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I. Today's Headlines:
1. Revised system audit norms for stock Brokers; Exchanges to report major audit observations on quarterly basis. (Click here for details) .
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II. Direct Tax Case laws:
1.
Commissioner of Income-tax v. Landmark Innovation (P.) Ltd, IT Appeal
No. 106 of 2011, Date of Order: August 8, 2013, High Court of
Allahabad.
Whether in a case where agricultural activities on land was
accepted for earlier years, could be doubted in subsequent year in
absence of cogent evidence.
Held No
The CIT (A) considered the question of addition of Rs.41,08,724/- by
AO under Section 68 of the Act and have recorded findings that if in the
previous years the agricultural income from the same land on which
agricultural crops were produced by the appellant was accepted, he could
not have recorded findings that in the present assessment year in
question, the income could not be treated as agricultural income for
want of proof of records of fertilizer and chemicals and expenditures
incurred on tube-well boring, construction of store house, levelling of
field etc. The ITAT has confirmed the findings recorded by CIT (A). Even
if each assessment year is treated to be a separate unit, the findings
in respect of previous years based on the record of title and possession
of agricultural land, and the evidence led for proving that
agricultural operations were carried out and crops were produced could
not be disbelieved in the subsequent year, for want of primary evidence.
The assessee was not required to submit proof of agricultural
operations every year, in the absence of any material, which may suggest
that the agricultural operations were stopped or was not carried out in
the relevant period. There was no evidence to establish that the
assessee has sold the agricultural land or that the assessee had stooped
the agricultural operations. There is nothing under the Income-tax Act
debarring the assessee from selling agricultural produce in cash, and
thus additions based only on suspicion could not be sustained.
(Please click here to view the Judgment)
2. Assistant Commissioner of Income-tax, Circle-12(3),
Bangalore v. Source Hub India (P.) Ltd, ITA No. 642 (Bang.) of 2012,
Date of Order : September 6, 2013. ITAT- Banglore
Whether where assessee-company received loan from another
company and assessee was not a shareholder in said company, deeming
provisions of section 2(22)(e) were not applicable to impugned
transaction of loan.
Held Yes
The provisions of section 2(22)(e) have to be applied as it is. Those
provisions do not contemplate looking behind the corporate veil. The
intention behind enacting provisions of section 2(22)(e) is that closely
held companies, i.e., companies in which public are not substantially
interested, which are controlled by a group of members, even though the
company has accumulated profits would not distribute such profit as
dividend because if so distributed the dividend income would become
taxable in the hands of the shareholders. Instead of distributing
accumulated profits as dividend, companies distribute them as loan or
advances to shareholders or to concern in which such shareholders have
substantial interest or make any payment on behalf of or for the
individual benefit of such shareholder. In such an event, by the deeming
provisions such payment by the company is treated as dividend. The
intention behind the provisions of section 2(22)(e) is to tax dividend
in the hands of shareholder. The deeming provision as it applies to the
case of loans or advances by a company to a concern in which its
shareholder has substantial interest is based on the presumption that
the loan or advances would ultimately be made available to the
shareholders of the company by giving the loan or advance. The intention
of the legislature is, therefore, to tax dividend only in the hands of
the shareholder and not in the hands of the assessee which is not
shareholder in the company that has given loan or advance. Since the
assessee was not a shareholder in company 'V', the deeming provisions of
section 2(22)(e) were not applicable.
(Please click here to view the Judgment)
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Golden Rules:
"Fairness is not an attitude,
it's a professional skill that must be developed and exercised "
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Thanks & Regards
Team
Voice of CA
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