Erecting road, bus shelters and so forth as part of advertisement business couldn’t be termed as infra-development

Where assessee-company had developed road medians, erected bus-shelters and light poles for its advertisement business, activities indulged by it were part of its normal activities of advertising and publicity rather than one of infrastructure development and, therefore, were not eligible for deduction under section 80-IA(4).

Facts

a)Assessee, an advertisement company, had entered into an agreement with the local authority for construction of bus shelters, putting up of footbridge, beautifying the road medians and erecting streetlights.

b)The assessee was allowed to utilize these bus-shelters, lampposts, road medians and footbridges for its advertisement business to recoup the expenditure incurred on them. The assessee claimed deduction under section 80-IA(4) after considering such activities as infrastructural activity.

c)The Assessing Officer (‘AO’) denied the benefit under section 80-IA(4). On appeal, the CIT(A) confirmed the order of AO. However, the ITAT set aside the order of CIT(A). The aggrieved-revenue filed the instant appeal.

The High Court held in favour of revenue as under:

1)Assessee was not an engineering or construction company that puts up public-infrastructure. It was only an advertising company which was interested only to find out the best space at the best locations for advertisements.

2)CBDT vide its Circular No. 777, dated 14/08/1995 made it clear that to avail deduction, income should arise from the use of infrastructural facility. But, in the instant case, the assessee derived income only from the advertisement hoardings erected on the bus-shelters, road medians and the street light poles. Hence, the said income could not be treated as income derived from the 'infrastructure facility'.

3)The benefit under section 80-IA could be extended only to those assessees who had developed infrastructural facility as defined under sub-section (4) of section 80-IA, i.e., road or a toll road, bridge, highway or a rail system. But, in the instant case, the assessee had developed the existing road median, erected bus shelters and light poles for its advertisement business, which, in any case could not be treated as infrastructure development.

4)Thus, the assessee was not eligible for Section 80-IA benefit and the order passed by Tribunal could not be sustained – CIT V. SKYLINE ADVERTISING (P.) LTD [2014] 45 taxmann.com 532 (Karnataka)

Room rent and food/beverage charges aren’t includible in value of convention services, if they are raised separately

Bills of room rent, food and beverages raised separately in a convention service cannot be included in value of convention service.

Facts:

a)The assessee, a provider of convention services, was paying service tax under that category. Participants of such convention normally book rooms for lodging purpose.

b)The department was of the view that room rent and charges for food provided to participants were required to be included in value of convention services.

c)Since the assessee did not pay tax on such charges, revenue initiated proceedings for recovery of tax short paid and confirmed demand.

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

1)In case of Ram Bagh Palace Hotels (P.) Ltd. v. CCE [Final Order No. ST/A/18/1012-Cus, dated 21-12-2011], it was held that renting of hotel rooms could not be held to be covered by the definition of ' Mandap Keeper' as the hotel had an identity, personality and function quite distinguishable from that of a Mandap.

2)It was also held that definition of Mandap Keeper nowhere covers the temporary occupation of hotel rooms for the purpose of boarding and temporary residence. Since bills of room rent, food and beverages were raised separately, they could not be held to be a part of value of convention service.

3)Thus, the case decided (Supra) on issue of Mandap Keeper’s Service was equally applicable to convention service. Hence, if bills were raised separately against room rent and food supply charges then they could not be included in value of convention service. - CHOKHIDHANI RESORTS (P.) LTD. V. CCE [2014] 46 taxmann.com 20 (New Delhi – CESTAT)

No disallowance of lawful exp. merely due to non-compliance with provisions of Companies Act

If the expenditure was otherwise lawful and neither amounted to offence nor any law prohibited it, but the procedural provisions attached to it were not complied with, no doubt irregularity would creep in, but such irregularity would not make the expenditure itself as unlawful under section 37(1).

Facts:

a)The Assessing Officer (‘AO’) noticed that the assessee had made payment of job work charges to a related party without obtaining prior approval of the Central Government in accordance with the provisions of section 297 of the Companies Act, 1956.

b)He, accordingly, made additions on the ground that Explanation to Section 37(1) was triggered as on the day of payment of such expenditure there was no prior approval of Central government.

c)On appeal, the CIT(A) sustained the disallowance. The aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1)The offence or prohibition referred to in the Explanation to section 37(1) had to be judged with reference to the 'purpose' of the expenditure on a standalone basis divorced from the fulfillment of procedural formalities attached with it and necessary for the incurring of such expenditure.

2)The Explanation to section 37(1) provided for disallowance of any expenditure incurred for 'any purpose’, which was either an offence or prohibited by law. If, however, the purpose of the expenditure was neither to commit an offence nor any law prohibited it, then there could be no question of disallowance.

3)If the expenditure was otherwise lawful and neither amounted to offence nor any law prohibited it, but the procedural provisions attached to it were not complied with, no doubt irregularity would creep in, but such irregularity would not make the expenditure itself as unlawful so as to be brought within the scope of the Explanation to sec. 37(1). – JAI SURGICALS LTD. V. ACIT [2014] 46 taxmann.com 246 (Delhi - Trib.)

Declaration under Service tax Amnesty Scheme is maintainable if issues therein aren’t pending before authorities

As long as in respect of particular period, subject matter of declaration under service-tax amnesty scheme is not pending or determined, main part of Section 106 would prevail and its second proviso would not apply.

Facts:

a)The assessee was providing vocational training for Air Hostesses/Stewards and in the hospitality and management sector. It claimed exemption for the period prior to 27-2-2010 but said matter was in dispute before Tribunal.

b)With effect from 27-2-2010, law was amended and, accordingly, assessee started paying service tax for period upto 31-3-2012. But due to some reasons, for period from 1.4.2012 to 31.12.2012, assessee did not deposit the service tax.

c)Accordingly, for the said period it applied for service tax Voluntary Compliance Encouragement Scheme, 2013 (‘VCES’). The Department rejected the said application on the ground of existence of the dispute concerning the previous period between 10-9-2004 to 27-2-2010 before CESTAT.

d)Thus, the issue before High Court was: Whether declaration under Service Tax Voluntary Compliance Encouragement Scheme would be admissible ?

The High Court held in favour of assessee as under:

1)The VCES was introduced to give benefit of one time amnesty or relief to service tax defaulters or those who had not paid their dues fully. Keeping in mind the spirit of the Scheme, certain safeguards and conditions had been indicated.

2)One of the conditions of VCES was that in respect of the subject matter there had to be no issues pending or determined before any of the tax authorities or Tribunals for adjudication (Second proviso to Section 106). The objective is to avoid multiplicity and reopening of settled matters.

3)The main provision, i.e., section 106 enables the filing of the declaration subject to the pre-condition of a pre-deposit. It is settled law that a proviso merely carves an exception out of the operation of the main provision.

4)The second proviso to section 106 (1) is no exception to that rule. This proviso when it alludes to 'any issue' must, therefore, mean that the issue as to service tax liability or quantum of liability itself for a particular period must be pending before the Tribunal or some of the tax authorities or should have been determined.

5)Thus, as long as in respect of a particular period, subject matter of declaration or application is not pending or determined, main part of section 106 would prevail and second proviso would not apply. Hence, declaration in this case was maintainable – FRANKFINN AVIATION SERVICES (P.) LTD. V. ASSISTANT COMMISSIONER, DESIGNATED AUTHORITY, VCES, SERVICE TAX [2014] 46 taxmann.com 39 (Delhi)

AO is to abide by SetCom's order; he can only raise consequential demand to give effect to same, says HC

The Assessing Officer cannot go beyond order passed by Settlement Commission and he could only raise a consequential demand while giving effect to order passed by Settlement Commission.

Facts:

a)The assessee-company filed the Settlement application. The Settlement Commission (‘SetCom’) passed the final order on the issues raised by the assessee.

b)The Assessing Officer (‘AO’) had calculated tax and interest payable by assessee after giving effect to the order passed by the SetCom. The assessee disputed period of interest under section 220(2) and submitted the miscellaneous application before SetCom which was rejected by it.

c)Thereafter, the assessee submitted the application under section 154 before the AO which was dismissed by him.

d)Further, the appeal filed before the CIT(A) and ITAT were dismissed. The aggrieved-assessee filed the instant appeal.

The High Court held in favour of revenue as under:

1)It was not in dispute that the Assessing Officer originally passed the order considering the order passed by the Settlement Commission under section 245D(4). Therefore, as such the Assessing Officer had given effect to the order passed by the SetCom.

2)The AO could not go beyond the order passed by the SetCom and he could only raise a consequential demand after giving effect to the order passed by the SetCom under section 245D(4).

3)Thus, no substantial question of law arose in the instant case. Hence, the instant case was to be dismissed.- MAHAVIR ROLLING MILL (P.) LTD. V. ITO [2014] 45 taxmann.com 431 (Gujarat)

CBDT notifies new Wealth-tax return form– Mandates e-filing except for those individuals or HUFs who not liable to tax audit

Earlier return of wealth-tax was required to be filed by individuals, HUFs and Companies in paper format alongwith certain documents(in specific cases) in Form BA. The CBDT has now notified new Form BB for filing of wealth-tax returns. The new provisions for filing of Wealth-tax return shall be as under:

a)E-filing of wealth tax returns: Taxpayers shall file return of wealth-tax electronically in new Form BB from Assessment Year 2014-15. However, individuals or HUFs can still file return in paper format if they are not liable for tax audit under Section 44AB of Income-tax Act, 1961.

b)Paperless return – Requirement as to furnishing of following documents alongwith return of wealth-tax has been dispensed with:

• Statement showing computation of tax payable;
• Proof of tax and interest paid;
• Any document or copy of any account, and
• Form of report of valuation by Registered Valuer.

No registration to a trust if its financing activities weren’t carried out for furtherance of its objects

Principal activities of metropolitan development authority were to be ascertained before denying it registration under section 12A on account of financing and rental activities.

Facts:

a)The assessee, a city metropolitan development authority under section 12, was established under a State Act, viz., MMRD Act. The assessee was claiming exemption under section 11.

b)It earned interest on sums lent to various organizations and lease rental of its property. The DIT(E) cancelled/withdraws its registration under Sec. 12A on the ground that activities carried out by it were commercial in nature.

c)The aggrieved-assessee filed the instant appeal.

The Tribunal held as under:

1)There was no finding that interest and rent receipts were integral to the assessee's functioning or its principal objects, so as to be considered as arising on account of activities necessary for the furtherance of the objects of assessee.

2)There ought to have been some principal activities for financing and rental activities to be considered as necessary and incidental thereto. The physical and/or functional correlation between the two would decide this aspect of the matter.

3)Such a finding was necessary to satisfy conditions stipulated under section 12AA(3). Thus, as the issue of applicability of section 12AA(3) in the instant case being factually indeterminate, the case was to be restored to the DIT(E) for passing a speaking order in accordance with law. - MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY V. DIT(E) [2014] 45 taxmann.com 354 (Mumbai - Trib.)

No business income if shares held as investments were sold within short span for better returns

Merely because assessee liquidated its investments within a short span, which had given better overall earning to assessee, it would not lead to conclusion that assessee had no intention to keep on funds as investment in equity shares, but was actually intending to trade in shares.

Facts:

a)The assessee was engaged in the activity of investing in shares and showed the said shares as investments in the audited balance-sheet. Consequently, as and when the shares were sold, profit arising thereon was offered as capital gains.

b)However, during the year under consideration, the Assessing Officer did not treat the gain on sale of investment as 'capital gains' and instead treated it as 'business income'.

c)On appeal, the CIT(A) allowed assessee's claim. The Aggrieved-revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1)The treatment given by the assessee in its books of account was one of the decisive factors to find out whether the shares were held as investments or stock-in-trade. If the shares were bought with the intention of earning capital gains and dividend by keeping it as investment, the gain arising therefrom was to be treated as capital gains.

2)On the other hand, if the shares were purchased with the intention to earn profit thereon and the same was treated as stock-in-trade in the books of account, the profit arising on their sales would be liable to be treated as business income.

3)Merely because the assessee liquidated its investment within a short span of time, which had given better overall earning to the assessee, it would not lead to the conclusion that the assessee had no intention to keep them as investments.

4)The assessee had been consistently investing in shares and income arising from transactions of sale and purchase of shares had been shown as capital gains. Analysis of balance sheet of assessee reflected holding of shares as investments.

5)In the instant case, the assessee had made investment in shares with an intention to earn dividend income. Therefore, it could not be said that the assessee was doing business. Thus, resultant gains on sale of shares were to be taxed as capital gains instead of business income.- DY. CIT V. E-CAP PARTNERS [2014] 45 taxmann.com 342 (Mumbai - Trib.)

Even genuine transactions go through rigours of sec. 50C; provision applicable if stamp value exceeds actual price

Stamp duty value shall be deemed to be full value of consideration where consideration stated by assessee is less than stamp duty value and section 50C would operate, whatever may be the problems faced by an assessee.

Facts

a)The assessee sold her property below the market value adopted by the Registration Authorities . By invoking provisions of Section 50C, the Assessing Officer (‘AO’) had brought the difference (i.e., difference between actual price of property and value adopted by registration authorities) to tax.

b)The assessee substantiated her claim on the ground that the property was sold for lesser price on account of pending litigations with the tenants. On appeal, the CIT(A) deleted addition made by AO. The aggrieved-revenue filed the instant appeal.

The Tribunal held in favour of revenue as under:

1)Section 50C states that the stamp duty value shall be deemed to be the full value of the consideration where the consideration stated by the assessee is less than the stamp duty value. Being a deeming provision of Section 50C, it has to be strictly applied without widening its scope.

2)If the assessee had not been satisfied with the value adopted for the stamp duty purposes, the assessee could request the Assessing Officer to refer the matter to the DVO for valuation but assessee had not done so.

3)The misfortunes happened to the assessee or the difficulties faced by the assessee or the matter of distress sale, etc. could not be a ground to modify the valuation. If such extraneous factors were relied upon, the deeming provision of law stated in section 50C would be contravened.

4)Being so, the Assessing Officer had to complete the assessment as per the provisions of section 50C and whatever problem might have been faced by assessee, in reality; those reasons could not be permitted to go beyond the scope of section 50C- ITO V. SMT. CHITTI PARVATHA VARDHANAMMA [2014] 45 taxmann.com 327 (Hyderabad - Trib.)

ITAT finds objective of development and propagation of Islam as ‘charitable’; registration allowed

Facts:

a)The assessee-Waqf (Shia Dawoodi Bohra Jamaat Waqf) was created vide indenture dated 9-7-1920 and was duly constituted waqf under Waqf Act, 1995.

b)It applied for registration under section 12AA. The DIT(E) denied registration on ground that assessee was not brought into existence either as trust or society.

c)The Aggrieved-assessee filed the instant appeal.

The Tribunal held in favour of assessee as under:

1)The object of assessee-Waqf was as under:

a)To advance, promote, propagate and preach the religion of Islam amongst the Dawood Bohras,

b)To develop, expand, renovate and maintain masjids, madresa, jamatkhanas, etc.

2)Waqf was created by Customs and tenants of Dawoodi Bohra community well before the enactment of the Income Tax Act, 1961. As the Waqf was existing prior to Income-tax Act, 1961, the object beneficial to a section of the public was an object of "general public utility".

3)To serve as a charitable purpose, it was not necessary that the object must be to serve the whole mankind or all persons living in a country or province. Even if a section of the public is benefited, it cannot be said that it is not a trust for charitable purpose in the interest of public.

4)For granting registration it would be sufficient if the object was beneficial to a section of the public, who were Muslims. Thus, there was no merit in the order of the DIT(E) for denial of registration under section 12AA. - SHIA DAWOODI BOHRA JAMAAT WAQF V. DIT(E) [2014] 45 taxmann.com 340 (Kolkata - Trib.)