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II. Direct Taxes Case Laws:
1. T. Rajkumar Vs. Union of India, W.P. Nos. 17407 - 17412 of 2015, Date of Decision: 12.04.2016, High Court of Madras
Issue:
Whether challenging to section 94-A (1), the Notification dated
1-11-2013 and the Press Release dated 1-11-2013 notifying Cyprus as a
non-cooperative jurisdiction is sustainable in law?
Held: No
Brief Facts:
Since December 1994, India and Cyprus entered into an treaty to avoid
double taxation of income and prevention of tax evasion. The Government
of India had notified section 94-A (1), as there was no information
flow from Cyprus. Petitioners filed several petitions, challenging
legality of section 94-A(1), on ground that it conferred sweeping powers
upon the central government to specify any country as a notified
jurisdictional area in relation to transactions entered into by any
assessee, irrespective of whether such country is one, with whom a
bilateral treaty has already been entered into.
Held:
The Government of India has the power to issue a Notification. The
power conferred by the Section 94-A cannot be said to be uncontrolled
and unrestrained since Government of India has to exercise the power
only in circumstances, where there is lack of effective exchange of
information. Both contracting parties are under obligation to exchange
information under the Treaty in good faith. When one of the parties
commits a default by failing to provide information, it is not open to
the beneficiary of such a default to contend that the other contracting
party should honour their obligations. Lack of exchange of information
by Cyprus, which led to the Notification dated 1-11-2013 cannot fall
under the category of information, which is not obtainable under the
laws. If the purpose of the Government of India entering into an
agreement under section 90(1) is defeated by the lack of effective
exchange of information, then section 90(1)(c) is actually diluted by
one of the contracting parties and not by section 94A(1).Section 94A was
the need of the hour. Hence, challenges to section 94-A (1), the
Notification dated 1-11-2013 and the Press Release dated 1-11-2013
notifying Cyprus as a non-cooperative jurisdiction were not sustainable
in law.
(Please click here for judgment)
2. Dewanchand Ramsaran Industries Pvt. Ltd. Vs. ACIT, I.T.A. No. 4587/Mum/2013, Date of Pronouncement: 11.04.2016, ITAT - Mumbai
Issue:
Whether the expenses incurred on mobilization of rigs can be
claimed as Revenue Expenditure under the Income Tax while the same has
been capitalised in the Books of Accounts under the Companies Act?
Held_Yes
Brief Facts:
The assessee company is engaged in the business of giving Rigs on
hiring to Government and Private Parties. It has claimed the expenses
with respect to the mobilization of rigs, which were not debited to
Profit & Loss Account but was treated as capital expenditure in the
books of accounts prepared under the Companies Act, while the same were
Revenue Expenditure as per the Income Tax Act. The AO did not allow the
expenses to be claimed as Revenue Expenditure in light of the reason
that no sufficient evidences were produced by the assessee to prove that
the rigs came into use in the relevant Assessment year. The CIT(A)
upheld the order of the AO. Aggrieved by which, the assessee is in
appeal before the ITAT.
Held:
Once the expenditure is found to be allowable as revenue expenditure
as per provisions of the Income Tax Act,1961, the same are to be allowed
as revenue expenditure under the Act while computing income chargeable
to tax even if the tax-payer has given different treatment in its books
of accounts by capitalizing the same in its books of accounts instead of
debiting it to the Profit and Loss Account. This is the mandate of the
Income Tax Act,1961 which has to be followed as the taxes can only be
collected by the authority of law. The addition made by the A.O. and
confirmed by the CIT(A) is to be deleted. The mobilization expenses
incurred by the assessee company as an revenue expenditure allowable
under the Act as deduction while computing the income chargeable to tax.
The appeal of the assessee is allowed.
(Please click here for judgment)
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