Mere admission before SetCom couldn’t be sole ground to confirm demand in adjudication proceedings

Whatever assessee admitted while submitting settlement application could not be deemed as its accepting liability; if application or proceedings before Settlement Commission (SetCom) failed, Central Excise Officer had to adjudicate the case in entirety.

Facts:

a)The assessee admitted clandestine removal of goods before SetCom but it sent the case back to adjudicating authority.

b)The adjudicating authority had confirmed clandestine removal of goods based on admission of assessee before SetCom.

c)Thus, the issue that arose before the High Court was: Whether revenue was required to establish clandestine removal, despite the same having been admitted by assessee before SetCom?

The High Court held in favour of assessee as under:

1)Even in view of section 32L(2) of Central Excise Act, 1944 whatever had been admitted by assessee while submitting settlement application under section 32E(1), straightway, couldn’t be said to be admission on behalf of assessee accepting clandestine removal of goods.

2)If the contention on behalf of the department had been accepted, in that case there would be no question of further adjudication by the Central Excise Officer. 3)Once application or proceedings before SetCom failed, the Central Excise Officer was required to adjudicate the case in entirety. Thus, adjudication was required and mere reliance on admission before Settlement Commission was not sufficient. Hence, department's contention was to be rejected – COMMISSIONER V. MARUTI FABRICS [2014] 47 taxmann.com 298 (Gujarat)

Extending benefits to hospitals only with NABH accreditation wasn’t abuse of dominance by Director General of Health Services

Where opposite party-DGHS was not directly engaged in any economic and commercial activities and different rates of empanelment fees prescribed by it for hospitals under ‘National Accreditation Board for Hospitals and Healthcare Providers’ (NABH) were not anti-competitive, there was no abuse of dominant position by DGHS.

Facts:

a)The informant alleged that opposite party-The Director General of Health Services (DGHS) was abusing its dominance for empanelment of private hospitals for purpose of healthcare and medical services to Central Government Health Scheme (CGHS) beneficiaries.

b)Further, it was alleged that DGHS had colluded with other opposite parties to give benefit to a selected hospitals having NABH accreditation and reimburse them with payments at higher rates compared to other hospitals without NABH accreditation

The Competition Commission of India held as under:

1)Since the DGHS’s role was limited to control and regulate heath care system in country and was not directly engaged in any economic and commercial activities, it could not be covered in definition of enterprise.

2)The different rates prescribed by DGHS for NABH accredited hospitals could not be considered as anti-competitive in any manner; rather it would act as an incentive to non-accredited hospitals to secure such accreditation and provide quality health care services, which would ultimately benefit patients.

3)Since informant had not submitted any cogent evidence stating existence of any agreement in any manner between opposite parties, the provisions of section 3 of the Competition Act, 2002 could not be invoked. – DR. BISWANATH PRASAD SINGH V. DIRECTOR GENERAL OF HEALTH SERVICES [2014] 47 taxmann.com 373 (CCI)

Tippers purchased for letting out purposes couldn’t be deemed as part of plant & machinery; depreciable at 40%

Facts:

a)The assessee claimed depreciation at 40 per cent on tippers. However, the Assessing Officer (‘AO’) held that tippers were part of block of plant and machinery and, thus, the assessee was eligible for depreciation at 25 per cent only.

b)On appeal, the CIT(A) directed the AO to allow depreciation at 40 per cent. The aggrieved revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1)It was noticed that the assessee was not carrying out any construction activity, therefore, it could not be said that the tippers were part of block of plant and machinery or construction equipment forming part of plant and machinery.

2)It was also not in dispute that the tippers were given on hire to a company from which the assessee received hire charges. The tippers were registered as vehicles with the registration authority, therefore, these were road transport vehicles and given on hire.

3)Thus, they were eligible for depreciation at 40 per cent instead of at 25 per cent allowed by the AO. – Asstt. CIT v. Ashok Doshi [2014] 47 taxmann.com 390 (Jodhpur - Trib.)

Exp. on issue of FCCBs were allowable as holders had no compulsion but an option to convert them into equity shares

Expenses on issue of Foreign Currency Convertible Bonds (FCCBs) couldn’t be disallowed just because they were issued with an option to convert them into equity shares within a period of one month.

Facts

a)Assessee issued Foreign Currency Convertible Bonds (FCCBs) with an option to convert them into equity shares within a period of one month from the date of issue of such bonds.

b)Assessing Officer (AO) allowed assessee's claim for deduction of expenditure incurred on issue of FCCBs. The CIT disallowed assessee’s claim by revising the order of AO.

c)Further, the Tribunal set aside the order of CIT. Revenue contended that once the FCCBs were capable of being converted, then, the expenditure incurred in relation thereto, could not be said to be revenue expenditure and, therefore, the expenditure ought to have been classified as capital expenditure. The Aggrieved revenue filed the instant appeal.

The High Court held in favour of assessee as under-

1)The conclusion reached by the AO was that the conversion of FCCBs was not automatic. Thus, the CIT could not have concluded on same material that the FCCBs, in real sense, were equity shares right from the beginning and that the conversion of bonds was only a routine technical compliance as per the Regulations and guidelines.

2)The Tribunal was justified in setting aside the revisional order of CIT as conversion of FCCBs into equity shares was not automatic as conversion was not permissible unless option for the same was exercised by the holder of FCCBs.

3)Thus, a possible view taken by AO could not be termed as prejudicial to the interest of the revenue. Therefore, Commissioner was not justified in exercising his powers under section 263. -CIT vs. Tata Teleservices (Mah) Ltd. [2014] 47 taxmann.com 238 (Bombay)

Relinquishment of right to purchase a property in lieu of a sum was ‘transfer’; to be taxed as capital gain

Consideration received from relinquishment of right to purchase a property to be taxed as capital gain and not as income of other sources as relinquishment of right over a capital asset amounts to transfer under section 2(47).

Facts:

a)The assessee entered into an agreement to purchase a plot. As per the terms of agreement of sale, assessee paid certain sum as advance to the vendor with the understanding to pay the balance at the time of registration.

b)Since the vendor did not act upon the agreement of sale, the assessee filed a suit for specific performance, which ultimately resulted in compromise. A Memorandum of Understanding (‘MOU’) was entered into between the assessee and the land owner in terms of which assessee gave up his claim over property against consideration of Rs. 1.50 crore (including the advance of Rs. 25 lakhs paid by the assessee at the time of agreement of sale).

c)The assessee disclosed said amount as sale consideration received by him for transfer of plot and computed long term capital gain which was accepted by the Assessing Officer (AO)

. d)The CIT revised the order of AO with an opinion that amount received by the assessee from the land owner being a windfall gain, should have been assessed as income from other sources and not as long-term capital gain. Aggrieved assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1)Relinquishing or extinguishing one's right over a capital asset amounts to transfer as per section 2(47) of the Income-tax Act. Therefore, when the assessee, as per terms of the MOU, gave up his claim over the property against consideration, certainly it could be interpreted that the assessee had relinquished or extinguished his right over the property.

2)Thus, there was 'transfer' of capital asset within the purview of section 2(47) attracting capital gain.

3)The assessment order passed by AO could not be considered to be erroneous and prejudicial to the interests of revenue, only because the Commissioner considered the receipts as windfall gain and in his opinion such receipt had to be assessed as income from other sources -P. Ramgopal Varma vs. ACIT [2014] 47 taxmann.com 334 (Hyderabad - Trib.)

SAT: Failure to make disclosure under Insider Trading norms attracts penalty, irrespective of mitigating factors

Irrespective of mitigating factors such as disproportionate gain or unfair advantage derived or any loss caused to investors, failure to make timely disclosures under regulation 13 SEBI (Prevention of Insider Trading) Regulations, 1992 would attract penalty

FACTS:

a)The appellant-company had become part of the promoter group of 'INCL' and on account of acquiring control of 'INCL' was obliged to file disclosures under regulation 13(2A) , read with regulation 13(6) of the SEBI (Prevention of Insider Trading) Regulations, 1992.

b)The appellant-company was imposed with penalty for not making disclosures within stipulated time period under regulation 13(2A) of the SEBI (Prevention of Insider Trading) Regulations, 1992.

c)On appeal to the Securities Appellate Tribunal

On appeal, The Securities Appellate Tribunal held as under:

1)An obligation to make disclosure under said regulation is not restricted to cases where there is disproportionate gain or unfair advantage and where loss is caused to investors as a result of failure to make disclosures.

2)Since Explanation to regulation 13 of the Securities and Exchange Board of India (Prevention of Insider Trading) Regulations, 1992 does not deal with disclosure requirements, argument of appellant-company that there was confusion regarding disclosure requirements contemplated in said regulations as compared to Takeover Regulations did not merit consideration.

3)Therefore, penalty imposed after consideration of mitigating factors could not be said to be arbitrary or unreasonably excessive and, thus, order passed by Assessing Officer could not be interfered with. – IndiaNivesh Capitals Ltd. vs. Securities and Exchange Board of India [2014] 47 taxmann.com 339 (SAT - Mumbai)

Institutions providing event management courses without awarding any diploma not entitled to sec. 12AA registration

Institutions conducting classes in event management were not entitled to Section 12AA registration as such courses do not result in conferment of any degree or diploma; such activity would not fall within the meaning of education under Sec. 2(15).

Facts:

a)The assessee-institution was formed with an object to establish and administer schools, colleges, etc.

b)In furtherance of its objects, it established an institution for teaching event management course. It filed an application seeking registration under section 12AA.

c)The CIT held that activity carried on by assessee would not fall within meaning of education as mentioned in section 2(15) and rejected assessee's claim for registration. The aggrieved assessee filed the instant appeal.

The Tribunal held in favour of revenue as under:

1)The Supreme Court in case of Sole Trustee, Loka Shikshana Trust v. CIT [1975] 101 ITR 234 held that the acquisition of all kinds of knowledge would not fall within the definition of education as provided under Section 2(15) and the acquisition of knowledge should be through a normal schooling to be regarded as education.

2)Thus, it was a well-settled principle that there had to be a systematic instruction to the students by way of normal schooling to be regarded as education. Mere conducting of event management classes might provide some kind of knowledge to the students; but that acquisition of knowledge would not fall within the meaning of 'education' as provided in section 2(15).

3)In the instant case, the assessee was conducting classes in event management but the government or any governmental bodies did not recognize the institution run by the assessee.

4)Therefore, the teaching courses conducted by the assessee would not result in conferment of any degree or diploma and remained unrecognised. Thus, the assessee was not eligible for registration under section 12AA. – IMPRESSARIO EDUCATIONAL TRUST V. CIT [2014] 47 taxmann.com 259 (Cochin - Trib.)

No liability of bank to withhold tax from cap gains remitted to a non-resident when it was merely acting as broker

Where assessee-bank was only acting as an authorized dealer to brokers of foreign residents in transferring funds in respect of share transactions, which resulted in gains, it was not liable to withhold tax under section 195.

Facts:

a)Individuals (residents of UAE) carried out transactions in shares through brokers and earned short-term capital gains. The assessee-bank made remittances on behalf of brokers in respect of these gains without deduction of tax.

b)According to the AO, the assessee-bank (in capacity as remitter) was to deduct tax at source before making overseas payments under section 195. Subsequently, the AO held that the assessee-bank was a defaulter under section 201 and was liable to pay interest under section 201(1A). On appeal, the CIT(A) reversed the order of AO.

On appeal, the Tribunal held in favour of assessee as under:

1)The ITAT Mumbai Bench in the case of Hongkong & Shanghai Banking Corpn. Ltd.,v. Jt. CIT [2009] 29 SOT 17 had held that capital gains arising to the NRIs residing in UAE were short term capital gains and the bank, which was acting as an authorized dealer, was not liable to deduct tax. Consequently, the AO was not justified in treating the assessee as a defaulter under section 201;

2)In the instant case, the non-residents had earned short-term capital gains and the assessee-bank was only acting as an authorized dealer in transferring the funds on behalf of the broker.

3)Thus, following the order of ITAT Mumbai bench (Supra) it was to be held that assessee-bank was not a person responsible for paying tax within the meaning of section 204 and, therefore, it was not liable to deduct tax at source under section 195. Therefore, assessee-bank could not be treated as a defaulter within the meaning of section 201. – ITO(IT)(TDS) V. ABU DHABI COMMERCIAL BANK [2014] 47 taxmann.com 263 (Mumbai - Trib.)

Salary income declared after search proceedings would be deemed as undisclosed even if tax was deducted there from

Where return was filed by assessee after block assessment proceedings were initiated by the AO, the intention of assessee was not to disclose income and, therefore, same was required to be treated as an undisclosed income as per section 158B(b).

Facts:

The issue that arose for consideration of the High Court was:

Whether non-disclosure of the salary income (by not filing the return of income) on which the tax was deducted at source, could be treated as "undisclosed income" within the meaning thereof in Section 158B(b)?

The High Court held in favour of revenue as under:

1)The Supreme Court in Asstt. CIT v. A.R. Enterprises [2013] 29 taxmann.com 50 held that since the tax to be deducted at source is also computed on the estimated income of an assessee, such deduction cannot result in the disclosure of the total income for the relevant assessment year'.

2)The assessee filed the return declaring the income only when the block assessment proceedings were initiated by the AO. It indicated that there was no intention on the part of assessee to disclose the income.

3)Therefore, the salary income was required to be treated as undisclosed income within the meaning thereof in section 158B(b). The Tribunal had materially erred in not treating the income earned by way of salary as 'undisclosed income'. – ASSTT. CIT V. MINOOBHAI D. IRANI [2014] 47 taxmann.com 289 (Gujarat)

No transfer under sec. 2(47) if share in inherited property was transferred pursuant to Court decree

Amount received by assessee pursuant to a Court decree in lieu of her share in self acquired property of father who died intestate, could not be said to result in 'transfer' attracting provisions of section 2(47).

Facts:

a)The Father (‘B’) of assessee (daughter) died intestate leaving behind four sons and six daughters including the assessee. After expiry of 'B', assessee along with other sisters filed a suit for partition of self acquired property of their father.

b)The Court duly recognized the suit compromised between the parties. In terms of memorandum of compromise, the daughters agreed to receive their 1/10th share in property, i.e., a sum of Rs. 87.50 lakhs each from their brothers.

c)The assessee's brothers subsequently entered into a joint development agreement of property. In terms of said agreement, the developer directly paid amount of Rs. 87.50 lakh each to daughters including assessee herein. The daughters thereupon executed a release deed of disputed property in favour of their brothers.

d)The assessee had not offered to tax the impugned sum on the ground that there was no transfer of any capital asset. The AO made additions on the ground that the said transaction was to be deemed as transfer under section 2(47). The CIT (A) confirmed the order of AO. The aggrieved assessee filed instant appeal.

The Tribunal held in favour of assessee as under:

1)In the instant case, on death of 'B', their children became entitled to 1/10th share each over the property by way of intestate succession. Since a physical division of each of the 1/10th share was not possible, sons took the property and daughters took money equivalent to their share over the property.

2)The sum received by the assessee was thus traceable to the realization of her rights as legal heir on intestate succession and not to any sale, relinquishment or extinguishment of right to property. It was, thus, clear that the release deed was executed by daughters (in favour of their brothers) only to confer better title over the property. That document did not create, extinguish or modify the rights over the property either of the sons or the daughters.

3)The sum of Rs.87.50 lakhs was paid only through Court and not at the time of registration of the deed of release. The document of release was between the daughters and sons. The developer was not a party to the document. The developer was also not a party to the suit for partition.

4)Therefore, the conclusions of the revenue authorities that there was a conveyance of the share of the daughters in favour of the developer was contrary to the written and registered document and could not be sustained. Thus, revenue authorities were not justified in taxing the impugned amount as capital gains in the hands of the assessee. – SMT. T. GAYATHRI V. ITO [2014] 47 taxmann.com 190 (Bangalore - Trib.)