to adduce appropriate evidence to prove that it was not
480
connected with the land purchased, evidenced by the title deeds found during the course of the
search in the premises of the assessee.
CIT v. Bharat Lub Industries (P) Ltd. (2017) 393 ITR 417 (Cal.) (HC)
S. 263 : Commissioner-Revision of orders prejudicial to revenue - Assessing Officer

allowing all related expenditure without applying provisions of section 40A (3)-Revision
order setting aside assessment order restored. [S.40A (3), 132, 158BC].
Allowing the appeal of the revenue. the Court held that; as regards the applicability of section
40A (3) of the Income-tax Act, 1961 there were never two views possible. It was not open to the
Assessing Officer to ignore the provisions of section 40A (3) nor did he appear to have done so
consciously. The revision order passed by the Commissioner was justified and was to be restored.
(BP. 1-4-1996 to 25-9-2002)
CIT v. Mohanlal Agarwal (2017) 393 ITR 402/154 DTR 129 (Cal) (HC)
S. 263 : Commissioner-Revision of orders prejudicial to revenue - Order of Commissioner

enhancing disallowance was held to be unsustainable.[S. 14A]
Dismissing the appeal of the revenue, the Court held that; the amount of disallowance under
section 14A of the Income-tax Act, 1961 was restricted to the amount of exempt income only and
not at a higher amount. For the assessment year 2008-09 the issue was answered in favour of the
assessee. The exercise of jurisdiction under section 263 was not proper. The order of the
Appellate Tribunal quashing the order under section 263 was justified. No question of law arose.
(AY. 2009-2010)
PCIT v. State Bank of Patiala (2017) 393 ITR 476 (P&H) (HC)
S.263 : Commissioner-Revision of orders prejudicial to revenue - partial was held to be

valid - Revision in was Failure to make necessary enquiries, order of revision was held to
be valid.[S. 11,13, 80G]
The Court held that,The Commissioner had also noted that the assessee trust had claimed various
expenses as debited in its income and expenditure which needed to be examined/verified to
ascertain genuineness before it could have been accepted that its claim was applied towards its
objects. Merely because it had been granted exemption under section 12AA of the Act, it could
not be said that therefore, nothing was required to be done during the assessment proceeding
except to accept the return of the charitable institution. Hence it was not a fit case for setting aside
the order of revision. The Court also observed that The Assessing Officer while making
assessment was to keep in mind the fact that both the order refusing renewal of approval under
section 80G and the show-cause notice for cancellation of registration had been quashed by the
court and accordingly decide the matter in accordance with law.
Imarat Shariah Educational and Welfare Trust v. CIT (2017) 392 ITR 301/245 Taxman 101
(Patna) (HC)
Shri Mahavir Sthan Nyas Samiti v. UOI (2017) 392 ITR 301 /245 Taxman 101 (Patna) (HC)
S. 263 : Commissioner-Revision of orders prejudicial to revenue – Commission payment to

sister concern - Revision was held to be not justified.
Dismissing the appeal of the revenue, the Court held that; because no income had escaped
taxation and no prejudice or loss was caused to the Revenue. The Tribunal was right in deleting
the disallowance made by the Commissioner. (AY.1998-1999)
CIT v. Micromatic Grinding Technologies Ltd. (2017) 392 ITR 268 (All) (HC)
481
S.263 : Commissioner-Revision of orders prejudicial to revenue - Changing method of
accounting in accordance with Accounting Standard 7-Not erroneous and prejudicial to
Revenue. [S.145]
Dismissing the appeal of the revenue, the Court held that; when the assesse followed the
accounting standard and the scrutiny assessment was completed, the revision was held to be not
justified. (AY .2007-2008)
CIT v. A2Z Maintenance and Engineering Services Ltd. (2017) 392 ITR 273/246 Taxman
193 (Delhi) (HC)
S.263 : Commissioner-Revision of orders prejudicial to revenue – Where the AO failed to

consider the absence of any business activity for the purpose of treating an expenditure
allowable for deduction, the order of AO was erroneous and prejudicial to Revenue and
therefore, revision u/s. 263 by the CIT was sustainable.
Dismissing the appeal of the assessee, the Court held that;where the AO failed to consider the
absence of any business activity for the purpose of treating an expenditure allowable for
deduction, the order of AO was erroneous and prejudicial to Revenue and therefore, revision u/s.
263 by the CIT was sustainable.
Zuari Management Services Ltd. (2017) 146 DTR 177/292 CTR 327 (Bom.) (HC)
S.263 : Commissioner – Revision of orders prejudicial to revenue – CIT can revise an

assessment order where an issue has not been examined by the AO.
Dismissing the appeal of the assessee the Court held that; the assessee did not furnish the
valuation of unquoted shares even after AO had raised a specific query. Thereafter, the AO did
not enquire into the same. Thus, this is case of non-enquiry as opposed to inadequate enquiry and
accordingly, CIT was right in revising the assessment order. (AY. 1997-98)
Jeevan Investment & Finance (P.) Ltd. v. CIT (2017) 291 CTR 241 / 145 DTR 252 (Bom.)
(HC)
S. 263 : Commissioner - Revision of orders prejudicial to revenue - Cash credits – Share

capital premium - Bogus share capital - Onus is on the assessee prove the creditworthiness
of the subscribers - Revision was held to be justified [ S. 56 (2) (viib),68 ]
Dismissing the appeal of the assessees, the Court held that; mere fact that payment was received
by cheque or that the applicants were companies borne on the file of the Registrar of Companies
does not prove that the transaction was genuine. Even under the un amended S. 68, the onus is on
the assesse to prove the creditworthiness of the subscribers. Argument that the amendment to
S.68 is not retrospective is not required to be considered. (AY. 2007-08 to 2009-10)
Pragati Financial Management Pvt. Ltd. v. CIT (2017) 394 ITR 27 /150 177 /248 Taxamn
349/295 CTR 422 (Cal.) (HC)
Valley Towers Pvt Ltd v. CIT (2017) 394 ITR 27 (Cal.) (HC)
Axis Shoppers Pvt Ltd v. CIT (2017) 394 ITR 27 (Cal.) (HC)
Cape town Merchandise Pvt. Ltd v. CIT (2017) 394 ITR 27 (Cal.) (HC)
Sangini Vyapar Pvt. Ltd. v. CIT (2017) 394 ITR 27 (Cal.) (HC)
Orbit Traders Pvt. Ltd. v. CIT (2017) 394 ITR 27 (Cal.) (HC)
Trinetra Vincom Pvt. Ltd. v. CIT (2017) 394 ITR 27 (Cal.) (HC)
Danila Commotrade Pvt. Ltd. v. CIT (2017) 394 ITR 27 (Cal.) (HC)
Kunj Behari Tie – Up Pvt. Ltd. v. CIT (2017) 394 ITR 27 (Cal.) (HC)
Mangalgouri Vanijia Pvt. Ltd. v. CIT (2017) 394 ITR 27 (Cal.) (HC);
482
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Salary- – Stay was more
than 182 days at Iraq-Not residence in India hence income earned at Iraq cannot be taxable
in India – Revision was held to be bad in law when on merit income cannot be assessed in
India. [ S. 5. 6 ]
Allowing the appeal of the assessee the Tribunal held that; stay of assessee, employee of RIL and
deputed to Iraq, outside India was for more than threshold limit of 182 days, salary income of
assessee for previous year could not be held to be taxable because he was not resident in
India,thus, on merits the assessment order passed by the Assessing Officer is not prejudicial to the
interest of the revenue, albeit can be reckoned as erroneous in the absence of any proper enquiry.
(AY. 2011-12)
Pramod Kumar Sapra v. ITO (2017) 167 ITD 596 (Delhi) (Trib.)
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Revision order cannot

be passed without affording an opportunity of being heard [ S. 32 ]
Allowing the appeal the Tribunal held that ;revision of an order passed by an Assessing officer
cannot be carried out in respect of an issue without putting assessee to notice as regards seeking
of revision and affording an opportunity of being heard to him, as regards same. (AY. 2007 - 08,
2011-12, 2012-13)
S. 263 : Revision – Lack of proper enquiry-Revision was held to be bad in law

The Tribunal held that the AO having passed the assessment order after examining the details, it
cannot be said that the assessment order was erroneous and prejudicial to the interest of the
Revenue, therefore impugned order under section 263 is not sustainable. (AY. 2011-12)
Riverbank Developers (P) Ltd. v. CIT (2017) 156 DTR 1 /188 TTJ 569 (Kol.) (Trib.)
S. 263 : Revision – Lack of enquiry-Revision was held to be not valid

The Tribunal held that the AO had conducted detailed investigation and through enquiry by
raising several queries which were replied by the assessee during the assessment proceedings.
The order of the AO cannot be said to be erroneous and prejudicial to the interest of the revenue
and therefore, exercise of jurisdiction under section 263 by the Principal CIT is not valid. (AY.
2011-12)
Shiv Lal Chaudhary v. Pr. CIT (2017) 188 TTJ 57 (UO) (Jd) (Trib.)
483
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Roaming charges -
Providing telecommunication services, not required to deduct tax at source while paying
roaming charges to other telecom operators - Revision was held to be not valid [ S. 194J ]
During relevant period, assessee made payments of roaming charges to other telecom operators
without deducting tax at source. Assessee claimed that roaming payments made to other telecom
operators for allowing use of their network to assessee's subscribers were in nature of provision of
a standard facility, which did not involve any human intervention at all and hence, such payments
could not be classified as FTS liable for deduction of tax at source. Assessing Officer allowed
assessee's claim. - Commissioner passed a revisional order holding that assessee should have
deducted tax at source while making payment of roaming charges . On appeal allowing the appeal
the Tribunal held that; the Assessing Officer in course of assessment was one of possible views,
moreover, Commissioner had not appreciated fact that other telecom operators, to whom roaming
charges had been paid, would have offered income arising from roaming charges received from
assessee to tax and hence, no prejudice would have been caused to revenue accordingly the order
of the Commissioner was set aside . (AY. 2007 - 08 to 2009 - 10)
Vodafone Digilink Ltd. v. CIT (TDS) (2017) 167 ITD 679 (Delhi) (Trib.)
S. 263 : Commissioner - Revision of orders prejudicial to revenue - compensation for

compulsory acquisition of agricultural land by State Government was to be regarded as
agricultural income and not chargeable to tax as capital gain - Revision was held to be not
justified .[ S. 2 (14) (iii) 10 (1), 45 ]
Allowing the appeal of the assessee the Tribunal held that; income accrued by way of
compensation for compulsory acquisition of agricultural land by State Government was to be
regarded as agricultural income and not chargeable to tax as capital gain. Revision was held to be
not justified . (AY. 2012-13)
Anil Plantations (P.) Ltd. v. PCIT (2017) 167 ITD 143 (Kol) (Trib.)
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Income computed in

terms of S.11,hence the Order passed by the AO was neither erroneous nor prejudicial to
the interests of the revenue [ S. 11 ]
The assessee trust had computed its income correctly in terms of section 11 and hence the Order
passed by the AO was neither erroneous nor prejudicial to the interests of the revenue (AY.
2011-12).
Shri Pragyadam Trust v. CIT (E) (2017) 160 DTR 233 (Mum) (Trib.)
S. 263 : Commissioner - Revision of orders prejudicial to revenue - Capital gains -

Investment in a residential house – Order of Commissioner was set aside and directed the
AO to decide the issue as per ratio laid down by jurisdictional high Court [ S. 45, 54F ].
The Tribunal held that since the Commissioner had not afforded an opportunity of hearing to
the assessee and the Assessing Officer had not conducted proper enquiry about satisfaction of
conditions as provided under section 54F, the impugned order passed by the Commissioner
484
deserved to be set aside and matter required to be sent back to the Assessing Officer for
considering relevant record and then to decide issue. Tribunal also observe that even if assessee
finally could not constructed new house with in time specified , once she has invested sale
proceeds of existing asset for purpose of construction of new house with in time specified
deduction cannot be denied .Refer PCIT v. C.Gopalaswamy (2016) 384 ITR 307 (Karn) (HC)
(AY. 2009 - 10)
Babitha Kemparaje Urs (Smt.) v. CIT (2017) 167 ITD 125/ 160 DTR 217 /(2018) 191 TTJ
473 (Bang’) (Trib))
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Once proceedings were

dropped, once again revision by, the successor Commissioner becomes functus officio in this
regard after the exercise conducted by the predecessor Commissioner. Therefore the order
was not sustainable on this ground alone. [ S.54F ]
Allowing the appeal of the assessee the Tribunal held that; the issue of exemption u/s. 54F had
examined by the Commissioner in the proceeding initiated u/s. 263 and, after considering the
assessee’s reply the proceedings had been dropped. The present proceeding having been initiated
on the identical issue were clearly unsustainable in law since they were tantamount to review of
the order of the Commissioner and not of the A.O. The successor Commissioner becomes functus
officio in this regard after the exercise conducted by the predecessor Commissioner. Therefore
the order passed u/s. 263 was not sustainable on this ground alone. (AY. 2005-06)
S. Baljit Singh Ryait v. ITO (2017) 59 ITR 289 (Chd.) (Trib.)
S. 263 : Commissioner - Revision of orders prejudicial to revenue - Cash credits - Revision

was held to be justified. [ S.68 ]
Dismissing the appeal of the assessee the Tribunal held that; in fact, there was nothing to indicate
that assessee had a running money lending business, assessee's return for relevant year was not
based on any books of account and same was only on basis of memory only hence PCIT was
justified in passing the revisional order. (AY. 2011-2012)
Avathan Marimuthu v. ACIT (2017) 166 ITD 141 (Chennai) (Trib.)
S. 263 : Commissioner - Revision of orders prejudicial to revenue - 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-Explanation 2 to s. 263 inserted w.e.f. 01.06.2015 does
not override the law as interpreted by the various High Courts .
Allowing the appeal of the assessee, the Tribunal held that; 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. If the Explanation is
485
interpreted otherwise, the CIT will be empowered to find fault with each and every assessment
order and also to force the AO to conduct enquiries in the manner preferred by the CIT, thus
prejudicing the mind of the AO, This will lead to unending litigation and no finality in the legal
proceedings which cannot be the intention of the legislature in inserting the Explanation. ( ITA
No. 3205/Del/2017. Dt. 29.11.2017) (AY. 2014-15)
Amira Pure Foods Pvt. Ltd v. PCIT (2018) 63 ITR (Trib) 355 (Delhi) (Trib);
www.itatonline.org
S. 263 : Commissioner - Revision of orders prejudicial to revenue - Stock in trade - Land

converted in to stock-in-trade and in same year entered into development agreement
without handing over possession to developer - Revision was held to be not valid as the
assessee has neither transferred capital asset nor handed over the possession . [ S. 2 (47) (v)
,45 (2)]
Allowing the appeal of the assessee the Tribunal held that, when Land converted in to stock-in-
trade and in same year entered into development agreement without handing over possession to
developer, provision of S. 45 (2) is applicable or not debatable hence revision was held to be not
valid as the assessee has neither transferred capital asset nor handed over the possession . (AY
2011-12)
American Spring & Pressing Works (P.) Ltd. v. PCIT (2017) 166 ITD 92 (Mum) (Trib.)
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Assessing Officer has

passed the order after inquiry – Revision was held to be bad in law .
Allowing the appeal of the assesse, the Tribunal held that; this is not a case where the Assessing
Officer did not make inquiry,further no cogent material or evidence brought on record to prove
that the view taken by the Assessing Officer was unsustainable in law . The order passed by the
PCIT was illegal and without jurisdiction. (AY 2011 – 2012)
Jashn Beneficiary Trust v ACIT (2017) 57 ITR 29 (Jab) (Trib))
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Assessment order was

in line with the order of the Tribunal – Revision was held to be not valid .[ S. 153A ]
The Assessment Order was revised to bring to tax undisclosed price paid for purchasing shares.
On appeal the Tribunal held that; similar addition was deleted by the Tribunal in group case
which was binding on the revenue authorities. The Assessment Order passed was in line with the
order of the Tribunal and the revision proceedings was unjustified and unreasonable. (AY. 2006-
07).
Radha Aggarwal (Smt.) .v. PCIT (2017)56 ITR 509 (Chd.) (Trib.)
Ruchi Singla (Smt.) .v. PCIT (2017) 56 ITR 509 (Chd.) (Trib.)
Manish Singla .v. PCIT (2017) 56 ITR 509 (Chd. (Trib.)
S. 263 : Commissioner - Revision of orders prejudicial to revenue - Revision – Merely on the

basis of in adequate enquiry revision was held to be not valid . [ S44BB ]
486
The Tribunal held that when the AO has made enquiry to his satisfaction and accepted
explanation given by assessee then it is not a case of no enquiry, the director of IT cannot assume
jurisdiction under section 263 merely because he does not agree with the opinion of AO and
wants that the case should be investigated in a particular manner. Therefore, assumption of
jurisdiction by the Director of IT under section 263 was not in accordance with law and therefore
the same is quashed. (AY. 2008-09)
Technip UK Ltd. v. DIT of (IT) (2017) 187 TTJ 617/81 taxmann.com 311 (Delhi) (Trib.)
S. 263 : Commissioner - Revision of orders prejudicial to revenue - Revision – Merely on the

basis of in adequate enquiry revision was held to be not valid .
The Tribunal held that this is a case of inadequate enquiry on the part of no and not a case of lack
of enquiry by any stretch of imagination. The order passed by CIT was quashed. (AY. 2011-12)
Braham Dev Gupta v. PCIT (2017) 187 TTJ 1 (Delhi) (Trib.)
S. 263 : Commissioner – Revision of orders prejudicial to revenue – CIT must mention in
his order as to what inquiries or verification ought to have been carried out by AO – If the
CIT is not in agreement with a view taken by the AO, that would not justify revision of
assessment order.
The CIT, after examining the records of assessment proceedings, held that the AO has neither
verified nor has applied his mind to the relevant provisions of the Act and thus, directed a fresh
assessment after making necessary enquiries.
On appeal, the Tribunal held that for the applicability of clause (a) of the Explanation 2 to Section
263, the CIT must mention in his order as to what enquiries or verification should have been
carried out by the AO. He must also establish as to how non-application of mind has resulted in
under assessment. Further, if the AO has taken a possible view with which CIT is not in
agreement with, that would not ipso facto lead to revision of assessment. (AY. 2013-14)
Systematix Consultants and Contractor (P.) Ltd. v. PCIT (2017) 57 ITR 361 (Luck.) (Trib)
S. 263 : Commissioner - Revision of orders prejudicial to revenue - - Bank guarantee

commission paid is not in nature of interest expenditure hence nodisallowance can be made-
Income from investments in foreign Joint Venture is not exempt hence investment was not
needed to be considered for disallowance, loss in trading in shares cannot be considered as
speculative ,Leave encashment, revision was held to be not valid. [S. 14A, R.8D ]
Allowing the appeal of the assessee, the Tribunal held that;Bank guarantee commission paid is
not in nature of interest expenditure hence no disallowance can be made.Income from written off
investment was not exempt from tax hence said investment was not to be considered for
disallowance.Loss in trading of shares on self - account, scrip wise profit and loss, etc. showed
same to be normal business loss, could not be held as to be arising from speculative business.
Leave encashment was held to be allowable.Revision was held to be not valid. (AY. 2012 –
2013)
Acumen Capital Marketing (I) Ltd. v. ITO (2017) 164 ITD 633 /156 DTR 330 (Cochin)
(Trib.)
487
S. 263 : Commissioner - Revision of orders prejudicial to revenue - Capital gains – Slump
sale - Sale of Manufacturing Unit – Exclusion of intangible assets would still covered under
the section 50B in case the transferee in same business as assesse - Revision was held to be
not valid. [S. 45, 50B]
The assessee declared long-term capital gain arising from slump sale of its manufacturing unit of
edible oil which was not accepted by the commissioner under the order passed u/s 263.
The Commissioner had observed that in the excluded item’s list of the slump sale, the name/trade
name/logs/trade mark were included. Therefore, it is not a slump sale.
The Tribunal held that the view of the commissioner had to be rejected for the simple reason that
the purchaser of the manufacturing unit of the edible oil was already in the same business and
wanted to sell the products manufactured from said unit after the closing date in their own name
and brand and so they were not keen to buy the name/trade name/logos/trademark/product name
etc. of the assessee, so, the assessee excluded the same from the transaction. So, therefore,
exclusion of the said intangibles cannot in any way affect the slump sale of the manufacturing
unit as a going concern in the facts and circumstances of this case. Revision order was cancelled .
(AY. 2009-10)
Ambo Agro Products Ltd. v. PCIT (2017) 165 ITD 20 /187 TTJ 648 /160 DTR 25 (Kol)
(Trib.)
S. 263 : Commissioner-Revision of orders prejudicial to revenue – Commissioner cannot

direct the AO to initiate penalty proceedings . [S. 10B, 271 (1) (c)]
The Tribunal held that CIT is not competent to direct the AO to redo the assessment with a view
to initiate and levy penalty under section 271 (1) (c) in respect of erroneous claim of deduction
under section 10B. (AY. 2008-09 2010-11)
Easy Transcription & Software (P) Ltd. v. CIT (2017) 185 TTJ 504 /156 DTR 265 (Ahd.)
(Trib.)
S. 263 : Commissioner - Revision of orders prejudicial to revenue – – Lack of proper

enquiry – Justified in setting aside assessment.[S. 10B, 271 (1) (c)]
The Tribunal held that AO having made no perceptible enquiry in discharge of his quasi judicial
function in making assessment which may reveal any application of mind to claims made by
assessee, CIT was justified in setting aside assessment and directing the AO to make de novo
assessment. (AY. 2008-09 & 2010-11)
Easy Transcription & Software (P) Ltd. v. CIT (2017) 185 TTJ 504 /156 DTR 265 (Ahd.)
(Trib.)
S. 263 : Commissioner - Revision of orders prejudicial to revenue – Possible view, hence

revision was held to be not valid .
The Tribunal held that the issue raised by the CIT in his notice under section 263 has been
adequately enquired and thoroughly examined by the AO during the course of assessment
proceedings and he has taken one of the legally possible views as per judicial pronouncements
available at that particular point of time. Therefore, the order passed by the CIT under section 263
is not sustainable. (AY. 2010-11)
Goldjyoti Polymers v. CIT (2017) 185 TTJ 366 (Ahd.) (Trib.)
S. 263 : Commissioner Revision by commissioner, of orders prejudicial to revenue —

Revisional jurisdiction cannot be invoked to correct each and every type of mistake or
error committed by AO and it was only when order is erroneous that the section will be
attracted.
488
Allowing the appeal of the assessee, the Tribunal held that, Revisional jurisdiction cannot be
invoked to correct each and every type of mistake or error committed by AO and it was only
when order is erroneous that the section will be attracted. (AY 2007-08)
Mukesh Jayantilal Kanakhara v. ACIT (2017) 49 CCH 238 /148 DTR 314 /184 TTJ 673
(Rajkot) (Trib.)
S.263 : Commissioner-Revision of orders prejudicial to revenue - Income determined by AO

not in excess of income shown in accounts of assessee even after disallowance of Provision
for Gratuity - Order not prejudicial to the interest of revenue. [S.40A (7)]
Held that provision for gratuity was not an allowable deduction in terms of the provisions of
Section 40A (7). Therefore, Commissioner rightly disallowed the provision of gratuity. Further
held that section 11 (4) is attracted only where the property held under trust includes a business
undertaking. Since the assessee did not have any business undertaking section 11 (4) will not be
attracted. Provision for gratuity had been disclosed in books. Total Income determined even after
disallowance of provision for gratuity was nil. Disallowance of provision for gratuity did not
result in a situation where income determined by AO was in excess of income as shown in the
accounts of assessee. Commissioner has erred in invoking section 263 since order passed by AO
was not prejudicial to the interests of revenue. (AY. 2011-12)
Malankara Orthodox Syrian Church Medical Mission Hospital v. DDIT (E) (2017) 55 ITR
53 (SN) (Cochin) (Trib.)
S.263 : Commissioner-Revision of orders prejudicial to revenue-Sale of shares to non-

resident and investment in residential property - Failure by AO to enquire into applicability
of notification of RBI on sale of shares by resident to non-resident, revision was held to be
justified.[S. 54F]
Held that order passed by AO was cryptic. The claim of assessee regarding the consideration
received on sales of shares was accepted by AO. However, he neither enquired nor applied his
mind to the applicability of the notification to sale of shares by resident to non-resident. Further,
the claim of the assessee regarding grant of exemption under 54F was not examined by AO. No
enquiry as to whether the condition laid down in section 54F was complied was not seen by AO.
Commissioner had rightly invoked the provisions of section 263. (AY.2011-12)
Ravi Kannan v. ACIT (2017) 55 ITR 38 (SN) (Chennai) (Trib.)
S. 263 : Commissioner-Revision of orders prejudicial to revenue – The fact that the AO is

silent in the assessment order does not mean that he has not applied his mind so as to justify
exercise of revisional powers by the CIT.
Allowing the appeal the Tribunal held that; there is a distinction between “lack of enquiry” and
“inadequate enquiry”. If the AO has called for the necessary details and the assessee has
furnished the same, the fact that the AO is silent in the assessment order does not mean that he
has not applied his mind so as to justify exercise of revisional powers by the CIT. (ITA No.
2464/Mum/2013, dt. 24.02.2017) (AY. 2009-10)
Small Wonder industries v. CIT (Mum.) (Trib.);www.itatonline.org
S. 263 : Commissioner - Revision of orders prejudicial to revenue - Non submission of

report of prescribed authority, revision was held to be not justified. [S.35 (2AB)]
Allowing the appeal of the assessee, the Tribunal held that; where the assessee had already
obtained approval of its in house Research & Development facility in Form 3CM, revision merely
on ground of non-submission of report of prescribed authority in form 3CL was held to be not
justified . (AY. 2009 – 2010)
Sun Pharmaceutical Industries Ltd. v. PCIT (2017) 162 ITD 484 (Ahd.) (Trib.)
489
S. 263 : Commissioner - Revision of orders prejudicial to revenue - Capital gains -
Investment in bonds - Transfer of shares to be considered on the date of execution transfer
form neither the date of agreement nor the date of receipts. [S. 2 (47), .45, 54EC, 54F, 263 ]
Assessment was completed u/s 143 (3), allowing the claim u/s54EC and S. 54 F of the Act.
Commissioner in revision proceedings held that, period of six months to be computed from the
date of receipt of money. Giving a share certificate along with share transfer form at a subsequent
date would not change the nature of transaction.Accordingly the assessee was held to be not
eligible for exemption u/s 54EC and 54F of the Act. On appeal allowing the appeal, the Tribunal
held thattransfer of shares to be considered on the date of execution transfer form neither the
date of agreement nor the date of receipts. Order of AO was up held. (AY.2010-11)
Y.V. Ramana v. ADIT (2017) 162 ITD 662 /183 TTJ 337 (Visakha) (Trib.)
S. 263 : Commissioner-Revision of orders prejudicial to revenue - Not earned any dividend

during the relevant years – Revision was not justified for disallowance of expenses u/s 14A.
[S.14A]
Allowing the appeal of the revenue, the Tribunal held that ;Revision was not justified for
disallowance of expenses u/s 14A, when the assessee has not earned any dividend during the
relevant years. (AY. 2008-09 to 2012 - 2013)
Dabwali Transport Co. Ltd. v. DCIT (2017) 163 ITD 579 (Asr.) (Trib.)
S. 263 : Commissioner-Revision of orders prejudicial to revenue – Claim was allowed by

the Assessing Officer without applicability of the notification, hence revision was held to be
justified.[S. 54F]
Dismissing the appeal of the assesse, the Tribunal held that the Assessing Officer failed to
examine applicability of notification dealing with sale of share of Indian company to non-resident
by assesse and allowed claim of assessee u/s 54F, hence the revision was held to be justified.
(AY. 2011-12)
Ravi Kannan v.CIT (2017) 163 ITD 640 (Chennai) (Trib.)
S. 263 : Commissioner-Revision of orders prejudicial to revenue – Depreciable asset –

Insurance claim – AO was directed to re do the assessment in accordance with law without
influencing the observations of the Commissioner. [S.45 (IA)]
Fire accident took place on assessee's cold storage and it received claim from insurance company.
Assessee claimed long term capital loss under section 45 (1A) by adopting indexation cost of
acquisition. Assessing Officer simply accepted return filed by assessee and allowed capital loss
claimed by assessee without asking any query in respect of capital loss claimed by assessee - In
revision, Commissioner observed that once asset was put to use, it would amount to a depreciable
asset and consequently, it would attain character of a short term capital asset, which is not entitled
for indexation of its cost. On appeal the Tribunal held that; since Commissioner had not
considered provision of Act, his findings were baseless and deserved to be set aside. AO was
directed to re do the assessment in accordance with law without influencing the observations of
the Commissioner . (AY. 2009-10)
Hima Bindu Cold Storage (P.) Ltd. v. CIT (2017) 163 ITD 487 (Visakha) (Trib.)
S. 263 : Commissioner-Revision of orders prejudicial to revenue – Provision for loss on

assets – No enquiry was made by the Assessing Officer ,revision was held to be justified. [S.
115JB]
490
Dismissing the appeal of the assessee, the Tribunal held that; AO while computing book profit
had not made enquiry in respect of provision and accepted same, hence the assessment order
erroneous and prejudicial to interest of revenue. (AY. 2007 - 08)
Hitachi Home & Life Solution (India) Ltd. v. DCIT (2017) 163 ITD 1 (Ahd.) (Trib.)
S. 263 : Commissioner - Revision of orders prejudicial to revenue - Order was passed

detailed enquiry – Revision was held to be not valid.
Allowing the appeal of the assessee the Tribunal held that, order was passed by the Assessing
Officer with detailed enquiry. It is the general presumption of law that the Assessing Officer has
considered all the details before completion of assessment and the Commissioner of Income-tax
cannot presume that enquiries conducted by the Assessing Officer are insufficient and that the
Assessing Officer has not applied his mind, unless the Commissioner proves that the assessment
order passed by the Assessing Officer is erroneous. (AY - 2010-2011)
G. V. R. Associates v. ITO (2017) 54 ITR 307 (Visakha) (Trib.)
S.263 : Commissioner-Revision of orders prejudicial to revenue - Capital or revenue-

Depreciation - Revision was held to be valid. [S. 32, 37 (1)]
Expenditure on modifying and improving leased property allowed as revenue expenditure.
Revision was held to be justified. Assessee can claim depreciation on value spent on such
improvement or changes in structure. (AY. 2011-2012)
MSA Motors v. ACIT (2017) 54 ITR 8 (Hyd.) (Trib.)
S. 263 : Commissioner-Revision of orders prejudicial to revenue – Works contract-AO has

applied the mind – Revision was held to be not valid. [S.80IA]
Allowing the appeal the Tribunal held that; AO making enquiries and assessee filing adequate
replies.-AO applying his mind taking a plausible view that project undertaken by assessee was
not works contract. Revisional order not pointing out how view of Assessing Officer incorrect.
Commissioner not referring to document, clause or agreement to hold project was works contract,
revision was held to be not valid . (AY. 2011-2012)
Unipro Techno Infrastructure P. Ltd. v. PCIT (2017) 54 ITR 726 /184 TTJ 205/153 DTR
195 (Chd.) (Trib.)
S. 263 : Commissioner-Revision of orders prejudicial to revenue - Revision based on special

audit report and incorrect presumption hence revision was held to be not valid. [S. 2 (22)
(e)]
Commissioner initiated revisionary proceedings based on special audit report obtained in the case
of a company as the company converted into public company, deemed dividend provision not
applicable hence revision was held to be not valid. (AY.2005-2006 to 2007-2008)
Gurucharan Dass Arora v. CIT (2017) 53 ITR 364 (Delhi) (Trib.)
S. 263 : Commissioner - Revision of orders prejudicial to revenue - Assessing Officer

arriving at decision after examination and enquiry, revision on the basis of audit objection
was held to be bad in law. [S.154 ]
Allowing the appeal the Tribunal held that; the Assessing Officer had made necessary enquiries
with respect to matters covered by order of Commissioner and arrived a decision after
examination and enquiry. As regards audit objection, the assessing Officer categorically replying
to objections raised by internal audit party objections and dismissed audit objections by replying
on each and every issue on merits. Rectification proposed by Assessing Officer on matter of
interest was also forms part of record before Commissioner. Order by the Assessing Officer was
491
neither erroneous nor prejudicial to interests of Revenue hence revision was not valid. (AY.2006-
2007)
Lotus Energy (India) Ltd. v. CIT (2017) 53 ITR 227 (Mum.) (Trib.)
S. 263 : Revision – Revision of orders prejudicial to revenue - write off investment as

revenue expenditure Excess deduction was allowed – Revision was held to be valid.
The assessee claimed a deduction which was accepted by the AO in the assessment order. On
revision proceedings it was found that excess deduction was allowed to the assessee . Tribunal
held that revision was held to be valid .
ILC Industries Ltd. v. PCIT (2017) 53 ITR 342 (Bang) (Trib.)
S. 263 : Commissioner - Revision of orders prejudicial to revenue - Mutuality-CIT (A)

allowed the exemption in earlier years, order cannot be regarded as erroneous [[S. 11]
The Tribunal held that the CIT (A) in the appellate orders for AY 2008-09 & 2009-10 held that
the assessee cannot be denied the benefit of exemption under section 11 as well as on the
principle of mutuality. Therefore, the order of AO was based on the order of CIT (A), accepting
nil income, it was not erroneous & prejudicial to the interests of revenue and consequently the
revision under section 263 is not sustainable. (AY. 2011-12)
Calcutta Cricket & Football Club v. ITO (2017) 183 TTJ 112 (Kol.) (Trib.)
S. 264 : Commissioner - Revision of other orders – On enquiry it was found that . there was
no mistake hence rejection of application was held to be justified [ S. 37 (1),139 (4),154 ]
Dismissing the petition, the Court held that; the theory as propounded by the assessee as a keying
error to be not proved conclusively. In such fact situation, the order passed by the Principal
Commissioner was justified. (AY. 2012-13)
Bali Trading Pvt. Ltd. v. CIT (2017) 251 Taxman 228 / (2018) 402 ITR 271 /162 DTR 215/
(Mad) (HC)
S. 264 : Commissioner - Revision of other orders – Civil contractor - Rejection of accounts

and estimate of gross profit rate was held to be justified .[ S. 144 ]
Dismissing the petition the Court held that; the application of net profit rate of 12 per cent. to the
gross receipts of the assessee was held to be reasonable on the basis of the material available
before the Assessing Officer. The assessee was provided an opportunity before the court too to
demonstrate that the profit rate of 12 per cent. adopted by the Assessing Officer was high and
unreasonable. It was evident from the certificate produced by him that there had been a lot of
variations in the gross profit rate and the net profit rate filed by the assessee for the assessment
years 2010-11 to 2014-15, and, therefore, in the absence of production of books of account, no
benefit could be derived by the assessee by claiming the profit rate as was applicable then. The
assessee had not been able to produce any material on record to substantiate his claim made in the
petition. (AY. 2010-11)
Sanjay Kundu v. CIT (2017) 397 ITR 371 (P&H) (HC)
S. 264 : Commissioner - Revision of other orders – Salary payable pursuant to

recommendation of 5th Pay Commission-Claim, rejection of petition was held to be not
justified, claim was directed to be allowed.[ S.17, 37 (1), 154 ]
492
Allowing the petition the Court held that; Salary payable pursuant to recommendation of 5th Pay
Commission-Claim was made u/s 154 of the Act which was rejected and revision application
against the said application was also rejected on the ground that claim was not made in the
revised return . Court held that, application filed before Commissioner should be treated as
having been allowed on merits . Since impugned order of Commissioner had ignored history of
litigation leading to filing of revision petition and assessee had already exhausted remedies that
were available to it and there was sufficient material on record to grant relief on merits,
application filed before Commissioner should be treated as having been allowed on merits . (AY.
1998-99)
Rites Ltd. v. CIT (2017) 249 Taxman 244 /154 DTR 121 (Delhi) (HC)
S. 264 : Commissioner - Revision of other orders – Dismissal on the ground that the petition
was time barred is held to be not proper he has to examine whether there was any
justifiable reason for delay .[ S.264 (3)]
Allowing the petition the Court held that; Dismissal on the ground that the petition was time
barred is held to be not proper he has to examine whether there was any justifiable reason for
delay . (AY. 2012-13)
Hargovind Pandey v. P CIT (2017) 249 Taxman 528 (Delhi) (HC)
S. 264 : Commissioner - Revision of other orders – Quasi judicial power – Commissioner

cannot abdicate his authority on the ground that a similar issue has arisen and is subject
matter of appellate proceedings in other years. This would be clearly contrary to the
provisions of the Act.
Allowing the petition the Court held that; Revisional power is a quasi judicial powers and he
must pass a speaking and a reasoned order. He cannot abdicate his authority on the ground that a
similar issue has arisen and is subject matter of appellate proceedings in other years. This would
be clearly contrary to the provisions of the Act. (WP No. 6052/2017, dt. 13.11.2017) (AY.2012-
13)
Paradigm Geophysical Pty Ltd. v. DCIT (2017) 160 DTR 202 /(2018) 300 CTR 27 /400 ITR
497 (Delhi) (HC)
S. 264 : Commissioner-Revision of other orders – Revised return - Intimation can be

considered in revision application, Commissioner was directed to consider the revision
application. [S. 12A, 143 (1)]
Dismissing the revision application Commissioner held that ,the intimation under section 143
(1) was not an order of assessment for the purpose of section 264, whereas it was deemed to be a
notice of demand under section 156 of the Act. On writ allowing the petition the Court held that;
section 143 had undergone certain changes with effect from June 1, 1999. The statute uses the
word intimation and not order. It was in the light of the change in the statutory provision that one
had to consider the scope and effect of the revisional powers under section 264 . Though not as a
challenge to section 143 (1) notice, when the assessee filed a revised return and sought for
interference by the Commissioner, necessarily the claim had to be considered in accordance with
law. Matter was remanded. (AY. 2013-14)
Agarwal Yuva Mandal (Kerala) v. UOI (2017) 395 ITR 502/246 Taxman 78 (Ker.) (HC)
S. 264 : Commissioner-Revision of other orders - Search and Seizure —Assessment of third

person—Under writ jurisdiction the cannot examine whether documents seized were
incriminating-Rejection of revision application was held to be justified. [S. 153C, Art. 226]
Held, dismissing the petitions,against the order u/s. 264, the Court held that; in writ proceedings,
it was difficult for the court to examine the documents seized and determine if in fact the
493
documents were incriminating for each of the assessees. The documents listed out in the
satisfaction notes were not non-incriminating on a bare perusal. There was sufficient opportunity
for both the assessees to demonstrate how they were not. But the assessees had failed to avail of
the opportunity. In the writ jurisdiction, the court has to be satisfied that the Commissioner’s
orders were not unfair, unjust or irrational and were consistent with the basic procedural
requirements. On none of these counts, did the orders of the Commissioner warrant interference.
(AY. 2004 - 05 to 2009-10)
Ganpati Fincap Services P. Ltd. v. CIT (2017) 395 ITR 692 /82 taxmann.com 408/152 DTR
250/298 CTR 174 (Delhi) (HC)
Sushree Securities Pvt Ltd v. CIT (2017) 395 ITR 692/82 taxmann.com 408 /152 DTR
250/298 CTR 174 (Delhi) (HC)
Shrey Infradevelopers Pvt Ltd v. CIT (2017) 395 ITR 692/82 taxmann.com 408 /152 DTR
250/298 CTR 174 (Delhi) (HC)
S. 264 : Commissioner - Revision of other orders - Record includes all records relating to
any proceedings - Commissioner has the power to entertain the claim .[ S. 144A, 263 ]
On appeal against the single judge, allowing the petition the Court held that; The embargo placed
on an Assessing Officer in considering a new claim would not impinge on the power of the
appellate authorities or the revisional authority. Record includes all records relating to any
proceedings. Commissioner has the power to entertain the claim.
The order under section 144A ought to have been taken into consideration and applied. The
remedy under section 264 was appropriate and ought to have been exercised in favour of the
assessee by the Commissioner. (AY. 2003 - 04, 2005 - 06)
Sri Selvamuthukumar v.CIT (2017) 394 ITR 247 /246 Taxman 185 /149 DTR 38 (Mad.)
(HC)
S. 264 : Commissioner - Revision of other orders - Application for exemption after long
delay-Commissioner has power to consider claim - Remuneration from foreign State under
technical assistance agreement with Government of India-Salary received under agreement-
Entitled to exemption - No collection of tax which is not authorised [ S.10 (8),art. 265 ]
Allowing the petition the Court held that ;Held, allowing the petition, that The remuneration paid
by the Association for Voluntary Surgical Contraception to the assessee was exempted under
section 10 (8) of the Act and as the exemption had not been claimed in the income-tax return for
the assessment year 1998-99, 1999-2000 and 2000-01 erroneously and in ignorance of the legal
provision, the amount was liable to be refunded. The competent authority was directed to refund
the tax deducted at source by the employer from the assessee`s remuneration for the assessment
years 1998-99, 1999-2000 and 2000-01 with interest at the rate of 6 per cent. per annum after
modifying the intimation under section 143 (1), if necessary. (AY. 1998-1999, 1999-2000, 2000-
2001)
Dr. Jyoti Vajpayee v. CIT (2017) 392 ITR 518/145 DTR 324/292 CTR 175 (All.) (HC)
S. 264 : Commissioner-Revision of other orders-Salary received by a non-resident for

services rendered abroad accrues outside India and is not chargeable to tax in India. The
source of the receipt is not relevant. The CIT has wide powers u/s 264 and has to exercise
them in favour of the assessee in terms of CBDT Circular No. 14 (XL-35) dated 11.04.1955.
[S. 5 (2), 15, 143 (1)]
The petitioner was working as a marine engineer and had rendered services as such to a foreign
shipping company during the assessment year 2011-2012. The petitioner had filed income tax
return for such assessment year under the residential status as non-residential Indian. He disclosed
a receipt of a remuneration of Rs. 5,63,850/- in US Dollars. The petitioner was issued an
assessment order cum intimation under Section 143 (1). The petitioner did not file any appeal.
494
The petitioner had applied under Section 264 of the Income Tax Act, 1961 claiming that the
income had accrued outside India and was not taxable in India. The CIT rejected the assessee’s
claim. On a Writ Petition by the assessee HELD allowing the claim held that ;salary received by a
non-resident for services rendered abroad accrues outside India and is not chargeable to tax in
India. The source of the receipt is not relevant. The CIT has wide powers u/s 264 and has to
exercise them in favour of the assessee in terms of CBDT Circular No. 14 (XL-35) dated
11.04.1955 .Relied CIT v.Mahalaxmi Sugar Mills Ltd (1986) 160) ITR 920 (SC) The matter was
remanded to the assessing officer to do the needful.
Utanka Roy v. DIT (2017) 390 ITR 109 /291 CTR 501 /146 DTR 27 (Cal) (HC)
S. 264 : Commissioner - Revision of other orders – Application for revision is maintainable

if appeal against assessment order withdrawn. [ S. 246, 246A ]
The Commissioner would be precluded from exercising revisional powers under sub-section (1)
of section 264 of the in the situations listed under sub-section (4) thereof. Merely because at one
stage, the assessee preferred an appeal against the order of assessment but withdrew it, on a
reasonable bona fide apprehension about maintainability of such appeal arising at a future date in
view of the provisions contained in sections 246 and 246A of the Act, that would not prevent the
assessee from presenting a revision petition within the framework provided under section 264 of
the Act. (AY. .2011-2012)
M.T. Maersk Mikage v. DIT (IT) (2017) 390 ITR 427 (Guj) (HC)
S. 268A : Appeal – Monetary limits-Central Board of Direct Taxes-CBDT has no power to

issue circular with retrospective effect .[ S. 119,260A]
Allowing the appeal of Revenue the Court held that; The CBDT cannot issue any circular having
retrospective operation - The fact that the CBDT itself vide Circular dated 10.12.2015 directed
that the instruction to withdraw low tax effect appeals will apply retrospectively to pending
appeals has no bearing. High Court was directed to hear the appeal on merits . Order of High
court, dated 2.11.2011 in ITA No.887/2006 is set aside.
CIT v. Gemini Distilleries (2017) 398 ITR 343/299 CTR 27/159 DTR 63/251 Taxman 324
(SC)
S. 268A : Appeal – Monetary limits - A beneficial circular has to be applied retrospectively

while an oppressive circular has to be applied prospectively. [ S. 260A
Dismissing the appeal of the revenue the Court held that; The view of the two-judge Bench in
CIT v. Suman Dhamija (2015) 16 SCC 176 (SC) &CIT v. Gemini Distilleries (2017) 398 ITR
343 (SC), that CBDT's low tax Circular dated 09.02.2011 cannot be given retrospective effect
cannot be followed as it is contrary to the three-judge bench verdict in CIT v. Surya Herbal Ltd
(2003) 350 ITR 300 (SC) . A beneficial circular has to be applied retrospectively while an
oppressive circular has to be applied prospectively. Circular dated 9.2.2011 has retrospective
operation except for two caveats : (i) The Circular should not be applied ipso facto when the
matter has cascading effect and/or (ii) where common principles are involved in subsequent
group of matters or a large number of matters. (
DIT v. S. R. M.B. Dairy Farming (P) Ltd (2017) 160 DTR 129 /299 CTR 321 /(2018) 400
ITR 9 /252 Taxman 1 (SC)
S. 268A : Appeal – Application – Reference – Monetary limits - Instructions – Circulars

would be binding on subordinate officers and Department cannot take a contrary view and
insist for arguing matter in appeal filed by it on merits – CBDT was directed to modify the
Circular .[ S.119, 154, 260A, 263, Art 141 ]
495
The Court held that; the circular issued by the CBDT under section 268A is binding on the
department thus appeal cannot be filed, if it is barred. It is, however, with a clarification that if the
issue decided by the Commissioner (Appeals) or Tribunal is contrary to the judgments of the
Supreme Court, the department can prefer an appeal, only in those cases where the order passed
by Commissioner (Appeals) or the Tribunal is contrary to the ratio propounded by the Supreme
Court on the same issue. In doing so, sanctity of article 141 of the Constitution of India would be
maintained, thereby, serious consequences of taking different view would also be avoided. The
department may incorporate it in the Circular to avoid further controversy.
CIT v. GAD Fashion (2017) 299 CTR 333/160 DTR 141/(2018)401 ITR 1/ 252 Taxman 219
(FB) (Raj.) (HC)
S. 268A : Appeal – If composite order is passed even if tax effect is less than prescribed
monetary limits in any of years, appeal is maintainable . [ S.254 (1)]
In case of a composite order of any High Court or any Appellate Authority, which involves more
than one assessment year and common issues in more than one assessment year, appeal shall be
filed in respect of all such assessment years even if tax effect is less than prescribed monetary
limits in any of years . (AY.2004 - 05)
PCIT v. Devendranath G. Chaturvedi. (2017) 247 Taxman 210 (Guj) (HC)
S. 269SS : Acceptance of loans and deposits – Bona fide belief that share application money
was neither loans or deposits, deletion of the penalty was held to be justified. [S. 271D]
Dismissing the appeal of the revenue the Court held that; in the instant case also, the assessee was
under the bona fide impression that the money received was only towards allotment of shares and
it is not a loan or deposit. Hence, no question of law much less any substantial question of law
arises for consideration in the instant appeal. (AY. 2002-03 to 2004-05)
CIT v. Object Frontier Software (P.) Ltd. (2017) 244 Taxman 292 (Mad.) (HC)
S. 269UD : Purchase of immovable property by Central Government-Natural justice -

Fresh order passed in compliance with principles of natural justice within two months,
order was held to be valid - Re-vesting of property can be claimed only by transferor and
not by transferee . [ S269UG, 269UH ]
Court directed the competent authority to pass fresh order passed in compliance with principles
of natural justice within two months, order was held to be valid. Court also held that the
transferee should prove payment made by it in pursuance of execution of agreement to sell--Re-
vesting of property can be claimed only by transferor and not by transferee. Failure by transferee
to prove payment made by it, transferee is not entitled to re-vesting of property.
Magadh Stock Exchange Association v. UOI (2017) 393 ITR 581/151 DTR 225/295 CTR 283
(FB) (Patna) (HC)
S.269UD : Purchase of immovable property by Central Government--Subsequent auction

sale of property-Sale on "as is where is and whatever there is" basis-Liability of auction
496
purchaser to pay out standings pertaining to property not known at time of auction--
Demand for unearned incremental charges in 1991-Auction purchaser liable to pay charges.
[Chapter XXI]
Dismissing the petition the Court held that in accordance with the conditions of the auction sale,
it was only the out standings known to the Income-tax Department, which had to be announced at
the time of the sale. The sale itself was on "as is where is and whatever there is" basis. If any
demand was made towards any out standings pertaining to the property, which was not known at
the time of the auction, the responsibility to honour such demand was clearly that of the auction
purchaser. The Collector chose to raise such demand after the auction purchase was effected.
These charges were not known to the Department at the time the auction sale was effected. Such
demand would be covered in the conditions of sale. The petitioners were liable to pay the charges.
Ashwin Bhagwandas Choksey v. Appropriate Authorities (2017) 392 ITR 394 /145 DTR 430
(Bom.) (HC)
S.271 (1) (b) : Penalty - Failure to comply with statutory notice—Insufficient time was given
- Levy of penalty was held to be not justified. [S.132, 153A, 274]
Allowing the appeal the Tribunal held that insufficient time given to gather voluminous
information for a period of seven years. Assessment completed with all material facts required for
assessment proceedings. Levy of penalty was held to be not justified. (AY. 2012-2013, 2013-
2014)
Pillala Vishnu Vandana v. ACIT (2017) 54 ITR 458 (Visakha) (Trib.)
S. 271 (1) (c) : Penalty – Concealment-Omission by the AO to explicitly specify in the

penalty notice as to whether penalty proceedings are being initiated for furnishing of
inaccurate particulars or for concealment of income makes the penalty order liable for
cancellation.
The Karnataka High Court had to consider the following question of law.
“Whether, omission if assessing officer to explicitly mention that penalty proceedings are being
initiated for furnishing of inaccurate particulars or that for concealment of income makes the
penalty order liable for cancellation even when it has been proved beyond reasonable doubt that
the assessee had concealed income in the facts and circumstances of the case?”
The High Court ruled in favour of the assessee with the following observations :
“The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the
Assessing Officer under Section 274 read with Section 271 (1) (c) of the Income Tax Act, 1961
(for short ‘the Act’) to be bad in law as it did not specify which limb of Section 271 (1) (c) of the
Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of
income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the
appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in
the case of CIT v Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565. In our view, since
the matter is covered by judgment of the Division Bench of this Court, we are of the opinion, no
substantial question of law arises in this appeal for determination by this Court. The appeal is
accordingly dismissed.”
The department filed a Special Leave Petition to challenge the aforesaid judgement of the High
Court. HELD by the Supreme Court dismissing the SLP : (CC. No. 11485/2016, dt. 23.11.2015)
“We do not find any merit in this petition. The special leave petition is, accordingly, dismissed.”
(AY. 2009-10)
CIT v. SSA’s Emerald Meadows (SC); www.itatonline.org
Editorial : Order in CIT v. SSA’s Emerald Meadows ITA No 380 of 2015 dt 23-11-2015 (Karn)
(HC) is affirmed .
497
S. 271 (1) (c) : Penalty-Concealment - Income disclosed in return and income assessed is nil,
penalty is not leviable.
Dismissing the appeal of the revenue, the Court held that, penalty is not leviable if the income
disclosed in the return and the income assessed is nil .
JCIT v. Classic Industries Ltd. (2017) 393 ITR 20/152 DTR 235/295 CTR 589/247 Taxman
152 (SC)
Editorial : Decision of Gujrat High Court is affirmed, JCIT v. Classic Industries Ltd (TA .No.
1798 of 2005 dt. 27 - 7 - 2016) (Guj) (HC)
S. 271 (1) (c) : Penalty – Concealment – The requirement to obtain previous approval of the
IAC is mandatory as it is to safeguard the interests of the assessee against arbitrary exercise
of power by the AO, however before approval opportunity must be given to explain the
specific charge is not mandatory . [ S. 274 ]
On reference by assessee the Court held that ;the requirement to obtain previous approval of the
IAC is mandatory as it is to safeguard the interests of the assessee against arbitrary exercise of
power by the AO. Non-compliance may vitiate the penalty order. However, the requirement in s.
274 that the assessee must be given a reasonable opportunity of being heard cannot be stretched
to the extent of framing a specific charge or asking the assessee an explanation in respect of the
quantum of penalty proposed to be imposed.There was no arbitrary exercise of discretion and the
reasons are recorded after taking into consideration the explanation submitted by the assessee.
The exercise of jurisdiction in respect of quantum of penalty is neither unjust nor beyond
jurisdiction. (ITR No. 21 of 2008, dt. 22.07.2017) (AY. 1987-88)
Maharaj Garage & Company v. CIT (2018) 400 ITR 292 (Bom) (HC)
S. 271 (1) (c) : Penalty – Concealment – In the absence of any overt act, which disclosed
conscious and material suppression, invocation of Explanation 7 to s. 271 (1) (c) in a blanket
manner could not only be injurious to the assessee but ultimately would be contrary to the
purpose for which it was engrafted in the statute. Deletion of penalty was held to be justified
. [ S. 92C, 271 (1) (c), Expl. 7 ]
Dismissing the appeal of the revenue the Court held that; in the absence of any overt act, which
disclosed conscious and material suppression, invocation of Explanation 7 to s. 271 (1) (c) in a
blanket manner could not only be injurious to the assessee but ultimately would be contrary to the
purpose for which it was engrafted in the statute. It might lead to a rather peculiar situation where
the assessees who might otherwise accept such determination may be forced to litigate further to
escape the clutches of Explanation 7.. (ITA 460/2016, C.M. APPL.26591/2016, dt. 22.08.2016)
(AY.2007 - 08)
PCIT v. Verizon India Pvt. Ltd. (Delhi) (HC); www.itatonline.org
S. 271 (1) (c) : Penalty – Concealment – Mere claim of rebate cannot be considered as
furnishing inaccurate particulars of income-Voluntary withdrawal of claim, levy of penalty
was held to be not valid – DTAA-India - Canada [ Art. 13 ]
Allowing the petition the Court held that; Voluntary withdrawal of claim, levy of penalty was
held to be not valid .There was no concealment of income nor submitting of inaccurate
information, as all the relevant details were furnished by the assessee. There had been no
misrepresentation of the facts to the Assessing Officer and that the inadvertent claim to rebate on
the tax liability which had admittedly been paid in the other country showed that the intention of
the assessee was not to furnish inaccurate particulars or conceal her income. The Assessing
Officer had not rendered any finding that the details supplied by the assessee in her return were
erroneous or false or that a mere claim for rebate amounted to furnishing of inaccurate
particulars. Thus the order passed under section 271 (1) (c) levying penalty was unsustainable.
(AY. 2014-2015)
498
Gopalratnam Santha Mosur v. ITO (IT) (2017) 399 ITR 155 /(2018) 165 DTR 251 (Mad)
(HC)
S. 271 (1) (c) : Penalty – Concealment – Gifts received on occasion of marriage – Failure to
prove genuineness of gift - Levy of penalty was held to be justified .[ S. 56 (2) (vi) ]
Dismissing the appeal of the assesse the Court held that; The Tribunal found that no explanation
was offered by the assessee to explain the genuineness of the gifts. He merely gave the names of
the donors but did not prove their identity, creditworthiness and genuineness of the transactions.
The Tribunal rightly concluded that since the assessee did not offer any explanation and whatever
explanation was offered was not substantiated through any evidence or material on record,
Explanation 1 to section 271 (1) (c) of the Act was clearly attracted to his case. There was
concealment on the part of the assessee so as to levy penalty under section 271 (1) (c) of the Act.
(AY. 2007 - 08)
Rajinder Mohan lal v. PCIT (2017) 399 ITR 223 (P&H) (HC)
S. 271 (1) (c) : Penalty – Concealment – Addition confirmed – Lender denied the advance of
loan - levy of penalty was held to be justified .
Dismissing the appeal of the revenue the Court held that; no explanation had been given at any
stage to explain the genuineness on receipt of these amounts. Therefore, the assessee failed to
substantiate any explanation filed before the authorities below. The assessee had thus, filed
inaccurate particulars of income so as to attract levy of the penalty under section 271 (1) (c) of the
Act. The findings recorded by the Tribunal had not been shown to be illegal or erroneous
warranting interference by the court. The levy of penalty was valid. (AY. 2006 - 07)
Basant Singh, Prop. Basant General Store v. CIT (2017) 399 ITR 247 (P&H) (HC)
S. 271 (1) (c) : Penalty – Concealment – The AO must specify whether the charge is of
concealment of particulars of income or furnishing of inaccurate particulars thereof and
which one of the two is sought to be pressed into service. He is not permitted to club both by
interjecting an ‘or’ between the two - Levy of penalty was held to be not valid
Dismissing the appeal of the revenue, the Court held that; penalty can be levied only where the
charge is unequivocal and unambiguous. The AO must specify whether the charge is of
concealment of particulars of income or furnishing of inaccurate particulars thereof and which
one of the two is sought to be pressed into service. He is not permitted to club both by interjecting
an ‘or’ between the two. The ambiguity in the show-cause notice compounded by the confused
finding of the AO that he was satisfied that the assessee was guilty of both renders the
proceedings void . (AY. 2010-11)
PCIT v. Baisetty Revathi (Smt) (2017) 398 ITR 88 (AP) (HC)
S.271 (1) (c) : Penalty – Concealment - Inaccurate particulars of income - There was no
excess stock in possession of assesse, stock was subject to central excise control and no
proceeding for clandestine removal of goods etc. are initiated against assessee - Deletion of
penalty was held to be justified .[S.145 ]
Dismissing the appeal of the revenue the Court held that; AO did not independently either in
Assessment proceedings or even in penalty proceedings examine contention of assessee that there
was no excess stock as found by ITO during survey proceedings, Assessee was consistently
499
stating that there was no excess stock in his possession. It was subject to central excise control
and no proceeding for clandestine removal of goods etc. As assessee had not furnished inaccurate
particulars of income deletion of penalty was held to be justified . (AY.2007-08)
ITO v. Ramsons Castings (P) Ltd. (2017) 159 DTR 306/85 taxmann.com 50 (Bom) (HC)
S. 271 (1) (c) : Penalty – Concealment – Assessee cannot be said to have furnished incorrect
particulars in the return filed in search proceedings where a revised computation of income
was filed after ITAT’s order in the course of parallel reopened assessments [ S.153A]
Assessee filed return of income for AYs 2002 – 03 and 2003 – 04 declaring a loss. The
assessments were reopened and a higher figure was assessed to tax. The assessee had filed
appeals against the order passed in the reassessment proceedings. While the assessee’s appeals
were pending before the ITAT, search proceedings were initiated. In response to the notice issued
u/s. 153A, assessee filed the same return which it filed originally. After the ITAT held that the
assessee should estimate 5% of its recoveries as profit, the assessee filed a revised computation of
income in the search proceedings and the assessment was completed accepting the same.
Thereafter, notices u/s. 271 (1) (c) were issued and it was held that the assessee had failed to
furnish true and correct particulars of income during the search proceedings. HC held that penalty
could not be levied on the assessee as the ITAT had passed its order after the return of income
was furnished in the section 153A proceedings. (AY. 2002-03, 2003-04)
CIT v. Juhu Construction Co. (2017) 151 DTR 157/295 CTR 316 (Bom) (HC)
S.271 (1) (c) : Penalty—Concealment - Estimation of profit – Levy of penalty was held to be
not justified. [S.153A]
Dismissing the appeal of the revenue, the Court held that, Tribunal has directed to estimate the
profit 5 % of recoveries of three projects .When the return was filed the order of the Tribunal was
not available and the income was offered on estimate basis .On the facts the view of the Tribunal
deleting the penalty was reasonable, hence no substantial question of law. (AY. 2002-03, 2003-
04)
CIT v. Juhu Construction Co (2017) 151 DTR 157/295 CTR 316 (Bom) (HC)
S. 271 (1) (c) : Penalty – Concealment – Rectification of declaration was made on the advice
of chartered Accountant – Deletion of penalty was held to be justified .
Dismissing the appeal of the revenue the Court held that; declaration was made by the assessee
under the advice of the chartered accountant and subsequently it was rectified. Therefore, there
was no intention on the part of assesse to commit any willful concealment .
ITO v. Silk City Petrofiles Co. Ltd. (2017) 396 ITR 191 (Guj) (HC)
Editorial : SLP is granted to the revenue; CIT v. Silk City Petrofiles Co. Ltd. (2017) 393 ITR 84
(St)
S. 271 (1) (c) : Penalty – Concealment – Draft discounting – Estimate of income - Basis upon
which penalty proceedings initiated set aside by tribunal—Penalty cannot be imposed.
On a reference Court held that; in the appeal arising out of the assessment, the Tribunal held that
the assessee carried on the business of draft discounting and earned money, thereby negating the
order of the Assessing Officer in the assessment proceedings. Further, no amount was added as
income. Thus, the basis upon which the penalty proceedings were initiated was set aside by the
Tribunal. The Tribunal was not right in invoking Explanation 1 to section 271 (1) (c) of the Act.
(AY. 1982 - 83 to 1985 - 86)
Indermal Manaji v. CIT (2017) 396 ITR 573/157 DTR 114 /299 CTR 390 (Bom) (HC)
500
S. 271 (1) (c) : Penalty – Concealment-Notice should state specific grounds for levy of
penalty—Printed form is not sufficient —Levy of penalty is held to be not valid.
Allowing the appeal the Court held that; there was a printed notice and no specific ground was
mentioned, which may show that the penalty could be imposed on the particular ground for which
the notice was issued. Hence the notice and the consequent levy of penalty were not valid (AY.
2006 - 07)
Muninaga Reddy v. ACIT (2017) 396 ITR 398 (Karn) (HC)
S. 271 (1) (c) : Penalty - Concealment – Capital gains-Disowning the document – Levy of
penalty was held to be in valid. [S. 45, 143 (3)]
The assessee disowned the sale of property and submitted that she had lodged a police complaint
that her name had been misused in a document in respect of a property of which she was not the
owner. On a writ petition, allowing the petitions, the Court held that ;the particulars of the
assessee found in the disputed document tallied with the real particulars but the description of the
property sold did not tally. The assessee who got land to an extent of 240 square yards, under a
gift settlement deed could not have sold the land of an extent of 551 square yards under the
disputed sale deed. Therefore, on the basis of the gift settlement deed it was not possible to link
the assessee with the sale deed in question. The Department could initiate proceedings against the
property after serving notices on all the persons through whom title to the property had passed on
and when the true owner was exposed. (AY. 2008 - 09)
Uppada Sarvani (Smt.) v. ITO (2017) 396 ITR 241 (T&AP) (HC)
S. 271 (1) (c) : Penalty – Concealment - Compensation received for relinquishing right to
sue—Levy of penalty was held to be not justified. [S. 28 (va), 260A]
Dismissing the appeal of the revenue the Court held that; there was no mens rea on the part of the
assessee qua concealment of income by her, which warranted penalty proceedings under
section271 (1) (c) . On the date of filing of the return for the relevant assessment year 2009-10,
the issue whether the receipt was of capital or revenue nature was debatable and, the assessee had
chosen to take a position which was favourable to her. That did not in any manner qualify as
deliberate non-disclosure or concealment. No question of law arose (AY. 2009 - 10)
PCIT v. Hemalatha Rajan (Ms.) (2017) 396 ITR 515/DTR 120 /299 CTR 402 (Mad) (HC)
S. 271 (1) (c) : Penalty – Concealment - Book profits – Penalty cannot be levied for
concealment in normal assessment .[ S. 115JB ]
Dismissing the appeal of the revenue, the Court held that; since at the stage when the Assessing
Officer sought to assume jurisdiction to levy penalty for concealment of income, the assessment
was completed under section 115JB of the Act, and there was no concealment of any material
particulars in respect of that part of the return, penalty proceedings could not have been initiated
on the basis of normal computation made later. No question of law arose.
PCIT v. Multiplex Capital Ltd. (2017) 396 ITR 62 (Delhi) (HC)
Editorial : SLP of revenue is dismissed, PCIT v. Multiplex Capital Ltd (2017) 394 ITR 5 (St.)
S. 271 (1) (c) : Penalty – Concealment – Penalty levied without specifying the specific
ground in the notice is held to be bad in law
Allowing the appeal of the assesse the Court held that; in the notice, there was no clear indication
about the concealment of the particulars of the income, nor was there clear indication of
furnishing of inaccurate particulars of the income on application of mind. In any case as there was
no specific ground, there would be breach of principles of natural justice and ultimately the order
imposing penalty even otherwise also could not be sustained. (AY. 2006 - 07)
S. Chandrashekar v. ACIT (2017) 396 ITR 538 (Karn) (HC)
501
S. 271 (1) (c) : Penalty – Concealment – Protective assessment – Charge of concealment
penalty cannot be levied where the order is passed on the basis of protective assessment . [
S. 69, 132, 153C]
Allowing the petition the Court held that ;Charge of concealment penalty cannot be levied where
the order is passed on the basis of protective assessment .There could be a protective order qua
assessment, but not a protective order in respect of penalty. Court also observed that apart from
the averment made in the affidavit, no material was placed to show the dispatch ,or receipt of the
order by the assessee. (AY. 1994 - 95)
S. Narayanan v. CIT (2017) 395 ITR 271/299 CTR 285 /159 DTR 387 (Mad) (HC)
S. 271 (1) (c) : Penalty – Concealment – Notice of penalty is not clear as to whether penalty
is imposed for concealment or furnishing of inaccurate particulars of income, the order
imposing penalty is not sustainable. [S.153A]
In the return of income filed in response to notice u/s. 153A of the Act, the assessee offered to
tax, cash payment made for the property. The disclosure was made voluntary and to buy
peace.The voluntary disclosure did not find favour with the AO and he levied the penalty u/s. 271
(1) (c) of the Act, on the ground of concealment or furnishing inaccurate particulars of income.
On appeal, the CIT (A) and ITAT confirmed the levy of penalty. On further appeal, the HC,
deleting the levy of penalty, held that, firstly, the notice of penalty should specifically mention as
to whether the assessee has concealed the income or furnished inaccurate particulars of income.
Secondly, sending of a printed form without specifying the grounds for levy of penalty, would not
satisfy the requirement of law. Thirdly, if the assessee is not made aware of the ground on which
penalty is levied, it defies the principles of natural justice.
S. Chandrashekar v. ACIT (2017) 293 CTR 409/148 DTR 322 (Karn.) (HC)
S. 271 (1) (c) : Penalty – Concealment – A deduction which is wrongly claimed on the advice
of an accountant, would not invite levy of penalty. [S. 57 ]
In the return of income, the assessee had claimed deduction towards expenditure incurred on
travelling u/s. 57 of the Act. During the assessment proceedings, the assessee conceded the
deduction so claimed on the ground that he was unable to produce necessary evidence in support
of its claim and also, the accountant on whose advise the claim was made, was no longer in her
service. The assessee also paid the tax and interest thereon. However, the AO, treated the
disallowance of deduction u/s. 57 of the Act as concealment of income or furnishing of inaccurate
particulars of income and levied penalty u/s. 271 (1) (c) of the Act. On appeal, the CIT (A)
confirmed the levy of penalty. On further appeal, the Tribunal deleted the levy of penalty. On
further appeal, the HC, confirming the tribunal’s order, held that when the assessee realized that
the expenditure claimed u/s. 57 of the Act was not tenable and was based on wrong professional
advice of the accountant, offered the said claim to tax and paid the requisite tax and interest upon
the same. On the said basis the HC held that the assessee could not be said to have either
concealed or furnished inaccurate particulars of her income.
CIT v. Anita Kumaran (Smt.) (2017) 293 CTR 454/148 DTR 281 (Mad.) (HC)
S.271 (1) (c) : Penalty—Concealment-Additions made in quantum proceedings-Levy of

penalty improper.
Allowing the appeal the court held that; the Appellate Tribunal was not right in confirming the
levy of penalty under section 271 (1) (c) of the Income-tax Act, 1961 consequent to the
confirmation of additions in the quantum proceedings before it. (AY. 1994-1995)
Rama Natha Gadhavi v. ITO (2017) 393 ITR 590/79 taxmann.com 152 (Guj) (HC)
Editorial : SLP of revenue was dismissed CIT v. Rama Natha Gadhavi (2017) 392 ITR 44 (St.)
502
S.271 (1) (c) : Penalty—Concealment-Assessing Officer initiating penalty proceedings for
furnishing of inaccurate particulars of income and imposing penalty for concealment of
income—Levy of penalty was held to be not valid.
Dismissing the appeal of the revenue, the Court held that; the satisfaction of the Assessing
Officer with regard to only one of the two breaches under section 271 (1) (c) of the Act, for
initiation of penalty proceedings would not permit penalty being imposed for the other breach.
Thus, the order imposing penalty was to be made only on the ground on which the penalty
proceedings were initiated and it could not be on a fresh ground of which the assessee had no
notice. The Tribunal rightly deleted the penalty. (AY. 2003-2004 to 2006-2007)
CIT v. Samson Perinchery (2017) 392 ITR 4 (Bom.) (HC)
S. 271 (1) (c) : Penalty-Concealment – when return filed was accepted there is no
concealment of income. Assets seized relating to assessment years 2005-06 and 2006-07,
penalty not leviable for assessment year 2007-08 . [S. 132, 153C]
Dismissing the appeals the Court held that; when return filed was accepted there is no
concealment of income. Assets seized relating to assessment years 2005-06 and 2006-07, penalty
not leviable for assessment year 2007-08 . (AY. 2005-2006, 2006-2007)
PCIT v. Ankur Aggarwal (2017) 393 ITR 1 /293 CTR 298/79 taxmann.com 96/147 DTR 342
(Delhi) (HC)
PCIT v. Neeraj Jindal (2017) 393 ITR 1 /293 CTR 298/79 taxmann.com 96/147 DTR 342
(Delhi) (HC)
S.271 (1) (c) : Penalty--Concealment – Arm’s length price--Difference in method leading to

rejection of loss claimed in respect of genuine new line of business--Penalty cannot be
imposed. [S. 92CA ]
Dismissing the appeal of the revenue, the Court held that ;Difference in method leading to
rejection of loss claimed in respect of genuine new line of business, penalty cannot be imposed.
(AY. 2010-11)
PCIT v. Mitsui Prime Advanced Composites India P. Ltd. (2017) 392 ITR 280/79
taxmann.com 283 (2018) 301 CTR 373 /163 DTR 165 (Delhi) (HC)
Editorial : SLP of revenue is dismissed; PCIT v. Mitsui Prime Advanced Composites India P.
Ltd. (2017) 251 Taxman 1 (SC)
S.271 (1) (c) : Penalty—Concealment-Incorrect claim cannot amount to furnishing

inaccurate particulars - Levy of penalty was held to be not justified.[S. 68, 132, 245H]
Immunity was granted by the Settlement Commission in respect of surrender of cash credits
.Consequential disallowance of interest in respect of surrendered loans of earlier years penalty
was levied . Levy of penalty was confirmed by the Tribunal .On reference the Court held that
,incorrect claim cannot amount to furnishing inaccurate particulars accordingly levy of penalty
was held to be not valid . (AY. 1981-1982, 1983-1984)
Ashirbad Enterprises v. CIT (2017) 392 ITR 289/78 taxmann.com 21 (Patna) (HC)
S. 271 (1) (c) : Penalty—Concealment-Opinion of chartered accountant – Se off under

different head – Levy of penalty was held to be not justified.
Dismissing the appeal of the Revenue the Court held that based on the opinion of chartered
accountant set off under different head does not amount to furnishing inaccurate particulars or
concealment of income, hence penalty was not leviable. (AY. 2004-2005)
PCIT v. Atotech India Ltd. (2017) 391 ITR 117 (P&H) (HC)
503
S.271 (1) (c) : Penalty—Concealment-Search and seizure— Disclosure in return filed under
section 153A amounts to extension of disclosure made under section 132 (4), hence penalty
cannot be levied [ S 132 (4), 153A, 153C ]
Dismissing the appeal of the revenue, the Court held that; disclosure in return filed under section
153A amounts to extension of disclosure made under section 132 (4) hence penalty cannot be
levied. (AY. 2002-2003 to 2006-2007)
PCIT v. Gopal Das Kothari (HUF) (2017) 391 ITR 390 (Cal.) (HC)
S. 271 (1) (c) : Penalty-Concealment – Revised return - Amount disclosed in the revised
return – Levy of penalty was held to be not valid.[S. 139 (1), 153A]
The High Court had to consider the interpretation and application of Section 271 (1) (c) of the
Act and Explanation 5 thereto. Two broad issues arose for consideration in this regard :
(i) Whether under Section 271 (1) (c) as it stood prior to the insertion of Explanation 5, levy of
penalty is automatic if return filed by the assessee under Section 153A of the Act discloses higher
income than in the return filed under Section 139 (1)?
(ii) What would be the position of law after insertion of Explanation 5 and whether it is attracted
in the facts of this case?
Dismissing the appeal of the revenue the Court held that; “The word „concealment‟ inherently
carried with it the element of mens rea. Therefore, the mere fact that some figure or some
particulars have been disclosed by itself, even if takes out the case from the purview of non-
disclosure, cannot by itself take out the case from the purview of furnishing inaccurate
particulars. Mere omission from the return of an item of receipt does neither amount to
concealment nor deliberate furnishing of inaccurate particulars of income unless and until there
is some evidence to show or some circumstances found from which it can be gathered that the
omission was attributable to an intention or desire on the part of the assessee to hide or conceal
the income so as to avoid the imposition of tax thereon. In order that a penalty under Section 271
(1) (c) may be imposed, it has to be proved that the assessee has consciously made the
concealment or furnished inaccurate particulars of his income.
In this case, the A.O. in his order noted that the disclosure of higher income in the return filed by
the assessee was a consequence of the search conducted and hence, such disclosure cannot be said
to be “voluntary”. Hence, in the A.O.’s opinion, the assessee had “concealed” his income.
However, the mere fact that the assessee has filed revised returns disclosing higher income than
in the original return, in the absence of any other incriminating evidence, does not show that the
assessee has “concealed” his income for the relevant assessment years. On this point, several
High Courts have also opined that the mere increase in the amount of income shown in the
revised return is not sufficient to justify a levy of penalty. (AY. 2005-06, 2006-07)
PCIT v. Neerj Jindal (2017) 393 ITR 1 (Delhi) (HC)
PCIT v.Ankur Aggarwal (2017) 393 ITR 1 (Delhi) (HC)
S. 271 (1) (c) : Penalty – Concealment - If the quantum appeal is admitted by the High
Court, it means that the issue is debatable and penalty cannot be levied.[S. 260A]
Dismissing the appeal of the revenue, If the quantum appeal is admitted by the High Court, it
means that the issue is debatable and penalty cannot be levied. . The court also held that the
argument of the Dept that CIT v. Nayan Builders and Developers (2014) 368 ITR 722 (Bom)
does not lay down this proposition is not correct. (ITA No. 1498 of 2014, dt. 17.02.2017) (AY.
2006-07)
CIT v. Advaita Estate Development Pvt. Ltd. (Bom.) (HC); www.itatonline.org
504
S. 271 (1) (c) : Penalty - Concealment – Disclosure of income after detection, levy of penalty
was held to be justified .[ S. 142 (1), 143 (2)]
Dismissing the appeal of the assesse the Court held that ;a disclosure of income, or withdrawal of
claim for deduction, by the assessee after a specific notice under section, 142 (1)/143 (2) notice
is issued cannot be said to be a "voluntary disclosure" so as to avoid the levy of penalty. The
argument that the earlier non-disclosure of income/wrong claim for expenditure was due to
"mistake" is not an acceptable. (AY. 2007-08)
Samson Maritime Ltd. v. CIT (2017) 393 ITR 102 (Bom) (HC)
S. 271 (1) (c) : Penalty – Claim of depreciation at higher rate-Levy of penalty was held to be
not valid
Tribunal held that when it is established that the claim was made under the bonafide belief, there
was no reason to impose penalty. The CIT (A) rightly deleted the penalty. (AY. 2012-13)
ITO v. Vaidangi Management Consultants (P) Ltd. (2017) 188 TTJ 49 (UO) (Jp) (Trib.)
S. 271 (1) (c) : Penalty – Concealment – Accommodation entries – Estimation of income -

Penalty at 100% of tax sought to be evaded confirmed
Assessee providing accommodation entries and its income was computed on estimation
basis .Penalty at 100% of tax sought to be evaded confirmed. Higher rate of penalty could not
be imposed upon the assessee merely on account of assessee’s non-appearance in the penalty
proceedings. (AY 2009-10)
Nexus Software Ltd. v. DCIT (2017) 59 ITR 177 (Ahd) (Trib)
S. 271 (1) (c) : Penalty – Concealment – Capital or revenue – Fee paid to registrar of
companies – Debatable – levy of penalty was held to be not justified .
Dismissing the appeal of the revenue the Tribunal held that the issue being debatable levy of
penalty was held to be not justified . (AY. 2009-10)
ACIT v. Jotindra Steel and Tube Ltd (2017) 59 ITR 66 (SN) (Delhi) (Trib)
S. 271 (1) (c) : Penalty – Concealment - AO. has used conjunction “or”. There was
ambiguity in recording of satisfaction and notice issued for the levy of penalty u/s. 274 read
with section 271 (1) (c). Since the change for levy of penalty was not explicitly clear from the
notice, the penalty was bad in law and hence, the penalty proceedings were liable to be set
aside. [ S. 274 ]
The Tribunal held that the satisfaction recorded for initiating penalty proceedings, the reasons for
the levy of penalty u/s. 271 (1) (c) were not coherent. The reasons for initiating penalty
proceedings and the notice for levy of penalty showed vagueness and ambiguity in the mind of
505
the A.O. with respect to charge for the levy of penalty. The AO. was not consistent in specifying
the limb under which penalty was to be levied. While recording satisfaction the AO. had used the
conjunction “and” to mention both the limbs for initiating penalty proceeding, i.e. concealment of
income or furnishing inaccurate particulars of income, whereas in the notice issue under section
274 the A.O. has used conjunction “or”. There was ambiguity in recording of satisfaction and
notice issued for the levy of penalty u/s. 274 read with section 271 (1) (c). Since the change for
levy of penalty was not explicitly clear from the notice, the penalty was bad in law and hence, the
penalty proceedings were liable to be set aside. (AY. 1998-1999)
Ashok Sahakari Sakhar Karkhana Ltd. v. ACIT (2017) 59 ITR 171 (Pune) (Trib.)
S. 271 (1) (c) : Penalty – Concealment – Search and seizure — Failure by assessee to
disclose additional income in return for relevant financial year the levy of penalty was held
to be justified . As regards estimated interest earned on such additional income, levy of
penalty was held to be not justified . [S. 132, Expl.5 ]
Tribunal held that, for Failure by assessee to disclose additional income in return for relevant
financial year the levy of penalty was held to be justified . As regards estimated interest earned on
such additional income, levy of penalty was held to be not justified .
Radha Govind Lashkari v. ACIT (2017) 59 ITR 578 (Jaipur) (Trib)
S. 271 (1) (c) : Penalty – Concealment - Change of head - Losses were not allowed to be set
off against business income treating the said loss as speculative nature - Penalty cannot be
levied [ S.43 (5) ]
Dismissing the appeal of the revenue the Tribunal held that; the losses declared in return was to
treated as a speculative loss and consequently, not allowed to be set off against normal business
income would only be a change of sub-head of loss and it could not be said that there was
furnishing of inaccurate particulars of income, therefore no penalty for Change of sub-head of
loss. (AY. 2009 – 10)
DCIT v. Shree Ram Electro cast (P.) Ltd (2017) 166 ITD 209 (Kol.) (Trib.)
S. 271 (1) (c) : Penalty - Concealment - Claim of depreciation on furnace - Claim being held
to be false levy of penalty was held to be justified [ S. 32 ]
Dismissing the appeal of the assessee the Tribunal held that; when assessee was aware of position
that depreciation for first year is subject to condition of user. Claim for depreciation was not a
mere wrong or erroneous claim but a false claim. Therefore, levy of penalty was justified. (AY.
2004 – 2005)
Sundaram Fasteners Ltd. v. ACIT (2017) 166 ITD 148 (Chennai) (Trib.)
S. 271 (1) (c) : Penalty – Concealment - Disallowance of claim - Levy of penalty was held to
be not valid as the details were disclosed in the return [ S.80IB ]
Allowing the appeal the Tribunal held that ;since facts necessary for computation of income, i.e.,
qua deduction u/s. 80IB were borne out of return as well as other material on record. levy of
penalty for furnishing inaccurate particulars of income was held to be not valid . (AY.2004-05)
Sundaram Fasteners Ltd. v. ACIT (2017) 166 ITD 148 (Chennai) (Trib.)
506
S. 271 (1) (c) : Penalty – Concealment – Additional ground was raised before the Tribunal -
Failure to specify the charge the levy of penalty was held to be invalid .The argument that
the assessee was made aware of the specific charge during the proceedings is of no avail. S.
292BB does not save the penalty proceedings from being declared void. [ S. 254 (1),274,
292BB ]
Allowing the appeal the Tribunal held that; Additional ground on jurisdiction issue was admitted
. Tribunal held that; concealment of particulars of income" and "furnishing of inaccurate
particulars of income" referred to in s. 271 (1) (c) denote two different connotations. It is
imperative for the AO to make the assessee aware in the notice issued u/s 274 r.w.s. 271 (1) (c) as
to which of the two limbs are being put-up against him. The failure to do so is fatal to the penalty
proceedings. The argument that the assessee was made aware of the specific charge during the
proceedings is of no avail. S. 292BB does not save the penalty proceedings from being declared
void. (ITA NOS. 1596 &1597/MUM/2014, dt. 01.09.2017) (AY. 2005-06, 2006-07)
Orbit Enterprises v. ITO (Mum) (Trib),, www.itatonline.org
S. 271 (1) (c) : Penalty – Concealment – Notice not specifying the specific charge - Levy of
penalty was held to be not justified
Allowing the appeal of the assessee, the Tribunal held that ,levy of penalty without specifying a
specific charge was held to be valid . The law in Maharaj Garage & Co (Bom) that it is not
necessary for the penalty notice to frame a specific charge cannot be followed in the context of
whether the notice should specify 'concealment' vs. 'inaccurate particulars' because the judgement
does not consider SSA’s Emerald Meadows (SC) and is contrary to Samson Perinchery (Bom)
(HC) . (ITA No. 5006/Del/2013, dt. 21.11-.2017.) (AY. 1997-98)
Aditya Chemicals Ltd. v. ITO (Delhi) (Trib); www.itatonline.org
S. 271 (1) (c) : Penalty – Concealment – Notice not specifying specific charge - Concealment
of income and furnishing of inaccurate particulars are distinct and separate charges. A
nebulous notice which contains both charges is null and void ab initio . [ S. 274]
Allowing the appeal of the assessee, the Tribunal held that, notice should specify the specific
charge. Concealment of income and furnishing of inaccurate particulars are distinct and separate
charges. A nebulous notice which contains both charges is null and void ab initio . (ITA No.
118/Agra/2015, dt. 19.09.2017) (AY. 2008-09)
Sachin Arora v. ITO (Agra) (Trib); www.itatonline.org

Das Cold Storage (P) Ltd v. Dy. CIT (Agra) (Trib); www.itatonline.org
Pravesh Agarwal (Smt) v. ITO (Agra) (Trib); www.itatonline.org
Late Shri Trilok Singh Kalra v. DCIT (Agra) (Trib); www.itatonline.org
Late (Smt) Shanta Balani Through L/H Ramesh Chand Balani v. ITO (Agra) (Trib);
www.itatonline.org
Shankuntala Devi (Smt) v. ACIT (Agra) (Trib); www.itatonline.org
Econ Antri Ltd v. JCIT (Agra) (Trib); www.itatonline.org
Shanti Vrat & Sons (P) Ltd v. ACIT (Agra) (Trib); www.itatonline.org
Kamaljit kalra (Smt) v. Dy.CIT (Agra) (Trib); www.itatonline.org
Shri Hukum Chand Sharma v. ITO (Agra) (Trib); www.itatonline.org
Shri Nand Kishore Goyal v. ITO (Agra) (Trib); www.itatonline.org
507
Bandejiya & Brothers v. DCIT (Agra) (Trib); www.itatonline.org
Seema Gupta (Smt) v DCIT (Agra) (Trib); www.itatonline.org
Bhawna Gupta (Smt) v.DCIT (Agra) (Trib); www.itatonline.org
Shashi Kant Agarwal v ITO (Agra) (Trib); www.itatonline.org
Shree Giriraj Education v. ITO (Agra) (Trib); www.itatonline.org
M.L.Housing Pvt Ltd v. ACIT (Agra) (Trib); www.itatonline.org
S. 271 (1) (c) : Penalty – Concealment - Change of method of computation of ALP by TPO
cannot be the ground t levy of concealment penalty . [S. 92C. 271 (1) (c) ,Expl. 7 ]
Allowing the appeal of the assessee . the Tribunal held that; under Explanation 7 to S.. 271 (1)
(c), the onus on the assessee is only to show that the ALP is computed in accordance with the
scheme of s. 92 C in good faith and due diligence. The fact that the TPO changes the method of
computation of ALP does not mean it is a fit case for imposition of penalty if there is no
dishonesty is found in the conduct of the assesse. (ITA No. 2647/Del/2016, dt. 31.10.2017) (AY.
2010-11)
Halcrow Consulting India Pvt. Ltd. (Delhi) (Trib); www.itatonline.org
S. 271 (1) (c) : Penalty – Concealment – Disallowance was confirmed by High Court –
Penalty was deleted as assessee had disclosed all material facts before the AO and also
there was no specific charge .
Dismissing the appeal of the revenue, the Tribunal held that; the mere making of claim which is
not sustainable in law, by itself will not amount to furnishing inaccurate particulars regarding
income of the assessee. Further theAssessing Officer was not sure as to which offence the
assessee had committed forlevy of the penalty, whether concealment of income or for filing
inaccurate particularsof income. Merely because the commission expenses had been disallowed in
the assessment year under appeal and confirmed by the appellate authority that was noground to
levy the penalty under section 271 (1) (c) against the assessee. (AY. 2006-07)
ACIT v. Usha Wadhwa (Smt.) (2017) 57 ITR 85 (Chd.) (Trib)
S. 271 (1) (c) : Penalty – Concealment - Failure to deduct tax at source does not amount to
furnishing inaccurate particulars, hence levy of penalty was held to be not justified .[ S.40
(a) (ia)]
Dismissing the appeal of the revenue the Tribunal held that; merely making a claim which was
not sustainablein law by itself would not amount to furnishing inaccurate particulars of income.
There wasno finding given by the Assessing Officer that in the details supplied by the assessee in
itsreturn, there was any incorrect, erroneous or false information which had been suppliedby the
assessee. Therefore the penalty levied was not justified. (AY. 2008-09)
Dy.CIT v. Compucom Software Ltd. (2017) 57 ITR 96 (Jaipur) (Trib)
S. 271 (1) (c) : Penalty – Concealment-Royalty or business income – Income was not offered
to tax ,as the issue being debatable, levy of penalty was held to be not justified.
Dismissing the appeal of the revenue, the Court held that, whether the royalty was taxable as not
being a debatable levy of penalty was held to be not justified . (AY. 1997-98)
DDIT v. Metapath Software International Ltd. (2017) 57 ITR 349 (Delhi) (Trib)
508
S. 271 (1) (c) : Penalty – Concealment-Proceedings initiated for furnishing inaccurate
particulars of income but penalty order alleging that the assessee had concealed its income –
Notice issued for initiating the proceedings was defective for failure to state the ground on
which penalty was imposed – Order imposing penalty was invalid. [S. 274]
On appeal, the Tribunal held that that at the time of issuing notice u/s. 274 the AO was not certain
as to whether it was for furnishing of inaccurate particulars of income or concealment of
particulars of income. While commonly for all the four years, in the assessment order under
section 153C read with section 153A (1) (b) read with section 144 penalty was initiated for
furnishing inaccurate particulars of income, in the penalty order, it was alleged that the assessee
had concealed its particulars of income. Therefore for all the four years i.e. 2001-02 to 2004-05,
the show-cause notice issued under section 274 read with section 271 was defective as it did not
speak about the grounds on which the penalty had been imposed. The orders imposing penalty for
all the four assessment years were invalid and consequently penalty imposed was cancelled. (AY.
2001-02 to 2004-05).
Multivision Infotech P. Ltd .v. ACIT (2017) 56 ITR 278 (Ahd) (Trib)
S. 271 (1) (c) : Penalty – Concealment – Estimate of profits by the AO – Tribunal

significantly reducing the quantum of addition – Appeal admitted by the High Court on
substantial question of law – Hence, the issue is debatable and no penalty is leviable. [S.
260A ]
On appeal by the Department, the Tribunal held as far as addition with respect to the suppressed
profitwas concerned, it was an estimated addition which was significantly reduced by
theTribunal. This issue was a debatable issue as the addition made by the AO had been deleted by
the Commissioner of Income-tax (Appeals) and while the Tribunal had restoredthese additions
partly and the appeal of the assessee had been admitted by the HighCourt suggesting a question of
law was involved. It could not be said that the explanationsubmitted by the assessee in support of
its addition was false, proving the fact that theassessee had concealed its income. Similarly the
assessee’s explanation with regard tothe issue of bogus purchases had been accepted by the
Commissioner of Income-tax (Appeals) in thequantum appeal but such conclusions of the
Commissioner of Income-tax (Appeals) did not meet theapproval of the Tribunal. The High Court
had admitted the question on this aspect also. Therefore it was also a debatable issue. Hence the
penalty is not leviable in the instant case. (AY. 1992-93).
DCIT .v. Maradia Copper Extrusion P. Ltd. (2017)56 ITR 172 (Ahd) (Trib.)
S. 271 (1) (c) : Penalty – Concealment – Interest on enhanced compensation – Bonafide

explanation levy of penalty was held to be not justified . [ S.10 (37)
Tribunal held that the assessee under a bonafide belief treated the interest on enhanced
compensation as being in the nature of compensation, and thus exempt under section 10 (37).
Explanation of the assessee, cannot be said to be false and assessee had disclosed all particulars
of his income pertaining to interest on enhanced compensation, hence, impugned penalty levied
under section 271 (1) (c) is deleted. (AY. 2012-13)
Pankaj Krishan Sehgal v. ITO (2017) 187 TTJ 49 (UO) (Chd.) (Trib.)
S.271 (1) (c) : Penalty – Concealment-Addition itself was deleted hence penalty cannot be
levied . [ S. 153A]
509
Allowing the appeal, the Tribunal held that; assessment pursuant to search is without jurisdiction
as no incriminating materials found during search and that the Gifts were disclosed in Capital
Account in Return of Income . Penalty on account of addition to be deleted as the addition itself
is deleted. (AY. 2003-04)
Nenshi L. Shah v. DCIT (2017) 57 ITR 106 (Mum Trib)
S. 271 (1) (c) : Penalty – Concealment – Disclosure in the course of survey to buy peace –
Levy of penalty was held to be not justified – Notice issued mechanically without
application of mind – Levy of penalty was held to be not valid - When there are conflicting
judgements, the latter one has to be followed . [ S. 133A ]
Allowing the appeal of the assessee the Tribunal held that; merely on the basis of disclosure made
in the course of survey levy of penalty was held to be not justified .Ratio in MAK Data (P) Ltd v.
CIT (2013) 358 ITR 593 (SC) explained . Penalty also deleted on the ground of non application
of mind by the AO while issuing the notice u/s 271 (1) (c) of the Act followed CIT v Samson
Parichery (2016) 288 CTR 50 (Bom) (HC) .Ratio in CIT v Kaushalya (Smt) 1995) 216 ITR 660
(Bom) (HC) explained Tribunal held that when there are conflicting judgements, the latter
decision has to be followed . (Bhika Ram and Ors v UOI (1999) 238 ITR 113 (Delhi) (HC),
Datamatics Financial Services Ltd v JCIT (2005 ) 95 ITD 23 (Mum) (Trib) (30), ITO v. Sanatan
Textrade Ltd (2010) 4 ITR 593 (Mum) (Trib) (AY. 2007 - 08)2008 - 09, 2009-10, 2010-11)
Uttam Value Steels Limited v. ACIT (Mum.) (Trib.), www.itatonline.org
S. 271 (1) (c) : Penalty-Concealment – Loss on capital asset – Debiting the loss to P& L
account instead reducing from the block of asset was bonafide mistake, levy of penalty was
held to be not justified .
Allowing the appeal of the assessee the Tribunal held that; there was no a mala fide intention to
conceal. Deferral of depreciation allowance does not result in concealment of income or
furnishing of furnishing of any inaccurate particulars. No penalty can be levied for a sheer
accounting error of debiting loss incurred on sale of a fixed asset to the P&L A/c instead of
reducing the sale consideration from the WDV of the block. (ITA No. 100/Del/2015, dt.
21.09.2017) (AY.2010-11)
Harish Narinder Salve v. ACIT (2017) 59 ITR 90 (N) (Delhi) (Trib)
S. 271 (1) (c) : Penalty – Concealment-Withdrawal of debatable claim and addition to

income - Levy of penalty is held to be not justified.
The Tribunal held that assessee having withdrawn the debatable claim of deduction by filing a
revised return and offered sound explanation to assail the addition made by the AO, penalty under
section 271 (1) (c) is not sustainable. (AY. 2011-12)
Dy. CIT v. Renu Agarwal (Smt.) (2017) 185 TTJ 36 (UO) (Jaipur) (Trib.)
S. 271 (1) (c) : Penalty-Concealment-False claim of expenditure and agricultural income –

Levy of penalty was held to be justified.
Tribunal held that ;false claim by assessee towards expenditure on film advertisement and
agricultural income was held is liable to concealment penalty . AY.2010-2011, 2011-12)
S. 271 (1) (c) : Penalty – Concealment – Satisfaction-As per provisions of the Act, the
satisfaction has to be recorded by the Assessing Officer before initiating penalty
proceedings as to under which limb the case of assessee falls.
Allowing the appeal of the assessee, the Tribunal that;where concealment of income and
furnishing of inaccurate particulars of income were two different connotations, then as per
510
provisions of the Act, satisfaction had to be recorded by AO before initiating penalty proceedings
as to under which limb case of assessee falls. In absence of same, it causes prejudice to right of
reasonable opportunity to be allowed to assessee before levy of penalty u/s 271 (1) (c). It was
further held that in cases where penalty proceedings had been initiated on different footing and
CIT (A) reversed same, there is change in opinion and basis for levy of penalty for concealment
varies. In such circumstances, there is no merit in levy of penalty under section 271 (1) (c) of the
Act Accordingly, court allowed the claim of assessee. (AY. 2003-04 to 2007-08)
Kanjaiyalal D. Jain v. ACIT (2016) 48 CCH 469 /(2017) 150 DTR 1 /185 TTJ 553 (Pune)
(Trib.)
S. 271 (1) (c) : Penalty – Concealment - Assessee liable to penalty as per Explanation 3 to s.
271 (1) (c) on failure to file return of income vis-à-vis income disclosed in return filed u/s.
153A – As per Explanation 4 (b) to s. 271 (1) (c), penalty is to be computed after allowing
credit of advance tax paid by the Assessee [ S. 132 ,153A ]
On appeal to Tribunal, the admitted fact was that no return of income was filed by the Assessee
prior to the date of search. Therefore, the Assessee was liable to penalty as per Explanation 3 to s.
271 (1) (c) of the Act, on failure to furnish any explanation for not returning the income
chargeable to tax. It was also observed by the Tribunal that the Assessee had paid advance tax for
the year under consideration. Therefore, the computation of penalty which stands levied at 100%
of tax evaded, shall, in the present case, be with reference to Explanation 4 (b) to s. 271 (1) (c),
which allows credit for the advance tax while calculating tax evaded amount. (ITA No.
2084/Mds/2013 dt. 06.06.2017) (A.Y.2006-07)
ACIT v. S&P Foundation (P) Ltd. (2017) 189 TTJ 892 /158 DTR 118 (Chennai) (Trib.)
S. 271 (1) (c) : Penalty – Concealment - As per Explanation 5A to s. 271 (1) (c), Assessee
liable to penalty on the sum offered as additional income as per return filed u/s. 153A [ S.
153A ]
Tribunal held that; Assessee admits to the sum credited to the account ‘advance from allottees’ as
representing its income during the year. Therefore, the Tribunal held that such facts and
circumstances of the Assessee are squarely covered by the provisions of Explanation 5A to s. 271
(1) (c) of the Act which levies penalty on additional income offered as per the s. 153A return of
income. (ITA No. 2084/Mds/2013 dt. 06.06.2017) (A.Y.2006-07)
ACIT v. S&P Foundation (P) Ltd. (2017) 189 TTJ 892/158 DTR 118 (Chennai) (Trib.)
S.271 (1) (c) : Penalty – Concealment - Deduction under wrong advice and incorrect
understanding of law levy of penalty is held to be not valid. [S.80IA]
Held that assessee had disclosed all facts in respect of the claim to deduction under section 80IA
according to the return and the statement of total income. Assessee had also furnished Form
10CCB and report was duly certified by chartered accountant. Under wrong advise and incorrect
understanding of law the assessee had made the claim. It was advised by a tax consultant that the
income generated from infrastructural contract work qualified for deduction. Assessee had
offered an explanation which was not found altogether untrue or false. Assessee should not be
penalized under section 271 (1) (c). Accordingly penalty was to be deleted. (AY. 2006-07)
511
Johnson Enterprises Ltd. v. ITO (2017) 55 ITR 6 (SN) (Ahd.) (Trib.)
S.271 (1) (c) : Penalty – Concealment Merely AO mentioned alternate charges at

preliminary stage of issue of notice under section 274 - proceedings cannot be held vitiated –
AO recording well-reasoned satisfaction before invoking provisions hence penalty was held
to be justified.
Held that there was no reasonable or bonafide cause for failure to declare income in the return to
get out of rigours of section 271 (1) (c). There was no infirmity in the notice issued by AO
wherein AO has clearly framed alternate charges for levying penalty under section 271 (1) (c) at
the stage of issue of notice. Merely because, AO had mentioned alternate charges at the stage of
issue of notice which was preliminary stage of initiating penalty, proceedings could not be held to
be vitiated. AO had clearly recorded a detailed satisfaction after application of mind in the
assessment order that assessee has not disclosed the income earned. It could not be held that the
assessee was not aware of the charge framed by the AO in which he was burdened for initiating
penalty proceedings u/s 271 (1) (c). (AY. 2011-12)
Mahesh M. Gandhi v. ACIT (2017) 55 ITR 36 (SN) (Mum.) (Trib.)
S.271 (1) (c) : Penalty – Concealment-Change of head of Income – Levy of penalty was held
to be not justified.
Held that there was only change of head of income by AO from short term capital gains income
on account of investment in shares and securities declared by the assessee to business income by
AO and there was no addition to the income of the assessee. Since there was only a change of
head of income and no evidence was brought on record that assessee’s claim was not bonafide,
penalty was liable to be deleted. (AY. 2008-09)
Pushpavati Khushalchand Mehta (Ms.) v. ITO (2017) 55 ITR 12 (SN) (Mum.) (Trib.).
S.271 (1) (c) : Penalty – Concealment – Bonafide mistake - Levy of penalty was held to be
not justified.
Held that assessee’s father filed the return based on Form 16 and by mistake he omitted to include
interest on savings and fixed deposits. Explanation of assessee that his father inadvertently
omitted to include interest in the return was bonafide and genuine. Lower authorities did not
prove that the explanation of assessee was false. Conduct of assessee did not show that there was
deliberate concealment of income. Penalty therefore is deleted. (AY. 2010-11)
Sachidanand Padgaonkar v. ITO (2017) 55 ITR 44 (SN) (Mum.) (Trib.)
S.271 (1) (c) : Penalty – Concealment-Bonafide claim to deduction u/s 54F relying upon
certain decisions – Levy of penalty is not justified. [S. 54F]
Held allowing the appeal that assessee had only made a bonafide claim to deduction u/s 54F
relying upon certain deductions. Thereby Reliance was placed on decision of Reliance
Petroproducts 322 ITR 158 (SC) for that a mere making of a claim which is not sustainable in law
will not amount to furnishing inaccurate particulars regarding the income of assessee. (AY.2007-
08)
Veerappan Sivakumar v. ITO (2017) 55 ITR 4 (SN) (Chennai) (Trib.)
S.271 (1) (c) : Penalty – Concealment - Notice not clearly specifying charge for levy of
penalty – Further, Penalty in earlier years dropped on similar additions - Penalty not
sustainable. [S. 274]
Held that while recording satisfaction of penalty, AO was not sure about the charge for levy of
penalty. In the notice issued u/s 274, AO had mentioned both the charges for levy of penalty i.e.
furnishing inaccurate particulars of income and concealment of income. Thus, notice did not
clearly specify the charge for levy of penalty. Therefore notice issued u/s. 274 rws 271 (1) (c) was
512
bad in law and penalty proceedings were therefrom were vitiated. Therefore, penalty be dropped.
Further, penalty on similar additions were dropped in earlier years. Hence, penalty be dropped.
(AY .2007-08, 2008-09)
Vidyanath Urban Co-Operative Bank Ltd. v. ACIT (2017) 55 ITR 61 (SN) (Pune) (Trib.)
S. 271 (1) (c) : Penalty-Concealment - The bonafides of the explanation of the assessee for
not complying with the law have to be seen - Levy of penalty was held to be not justified .
Dismissing the appeal of the revenue the Tribunal held that; penalty cannot be levied unless there
is "evidence beyond doubt" that there was concealment of particulars of income or furnishing
inaccurate particulars thereof on the part of the assessee. The fact that the assessee did not
voluntarily furnish the return of income, and that the merits were decided against it, does not per
se justify levy of penalty. The bonafides of the explanation of the assessee for not complying with
the law have to be seen. (ITA No. 1393/Del/2011, dt. 28.04.2017) (AY. 1997-98)
DDIT v. Metapath Software international Ltd. (Delhi.) (Trib.),www.itatonline.org
S. 271 (1) (c) : Penalty-Concealment – The non-striking of the irrelevant portion in the
show-cause notice means that the AO is not firm about the charge against the assessee and
the assessee is not made aware as to which of the two limbs of s. 271 (1) (c) he has to
respond hence the levy of penalty is bad in law.
Allowing the appeal of the assessee, the Tribunal held that ;penalty proceedings are “quasi-
criminal” and ought to comply with the principles of natural justice. The non-striking of the
irrelevant portion in the show-cause notice means that the AO is not firm about the charge against
the assessee and the assessee is not made aware as to which of the two limbs of s. 271 (1) (c) he
has to respond. The fact that the assessment order is clear about the charge against the assessee is
irrelevant, levy of penalty was deleted . (AY. 2008-09)
Meherjee Cassinath Holding Pvt. Ltd. v. ACIT (2017) 155 DTR 143/187 TTJ 722 (Mum.)
(Trib.)
S. 271 (1) (c) : Penalty – Concealment – Revised return was filed prior to initiation of
reassessment proceedings – Levy of penalty was held to be not justified .[ S.69A ]
Allowing the appeal of the assessee, the Tribunal held that, assessee declared certain amount
deposited in bank by filing a revised return prior to initiation of reassessment proceedings, merely
because tax evasion petition was filed against assessee family earlier did not mean that he had
concealed income or furnished inaccurate particulars of income and, thus, impugned penalty
order passed was set aside. (AY. 2005 - 06, 2007 - 08)
Murli Dodeja v. ITO (2017) 163 ITD 617 (Mum.) (Trib.)
S.271 (1) (c) : Penalty—Concealment-re allocation of expenses - Levy of penalty was held to
be not justified .
On reallocation of expenses levy of penalty was held to be not justified. (AY.2005-2006)
ITO v. Bio-Vet Industries. (2017) 54 ITR 600 (Mum) (Trib.)
S. 271 (1) (c) : Penalty—Concealment-Satisfaction of Assessing Officer mandatory - Failure

to apply his mind at time of issuing penalty notice to assessee-Levy of penalty invalid. [S.
274]
Allowing the appeal the Tribunal held that the AO not certain whether he has to proceed on basis
that assessee has concealed his income or had furnished inaccurate particulars of its income.
Assessing Officer failed to apply his mind at time of issuing penalty notice to assessee. Levy of
penalty was held to be invalid. (AY-2012-2013)
Prince Consultancy P. Ltd v. DCIT (2017) 54 ITR 334 (Mum) (Trib.)
513
S. 271 (1) (c) : Penalty – Concealment – The failure by the AO to specify in the S.. 274 notice
which of the two charges is applicable reflects non-application of mind and is in breach of
natural justice as it deprives the assessee of an opportunity to contest. The penalty
proceedings have to be quashed. [ S. 274 ]
Allowing the appeal of the assesse the Tribunal held that ;Furnishing of inaccurate particulars of
income' and 'concealment of particulars of income' have different connotations. The failure by the
AO to specify in the s. 274 notice which of the two charges is applicable reflects non-application
of mind and is in breach of natural justice as it deprives the assessee of an opportunity to contest.
The penalty proceedings have to be quashed. (ITA No. 1261/Mum/2011, dt. 17.05.2017) (AY.
2006-07)
Jehangir HC Jehangir v. ACIT (Mum.) (Trib),www.itatonline.org
S. 271 (1) (c) : Penalty-Concealment - Penalty cannot be levied if the omission to offer
income, and the wrong claim of deduction, was by oversight and the auditors did not point
it out. Also, the failure of the AO to specify the limb under which penalty u/s 271 (1) (c) is
imposed is a fatal error.
Allowing the appeal of the assessee the Tribunal held that;penalty cannot be levied if the
omission to offer income, and the wrong claim of deduction, was by oversight and the auditors
did not point it out. Also, the failure of the AO to specify the limb under which penalty u/s 271
(1) (c) is imposed is a fatal error. (ITA No. 2158/Mum/2016, dt. 24.02.2017) (AY. 2011-12)
Wadhwa Estate & Developers India Pvt. Ltd. v. ACIT (Mum.) (Trib.); www.itatonline.org
S. 271 (1) (c) : Penalty – Concealment - Bogus purchases - Surrendered in the course of
assessment – Levy of penalty was held to be not justified, however merely on the basis of
defects in the notice penalty cannot be deleted. [ S. 69C,274, 292BB ]
In the course of assessment proceedings the assesse surrendered the alleged bogus purchases to
buy peace and not contested the addition in quantum proceedings . The AO levied the penalty
which was confirmed in appeal by CIT (A). In appeal deleting the penalty the Tribunal held that,
the claim of the assesse was bona fide and same was coupled with documentary evidence hence
imposition of penalty was not justified . As regards the legal ground on alleged the defects in the
notice, the Tribunal held that penalty could not be deleted merely on the basis of defect pointed
out in the notice . (AY. 2010-11)
Earthmoving Equipment Service Corporation v. DCIT (2017) 153 DTR 226 /187 TTJ 233
/166 ITD 113 (Mum.) (Trib.).
S. 271 (1) (c) : Penalty--Concealment – Excess claim of interest under bona fide belief, levy
of penalty was held to be not justified .
Allowing the appeal of the assesse, the Tribunal held that; Excess claim of interest under bona
fide belief, levy of penalty was held to be not justified. No finding by authorities that assessee
either concealed income or filed inaccurate particulars of income. Assessee neither concealing
income nor filing inaccurate particulars. Penalty levied was deleted. (AY.2010-2011)
Lata Hospitals Pvt. Ltd. v. DCIT (2017) 53 ITR 625 (Visakh) (Trib.)
S.271 (1) (c) : Penalty--Concealment - -Additions deleted by Tribunal hence penalty levied
was held to be not sustainable.
Allowing the appeal, since the additions themselves had been deleted by the Tribunal, levy of
penalty was held to be not valid. (AY.2007-2008)
Birla Sun Life Asset Management Co. Ltd v. JCIT (2017) 54 ITR 472 (Mum) (Trib)
S. 271 (1) (c) : Penalty—Concealment--Bogus purchase and sale of shares—Additions

deleted - Penalty was held to be not leviable [ S. 45, 153A ]
514
Dismissing the appeal of the revenue, the Tribunal held that; the Commissioner (Appeals) having
cancelled the additions made by the Assessing Officer the Commissioner (Appeals) deleted the
penalty under section 271 (1) (c) on correct reasoning and hence his order did not call for any
interference. (AY.2003-2004)
CIT v. Asha V. Mehta (Smt.) (2017) 54 ITR 191 (Mum) (Trib)
S. 271AAA : Penalty - Search initiated on or after 1st June, 2007 – Additional condition of
having to substantiate manner in which undisclosed income was earned, only if revenue
raises question regarding manner in which undisclosed income was earned while recording
assessee’s statement.The cancellation of penalty was justified [ S.132 (4) ]
Dismissing the appeal of the revenue the Court held that ;the additional condition of having to
substantiate manner in which undisclosed income was earned, only if revenue raises question
regarding manner in which undisclosed income was earned while recording assessee’s statement.
the Commissioner (Appeals) was specific that no question was put to the assessee while recording
his statement under section 132regarding the manner of deriving the undisclosed income hence
the cancellation of penalty was justified. (AY.2010-11)
PCIT v. Mukeshbhai Ramanlal Prajapati (2017) 398 ITR 170 (Guj) (HC)
S. 271AAA : Penalty-Search initiated on or after 1st June, 2007-No penalty can be levied in
respect of undisclosed income found during a search if the AO did not put a specific query
to the assessee by drawing his attention to S.. 271 AAA and asking him to specify the
manner in which the undisclosed income, surrendered during the course of search, had
been derived. Deletion of penalty was held to be justified .[S. 132]
Dismissing the appeal of the revenue, the Court held that; The CIT (A) noted that no specific
query had been put to the Assessee by drawing his attention to Section 271 AAA of the Act
asking him to specify the manner in which the undisclosed income, surrendered during the course
of search, had been derived. The CIT (A), therefore, relying on the decisions of this Court held
that the jurisdictional requirement of Section 271AAA was not met. The above view has been
concurred with by the ITAT. In the facts and circumstances of the case, the Court is of the view
that the concurrent decision of the CIT (A) and the ITAT represent a plausible view which cannot
be said to be perverse .Deletion of penalty was held to be justified . (AY. 2010-11)
PCIT v. Emirates Technologies Pvt. Ltd (2017) 387 ITR 189 (Delhi) (HC)
S. 271AAA : Penalty - Search initiated on or after 1st June, 2007 - Assessee entitled to
adjustment of seized cash to advance tax--Penalty cannot be imposed - Explanation 2, to
section 132B is not retrospective. [S.132B, 234B ]
Dismissing the appeal of the revenue, the Court held that; the assessee was entitled to adjustment
of cash seized during the search against the advance tax dues. Explanation 2 to section 132B of
the Income-tax Act, 1961, inserted by the Finance Act, 2013, was not retrospective in nature.
Moreover, Explanation 2 to section 132B came into force on June 1, 2013 whereas the assessee's
case related to the assessment year 2011-12. (AY. 2011-2012)
PCIT v. Surinder Kumar Khindri (2017) 393 ITR 479/154 DTR 157/297 CTR 109 (P&H)
(HC)
S. 271AAA : Penalty - Search initiated on or after 1st June, 2007 – Source was not explained
and taxes due on undisclosed income was not paid – Levy of penalty was held to be justified
[ S. 132 (4) ],
515
Allowing the appeal of the revenue the Tribunal held that; the assessee had not explained sources
from where he made said investments and taxes due on said income were also not paid, penalty
imposed under section 271AAA was justified (AY. 2011-12)
ACIT v. Shailesh Gopal Mhaske. (2017) 167 ITD 344/(2018) 164 DTR 5 (Pune) (Trib.)
S. 271AAA : Penalty - Search initiated on or after 1st June, 2007 – Surrender in the Course
of assessment – Levy of penalty was held to be not valid [ S. 132, 143 (3) ]
Allowing the appeal of the assessee the Tribunal held that; the assessee during course of search
and post search investigation assessee did not surrender any money but during course of scrutiny
assessment, he surrendered an income which was claimed to be his wife's savings/pin money,
same would not be considered as 'undisclosed income', thus, penalty under section 271AAA was
not justified. (AY. 2012-13)
Mahavir Prasad Jaipuria v. ACIT (2017) 167 ITD 253 (Delhi) (Trib.)
S. 271AAA : Penalty - Search initiated on or after 1st June, 2007 – When no question was
asked during statement recorded u/s. 132 (4) regarding manner of earning of income
declared subsequently penalty cannot be levied for failure to disclose the manner of earning
of income [ S. 153A,132 (4) ]
Dismissing the appeal of the revenue the Tribunal held that; it was mentioned by the assessee in
statement recorded u/s. 132 (4) that income was earned from taxable business and no further
question was asked by revenue during statement recorded. Therefore, subsequently revenue
cannot levy the penalty on the ground that manner of earning of income was not disclosed . (AY.
2010-11)
ACIT v. Shreenarayan Sitaram Mundra. (2017) 166 ITD 47 (Ahd) (Trib.)
S. 271AAA - Penalty — Search initiated on or after 1st June, 2007 — No penalty where
assessee in statement recorded under section 132 (4) admits undisclosed income and
specifies manner in which such income derived [ S. 132 (4) ]
Held, allowing the appeal of the assessee, that in the statement recorded under section 132 (4) of
the Act, the assessee categorically stated that he had derived undisclosed income by inflating
expenses recorded in the books of account. The Commissioner (Appeals) was not justified in
confirming the penalty under section 271AAA of the Act. (ITA No. 773/JP/2016) (AY 2008-09)
Murarilal Mittal v. ACIT (2017) 59 ITR 568 (Jaipur) (Trib)
S. 271AAA : Penalty - Search initiated on or after 1st June, 2007 – Penalty could not be
levied on amount which assessee had already admitted in statement recorded during
search, however penalty can be levied on income which was not admitted in the statement .
[ S. 132 (4), 153A ]
Tribunal held that, penalty cannot be levied on admitted income in statement recorded u/s. 132
(4) and also substantiated manner in which it was derived however ,penalty can be levied on
balance amount of income which was not admitted in statement recorded u/s. 132 (4) even though
taxes with interest were paid. (AY .2010-11)
Ravi Kiran Aggarwal v. ACIT (2017) 166 ITD 33 (Mum) (Trib.)
516
S. 271AAA : Penalty – Search initiated on or after 1st June, 2007 - Undisclosed income -
Assessee submitted break up and proximate source of income - Penalty was set aside.
The AO while completing assessment had also passed a penalty order u/s. 271AAA. Undisputed
fact that assessee had during course of search proceedings, declared undisclosed income and also
submitted break up of same and proximate manner of income earned. The AO without identifying
same levied penalty u/s. 271AAA. The ITAT held that when detailed break up and item-wise of
income given and also explained the proximate manner of income earned/derived then penalty
order required to be set aside. (A.Y.2009 – 2010)
DCIT v. Vijay Ravji Gajra (2017) 162 ITD 210 (Mum) (Trib.)
S. 271AAB : Penalty – Absence of proper show cause notice - Notice issued under section
271 (1) (c) and not under section 271AAB. [S. 271 (1) (c)]
The Tribunal held that opportunity of being heard has been given to the assessee only in respect
of the proceedings initiated under section 271 (1) (c) of the Act. No opportunity has been given to
the assessee in respect of the penalty to be levied under section 271AAB of the Act. The order
passed by the AO is against the principles of natural justice of providing the proper opportunity to
the assessee. The Tribunal quashed the order of AO.
The Tribunal further held that AO has not specified in the notice in respect of which clause the
penalty is going to be levied on the assessee. The provisions of section 271 AAB are not
mandatory which means that the penalty has to be levied on each and every case wherever the
assessee has made default as stated under clause (a), (b) and (c) of the Act. On this basis also the
Tribunal set aside the order of CIT (A) and deleted the penalty levied on the assessee. (AY. 2014-
15)
Kamal Kishore Chandak v. ACIT (2017) 185 TTJ 265 /55 ITR 209 /150 DTR 247 (Luck.)
(Trib.)
Sandeep Chandak v. ACIT (2017) 185 TTJ 265 /55 ITR 209/150 DTR 247 (Luck.) (Trib.)
Shakuntala Devi Chandak (Smt) v. ACIT (2017) 185 TTJ 265 55 ITR 209/150 DTR 247
(Luck.) (Trib.)
S. 271B : Penalty - Failure to get accounts audited - Bona fide belief that securities was
shown as investment hence not liable to get the tax audit certificate – Levy of penalty was
held to be not justified . [ S.44AB ]
Allowing the appeal of the assessee the Tribunal held that; securities held by assessee were
disclosed as investment in books of account whereas profit arising on sale of those securities was
reflected as business income, said method being accepted by ICAI, plea raised by assessee that it
was under bona fide belief that provisions of section 44AB did not apply to its case, therefore
levy penalty was held to be not justified . (AY. 2003-04)
Off - Shore India Ltd. v. DCIT (2017) 167 ITD 635 (Kol) (Trib.)
S. 271B : Penalty - Failure to get accounts audited – Reasonable cause - Levy of penalty was
held to be not justified [ S.44AB ]
Allowing the appeal of the assessee the Tribunal held that ;since assessee had proved beyond
doubt that its books of account were damaged by flood by bringing on record copies of insurance
claim for loss of stock, a reasonable cause for not getting its accounts audited was there, hence
levy of penalty was held to be not valid . (AY.2007 - 08)
Kanjan Marketing v. ITO (2017) 166 ITD 626 (Mum) (Trib.)
517
S. 271B : Penalty-Failure to get accounts audited – Project completion method - levy of
penalty was held to be justified. [S.44AB]
Dismissing the appeal of the assessee, the Tribunal, held that; application of section 44AB is
independent and is not depended upon the method of accounts adopted by the assessee under
section 145, whether it is project completion method or percentage completion method. Levy of
penalty was held to be justified. (AY. 2006 - 07 to 2008-09)
Lalanath Reddy v. ACIT (2017) 163 ITD 612 (Bang.) (Trib.)
S. 271BA : Penalty - Failure to furnish reports - International transaction - Transfer pricing

– Non furnishing of report without reasonable cause levy of penalty was held to be justified
[ [ S.92E ]
Dismissing the appeal of the assessee the Tribunal held that; mere ignorance and bona fide belief
could not be considered as reasonable cause to delete penalty levied for not furnishing of report.
(AY. 2010-11, 2011-12)
Karvy Computershare (P.) Ltd. v. ACIT (2017) 167 ITD 16 (Hyd) (Trib.)
S. 271C : Penalty - Failure to deduct at source - Interest paid to sister concerns without
deduction of tax at source, no reasonable cause was proved, held liable to pay penalty . [ S.
194A ]
Allowing the appeal of the revenue the Court held that; the assessee has failed to prove the
reasonable cause for failure to deduct tax at source in respect of interest paid to sister concern
hence the levy of penalty was held to be justified . (AY. 2004-05)
CIT (TDS) v. Muthoot Bankers (2017) 398 ITR 276 (Ker) (HC)
Editorial : Order in Muthoot bankers v JCIT (2011) 12 ITR 40 (Cochin) (Trib) is seta side .
S. 271D : Penalty – Takes or accepts any loan or deposit-Genuineness of the transaction was
not in doubt - Levy of penalty was not justified. [S. 269SS]
Dismissing the appeal of the revenue, the Court held that the transaction was found to be genuine.
The Assessing Officer had not doubted the transaction. In that view of the matter, both the
Commissioner (Appeals) and the Tribunal had rightly deleted the penalty. (AY. 1994-95)
CIT v. Panchsheel Owners Associations (2017) 395 ITR 380 (Guj.) (HC)
S. 271D : Penalty – Takes or accepts any loan or deposit-cash received from son for urgent
necessary, penalty cannot be levied . [S. 269SS]
Allowing the appeal the Court held that,penalty is not automatic under section 271D of the
Income-tax Act, 1961 on mere violation of the provisions of section 269SS of the Act. The
assessee explained that the amount received from his son was neither a loan nor a deposit within
the meaning of section 269SS of the Act and it was received in cash in view of urgent necessity.
A proper explanation had been rendered by the assessee for the transaction. Hence, the
imposition of penalty under section271D was not valid.
Dr. Rajaram L. Akhani v. ITO (2017) 395 ITR 497 (Guj.) (HC)
S. 271F : Penalty - Failure to furnish – Reasonable cause for non filing of return will also a
reasonable cause for non levy of penalty [ S. 153A ]
518
Allowing the appeal of the assesse, the Court held that; where a cause is found to be reasonable
for non-filing of return immediately in response to notice issued under section 153A, such cause
can also be construed as a reasonable cause, while considering as to whether penalty has to be
levied under section 271F.Accordingly ;the writ petition is allowed and the impugned orders
levying penalty under section 271F is set aside. (AY. 2008-09 to 2014-15)
S. Jayanthi Shri v. ACIT (2017) 244 Taxman 295 (Mad.) (HC)
S. 271FA : Penalty-Annual information return-Failure to furnish-Tribunal finding no

reasonable cause for delay—Imposition of penalty is valid. - Order of penalty is not barred
by limitation.
Dismissing the appeal the Court held that; it had been categorically recorded by the Tribunal that
the assessee had not established any reasonable cause for not filing the annual information returns
within time. The assessee also failed to file any documentary evidence supporting the version
submitted by him. Thus, the Tribunal rightly held the penalty levied to be valid. Court also held
that when the show-cause notice was issued on September 6, 2010 asking the filer of the annual
information to show cause why penalty under section 271FA of the Act should not be imposed
and the reply was sought by September 27, 2010, the order imposing penalty under
section 271FA of the Act having been passed on January 6, 2011 was not beyond limitation.
Sub-Registrar,Bhiwani v. DIT (CIB) (2017) 396 ITR 444 (P&H) (HC)
S. 271G : Penalty – Documents - International transaction - Transfer pricing – Documents

were fled in the course of assessment and assessment was made without making any
adjustments, levy of penalty was held to be not justified [ S.92D (3)]
Allowing the appeal of the assessee the Tribunal held that; where assessee had filed relevant
information during assessment proceedings as soon as it was brought to notice and accordingly
Assessing Officer completed assessment without making any adjustment, assessee having
complied with provisions of section 92D (3), penalty was held to be not justified. (AY. 2010-11,
2011-12)
Karvy Computershare (P.) Ltd. v. ACIT (2017) 167 ITD 16 (Hyd) (Trib.)
S. 272A : Penalty - For failure to answer question, sign statements - Delay in filing TDS
statement – Matter restored to AO.
Tribunal held that the assessee had made TDS payments to credit of Central Government but had
not filed quarterly TDS statements in Forms 24Q and 26 in time with revenue. Assessee had
come forward with reasons that delay occurred due to non-availability of PANs in respect of few
deductee parties but no evidences were filed to substantiate said contentions. Tribunal restored
matter to the AO for determination of issue on merits after examination of evidences filed by
assessee in its defence explaining reasonable cause in filing TDS statements late. (AY .2009 - 10
to 2011 – 12)
Dr. Khan Industrial Consultants (P.) Ltd. v. ACIT (2017) 164 ITD 503/ 189 TTJ 648
/(2018) 162 DTR 258 (Mum) (Trib.)
519
S. 272A : Penalty - Failure to answer questions - Sign statements - Furnish information –
Reasonable cause – Levy of penalty was held to be not justified. [ S. 272A (2) (c), 272 (2)
(k) ]
Allowing the appeal, the Tribunal held that; delay in filing TDS returns cannot be levied if the
delay was caused due to requirement to collect PAN of payees. The non-availability of the PAN
of the payees is a reasonable cause. The delay is unintentional and it causes no loss to the revenue
as the TDS has been deducted and deposited in the treasury. Wrong levy of penalty u/s 272A (2)
(k) (failure to deliver TDS certificate) instead of u/s 272A (2) (c) (delay in filing TDS returns)
shows that AO is not clear of the charge and vitiates the penalty proceedings. (AY. 2011-12)
Argus Golden Trade India Ltd. v JCIT (2017) 65 ITD 318 /57 ITR 195 /158 DTR 201 /189
TTJ 589 (Jaipur) (Trib)
S. 273 : Penalty - Advance tax - false estimate - Failure to pay self assessment tax –
Tribunal was justified in confirming the levy of penalty .[ S. 140A (3), 273 (2) (a) ]
On reference the Court held that just because for earlier years no penalty was levied cannot be
the reasonable cause, in spite that for earlier years the Tribunal has held that the assesse was
liable to tax . Accordingly, levy of penalty for failure to file estimate and payment of self
assessment tax was confirmed . (AY.1983 - 84)
Trustees of Saurashtra Trust v DIT (E) (2017) 398 ITR 355 /159 DTR 243 (Bom) (HC)
S. 275 : Penalty - Bar of limitation – Time limit prescribed for completion of penalty
proceedings under section 275 (1) (a) was held applicable and not section 275 (1) (c) of the
Act .[ S. 132, 153A, 271E,275 (1) (a), 275 (1) (c) ]
AO initiated the penalty on 30 - 12-2009,in the Course of assessment proceedings . Assessee
filed an appeal before the CIT (A) vide order dated 30-3-2011 confirmed the addition . against
the addition and further appeal to Tribunal, the order of the Tribunal was received on 14-12-2012
. A reference was made to Add. CIT for imposing penalty u/s 271E of the Act .Show cause
notice was issued vide letter dated 24-2-2012 and penalty order was passed on 30-3-2012. On
appeal the Tribunal held that the time limit prescribed for completion of penalty proceedings u/s
275 (1) (a) was applicable and not S. 275 (1) (c) of the Act. On appeal by revenue, after
considering the view of the Board, High Court affirmed the view of the Tribunal.
PCIT v. Govindkripa Buildmart Pvt. Ltd (2017) 397 ITR 650 (Raj) (HC)
S. 275 : Penalty - Bar of limitation - Starting date of limitation is the date of letter of
assessing officer recommending initiation of penalty proceedings - Levy of penalty was held
to be barred by limitation .[ S. 153A, 269SS, 269T, 271D, 271E, 275 (1) (c) ]
Dismissing the appeal of the revenue, the Court held that; under section 275 (1) (c) of
the Income-tax Act, 1961, the starting point of “initiation” of penalty proceedings, would be the
date on which the Assessing Officer wrote a letter to the Additional Commissioner
recommending the issuance of the notice. Though the Additional Commissioner had the
discretion whether or not to issue a notice, if he did decide to issue a notice, the limitation would
begin to run from the date of the letter sent by the Assessing Officer recommending “initiation”
of the penalty proceedings. In the assessee’s case, the limitation under section 275 (1) (c) began
to run on July 23, 2012 and the last date for passing the penalty orders was January 31, 2013.
Therefore, the penalty orders issued on February 26, 2013 were barred by limitation. No question
of law arose. (AY. 2009-10)
PCIT v. Mahesh Wood Products Pvt. Ltd. (2017) 394 ITR 312/154 DTR 154 (Delhi) (HC)
520
S. 275 : Penalty - Bar of limitation - Acceptance any loan or deposit – Repayment of loan or
deposit – Date of passing of assessment order cannot be reckoned as date of initiation of
penalty – Levy of penalty was not barred by limitation . On merit the matter was set a side
to CIT (A). [ S. 269SS, 269T, 271D. 271E, 275 (1) (c)]
Penalty proceedings in respect of violation of S. 269SS and 269T were referred to Additional
/Joint CIT . Neither AO initiated penalty proceedings during original assessment proceedings nor
did he issue any notice for initiation of penalty proceedings, in such event, date of passing of
assessment order cannot be reckoned as date of initiation of penalty u/s. 275 (1) (c). Accordingly
the penalty order was not barred by limitation. On merit the matter was set aside to the CIT (A).
(AY. 2011-12)
ACIT v. Subhash Pareta (2017) 158 DTR 1 / 189 TTJ 665 (Jaipur) (Trib.)
S. 276C : Offences and prosecutions – Wilful attempt to evade tax – Return was tampered –
Amount involved was less than Rs 25000, prosecution ought not to have been initiated .[ S.
277 ],
Allowing the appeals the Court held that; as the amount involved was small, and had been paid
with interest long ago, the Circular dated February 7, 1992 squarely applied and no proceedings
should have been filed as the amount was below Rs. 25,000. Proceedings against the appellants
were to be quashed.
Magdum Dundappa Lokappa v. Income tax Dept. (rep by its Income tax Officer, Angad
Kumar) (2017) 397 ITR 145/298 CTR 227/157 DTR 237 (SC)
Suresh Sholapurmath v. Income tax Dept (rep by its Income tax Officer, Angad (Kumar)
(2017) 397 ITR 145 /298 CTR 227/157 DTR 237 (SC)
S. 276C : Offences and prosecutions - Willful attempt to evade tax – Serach and seizure -
Failure to pay self assessment tax - Issue of show cause was held to be justified-Petition to
quash complaint was dismissed [ S. 153A, 276B, 279 ]
Show cause notice was issued u/s 279 (1) why prosecution should not be initiated for failure to
pay outstanding tax u/s 143 (3) and 143 (1) of the Act . Assessee filed the petition to quash the
proceedings; dismissing the petition the Court held that, contention that when the notice has
been issued under S. 153A, the earlier self assessment tax return submitted by the assesse stands
abated ,therefore, assesse is not liable to pay tax is not sustainable . (AY. 2013-14)
Neo Corp International Ltd v.PCIT (2017) 147 DTR 48 /292 CTR 91/88 taxmann.com 598
(MP) (HC)
S. 276CC : Offences and prosecutions – When High Court has given direction to consider
the application for compounding ,pendency of appeal against conviction could no longer be
a reason for refusing consideration for compounding of offence .
Allowing the petition the Court held that ;When High Court has given direction to consider the
application for compounding,pendency of appeal against conviction could no longer be a reason
for refusing consideration for compounding of offence ,with in meaning of clause 4.4 (f) of
Guidelines dated 16-5-2008 (F.No. 285/90/2008 - IT (Inv) dt. 16 th May .2008) (AY. 1996-97 to
1998-99)
Government of India, Ministry of Finance, Department of Revenue (CBDT) v. R. Inbavalli
(2017) 249 Taxman 476/159 DTR 15 /(2018) 400 ITR 352/301 CTR 225 (Mad.) (HC)
521
S. 276CC : Offences and prosecutions - Failure to furnish return of income - Compounding
of offences - First offence-Subsequent assessment year the return was not filed within
prescribed time, offence for subsequent assessment year could not be compounded
Dismissing the petition the Court held that ,as per Guidelines for compounding offence 2008,
only in case of 'first offence', compounding is permissible .As per clause 8 (ii) of Direct tax laws
first offence means offence under any of Direct Tax Laws committed prior to (a) date of issue of
any show cause notice for prosecution or (b) any intimation relating to prosecution by the
Department to person concerned or (c) launching of any prosecution, whichever is earlier. On
facts where there was already a show cause notice issued against assessee under S. 276CC for
non-filing of return before due date for assessment year 2011-12 and despite same, assessee did
not file return of income for assessment year 2013-14 within time prescribed, offence for
assessment year 2013-14 could not be said to be first offence . Therefore the Chief
Commissioner was justified in rejecting compounding application submitted by assessee for
assessment year 2013-2014 in consonance with the Guidelines, 2014 (AY.2013-14)
Vinubhai Mohanlal Dobaria v. CCIT (2017) 247 Taxman 253 /153 DTR 118 (Guj) (HC)
S. 276C : Offences and prosecutions - Wilful attempt to evade tax - False statement in
verification —Assessee already undergoing sentence therefore only fine would remain .[S.
277 ]
On revision the Court held that; the prosecution had proved its case by leading cogent evidence
beyond reasonable doubt. Therefore, the judgment of conviction in the earlier complaint passed
by the Chief Judicial Magistrate was correct and did not call for interference. The separate order
of even date had been allowed and the sentence imposed upon the assessee in the present
complaint had been ordered to run concurrently with the sentence passed in the earlier complaint.
Since the assessee was already undergoing sentence and the sentence imposed upon him in the
present complaint had been ordered to run concurrently, the sentence imposed in the present case
was reduced to the sentence already undergone by him. However, the sentence of fine and in
default thereof remained. The assessee was to be set at liberty forthwith, if his custody was not
required in connection with any other case, subject to payment of fine if already not paid.
Satwant Singh Mehta v. ITO (2017) 397 ITR 45 (P&H) (HC)
S. 276C : Offences and prosecutions - Wilful attempt to evade tax - Assessee had not been
exonerated by the Income-tax Department in the adjudication proceedings till date -
Proceedings is allowed to continue . [ CRPC, 1973, S. 482 ]
Held, dismissing the writ petition, that it was apparent that the assessee had not been exonerated
by the Income-tax Department in the adjudication proceedings till date. According to the
assessee, the special leave petition filed by him was still pending in the Supreme Court. In such
circumstances, there was no illegality in the order passed by the criminal court taking cognizance
against the assessee under section 276C (1) and (2) .Radheshyam Kejriwal v. State of West
Bengal (2011) 333 ITR 58 (SC) (AY. 1993 - 94)
Vijay Kumar Mallik v. CIT (2017) 397 ITR 130/248 Taxman 570 /160 DTR 444 /(2018) 301
CTR 259 (Patna) (HC)
S. 276C : Offences and prosecutions - Wilful attempt to evade tax – Depreciation on land –
A claim in the return which is scrutinised by the auditors and the directors cannot be
considered as a mere accounting mistake, hence order of the learned Magistrate is up held
.[ S, 277, CRPC, 1973, S. 397 ]
522
Dismissing the revision application of the petitioner the Court held that ,Claim of depreciation
was made in the return which is scrutinised by the auditors and the directors cannot be
considered as a mere accounting mistake, hence order of the learned Magistrate is up held .
(CRL. REVP 16 /2015 dt.23-11-2017) (AY. 2007 - 08)
Ambience Hospitality Pvt Ltd v.Dy .CIT (2018) 161 DTR 36 (Delhi) (HC)
S. 278AA : Offences and prosecutions – Tax deduction at source - Reasonable cause - No

punishment. [S. 201 (IA), 276A, 276AB, 276B, 279, Code of Criminal Procedure, 1973, S.
482]
Allowing the petition the Court held that; continuance of criminal proceeding under
section 276B of the Act against the assessee was mere harassment and abuse of process of court.
The assessee had been able to prove reasonable cause for not depositing the amount of tax
deducted at source within the prescribed time limit. Oversight on the part of the accountant, who
was appointed to deal with the accounts and tax matters, could be presumed to be a reasonable
cause for not depositing such amount within the prescribed time limit. The assessee immediately
after noticing the defects by its auditors had deposited the amount along with the interest as
required under section201 (1A) for the delayed payment in the year 2010 itself. Prosecution had
been launched against the assessee after a lapse of about three years from the date of deposit of
the due amount of tax deducted at source along with interest and that was contrary to the
instruction, F No. 255/339/79-IT (Inv.), dated May 28, 1980 issued by the Central Board of
Direct Taxes in that regard. Moreover, according to the provisions of section 278AA, no person
for any failure referred to under section 276B should be punished under the provisions if he had
proved that there was reasonable cause for such failure. Accordingly, the order passed by the
Special Judge, Economic Offences taking cognizance of the offence under section 276B of the
1961 Act, along with the entire criminal proceedings against the assessee were quashed.
Sonali Autos P. Ltd. v. State of Bihar (2017) 396 ITR 636 /298 CTR 91 /157 DTR 33 (Patna)
(HC)
S.279 : Offences and prosecutions--Compounding of offences--Failure by assessee to deposit

amount deducted as tax at source was beyond its control, Order rejecting application for
compounding not sustainable - Guidelines issued by CBDT do not bar for consideration of
application of offence having regard to facts of the case. [ S. 276B, 279 (2) ]
Allowing the petition the Court held that ;failure by assessee to deposit amount deducted as tax at
source was beyond its control, Order rejecting application for compounding not sustainable -
Guidelines issued by CBDT do not bar for consideration of application of offence having regard
to facts of the case.
Sports Infratech P. Ltd. v.Dy. CIT (2017) 391 ITR 98/246 Taxman 21/150 DTR 93 /294
CTR 66 (Delhi) (HC)
S. 279 : Offences and prosecutions – Compounding of an offence – No time limit is

prescribed-The CBDT has no jurisdiction to demand that the assessee pay a 'pre-deposit' as
a pre-condition to considering the compounding application.
Allowing the petition ;the Court held that; As, there is no time limit prescribed for filing an
application for compounding of an offense, the CBDT is not entitled to reject an application on
the ground of 'inordinate delay'. The CBDT has no jurisdiction to demand that the assessee pay a
'pre-deposit' as a pre-condition to considering the compounding application. The larger question
as whether in the garb of a Circular the CBDT can prescribe the compounding fee in the absence
of such fee being provided for either in the statute or prescribed under the rules is left open.
523
Vikram Singh v. UOI (2017) 394 ITR 746/247 Taxman 212 /(2018) 301 CTR 439 (Delhi)
(HC)
S. 281 : Certain transfers to be void - Recovery of tax--Order declaring purchase void in

breach of principles of natural justice and to be quashed.
Allowing the petition the court held that before passing the order under section 281 (1) of the
Act, no opportunity of being heard was given to the transferee. Therefore, the order under section
281 (1) of the Act was absolutely in breach of the principles of natural justice and deserved to be
quashed and set aside.
Arvindkumar Kuberbhai Patel v. Dy.CIT (2017) 391 ITR 103 /294 CTR 120/150 DTR 24
(Guj) (HC)
S. 281 : Certain transfers to be void – Rejection of application for permission for transfer of
asset, without any discussion on merits of any particular of application, proposed transfer
or individual asset was held to be not valid matter to be decided on merits by the AO
afresh.
The AO rejected assessee's application for permission u/s 281 without discussion on the merits of
any particular of application, proposed transfer or individual asset. The assessee filed a writ
petition. The High Court held that section is asset-specific and transfer-or charge-specific and
therefore, the section demands, above all, precision. Such an application cannot be disposed of by
resorting to generalities 'likelihood', 'huge demands', 'might be revoked', etc. There is no room in
considering an application u/s 281 for a response that is speculative, predicated on imponderables
and unknowns such as litigation outcomes or on suppositions that all stay orders obtained by an
assessee are bound to be vacated and an assessee's appeals lost. Accordingly, since there is no
discussion on the merits of any particular of application, proposed transfer or individual asset, the
matter was to be consdeired denovo by the AO.
Vedanta Ltd. v. ACIT (2017) 160 DTR 440 /86 taxmann.com 120 (Bom.) (HC)
S. 281B : Provisional Attachment - Attachment order by department affirmed —

Confirming banks not affected by disputes between non-resident and Indian company or
non-resident and department — Direction to non-resident to deposit amount involved with
high court and for release of amount deposited by issuing bank to confirming banks
thereafter.
Court held that, the Non - resident was held to be liable to pay tax in India hence the confirming
banks were under legal obligation to make the payments under the letters of credit once these
letters of credit were invoked. Confirming banks not affected by disputes between non-resident
and Indian company or non-resident and department . Direction to non-resident to deposit amount
involved with high court and for release of amount deposited by issuing bank to confirming banks
thereafter.
Axis Bank Ltd v. CIT (2017) 398 ITR 518 /250 Taxman 392 / 298 CTR 1/157 DTR 10 (SC)
Royal Bank of Scotland PLC v. CIT (2017) 398 ITR 518/250 Taxman 392 / 298 CTR 1 /157
DTR 10 (SC)
Lloyds Bank PLC v CIT (2017) 398 ITR 518/250 Taxman 392 / 298 CTR 1 /157 DTR 10
(SC)
524
S. 282 : Service of notice – Service by post-Service of notice was returned with endorsement
“ addressee not found “, followed by an attempt at personal service and subsequent
affixture would constitute substantial compliance of provisions of service of notice .[ S. 68,
263 ]
Dismissing the appeal of the assesse, the Court held that; Service of notice was returned with
endorsement “ addressee not found “, followed by an attempt at personal service and subsequent
affixture would constitute substantial compliance of provisions of service of notice . (AY. 2008 -
09)
Success Tours & Travels P. Ltd. v. ITO (2017) 394 ITR 37 /247 Taxman 109/295 CTR
430/150 DTR 185 (Cal.) (HC)
S. 282 : Service of notice – When a notice is sent by RPAD and its return by the postal
authorities with the remark "addressee refused to accept" amounts to a valid service .[
Bombay Sales tax Rules, 1959, R.68 ]
Court held that admittedly, in the present case, there is an endorsement on the packet which was
sent to the address of the notice, namely, the sole proprietor; that the sole proprietor received it
but refused to accept the same. When it was sent by R.P.A.D. to the address, it was returned by
the postal authorities with the remark, that the addressee refused to accept the packet. That is why
it is returned. Thus, the presumption that when the addressee whose address is set out on the
envelope had an occasion to notice and peruse the packet, meant for him, but he refuses to accept
it, then, that is deemed to be served. The addressee in this case is correctly described. There is no
dispute about his identity. Even his address is correct. It is at that address the packet is carried and
by the concerned postal authority. The duly authorised person carrying the packet reached the
address. On noticing the addressee, he serves it, but the addressee after having perused the packet
refused to accept it. It is in these circumstances, the postal remark that the concerned person has
refused to accept; hence, returned to the sender denotes good and valid service. Then there was no
occasion to resort to the proviso. In the given facts and circumstances, when there was sufficient
and adequate notice and the sole proprietor had an occasion to appear and object to the stand of
the Department on merit, so also by raising other legal contentions, then, the conclusion is
inevitable that there is no defect or deficiency as far as this service is concerned. There is a
factual finding recorded that Rule 68 (1) has been complied with. To our mind, therefore, such a
conclusion in the backdrop of the peculiar facts and circumstances raises no question of law.
There was nothing that required any answer and opinion by this Court. A purely factual finding
and which, to our mind, would suffice enables the Tribunal to render a complete decision on the
appeal. In other words, the other points in the appeal could have definitely been considered and
answered, if required. The Tribunal got carried away only with this technical or procedural aspect
of the matter and erroneously refused to consider and decide the appeal on merits. The Tribunal
should have rendered that conclusion once the aspect of notice is duly taken care of. As a result
of the above discussion, we are of the opinion that the reference is wholly unnecessary. The
Tribunal’s orders and referred by us above do not raise any question of law for opinion and
answer of this Court. Suffice it to say that whether Rule 68 has been complied with in a given
case would depend upon the circumstances and the record of that case. Whether there is proof of
service or not would, therefore, necessarily depend on the facts and circumstances in each case.
No general rule can be laid down. (STR No. 53 of 2009, dt. 21.03.2017)
CST v. Sunil Haribhau Pote (Bom) (HC) : www.itatonline.org
S.282 : Service of notice - Service of notice by Whatsapp - E-Mail & Whatsapp are not
formally approved but if service is shown to be effected and is acknowledged it cannot be
said that the Defendants had ‘no notice’. Defendants who avoid and evade service by
regular modes cannot be permitted to take advantage of that evasion
The Court held that; the purpose of service is put the other party to notice and to give him a copy
of the papers. The mode is irrelevant. The rules and procedure are not so ancient or rigid that only
525
antiquated methods of service through a bailiff or by beat of drum is acceptable. E-Mail &
Whatsapp are not formally approved but if service is shown to be effected and is acknowledged it
cannot be said that the Defendants had ‘no notice’. Defendants who avoid and evade service by
regular modes cannot be permitted to take advantage of that evasion. (Suit No. 162 of 2017, dt.
23.05.2017)
Kross Television India Pvt. Ltd. v. Vikhyat Chitra Production (Bom) (HC) :
www.itatonline.org
S. 293 : Bar of suits in Civil Courts - Subject matter of Income-tax proceedings cannot also
be the subject matter of civil proceedings.
Decree holder in possession of suit property filed appeal to high court . The Court held that;
Subject matter of Income-tax proceedings cannot also be the subject matter of civil proceedings.
(HC)
526
Finance Act, 2016 - Pradhan Mantri Garib Kalyan Yojana scheme
S. 199A : Pradhan Mantri Garib Kalyan Yojna, 2016 - Legislative powers - Judicial review
- Court declined to enter into or encroach upon policy making arena and suggest a different
policy on ground that it was not within domain of Court - There is a distinction between
assailment of the constitutional validity of a policy and conception of framing of a better
policy. [S. 199E, 199FArt. 32 ]
Challenging the Section 199A of the Finance Act, 2016, Pradhan Mantri Garib Kalyan Yojna,
2016 the petitioner urged for a different and better scheme which could have got more good
money in banks and honest tax payers would have deposited amount. However Court declined to
enter into or encroach upon policy making arena and suggest a different policy on ground that it
was not within domain of Court, therefore there was no justification to issue notice in instant
petition and accordingly it was to be dismissed
Siddharth Mehta v. UOI (2017) 393 ITR 312 /244 Taxman 289/148 DTR 248/293 CTR 365
(SC)
S. 199C : Unexplained Money - Where cash was seized from a person during
demonetization 2016 and he was not tried under any provision of law, he would be eligible
to deposit amount under Pradhan Mantri Garib Kalyan Yojana scheme on or before 31-3-
2017 [ S. 69C ]
The assessee was travelling in a cab from Delhi carrying Rs. 30lakhs in new currency notes. The
cash amount was seized by police officials and handed over to Income-tax Officers. The assessee
filed a writ against the action of the respondents in depriving him of the cash amount and a prayer
to permit him to have his advocate present during his interrogation. He further asked, to not take
any coercive action against him alleging on the aforesaid dispute and a liberty to avail the remedy
under Pradhan Mantri Garib Kalyan Yojana, 2016 (PMGKY, 2016) by depositing the required
tax, surcharge and penalty.
On assessee’s writ, High Court observed that economic offences are very serious and the assessee
was one of the persons eligible for availing the benefits of the PMGKY Scheme, therefore, the
ITO could not deny him the benefits of such scheme. Further, it also directed the respondent to
not take any coercive action against the assessee and permit him to take the assistance of a lawyer
to be present at visible but not audible distance during his interrogation. However, the assessee’s
plea for return of the seized amount was rejected.
Vishal Jain v. State of Punjab (2017) 246 Taxman 213 /293 CTR 137 /148 DTR 16 (P&H
(HC)
Finance Act, 2016 - Direct tax Dispute Resolution Scheme
S. 208. Finance Act, 2016 - Penalty for failure to collect tax at source — Person, who
defaults penalties can claim benefit of amnesty in respect of penalties alone [ S. 271D,
271E, 271 (c), 272 (2) (c)]
Assessee preferred an application under the Dispute Resolution Scheme, 2016 (‘amnesty
scheme’) in respect of penalties imposed on the assessee u/s 271D, 271E and 272A (2) (C) of the
Act. Aggrieved by the same, assessee preferred appeals before CIT (A), thus the said appeals
were stated to be pending. As per the provisions of the Amnesty Scheme, assessee identified an
opportunity to settle disputed penalty amounts. However, the CIT (A) serviced notices on the
Assessee on the ground that Amnesty Scheme must be intended to cover only such penalties as
527
had been imposed on an assessee along with assessment order. Allowing the petition the Court
held that; On perusal of Amnesty Scheme, contemplates making of a declaration of tax arrears.
The contention of Revenue was that, inasmuch as there was reference to payment of tax and
interest payable on total income finally determined, along with 25% of minimum penalty
leviable, the Amnesty Scheme must be intended to cover only such penalties as had been imposed
on an assessee along with assessment order. As per the clarification of CBDT in the context of a
penalty order u/s 271 (C) or 271 (C) (A), the penalties which were not linked to assessment
proceedings would not be covered under Amnesty Scheme.However, High Court held that there
cannot be any scope for such a restrictive interpretation of ambit of the Amnesty Scheme and held
that the provisions of the amnesty scheme does not expressly provide for exclusion of a
declaration, such as those filed in instant writ petition, where amnesty was sought only in respect
of penalty that was imposed. Accordingly ,intimations served on petitioners cannot be legally
sustained to deny petitioners benefit of Amnesty Scheme.
Grihalakshmi Films v. JCIT (2017) 396 ITR 10/249 Taxman 237 /296 CTR 11/153 DTR 297
(Ker) (HC)
Direct Tax Dispute Resolution Scheme, 2016 – Finance Act, 2016
S.208 : Pendency of appeal – Survey - AO on basis of material seized during survey,

reassessed assessee and also imposed penalty and during pendency of penalty appeal before
CIT (A), assessee made declaration under Direct Tax Dispute Resolution Scheme, 2016 -
declaration was not maintainable. [ S.133A, 271 (1) (c) ]
Dismissing the writ of the assessee the Court held that; the scheme made detailed provisions for
an eligible assessee to make a declaration and to deposit certain amount of tax arrears. This
scheme, however, had few exclusion provisions. The term 'tax arrear' for the purpose of the said
scheme, therefore, had a definite meaning as provided in the said definition. Reference to any tax
arrear under DTDRS is not limited to an order of assessment or reassessment but could also be in
relation to an assessment or reassessment, clearly indicating the legislative intent not to confine
the term 'tax arrear' in the said clause to the simplicitor tax exclusive of interest or penalty,
contrary to the plain language used in the definition section. The High Court further held that the
term 'has a bearing' is much wider and must be understood in its plain grammatical meaning as to
include assessment or reassessment of which a survey conducted under section 133A of the
Income-tax Act has a bearing. The very genesis of the reassessment proceedings in case of the
assessee was the documents found and seized during the survey operation. This condition was
also, therefore, satisfied in the instant case. Hence, there was no error in view of the
Commissioner in rejecting the assessee's declaration. (AY. 2007-08)
Parbatbhai J. Golakia HUF (2017) 158 DTR 289/299 CTR 84 /85 taxmann.com 83 (Guj)
(HC)
528
Income Declaration Scheme, 2016 - Finance Act, 2016
S.183 : Charge of tax and surcharge - Petitioner failed to pay 25 per cent of tax payable on
undisclosed income declared under Income Declaration Scheme, 2016 before due date –
Assessee filed a petition to direct revenue to accept the said payment after the due date -
Held no provision under IDS which would permit revenue to accept payment after specified
date.[ S. 186]
Assessee filed a declaration under Income Declaration Scheme, 2016 declaring certain
undisclosed income. He, however, failed to pay 25 per cent of tax payable on or before due date.
Assesse’s grievance was that he failed to deposit tax payable in view of demonetization of Rs.
500 and Rs. 1000 currency notes. Therefore, the petition was filed before the Court to direct the
Department to accept the payment after the due date. The High Court held that since there was no
provision under IDS which would permit revenue to accept payment after specified date, it would
not direct revenue to accept tax payable after specified date to make payment. (AY.2014-2015)
Nandu Atmaram Wajekar v. UOI (2017) 247 Taxman 145 /295 CTR 212 /151 DTR 121
(Bom.) (HC)
S. 184 : Credit for advance tax - There is no bar for an assessee or declarant to claim credit
of advance tax and TDS paid previously relating to assessment years for which it seeks
benefit under [ IDS, 2016, S. 185, S 219 ]
Against tax liability arising under IDS, assessee claimed credit of advance tax and TDS paid
earlier. However, the revenue authorities denied credit of advance tax and the TDS paid in
determining the tax payable under the Scheme which was rejected . Allowing the petition the
Court held that ;the objective of the IDS is to enable assessees who did not file their returns, an
opportunity to do so. A salient - and perhaps most distinguishing feature which sets apart the
present Scheme from the Kar Vivad Samadhan Scheme, 1998 is that there is no express bar to
inclusion of previously paid amounts, or tax arrears. Further, the provision of section 182 of
Finance Act 2016 itself states that for the purposes of the IDS, undefined terms and expressions
shall be in terms of the Act, by incorporating those into the Finance Act and the scheme and
therefore, it was held that there is no bar for an assessee or declarant to claim credit of advance
tax amounts paid previously relative to the assessment years or periods for which it seeks benefits
under the Scheme. Furthermore, the clarification by the revenue, that credit for TDS paid, can be
enjoyed for availing the benefit (under the scheme in question) precludes any meaningful
argument by it that advance tax payments relative for the assessment years covered by the
declaration cannot be taken into consideration as payments under and for purposes of availing the
benefits of the scheme. Accordingly, writ petition was allowed giving direction to the revenue
that the credit of the amounts paid as advance tax and TDS shall be given.
Kumudam Publications P. Ltd. v. CBDT (2017) 393 ITR 599 /247 Taxman 25/294 CTR 54
/150 DTR 33 (Delhi) (HC)
S.187 : Payment of tax - Condonation of delay – Instruction of the Board dated 28th March,
2017 prescribes certain situations for condonation over which the declarant has no control -
Held, the application was to be decided on merits particularly in light of the Board’s
circular. [S. 119]
An application seeking condonation of delay in making payment of installments under the
Income Declaration Scheme, 2016. Reliance was placed upon the Board Order F. No.
225/86/2017-ITA-II, dt. 28/03/2017. In the said order, the Board had prescribed certain
circumstances under which the delay should not be condoned, whereas, they also prescribed
certain circumstances over which the assessee had not control, in which cases, the delay was to be
529
condoned. The High Court directed the Revenue to consider the application for condonation of
delay of the Petitioner on merits in light of the Instruction/Circular of the Board.
Sadhana Rajendra Jain v. CBDT & Anr. (2017) 160 DTR 373 /86 taxmann.com 4/(2018) 300
CTR 23 (Bom.) (HC)
S. 196 : Disqualification to file declaration under Scheme —Search carried out after
commencement of Scheme, assesse is not entitled to avail of benefit of Scheme - The
Scheme of 2016 would not override the provisions of the 1961 Act [ s. 132, 196 (e), (ii)]
Dismissing the appeal the Court held that; the assessee who was subject to the search proceedings
after June 1, 2016 was disqualified to apply under the Scheme. The benefit was granted under the
Scheme only to persons who were not covered under section 132 and other proceedings. The
class which had been debarred under the Scheme and any person who acquired the same debar
during the currency of the Scheme could not be granted the benefit of the Scheme. The terms
were not which were prohibited by law prior to launching of the Scheme. Anybody who had
acquired any disqualification during the Scheme, was to be treated equal otherwise that would
have created two classes. The Scheme of 2016 would not override the provisions of the 1961 Act
and the Scheme which came for a limited purpose could not prevail over the Act. The order
passed by the designated authority was just and proper. No interference was called for in the
decision of the single judge. (Surendra Pal Singh Sahni v. DGIT (Inv) (2017) 248 Taxman 98
(Raj.) (HC)
Surendra Pal Singh Sahni v. DGIT (Inv.) (2017) 398 ITR 505/248 Taxman 146 (Raj.) (HC)
530
Kar Vivad Samadhan Scheme, 1998
S.86 (m) : Tax arrear-Computation of tax arrears - Advance tax paid prior to application -
Cannot be adjusted while determining balance. [ S.90 ]
Once the statute clarified that amounts paid towards tax were not to be deemed "unpaid" for any
reason, the normal provisions which had applied, when they did during the course of assessment,
could not have been reversed or given a go by, as sought by the assessees. Doing so would be
contrary to law. The assessees' grievance was limited to the scheme for reduction of the demand
for finalisation of its request for settlement under the Kar Vivad Samadhan Scheme, 1998. The
normal operation of law was predicated upon treatment of amounts paid and their appropriation
as required by the provisions of the Act. In the assessees' cases, the demands had been made
much after the advance tax payments were due. Furthermore, the amounts were to be adjusted
towards the outstanding arrears for the previous years. Therefore, the assessees were not correct
in contending that the amounts of advance tax paid had to be necessarily adjusted while
determining the balance.
Inter Craft Ltd v. CIT (2017) 390 ITR 409 /147 DTR 95 /295 CTR 360 (Delhi) (HC)
Old Village Industries Ltd v. CIT (2017) 390 ITR 409 /147 DTR 95/295 CTR 360 (Delhi)
(HC)
S.90 : Time and manner of payment of tax arrear-Certificate issued under the scheme is
conclusive-Settlement Commission has no jurisdiction to pass the order after issue of
certificate by competent authority . [ S. 88,95, 245C, 245D ]
Allowing the petition the Court held that; The certificate issued under section 90 (1) of the
Scheme making a determination as to the sum payable under Scheme is conclusive as to the
matters stated therein and cannot be reopened in any proceedings under law for the time being in
force, except on the ground that false declaration by a declarant. Subsequently the Settlement
Commission passed orders. Court held that the order dated June 25, 1999 passed by the
Settlement Commission under section 245D (4) of the Act was void and liable to be set aside.
(1987-1988 to 1989-1990)
Hasmukhlal Thakordas Dalwala v. CIT (2016) 75 taxmann.com 186 /(2017) 393 ITR 280
(Guj.) (HC)
S.91 : Immunity from prosecution and imposition of penalty in certain cases – Circulars are
binding on the department – Protective assessment – Designated authority was justified
granting the immunity fromprosecution and penalty. [S. 132, 153C]
Allowing the petition the Court held that, according to section 91 of theFinance (No. 2) Act,
1998, a designated authority was empowered to grant waiver from the imposition of penalty and
interest in respect of the income, which was the subject matter of the declaration under the
Scheme. In the assessee’s case since the penalty and interest was levied on the tax arrears, as on
March 31, 1998, the declaration issued by the designated authority, according to the circular
issued by the Central Board of Direct Taxes, would cover the penalty and interest, determined at a
later point in time. Th Board’s circular was binding on the Department, especially, in the
circumstances that sought to explain as to how the Scheme was to operate.Designated authority
was justified granting the immunity from prosecution and penalty. (AY. 1994-95)
531
S. Narayanan v. CIT (2017) 395 ITR 271/299 CTR 285 /159 DTR 387 (Mad.) (HC)
Voluntary Disclosure of Income Scheme, 1997--Finance Act, 1997
S.64 : Tax deduction at source - Tax payable under 1961 Act is not tax payable under 1997
Scheme--Tax deducted at source on income under 1961 Act cannot be taken into account to
determine tax payable on voluntarily disclosed income under Scheme. [ S. 65 (3), 66, 67,
ITAct,S.4, Art 226 ]
Dismissing the petition, the Court held that; Tax payable under 1961 Act is not tax payable under
1997 Scheme hence tax deducted at source on income under 1961 Act cannot be taken into
account to determine tax payable on voluntarily disclosed income under Scheme. (AY .1995-
1996, 1996-1997, 1997-1998)
Earnest Business Services P. Ltd. v. CIT (2017) 393 ITR 453/294 CTR 80 /80 taxmann.com
11/149 DTR 1 (Bom.) (HC)
Wealth – tax Act, 1957
S.3 : Asset — Valuation — Land was not used for business purposes for two years
following purchase — Land constituted an asset for purposes of Wealth-Tax —Valuation
under Rule 3 Of Schedule III to Wealth-Tax Act was held to be justified.[ S40, Finance Act,
1983 ,Sch. III, R. 3. ]
Dismissing the appeal of the revenue the Court held that; Land was not used for business
purposes for two years following purchase hence land constituted an asset for purposes of
Wealth-Tax. Valuation under Rule 3 of Schedule III to Wealth-Tax Act was held to be justified.
(AY .1990 - 01 to 1993 - 94)
Balaji Industries Ltd v. Dy. CWT (2017) 397 ITR 18/(2018) 163 DTR 94/301 CTR 686
(Mad) (HC)
S 5 (1) (xii) : Exemption - Work of art – Buggy was used on rare ceremonial occasions
therefore, its personal use was incidental, therefore was better qualified as ‘work of art’
exemption was available.
Allowing the appeal the Court held that; the Buggy was used on rare ceremonial occasions
therefore, its personal use was incidental, therefore was better qualified as ‘work of art’
exemption u/s 5 (1) (xii) was available. The Court held that when several exemption entries are
provided in the Legislature, a particular article or a thing may fall in more than one of them and
the intention of the Court in such case was to apply the provision which furthers the intention of
the legislation rather than frustrating it. Accordingly, the Court held that if any 'work of art' can
be incidentally also be put to personal use, it would not destroy its very essence or basic character
of being an artwork. By very nature of things its use may be rare or on special occasions. The
element of such an article being one of personal use would be wholly incidental. Accordingly,
since in the present case, the use for personal purpose was very rare the Court held that buggy
was work of art and was eligible for exemption u/s 5 (1) ( (xii). (AY 1972-73).
Shanta Devi P. Gaekwad v. WTO (2017) 157 DTR 121 /299 CTR 312 (Guj.) (HC)
532
S. 7 : Valuation of assets - Business asset-Valuation of immovable properties under the
'rent capitalisation' method - 'land and building' method – Valuation on the basis of land
and building method was held to be justified . Interpretation that, when there are two
method of valuation the method of valuation which is favourable to the assesse may be
adopted was not to apply to valuation by two different methods . [ S.16A ]
Dismissing the appeal of the assesse the Court Held that; High Court has expressed opinion that
Wealth Tax Officer was justified in adopting the land and building method. One of the reasons
given by the High Court is that if there is loss in the business or in other words there is negative
income, it cannot be possible to say that the property in question has no marketable value.
Learned counsel for the appellants has submitted that in the relevant year the income was
earned.The proposition which was laid down by this Court was that if two reasonable
constructions of taxing statute are possible, that construction which favours the assessee must be
adopted. The above proposition cannot be read to mean that under two methods of valuation if the
value which is favourable to assessee should be adopted. Here in the present case, the provisions
of Section 7 are neither unambiguous nor lead to two constructions. The construction of Section 7
is clear as has already been elaborately considered by this Court in the judgment of this Court in
Juggilal Kamlapat Bankers . v.WTO (1984) 145 ITR 485 (SC) . The Wealth Tax Officer having
referred the Departmental Valuer to value the property, in consequent to which reference for
valuation report having already been received on 26.07.1977 which has relied in the assessment.
Objections to the valuation report were considered by the Appellate Authority and having been
rejected, we do not find any fault with the assessment made by the Wealth Tax Officer. We are of
the view that the High Court did not commit any error in interfering with the order of
ITAT.Interpretation that, when there are two method of valuation the method of valuation which
is favourable to the assesse may be adopted was accepted does not apply to valuation by two
different methods . (AY. 1970-71 to 1974 - 75)
Bimal Kishor Paliwal v. CWT (2017) 398 ITR 553/298 CTR 540 /158 DTR 273 /251 Taxman
312 (SC)
Renuka Agarwal v. CWT (2017) 398 ITR 553 (SC)
Master Rahul v. CWT (2017) 398 ITR 553 (SC)
Surendra Kumar v. CWT (2017) 398 ITR 553 (SC)
Jitendra Kumar (HUF) v. CWT (2017) 398 ITR 553 (SC)
Shyamlal (D) By LRSv. CWT (2017) 398 ITR 553 (SC)
S. 7 : Valuation of assets - Residential property in existence before 1996 - JDA Regulations

not applicable [Jaipur Development Authority Act, 1982 and Regulations 1996 -
Held, that for the purpose of valuation of the property in dispute, reliance placed on the 1996
Regulations was neither correct nor valid nor in accordance with law. The regulations would have
no application for the purpose of valuation of the building in dispute and it would have to be
made only in accordance with Schedule III, as it is. Statutes which are not declaratory or
clarificatory or procedural, are prospective unless provided otherwise and in tax matters, there
should not be any approach so as to make a provision retrospective if it is not otherwise. (AY
1987-1988 to 2001-02)
CWT v. Late Padampat Singhania (2017) 390 ITR 86/148 DTR 301/293 CTR 420 (All)
(HC)
S.7 : Valuation of assets —Rental income from property was assessed as income from
house property for a long time — Value of property includible in net wealth. Amendment to
section 40 (3) of the Finance Act, 1983 by the Finance Act, 1988 was not retrospective and
would not apply to a period prior to April 1, 1989. [ Finance Act, 1983, S 40 (3)
Allowing the appeal of the revenue the Court held that; Rental income from property was
assessed as income from house property for a long time therefore value of property includible in
533
net wealth . The amendment to section 40 (3) of the Finance Act, 1983 by the Finance Act, 1988
was not retrospective and would not apply to a period prior to April 1, 1989. (AY. 1984 - 85 to
1998 - 99)
CWT v. Atma Ram Properties (P) Ltd. (2017) 399 ITR 380 /158 DTR 33 (Delhi) (HC)
S.16 (3) : Assessment — Amalgamation-Scheme of Amalgamation specifying that legal

proceedings against transferor could be continued against transferee —Assessment
proceedings against transferee was held to be valid
Dismissing the appeal the Court held that; the Tribunal had considered the validity of the
assessment made after amalgamation and held that as per the scheme of amalgamation, all actions
and legal proceedings by or against the transferor-company pending on the completion of
procedure date shall be continued and be enforced or against the transferee-company as the case
may be. Therefore, the Tribunal had rightly held even after amalgamation, the transferee-
company would discharge the wealth-tax liabilities of the transferor company. The liability of the
transferor would continue against the transferee. The assessment order was not void. (AY .1990 -
01 to 1993 - 94)
Balaji Industries Ltd v. Dy. CWT (2017) 397 ITR 18 /(2018)163 DTR 94/301 CTR 686
(Mad) (HC)
S.27A : Appeal-High Court-"substantial question of law" The High Court cannot proceed
to hear a second appeal without formulating the substantial question of law involved in the
appeal and if it does so it acts illegally and in abnegation or abdication of the duty case on
Court [I.T. Act, S.260A, Code of Civil Procedure, S.100]
The Questions raised before theCourt is whether the High Court was justified in allowing the
appeals filed by the Revenue and there by setting aside the orders passed by the
Tribunal.Allowing the appeals the Court held that, The High Court cannot proceed to hear a
second appeal without formulating the substantial question of law involved in the appeal and if it
does so it acts illegally and in abnegation or abdication of the duty case on Court. The
Honourable Court analysed the provision of section 100 of the Code of Civil Procedure and
section 27A of the wealth tax Act, 1957. Referred Santosh Hazari vs. Purushottam Tiwari
(Deceased) by L.Rs., (2001) 3 SCC 179.Kshitish Chandra Purkait v. Santosh Kumar Purkait,
(1997) 5 SCC 438 Panchugopal Barua v. Umesh Chandra Goswami, (1997) 4 SCC 413 and
Kondiba Dagadu Kadam v. Savitribai Sopan Gujar, (1999) 3 SCC 722. (AY . 1981, 82, 1982 -
83, 1983-84)
Maharaja Amrinder Singh v. CWT (2017) 397 ITR 752/ 156 DTR 313/297 CTR 561/250
Taxman 341 (SC)
S. 27A : Appeal-High Court—Tribunal not considering effect of section 42 — application

for rectification to be made—Appeal is not maintainable. [S. 42, 260A]
Court held that the attention of the Tribunal had not been brought to section 42 of the Wealth-tax
Act, 1957, at the time when the matter was heard before the Tribunal. Resultantly, there was no
discussion whatsoever of the Tribunal in the order for consideration of section 42 of the Act, its
applicability or effect. It would be for the Department to move an appropriate application for
rectification of the order and it was only after the Tribunal considered the matter and the reasons
were recorded, that a ground may be available before the court in the appellate jurisdiction. (AY.
2006 - 07)
CWT v.M.R.Jyaram (HUF) (2017) 394 ITR 233 (Karn.) (HC)
CWT v. M. R. Anandram (Individual) (2017) 394 ITR 233 (Karn.) (HC)
CWT v. M.R.Jayaraman (2017) 394 ITR 233 (Karn.) (HC)
CWT v. M.R.Kodanadram (2017) 394 ITR 233 (Karn.) (HC)
CWT v. M.R.Janakiram (HUF) (2017) 394 ITR 233 (Karn.) (HC)
534
535
Interpretation of taxing statues
Exemption provisions - while interpreting exemption provisions liberal construction does

not mean ignoring conditions of exemption
While interpreting the S. 80IB the Court held that, construction of statute relating to exemption
should be construed liberally, liberally does not mean ignoring conditions for exemption.
DCIT v. Ace Multi Axes Systems Ltd (2017) 160 DTR 353 /299 CTR 441 (2018) 400 ITR
141 (SC)
CIT v Sunder Forging (2018) 400 ITR 141 (SC)
Circulars are binding on the department – When two views are possible, one which favours
the assesse has to be adopted .
It is trite that when two views are possible, one which favours the assessees 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. (CA.NOS. 2781-2790
OF 2010, dt. 10.11.2017.)
SRD Nutrients Private Limited v. CCE (SC), www.itatonline.org
Precedent — When there is conflict of views regarding provision, view of jurisdictional

high court to be followed.
Court held that, When there is conflict of views regarding provision, view of jurisdictional high
court to be followed.
Gordhanbhai Nagardas Patel v. Dy. CIT (2017) 398 ITR 307/249 Taxman 604 (Guj) (HC)
Precedent — High Court — When Bench is disagreeing with decision of co-ordinate Bench,
the matter to be referred to larger Bench.
Allowing the appeal the Court held that; When Bench disagreeing with decision of Co – ordinate
Bench, the appropriate course of action for the High Court would have been to refer the matter to
a larger Bench. Since subsequently, in another case pending before the High Court on the same
question, the High Court had referred the matter to a larger Bench, the judgment of the High
Court was to be set aside and the appeal remanded to the High Court for decision afresh along
with the decision in the other case by the larger Bench. (AY, 2006 - 07)
Engineers India Ltd v. CIT (2017) 397 ITR 16 /250 Taxman 19 /298 CTR 115/157 DTR 235
(SC)
Editorial : Order in CIT v Engineers India Ltd (2015) 55 taxmann.com 1 (Delhi) (HC) was set
aside .
536
Double taxation avoidance agreements---Context in agreement and any subsequent
agreement to be taken into account.
While interpreting tax treaties and conventions, the emphasis is upon the context – in the
instrument itself, and “ any subsequent agreement between parties” as to the interpretation of the
treaty or the application of its provisions .
DIT v. KLM Royal Dutch Airlines (2017) 392 ITR 218/245 Taxman 341/292 CTR 121
(Delhi) (HC)
DIT v. Lufthansa German Airlines (2017) 392 ITR 218/245 Taxman 341/292 CTR 121
(Delhi) (HC)
Precedent – Later decision by a Bench of equal strength is binding

Tribunal held that when there are conflicting judgements, the latter decision has to be followed .
(Bhika Ram and Ors v UOI (1999) 238 ITR 113 (Delhi) (HC), Datamatics Financial Services Ltd
v JCIT (2005 ) 95 ITD 23 (Mum) (Trib) (30), ITO v. Sanatan Textrade Ltd (2010) 4 ITR 593
(Mum) (Trib) (AY. 2007 - 08)2008 - 09, 2009-10, 2010-11)
Uttam Value Steels Limited v. ACIT (Mum.) (Trib.), www.itatonline.org
Precedent - Dismissal of Special leave petition in limine – Not an affirmation of High Court.
[ S.40 (a) (ia), 194C, 200 ]
The fact that the Special leave petition against the decision of the High Court was dismissed by
the Supreme Court would not amount to a confirmation of the view of the High Court .
Palam Gas Service v. CIT (2017) 394 ITR 300/247 Taxman 379 /151 DTR 1/295 CTR 1
(SC)
Precedent – Law laid down by High Court is binding on all in State

The law laid down by the High Court is binding on all the State
CIT v. Raghuvir Synthetics Ltd (2017) 394 ITR 1/151 DTR 153/295 CTR 143 (SC)
Res judicata - Need for consistency and certainty

While it is true that the principle of res judicata would not apply to assessment proceedings under
the Act, the need for consistency and certainty and existence of strong and compelling reasons
for a departure from a settled position has to be spelt out for departure from settled position
.Followed Radhasoami Satsang v CIT ( (1992) 193 ITR 321 (SC)
Godrej & Boyce Manufcaturing Co .Ltd v .Dy.CIT (2017) 394 ITR 449 /247 Taxman
361/151 DTR 89/295 CTR 121 (SC)
537
Precedent – Supreme Court decision
It is axiomatic that a decision of the Supreme Court does not make the law but it only declares the
law as always existing since its inception .
E.Mark (India) Ltd v CIT (2017) 393 ITR 91 (Bom) (HC)
Rule against retrospectivity.

The Court held that, in the matter of taxation , unless things are very clear, no attempt shall be
made to make a provision retrospective .
CWT v. Lt. Padampat Singhania (2017) 390 ITR 86/148 DTR 301 /293 CTR 420 (All) (HC)
Reasonable and purposive interpretation to be adopted

The purpose and object of section 32 (1) (iia) of the Income-tax Act, 1961 is to encourage the
manufacturing sector by allowing the deduction of a further sum equal to 20 per cent. (prior to
amendment 15 per cent.) of the actual cost of machinery or plant acquired and installed.
Therefore, the underlying object and purpose is to encourage the industries by permitting the
assessee in setting up the new undertaking or installing of new plant and machinery to claim the
benefit of additional depreciation. While interpreting the taxation statues, reasonable and
purposive interpretation to be adopted .
PCIT v. IDMC Ltd. (2017) 393 ITR 441 /246 Taxman 6 (Guj) (HC)
Allied laws .
Advocates Act, 1961
Advocate – Vakalatnama - NOC from Advocate to appoint new advocate - The Registry
cannot insist on a NOC from the old advocate and refuse to take the new vakalatnama on
record.
The High Court had to consider whether vakalatnama filed by a new advocate is to be accepted in
the absence of ‘no objection’ of the advocate already on record. HELD by the High Court : A
litigant has the absolute right to appoint an advocate of his choice and to terminate his services
any time and for whatever reason. There is no concept of an "irrevocable vakalatnama". A party
has the absolute freedom to change his advocate. Fairness demands that the party should inform
his advocate already on record though this is not a condition precedent to appoint a new advocate.
The Registry cannot insist on a NOC from the old advocate and refuse to take the new
vakalatnama on record. (ANo. 6525/2013, dt. 02.012.2016)
Karnataka Power Transmission Corp. Ltd. v. M. Rajashekar (Karn) (HC) :
www.itatonline.org
Advocate - Strictures passed against Advocate for making frivolous arguments without
having the file and wasting the valuable time of the Court. Costs imposed
Shri. M. Selvakumar, learned counsel has made frivolous argument without having the file or and
document in his hand. He has wasted the valuable time of the court. He also made a request for
adjournment. This as a fit care where the Bench may recommend to Tamilnadu Bar Council to
538
take appropriate action against him. But, by keeping a lenient view in mind, we adjourn the case
at the cost of Rs. 1,000/- (Rupees on thousand only) which will deposited by the counsel toward
Prime Minister’s Relief Fund within three days from today. On the next date of hearing, proof of
deposit shall be submitted. (A No. C/126/2007-DB) 17.01.2017)
Clarion Power Corp v. Commissioner of Customs (CESTAT) (Trib.), www.itatonline.org
S. 8 : Term of office of members of State Bar Council – Supreme Court directed Bar
Council of India and all State Bar Councils to conclude process of verification before 31-12-
2017 to find out fake lawyers for purpose of elections to State Bar Council
Petitioners filed petition requesting for immediate elections of State Bar Council as term had
expired long back whereas Bar Council of India was pressing for need of verification of
candidates to eliminate fake lawyers in order to bring improvement in Bar and to get deserving
practicing advocates for respective Bar Councils. Bar Council of India as well as State Bar
Councils stated that process of verification was not completed yet . Apex Court, directed Bar
Council of India and all State Bar Councils to conclude process of verification before 31-12-2017
to find out fake lawyers for purpose of elections to State Bar Council .
Ajayinder Sangwan v. Bar Council of Delhi (2017) 250 Taxman 334 (SC)
S. 24 : Persons who may be admitted as advocates on State roll - Practicing Chartered

Accountant could not be enrolled as an Advocate with Bar Council of Gujarat in terms of
rules framed by Bar Council under section 28 . [ S. 28, Chartered Accountant Act, 1949 ]
Dismissing the petition the Court held that; Practicing Chartered Accountant could not be
enrolled as an Advocate with Bar Council of Gujarat in terms of rules framed by Bar Council
under section 28,
Mam Raj Goel v. Bar Council of Gujarat (2017) 250 Taxman 369 (Guj.) (HC)
Strike by Advocates : [ Art . 141 ]

Court held that; giving a call to protest when the Bill is still at a draft stage is premature. Wisdom
has to prevail on the Advocates in the light of the law laid down in Harish Uppal AIR 2003 SC
739. The law laid down by the Supreme Court is binding on the Advocates as well under Article
141 of the Constitution. The lawyers' community has to appreciate their responsibility in
discharging the duties of their profession. (PIL No. 37 of 2017, dt.30.03.2017)
Manoj Laxman Shirsat, Adv. v. Bar Council of India (Bom) (HC); www.itatonline.org
Chartered Accountants Act, 1949.
S. 21 : Professional misconduct – When company made an allegation against Chartered

Accountant stating that he did not act with due diligence during certification of its forms
filed before ROC and same was done with mala fide intention by colluding its director for
personal gain, ICAI should investigate the allegations.
Allowing the petition of the compliant the NCLT held that, When company made an allegation
against Chartered Accountant stating that he did not act with due diligence during certification of
its forms filed before ROC and same was done with mala fide intention by colluding its director
for personal gain, ICAI should investigate the allegations.
Sudhindran Parikkal & Chokkalingam v. East India Investment Holding P. Ltd. (2017) 246
Taxman 2 (NCLT) (Chennai)
Chartered Accountants Act, 1949
539
S. 21 : Misconduct - Not allowed to re-agitate the issue albeit on basis of additional
information received pursue the RTI application.
Dismissing the petition , the Court held that ICAI having formed prima facie opinion that the
petitioner was prima facie guilty of misconduct, they cannot - re-agitate the issue albeit on basis
of additional information received pursuant to RTI application.
Partha Ghosh v. ICAI (2017) 251 Taxman 326 (Delhi) (HC)
S. 22 : Professional or other misconduct - High Court set aside findings of fact recorded by
Disciplinary Committee as also Council - Supreme Court affirmed the order of High Court.
[ S. 21 ]
The Council of the Institute of Chartered Accountants of India, agreed with the findings of
Disciplinary Committee and decided to recommend to the High Court that the respondent be
reprimanded. High Court set aside findings of fact recorded by Disciplinary Committee as also
Council. On appeal the Supreme Court, affirmed the finding of the High Court and dismissed
the petition.
Institute of Chartered Accountants of India v. M.S. Rathi (2017) 249 Taxman 565 (SC)
S.22 : Misconduct - Chartered Accountant had resigned as Director of a company before

opening of public issue but had signed prospectus of said issue, Chartered Accountant was
guilty of other misconduct.[ S.21 ]
Chartered Accountant had resigned as Director of a company before opening of public issue but
had signed prospectus of said issue Chartered Accountant was guilty of other misconduct.
Removal of name of Chartered Accountant for a period of three months was held to be justified.
Chartered Accountants Act, 1949, In re. (2017) 250 Taxman 35 (All) (HC)
S. 22 : Misconduct - A Chartered Accountant who had resigned as Director of a company

before opening of public issue but had signed prospectus of said issue despite his alleged
resignation was held to be guilty of other misconduct [ S. 21 ]
Court held that the disciplinary Committee of the Council of the Institute of Chartered
Accountants of India was right in holding that ,Chartered Accountant who had resigned as
Director of a company before opening of public issue but had signed prospectus of said issue
despite his alleged resignation was held to be guilty of other misconduct..
Chartered Accountants Act, 1949, In re (2017) 250 Taxman 35 (All.) (HC)
S.22 : Professional misconduct—A practicing Chartered Accountant carrying on business

through companies, trusts and firms was guilty of professional misconduct and his name
was to be removed from the Register of Members for a period of 2 years. [S. 21]
A practicing Chartered Accountant incorporated three companies and a trust. He was a director in
those companies. He failed to take the permission of Council before becoming director of the
companies. High Court held that since the practicing Chartered Accountant was actively carrying
540
on the business through companies, trust and firm, he was guilty of professional misconduct and
his name was to be removed from the Register of Members for a period of 2 years.
Council of Institute of Chartered Accountants of India v. Subodh Gupta (2017) 246 Taxman
64 (Delhi) (HC)
S.22 : Professional misconduct—A statutory auditor of the company who failed to discharge
his duty to enquire whether the transactions which were mere book entry were prejudicial
to the interest of the company was guilty of professional misconduct and his name was to be
removed from the Register of Members for a period of 5 years.
A complaint was received against a statutory auditor of a company that he committed serious
irregularities while carrying out audit of the said company. The company along with its group
concern were passing mere book entries without any cash flows thereby increasing its sales,
stocks etc. The High Court held that the statutory auditor had failed to discharge its duty to
enquire whether the transactions which were mere book entry were prejudicial to the interest of
the company. Accordingly, he was held guilty of professional misconduct and his name was
ordered to be removed from the Register of Members for a period of 5 years.
Council of the ICAI v. CA. G. S.Johar (2017) 246 Taxman 156 (Delhi) (HC)
S.22 : Professional misconduct—Where a CA failed to cross check the certificates issued by

him for listing of shares in stock-exchange, with the statement of accounts issued by Bank,
he was guilty of professional misconductand his name was to be removed from the Register
of Members for a period of 5 years.
Respondent CA issued certificates to a company for listing of his shares in stock-exchange. The
said certificates were not cross-verified with the statement of accounts issued by the Bank to the
said company. On the basis of the said certificate the company started trading shares on the stock-
exchange. A report was submitted by SEBI regarding unusual price movement of the said
company’s share. High Court held him guilty of professional misconduct and ordered his name
was to be removed from the Register of Members for a period of 5 years.
Council of the ICAI v. Kailash Chander Agarwal (2017) 246 Taxman 165 (Delhi) (HC)
S. 22 : Professional misconduct-Issue of certificate without verification was held to be

professional misconduct. Action of disciplinary committee suspending the chartered
Accountant, from practicing as a Chartered Accountant for a period of three years as
recommended by Institute was held to be justified .
On reference by the Institute of Chartered Accountant’s of India, the Court held that; issue of
certificate without verification was held to be professional misconduct. Action of disciplinary
committee suspending the chartered Accountant from practicing as a Chartered Accountant for a
period of three years as recommended by Institute was held to be justified
Institute of Chartered Accountants of India, In re (2017) 244 Taxman 59 (AP) (HC)
Institute of Cost and Works Accountants of India Regulations, 1959

S. 41 : Restriction of three attempts to pass all the papers is appropriate to improve
standard and conduct of examination, no fault could be found with such restriction
Dismissing the petition the Court held that; Restriction of three attempts to pass all the papers is
appropriate to improve standard and conduct of examination, no fault could be found with such
restriction
Deep Singh v. Institute of Cost Accountants of India (2017) 248 Taxman 339 (Delhi) (HC)
Constitution of India
541
Art. 235 : Control over subordinate Courts-CCTV cameras are culture of the day and
promotes good governance. All Tribunals including the ITAT should have CCTVs with
audio recording. The footage of the CCTV Camera will not be available under the RTI and
will not be supplied to anyone without permission of the concerned High Court . [Art.226,
227]
(i) It is pointed out that there is acknowledged utility of CCTV cameras in recording
contemporary events which may be useful for any monitoring authority. By way of illustration,
reference was made to orders of this Court directing CCTV cameras to be installed in all Police
Stations and prisons in 2015 (8) SCC 744 Dilip K. Basu Vs. State of West Bengal & Ors.
Similarly to curtail the events of eve-teasing, same direction was given in 2013 (1) SCC 598
Deputy Inspector General of Police & Anr. Vs. S. Samuthiram.
(ii) Some of the High Courts have suggested that audio recording should also be permitted
modifying the earlier direction of recording without audio. They have expressed an opinion that
installation of CCTV cameras will advance the interest of Justice. Learned ASG and learned
amicus curiae point out that as per Article 235 of the Constitution of India, the High Court is to
exercise power of superintendence over the subordinate Courts. There are untoward instances
which may take place in lower Courts and it may be useful if proceedings in Court are captured
on the CCTV camera by audio as well as video. This can assist the High Courts in exercising the
constitutional power under Article 235 of the Constitution of India.
(iii) We are satisfied, after considering the submissions and perusing the studies which have been
brought to our notice that installation of CCTV Cameras will be in the interest of justice. Any
apprehension to the contrary needs to be repelled. We have already incorporated safeguards of
footage of recording not being given for any purpose other than the purpose for which the High
Court considers it appropriate. We have also directed that the R.T.I provisions will not apply to
CCTV camera recordings in our Order dated 28.03.2017.
(iv) We asked learned Additional Solicitor General as to why the Union of India has not so far
installed CCTV cameras in Tribunals where open hearing takes place like Court such as ITAT,
CESTAT etc. as the tribunals stand on the same footing as far as object of CCTV camera are
concerned. He is unable to dispute the utility and requirement of doing so and we see no reason
why this should not be done. Recordings will help the constitutional authorities and the High
Court’s exercising jurisdiction under Articles 226 and 227 of the Constitution over such
Tribunals. We, therefore, direct that this aspect may now be taken up by learned Additional
Solicitor General with the concerned authorities so that an appropriate direction is issued by the
concerned authority for installation of CCTV cameras in Tribunals in same manner as in Courts
and an affidavit filed in this Court.
(v) We find from the report that there is a variance about the cost of installation of CCTV
cameras and no uniform technical specifications have been prescribed.
(vi) We direct the Union of India, Ministry of Information and Technology in consultation with
E-Committee of this Court to lay down technical specifications and other modelities, including
price range and sources of supply for installation of CCTV cameras in Courts. This may be done
within a period of one month from today and such information may be provided to all the High
Courts. The duration for which audio and video recordings may be retained may normally be
three months, unless otherwise directed by any High Court.
(vii) Though our earlier direction was to install CCTV cameras in two districts in every
State/Union Territory, with the experience now gained, it is desirable that CCTV cameras are
installed in all subordinate courts in such phased manner as may be considered appropriate by the
High Courts. Schedule for the purpose may be laid down within one month and information
furnished to this Court within two months. Audio recording may also be done. Similar directions
may be issued by the Government for Tribunals. (WP No. 99/2015, dt. 14.08.2017.)
Pradyuman Bisht v. UOI (SC), www.itatonline.org
542
Hindu law
Hindu law – HUF-The burden lies upon the member who after admitting the existence of
jointness in the family properties asserts his claim that some properties out of entire lot of
ancestral properties are his self-acquired property.
It is a settled principle of Hindu law that there lies a legal presumption that every Hindu family is
joint in food, worship and estate and in the absence of any proof of division, such legal
presumption continues to operate in the family. The burden lies upon the member who after
admitting the existence of jointness in the family properties asserts his claim that some properties
out of entire lot of ancestral properties are his self-acquired property. The plaintiffs failed to
prove this material fact for want of any evidence. (CA.No. 11220 of 2017, dt. 06.09.2017)
Adveppa v. Bhimappa (SC); www.itatonline.org
Central Services (Conduct) Rules, 1964.

Charge framed after lapse of 20 years was liable to be quashed .
Allowing the petition the Court held that; Charge framed after lapse of 20 years was liable to be
quashed, as there was no allegation against petitioner regarding any misconduct in discharge of
his duties, impugned Memorandum of Charge was to be quashed.
Nai Pal Singh. v. UOI (2017) 251 Taxman 352 (Bom) (HC)
GST :
No penal interest late feeprosecutionshall be levied - The composition Scheme is extended

upto 30.9.2017 .
Allowing the petition the Court held that; as the system is not working and is required to be
corrected, taxpayers who are unable to log-in should inform the concerned officials. No coercive
action (penal interest, late fees and prosecution) shall be levied against the clients of the
Petitioners' members referred in the petition and those who inform by email. The composition
Scheme is extended upto 30.9.2017 and desirous assessee can apply. (D.B. C WPNo. 15239
/2017, dt. 20.09.2017)
Rajasthan Tax Consultants Association v. UOI (Raj) (HC), www.itatonline.org
Finance Act, 1994 S.83 Central Excise Act, 1944

Service tax
S. 11B : Refund - limitation - Construction services – Service tax was paid under protest –
Claim of refund cannot be rejected on the ground of limitation.
Allowing the petition the Court held that, since the levy of service - tax on construction came in
to force w.e.f I st July 2010 per see, service tax paid by the assesse – builder during the period
prior to that date is to be refunded to it. As the assesse has lodged protest with in reasonable time,
proviso to S.11B (1) of the Central Excise Act, 1944 is attracted and therefore, the claim of
refund cannot be rejected on the ground of limitation.
543
Mera Baba Reality Associate (P) Ltd v. CST (2017) 145 DTR 259 (Delhi) (HC)
S.85 : Appeal – Limitation – Condonation of delay - When the assesse made statement on
oath that it received the order only on 11 th Sept, 2012, the same has to be accepted – Delay
was condoned .
Allowing the petition the Court held that; When the assesse made statement on oath that it
received the order only on 11 th Sept, 2012, the same has to be accepted. Accordingly delay was
condoned .
Ebilitz Inc v. Addl. CST & Anr. (2017) 145 DTR 284 (Karn.) (HC)
Indian Penal code, 1860
S. 181 : Knowingly stating to a public servant on oath as true that which is false - Search
and seizure – Unexplained investment - Contradiction statement against bank locker -
Addition was deleted by Tribunal - Dismissal of criminal complaint by Chief Judicial
Magistrate was held to be justified . [ S. 69A, Cr.P.C. S. 313 ]
In the Course of search proceedings the assesse has denied having any bank locker in joint name
of assesse and his wife . The statement was taken on oath. Addition made under section 69A
was deleted by Tribunal. ADI (Inv.) filed a complaint under section 181 of Indian Penal Code
against assessee on allegation that the assessee had made a statement having glaring contradiction
with regard to existence of locker held in joint name of assessee and his wife, as proved to be a
false statement purposely made before a Public Servant. Chief Judicial Magistrate relying upon
conclusion of Tribunal held that it was not a case of concealment of income, dismissed criminal
complaint. On appeal by revenue dismissing the petition the Court held that ;on facts, finding
recorded by Chief Judicial Magistrate being a reasoned one, did not require any interference .
ADIT v. Dr. Kaushal Goyal (2017) 250 Taxman 250/(2018) 400 ITR 320 (P&H) (HC)
Sales tax-VAT Tribunal - Qualification and appointment of Members of the Tribunal -

Infrastructure - Transparency
Allowing the petition, the Court held that; (i) Only legally qualified, judicially trained and
experienced persons can be appointed Members. A Chartered Accountant or Commissioner
cannot be appointed unless they have expertise in the subject. (ii) The Selection Committee
should be headed by either a sitting Judge or a retired Judge of the High Court. (iii) It is the
constitutional obligation of the State to provide proper infrastructure to the Courts, Tribunals and
Judicial Officers. Financial constraint on the part of the Government is no ground to deny the
adequate infrastructure to the Courts and Tribunal. (iv) For complete transparency, the Tribunal
will have to ensure that its records are digitized and all orders, short or long, are uploaded on a
dedicated website. However, the compliance with the directions issued by this Court will have to
be monitored by this Court. We therefore, direct that notwithstanding the disposal of this petition,
the petition shall be listed under the caption of “Directions” on 18th January 2018. The State
Government shall file an affidavit of compliance on 15th January 2018;It will be appropriate if
this petition is placed before the same Division Bench or before the Division Bench to which one
of us is a party. We, therefore, direct the Prothonotary and Senior Master to seek appropriate
directions from the Hon’ble the Chief Justice in this behalf. (WP. 2069 of 2015, dt. 29.09.2017)
Sales Tax Tribunal Bar Association v. State of Maharashtra (Bom) (HC);
www.itatonline.org
Code of Criminal Procedure, 1973
S. 193 : Punishment for false evidence-Offences and Prosecution — Giving false affidavits
before court, making deliberate false statements on oath and suppressing material facts in
544
pleadings is the grounds for prosecution. Registrar General was directed to forthwith file a
written complaint before the concerned appropriate Court against the assesse. [, S. 195,
197, 340 ]
The Court held that in the writ petition,the assesse has not only suppressed material facts in their
petitions in the first place, but after this was pointed out in the Department’s counter-affidavit, the
assessee’s were most casual in their response thereto making no attempt to justify the suppression
of such material facts. The length of the respective rejoinders in both petitions only demonstrated
the extent to which material facts within the knowledge of the assessee were not placed before the
court in the first instance. The conditions existed for initiation of action under section 340 of
the Code of Criminal Procedure, 1973 against the assessees, since, the assessees had given false
affidavits and made deliberate false statements on oath and also suppressed material facts in the
pleadings with a clear attempt to mislead the court. An inquiry should be made against the
assessees in relation to the offences committed by them as contemplated by section 195 (1) (b) of
the 1973 Code. A prima facie case was made out for a complaint being filed against the assessees
to be prosecuted under section 193 of the Indian Penal Code, 1860 . The Registrar General was
directed to forthwith file a written complaint before the concerned appropriate court against the
assessees under section 340 read with section 197 of the 1973 Code thereof.
Strategic Credit Capital P. Ltd. v. Ratnakar Bank Ltd. (2017) 395 ITR 391/81 taxmann.com
408/153 DTR 1/297 CTR 341 (Delhi) (HC)
Veena Singh v. DI (Inv) (2017) 395 ITR 391/81 taxmann.com 408 /153 DTR 1 /297 CTR 341
(Delhi) (HC)
S.300. Fodder scam - Delay - The Court has to ensure that owing to some delay on part of
the machinery, miscarriage of justice should not take place. It is also contended that the
power under Section 5 of the Limitation Act should be exercised to advance substantial
justice - Delay was condoned - Severe strictures passed against the High Court for
"inconsistent decision-making" and passing orders which are "palpably illegal, faulty and
contrary to the basic principles of law" and by ignoring "large number of binding decisions
of the Supreme Court" and giving "impermissible benefit to accused". Law on condonation
of delay explained. CBI directed to implement mechanism to ensure that all appeals are
filed in time [ Constitution of India, Art .20 (2), Limitation Act, S.5 ]
Reliance was placed for condonation of delay; the State of Tamil Nadu v. M. Suresh Rajan
(2014) 11 SCC 709 is apt in which the time consumed in taking opinion on change of
Government was held to be sufficient cause so as to condone the delay. Reliance has also been
placed on Indian Oil Corporation Ltd. & Ors. v. Subrata Borah Chowlek, etc. (2010) 14 SCC 419
in which there was a delay in filing the appeals in which this Court has observed that Section 5
owes no distinction between State and citizen. The Court has to ensure that owing to some delay
on part of the machinery, miscarriage of justice should not take place. It is also contended that the
power under Section 5 of the Limitation Act should be exercised to advance substantial justice by
placing reliance on State of Nagaland v. Lipok AO & Ors. (2005) 3 SCC 752. The Court
condoned the delay .The Court also passed severe strictures against the High Court for
"inconsistent decision-making" and passing orders which are "palpably illegal, faulty and
contrary to the basic principles of law" and by ignoring "large number of binding decisions of the
Supreme Court" and giving "impermissible benefit to accused". Law on condonation of delay
explained. CBI directed to implement mechanism to ensure that all appeals are filed in time. (CA
No. 394 of 2017, dt. 08.05.2017)
State of Jharkhand v. Lalu Prasad Yadav (SC), www.itatonline.org
State of Jharkahnd v. Dr.Jagannath Mishra (SC), www.itatonline.org
545
Assam Value Added Tax Act, 2003 (8 of 2005),
S.81 : Revision--High Court--Revision before High Court--Value added tax--Limitation--
Specific provision under Value Added Tax Act making sections 4 to 12, Limitation Act
applicable. Amounts to exclusion of operation of section 5, Limitation Act by necessary
implication [ S. 84,Limitation Act (36 of 1963), S. 5, 29 (2).]
Dismissing the appeal the Court held that; The court cannot interpret the law in such a manner so
as to read into the Act an inherent power of condoning the delay by invoking section 5 of the
1963 Act so as to supplement the provisions of the 2003 Act which excludes the operation of
section 5 by necessary implications.
It is for the Legislature to set right the deficiency, if it intends to give power to the High Court to
condone the delay in filing revision petition under section 81 of the 2003 Act.
Accordingly, that the application under section 5 of the Limitation Act, 1963 to a proceeding
under section 81 (1) of the Assam Value Added Tax Act, 2003 which prescribed a limitation
period of 60 days within which revision petition was to be preferred to the High Court, stood
excluded by necessary implication, by virtue of the language employed in section 84 of the 2003
Act.
Patel Brothers v. State of Assam (2017) 391 ITR 244 (SC)

Editorial : Decision in Patel Brothers v. State of Assam [2016] 93 VST 230 (Gauhati) (HC) is
affirmed.
546
Prevention of Corruption Act, 1988.
S.13 : A Chartered Accountant who is accused of offering a bribe to an Income-tax Officer

for performing an official act can be tried under sections 7 and 13 (1) (d) of the Prevention
of Corruption Act and s. 120-B of the IPC. Chartered Accountant is not a “public servant”
is irrelevant. [S. 13, IPC, S. 120B, CRPC, S. 227]
Dismissing the revision application, the Court held that; A Chartered Accountant who is accused
of offering a bribe to an Income-tax Officer for performing an official act can be tried under
sections 7 and 13 (1) (d) of the Prevention of Corruption Act and s. 120-B of the IPC. The fact
that the Chartered Accountant is not a “public servant” is irrelevant. (CRP. No. 1040/2014, dt.
13.09.2017)
H. Naginchand Kincha v. Superintendent of Police (Karn.) (HC), www.itatonline.org
S.13 : Government Servant - Prevention of corruption-Cash credits – Gifts-Assets was

found disproportionate to known sources of income-Income-tax returns and orders passed
in income-tax proceedings not by themselves proof that income was lawfully earned.
Further scrutiny and analysis required to determine whether offence under 1988 Act made
out. [ S. 56, 68, 139, 143 ]
Where charges are levelled against the assessee of having assets disproportionate to his known
sources of income under the Prevention of Corruption Act, 1988, income-tax returns and orders
passed in income-tax proceedings recording the income of the assessee as disclosed in his returns
would not by themselves establish that such income had been earned from lawful sources as
contemplated in the Explanation to section 13 (1) (e) of the 1988 Act and independent evidence
would be required to account for it. Court also held that; none of the assessees had been
examined on oath. The income-tax returns had been filed and the orders in the proceedings
pertaining thereto had been passed after the charge-sheet under the 1988 Act had been submitted.
There was a charge of conspiracy and abetment against the assessees. In the overall perspective
therefore neither the income-tax returns nor the orders passed in the proceedings relatable thereto,
either definitively attested the lawfulness of the sources of income of the assessees nor were they
of any avail to satisfactorily account for the disproportionateness of their pecuniary resources and
properties as mandated by section 13 (1) (e) of the 1988 Act. Decision of the Karnataka High
Court reversed.
State of Karnataka v. Selvi J. Jayalalitha and others (2017) 392 ITR 97/78 taxmann.com 161
(SC)
State of Karnataka v. Indo Doha Chemicals and Pharmaceuticals (2017) 392 ITR 97/78
taxmann.com 161 (SC)
K.Anbazhagan v. Indo Doha Chemicals and Pharmaceuticals (2017) 392 ITR 97 (SC)
K.Anbazhagan v. Selvi J. Jayalalitha (2017) 392 ITR 97/78 taxmann.com 161 (SC)
2017 - Circulars /notifications, Articles
Finance Bill, 2017 .

Budget Speech of Minister of Finance for 2017-18 :
Part A (2017) 391 ITR 1 (St.)
Part B (2017) 391 ITR 23 (St.)
Annexures (2017) 391 ITR 32 (St.)
Finance Bill, 2017 (2017) 391 ITR 40 (St.)
Notes on clauses (2017) 391 ITR 113 (St.)
Memorandum explaining the provision in the Finance Bill, 2017 (2017) 391 ITR 165 (St.)
Finance Bill, 2017 : Notes of amendments (2017) 392 ITR 50 (St)
547
Finance Act, 2017 (7 of 2017) (Assent of the President on 31 - 03 2017) (2017) 393 ITR 1 (St)
Circulars /Notifications
41 of 2016 dated - - Clarifications on indirect transfer provisions under the Income-tax Act, 1961
(2017) 390 ITR 7 (St.)
42 of 2016 dated 23 rd . December 2016 – Clarifications on the Direct Tax Dispute Resolution
Scheme, 2016 (2017) 390 ITR 14 (St.)
1 of 2017, dated 2 nd January, 2017-Income – tax deduction from salaries during the financial
year 2016-17 under section 192 of the Income – tax Act, 1961 (2017) 390 ITR 33 (St)
2 of 2017, dated 18 th January, 2017 – Clarifications on the Taxation and Investment Regime for
Pradhan Mantri Garib Kalyan Yojna, 2016 (2017) 390 ITR 125 (St)
3 of 2017, dated 26 th January, 2017 – Explanatory notes to the provisions of the Finance Act,
2016 (2017) 391 ITR 253 (St.)
4 of 2017 dated 20 th January, 2017 - Circular no 41 of 2016 (F.No. 500/43 /2012 – FT & TR)
dated 21-12 - 2016 (Indirect transfer provisions)
5 of 2017, dated 23 rd January, 2017 - Measures for reducing litigation – Clarification on Circular
No 21 and 8 of 2016 – reg . (2017) 391 ITR 229 (St.)
6 of 2017, dated 24 th January, 2017 – Guiding principles for determination of place of effective
Management (POEM) of a company (2017) 391 ITR 243 (St)
7 of 2017, dated 27 th January, 2017 – Clarifications on implementation of GAAR provisions
under the Income – tax Act, 1961, (2017) 391 ITR 234 (St.)
8 of 2017, dated 23 rd, February, 2017 - Clarification for determination of Place of Effective
Mannagement (POEM) of a company ,other than an Indian company – Reg . (2017) 392 ITR 7
(St.)
Circular No - - - of 2017 dt, 28 th March, 2017 - S.119 – Sub : Petition seeking condonation of
delay in making payment of first installment under the Income disclosure Scheme (IDS) ,2016 –
reg . (2017)393 ITR 77 (St.)
9 of 2017, dated 14 the March, 2017 – Clarification of the Taxation and Investment Regime for
the Pradhan Mantri Garib Kalyan Yojna, 2016 (2017) 392 ITR 59 (St.)
10 of 2017, dated 23 rd March, 2017 – Clarifications of Income Computation and Disclosure
Standards (ICDS) notification under section 145 (2) of the Income – tax Act, 1961 (2017) 392
ITR 60 (St.)
11of 2017, dated 24 th March, 2017 – order under section, 119 (2) (a) of the Income – tax Act,
1961 – Guidelines for waiver of interest charged under section 201 (IA) (i) of the Income – tax
Act, 1961 (2017) 392 ITR 68 (St.)
12 of 2017, dated 31 st March ,2017 – Clarification on the Taxation and investment Regime for
Pradhan Mantri Garib Kalyan Yojana, 2016 (2017) 393 ITR 79 (St.)
548
13 of 2017, dated 31 st March, 2017 – Clarification regarding liability to income – tax in India for
a non – resident seafarer receiving remuneration in NRE (Non – resident External) account
maintained with an Indian bank (2017) 393 ITR 91 (St)
14 of 2007, dated 21 st April, 2017 – Extension of time for filing declaration under the taxation
and investment Regime for Pradhan Mantri Kalyan Yojana, 2016 (2017) 393 ITR 114 (St.)
15 of 2017 dated 21 st April, 207 – Clarification on removal of Cyprus from the list of notified
jurisdiction areas under section 94A of the Income – tax Act, 1961 (2017) 393 ITR 115 (St.)
16 of 2017, dated 25 th April, 2017 – Lease rent from letting out building /developed space along
with other amenities in an Industrial park/SEZ – to be treated as business income (2017) 393 ITR
116 (St.)
17 of 2017 dated 26 th April, 2017 – Corr igendum to Circular No 13 of 2017, dated April 11,
2017, on the clarification regarding liability to income tax in India for a non-resident seafarer
receiving salary in NRE (Non – resident External) account maintained with an Indian Bank .
19 of 2017, dated 12 th June, 2017 - Settled view on section 2 (22) (e) of the Income – tax Act,
1961, trade advances – Reg . (2017) 395 ITR 20 (St).
20 of 2017, dated 12 th June, 2017 – Applicability of Explanation 2 to section 132B of the
Income – tax Act, 1961 – Reg. (2017) 395 ITR 21 (St)
21 of 2017 dated, 12 th June, 2017 – Non – applicability of the provisions of section 194I of the
Income – tax Act, 1961 on remittance of passenger service fee (PSF) by an air line to an airport
operator – Reg (2017) 395 ITR 23 (St.)
22 of 2017 dated 29 th June, 2017 - Clarification in respect of section 269ST of the Income – tax
Act, 1961, (2017) 395 ITR 29 (St)
C.B.D.T. Circulars /Corrigendum, dated 24 th January, 2017 – Corrigendum to Circular No 1 of

2017, dated 2-1-2017 on TDS under section 192 of the Income – tax Act, 1961 (2017) 391 ITR
230 (St.)
Circular No - -- - of 2017, dated 14 th July 2017 – Modification of circular Np 21 of 2015 of

2015, dated December, 10, 2015 (2017) 396 ITR 5 (St)
Circular No 23 of 2017, dated 19 th July, 2017 – Modification of Circular No 1 of 2014 in view

of substitution of Service Tax by Goods and Services Tax (GST) (2017) 396 ITR 6 (St)
Circular No 24 of 2017, dated 25 th July, 2017 – Clarifications on computation of book profit for
the purpose of levy of minimum alternative tax (MAT) under section 115JB of the Income – tax
Act, 1961 for Indian Accounting Standards (IndAS) complaint companies (2017) 396 ITR 11 (St)
Order dated 31 st July , 2017 – Order under section 119 of the Income – tax Act, 1961 : Extension
of due date for filing returns from 31-7-2017 to 5 - 8 - 2017 (2017) 396 ITR 53 (St)
Order dated 4 th August, 2017 – Order under section 119 of the Income-tax Act, 1961 : Extension
of due date for filing returns (2017) 396 ITR 69 (St)
Order dated 31 st August, 2017 - Order under section 119 of the Income – tax Act 1961 : Due
date for filing return as well as various reports of audit extended to October 31, 2017 (2017) 397
ITR 19 (St)
Order dated 31 st August, 2017 – Order under section119 of the Income-tax Act, 1961 : Linking
Adhaar with PAN extended till December 31, 2017 (2017) 397 ITR 20 (St)
25 of 2017 dated 23 rd ,October, 2017 – Clarification related to guidelines for establishing “ Place
of Effective Management ” (PoEM) in India – reg. (2017) 398 ITR 7 (St.)
549
26 of 2017, dated 25 th October, 2017 - Order under section 119 of the Income – tax Act, 1961
(“the Act”) (2017 398 ITR 9 (St)
27 of 2017 dated 3 rd November, 2017 - Clarification on cash sale of agricultural produce by
cultivators /agriculturist (2017) 398 ITR 46 (St)
28 of 2017 dated 7 th November 2017 – Clarification on indirect transfer provisions in case of

redemption of share or interest outside India under the Income – tax Act, 1961 (2017) 398 ITR
47 (St)
Order dated 27 th September, 2017 : Oder under section 119 of the Income – tax Act, 1961 – The
taxation and investment regime for Pradhan Mantri Garib Kalyan Yojana, 2016 – representations
under the Scheme pertaining to challan corrections and conversion, etc – reg (2017) 398 ITR 17
(St)
Order dated 12 th October, 2017 – Disposal of high tax effect cases having tax effect more than
Rs 50 Cr. reg . (2017) 398 ITR 20 (St)
Order dated 31 st October 2017 : Order under section 119 of the Income – tax Act, 1961 : Due
date for filing return as well as various reports of audit extended to November 7, 2017 (2017) 398
ITR 38 (St)
Circular dated 15 th November, 2017 – Sub - SOP for issue of notice under section 142 (1) of the
Income – tax Act, in cases related to substantial cash deposit during demonetization period – reg .
(2017) 399 ITR 11 (St)
Circular dated 24 th November, 2017 - Some of the important issues to be considered while
framing scrutiny assessments pertaining to filing of revised /belated returns by assesses, post –
demonetisation – reg. (2017) 390 ITR 17 (St)
Circular dated 30 th November, 2017 – Unauthorised expansion of the scope of limited scrutiny
– Instructions (2017) 390 ITR 15 (St)
CBDT - Order dated 8 th December, 2017 . S.119 : Linking of Aadhaar with PAN till 31 st
March, 2018 (2017) 390 ITR 19 (St)
Instructions
Notification No. 1 of 2017, dated 17 th, January, 2017 – Procedure for registration and
submission of statement of financial transactions (SFT) as per section 285BA of the Income – tax
Act, 1961 read with rule 114E of the Income-tax Rules, 1962 (2017) 392 ITR 10 (St.)
Instruction No . 3 of 2017, dated 21 st, February, 2017 – Standard operating procedure (SOP) to
be followed by the Assessing Officers in verification of cash transactions relating to
demonetization – regd. (2017) 392 ITR 31 (St.)
Instruction No . 2 of 2017, dated 16 th January ,2017 – The Income declaration Scheme ,2016 –
Reg. (2017) 393 ITR 92 (St.)
Instruction No . 4 of 2017, dated 3rd March, 2017 – Issue of notice under section 133 (6) of the
Income – tax Act, 1961 for clarification of cash deposits under “ operation Clean Money “ – reg.
(2017) 392 ITR 31 (St.)
550
Instruction No 5 of 2017, dated 7 th July, 2017 – Guidelines for selection of cases for scrutiny
during the financial year 2017 - 18 – reg. (2017) 396 ITR 1 (St)
Instruction No 6 of 2017, dated 21 st July, 2017 – Revised Instruction on Internal Audit – Reg .
(2017) 396 ITR 22 (St)
Instruction No 7 of 2017, dated 21 st July 2017 – Instruction laying down Standard Operating
Procedure to handle receipt/revenue audit objections – Reg (2017) 396 ITR 36 (St)
Office Memorandum dated 31 July, 2017 - Partial modification on Instruction No 1914, dated
21-03 - 1996 to provide for guidelines for stay of demand at the first appeal stage (2017) 2017)
396 ITR 55 (St.)
Instruction No 8 of 2017, dated 29 th September, 2017 – Conduct of assessment proceedings
electronically in time – barring scrutiny cases – Order under section 119 of the Income – tax Act
1961 (“Act ”) – reg (2017) 398 ITR 10 (St)
Instruction no 9 of 2017, dated 11 th October, 2017 – Order under 119 of the Income – tax Act,
1961 : Processing of returns in Form ITR - 1 under section 143 (1) of the Income – tax Act,
1961 – Applicability of section 143 (1) (a) (vi) – Reg (2017) 398 ITR 15 (St)
Instruction No.10 of 2017, dated 15 th November, 2017 – Sub : Processing of income tax returns
filed in forms ITR-2, 3, 4, 5 and 6 under section 143 (1) of the Income – tax Act – Applicability
of section 143 (1) (a) (vi) – reg. (2017) 399 ITR 9 (St)
Notifications
Notification No 4 of 2017, dated 3rd April, 2017 – Procedure, formats and standards for ensuring
secured transactions of electronic communication - Introduction of e. proceeding for
communication between the Income-tax Department and assesse – Reg . (2017) 393 ITR 93 (St)
Notification No. 7 of 2017 dated 29th June, 2017 – Procedure of intimating AADHAR number to
Income – tax Department by permanent account number (PAN) holder and quoting of the same in
PAN applications in compliance to section 139AA of the Income – Tax ACT . (2017) 395 ITR 30
(St.)
Notification – S.54EC : Notified long term specified asset. (2017) 395 ITR 18 (St)
Notification – S.92C (2) : Deemed arm’s length price for assessment years 2017-18 and 2018-19
(2017) 395 ITR 17 (St.)
Press Releases : Supreme Court on AADHAR – PAN linkage (2017) 395 ITR 15 (St.)
Order dated 26 th July, 2017 – Income – tax Act, 1961 : Notification under section 138 (1) (a) :
Furnishing bulk information : Specified authority notified (2017) 396 ITR 54 (St)
Notification No 8 of 2017, dated 13 th September, 2017 - TDS on interest on deposits made under
the Capital gains Accounts Scheme, 1998 where the depositor is deceased (2017) 397 ITR 28 (St)
Ordinances :
Specified Bank Notes (Cessation of liabilities) Ordinance, 2016 (2016) 390 ITR 24 (St.)
Specified Bank Notes (Cessation of Liabilities) Ordinance, 2016; Notification under section 2 (1)
(b) : Period of resident in India and not resident in India Specified .Notification No . S.O. 4251
(E), dated 30 th December, 2016 (2017) 390 ITR 28 (St)
Notification No 74 of 2017, dated 26 th July, 2017 (2017) 396 ITR 53 (St)
551
Schemes :
Pradhan Mantri Garib Kalyan Deposit Scheme, 2016 : Amendment (2016) 391 ITR 234 (St.)
Pradhan Mantri Garib Kalyan Deposit Scheme : Amendments (2017) 393 ITR 77 (St)
Rules
Prohibition of Benami Property Transaction Rules, 2016, Notification No G.S.R. 1004 (E) dated
25 the October, 2016 (2017) 390 ITR 17 (St)
Black money (Undisclosed Foreign Income and Assets) and Imposition of Tax (Amendment)
Rules, 2016 No no G.S.R.1180€, dated 28 th December, 2016 (2017) 390 ITR 30 (St.)
Prevention of Money – Laundering Act, 2002 : Notification under section 2 (1) (sa) (iv) : Person
carrying on designated business or profession (2017) 396 ITR 83 (St)
S. 90.Double taxation.
Protocol amending the agreement between the Government of the Republic of India and the
Government of the Socialist Republic of Vietnam for the avoidance of double taxation and the
prevention of fiscal evasion with respect to taxes on income (2017) 397 ITR 22 (St)
Amending the convention and protocol between the Government of the Republic of India and
the Government of the Republic of Slovenia for avoidance of double taxation and the prevention
of fiscal evasion with respect to taxes on income (2017) 398 ITR 38 (St)
Third protocol to the convention between the Government of the Republic of India and the
Government of New Zealand for the avoidance of Double taxation and the prevention of fiscal
evasion with respect to taxes on income (2017) 399 ITR 1 (St)
Press releases : Clarification of India’s position on the acceptance of MAP and bilateral APA in
cases of Countries where article 9 (2) of OECD Model tax Commentary is absent (2017) 390
ITR 20 (St)
Sections.
S.2 (22) (e) : Deemed dividend - For taxing deemed dividend under section 2 (22) (e) of the
Income – tax Act, the purpose for which loan or advance is given ,is irrelevant by T.N Pandy
(2017) 396 ITR 1 (Journal)
S.10A : Enhanced income and section 10A exemption by T.N .Pandey (2017) 54 ITR 13 (Trib)
(Articles)
S. 11 : Charitable Trust - Exemption under S.11 of the Income-tax Act, 1961 by D.S Walja
(2017) 295 CTR 30 (Articles)
S. 14A : Recording of reasons - Whether an empty formality under section 14A of the Income –
tax Act, 1961 by Asim Choudhury (2017) 390 ITR 9 (Journal)
552
S. 14A : Special Bench Puts An End To The Controversy Of Applicability Of S. 14A Adjustment
To Profit u/s 115JBby Jyoti Gupta, CA, www.itatonline.org
S. 14A : Exempt Income Vs. Expenses For Exempt Income by Jyoti Gupta, CA www.itatonline
.org
S.14A : Scope Of Disallowance Explained by Dev Kumar Kothari,CA, www.itatonline .org
S. 36 (1) (vii) : Bad debt – A bad debt is allowable once it is written off as such in books of
account by T.N.Pandey (2016) 295 CTR 22 (Articles)
S. 37 (1) : Business expenditure - Capital or revenue or none of the above by V.N. Murlidharan
(2017) 297 CTR 38 (Articles)
S. 37 (1) : Business expenditure – Deductibility of expenses on business launch – CBDT needs to
issue instructions that expenses incurred during the period of setting up of the business are also
deductible to avoid the proliferation of litigation by T.N .Pandey (2017) 56 ITR 1 (Trib) Articles
S.44AD : The big assumption in “ Small” (?) presumption by N.S Doshi (2017) 249 Taxman 5
(Mag) (Article)
S. 45 : Capital gains - Capital gains on sale of cost – Indeterminable capital assets by T.N.Pandey
(2017) 393 ITR 1 (Journal)
S. 47 (xiii) : Conversion of firm in to a company – Section 47 (xiii) and 47A (3) - Whether futile
by Minu Agarwal (2017) 296 CTR 1 (Articles)
S. 50B : Slump sale - The Concept “Slump sale “ in the context of taxation of capital gains under
the Income-tax Act, 1961 by T.N.Pandey (2017) 390 ITR 1 (Journal)
S. 50C : Deemed consideration, by V. Srikanth (2017) 399 ITR 95 (Journal) (Article)
S. 54 : Capital asset transfer – Whether section 54 benefit can be availed by a trust for its
beneficiary on transfer of a capital asset ? by T.N Pandey (2017) 396 ITR 27 (Journal)
S.92C : Transfer pricing – Reference to transfer pricing officer by Darshan R.Patel (2017) 248
Taxman 31 (Mag.)
S. 94B : Understanding “ thin capitalization” norms in India – A double whammy to abusive tax
structures by Suyash Sinha (2017) 248 Taxman 15 (Mag.)
S. 115JAA. Book profit - MAT credit set off under section 115JAA by Mr M.R.Sahu (2017) 250
Taxman 7 (Mag.) (Articles)
S. 115JB : Section 15JB of the Income – tax Act, 1961 – Audit by the C& AG by T.N.Pandey
(2017) 398 ITR 24 (Journal)
S. 132 : Powers of search - Are they being abused ? (2017) 390 ITR 100 (Journal) (Articles)
S. 139AA : Linking aadhaar with PAN of tax payers – Challenge before the SC. By T.N.Pandey
(2017) 248 Taxman 11 (Mag.)
553
S. 142 (2A) : Section 142 (2A) of the IT Act confers extensive power to companies to abdicate
their work to CAs. By T.N .Pandey (2017) 249 Taxman 1 (Mag.) (Article)
S. 145 (3) : Profitability and section 145 (3) of the IT Act : Section 145 (3) of the Income tax Act
1961 cannot be invoked merely because profit in the previous years is low – By T.N.Pandey
(2017) 397 ITR 1 (Journal) (Article)
S. 148 : Whether assesse can claim refund in ITR filed I response to section 148 Notice ? Mr
M.R.Sahu (2017) 250 Taxman 49 (Mag.) (Articles)
S. 154 : Rectification of mistake – by V.Srikant (2017) 56 ITR 9 (Trib) (Article)

S. 194IB : TDS u/s194IB on payment of rent by certain individuals or Hindu undivided family
by Jagdish T.Punjabi (2017) BCAJ – August P. 22
S. 220 (6) : Deemed defaulter by V.Srikanth (2017) 54 ITR 8 (Trib) (Articles)
S. 234B, 234C - Interest under sections 234B and 234C of the Act arising from retrospective
charges in advance tax provisions - Interest under section 234B and 234C of the Income – tax Act
for shortfall in payment of advance tax is not leviable if it arises because of retrospective
amendment of the Income – tax Act ? by T.N Pandey (2017) 397 ITR 36 (Journal) (Article)
S. 260A : Jurisdiction for filing appeals by Pushya Sitraman (2017) 390 ITR 92 (Journal)
(Articles)
S. 271 (1) (c) : Karnataka HC reiterates that show cause notice issued for levying penalty u/s 271
(1) (c) should be a speaking order by T.N Pandey (2017) 250 Taxman 45 (Mag.) (Articles)
S.270A : Whether under reporting and misreporting of income will cover ‘no reporting’ cases
also ? by T.N.Pandey (2017) 247 Taxman 1 (Mag.) (Article)
S. 271DA : Penalty U/s 271DA For Violation Of S. 269ST Of The Income-tax Act, 1961 by
Vinay Kawdia, CA www.itatonline.org
S. 271DA : Surgical Strike On Cash Transactions (Analysis Of Sections 269ST & 271DA Of
The Income-tax Act, 1961) by Jyoti Gupta, CA www.itatonline .org
S. 271J : Is it fair to impose penalty on the professionals ? by Pankaj R.Toprani (2017) 392 ITR
49 (Articles)
S. 281 : Void transfers by V. Srikanth (2017) 399 ITR 69 (Journal) (Articles)
S. 285B : Section 285BA of the Income – tax Act, 1961 casts onerous duties on tax payers to
furnish information about financial transactions /reportable accounts by T.N .Pandey (2017) 397
ITR 11 (Journal) (Article)
S. 292C : legislative presumption u/s 292C does not over – rule the necessity of prevalence of
“independent Evidence “” by Hemant O. Sharma (2017) 248 Taxman 1 (Mag.)
A.
554
Accounts – Construction contracts – A disclosure for accounting and tax purposes by
S.Ramachandran (2017) 2098 CTR 9 (Articles)
Accounts - Classification of expenses in profit or loss and fine – tuning of application of
Accounting Standards by S. Ramachandran (2017) 297 CTR 9 (Articles)
Assessment - Assessment of income under the Income – tax Act, by itself is no proof that income
aaseessed has been law fully earned by T.N.Pandey (2017) 246 Taxman 23 (Mag) (Article)
Accounts - Change in method of accounting by T.N.Pandey (2017) 54 ITR 1 (Trib) (Articles)
Amnesties galore – But these do not check evasion and black money - Merely impact the
credibility of the Government by T.N .Pandey (2017) 392 ITR 1 (Journal)
Arrest under tax laws - An analysis by Ramesh Chandra Jena (2017) 345 ELT 155 (Article)
Appeal before High Court under Customs Provisions by Dr. M.Govnd Rajan (2017) 346 ELT 97
(Article)
Amnesty Under Taxation Laws (Second Amendment) Act 2016 : A Study-by Shri. K. C.
Singhal, former Vice President www.itatonline .org
Agricultural Income-taxation of agricultural income - Finance Minister’s instant adverse reaction

to a suggestion for taxing agricultural income is baffing ! by T.N.Pandey (2017) 395 ITR 1
(Journal)
B.
Budget : An appraisal of some income – tax proposals by T.N .Pandey (2017) 391 ITR 41
(Journal)
Benami Transactions
Prohibition of Benami Property, Transactions, Act 1988 – An Introduction by Dilip K Sheth
(2017) The Chamber’s Journal, November – P. 11
Benami Property - Benami and Beneficial Owner by Dr. Anup P.Shah (2017) The Chamber’s
Journal, November – P. 17
Appeals and adjudication under the Prohibition of Benami Property Transactions Act, 2016, by
Aditya Ajgaonkar (2017) The Chamber’s Journal, November – P. 24
Implications of BTPA under Income – tax Act, 1961 by Kirit S .Sanghvi 2017) The Chamber’s
Journal, November – P. 31
Implications of BTPA under Indirect Tax laws by Amar Gahlot 2017) The Chamber’s Journal,
November – P. 38
The Prohibition of Benami Property Transactions Act, 1988 – Other important provisions by
Ashish Mehta The Chamber’s Journal, November – P. 43
Benami - Prohibition of Benami property transactions Act, 1988 (As amended) – Some important
issues (Part – I) by Mayur B.Nayak (2017) BCAJ – April P. 10
Benami - Prohibition of Benami property transactions Act, 1988 (As amended) – Some important
issues (Part – II) by Mayur B.Nayak (2017) BCAJ – May - P. 43
Benami - Amendment to Benami Transactions law – An analysis by T.N Pandey (2017) 244
Taxman 23 (Mag.)
555
Black money - Amnesties Gallore : But these do not check evasion and black money – merely
impact the credibility of the Government by T.N Pandey (2017) 392 ITR 1 (Articles)
Benami - The rejuvenated law relating to Benami Property transactions by T.N .Pandey (2017)
251 Taxman 1 (Mag.) (Articles)
C.
Cash transactions - Law on cash transactions – Paradigm shift – A study by Kapil Goel (2017)
AIFTPJ - December - P. 30
Charitable Trust - Treatment of voluntary contributions under the IT Act by Ramesh Chander
(2017) 297 CTR 27 (Articles)
Cash deposits - IT notices pursuant to cash deposits and e-responses by recipients (2017) The
Chamber’s journal - Feb – P. 109
Corporate Social Responsibility - tax implications by S.Rajaratnam (2017) 393 ITR 22 (Journal)
Charity - Is business a tobacco for charities by S.Rajarathnam (2017) 391 ITR 49 (Journal)
Cash transactions under Income-tax Act, 1961 : After Finance Bill, 2017 by Deepak Kalani
(2017) 245 Taxman 1 (Mag.)
Conventions for the noble profession of law and accountancy by N.M Ranka (2017) 292 CTR 13
(Articles)
Controversies – Set off of losses from an exempt source of income by Pradip Kapasi (2017)
BCAJ - December - P.61
Controversies – Applicability of section 68 to cash credits in absence of books of account by
Pradip Kapasi (2017) BCAJ - November - P.53
Controversies – Allowability of expenditure towards corporate social responsibility by Pradip

Kapasi (2017) BCAJ – August – P. 57
Controversies – Expenditure by Pharmaceutical Companies on Doctors by Pradip Kapasi (2017)
BCAJ-June 65
Controversies – Payments for use of Online data base – Whether Royalty (2017) BCAJ – May –
79
Controversies - Taxability of contingent consideration on transfer of capital asset by Pradip

Kapashi (2017) BCAJ - January – 57
Controversies - Interest income of a Credit Society and deductibility u/s 80P by Pradip Kapasi
(2017) BCAJ – Feb. 45
Controversies - Depreciation-on non compete fee by Padip Kapasi (2017) Feb - 43
Carbon credits – Concept and issues relating to taxation under the Income – tax Act, 1961 by
T.N.Pandey (2017) 392 ITR 67 (Articles)
Cross examination by N.Prabhakaran (2017) 345 ELT 23 (Article)
D.
Demonetisation – Challenges in Cash less Economy by Ms Prema Sigh (2017) The Chamber’s
Journal P. 76
556
Deemed dividend – Closements - Loan or advance to specified “concern” closely held company
which is deemed as dividend u/s 2 (22) (e) – Whether can be assessed in the hands of the “
Concern” Part 1-by Kishor Karia (2017) BCAJ - December – P. 55
Demonetisation 2016 - Truth behind by S.Rajarathnam (2017) 399 ITR 83 (Journal) (Articles)
Direct taxes Reform – The PM’s next miles stone by T.N Pandey (2017) 396 ITR 13 (Journal)
Demand notices – Handle with care by Sachin Sinha (2017) 246 Taxman 74 (Articles)
Dividend - Taxation of “ Dividend” under the Income-tax Act : Pragmatic and practical view
necessary by T.N.Pandey (2017) 390 ITR 29 (Journal)
Demonetisation - A Fight Against Black Money and counterfeits by Dr. T.P.Gosh (2017) 244
Taxman 1 (Mag.)
Double taxation agreements - India – Cyprus Treaty - A comprehensive
Picture by Pranav Bhatia (2017) 244 Taxman 33 (Mag.)
GST - Analysis of significant provisions under Model GST Law (Part - 1) ,The Chamber’s
Journal (2017) January - 1-68
Demonetisation – Some tax issues by Pradip Kapasi (2017) BCAJ – January – P. 10

Disclosure scheme - Second Income disclosure Scheme - 2016 by P.N.Shah (2017) BCAJ-Feb-18
DTAA - limiting meaning of domestic law under article 3 (2) of DTAA : Limiting the scope of
the meaning of “ domestic law “ under article 3 (2) of DTAA with reflections from European
Court of Justice by Tarun Jain (2017) 399 ITR 16 (Journal) (Articles)
E.
Evidence - Whatsapp as evidence - -- - What’ that ? by Dr Anup P.Shah (2017) BCAJ – May -
107
Editorial - Digitalisation of Supreme Court – The Supreme Court will go paperless from 3rd July,
2017 by Dr .K Shivaram (2017) May, 2017 – P. 5
Editorial - Appointment of a judge as President of the Income tax Appellate Tribunal – Is he
restricted to administrative duties or can he discharge judicial work as well? Appointment of
Vice-President of ITAT by Dr .K shivaram (2017) AIFTPJ – March, 2017 – P 5
Employee : The expenditure incurred by the employer on the training or educational course
undertaken by an employee in his own filed of expertise, will not be liable to tax in the hands of
the employee by S.K Tyagi (2017) 391 ITR 27 (Article) (Journal)
F.
Farmers loan waiver and assesee’s income tax amnesties : A comparative study of loan waivers
for farmers and income-tax amnesties for tax payers by T.N .Pandey (2017) 393 ITR 14 (Journal)
Finance Act, 2017 – Encourages political corruption ? by T.C.A .Ramanujam (2017) 390 ITR 76
(Journal) (Articles)
Finance Act, 2017, invites the wrath of Constitutional Pundits – By T.C.A. Ramanujam and
T.C.A. Sangeetha (2017) 398 ITR 16 (Journal) (Articles)
Finance Act, 2017 by P.N. Shah (2017) BCAJ - May - P. 10
Finance Bill, 2017 - Proposed amendments in search Assessment and reassessment provisions by
the Finance Bill, 2017 by N.M Ranka (2017) AIFTPJ – Feb – P.9
Finance Bill, 2017 - Restrictions on cash transactions by S.R Wadhwa (2017) AIFTPJ - Feb - P.
14
557
Finance Bill, 2017 - Indirect transfer provisions & domestic Transactions as per the Finance Bill,
2017 by I.P. Bansal (2017) AIFTPJ – Feb - 2017 – P 17
Finance Bill, 2017 - Budget to boost Housing Sector – By Naryan Jain (2017) AIFTPJ – Feb -
2017 – P 21
Finance Bill, 2017 – Amendment proposed in Finance Bill, 2017, relating to TDS & TCS under
the Income – tax Act by V.P.Gupta (2017) AIFTPJ – Feb - 2017 – P 23
Finance Bill, 2017 – Profits from business /profession, presumptive tax and tax Audits by Rahul
R.Sarda (2017) AIFTPJ – Feb - 2017 – P 26
Finance Bill, 2017-Charitable Trusts by Ketan Ved (2017) AIFTPJ – Feb - 2017 – P 31
Finance Bill, 2017 – MAT (Including Accounting Standards) as per the Finance Bill, 2017 by
Pankaj R.Toprani (2017) AIFTPJ – Feb - 2017 – P 33
Finance Bill, 2017 – Salint features of the Fiannace Bill, 2017 (Relating to direct taxes) by S.K.
Tyagi (2017) 392 ITR 17
Finance Bill, 2017 - Is it fair to impose penalty on the professionals by Pankaj R.Thoprani (2017)
392 ITR 49 (Journal)
Finance Bill, 2017 - Company – Book profit - Critical analysis of clause 17 by S.Rmachandran
(2017) 292 CTR 1 (Article)
Finance Bill, 2017 - Salient features of the Finance, Bill, 2017 – Relating to direct taxes – By
S.K.Tyagi (2017) 392 ITR 17 (Articles)
Finance Bill, 2017 - Changes proposed in Finance Bill, 207 – An Insight into (2017) 246 Taxman
1 (Mag.)
Finance Bill, 2017 – (2017)The Chamber’s Journal - Special Issues - Feb - 11 to 99

Finance Bill, 2017 : Some Proposals In The Finance Bill 2017 Need Urgent Reconsideration by
Shri. K. C. Singhal, Vice-President of ITAT, www.itatonline.org
“ Freebies” to Doctors – Under the tax radar by Noopur Aggashe, Piyush Gupta (2017) 250
Taxman 20 (Mag.) (Articles)
G.
GAAR (General Anti - Avoidance Rules)

Over view and background of GGAR – By Pinakin D.Desai (2017) Chamber’s Journal – October
P. 11
Applicability of GAAR – Fundamental requirements by Naresh Ajwani (2017) Chamber’s
Journal – October P. 11
Implications of GAAR applicability by Siddrath Banwat (2017) Chamber’s Journal – October
P. 32
Guidelines and Rules under GAAR by Harshal Bhuta (2017) Chamber’s Journal – October P. 40
Exemption from GAAR by Sunil Arora (2017) Chamber’s Journal – October P. 53
Dispute Resolution, legal Remedies available against GAAR proceedings by Sunil Moti lal
(2017) Chamber’s Journal – October P. 60
Judicial precedents under Income – tax Act on Anti – Avoidance Rules by Anish Thacker
(2017) Chamber’s Journal – October P. 60
Comparable GAAR rules in USA, UK, South Africa, Austarlia by Ganesh Rajagopalan (2017)
Chamber’s Journal – October P. 75
SAAR verses GAAR – by Hierarchy (2017) Chamber’s Journal – October P. 85
GAAR and DTAA by Bhaumik Gada (2017) Chamber’s Journal – October P. 92
Corporate Restrucring – Mergers, Demergers etc. – GAAR implications by N.C Hegde (2017)
Chamber’s Journal – October P. 98
558
LOB Clauses under Indian DTAAs by Sidharth Parekh (2017) Chamber’s Journal – October P.
104
Case studies – International tax Considering GAAR by Kartik Badiani (2017) Chamber’s
Journal – October P. 113
Disruptions in income taxation by Rashmin Sangvi (2017) Chamber’s Journal – October P. 131
GST - Compliances, Role of IT & Judicial decisions relevant in GST (Part - II (2017) The
Chamber’s Journal – March 2017 P.11 to 84
GST - GST Gyan – GST Impact on societies, Religious and Charitable Trusts, NGOs Part 1 by
Rajkamal Shah (2017) Chamber’s Journal – November P. 83
GST – (2017) BCAJ - July – P. 10 - 124

GST - The Chamber’s Journal – Industry specific (2017) June ,P. 11 to 74
GST – The Chamber’s Journal (2017) March – P.11 to 84
GAR - Implications of GAR on mergers and acquisitions by Akhil Nene (2017) 394 ITR 4
(Journal)
GAAR : Understanding General Anti-Avoidance Rules (‘GAAR’) : Part 1 - Paras Dawar, CA,
www.itatonline.org
GAAR : Understanding General Anti-Avoidance Rules (‘GAAR’) : Part 2 - by Paras Dawar, CA

www.itatonine.org
CAG’s Report on health care sector Assessment : An appraisal by T.N .Pandey (2017) 399 ITR 1
(Journal) (Article)
CAG’s report : S. 115JB - Audit by the C& AG - Findings in the C& AG’s audit on the working
of S. 115JB of the Income – tax Act, 1961, which was imposed MAT on companies by
T.N.Pandey (2017) 399 ITR 24 (Journal) (Articles)
H.
Health care - GAG’ S report on health care sector assessment : An appraisal by T.N.Pandey
(2017) 399 ITR 1 (Journal)
Hindu Undivided family under Direct taxes and civil laws by K.H.Kaji (2017) AIFTPJ - January
– P 10
I.
Insolvency and Bankruptcy Code 2016 (2017) The Chamber’s Journal – September-P. 11 to 122
ICDS - Delhi High Court on ICDS - Battle begins by Bhardesh Doshi (2017) BCAJ - December –
P. 23
Interpretation of taxing statutes - Doctrine of “fairness” Countering “Implied Retrospectivity “ of

Fiscal Enactments by Tarun Jain (2017) 397 ITR 21 (Journal) (Article)
IDS : Income declaration scheme - Omission of cl. (c) of the Finance Act, 2016, by the Finance
Act. 2017 – Will the Government refund the tax paid under Income Declaration Scheme by
Sushil Kumar Agarwal (2017) 297 CTR 44 (Articles)
559
IFTG - Accounts - ITFG - Clarification bulletin 10 – Analysis of selected issues by
S.Ramachandran (2017) 207 CTR 1 (Articles)
ICDS - Technical guide on Income Computation and Disclosure Standards – Analysis of

selected issues by S.Ramachandran (2017) 296 CTR 5 (Articles)
IDS - Transactional provisions of Income computation and Disclosure Standard VI-Analysis of
recent clarification and related issues by S.Ramachandran (2017) 295 CTR 33 (Articles)
ICDS : Income Computation And Disclosure Standards (ICDS) – An Update by Dhaval Desai,
CA, www.itatonline .org
ICDS : Tax issues in computation of taxable income for companies adopting Ind - As by Gautam
Nayak (2017) BCAJ – August – P. 10
ICDS : An Insight in to the ICDS – Accounting policies by Alok Pareek (2017) 250 Taxman 53
(Mag.) (Articles)
International taxation - Practical issues relating to Foreign tax credit by Mayur Nayak (2017)
BCAJ – December – P. 67
International taxation – New Safe harbor provisions in Indian Transfer Pricing Regime by Mayur
Nayak (2017) BCAJ – August – P. 106
International taxation - Issues in International taxation (D.Rangaswamy Memorial Endowment
Lecture.) by Justice Easwar (2016) 391 ITR 1 (Article) (Journal)
International taxation - Supreme Court up holds constitution of PE for Formula one in India by
Frank D’ Souza (2017) 247 Taxman 9 (Article)
International taxation - Place of effective management – Final guide lines (2017) 246 Taxman 20
(Mag) (Article)
International taxation - May be taxed under DTAA by Rano Jain (2017) AIFTPJ – April – P 10
International taxation - Investment Opportunities in Cambodia India’s Advantages – tax and legal
by Sujeet S. Karkala (2017) BCAJ-June – P 25
International taxation – Section 92CE and Section 94B – Analysis and some issues by Rajiv
G.Shah (2017) BCAJ – May - P. 31
International taxation - D.Rangaswamy Memorial Endowment Lecture : Issues in International
Taxation by Justice Easwar on December 19, 2016 at Madras (2017) 391 ITR 1 (Journal)
International taxation-New India – Cyprus DTAA-An Over view by Mayur Nayak (2017) BCAJ
– January – P. 63
Interest deductions and secondary adjustments by H.Padamchand Khincha (2017) AIFTPJ –

April – P. 18
Income computation and disclosure Standards – Up date by Dharval Desai (2017) AIFTPJ – April
– 29
Income - Subvention money is taxable as income – So decides the Supreme Court by T.N
.Pandey (2017) 244 Taxman 39 (Mag.)
ITAT - Disposal and pendency of appeals as on 1-04-2017 (2017) AIFTPJ - April – P 63
J.
Jan Dhan Accounts – Confiscation of deposits in Jan Dhan Accounts by T.N.Pandey (2016) 390
ITR 19 (Journal)
Joint Development agreement – Impact under direct & indirect taxes by Ramprasad (2017) 246
Taxman 3 (Mag.)
560
Jurisdiction – Concurrent and Joint : Concurrent jurisdiction and joint jurisdiction are different
concepts, not synonyms by T.N Pandey (2017) 55 ITR 7 (Trib) (Journal)
M.
Medical profession - Central Board of Direct Taxes’s messed up interpretation relating to
freebies prevalent in medical profession by T.N.Pandey (2017) 392 ITR 54 (Articles)
Month - Meaning of “ month ” in the Income – tax Act, 1961 by T.N.Pandey (2017) 55 ITR 1
(Trib) (Journal)
N.
Non-Resident - Income – Another billion dollar dispute by V.N.Muralidhran (2017) 294 CTR 1
(Articles)
Non – resident – Reckoning non – resident’s stay in India : For counting a non – resident ‘s stay
in India, either day of arrival or day of departure has to be excluded by T.N.Pandey (2017) 392
ITR 62 (Articles)
O.
Opinions
S. 2 (15) : Charitable trust - Amending powers of trustees of a public trust by S.Rajaratnam
(2017) 295 CTR 1
S. 90 : Double taxation relief - Agreement between India and USA – Payment of consultancy
fees, by S.Rajaratnam (2017) 295 CTR 4
S. 148 : Reassessment – Notice – Action to be taken S.Rajaratnam (2017) 295 CTR 7
P.
Public Trusts in Maharashtra : The Changing legal landscape – Recent amendments to the
Maharashtra Public Trusts Act, 1950 by Radhika Gaggar (2017) BCAJ - November – P. 21
Prevention of Money Laundering Act, 2002 (PMLA) (2017) The Chamber’ s Journal – April –
11-65
Parents - Maintenance of parents by Dr Anup P.Shah (2017) BCAJ - June – P. 87

Perquisites – The expenditure incurred by the employer on the training or educational course
undertaken by an employee in his own filed of expertise, will not be liable to tax in the hands of
the employee by S.K Tyagi (2017) 391 ITR 27 (Journal)
PMGKY - Another failed amnesty scheme - By T.N.Pandey (2015) 395 ITR 13 (Journal)
Presumptive taxation - Income taxation of professionals on presumptive taxation by T.N .Pandey
(2017) 298 CTR 1 (Articles)
R.
Reorganisation – Indirect transfer – An important aspect of reorganistion by Anish Tahker (2017)
The Chamber’s Journal – (2017) August – P. 65
Real Estate Development – Implication of Income – tax, Real Estate Regulatory Authority,
Goods and service tax by Firoze B.Andyarujina (2017) AIFTPJ - December - P. 9
Retrospectivity - Doctrine of “ fairness” countering “implied retrospectivity ” of fiscal enactments

by Tarun Jain (2017) 397 ITR 21 (Journal)
561
Recovery - Stay - Senior functionaries of the status of Principal Commissioner need to avoid
passing orders in perfunctory manner by T.N .Pandey (2017) 297 CTR 33 (Articles)
Real Estate (Regulation and Development) Act, 2016, (2017) Chamber’s Journal, July, 2017 P.
11-80
RERA – An over view by Dr Anup P.Shah (2017) BCAJ - August – P.89
RERA - Imprisonment and penalty under RERA reality firm’s directors, partners and officers,
beware by Dr Dilip K Sheth (2017) BCAJ – June – 12
Return – Rectification - Whether filing of revised return is the only way to recompute the income
before assessment by N.L. Das (2017) 294 CTR 5 (Article)
Return - Key changes in new ITR Forms for AY. 2017-18 (2017) 246 Taxman 9 (Mag.)
Return - New ITR Forms for AY. 2017-18 : which ITR Form you should opt for.? (2017) 246
Taxman 13 (Mag.)
Return - Return of demonetized notes – Appraisal of figures disclosed by RBI by T.N.Pandey

(2017) 250 Taxman 1 (Mag.) (Articles)
S.
Search and seizure – Search assessment – A matter of search by Minu Agarwal (2017) 297 CTR
22 (Articles)
Settlement commission – IT Settlement Commission needs a Judicial member – By Pawan Ved

(2017) 396 ITR 11 (Journal)
Stamp duty and sale consideration - Can stamp duty value be applied in respect of purchase of an
immoveable property where the sale consideration is less than the stamp duty value ? by Pankaj
R.Toprani (2017) 55 ITR 17 (Trb) (Journal
Speculation – Dealing in allotted shares not speculation business – Magic of judicial construction
by Minu Agarwal (2017) 295 CTR 92 (Articles)
Safe Harbour Rules (SHRs) by Paresh Patil (2017) 248 Taxman 19 (Mag.)
Salary – Provisions related to taxing of salary income requiring rationalization by Neeraj Gupta
(2017) 250 Taxman 29 (Mag.) (Articles)
Service tax - Liability Of Advocates To Register For, And Pay, GST – Entire Law Explained - P.
C.Joshi, Advocate, www.iatonline.org .
T.
Tax Audit and MAT – Recent developments (2017) The Chamber’s Journal (2017) August – P 11
to 60
Tax avoidance – Redrawing the canvass of tax avoidance jurisprudence in India : A case of
antithetical dichotomy by Tarun Jain (2017) 390 ITR 41 (Journal) (Articles)
Trust - Are Trusts Association of persons ? (2017) 399 ITR 73 (Journal) (Articles)
TDS - Form 15H and auto renewal of fixed deposits with banks by by S. Ramachandran (2017)
295 CTR 17 (Articles)
562
Transfer pricing - Secondary adjustment – Need of the hour ? by Rano Jain (2017) 247 Taxman
13 (Mag.) (Article)
Transfer Pricing – Corporate Guarantee - Transfer pricing implications by Gaurav Jain (2017)
246 Taxman 35 (Mag) (Article)
Transfer Pricing – Departure from traditional operating profit ratios as profit level indicators by
Dinesh Supekar (2017) 246 Taxman 29 (Mag) (Article)
Transfer Pricing – Importance of turnover and RPT Filter in Transfer Pricing by Akshay R.Jain
(2017) 244 Taxman 44 (Mag.)
TDS - Ambiguity of Merliyan Shipping and transport agencies case resolved – Homet’s Nest
stirred up in the case of Merilyn Shipping and Transport agencies finally resolved – Gayatri
Sridharan Principal Associate (2017) 395 ITR 1 (Journal)
Vision – 2025 - Tax laws and Administration - (2017) The Chamber’s Journal – P 11-104
Ideal tax system for 21 st Century – Y.P Trivedi P 11
Corruption - Shorab Earch Dastur P. 13

Future litigation – Indirect taxes – P.C.Joshi P. 19
Tax Evasion and tax Avoidance – Tax planning and morality – Dinesh Vyas
Tax Terrorism in India - Saurab N.Soparkar P. 28
GAAR – Teatimony on trust Deficiency by V.Sridharan P. 37
Tax litigation in India – Vision 2022 by Dr .K Shivaram P. 42
Mediation and Conciliation of tax Disputes by S.R.Wadhwa P. 48
Role and Responsibilities of Professional bodies in the current Scenario by P.N.Shah
P.56
Vision - 2015 for the accounting Profession T.N.Manhoran P. 61
Challenges to the accounting & tax Professionals Sunil Talati P. 65
International tax Disruption – Way forward – T.P. Ostwal P. 71
GST - Changing landscape of Indirect taxes – V.Lakshikumaran P.77
GST - A new Era of Co-Operative Federalism in India – Satya Poddar P. 82
Technology Disruptions - Ninad Karpe – P-91
Right to information & Income tax – Shailesh Gandhi P. 93
Electronic Evidence in serach and seizure Proceedings under the Income tax Act, 1961 - Nishant
Gokhale P. 98
Tax Articles for your reference by Kishor D.Vanajara (2017) The Chamber’s Journal – April -
105
Tax Articles for your reference by Kishor D.Vanajara (2017) The Chamber’s Journal – June - 127
Tax Articles for your reference by Kishor D.Vanajara (2017) The Chamber’s Journal – August P.
143
Tax litigation in India - Secondments to India – Ray of hope for Income – tax Litigation by
Rakesh B.Jain (2017) 248 Taxman 27 (Mag) (Article)
Tax litigation - Litigation on capital gains can be avoided if AO adhere to legislative intent
behind a provision (2017) 248 Taxman 47 83 (Mag) (Article)
Tax evasion - Reappraisal of concepts of tax evasion, avoidance and planning in the context of
Supreme Court decision in Maneklal Agarwal’s case by T.N .Pandey (2017) 398 ITR 1 (Journal)
(Articles)
563
Tax avoidance : Anew dimension by Kaustubh Ban (2017) 250 Taxman 40 (Mag.) (Articles)
Tax payers – More responsibility thrust on tax payers to assist the Govt .in income – tax budget
making by T.N .Pandey (2017) 250 Taxman 15 (Mag.) (Articles)
W.
Wealth - Checking concentration of wealth - Concentration of economic power (Wealth) in fewer
hands needs to be checked, inter alia , by restoration of wealth and inheritance taxes by
T.N.Pandey (2017) 392 ITR 80 (Articles)
A residential house having more than one floor entitled to exemption under wealth - tax Act by
S.krishnan (2017) 250 Taxman 23 (Mag.) (Articles)
Opinions
S.6 (3) : Residential status – Income of a foreign subsidiary treated as a residential in India by S.
Rajaratnam (2017) 291 CTR 4 (Opinions)
S.10 (23C) : Exemption under section 10 (23C) (vi) – Application for approval for trusts running
many institutions by S. Rajaratnam (2017) 291 CTR 13 (Opinions)
S. 35AD : Business expenditure – Deduction under section 35AD by S.Rajaratnam (2017) 291
CTR 9 (Opinions)
S.45 : Capital gains-Capital asset – Deep Discount bonds by S.Rajaratnam (2017) 291 CTR 25
(Opinions)
S.47 : Company – Transfer of one of the business – Best tax – efficient option by S. Rajaratnam
(2017) 292 CTR 5 (Opinions)
S.47 (xiiiib) : Firm – Formation of a new LLP by two pre existing LLPs by S. Rajaratnam (2017)
291 CTR 1 (Opinions)
S.1150 : Company – Rebate on dividend distribution out of tax paid dividend under section .
115O by S. Rajaratnam (2017) 292 CTR 1 (Opinions)
S. 194J : TDS - Payment to non – resident-Technical know – how fees vis – a – vis consultancy
services - Effect of DTAA by S. Rajaratnam (2017) 291 CTR 30 (Opinions)
S.234E : An extortionist fee by Dr. C.P.Ramaswami (2017) 394 ITR 1 (Journal)
Disclaimer: The contents of this document are solely for informational purpose. It does not constitute
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document, the existence of mistakes and omissions herein is not ruled out. Neither the authors nor
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Compiled by Research team of KSA LEGAL CHAMBERS and AIFTP Journal committee
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CONSOLIDATED DIGEST OF CASE LAWS (JANUARY 2017 TO DECEMBER 2017)

(Journals Referred: ACAJ /AIR/AIFTPJ/ BCAJ / BLR / IT Review//Comp Cas/CTR /

S. 2 (12A) : Books of accounts - Entries in loose papers/sheets are irrelevant and

S. 2 (14) (iii) : Capital asset-Agricultural land-Land situate at specified distance from

ITO v. Bhanwarlal Paliwal (2017) 188 TTJ 1 (Jd) (UO) (Trib.)

S. 2 (22) (e) : Deemed dividend—Share application money received by companies from

S. 2 (22) (e) : Deemed dividend—Share application money—Assessee having beneficial

S. 2 (22) (e) : Deemed dividend-Substantial interest - Movement of funds in both ways on

S. 2 (22) (e) : Deemed dividend-Money Lending Substantial part of business of Company -

S. 2 (47) (v) : Transfer-Development agreement - If the entire consideration is not received

S. 4 : Charge of income-tax – Entertainment subsidy – Capital or revenue - A subsidy

Bhushan Steeel v. CIT (SC); www.itatonline.org

S. 4 : Charge of income-tax – Hindu law – Burden is on the member to establish the

S. 4 : Charge of income-tax – Capital or revenue receipt-Sales tax subsidy – Matter was

S. 4 : Charge of income – tax - Capital or revenue - Subvention received by assessee from

S. 4 : Charge of income-tax – Diversion of income by overriding title – Company formed for

S. 4 : Charge of income-tax - Receiving 95 per cent. of payments against invoices after

S. 4 : Charge of income-tax - Gain or loss on account of fluctuation in exchange rate is

S. 4 : Charge of income-tax - Capital or revenue - Subsidy — Government allowing assessee

S. 4 : Charge of income-tax - Mmaintenance charges collected from allottees of low cost

S. 4 : Charge of income-tax – Capital or revenue - Sales tax subsidy is held to be capital in

S. 4 : Charge of income-tax – Accrual-Carbon receipts were neither sold and/or transferred

S. 4 : Charge of income-tax-Accrued interest on non-performing assets is not assessable. [S.

S. 4 : Charge of income-tax-Interest on non-performing assets cannot be recognised on

S. 4 : Charge of income-tax – Accrual-Carbon receipts were neither sold and/or transferred

S. 4 : Charge of income-tax-Interest on interim compensation received pending final

S. 4 : Charge of income-tax – Capital or revenue-Non-compete fees-Receipt of non-compete

S. 4 : Charge of income-tax – Capital or revenue Transport subsidy to stimulate industrial

S. 4 : Charge of income-tax - Land purchased for company by its director-Sale of land

S.4 : Charge of income-tax – Capital or revenue - Refundable security deposit received by

S.4 : Charge of income tax-Capital or revenue-Statutory authority-Funds received from

S. 4 : Charge of income-tax – Capital or revenue – Club-Security deposit as entrance fee

S. 4 : Charge of income-tax - Sale of CER certificate was held to be capital receipts.

S. 4 : Charge of income-tax – Cash system - Advance payment - Advance received from

S. 4. Charge of income-tax – Mutuality - A club whose membership is also open to the

S.4 : Charge of income-tax – Capital or revenue - Accrual - Arbitration award received on

S. 4 : Charge of income Capital or revenue – Interest subsidy received under Technology

S. 4 : Charge of income-tax – Capital or revenue-Gains due to fluctuation in foreign

S. 4 : Charge of income-tax-Method of accounting - stock in trade - Development of

S. 4 : Charge of income-tax – Accrual - Mercantile system of accounting— Retention money

S. 4 : Charge of income-tax-Capital or revenue-Share warrants-Receipt of advance amount

S. 4 : Charge of income-tax - Capital or revenue-Receipts from sale of carbon credits is

S. 4 : Charge of income-tax - Capital or revenue-Sales tax remission scheme is capital

S.4 : Charge of income-tax-Accrual-Banking company - Interest on non-performing assets

S.4 : Charge of income-tax-Diversion of income by overriding title - Passenger service fee-

S. 5 : Scope of total income – Sub-contract - Amount received for work shared

S. 5 : Scope of total income – Salary received by a non-resident for services rendered

S. 5 : Scope of total income-Non-resident-Permanent establishment-Assessee deciding venue

S. 5 : Scope of total income-Accrual – Developer-Income could be recognized only in year in

S. 6 (1) : Residence in India – Individual – Resident – Not resident-Period of stay in India-

S. 9 (1) (i) : Income deemed to accrue or arise in India – Business income-Consideration

S.9 (1) (i) : Income deemed to accrue or arise in India-Non-resident-Royalty—Transmission

S. 9 (1) (v) : Income deemed to accrue or arise in India – Interest-Bank incorporated in

S. 9 (1) (vi) : Income deemed to accrue or arise in India – Royalty-Payments received by

S. 10 (4) : Exemption—Interest earned on non-resident external account is entitle

S. 10 (10B) : Compensation – Workman-Package received by workmen as compensation

S. 10 (10C) : Public sector companies - Voluntary retirement scheme – Compensation – Not

S.10 (15) : Interest payable-Foreign currency loan-Requirement of approval of Central

S. 10 (20) : Local authority – Promotion of irrigation projects and water supplies -

S.10 (20) : Local authority--Greater Noida Industrial Development Authority is not

S.10 (23BBA) : Authorities or bodies for the administration of charitable trusts,

S. 10 (23C) : Educational institution - Genuineness of activities was not doubted - Direction

S. 10 (23C) : Educational institution-Mere receipt of interest-free loan not indicative of

S.10 (23C) : Educational institution—Delayed application - Order passed contrary to