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II. Direct Taxes Case Laws:
1. VLS Finance Ltd. Vs. CIT, Civil Appeal No. 2667 of 2007, Date of Order: 28.04.2016, Supreme Court of India
Issue:
Whether the limitation period for passing of block assessment
order under Section 158BE of the Income Tax Act would exclude the period
for which the direction for Special Audit was stayed by the High Court?
Held_Yes
Brief Facts:
The search and seizure operation was conducted on the premises of the
assessee. Thereafter, notice under section 158BC(c) of the Income Tax
Act was issued and the returns were filed for the block period. However,
the assessment was not completed by the AO within the stipulated time
as per period prescribed in Section 158BE. A direction u/s 142(2A) was
also issued by the AO for the conduct of Special Audit for the block
period. The assessee challenged such order in the High Court via writ
petition and the stay remained in operation during the pendency of such
writ petition. Later, the high court quashed the direction for special
audit in view of the fact that assessee was not given proper opportunity
of being heard. It was also held that since special audit was an
integral step in the assessment proceedings, once the direction for
special audit was stayed by the High Court, the assessment proceedings
cannot go on and the order of the limitation period u/s 158BE was not
violated. Therefore, the assessee filed an appeal before the Supreme
Court.
Held:
Special audit is an integral part of the assessment proceedings. It
is not possible for the Assessing Officer to carry out the assessment
without it and, therefore, stay of the special audit may be treated as
stay of assessment proceedings. Therefore period of such stay will be
excluded from period of limitation to complete block assessment
proceedings under Explanation 1 to section 158BE(2). Moreover, the
exclusion of the time period is not dependent upon the final outcome of
the proceedings in which interim stay was granted. The appeal of the assessee stands dismissed.
(Please click here for judgment)
2. DDIT Vs. Mitsubishi Motors Corporation, I.T.A. No. 411/Del/2014, Date of Pronouncement: 28.04.2016, ITAT - Delhi
Issue:
Whether the capital gain that had arisen to a non-resident from
transfer of shares in an Indian Company would be taxed at the rate of
20% and the proviso to Section 112(1) would be not applicable?
Held_No
Brief Facts:
Assessee is a foreign company incorporated in Japan and engaged in
the business of development, design, manufacture, assembly, sales and
purchase, import of automobiles and its component parts. During the year
under consideration, the assessee reported income from three streams,
viz., capital gains, royalty and fees for technical services. However,
only income under the head ‘Capital gains’ was offered for tax. The
dispute in the instant appeal is only qua the application of tax rate on
the amount of such capital gain alone. Such capital gains arose from
the sale of shares of Eicher Motors Ltd. to Eicher Motors Ltd. Shares
were held for more than one year, therefore, assessee applied 10% rate
of taxation as per provisions of proviso to Section 112(1) of the Income
Tax Act. AO held that the proviso was not applicable to the assessee
and hence, tax was charged @ 20%. On the appeal of the assessee in
Dispute Resolution Panel, the assessee’s claim was accepted and tax rate
of 10% was given effect. Hence, the revenue is in appeal before the
ITAT.
Held:
It is held by the Hon’ble jurisdictional High Court in Cairn UK
Holdings Ltd. that the long-term capital gain earned by the assessee
non-resident on off market sale of shares of listed Indian company is
taxable @ 10% under the proviso to section 112 and proviso to section
112(1) does not state that an assessee, who avails benefit of the first
proviso to section 48, is not entitled to the benefit of lower rate of
tax at 10%. As the view taken by the DRP is in consonance with that of
the Hon’ble High Court, we ergo countenance the same.The appeal of the Revenue stand dismissed.
(Please click here for judgment)
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