When refund is granted partly, it has to be first adjusted against interest payments and balance against tax

Facts:

a) The income-tax dept. refunded part amount of tax to the assessee in the first phase and refunded remaining tax amount in the second phase.

b) The assessee arguedthat it was entitled to interest on balance amount of tax refund paid in the second phase but the AO had not granted the same.

c) Thus, the issue before the ITAT was:

Whether the amount of refund paid in the second phase should be adjusted first against the interest component and thereafter the balance amount should be adjusted against the principal component?

The ITAT held as under:

1) It was not a case of payment of interest on interest. Thus, the CIT (A) had wrongly applied the judgment of Hon'ble Supreme Court in the case of Gujarat Fluoro Chemicals[2014] 42 taxmann.com 1 (SC).

2) It is clear that where the amount of tax demanded is paid to the assessee then it shall first be adjusted towards interest payable and balance, if any, adjusted towards whatever tax payable.

Dy. Director of Income Tax isn’t empowered to lodge complaint for prosecution against taxpayer

Facts:

a) The Deputy Director of Income Tax (‘Dy. DIT’) filed complaint for prosecution against taxpayers (i.e., husband and wife) under Indian Penal Code on basis of revelation that the statements made by taxpayers on the date of the search were false and misleading.

b) The Trial Court held that sufficient grounds had been made out against taxpayers to proceed under Sections 191,193, 200 IPC.

c) The taxpayers sought annulment of order of Trial Court primarily on the ground that the search operations having been undertaken by the I.T.Os., the complaint could not have been lodged by the DY. DIT, who was not the appellate authority in terms of Section 195(4) of the CrCPC. On appeal, the High Court declined to interfere on either of these contentions.

The Supreme Court held as under:

1) The DY. DIT, cannot be construed to be an authority to whom appeal would ordinarily lie from the decisions or orders of the I.T.Os involved in the search proceedings so as to empower him to lodge the complaint in view of the restrictive preconditions imposed by Section 195 of CrPC.

2) Thus, the complaint filed by the Deputy Director of Income Tax was to be held as incompetent. – [2016] 73 taxmann.com 32 (SC)

Bank can purchase auction property of borrower in absence of any response from bidder: SC

Rule 17 of the Second Schedule of Income Tax Rules, 1961 doesn’t impose any restriction on the Bank from participating and purchasing property in auction where invitation to bid did not result in any response from any interested bidder and it is the Recovery Officer on whom such an embargo has been placed.

Issue:

a) Whether a bank can purchase mortgaged property in auction sale from its own borrower where there is no show or invitation to bid doesn’t result in any response from bidder?

b) Whether Rule 17 of the Second Schedule of Income Tax Rules, 1961 imposes any restriction in permitting a Bank to take part in the public auctions?

Facts:

a) ICICI bank Ltd. approached DRT for enforcing security interest against loan. The DRT directed recovery officer to conduct a public auction after fixing offset price however, no bidder came forward to purchase property.

b) In such circumstances, the Bank itself had offered to purchase the properties and Bank’s o􀁹er was accepted and property were sold to Banks. The Bank gave an option to the respondents-borrowers to deposit the amount with interest however, the respondent borrowers did not acted upon.

c) The respondent-borrowers moved to DRT and later to DRAT against sale of the mortgaged properties to Bank however, the plea was dismissed by both the Tribunals.

Tax Benefits by Ireland to Apple: 8 Things to Know

Apple Inc. has been asked by the European Commission to pay tax of €13 billion plus interest to the Irish Government. Such directions have been given by the European Commission after its investigation that Ireland had granted undue tax benefits to Apple Inc. which is illegal under the EU State Aid Rules.

The European Commission in its investigation found that Apple Inc. was carrying on business in Ireland through its two subsidiary companies, namely, Apple Sales International and Apple Operations Europe.

The Irish subsidiaries were internally allocating almost all their profits to their respective head office. These head offices were existed only on papers and not based in any country. Therefore, Irish Subsidiaries were paying tax in Ireland only on profits that were allocated to Irish branch and not on majority of profits that were allocated to the ‘head office’.

The Irish Apple subsidiaries were able to transfer their profits to head office without paying any taxes because of two tax rulings of Ireland whereby they were allowed to allocate most of their profits to the head office and were liable to pay tax only on remaining part.

After assessing the business operations of Apple and tax rulings of Ireland, the European Commission concluded that Ireland had violated the EU State Aid Rules by allowing Apple’s subsidiaries to artificially allocate their profits to non-existent head office.

To read more, click below:

TaxBenefits by Ireland to Apple: 8 Things to Know

EuropeanCommission’s Press Release

Rules restricting appearance of outside lawyer in court without local lawyer are valid: SC

Rules 3 and 3A of the Allahabad High Court Rules, 1952 which mandates that a lawyer outside state cannot appear in Court without a Local lawyer's appointment are perfectly valid, legal and do not violate right of appellant under article 19(1) (g ) of the Constitution

Facts:

a) The Allahabad High Court framed Rule 3 and 3A of the Allahabad High Courts Rules, 1952 under the Advocates Act, 1961. As per the Rules, an Advocate who is not on the Roll of Advocate or the Bar Council of the State is not allowed to appear, act or plead in the said Court unless he files an appointment along with the advocate who is on the Roll of such State Bar Council and is ordinarily practicing in that Court.

Sum received from developer due to hardship caused on redevelopment of flat not a revenue receipt

The issue before the ITAT was as under:

Whether compensation received towards hardship caused to assessee on redevelopment of flat was in the nature of capital receipt and as such not taxable?

The ITAT held as under:

1) Similar facts were present in case of Kushal K Bangia v. ITO [2012] 18 taxmann.com 31 (Mum.), wherein the Mumbai ITAT held as under:

“It is not even the case of the AO that the compensation received by the assessee is in the revenue field, and rightly so because the residential flat owned by the assessee in society building is certainly a capital asset in the hands of the assessee and compensation is referable to the same. The only defence put up by DR is that cash compensation received by the assessee is nothing but his share in profits earned by the developer which are essentially revenue items in nature. This argument however proceeds on the fallacy that the nature of payment in the hands of payer also ends up determining it's nature in the hands of the recipient. In order to find out whether it is a capital receipt or revenue receipt, one has to see what it is in the hands of the receiver and not what it is in the hands of the payer"

2) Following the judgment of Kushal (Supra), it could be held that such compensation could not be said to be of revenue nature, and, accordingly, the same was outside the ambit of income under section 2(24).

3) The impugned receipt ends up reducing the cost of acquisition of the asset, i.e. flat, and, therefore, the same would be taken into account as such, as and when occasion arises for computing capital gains in respect of the said asset. - JITENDRA KUMAR SONEJA V. ITO [2016] 72 taxmann.com 318 (Mumbai - Trib.)

Sec. 145A applies only to valuation of goods and not services

Facts:

a) The assessee was engaged in the business of real estate consultancy/agency and property management services. During the course of the assessment proceedings, the AO sought to include the service tax as trading receipts on invocation of Section 145A(ii).

b) The assessee contended that Section 145A(a)(ii) would have no application to the present facts as service tax is not mentioned therein.

c) On appeal, the CIT (Appeals) held that Section 145A(a)(ii) would apply as it is not restricted only to manufacturing and trading companies. It was concluded that the service tax stands on the same footing as excise duties, sales tax and other taxes, which are collected to be paid over to the Government.

d) Further, the Tribunal held in favour of assessee by observing that section 145A(a)(ii) deals with goods and not services.

The High Court held as under:

1) For the better appreciation of the controversy to be examined, it was necessary to reproduce Section 145A of the Act, which at the relevant time read as under :—

“145A - Notwithstanding anything to the contrary contained in Section 145 —

a) The valuation of purchase and sale of goods and inventory for the purposes of determining the income chargeable under the head "Profits and gains of business or profession" shall be

i) In accordance with the method of accounting regularly employed by the assessee; and

ii) Further adjusted to include the amount of any tax, duty, cess or fee (by whatever name called) actually paid or incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation.”

No compensation from Insurance Co. if there is theft without a forcible entry: Apex Court

Insurer cannot claim compensation against theft from insurance company in absence of any forcible entry.

Facts:

a) Appellant had taken insurance on assets taken over from company under the Fire Policy and the Burglary and House Breaking policy.

b) At the time of auction of asset, it was detected that some parts of plant and machinery were missing from factory premises. Thus, appellant filed claim for theft with the insurance company.

c) The claim of appellant was rejected by the insurance company on the ground that the theft was not occurred as result of forcible and violent entry of and/or exit from the premises.

The Apex Court held as under:

1) It was clear from the facts of the present case that the Appellant has made out a case of theft without a forcible entry. The case of appellant is that forcible entry is not required for a claim to be made under the policy.

Church can furnish decree issued by bishop to establish creation of trust for sec. 12A registration

Facts:

a) The assessee, a religious institution (Parish),was created under the conventional way by issuing a 'decree' under Cannon law by the concerned Bishop. It filed an application in Form No. 10A requesting for registration under section 12A.

b) The Commissioner denied registration stating that since the assessee had not produced copy of the instrument in support of creation of the trust, the objects and its activities as well as the existence of the trust could not be ascertained.

The Tribunal held as under:

1) A plain reading of rule 17A makes it clear that a religious or charitable organization can be an institution other than a 'trust'. The usage of the words 'charitable or religious trust or institution' in the first and second limb of rule 17A connotes that where the trust is created, or institution is established, under an instrument, the instrument in original, together with a copy thereof, have to be filed along with the prescribed Form No. 10A for registration.

Any dishonest act of CA isn’t a professional misconduct if it is done in Individual capacity

Chartered Accountant Act, 1949: Where a CA sold his shares but continued to receive dividends declared by the Company by cheating upon transferee, such activity could not be said done in relation to practice as CA as such act of dishonesty was done in individual capacity. Thus, disciplinary committee’s proposal to remove CA’s name from registers of members of ICAI for 6 months was to be set aside.

Facts:

1) A Chartered Accountant sold his shares in November 1999 however, share transfer deed for transfer of shares was lodged on November 04, 2004. In the meantime, CA continued to receive dividend declared by company for 5 years.

2) The transferee made complaint about this conduct of CA before the Disciplinary Committee of the Institute of Chartered Accountants. The Disciplinary Committee found that the conduct of CA was wholly unworthy and amounted to professional misconduct.

On appeal the High Court held as under:

a) In the instant case the respondent was acting as an individual in his dealings with the complainant which were purely commercial. While selling the shares held by him the respondent was not acting as a Chartered Accountant. He was not discharging any function in relation to his practice as a Chartered Accountant.