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III. Direct Taxes Case Laws:
1. Principal CIT Vs. Tupperware India Pvt. Ltd., I.T.A. No. 415/2015, Date of Order: 10.08.2015, Delhi High Court
Whether
ITAT was justified in holding that the reassessment proceedings under
Section 147/148 of the Act were not legally initiated and are on account
of change of opinion since notice u/s 148 was issued on account of
inadmissible expenditure under Section 40 (a) (i) of the Act?
Held Yes.
At the
outset it requires to be factually noticed that the reopening order of
the AO only refers to the report of Statutory Auditor under Section 44AB
of the Act which report was already enclosed with the return filed by
the Assessee. Therefore, factually, there was no new material that the
AO came across so as to have „reasons to believe that the income had
escaped assessment. As far as the legal requirement is concerned, the
Court finds that the decision in CIT v. Orient Craft Ltd. (supra)
answers the question squarely in favour of the Assessee in the facts of
the present case. In Orient Craft Ltd. this Court considered the
decisions of the Supreme Court in CIT v. Kelvinator India Ltd. (2010)
320 ITR 561 and Rajesh Jhaveri Stock Brokers P. Ltd.
(Please click here for judgment)
2. CIT Vs. Vaish Associates, I.T.A. No. 50/2014, Date of Order: 11.08.2015, Delhi High Court
Whether
the AO is correct in concluding that since the partnership deed
“neither specified the amount of salary to be paid to each of the
working partners nor has laid down a specific method of computation
thereof” and has only mentioned „allocable profit‟ which has not been
defined in the partnership deed, under such circumstances section
40(b)(v) of the Act would not apply?
Held No.
ITAT
held that clause 6(a) of the partnership deed dated 20th June 2008
clearly indicates the methodology and the manner of computing the
remuneration of partners. The remuneration of the partners has been
computed in terms thereof. The Court additionally notes that under
Section 28(v) of the Act, any salary or remuneration by whatever name
called received by partners of a firm would be chargeable to tax under
the head profits and gains of business or profession.
The
proviso to Section 28 (v) states that where such salary has been allowed
to be deducted under Section 40(b)(v), the income shall be adjusted to
the extent of the amount not so allowed to be deducted. Further Section
155 (1A) of the Act states that where in respect of a completed
assessment of a partner in a firm, it is found on the assessment or
reassessment of the firm that any remuneration to any partner is not
deductible under Section 40(b), the AO may amend the order of the
assessment of the partner with a view to adjusting the income of the
partner to the extent of the amount not so deductible. A conspectus of
these provisions makes the opinion the ITAT consistent with the legal
position and therefore the salary paid to the partners was in accordance
with Section 40(b)(v) of the Act and ought not to have been disallowed.
(Please click here for judgment)
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