Monthly Archives: April 2012

CIT vs. The Instalment Supply Ltd (Delhi High Court) The assessee bought 1614 items of computer systems for Rs.40 lacs from HCL Hewlett Packard Ltd and leased back to the same company. The assessee claimed 100% depreciation on the ground that the cost of each itemswas less than Rs.5,000. The AO & CIT (A) held that the lease was not a bona fide transaction and that the transaction was a finance transaction. It was held that the assessee had advanced Rs.40 lacs to HCL Hewlett Packard Ltd and agreed to receive back this amount along with the interest over six years. However, the Tribunal upheld the claim on the ground that the conditions of a valid lease were satisfied. On appeal by the department to the High Court,

Difference between Finance Lease and Operating Lease

M/s. Alpha Projects Society P. Ltd vs. DCIT (ITAT Ahmedabad) In AY 2005-06, the assessee made payments to contractors & for professionals & technical services. Though TDS was deducted, it was paid after the end of the FY but before filing the ROI. The assessee pleaded that s. 40(a)(ia), as amended by the FA 2010 w.e.f. 1.4.2010 to provide that no disallowance should be made if the TDS was paid before the due date of filing the ROI should be held to be retrospective. However, the AO & CIT (A), rejected the claim by relying on Bharati Shipyard Ltd 132 ITD 53 (Mum) (SB). On appeal to the Tribunal, HELD allowing the appeal:

S. 40(a)(ia): Another judgement in favour of retrospective amendmend!

The Finance Minister through the Union Budget 2012-13 has introduced several amendments in the income-tax law having far reaching implications on the tax payers. A key tax proposal introduced is the General Anti-Avoidance Rules (GAAR) which intends to address the issue of aggressive tax planning and codify the doctrine of “substance over form”.  GAAR is proposed to be implemented with effect from AY 2013-14. Click here to download the article

Article: GAAR – Tax planning mayhem?

Piyush Mehta v ACIT (ITAT Mumbai) For AY 2005-06, the AO made a disallowance of expenditure incurred by the assessee on the ground that the assessee had made the TDS payments u/s 194C after the end of the year. Before the Tribunal, the assessee claimed that as the TDS had been paid before the due date of filing the ROI, no disallowance could be made as per s. 40(a)(ia) amended by the FA 2010 w.e.f. 1.4.2010. The assessee relied on Virgin Creations and claimed that it had to be followed in preference to the contrary ruling of the Special Bench in Bharati Shipyard Ltd 132 ITD 53 (Mum). HELD by the Tribunal:

S. 40(a)(ia): Amendment by FA 2010 w.e.f 1.4.2010 is retrospective

CIT vs. M/s Sangameshwara Associates (Karnataka High Court) The assessee filed a ROI offering Rs. 4.68 lakhs which was assessed. Subsequently, the AO issued a s. 148 notice claiming that cash credits of Rs. 4.50 lakhs had to be assessed. The assessed filed a ROI pursuant to the s. 148 notice in which it offered the said cash credits as income and the assessment was finalized on that basis. In the s. 271(1)(c) penalty proceedings, the assessee claimed that it was not liable for penalty on the ground that (i) the income offered in the ROI was accepted without any addition and so there was no concealment as per the ROI; (ii) the cash credits were offered as income to buy peace & (iii) that the AO had not recorded satisfaction that the assessee had concealed the income. The CIT (A) & Tribunal accepted the assessee’s claim. On appeal by the department to the High Court, HELD reversing the lower authorities:

Despite offer of income in s. 148 ROI, s. 271(1)(c) penalty leviable

Rajamahendri Shipping & Oil Field Services Ltd vs. ACIT (ITAT Vizag) For AY 2005-06, the AO disallowed Rs. 47.26 lakhs u/s 40(a)(ia) on the ground that the TDS had not been paid in time. The assessee claimed that the amendment to s. 40(a)(ia) by the Finance Act 2010 w.e.f. 1.4.2010 to provide that no disallowance could be made if the TDS was paid on or before the due date specified in s. 139(1) was retrospective in nature as held in CIT vs. Virgin Creations and that the contrary ruling of the Special Bench in Bharti Shipyard Ltd vs. DCIT 132 ITD 53 (Mum) could not be followed. HELD by the Tribunal:

S. 40(a)(ia): Non-jurisdictional High Court prevails over Special Bench

M/s. Merilyn Shipping & Transports vs. ACIT (ITAT Visakhapatnam Special Bench) The assessee incurred brokerage expenses of Rs.38.75 lakhs and commission of Rs.2.43 lakhs without deducting TDS. Of this only Rs. 1.78 lakhs was payable and the rest was paid. The AO disallowed the entire expenditure u/s 40(a)(ia). Before the CIT (A), it was argued that disallowance u/s 40(a)(ia) could be made only of the amount “payable” and not of that which had already been “paid” though it was rejected. On appeal to the Tribunal, the matter was referred to the Special Bench. HELD by the Special Bench:

S. 40(a)(ia) TDS Disallowance applies only to amounts “payable” as at 31st March and not ...

ITO v Ajay Shantilal Lalwani (2012) 145 TTJ511 (Pune)   Facts of the case The assessee had purchased shares of a company in physical form and transferred to the demat account on a later date as the assessee was not having demat account at the time of purchasing the shares. When the assessee decided to sell the shares, he sent the shares for de-materialisation. He claimed exemption under section 10(38) for long term capital gains on sale of the said shares. During the assessment proceedings, copies of share certificates held by the assessee in physical form were also provided to the A.O, which contained complete relevant details viz address of Registered Office of the Company, signatures of the authorized signatory along with 2 directors’ signature, value of shares with paid up amount of shares purchased in each Company, date of issue of Certificate, Certificate No., Registered Folio, number of shares with their distinctive numbers, date of transfer of shares in the name of assessee and also copies of contract notes along with bills issued by share broker S.B. Buthra & Company. The A.O denied claimed exemption u/s. 10(38) of the Act in respect of Long Term Capital Gain mainly on the basis that there was a substantial delay in transferring the shares into D-MAT A/c.

Delayed transfer of shares from physical to Demat form – not a ground for denial ...