RECENT CASE LAWS UNDER DIRECT TAX

direct-tax-250x250

1. Nagarjuna Fertilizers and Chemicals Limited vs. ACIT (ITAT Hyderabad) (Special Bench) – S. 206AA does not have an overriding effect over the other provisions of the Act.
By virtue of s. 90(2), the provisions of the Treaty override s. 206AA to the extent they are beneficial to the assessee. Consequently, the payer cannot be held liable to deduct tax at higher of the rates prescribed in s. 206AA in case of payments made to non-resident persons in spite of their failure to furnish the PAN.
2. PCIT vs. Quark Media House India Pvt. Ltd. Mohali – Punjab & Haryana High Court (2017) – Reference u/s 55A – AO is not Entitled to Determine the Fair Market Value when he did not find the Consideration to have been Understated.
Thus the Assessing Officer proceeded on the erroneous basis that as the assessee and the purchaser are interconnected and the property was sold at an undervalue he had the jurisdiction to invoke the provisions of section 55A or even otherwise to determine the fair market value. As held by the Supreme Court it then is a distinction between undervaluation and understatement of the value. The Assessing Officer did not find the consideration to have been understated. He, therefore, was not entitled to determine the fair market value.

 

3. GOPAL AND SONS (HUF) vs. CIT (2017) – Supreme Court -Deemed Dividend u/s 2(22)(e) – HUF is Liable for Tax on Deemed Income in spite of the fact that HUF Cannot be Registered & Beneficial Shareholder of a Company.
Payment in question is made to the assessee which is a HUF. Shares are held by Shri. Gopal Kumar Sanei, who is Karta of this HUF. The said Karta is, undoubtedly, the member of HUF. He also has substantial interest in the assessee/HUF, being its Karta. It was not disputed that he was entitled to not less than 20% of the income of HUF. In view of the aforesaid position, provisions of Section 2(22)(e) of the Act get attracted and it is not even necessary to determine as to whether HUF can, in law, be beneficial shareholder or registered shareholder in a Company.

 

4. Piramal Enterprises Ltd. Vs. DCIT (Bombay High Court) – Mere receipt of information cannot be equated to reason to believe that income has escaped assessment.

Mere receipt of information from any source would not by itself tantamount to reason to believe that income chargeable to tax has escaped assessment. In the present case the Assessing Officer prima facie has not done the bare necessary/rudimentary enquiry into the material received before he concludes that income chargeable to tax has escaped assessment.

5. Council of The Instt. Of Chartered Accountants Of India Vs. CA G S Johar & Anr. (Delhi High Court) – CA guilty of professional misconduct for failure to report suspicious book entries.
Suffice it to highlight that in paras 26 and 27 of the report the Committee highlighted the modus operandi adopted by PCL and AIL to form a loop with no cash flow coming in, but sales, stocks and receivables increases. The obligation of the auditor concerning transactions which are merely book entries was highlighted i.e. the duty of the auditor to enquire whether the transactions were prejudicial to the interest of the company being not discharged by the auditors. The Committee also highlighted that as an auditor it was the obligation of the respondent to comment about the internal control procedures of the company. With reference to AAS-3 and AAS-4, the Committee further brought out the obligations of the auditor to be discharged in the course of the audit.
The Committee has also highlighted the duties of the auditor to maintain the working papers and documents and noted that in spite of repeatedly directed to do so, the respondent did not produce the papers and took the plea that since the year 2003 he had surrendered the certificate of practice, therefore he was not keeping the past record.
The report of the Disciplinary Committee is based on the accounting standards to be followed and breach thereof. Having not filed any response to the report of the Disciplinary Committee, and finding the report to be suffering from no infirmity, as did the Council accept the same, so do we. Indeed, the respondent is guilty of committing professional misconduct falling within clauses 5, 6, 7 and 8 of Part 1 of the 2nd Schedule to the Chartered Accountants Act, 1949.
Keeping in view the scam which has taken place and the seriousness of the indictment of the respondent we accept the recommendation of the Council and levy the penalty of removing the name of the respondent from the register of members of the Institute of Chartered Accountants for a period of 5 years.

 

6. Erhardt + Leimer (India) (P.) Ltd. v. Assistant Commissioner of Income-tax, Circle-4, Ahmedabad – Depreciation would be excludible to compute PLI when assessee had made huge additions in fixed assets
Where in respect of purchase of certain components from AE, assessee adopted TNMM to determine ALP, in view of fact that assessee had made huge additions in fixed assets during relevant year, its claim that depreciation had to be excluded before computed corresponding profit level indicator, was to be accepted.

 

7. Vodafone Cellular Limited Vs. Additional Commissioner of Income Tax, TDS Range (ITAT Pune) (2017) – No penalty for non deduction of TDS on sale of SIM Cards/recharge coupons at discounted rate
Tribunal held that sale of SIM Cards/recharge coupons at discounted rate to distributors is not commission and therefore, not liable to TDS provisions u/s. 194H of the Act. Once, the substratum for levy of penalty has eroded there is no question for sustaining the penalty.

One Comment

Leave a Reply

Your email address will not be published. Required fields are marked *