INCOME TAX ACT, 1961

Facts: The present appeals have been filed by the assessee against the orders of the learned CIT(A). The Assessing Officer made addition on account of agricultural income to the total income. Subsequently, the Tribunal determined agricultural income Rs.10,000 per acre. Consequent to the addition, penalty under Section 271(1)(c) of the Income Tax Act, 1961 (IT Act) has been levied by the AO.

Held: In CIT vs. Manjunatha Cotton and Ginning Factory, High Court held that notice under section 274 of IT Act should specifically state the grounds mentioned in section 271(1)(c) of the IT Act, i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form where all the grounds mentioned in Section 271 of IT Act are mentioned would not satisfy requirement of law. The Hon'ble jurisdictional Delhi High Court in the case of PCIT vs. Sahara India Life Insurance Co. Ltd. reiterated that notice under Section 274 of the IT Act should specifically state the grounds on which penalty was sought to be imposed as the assessee should know the grounds which he has to meet specifically. In present case, since the AO has not been specified under Section 274 as to whether penalty is proposed for alleged 'concealment of income' OR 'furnishing of inaccurate particulars of such income', the penalty levied is obliterated. The appeals of the assessee are allowed.

Facts: The assessee, a wholesale dealer, acquired goods from various persons and immediately sold them to WS Retail Services Pvt. Ltd. The retail seller ultimately sold those goods from e-commerce platform ‘Flipkart.Com’. To increase the volume of sale, assessee was purchasing goods at low cost and was selling them to the retailers at discount. The strategy to forego the profit had resulted in assessee-co. became a loss making company.
The Assessing Officer held that the profits foregone by selling goods at less than cost price were to be regarded as expenditure incurred in creating intangibles. Thus, only depreciation claim could be allowed on it. The Tribunal held in favour of assessee, thus appeal exists.

Held: The court held that the loss as declared by the Assessee in the return of income should be accepted by the AO and his action in disallowing expenses and arriving at a positive total income by assuming that there was an expenditure of a capital nature incurred by the Assessee in arriving at a loss as declared in the return of income and further disallowing such expenditure and consequently arriving at a positive total income chargeable to tax is without any basis and not in accordance with law and the said manner of determination of total income is deleted.

Facts: The assessee claimed that gift of certain amount received from his Hindu undivided family was exempt from tax under section 56(2)(vii). However, the Assessing Officer held that the term 'relative' does not include as donor and, therefore, added the impugned amount to assessee's income under Section 68.
On further appeal, the Tribunal held in favour of revenue that as per Explanation to Section 56(2)(vii) members of an HUF are its relatives.

Held: The court held that when member receives any sum from the HUF, same would be chargeable to tax as the term ‘relatives’ defined under said Explanation does not include HUF as a relative of such individual. The legislative intent is very clear that an HUF is not to be taken as a donor in case of an individual recipient. Thus, the assessee's plea of having received a valid gift from his HUF was rightly declined.

Facts: The assessee claimed that gift of certain amount received from his Hindu undivided family was exempt from tax under section 56(2)(vii). However, the Assessing Officer held that the term 'relative' does not include as donor and, therefore, added the impugned amount to assessee's income under Section 68.
On further appeal, the Tribunal held in favour of revenue that as per Explanation to Section 56(2)(vii) members of an HUF are its relatives.

Held: The court held that when member receives any sum from the HUF, same would be chargeable to tax as the term 'relatives' defined under said Explanation does not include HUF as a relative of such individual. The legislative intent is very clear that an HUF is not to be taken as a donor in case of an individual recipient. Thus, the assessee's plea of having received a valid gift from his HUF was rightly declined.

Facts: The assessee claimed that gift of certain amount received from his Hindu undivided family was exempt from tax under section 56(2)(vii). However, the Assessing Officer held that the term 'relative' does not include as donor and, therefore, added the impugned amount to assessee's income under Section 68.
On further appeal, the Tribunal held in favour of revenue that as per Explanation to Section 56(2)(vii) members of an HUF are its relatives.

Held: The court held that when member receives any sum from the HUF, same would be chargeable to tax as the term 'relatives' defined under said Explanation does not include HUF as a relative of such individual. The legislative intent is very clear that an HUF is not to be taken as a donor in case of an individual recipient. Thus, the assessee's plea of having received a valid gift from his HUF was rightly declined.

Facts: The Applicant, MasterCard Asia Pacific, is a Singaporean company engaged in processing of electronic payments, where the customers are provided with a MasterCard Interface Processor that connects to card's Network and processing centres and Indian subsidiary owns and maintains MlPs placed at Customers' locations in India. The applicant approached the AAR to decide if it had a PE in India.

Held: The Authority for Advance Rulings held that MasterCard has a PE in India under provisions of Article 5 of India-Singapore DTAA in respect of services rendered with regard to use of a global network and infrastructure to process card payment for Customers in India. It was held that the applicant has fixed place PE, service PE and dependent agency PE in India and is required to withhold tax at source on amount attributed to the PE in India at the full applicable rate at which the non-resident is subjected to tax in India.

Facts: The Applicant, MasterCard Asia Pacific, is a Singaporean company engaged in processing of electronic payments, where the customers are provided with a MasterCard Interface Processor that connects to card's Network and processing centres and Indian subsidiary owns and maintains MlPs placed at Customers' locations in India. The applicant approached the AAR to decide if it had a PE in India.

Held: The Authority for Advance Rulings held that MasterCard has a PE in India under provisions of Article 5 of India-Singapore DTAA in respect of services rendered with regard to use of a global network and infrastructure to process card payment for Customers in India. It was held that the applicant has fixed place PE, service PE and dependent agency PE in India and is required to withhold tax at source on amount attributed to the PE in India at the full applicable rate at which the non-resident is subjected to tax in India.

Facts: The Applicant, MasterCard Asia Pacific, is a Singaporean company engaged in processing of electronic payments, where the customers are provided with a MasterCard Interface Processor that connects to card's Network and processing centres and Indian subsidiary owns and maintains MlPs placed at Customers' locations in India. The applicant approached the AAR to decide if it had a PE in India.

Held: The Authority for Advance Rulings held that MasterCard has a PE in India under provisions of Article 5 of India-Singapore DTAA in respect of services rendered with regard to use of a global network and infrastructure to process card payment for Customers in India. It was held that the applicant has fixed place PE, service PE and dependent agency PE in India and is required to withhold tax at source on amount attributed to the PE in India at the full applicable rate at which the non-resident is subjected to tax in India.

Facts: The assessee submitted that the limited controversy on the issue pertains to denial of indexation benefits on the cost of acquisition of land under sale giving rise of the long-term capital gains. The Assessee pointed out the fact that documents in respect of land acquired certain years back could not be produced, the land was duly reflected in the balance sheet for last many years. It was thereafter contended that the AO had duly accepted the long-term capital gain on sale of such land parcels. The AO had granted long-term capital gain based on the said amount of cost of acquisition but however had denied indexation benefit which is inexplicable and the Department relied upon the orders of the AO and Commissioner. Hence, present appeal.

Held: The court held that assessee has not received this amount under an agreement for not carrying out activity in relation to any business or not to share in know-how, patent, copyright, trade mark, license, etc. as specified u/s 28(va) of the Act for its taxability under the head of business income. Thus the compensation received in lieu of 'right to sue' could not be regarded as revenue receipt and applea allowed.

Facts: The assessee submitted that the limited controversy on the issue pertains to denial of indexation benefits on the cost of acquisition of land under sale giving rise of the long-term capital gains. The Assessee pointed out the fact that documents in respect of land acquired certain years back could not be produced, the land was duly reflected in the balance sheet for last many years. It was thereafter contended that the AO had duly accepted the long-term capital gain on sale of such land parcels. The AO had granted long-term capital gain based on the said amount of cost of acquisition but however had denied indexation benefit which is inexplicable and the Department relied upon the orders of the AO and Commissioner. Hence, present appeal.

Held: The court held that assessee has not received this amount under an agreement for not carrying out activity in relation to any business or not to share in know-how, patent, copyright, trade mark, license, etc. as specified u/s 28(va) of the Act for its taxability under the head of business income. Thus the compensation received in lieu of 'right to sue' could not be regarded as revenue receipt and applea allowed.

Facts: Mr. Shah Rukh Khan, had received a villa at Dubai as gift and offered an amount of Rs. 14 lakhs as the notional income of the villa for tax in his return of income for the year under consideration. During the course of assessment proceedings, assessee claimed that Article 6 of India-UAE tax treaty doesn’t expressly recognize the right of the resident State to tax the income from immovable property situated in the source State. Therefore, the notional income of the villa owned by him in Dubai could not be subjected to tax in India.

Held: It was held that claim raised by the assessee being clearly backed up by a bonafide belief on his part that the notional income of the villa was not liable to be taxed in India, no penalty for concealment of income could be validly imposed on the assessee.

Facts: Mr. Shah Rukh Khan, had received a villa at Dubai as gift and offered an amount of Rs. 14 lakhs as the notional income of the villa for tax in his return of income for the year under consideration. During the course of assessment proceedings, assessee claimed that Article 6 of India-UAE tax treaty doesn't expressly recognize the right of the resident State to tax the income from immovable property situated in the source State. Therefore, the notional income of the villa owned by him in Dubai could not be subjected to tax in India.

Held: It was held that claim raised by the assessee being clearly backed up by a bonafide belief on his part that the notional income of the villa was not liable to be taxed in India, no penalty for concealment of income could be validly imposed on the assessee.

Facts: Mr. Sachin Tendulkar, owned two properties in Pune, Flat S and Flat T. Flat T was let out, however, Flat S was vacant for the whole year as suitable tenant couldn’t be found. He claimed that the said flat had remained vacant throughout the year despite his reasonable effort to let out the same. In this regard, he submitted three letters written to the builder. In first letter, he thanked the builder for identifying the tenant for the flat at Flat T and also requested to identify tenant for Flat S. Subsequently, the assessee had written second letter and after that third letter being reminders for identifying the tenant to let out Flat S. Therefore, he claimed vacancy allowance for Flat S and declared nil income. During the course of assessment proceedings, the Assessing Officer made additions for the notional rental income from Flat S, which was also upheld by the CIT(A).

Held: The ITAT held in favour of assessee when same builder had helped the assessee to find tenant for another flat, it couldn’t be said that these letters to the same builder to help him identify one more tenant, to be considered as fake, defied logic. Therefore, if a property was held with an intention to let out in the relevant year coupled with efforts made for letting it out, the same would fall within the purview of section 23(1)(c).

Facts: Mrs. Shilpa Shetty, was resident of India and a share purchase agreement (SPA) was signed by the shareholders of EMSHL, a Mauritian company, to transfer a portion of the shareholding to Kuki Investments Ltd. Assessee was neither a buyer nor a seller of shares of EMSHL in SPA. However, under SPA, she undertook to provide brand ambassadorship services without charges to Jaipur IPL Cricket Private Limited (JICPL), an Indian Company that was a 100 per cent subsidiary of EMSHL, in relation to promotional activities of 'Rajasthan Royals', an IPL cricket team owned by JICPL. The AO held that there was a deemed 'international transaction' between assessee and JICPL, therefore, adjustment should made in assessee's income on basis of ALP.

Held: a. The ITAT held in favour of assessee that Section 92B(2) deems a transaction between two non-AEs as 'international transaction' if there exists a prior agreement in relation to the relevant transaction between one of the non-AE’s and AE of an assessee and couldn’t be applied to hold that transaction between assessee and JICPL was an 'International transaction' as neither of the parties to the SPA was an AE of the assessee nor JICPL had entered into a prior agreement with AE of assessee (JICPL was not a party to SPA).
b. Thus, in absence of a prior agreement between non-AE and AE of an assessee, no adjustments could be made.

Facts: Shares held by Mr. Jackie Shroff, in a company were sold due to forged signature by another person. Assessee filed a criminal complaint before the Economic Offences Wing. After filing of complaint, the accused came forward for amicable settlement of dispute and a settlement deed was executed in order to settle the dispute. As per the terms of settlement deed, assessee received Rs. 6.97 crores as compensation in lieu of withdrawing the criminal complaint. Assessee treated said compensation as capital in nature and did not offer it for taxation at the time of filing of return. However, during assessment proceedings, the Assessing Officer treated the compensation as income and added it to income of assessee.

Held: The compensation received by the assessee was not for his professional activities but for settlement of dispute between him and some other party resulting in filing of a criminal complaint. The amount received towards compensation could not fit in to the definition of income as per section 2(24), read with section 4 of the act. Thus, compensation received by assessee for withdrawing criminal complaint was a capital receipt and couldn’t be treated as income.

Facts: Shares held by Mr. Jackie Shroff, in a company were sold due to forged signature by another person. Assessee filed a criminal complaint before the Economic Offences Wing. After filing of complaint, the accused came forward for amicable settlement of dispute and a settlement deed was executed in order to settle the dispute. As per the terms of settlement deed, assessee received Rs. 6.97 crores as compensation in lieu of withdrawing the criminal complaint. Assessee treated said compensation as capital in nature and did not offer it for taxation at the time of filing of return. However, during assessment proceedings, the Assessing Officer treated the compensation as income and added it to income of assessee.

Held: The compensation received by the assessee was not for his professional activities but for settlement of dispute between him and some other party resulting in filing of a criminal complaint. The amount received towards compensation could not fit in to the definition of income as per section 2(24), read with section 4 of the act. Thus, compensation received by assessee for withdrawing criminal complaint was a capital receipt and couldn't be treated as income.

Facts: Mr. Rahul Gandhi and Mrs. Sonia Gandhi, extended a loan to the National Herald to write off the accumulated debts and recommence the newspaper publication. The said loan was assigned by the assessee to a newly incorporated non-profit company ‘Young India’ (YI) and in lieu of that they were allotted shares of YI. However, in Income-tax returns, they failed to pay tax on the shares allotted by Young India. The assessees argued that the allotment of shares did not trigger any taxing event. It was also argued that since they were shareholders of a non-profit and charitable company, they were under no obligation to disclose the value of shares.

Held: The High Court held in favour of revenue that if certain shares or property are acquired at a price which is less than its aggregate fair market value by an amount exceeding Rs. 50,000, the fair market value as reduced by the considered paid shall be charged to tax. In the instant case, the assessee bought the shares at Rs. 100 per share which could not be deemed as its fair market value. The assesse had nowhere disclosed the fair market value of such shares and had not recorded the facts relating to above taxing event. Therefore, the AO was justified in reopening the cases.

Facts: UBER India, was providing marketing and support services to a Dutch company, Uber BV. It was collecting payments on behalf of said company and making disbursements to driver-partners as per directions of Uber BV. A survey was conducted at the registered office of assessee-co. and it was observed that assessee had not complied with provisions of section 194C on pay-outs to Driver-Partners. Accordingly, the assessee was treated in-default and a demand notice of Rs. 24.92 crores and Rs. 84.13 crores for assessment years 2016-17 and 2017-18 were raised and penalty proceedings initiated. The assessee denied his liability to deduct TDS under section 194C on ground that it was not a 'person responsible for making payment' to Driver-Partners as contract was between Uber B.V. and Driver-Partners. It filed an application before ITAT for stay of demand.

Held: The ITAT referred to the submission made by the assessee as to its modus operandi of collecting the payments on behalf of the Dutch company, which were made by way of debit or credit cards or collected by the Driver-Partners directly from the customers. It was stated that there were practical difficulties as it was not possible for the assessee to collect TDS on the cash payments received by the Driver-Partners directly. Since the assessee had proved that the facts of the case were not properly and thoroughly examined and verified by the lower authorities, demand raised by the revenue had to be stayed subject to deposit of Rs. 20 Crore till the disposal of appeal by the Tribunal so that the business of the assessee was not adversely impacted.

Facts: Sushmita Sen, received a sum of Rs. 145 lakhs from Coca Cola India Limited. Out of total sum, she offered to pay tax only on Rs. 50 Lacs and claimed that balance Rs. 95 lakhs was capital receipt. She claimed that Rs. 95 lakhs represented the compensation received towards damages caused to her reputation.

Held: The Mumbai ITAT held that compensation received by the assessee was not income liable to tax. Though she had received total amount of Rs. 145 lacs in lieu of settlement for breach of terms of celebrity engagement contract, yet only an amount of Rs. 50 lakhs was due to assessee under the contractual terms, and additional amount of Rs. 95 lakhs did not arise out of exercise of profession. Rs. 95 lacs was received towards damages arising out of her being sexually harassed by CCIL employee, disparaging her professional reputation by false allegations and for the repudiatory breach of contract by CCIL. Such compensation could not be termed as any benefit, perquisite arising to assessee.

Facts: The course of search on the assessee Priyanka Chopra, an amount was declared as undisclosed income for cash payment for purchase of Studio. When the same was confronted to the mother of the assessee who was managing the affairs of the assessee. Subsequently, the mother of the assessee filed in the office of Income Tax Office, retracted the statement. In this background, the Assessing Officer was of the opinion regarding the retraction statement of mother of Assessee, that no cash payment was made for purchase of Studio, except the payment made by a cheque. However, the Assessing Officer was not convinced. He observed that the assessee had not contradicted the seized material on the basis of which she had disclosed an amount being made for purchase of Studio. Instead, the assessee had simply stated that there is no cash component as agreed in the statement recorded during the course of search. Therefore, the contention of the assessee was not accepted. On appeal, the Commissioner deleted addition made by AO. Hence, present appeal.

Held: The assessee has also raised an additional ground wherein it is urged that addition is not based upon any incriminating material. On the same reasoning, as the previous ground adjudicated by us wherein we have admitted the additional ground and remitted the issue to the file of the Assessing Officer, we similarly admit this ground. The Assessing Officer is directed to consider the issue afresh in accordance with the ratio arising out of the order of this court.