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II. Direct Taxes Case Laws:
1. CIT Vs. Knight Frank (India) Pvt. Ltd., I.T.A. No. 247 & 255 of 2014, Date of Order: 16.08.2016, High Court of Bombay
Issue:
Whether Section 145A of the Income Tax Act, 1961 is applicable
only to valuation of purchase and sale of goods/inventory and not on
service rendered on which service tax is payable?
Held_Yes
Brief Facts:
The assessee is engaged in the business of real estate
consultancy/agency and property management services. During the
assessment, the AO included the service tax for rendering services as
trading receipts by invoking Section 145A(ii) of the Income Tax Act,
1961. The assessee contended that the Section 145(a)(ii) does not
include service tax. On appeal to CIT(A), the additions u/s 145(a)(ii)
and 43B were upheld on the grounds that the applicability of the section
145 (a)(ii) is not restricted only to manufacturing and trading
companies. Moreover, service tax stands on the same footing as excise
duties, sales tax and other taxes, which are collected to be paid over
to the Government. On another appeal to the Tribunal, it was held that
Section 145(a)(ii) would not be applicable to the service tax.
Similarly, as no deduction was claimed u/s 43B, the addition made by the
AO was deleted. Aggrieved by which, the revenue appealed before the
High Court.
Held:
It was held that from the reading of Section 145A(a)(ii) that it only
covers cases where the amount of tax, duty, cess or fee is actually
paid or incurred by the assessee to bring the goods to the place of its
location and condition as on the date of valuation. Since, the assessee
has not incurred any liability for the purpose of bringing any goods to
the place of location; therefore, the said section is not applicable in
the present case. The Rendering of service is not goods or inventory.
Goods would mean movables and inventory would mean stock of goods.
Section specifically restricts its ambit only to valuation of purchase
and sale of goods and inventory. Therefore, the Explanation to the
Section does not widen the scope of tax and only clarifies the
ambiguity. Hence, the appeal of the revenue is dismissed.
(Please click here for judgment)
2. Shri Raj Dutta Vs. JCIT, I.T.A. No. 930/Del./2012, Date of Judgment: 12.08.2016, ITAT - Delhi
Issue:
Whether the factum of not declaring the STCG allegedly due to
bonafide mistake/clerical error amounts to concealment of income so as
to attract the penalty u/s 271(1)(c) of the Act?
Held_No
Brief Facts:
The assessee a CEO of an MNC, being a salaried tax payer deposited
income-tax to the tune of Rs.26,00,000/-, on total income at
Rs.75,46,850/-, the assessment was completed under section 143 (3) of
the Income-tax Act, 1961 vide order dated 29.12.2008 at Rs.94,01,360/-
and penalty proceedings u/s 271(1)(c) of the Act initiated for the
reason that the assessee has not declared STCG (STT not paid) amounting
to Rs.18,54,504/- which was subsequently offered for taxation.
Assessee
during the penalty proceedings took the plea that due to bonafide
mistake on the part of the Chartered Accountant, STCG could not be
counted correctly leaving behind a difference of Rs.6,00,000/- in tax;
the CA had already furnished the affidavit as to the mistake committed
by him. However, AO, by invoking Explanation 1 to Sec. 271(1)(c) of the
Act, did not accept the plea of the assessee and imposed the penalty.
The Ld. CIT(A) also affirmed the penalty order by dismissing the appeal.
The ld. DR contended that such a mistake cannot be bonafide on part of
the assessee who is working as CEO of an MNC and relied upon the order
passed by AO/ CIT(A).
Held:
The explanation offered by the assessee is found to be not
sustainable by AO as well as CIT(A) on the sole ground that such a
mistake cannot be bonafide as the assessee is a CEO of an MNC which is
not sustainable. Also the assessee has made investment in numerous
mutual funds of which he has furnished statement of STCG before the ld.
CIT (A) showing computation of capital gain to the tune of
Rs.37,48,819/- whereas the same were required to be Rs.56,07,323/-, such
a computation cannot be considered as false rather just a result of a
bonafide mistake. The contention of the ld. DR that if this case was not
subjected to scrutiny the assessee would have evaded the tax is not
sustainable because mere filing of the return of income by the assessee
is not to be treated by the revenue as a gospel truth and it has to be
examined by the expert taxman or to be put to the scrutiny. In view of
the above, it was held that penalty order affirmed by Ld. CIT(A) is not
sustainable.
(Please click here for judgment)
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