Saturday, November 30, 2013

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


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

Facts:

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

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

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

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

The Competition Commission held as under:

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

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

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

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

5) Therefore, the OP did not, prima facie, appear to be a dominant player in the relevant market. In the absence of dominance of OP in the
relevant market, there was, prima facie, no reason for abuse of dominance in that market - Achyut P. Rao v. Designarch Infrastructure (P.) Ltd. [2013] 38 taxmann.com 380 (CCI)

Friday, November 29, 2013

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

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

Facts:

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

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

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

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

The Competition Commission held as under:

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

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

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

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

5)
Therefore, the OP did not, prima facie, appear to be a dominant player in the relevant market. In the absence of dominance of OP in the relevant market, there was, prima facie, no reason for abuse of dominance in that market - Achyut P. Rao v. Designarch Infrastructure (P.) Ltd. [2013] 38 taxmann.com 380 (CCI)

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

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

Facts:


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

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

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

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

The High Court held in favour of revenue as under:

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

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

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

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

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

6)
Thus, the application filed by the Income-tax department was to be allowed - M.D. Overseas Ltd. v. Director General of Income-tax [2013] 38 taxmann.com 433 (Allahabad)

Thursday, November 28, 2013

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

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

Facts:   

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

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

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

The Tribunal held in favour of revenue as under:

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

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

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

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

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

6) Therefore, such service rendered by the foreign company was technical in nature as per India-USA treaty - US Technology Resources (P.) Ltd. v.  ACIT [2013] 39 taxmann.com 23 (Cochin - Trib.)

No ‘royalty’ from sale of software, HC ignores amended Sec. 9 as DTAA more beneficial; Samsung’s case distinguished

Delhi High Court upheld the order of the Tribunal that amount received by the assessee under the license agreement for allowing the use of the software would not be royalty under the DTAA.

The Delhi High Court held as under:

1) What was transferred was neither the copyright in the software nor the use of the copyright in the software, but what was transferred was the right to use the copyrighted material or article which was distinguishable from the rights in a copyright;

2) It further held that the right that was transferred was not a right to use the copyright but was only limited to the right to use the copyrighted material and the same would  not give rise to any royalty income and would be business income;

3) The Delhi High Court expressed its disagreement with the decision of the High Court in the case of CIT v. Samsung Electronics Co. Ltd. [2011] 203 Taxman 477 (Kar.) that right to make a copy of  the software and storing the same in the hard disk of the designated computer and taking backup would amount to copyright work – DIT v. Infrasoft Ltd. [2013] 39 taxmann.com 88 (Delhi)

Sale of business in lieu of shares under an amalgamation scheme not a ‘slump sale’; in sync with Bharat Bijilee’s case

Where no monetary consideration was involved in transfer of manufacturing division along with all its assets and liabilities under amalgamation scheme, same could not be considered as slump sale under section 50B

Facts:

a) The assessee transferred its manufacturing division to NIL under a scheme of amalgamation as per which all the assets and liabilities of the assessee were vested in NIL;

b) The assessee in return received certain investments held by NIL besides allotment of equity shares to the shareholders of the assessee;

c) The Assessing Officer held that the transfer of the manufacturing division to NIL would tantamount to a 'slump sale' attracting liability of capital gains under section 50B;

d) On appeal, the CIT(A) deleted the order of Assessing Officer. The aggrieved revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) To qualify as slump sale two conditions have to be satisfied, viz., (A) there must be transfer of one or more undertakings as a result of sale, and (2) the sale should be for a lump sum consideration without values being assigned to the individual assets and liabilities;

2) In the instant case it was not disputed that there was no monetary consideration involved for transfer of the assets and liabilities of the manufacturing division to NIL, though there might have been transfer of an undertaking;

3) Since there was no monetary consideration involved in transferring the manufacturing division under scheme of amalgamation approved by the High Court, it couldn’t be considered to be a slump sale so as to attract the liability of the capital gain under section 50B – ITO v. Zinger Investments (P.) Ltd [2013] 38 taxmann.com 388 (Hyderabad - Trib.)

Monday, November 25, 2013

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

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

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

The Supreme Court held in favour of assessee as under:

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

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

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

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

Friday, November 22, 2013

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

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

Facts:

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

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

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

The Tribunal held in favour of revenue as under:

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

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

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

Tuesday, November 19, 2013

A blood bank isn’t analogous to a hospital or medical institution; not entitled to section 11 exemption

Assessee engaged in running a blood bank cannot be said to be engaged in providing medical facilities so as to be entitled to exemption under section 11

Facts:

1) The assessee, a company registered under section 12AA, had entered into transaction of sale of blood components (FFP) with its associated concern and during the year it had supplied FFP to said concern;

2) The Assessing Officer found that the assessee had supplied FFP to patients at higher price and had also charged service charges from patients which were not charged to the said concern;

3) The Assessing Officer was, thus, held that since the assessee had provided concessional benefit to its associated concern it was not eligible for deduction under section 11;

4) The CIT (A) upheld the order of Assessing Officer. Aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of revenue as under:

1) As per section 13(6) a trust running an educational institution or a medical institution or a hospital shall not lose the benefit of exemption of any income other than the value of benefits of educational or medical facilities provided to the specified persons, solely on the ground that such benefits have been provided to specified persons;

2) This section covers, (i) only those trusts running an educational institution or a medical institution or a hospital, (ii) the benefit extends only in respect of educational or medical facilities and not any other facility;

3) In the instant case, it was an undisputed fact that assessee has entered into transactions with the related concerns;

4) Yet assessee couldn’t be said to be a hospital or medical institution as it was not engaged in dispensing medical facility though it was engaged in running a blood bank. Thus, assessee wasn’t entitled to relief under section 11 - Advance Transfusion Medicine Research Foundation v. ADIT (Exemption) [2013] 38 taxmann.com 360 (Ahmedabad - Trib.) 

Monday, November 18, 2013

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

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

Facts:

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

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

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

The Tribunal held in favour of assessee as under:

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

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

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

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

5) Thus, the fund created by assessee was a public charitable fund having been set up to advance an object of general public utility, assessee was entitled to get registration - Inter-connected Stock Exchange Investors Protection Fund ( ISE IPF) v. Director of Income-tax (Exemption) [2013] 38 taxmann.com 329 (Mumbai - Trib.)

Friday, November 15, 2013

Moisturex cream meant for curing skin is medicament; SC lays down principles to identity medicament products

'Moisturex' cream having medicinal ingredients and meant for curing of skin ailments/diseases is a medicament (duty 15%) and not cosmetic (duty 70%)

Facts:

The assessee was engaged in manufacture of product 'Moisturex', which it sought to classify as 'medicament', liable to duty at 15% under Heading 30.03. However, the Department classified product as cosmetics liable to duty @ 70% under Tariff Heading 33.04.

The Supreme Court held in favour of assessee as under:

1) For deciding whether a product is 'medicament' following principles are relevant :

a) Presence of pharmaceutical ingredients that have therapeutic or prophylactic or curative properties, is relevant and proportion of such ingredients is not decisive;

b) Even if a product is sold without a prescription of a medical practitioner or over/across counter, it may be 'medicament';

c) People who actually use such products must understand it to be 'medicament';

d) Its primary function has to be "cure" and not "care", i.e., it must be used mainly in curing or treating ailments or diseases.

2) Accordingly, 'Moisturex' cream having medicinal ingredients, though in small quantities, is not primarily intended for protection of skin but for curing of skin ailments/diseases, is a medicament (duty @15% : Tariff Heading 30.03) and not cosmetic (duty @70% : Tariff Heading 33.04) - Commissioner of Central Excise, Mumbai-IV v. Ciens Laboratories [2013] 38 taxmann.com 337 (SC)

Tuesday, November 12, 2013

Inevitable TDS obligation even if deduction for impugned exp. is not claimed

Assessee is liable to deduct tax at source on interest payments, even if it has not claimed same as deduction while computing its total income

Facts:

a) The assessee-company credited interest to its sister concern’s account without deducting tax under section 194A. The Assessing Officer treated assessee as an 'assessee-in-default' and levied interest on it under section 201(1A);

b) On appeal before the CIT (A), the assessee contended that it could not be treated as an 'assessee-in-default', when it had not claimed interest amount as expenditure. The CIT (A) dismissed the assessee's appeal. Aggrieved assessee filed the instant appeal.

The Tribunal held in favour of revenue as under:

1) Provisions of section 194A(1) provide that the person responsible to pay the interest is liable to deduct tax at source at the time of credit or payment, whichever is earlier. Since the section uses the term 'any income by way of interest', it should be viewed from the angle of the payee and not from the angle of the person making the payment;

2) The accounting or tax treatment given by the payer in respect of interest paid by him may not be relevant at all for the purposes of section 194A. So long as the interest amount constitutes "income" in the hands of recipient, the payer shall be liable to deduct tax at source on the interest amount so paid;

3) Thus, even if the payer had disallowed the expenditure under section 40(a)(ia) or did not claim the same as expenditure at all, he would still be liable to deduct tax at source under section 194A on the interest amount so paid, if the said payment was liable to TDS;

4) Further, the provisions of section 40(a)(ia) do not override the provisions of section 201. It provides only for deferment of the allowance and does not provide for absolute disallowance. Its objective appears to be to compel the assessee to deduct tax at source in order to claim the relevant expenditure as deduction;

5) Section 201 provides for treating an assessee as an assessee-in-default who has failed to deduct or pay the TDS amount. Its objective is only to compensate the Government for the failure of an assessee to deduct or pay the TDS amount;

6) Thus, the provisions of section 40(a)(ia) and section 201 operate on different objectives. Accordingly, the assessee was liable to deduct tax at source on interest payments, even if it had not claimed the same as deduction while computing its total income. The revenue was entitled to initiate proceedings under section 201 for such failure. Thus, the order of CIT(A) was to be upheld  - Agreenco Fibre Foam (P.) Ltd v. ITO(TDS) [2013] 38 taxmann.com 155 (Cochin - Trib.)

100% EOU carries on its business in India, its source of income is in India; technical service used by it is FTS

The Tribunal held as under:

1) Irrespective of the fact whether an India based business is one hundred per cent export oriented unit or not, it is still a business carried on in India, and it cannot, therefore, be covered by the first limb of exception envisaged in section 9(1)(vii)(b);

2) Even if entire products are sold outside India, the fact of such export by itself does not make business having been carried outside India;

3) Once the manufacturing facilities are outside India and the customers are also outside India, such a situation will indeed be covered by the exception visualized in section 9(1)(vii)(b), however, merely because the user of services was a one hundred per cent export unit, it couldn’t be said that the technical services were used "for the purpose of making or earning any income from any source outside India", and, accordingly, would be outside the ambit of fees for technical services under section 9(1)(vii) - Metro & Metro v. ACIT [2013] 39 taxmann.com 26 (Agra - Trib.)

Sec. 54EC exemptions allowable despite deeming fiction of sec. 50 treating capital gains as short-term ones

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

The High Court held in favour of assessee as under:

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

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

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

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

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

HC grants extra time to assessee for repatriation of forex realizing economic crisis in Russia

Due to disintegration of the USSR and economic crisis in Russia, the buyers were unable to remit payment within time and, therefore, assessee's application seeking extension of time to realize convertible foreign exchange in India was allowed

Facts:

a) The assessee, engaged in manufacture and export of certain goods, had exported almost 100 per cent of its produce to erstwhile Russia or USSR. For the purpose of taxation, it wanted to claim benefit of Section 80HHC in respect of profits derived from exports;

b) As per section 80HHC, to avail of the said benefit, the assessee was required to receive the sale proceeds in convertible foreign exchange within a period of six months from the end of the previous year;

c) During relevant period, on assessee’s failure to receive part of sale proceeds in convertible foreign exchange within stipulated period, it filed an application seeking extension of time to realize such proceeds;

d) The Commissioner rejected assessee's application.  Against said order, assessee filed the instant writ.

The High Court held as under:

1) The Commissioner had not rebutted or denied that assessee was factually correct when it had stated that due to economic crises, fall or depreciation in value of Russian currency payments were not being received by the Indian exporters from buyers in the USSR or countries which were earlier part of the USSR;

2) He had also not adverted to fact that RBI had realized said problem and had taken notice of unprecedented situation and hardships faced by exporters from India;

3) It was also undisputed fact that assessee had realized entire export proceeds before expiry of time-limit for completing assessment. Thus, the impugned order was to be set aside and assessee's application seeking extension of time was to be allowed - York Exports (P.) Ltd. v. CIT [2013] 38 taxmann.com 205 (Delhi)

Presumption as to valid service of notice holds good if same is not returned back to department

Where revenue dispatched notice under section 143(2), and the fact that notice was not received back raise a presumption of service under Section 27 of the General Clauses Act, 1897

Facts:

a) Notice under section 143(2) was claimed to have been issued by revenue under section 143(2);

b) The assessee raised an objection that notice was not served within 12 months from end of month in which return was furnished and, thus, it was null and void;

c) Despite this objection, revenue proceeded to finalized assessment. Thus, the dispute, in the present case, revolves around the issuance and service of notices issued under Section 143(2) of the Act.

The High Court held as under:

1) The averments in the reply, duly supported by copy of the notice and the fact that notice was not received back raised a presumption of service under Section 27 of the General Clauses Act, 1897;

2) The onus to rebut the presumption of service of notice sent by post, lies upon the petitioner;

3) The petitioner has failed to discharge this onus. Mere denial by the petitioner that notice was never received, was insufficient, to record a finding in favour of the petitioner;

4)  Thus, the instant petition was dismissed as there was no error in the impugned order or proceeding - Shahbad Cooperative Sugar Mills Ltd. v. Dy.CIT [2013] 38 taxmann.com 204 (Punjab & Haryana)

Thursday, November 7, 2013

Voluntary disclosures don’t absolve one from concealment penalty; plea as to ‘buy peace’ is irrelevant

Voluntary disclosure does not lead to assessee being free from mischief of penal proceedings under section 271(1)(c)
The Supreme Court held as under:

1) Explanation to section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer, between reported and assessed income. The burden then shift on the assessee to show otherwise, by cogent and reliable evidence;

2) When the initial onus placed by the Explanation, has been discharged by assessee, the onus shifts on the revenue to show that the amount in question constituted the income and not otherwise;

3) The Assessing Officer shall not be carried away by the plea of the assessee like ‘voluntary disclosure’, ‘buy peace’, ‘avoid litigation’, ‘amicable settlement’, etc., to explain its conduct;

4) Assessee had only stated that he had surrendered the additional sum with a view to avoid litigation, buy peace and to channelize the energy and resources towards productive work and to make amicable settlement with the income-tax department. Statute does not recognize those types of defences under the Explanation 1 to section 271(1)(c);

5) It is trite law that the voluntary disclosure does not free the assessee from the mischief of penal proceedings under section 271(1)(c). The law does not provide that when an assessee makes a voluntary disclosure of his concealed income, he has to be absolved from penalty;

6) The surrender of income in this case was not voluntary in the sense that the offer of surrender was made in view of detection made by the Assessing Officer in the search conducted in the sister concern of the assessee;

7) The Assessing Officer had to satisfy whether the penalty proceedings were initiated or not during the course of the assessment proceedings and the Assessing Officer was not required to record his satisfaction in a particular manner or reduce it into writing. Thus, there was no illegality in action of department in initiating penalty proceedings - MAK Data (P.) Ltd. v. CIT (2013) 38 taxmann.com 448 (SC)

SC: Petitioner is stool pigeon of business houses anxious to remove SEBI’s Chairman; writ for his removal dismissed

Writ seeking removal of Mr. UK Sinha from the post of Chairman of SEBI dismissed
The Supreme Court held as under:

1) It couldn’t be said that deputation of Mr. UK Sinha (Mr. Sinha) as a Chairman of SEBI under rule 6(2)(ii) was approved in colourable exercise of power as he was on deputation with UTI AMC since the year 2005 and was in no way responsible for being set on deputation initially under rule 6(2)(iii) and subsequently under rule 6(2)(i);

2) He had no role to play in the grant of approval of deputation, once he had fully disclosed that he had been working as Joint Secretary, Banking;

3) UTI AMC was not a ‘Government company’ under section 617 of the Companies Act and it was for the shareholder to decide what process to follow and whom to appoint;

4) As per the consolidated guidelines, the deputation of Mr. Sinha was covered under rule 6(1)(i) of the IAS Cadre Rules and his recommendation and appointment were not vitiated by mala fide exercise of powers. The search-cum-selection committee, after scrutinizing qualification and experience of the short-listed candidates, unanimously placed his name on top of merit list;

5) He had no role to play in the whole procedure except for accepting the invitation of the search-cum-selection committee for interaction. His appointment was strictly in conformity with the procedure prescribed by service rules, i.e., rules 16 and 26 of the AIS (DCRB) Rules, 1958;

6) The petitioner had not placed on record any material to establish that any conspiracy was hatched to ensure the selection of Mr. Sinha. He had unjustifiably attacked the integrity of the entire selection process. He did not satisfy the test of utmost good faith which was required to maintain public interest litigation;

7) This was not a petition to protect the Fundamental Rights of any class of down trodden or deprived section of the population. It was more for the protection of the vested interests of some unidentified business lobbies;

8) The petitioner was a stool pigeon acting on the directions of the business houses like Sahara and Reliance. It is a well known fact that in recent times, SEBI has been active in pursuing a number of cause célèbre against some very powerful business houses;

9) Therefore, the anxiety of these business houses for the removal of the present Chairman of SEBI was not wholly unimaginable. There was no merit in this petition which was, accordingly, to be dismissed - Arun Kumar Agrawal v. Union of India [2013] 38 taxmann.com 300 (SC)