1.  Tata Business Support Services Ltd. Vs. DCIT, ITO & UOI, Writ Petition No. 2959 of 2015, Date of Decision: 26.03.2015, Bombay High Court

Where the assessee had disclosed all the material facts and provided necessary documents during assessment proceedings regarding particular expenses, whether the contention of Ld. AO is justified to reassess the income of assessee u/s 147?

HELD_ NO

Brief Facts:

The Petitioner is a public limited company. It is engaged, inter alia, in the business support services. For the AY. 2007-08, return of income was filed electronically declaring loss of Rs.13,13,16,597/. The scrutiny assessment of assessee was undertaken and completed. Subsequently, assessee received notice u/s 148 for reassessment. The alleged issue was that of the management fees and taken to be allegedly capital in nature. The assessee filed writ petition before Hon’ble High Court for quashing the reassement u/s 147 stating that during assessment proceedings, it had filed all relevant records including the balance sheet and profit and loss account along with all enclosures and also the Director’s Report substantiating the expense booked by the assessee. The Assessee did not hold back any document nor failed to supply any information in addition to the explanation given by it in writing concerning the said management fees expenses.

Held:

We are of the clear view that there was no failure to disclose material facts and failure to place a version favourable to the Revenue cannot be a reason to reopen the assessment. The conclusion that the Assessing Officer never applied his mind on this issue and therefore change of opinion is not the basis on which the assessment is sought to be reopened cannot be sustained. In the light of the undisputed factual material and referred by us extensively, it is apparent that the reopening was fully impermissible in law. In the circumstances, this is a clear case of change of opinion and based on which, the reassessment is proposed. That being impermissible in law, the Writ Petition must succeed. It is accordingly allowed.

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2.  Smt. Maya A. Ajwani Vs. ITO, I.T.A. No. 7091/Mum/2012, Date of order: 10.04.2015, ITAT - Mumbai

Issue: Where an assessee holds two houses and gifts one house to her spouse prior to transfer of long term capital asset other than residential house, in that case, whether exemption u/s 54F can be denied?

Held: No

Brief Fact:

The assessee, a co-owner along with her spouse of a residential property in Wadala (E), Mumbai. The assessee transferred her capital asset in the form of a shop for a consideration of Rs.85 lacs, disclosing a capital gain of Rs.83,25,400/-, which was claimed exempt as under section 54F of Rs. 26 lacs. The assessee owning another residential house at Sion (E), Mumbai. The assessee's claim that the Sion house was gifted by her to her husband on 03.10.2008 through gift deed.

Therefore, she was on the relevant date (06.10.2008), owner of only one house i.e. Wadala residence. However the AO alleged that the same was only a devise to evade tax since the assessee had 'gifted' her property to her husband three days prior to the relevant date only with the view to eschew the provision of section 54F. The AO stated that section 27(i) clearly provides that the transfer of a house property to, among others, spouse, for other than adequate consideration, would stand to be ignored, so that the assessee-transferor would deemed to be the owner of the residential house and, thus, continue to be considered as its 'owner' in the eyes of the law. The AO therefore denied the exemption u/s 54F as she holds two house properties.

Held:

Section 27 of the Act, clause (i) shall apply only for the purposes of sections 22 to 26, i.e., for computing the income under the head 'income from the house property' (i.e., Chapter IV-C.) Also section 64(I)(iv) is not applicable to nullify the gift and would applicable only to club income from the gifted house in the hands of the donor spouse. The gift cannot be regarded as a sham merely because assessee along with her husband continues to reside in the same house even after the gift. In view of the foregoing, we find no warrant in law and, accordingly, no merit in the Revenue's case for disregarding the gift of a house property by the assessee to her spouse prior to the transfer date (of the original asset) for the purpose of reckoning eligibility to exemption u/s.54F of the Act.

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