Southern India Regional Council of
The Institute of Chartered Accountants Of India
(Setup by an Act of Parliament)


Professional Updates


Income Tax Update (March, 2018)

Ambati Chinna Gangaiah, +919391142969

Gist of Judgments of Supreme Court
Sr. No. Name of the Appellant / Respondent Appeal No and date of decision Gist of Judgments / Orders passed
1 CIT Vs Essar Teleholding AC 2165/12 and batch dt 31.01.18 The Rule 8D is prospective in operation and could not have been applied to any assessment year prior to Assessment Year 2008-09
2 SEBI Vs Rakhi Trading Co AC 1969 OF 2011 dt 8.2.18 SAT held that even assuming that non-genuine synchronized trades have been entered into for the purposes of tax planning, such trade could be held objectionable only if they have resulted in influencing the market in one way or other……….If the findings of SAT are to be sustained, it would have serious repercussions undermining the integrity of the market and the impugned order of SAT is liable to be set aside
3 Industrial Infrastructure Development Corporation (Gwalior) M.P. Ltd. Vrs CIT AC 6262/10 Dt 16.2.18 (uploaded in Daily Orders) The CIT has no power to cancel/withdraw/recall the registration certificate granted u/s 12A until express power to do so was granted by s. 12AA(3). Though the grant of certificate is a quasi judicial function, s. 21 of the General Clauses Act cannot be applied to support the order of cancellation of the registration certificate

Gist of Judgments of High Courts
1 Pr CIT Vs Hind Filter ITA 662/2015 dt 13.11.17 (Bombay HC) The CIT (A) found that the company has advanced Rs.1,00,00,000/- as inter-corporate deposit to the appellant which was a public company. He concluded that the provisions of Section 2(22)(e) were not applicable and the payment was made in the ordinary course of business……….. The Tribunal as the last fact finding Court has clearly opined that the company was one in which the public was substantially interested. In the circumstances the question nos.1 and 2 as proposed will not construe substantial questions of law that requires consideration by the Court
2 Pr CIT Vs Kitchen Express Overseas Tax Appeal 966/17 dt 6.12.17 (Gujarat HC) 89 407 (upholding ITA No.1174/Ahd/2014 dt 28.6.17) Expenditure incurred on software development services which were in nature of maintenance and support services providing essential backup to assessee, who had procured software for its business purpose, was to be allowed as deduction
3 CIT Vs Ashok Kumar Rati T.C.A 590/17 dt 7.12.17 (Madras) 89 406 (ITA No.763/Mds./2016 24.6.16) “land is to be treated as agricultural land only and sale of said land cannot go rise to any taxable capital gains and it is to be considered as agricultural land in terms of Sec.2(14)(iii)(b) of the Act” was upheld
4 CIT Vs Vasantha Anirudhan ITA 78/08 dt 12.1.18 90 taxmann.com74 (Kerala) It is made clear that the present respondent being alegal heir of the assessee, recovery would be made only to the extent of the estate of the assessee capable of meeting the liability as provided in Section 159(6)
5 CIT Vs Banaras House Ltd ITA 583/054 dt 17.1.18 Delhi HC) Further, when a liability was acknowledged by the debtor, it cannot be said that the claim of the creditor was barred by limitation. In case of 16 creditors, the credit balance was returned or adjusted for the next financial year. Provisions of Section 41(1) of the Act were not attracted.
6 Vipul Chavda and Ors Vs State of Gujarat Special Criminal Application 10055/17 Dt 18.1.18 (Gujarat HC) It is declared that the department is entitled to retain the cash till the final conclusion of the proceedings under the Income Tax Act. The Investigating Officer is permitted to handover the Muddamal currency notes amounting to Rs.13,00,000/- (Thirteen Lakh) to the applicant-Deputy Director of Income Tax
7 Pr CIT Vs Satya Sheel Khosla ITA No.289/2016 dt 29.1.18 (Delhi HC) so far as they relate to consideration for professionals should be treated as income by virtue of the amendment of 2017. However, with respect to the Revenue’s contention that regardless of that amendment even in the pre-existing law, this amount had to be treated as receipts and therefore taxable as income, cannot be accepted.
8 Commissioner of Gift Tax Vs Jindal Equipment Leasing GTA 1/2005 and Batch dt 29.1.18 (Delhi HC) ITAT intervened in gift tax proceedings (which are the subject matter in these appeals), it considered only the validity of the proceedings, but, did not consider whether in fact the transaction under Section 4(1)(a) amounted to a deemed gift; no conclusive finding in that regard was rendered; nor any finding could have been rendered or was given
9 Shayona Pulp Conversion Mills Vs CIT WP 3714 & 4499/13 dt 1.2.218 (Bombay HC– Aurangabad) Whenever there is special provision in special enactment fixing the period of limitation even the Court cannot extend that period and the provision of section 5 of the Limitation Act cannot be applied in those cases. There cannot be dispute over that proposition. In the present matter, due to the provision like section 119(2)(b) made in the Income Tax Act, it can be said that discretionary power is given to the Board to issue such instructions and only after that the assessing authority can use such power
10 Navodaya Education Trust v. Union of India WP 3468-3472 /18 (T-IT)dt 5.2.18 90 148 (Karnataka HC) Trust rendering it as merely a skeleton for the purpose of exemption to Educational Trust and rather than a real Educational Trust, solely existing for the purpose of Education. Such sham or bogus Trusts cannot be held to be entitled to exemption under the provisions of Section 10(23-C) of the Act and therefore the Respondent Authority has rightly withdrawn the approval of the petitioner - Trust under the said provision.
11 Prime Ceramics Vs ITO ITA 355/Ahd /2016 dt 5.2.18 it is also clear from material on record that the deferred revenue expenditure incurred by the assessee is not of the nature which can be covered by section 35D.
12 Kamla Devi Sharma Vs ITO ITA 1026/JP/2016 dt 6.2.18 the issue of notice U/s 143(2) in reassessment proceedings, prior to finalizing re-assessment order, cannot be condoned by referring to Section 292BB and is fatal to the order of re-assessment
13 Pr CIT Vs Nokia Solutions & Network ITA 135/2018 dt 6.2.18 (Delhi HC) if the assessment is concluded in favour of a non existing entity, then notwithstanding Section 292B, the position does not improve. Applying Spice Entertainment Ltd. (supra), this Court had in Commissioner of Income Tax v. Dimension Apparels Pvt. Ltd. (2015) 370 ITR 288 also held that the position taken or urged by the assessee cannot be held against it if the primary jurisdiction does not exist i.e. to conclude an assessment in the name of a non existing entity.
14 Pr CIT Vs Shree Gopal Housing & Plantation IT Appeal 701/15 dt 6.2.18 (Bombay HC) Needless to state that considerations for imposition of penalty are undoubtedly different from considerations which would come into play while deciding the appeal in quantum proceedings. In case, if the respondent assessee succeeds in quantum proceedings, no occasion to impose penaly upon the assessee can arise. However in case the Revenue succeeds in the quantum proceedings, then that by itself will not necessarily invite penalty. It would still be open to respondent to urge that in the facts and circumstances of the case, no penalty is imposable.
15 CIT Vs Gee Kay Finance & Leasing ITA 935/09 Dt 8.2.18 (Delhi HC) is entitled to the succession certificate of the movable assets by way of an opinion by the higher official expressing satisfaction is on the record before a notice is issued under Section 148, in respect of a period beyond 4 years from the end of the relevant assessment
16 Pr CIT Vs Pavitra Commercial Ltd ITA 146/18 and Batch dt 9.2.18 (Delhi HC) As far as the question with respect to reporting of mercantile interest of doubtful debts is concerned, the question is covered by the decision of this Court in Commissioner of Income Tax Vs. Vasisth Chay Vyapar Ltd. (ITA 552/2005 and connected cases decided on 29.11.2010). The Court had applied “real income” principle to uphold the assessee’s contention
17 CIT Vs Prasidh Leasing ITA 637/2004 dt 20.2.18 assessee even made over a substantial part of it – `6.14 crores to Adani to whom it paid `43.5 lakhs as commission for the standing guarantor. The latter payment in the light of the transactions previously discussed strain ones’ credibility and does not accord with prudent commercial practice
18 Pr CIT Vs Vandana Gupta ITA 219/2017 dt 20.2.18 (Delhi HC) The mere offer therefore, of the amount during the search in the absence of any explanation for the source of income, renders the assessee’s argument insubstantial in the totality of circumstances.
19 CIT Vs MGF India Ltd. ITA378/04 dt 22.2.18 lease equalization charges are not to be treated as adjustments needing to be added back while computing book profits, under Section 115JA on account of Explanation 1.

Gist of Appeal Orders of Income Tax Appellate Tribunal
1 Tractors & Farm Equipment Ltd. v. ACIT ITA 1264/ Mds /16 dt 27.9.17 (89 445) Where assessee, engaged in manufacture and sale of tractors and farm equipments, made payments to its subsidiary in USA towards service rendered to provide input for new product development including market survey expenses in USA, payment in question being falling within meaning of 'Fees for included services' under clause 4 of article 12 of DTAA, was taxable in India ……..Amount paid by assessee to its overseas office to meet regular expenses and maintenance of those offices was not taxable in India
2 Adani Retail Ltd Vs ACIT ITA 2177/Ahd /11 dt 13.12.2017 (89 409) These explanations cannot be brushed aside on the ground that separate books of accounts are not maintained, which is not a condition precedent for invoking section 72A(4)(a) anyway, or that these explanations were not furnished at the time of demerger. Nor, for that purpose, rejection of the explanation on the basis of sweeping generalizations or vague reasons can meet our approval either. The approach adopted by the authorities below, thus, does not meet our approval.
3 DCIT Vs Cowtown Land Development ITA No.428/Mum/2016 dt 27.12.17 90 17 It is evidently clear that the payment of Rs.6.50 crores was made to these shareholders of Seth Industries Pvt. Ltd. for withdrawal of litigations and suits filed before Hon'ble High Court of Delhi and Bombay, so that the development of the said property could be smoothly undertaken without any hindrance, consequently, the expenditure was incurred to protect the business interest of the assessee and further to safeguard the assessee itself for further losses, resultantly, we find no infirmity in the order of the First Appellate Authority
4 ITO Vs Keshav Sunderam Rajam ITA 1758/Mds /17 dt 28.12.17(89 411) To establish the cultivation, the only document available is the Adangal extract. Therefore, the Adangal extract cannot be brushed aside so lightly when the assessee produced the same to establish his case that the land in question was used for agricultural activities.
5 Subodh Gupta Vrs Pr CIT ITA 3571/ Del/17 dt 5.1.18) It does not provide that if gift is made to an HUF by any of the „relatives‟ of those individuals comprising the HUF, who is not the member of the HUF, then such gift is not chargeable to tax
6 Pankaj Kumar Gupta Vs ITO ITA 486/LKW /16 dt 16.1.18 In the instant case, nothing is on record to show that there was any malafide intention on the part of the assessee to conceal the income or furnish inaccurate particulars of income and there was an omission while filing the return of income which was rectified through challan on the very date of passing the assessment order
7 Priyanka Chopra Vs DCIT ITA 2769/M/15 dt 16.1.18 S. 68: If an admission of undisclosed income is made by the assessee after reference to the material found during search and seizure, it cannot be said that the admission is not based on incriminating material. The retraction of such admission of undisclosed income is not permissible especially when the retraction is by the mother
8 Sandvik Asia Vs DCIT ITA 467/PUN / 2015 dt 25.1.18 we hold that the draft assessment order passed by the Assessing Officer was complete assessment order which is not envisaged under section 143(3) r.w.s. 144C of the Act. Accordingly, we hold that the draft assessment order passed in the case is invalid in law
9 ITO Vs Zoom Vallabh Steel ITA NO. 4786.Del.2014 dt 25.1.18 Authorities below have not brought out any material on record to establish that assessee has utilised the working capital loan for any other activity other than the business activity. In our considered opinion ad hoc disallowance in such manner cannot be made.
10 DCIT Vs Jubilant Food Works ITA Nos.483 & 615/Del/2016 dt 25.1.18 If such term loan is found to be relating to construction activity which has been capitalized as CWIP, then, the interest actually paid on such term loan should not be allowed as deduction in terms of proviso to section 36(1)(iii) and vice versa
11 ITO Vs Serum Institute of India ITA 621/ PUN/2016 dt 29.01.18 Corpus-specific-voluntary contributions are outside the taxations in case of an unregistered Trust u/s. 12 /12A / 12AAA of the Act too.
12 Emcure Pharmaceuticals Ltd., ITA No.1532/PUN/2015 dt 29.01.18 The pharmaceutical company like the assessee is outside the scope of the circulars by the Medical Council of India or the CBDT.
13 Hitech Plast Ltd Vs DCIT ITA 4358/ Mum /16 dt 30.1.18 interest paid on late payment of TDS, Service tax, income tax and income tax penalty cannot be considered as expenditure wholly and exclusively for the purpose of business.
14 ITO vs.Shreenathji Builders ITA No. 47/Rjt/2013 dt 30.1.18 Unless the Assessing Officer establishes that the payment made by the assessee to the specified persons is excessive or unreasonable, there is no question of disallowance under section 40A(2).
15 Varshney Bhandu FoodsVs DCIT ITA No. 2973/Del/2014dt 30.01.18 assessee has failed to discharge the initial onus cast upon it by cogent or reliable evidence and has simply mentioned that the amount was being surrendered as a voluntary disclosure to buy peace and avoid litigation. We are of the considered opinion that the assessee, in the present case, cannot escape the rigours of penalty as it has failed to offer any explanation and has also failed to lead any cogent or reliable evidence
16 DCITVs Impact Marketing Services ITA No. 4984/Del/2014 dt 30.1.18 There was no rejection of books of accounts by the Assessing Officer and thus the addition on estimated basis by estimating net profit at 3.34% is not just and proper
17 Eastern Track Udyog vs JCIT ITA 1690& 1691 / Kol /16 dt 31.1.18 transaction between two sister concerns are in the nature of current account and hence does not fall in the ambit of sections 269SS and 269T of the Act
18 ACIT Vs V.Rajan, ITA 1234/Mds /2017 dt 31.1.18 Coming to the issue of the creditworthiness of the creditors, the fact that they have accepted the transaction goes to prove that the creditors did have the capacity. This being so, if the AO is still doubted the creditworthiness of the creditors, then, it was opened to him to make the assessment in the hands of such creditors.
19 Sheetal Restaurant & Bar Vs ITO ITA 7511/Mum./ 2012 dt 31.1.18 Therefore, when the addition of interest income was made on notional basis without establishing the fact that the assessee has actually received any interest income on the interest free loan advanced, it cannot be said that the assessee has concealed the interest income.
20 ACIT Vs Narendra J Bhimani ITA 411/Rjt/ 12 dt 31.1.18 90 329 Where assessee sold its land held for more than 60 years in small plots as required by end users and sale consideration was not ploughed back in land, investment, gains on sale of these plots was to be treated as capital gains
21 DCIT Vs Zydus Wellness Ltd ITA 80/Ahd/16 dt 1-2-18 we are of the view that the assessee is entitled for depreciation on goodwill.
22 DCIT Vs Brightways Housing ITA No. 5313/DEL/15 dt 1.2.18 an admitted fact that quantum addition does not survive. Therefore, there is no justification to levy the penalty against the assessee.
23 Vidyanidhi Education Trust Vs ACIT ITA 1380/ Bang /17 dt 2.2.18 we direct the AO to allow accumulation u/s.11(1)(a) of the IT Act to the extent of 15% of gross receipts in place of 15% of net income
24 Akay Flavours & AromaticsVs ACIT ) ITA No.491/Coch/2016 dt 5.2.18 In view of the judgments of the Hon’ble Apex Court in the case of CIT vs. Yokogawa India Ltd. (supra) and Patspin India Ltd. vs. CIT (supra), we hold that deduction under section 10B of the Act is to be calculated before setting off unabsorbed depreciation and carry forward business losses.
25 Bijaynagar Kraya .. Vs ITO (Exemptions) ITA 330/JP/2016 dt 5.2.18 allowability under section 40A(9), section 37(1) and diversion by overriding title, we believe that the same can be examined by the AO
26 ACIT Vs Shyamsundar Das ITA No.820/Kol/2015 dt 7.2.18 Ld. CIT(A) had rightly placed reliance on the remand report with regard to the issue. We hold that the ld. AO having accepted the stand of the assessee in the remand report ought not to have preferred any appeal
27 Allahabad Bank Vs DCIT ITA 127/Kol /11 dt 7.2.18 90 328 The scheme of taxation is primarily governed by the principles laid down in the Constitution of India and as per Article 265 of the Constitution of India, no tax shall be levied or collected unless by an authority of law …….In case of assessee-bank, amortisation of premium paid for purchase of securities was to be allowed as deduction
28 ACIT Vs Deloitte Haskins & Sells ITA 1517/ CHNY/17 dt 8.2.18 The assessee had merely made compensatory payment of interest on delayed remittance of TDS which is squarely an allowable deduction in the computation of income of the assessee firm
29 Leo Fasteners vs DCIT ITA 2164 & 2165/Mds/17 dt 8.2.18 loss suffered by the assessee on foreign exchange fluctuation has to be allowed under Section 37(1)
30 J. Muthukumar Vs ITO ITA 2203 /CHNY /2017 dt 13.2.18. What the assessee received during the impugned assessment year was income which already accrued to him in an earlier year, when he was a Non Resident. An amount can be income either at the time of accrual or at the time of receipt, under the circumstances mentioned in Section 5 of the Act
31 ACIT Vs POSCO India ITA 155 & 122/CTK/2017 dt 15.2.18 A.R. demonstrated before us by referring to the audited accounts and income tax returns at page 6 of the paper book explaining that the assessee has capitalised the expenditure under pre-operative expenses. Therefore, there is no claim and the Assessing Officer by applying the provisions of section 14A r.w.Rule 8D has made the addition……….we are of the substantive view that the provisions of section 14A are not applicable…
32 ITO Vs R S T Holdings ITA 162 & 163/Kol/2016 dt 15.2.18 It has to be remembered that as per Article 141 of the Constitution, the law laid by the Hon’ble Supreme Court is binding on all courts. The AO while framing the assessment is acting as a quasi judicial authority and is bound to follow the decision of the Hon’ble Supreme Court. Violation of the same makes the order of assessment fragile in the eyes of law
33 Urvi M. Kothari vs. ITO ITA 1331/Ahd /14 dt 19.2.18 benefit of doubt should be given to the assessee and discretion for non imposing the penalty should be exercised in favour of the assessee.

CBDT Circulars / Notifications / Instructions
1 Instruction No.1/2018 12.2.2018 Conduct of Assessment Proceedings in scrutiny cases electronically………."hearing" includes communication of data and documents through electronic mode….. Some of the important procedural aspects while conducting assessment proceedings through 'E-Proceeding'