No denial of exemption u/s 11 to an educational trust if it lets out its auditorium for educational activities

Facts

a)    Assessee-trust, established for educational purposes, had let out its auditorium to a management institute on a nominal rent.

b)    Assessing Officer (AO) found that the first proviso to section 2(15) was attracted in view of the income earned by the assessee from letting out of the said premises. Accordingly, exemption under section 11 was denied to assessee.

c)    The Tribunal, after examining the facts, had come to a conclusion that the main object of the assessee-trust was to promote educational activities. It was in the course of this activity that the premise was let out. Hence, proviso to section 2(15) wouldn’t be attracted in case of assessee.

d)    Aggrieved by the order of the Tribunal. The revenue filed the instant appeal before the High Court.

The High Court held in favour of assessee as under-

Protocol to India-Mauritius DTAA: A move towards avoidance of double non-taxation

Introduction:

A thirty three year old journey, peppered with much fund inflows, tax benefits, and simultaneously, ample criticism, is set to change its course, aligning with the emerging global tax order. The India-Mauritius tax treaty has finally been amended to remove capital gain exemption, albeit in a phased manner, particularly in the wake of India's commitment to BEPS²Action plan which advocates Stateless income, treaty abuse and round tripping of funds.

The Indian Government needs to be lauded and given credit for the manner in which the treaty has been sought to be amended (in a phased manner and not an abrupt shift), namely levying capital gains tax on transfer of Indian shares, which are acquired after 1st April, 2017. In other words, all investments made through Mauritius in shares of Indian companies till 31st March, 2017, have been grandfathered, thus the existing interests of investors have not been infringed at all. Further, it is proposed to introduce capital gains tax with respect to investments made in Indian shares on or after 1st April, 2017, in a phased manner, namely 50% of the tax for capital gains arising between 1st April, 2017 and 31st March, 2019, subject to fulfilling the limitation of benefit clause; and post 1st April, 2019, capital gains tax shall be levied at full rate. The aforesaid amendment to the tax treaty with Mauritius is likely to impact the India-Singapore tax treaty in a similar manner, as per the protocol signed between India & Singapore.

Forex loss incurred on loan is deductible if its underlying objective is to save interest cost

Facts

a)    Assessee had, initially availed of various term loans in Indian rupee from banks for acquisition of assets and for expansion of project etc. It had converted these loans into foreign currency loans to take benefit of lower rate of interest on such foreign currency loans vis a vis loans in Indian rupee. However, assessee incurred loss due to fluctuation in rate and claimed it as a business loss.

b)    Assessing Officer disallowed loss claimed by assessee on ground that loans were obtained to acquire capital asset, thus, same could not be allowed as revenue expenditures.

c)    The Commissioner (Appeals) granted partial relief to assessee on account of foreign currency fluctuation loss arising on loans connected to revenue items such as bill discounting, debtors, etc.

d)    Aggrieved assessee filed the instant appeal before the Tribunal.

Indian subsidiary won’t form PE of foreign parent Co even if latter has right to audit subsidiary

Facts:

a) Adobe Systems Incorporated (“assessee”) is a company incorporated outside India having a wholly owned subsidiary in India (Adobe India).

b) Adobe India provides software related Research and Development (R&D) and is paid on cost plus basis in terms of an agreement entered into between the Assessee and Adobe India.

c) Assessee claimed that such income received from Adobe India was not assessable in India as assessee did not have any business operations in India, thus he did not file return in India.

d) Assessing O􀁹icer (AO) issued notice under section 148 on observation that as per the agreement between assessee and Adobe India, it was obliged to audit the facilities of Adobe India for maintenance of the requisite standards. Therefore, it had a Service PE in India in terms of Article 5(2)(l) of the Indo-US DTAA and was liable to file return of income and pay taxes in India.

Disallowance on account of cash payment exceeding Rs. 20,000 would be eligible for sec. 80-IB relief

Where assessee paid cash for certain expenses in excess of limit prescribed under Section 40A(3) and, consequently, it was added back to income of assessee, it would be treated as income from undertaking and, thus, would be eligible for deduction under section 80-IB.

Facts

a)    Assessee, eligible for deduction under section 80-IB, made payment in cash for certain expenses in violation of section 40A(3). Consequently, the Assessing Officer (AO) disallowed said payments.

b)    Assessee filed an unsuccessful appeal before the CIT(A). The contention of the assessee was that, though the expenses were disallowed under Sec. 40A(3) and would be added back to gross total income, deduction under section 80-IB was allowable on same.

c)    Aggrieved by the order of the CIT(A), assessee filed the instant appeal before the tribunal.

Proviso to sec. 2(15) won't apply if management institute is running business to impart practical training to students

Facts

a) The assessee-society was an educational institution running courses of B. Tech, M. Tech and MBA, etc.

b) It was also running a textile division which was engaged in manufacturing of cloth and yarn and was attached to very institution for imparting practical training to students. 

c) Textile division of assessee incurred a huge loss which was adjusted against profits generated from educational institution.

d) The DIT(E) held that the assessee was doing business as well as was engaged in educational activity and, therefore, it was hit by proviso to section 2(15), inserted by the Finance Act, 2008. In view of activities of the assessee, the registration granted to it under section 12AA was withdrawn.

NHAI isn't liable to collect TCS on toll charges retained by developers of national highways

Facts

a)    The National Highway Authority of India (NHAI) granted a project to Oriental Pathways Pvt. Ltd. (OPPL) to develop a National Highway on BOT (Build, Operate and Transfer) basis. As per the agreement, OPPL was required to pay Rs. 1 per year to NHAI during the term of the agreement.

b)    The development cost of highway was to be recovered by OPPL through collection of toll. However, the toll collection was required to be deposited in an escrow account jointly held by both the parties. The purpose of depositing the amount in escrow account was to make a provision, in case NHAI had to recover any amount from OPPL.

c)    Assessing Officer (AO) contended that NHAI was liable to collect TCS from OPPL on toll fee collected by it as per section206C(1C).

d)    The CIT(A) set aside the order of the AO by holding that the OPPL was required to pay only Re. 1 per year to NHAI and not the toll fee. Therefore, provisions of section 206C(IC) could not be applied on this very nominal and insignificant amount.

e)    Aggrieved by the order of CIT(A), revenue filed the instant appeal before the tribunal.

The tribunal held in favour of assessee as under-

Sec. 54 relief is available even if expenditure is incurred for making new house habitable

Facts

a)  Assessee earned capital gain on sale of his tenancy rights in a residential house property. He invested the sale proceeds to purchase another house property which was in a dilapidated condition.

b)  In order to make the said house fit for residential purpose, assessee incurred certain expenses on repairs and painting work etc. Assessee claimed deduction under section 54 in respect of expenses so incurred to make the new house property habitable.

c)  Assessing Officer (AO) contended that only the cost paid for acquiring new residential house is to be taken for the purposes of granting benefit under section 54 and not cost incurred towards the improvement of the same. Thus, the claim of the assessee towards cost of making a new house property habitable was disallowed.

d)  The CIT(A) confirmed the order of the AO. Aggrieved by the order of the AO, assessee filed the instant appeal before the tribunal.

The tribunal held in favour of assessee as under-

No denial of sec. 54 relief if house is purchased within 2 years, though occupancy certificate is received later on

Facts

a) Assessee earned capital gain on sale of a residential house property. He claimed exemption under section 54 in respect of investment made for purchase of a flat.

b) Assessing O􀁹icer (AO) disallowed the claim of the assessee on ground that the assessee didn’t get the occupancy certificate of said flat with in the period of 2 years from the date of transfer of residential house property.

c) Appellate authorities allowed exemption to assessee. Aggrieved revenue filed the instant appeal before the High Court.

The High Court held in favour of assessee as under-

‘Big B’ in Tax trouble; Apex Court nods to reopening of his tax case of 2001

Facts

a) The CIT passed revisionary order under Section 263 against assessee (Amitabh Bachchan) on ground that requisite enquiries were not made by the Assessing Officer (AO) prior to finalization of the assessment.

b) Consequently, a show cause notice was served on the assessee detailing issues on which the assessment order was proposed to be revised and, thereafter, revisional order was passed under Section 263.

c) Assessee challenged the order of the CIT on ground that additions were made on basis of issues which were not mentioned in show cause notice.

d) The tribunal and the High Court held in favour of assessee. Aggrieved by the order of the High Court, revenue filed the instant appeal before the Supreme Court.

The Supreme Court held in favour of revenue as under-