Direct Tax Laws Sept 2011

Where assessees filed an application for restoration of a writ petition after a delay of more than 30 years without providing satisfactory explanation for said delay writ petition could not be restored - [2011] 13 taxmann 135 (Calcutta)

Having regard section 158BB(1) as amended with effect from 1-7-2002, addition made on basis of statement of manager of assessee-firm recorded prior to date of search, was to be upheld - [2011] 13 taxmann 134 (Madras)

Where in return of income, assessee had not declared any additional amount of income surrendered during course of survey and later agreed to pay income-tax thereon along with interest under section 234B, Assessing Officer was justified in levying penalty under section 271(1)(c) - [2011] 13 taxmann 133 (Punjab & Haryana)

Reassessment is not justified where AO just changes& his opinion regarding assessee's system of accounting appropriate, it was a case of mere change of opinion on basis of which reassessment could not be made - [2011] 13 taxmann 132 (Rajasthan)

Once assessee had explained source of investment in shares and debentures by stating that they belonged to some other person and his explanation had been accepted, then if further investigation was required in case of said other person, that aspect could not be considered while considering assessment of assessee - [2011] 13 taxmann 131 (Delhi)

Designated authority under provisions of Kar Vivad Samadhan Scheme has no power to condone delay in making payment of amount of tax as required under section 90(2) - [2011] 13 taxmann 130 (Madhya Pradesh)

Payment made outside India for services rendered outside India is not taxable in India and, consequently, no disallowance could be made invoking section 40(a)(i) - [2011] 13 taxmann 137 (Mumbai - Trib.)

To treat a person as an agent of non-resident, it is to be proved that such person has business connection with non-resident and from or through such a person, non-resident is in receipt of income, whether directly or indirectly - [2011] 13 taxmann 136 (Mumbai - Trib.)

Depletion claimed by assessee on account of reduction in value of capital expenditure incurred on account of exploration and development of oil and gas is to be treated as depreciation for purpose of computation of book profits under section 115JB - [2011] 13 taxmann 129 (Chennai - Trib.)

An order can be revised only if twin conditions of 'error in order' and, 'prejudice caused to revenue' co-exist - [2011] 13 taxmann 127 (Chennai - Trib.)

There could be a cold chain facility for storage only without involving transportation of agricultural produce; various attendant facilities provided along with storage complete cold chain facility insofar as storage is concerned - [2011] 13 taxmann 126 (Agra - Trib.)

.......

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Some recent past case. (Favor Revenue)

2011-TIOL-89-SC-IT + it sc story : - ITO Vs M/s Mangat Ram Norata Ram Narwana (Dated: May 5, 2011 ) Income tax - Sections 142(1), 143(3), 148, 271(1)(a) & (c), 276C, 277, 278 - Whether, for the purpose of prosecution, it is statutorily required of the partner of the assessee-firm to sign the revised return showing higher income and leading to imposition of penalty - Whether when the partner fails to raise the issue of not signing the revised return and the assessee-firm pays up the penalty imposed, such acts impliedly amounts to admission for the purpose of prosecution.- Revenue's appeal allowed: SUPREME COURT

2011-TIOL-529-HC-AHM-IT : - Dy.CIT Vs Pradip N Desai (Dated: July 6, 2011) Income Tax - Section 32 - Whethe the depreciation at the rate of 50% can be claimed in respect of vehicles given on lease. - Revenue's appeal allowed : GUJARAT HIGH COURT

2011-TIOL-533-HC-AHM-IT : - CIT, Ahmedabad Vs Gurukrupa Developers (Dated: July 27, 2011) Income Tax - Section 113 - Whether the proviso to Section 113 which is in respect to the surcharge on the undisclosed income is clarificatory in nature. - Revenue's appeal allowed: GUJARAT HIGH COURT

2011-TIOL-543-HC-AHM-IT : - CIT Vs Saurashtra Kutch Stock Exchange Ltd (Dated: August 8, 2011) Income tax – Section 12A, 13(3) – Whether once the CIT grants approval for registration of the trust u/s 12A, the AO is not required to re-examine the entire question of the object and purpose of the trust even though the approval was given with the said condition as the CIT cannot keep the very foundational issue open to be judged by the AO – Whether when there is no conclusion that any part of the funds were diverted or applied as not permitted under sub-section (3) of Section 13, the exemption cannot be denied only on the basis of some irregularities observed by SEBI in managing the funds of the trust. - Revenue's appeal dismissed : GUJARAT HIGH COURT

2011-TIOL-519-HC-DEL-IT : - CIT, Delhi Vs Industrial Finance Corporation Of India Ltd (Dated: July 11, 2011) Income tax – Sections 36(1)(viia)(c), 36(1)(vii), 41(4A) – Whether the deduction claimed for the special reserve can be disallowed for an amount which is transferred from special reserve account to other account as per the amendment in section 36(1)(viii) which required to also maintain the amount in the reserve account though it is not retrospective – Whether the assessee is entitled to claim deduction for the amount of interest offered on NPA account which is not realized. - Revenue's appeal allowed: DELHI HIGH COURT

2011-TIOL-519-HC-DEL-IT : - CIT, Delhi Vs Industrial Finance Corporation Of India Ltd (Dated: July 11, 2011) Income tax – Sections 36(1)(viia)(c), 36(1)(vii), 41(4A) – Whether the deduction claimed for the special reserve can be disallowed for an amount which is transferred from special reserve account to other account as per the amendment in section 36(1)(viii) which required to also maintain the amount in the reserve account though it is not retrospective – Whether the assessee is entitled to claim deduction for the amount of interest offered on NPA account which is not realized. - Revenue's appeal allowed: DELHI HIGH COURT

2011-TIOL-559-HC-KAR-IT : - CIT, Bangalore Vs Dr T K Dayalu (Dated: June 20, 2011) Income Tax - Section 2(47)(v), 45, 143(2) – Whether, in respect of development agreement, the relevant date for attracting capital gain is the date on which possession is handed over to the developer or the date of completion of the project. - Revenue's appeal allowed : KARNATAKA HIGH COURT

2011-TIOL-564-HC-KAR-IT : - CIT, Bangalore Vs M/s Ganjam Nagappa And Sons (HUF) (Dated: May 26, 2011) Income Tax - Sections 147, 148 - Whether the Tribunal can interfere with the concurrent findings on the question of fact when no cogent reasons are given for interfering. - Revenue's appeal allowed : KARNATAKA HIGH COURT

2011-TIOL-536-HC-MAD-IT : - CIT, Madurai Vs K A S Mathivanan (Dated: August 1, 2011) Income Tax - Whether allowance can be made merely because future payments were made out of the funds said to be kept in the suspense account - Revenue's appeal allowed : MADRAS HIGH COURT

2011-TIOL-496-HC-P&H-IT : - CIT, Chandigarh Vs Sanjay Chhabra (Dated: March 31, 2011) Income tax – Sections 69, 133A – Unexplained Investment – Whether when the assessee fails to rebut the unexplained investment in the purchase of fuits, and the CIT(A) and Tribunal fail to record the fact that such entries were made in the books, the addition made by the AO is sustainable. - Revenue's appeal allowed : PUNJAB AND HARYANA HIGH COURT;

2011-TIOL-567-HC-P&H-IT : - CIT Vs Mukta Metal Works (Dated: February 28, 2011) Income Tax – Section 158BC, 158BD - Whether the office note appended to section 158BC constitutes a valid satisfaction note within the parameter of section 158BD of the Act – Whether any inference could be drawn from the entries in the seized diary during search, so as to make additions on account of undisclosed income - Whether the Tribunal is duty bound to consider the additional evidence in the form of report of forensic science laboratory in the interest of justice if the same is authentic and necessary for the decision of the issue raised before it.- Revenue's appeal allowed : PUNJAB AND HARYANA HIGH COURT

Where assessee invested its own funds in shares which were held by it for a

 

IT : Where assessee invested its own funds in shares which were held by it for an average period of 300 days and, moreover, those shares were shown as investment in books of account, it was to be held that transactions in shares were made by assessee as an investor and, thus, profit earned from sale of shares was to be treated as capital gain

[2011] 12 taxmann.com 321 (Mum. - ITAT)

IN THE ITAT MUMBAI BENCH 'E'

Deputy Commissioner of Income-tax, 8(3), Mumbai

v.

Securities Capital Investment India Ltd.*

P.M. JAGTAP, ACCOUNTANT MEMBER
AND VIJAY PAL RAO, JUDICIAL MEMBER
IT APPEAL NO. 211 (MUM.) OF 2010
[ASSESSMENT YEAR 2006-07]

Whether when entire business is taken over as going concern, and a composi

Whether when entire business is taken over as going concern, and a composite fee is paid for same, plea of assessee that fee paid for use of trade mark is different from non-compete fee can be sustained - NO, says ITAT

MUMBAI : THE issues before the Tribunal are - Whether trade mark is inseparable from business and hence when the entire business is taken over as a going concern the trademark alone holds no meaning and whether when the entire business is taken over as a going concern, and a composite fee is paid for the same, the plea that the fee paid for use of trade mark is different from non-compete fee is sustainable. NO is the Tribunal's order.

Facts of the case

The assessee company is engaged in the manufacturing and trading of textile chemicals and auxiliaries including export thereof. Assessee entered into separate agreements effective from 01.09.1996 with the proprietors of two sister concerns, viz., Supertex (India) Corporation (proprietor M.G. Saraf) and Superchem (prop. M.G. Saraf, HUF), which were engaged in trading of chemicals in earlier years for a long period. As per the agreements the assets of the proprietary concerns were valued and the business was taken over as a going concerns. In addition to the amounts paid on the basis of valuation reports towards acquiring the assets and liabilities of the two proprietary concerns, the company also undertook to pay a sum of Rs 3.5 lakhs per month to Shri M.G. Safar and a sum of Rs 2,00,000/- per month to M.G. Saraf, HUF for a period of 15 years starting from 01.09.1996 to 31.08.2011. These amounts were payable as per the relevant clauses of agreements in consideration of the transfer and assignment of specific business as going concern and considering the non-compete obligation undertaking by the aforesaid two proprietary concerns. Accordingly assessee claimed the total amount of Rs 66,00,000/- as deduction in the respective assessment years, stated to be amount of Rs 9,00,000/- towards assignment fees and royalty of Rs57,00,000/. This claim was for the first time made in A.Y. 1997-98 and in subsequent years and the A.O. in the respective scrutiny assessments held the amount as capital expenditure and disallowed the same. This matter was carried to the ITAT, which by the orders in ITA 2218/Mum/2002 for A.Y. 1997-98 and ITA No. 3170/Mum/2002 for AY 1998-99 and ITA no. 3171/Mum/2002 for A.Y. 1999-2000 dated 17th October 2005 held that the amounts were capital in nature. However, during the impugned assessment years assessee made a separate claim on the basis of the supplementary agreement entered into by assessee company w.e.f. the first day of April 2002 with the above said two persons on the basis of which the payment of Rs 3, 50,000/- and Rs 2,00,000/- payable to the respective parties were in turn bifurcated as Rs 3,00,000/- towards use of trade name Supertex and Rs50,000/- towards non compete fees in the case of M.G. Saraf and Rs1,75,000/- towards use of trade name Superchem and Rs25,000/- towards non-compete fees to M.G. Saraf, HUF. On the basis of these supplementary agreements assessee claimed the amounts as assignment fees and royalty for the use of trade name. The A.O., while relying on the findings of the ITAT with reference to the original agreement also held that the supplementary agreements in the name of making a clarificatory deed was a colourable transaction and the real purpose was to scuttle the legal and factual conclusion taken by the ITAT. Further he also held that the clarificatory deed was a sham transaction and was stage-managed merely with a view to evade income-tax, vide para 4.17 and 4.18 of the assessment order. Thus upholding the stand taken earlier AO disallowed the amount paid to the tune of Rs66,00,000/- holding it for non-compete fees and as capital expenditure. Aggrieved by the said order assessee preferred appeals before the CIT(A). The CIT(A) in the respective orders not only relied on the findings of the ITAT in earlier years but also agreed with the Assessing Officer's contentions that supplementary/clarificatory deed does not change the issue during this year as the same is an afterthought of assessee and which have been rightly held by the A.O. as a sham transaction and stage managed just to escape from the ITAT order against assessee in its own case. Thus holding, the CIT(A) rejected assessee's contentions more so relying on the order of the ITAT.

After hearing the parties the ITAT held that,

++ the ITAT considered the entire agreement and held that use of trade mark, if any, by the assessee company is only an inseparable part of the entire agreement. By the non-compete clause of the agreement erstwhile owners are automatically excluded from use of such trade mark and they have bound themselves contractually not to carry on similar activities in whatever name for a period of 15 years. In view of this, since the payment was composite payment at the time of acquiring the business, eventhough payable over a period of 15 years in monthly instalments, the ITAT came to a conclusion that the amount has to be treated as capital expenditure;

++ in view of the clear findings of the ITAT on the original agreement, we are of the opinion that the supplementary agreement bifurcating the monthly payments into use of trade mark and non-compete fee does not help assessee's case. Since the payments were also held to be capital in nature, respectfully following the Coordinate Bench decision we agree with the findings of the CIT(A) that the amounts cannot be allowed a revenue expenditure. In the course of argument the learned counsel tried to distinguish the facts in the present issue with that of the earlier year when the ITAT has considered the issue. It was his submission that consequent to the principles established by the Supreme Court in the case of Continental Construction Ltd. vs. CIT (2002-TIOL-661-SC-IT), the ITAT is bound to apportion the amount paid towards various services and accordingly the amount paid towards use of trade marks should be considered as revenue and the amount paid for non-compete fees should be considered as capital expenditure. We are unable to pursue ourselves with the argument of the learned counsel. First of all, as seen from the agreements entered with the erstwhile proprietary concerns by Assessee Company dated 02.09.1996 effective from 01.09.1996 the agreements were very clear that the entire specified business was transferred as ongoing concern to that of the company. This aspect was also discussed by the ITAT in its order in para 10, which was extracted above. The specified business as defined in the agreement includes the running business and infrastructural facilities, including continued use of registered trade names of the companies, i.e. the name of Supertex and Superchem in the respective cases.

Foreign training expenses incurred on son of director, who is not even an e

Foreign training expenses incurred on son of director, who is not even an employee of company, is not an allowable expenditure - [2011] 10 taxmann.com 91 (Mum. - ITAT)

Where FMV declared by assessee was more than FMV declared by DVO, estimatio

Where FMV declared by assessee was more than FMV declared by DVO, estimation of FMV as made by assessee was to be accepted - [2011] 10 taxmann.com 99 (Mum. - ITAT)

Bundle of case law

IT : Where pursuant to an agreement a US company, which had a global central purchasing unit (CPU) in USA allowed access to use of CPU to assessee and assessee made payment to said non-resident company on account of link charges, since manner in which services were provided could not be easily ascertained matter was to be remanded to lower authorities for deciding as to whether payment amounted to `royalty' or `fees for technical services' in order to bring it to tax in India - [2011] 11 taxmann.com 225 (Mum. - ITAT)

IT : By way of amendment made in section 43(5) with effect from 1-4-2006 legislature did not intend to take away brought forward losses of dealing in derivatives or make them ineligible for being set off against profits of same business in subsequent years - [2011] 11taxmann.com 231 (Mum. - ITAT)

IT : Assessing Officer after making enquiries has taken a permissible view on a issue while passing assessment order and if on same facts Commissioner has a different opinion, revisionary proceedings under section 263 cannot be initiated by him - [2011] 11 taxmann.com 230 (Ahd. - ITAT)

IT : Where financial data of three comparable companies were not before Assessing Officer/TPO at time of making assessment and they were not examined on their merit, it was considered fit and proper to restore matter regarding determination of arm's length price of international transactions entered into by assessee with AE to the file of Assessing Officer/TPO for fresh adjudication - [2011] 11taxmann.com 232 (Delhi - ITAT)

IT : Mere making of a claim by assessee in its return based upon ruling of AAR which it had subsequently revised voluntary as per latter ruling of AAR would not amount to concealment of income on part of assessee warranting levy of penalty under section 271(1)(c) - [2011] 11taxmann.com 226 (Mum. - ITAT)

IT : Section 44BB would be applicable to a non-resident-company who entered into turnkey basis contracts with ONGC even though it had bifurcated contract price into two segments one relating to supply of services and other relating to supply of spares - [2011] 11taxmann.com 229 (Delhi - ITAT)

IT : Where no opportunity was provided to assessee by way of issuing show cause notice prior to making order under section 92CA(3), matter was to be remanded back to file of Assessing Officer to comply with provisions of law and provide adequate and meaningful opportunity of being heard on issues and then decide matter afresh in accordance with law - [2011] 11 taxmann.com 228 (Delhi - ITAT)

IT : Where assessee-society advanced rupees five lakhs to one of its members allegedly for improvement and expansion of her building which accommodated school being run by assessee, but there was no evidence that amount had been utilized for purpose it had been lent, assessee was denied exemption under section 11 - [2011] 11 taxmann.com 234 (Patna)

IT : Where Commissioner noticed vital flaws in order of assessment entirely attributable to extremely dishonest and defiant approach of assessee, he was justified in setting aside assessment order by invoking powers under section 263 - [2011] 11 taxmann.com 237 (Patna)

IT : For initiating penalty proceedings under section 271(1)(c) recording of satisfaction about concealment of assessee's income is not necessary to be recorded in specific terms and words - [2011] 11 taxmann.com 236 (Cal.)

IT : Income from sale of scrap generated in course of extraction of rubber latex from trees, which is purely an agricultural operation, cannot be brought to Central Income-tax by applying rule 7A of Income-tax Rules - [2011] 11 taxmann.com 239 (Ker.)

IT : Grant of exemption to assessee-trust under section 11 would not effect assessee's right of claming depreciation - [2011] 11taxmann.com 242 (Punj. & Har.)

IT : Tax of non-resident recipient borne by Indian payer is nothing but deemed income of non-resident and same would not fall within definition of tax on income for disallowance under section 40(a)(ii) - [2011] 11 taxmann.com 268 (Mum. - ITAT)

: Notional interest on interest free security cannot be taken as determinative factor to arrive at fair rent - [2011] 11 taxmann.com 265 (Mum. - ITAT)

IT : Production of television and radio programmes for purpose of telecasting and broadcasting through assessee's own network or through network hired by it did not constitute advancement of any object of general public utility within meaning of section 2(15) - [2011] 11 taxmann.com 240 (Ker.)
2011-TIOL-387-HC-AHM-IT

Vinodbhai Arvindbhai Patel Proprietor Shakti Construction Vs ITO (Dated: May 3, 2011)

Income tax – Sections 147, 148, 149, 150 – Whether when assessment is framed as per remand order of the Tribunal, re-assessment can be initiated even after completion of six years from the end of the assessment. - Assessee's appeal allowed: GUJARAT HIGH COURT;

2011-TIOL-369-ITAT-COCHIN + depreciation story

Dy.DIT, Ernakulam Vs Adi Sankara Trust (Dated: June 16, 2011)

Income Tax - Sections 11, 12A, 32(1) - Whether when assessee, a charitable body, has already claimed deduction for acquisition of capital assets as application of money, the further claim of depreciation on the same assets would amount to double benefits. - Revenue's appeal allowed : COCHIN ITAT;

2011-TIOL-368-ITAT-MUM

The Tata Power Co Ltd Vs Addl.CIT, Mumbai (Dated: May 31, 2011)

Income Tax - Sections 54EC, 72, 74 - Whether when assessee has long-term capital gains, the stage of setting off of long-term capital loss comes only after grant of exemption u/s 54EC. - Revenue's appeal allowed: MUMBAI ITAT;

2011-TIOL-367-ITAT-CHD

M/s Vodafone Essar Ltd Vs Addl.CIIT, Chandigarh (Dated: April 7, 2011)

Income Tax - Sections 14A, 40(a)(ia), 80IA, 115JB, 143(3), 144C(13), 194C, 195, 220(6), 226(3) - Whether when Sec 80IA benefits are debatable, the Tribunal is right in granting conditional stay of high-pitch demand raised - Whether, to do justice to the cause of Revenue, Tribunal is right in directing the assessee to pledge its investments in subsidiaries as security with the AO for the balance demand. - Case disposed of: CHANDIGARH ITAT;

2011-TIOL-366-ITAT-MAD

M/s Rane Brake Lining Ltd Vs ITO, Chennai (Dated: April 21, 2011)

Income tax – Sections 14A, 80HHC, 80IB – Whether disallowance can be made u/s 14A for the interest on borrowed fund even if it is explained that the funds utilised for investments are not borrowed funds – Whether 90% of the rent recovered as sublet is to be excluded from the profit eligible for deduction u/s 80HHC while computing the deduction – Whether the deduction u/s 80HHC is to be allowed after reducing the deduction u/s 80IB. - Assessee's appeal partly allowed : CHENNAI ITAT;



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Flats which are acquired on 22-11-2001 and sold on 28-1-2003 are not long-t

Flats which are acquired on 22-11-2001 and sold on 28-1-2003 are not long-term capital asset, not liable for indexation - [2011] 10 taxmann.com 96 (Mum. - ITAT)

Penalty 271(1)(c)

(2010) 34 (II) ITCL 552 (Mum `B'-Trib)

ACIT v. Bhoruka Logistics (P) Ltd.


Counsel: Shri M Jagdish, Shri SS Rana Appellant Rep by q None Respondent Rep by


ORDER


This is an appeal filed by the revenue directed against the order of the Commissioner (Appeals)-VI, Mumbai dated 12-05-2009 for the assessment year 2005-09 on the following grounds :


"On the facts and in the circumstances of the case, the Ld. Commissioner (Appeals) has erred in cancelling the penalty levied depending on the decision of the Hon'ble Apex court in the case of Dilip N. Shroff v. JCIT (2007) 16 (I) ITCL 246 (SC) : (2007) 291 ITR 519 (SC) ignoring the decision of the Hon'ble Apex court in the case of UOI v. Dharmendra Textile Processors and others (2008) 306 ITR 277 (SC)."


2. None appeared on behalf of the assessee despite visual of notice. A letter dated 7th May, 2010 was filed by the Chartered Accountant firm requesting for adjournment. As no power of attorney has been filed, no cognizance is taken of this letter. As nobody has filed a power of attorney, and as none appeared on behalf of the assessee, we dispose of the case exparte, qua the assessee, on merits, after hearing the learned DR.


3. Facts in brief :


The assessee is a company and is engaged in the business of transporter and public carrier. During the course of assessment proceedings, the assessing officer made a disallowance under section 40(a)(ia) of the Act by observing that the assessee had deducted tax at source but there was some delay in payment of TDS in the Govt. Treasury. The assessing officer asked the assessee to file details of party-wise freight rate, with corresponding details of TDS deducted and the date on which the amount was credited in the Govt. Treasury. The assessee admitted delay and requested the assessing officer to disallow the amount under section 40(a)(ia) of the Act. He requested that the amount in question should be allowed as an expenditure in the assessment year 2006-07, as the payment of TDS was made in that year. The assessing officer disallowed this amount of Rs.56,38,686/- under section 40(a)(ia) in this year and also levied a penalty under section 271(1)(c) by observing that the assessee had made a mention about the delay in TDS payment in the audit report, while at the same time, he did not disallow the amount in the computation of income filed by it. Thus he concluded that the assessee had furnished inaccurate particulars of income. He levied a penalty under section 271(1)(c) of the Act. Aggrieved, the assessee carried the matter in appeal.


4. The first appellate authority agreed with the submissions of the assessee that the disallowance of expenditure does not amount to concealment of income or furnishing of inaccurate particulars of income. He held that the assessee had made full disclosure. He deleted the penalty. Aggrieved, the revenue is in appeal before us.


5. We have heard Mr. M. Jagdish and Mr. S.S. Rana, the learned representatives appeared on behalf of the revenue.


6. On a careful consideration of the facts and circumstances of the case and a perusal of the papers on record and the orders of the authorities below, we hold s follows.


7. This is a case where the dispute arose against the disallowance of expenditure in view section 40(a)(ia) of the Act. The assessee had in fact paid TDS and it is not in dispute that the expenditure should be allowed in the subsequent year in which the TDS has been paid to the Govt. Treasury. The first appellate authority, in our considered opinion, has rightly relied upon the judgment of the Hon'ble Punjab & Haryana High Court in the case of CIT v. Ajain Singh & Co. (2002) 253 ITR 630, wherein it is held that mere disallowance of expenditure will not per se amount to furnishing of inaccurate particulars of income. At para 4 page 3 of his order, the first appellate authority rightly held as follows :


" Once the explanation of the assessee is not considered false and explanation has been given, the penalty can only be levied if the explanation is not bona fide and full details for the computation of income has not been given by the appellant. It may be noted that Rajasthan High Court decision in (2001) 251 ITR 373 has enunciated the principle of bona fide, wherein it has been held that there is presumption that explanation given is bona fide unless proved to be otherwise."


We uphold this finding of the first appellate authority.


8. In the result, the appeal of the revenue is dismissed.

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Dear Friends : The emails are schedule to be posted in the blog and will sent to the group on various dates and time fixed. Instead of sending it on one day it is spread on various dates.  

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As TDR has no cost of acquisition, amount received not taxable

ITO vs. Hemandas J. Pariyani (ITAT Mumbai)

The assessee was a member of Rajratan Palace Co-op Hsg Society. The Society entered into an agreement with a developer for redevelopment of the building owned by the Society pursuant to which the Society and its Members received Rs. 3.02 crores “on account of sale of FSI” from the developer. While Rs. 2.99 crores was received directly by the 51 members of the society, the Society received Rs. 2.51 lakhs. The AO took the view that the entire consideration of Rs. 3.02 crores was taxable in the hands of the Society {this was struck down in Raj Ratan Palace Co-op Hsg Soc vs. DCIT (ITAT Mumbai)}. A protective assessment was made in the hands of the Members on the ground that the “share of the assessee in the total FSI available to the CHS was a capital asset held by the assessee and that this was transferred to the developer“. This was reversed by the CIT (A). On appeal by the department, HELD dismissing the appeal:

Transferable Development Rights (TDR) granted by the Development Control Regulations for Greater Mumbai, 1991, qualifying for equivalent Floor Space Index (FSI) have no cost of acquisition and so sale thereof does not give rise to taxable capital gains (Jethalal D. Mehta vs. DCIT 2 SOT 422 (Mum) followed).

Notional interest

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH "G", MUMBAI
BEFORE SHRI P.M.JAGTAP (A.M) & SHRI N.V.VASUDEVAN(J.M)

ITA NO.591/MUM/07(A.Y. 2003-04)

The DCIT 5(1),Vs. M/s. Gagan Trading Co. Ltd.
ITA NO.678/MUM/07(A.Y. 2003-04)
M/s. Gagan Trading Co. Ltd.Vs. The DCIT 5(1),
*******************************************************
ORDER

PER N.V.VASUDEVAN, J.M,

ITA No.678/Mum/07 is an appeal by the assessee while ITA No.591/M/07 is an appeal by the revenue. Both these appeals are directed against the order dated 8/11/2006 of CIT(A)-V, Mumbai relating to assessment year 2003-04.

2. First we shall take up for consideration the appeal by the revenue. The ground of appeal raised by the revenue reads as under:
"On the facts and in the circumstances of the case and as per law, the ld. CIT(A) erred in deleting the notional interest taxed by AO on deposits received while calculating income from house property."

3. The assessee is owner of the commercial premises know as Jindal Mansion situate at Peddar Road, Mumbai. The assessee let out the premises to two tenants since 1987 namely Jindal Steel Ltd. and Jindal Iron & Steel Ltd. for a monthly rent of Rs. 5000/- & 6500/- respectively. In respect of the area occupied by them in the F.Y.95-96 relevant to A.Y. 96-97, the assessee had reconstructed the property and thereafter the property consisted of ground plus five upper floors. The assessee has let out the property to the following companies 1) Jindal Steel Ltd. 2) Jindal Thermal Power Co. Ltd. 3)Jindal Iron & Steel Co. Ltd. 4) Jindal Vijay Nagar Ltd., on a monthly rent of Re.1/- per sq.ft. and collected security deposit totalling to 85 crores from them. The deposits so collected were interest free deposits and they do not carry any interest as per terms of these agreement. The total area so let out was 26,200/- sq.ft. According to the AO, the Assessee has used the interest free deposit to make investment in equity shares of group companies. In this background, the AO called upon the Assessee to show cause as to why interest on such security deposit should not be taken as indirect rent for purpose of determining the Annual Value for the purpose of determining income under the head "income from house property". According to the AO, the assessee filed its explanation and the same has been placed on the records.

4. Thereafter, the AO has observed in the order of assessment that similar issue has been discussed in assessment order for A.Y 1996-97 to 2002-03 and in view of the detailed discussion contained in those orders, he was of the view that the motive of the assessee in collusion with group company was to reduce the tax liability by showing nominal rate and accepting huge deposit carrying no interest. The Assessee pointed out that the in the earlier years the Hon'ble ITAT Mumbai, had held that notional interest on interest free security deposit cannot be added cannot be added to the rent received to arrive at the Annual Value for determining income under the head "Income from House Property". The AO however observed that the department has not accepted the decision of the Hon'ble ITAT and on this issue and has filed an appeal under section 260A before the Hon'ble Bombay High Court. For the reasons stated above and to keep the issue alive as per the assessment orders of his predecessor a notional interest @18% was worked out on the interest free deposit and the same was considered for determining ALV in order to determine income from house property. The AO accordingly determined income under the head "Income from House Property as follows:
The Annual Area of the Property is computed as under:-
Total notional interest on deposit of Rs.85 Crores @ 18% Rs.15,30,00,000
Add: Actual rent received Rs. 26,200
--------------------
Gross Annual value Rs.15,30,26,200
Less: Deduction u/s. 24(1)
i) ¼ repair and collection charges Rs. 3,82,56,550
---------------------
Rs.11,47,69,650

Income from House Property Rs.11,47,69,650/-

5. On appeal by the assesse, the CIT(A) following the decision of the ITAT in assessee's own case for A.Y 1999-2000 held that notional interest of interest free security deposit cannot be added to the actual rent received while determining the annual value for the purpose of determining the annual value for the purpose of determining income from house property.

6. Aggrieved by the order of the CIT(A) the revenue has preferred the present appeal before the Tribunal.

7. We have heard the rival submission. The ld. D.R while admitting that similar issue has been decided in favour of the assessee by the ITAT in A.Y 1999-2000 relied on the order of AO. The ld. counsel for the assessee relied on the order of the Tribunal in assessee's own case for A.Y 1999-2000.

8. We have considered the rival submissions. The very same issue was considered and decided in favour of the assessee by the Tribunal in ITA NO.3799/Mum/99 for A.Y 1999-2000 in assessee's own case. For the reasons given in the said order, we uphold the order of CIT(A) and dismiss the appeal by the revenue.

9. Now we will take up for consideration ITA No.678/M/07, the appeal of the assessee. Ground raised by the Assessee reads as follows:

"The learned Assessing erred in disallowing set off of brought forward losses of Rs. 43,48,809/- against dividend income of Rs.43,48,809/- earned on the shares held in stock in trade."

10. We have already seen that the Assessee is in the business of purchase and sale of shares, debentures and earning dividend income. The Assessee had suffered a loss under the head business and profession in A.Y.95-96. That loss could not be set off in that year against any head of income in accordance with the provisions of section 71 of the Income Tax Act, 1961 (the Act). It was accordingly carried forward for the following Assessment year to be set off in accordance with the provisions of Section 72 of the Act. The loss so carried forward for being so set off remained unabsorbed till A.Y.03-04. In A.Y.03-04, the Assessment Year to which this appeal relates to, the Assessee had income under the head "Income from other sources" viz., Dividend Income of Rs.43,48,809. There is no dispute that the dividend income was in respect of shares held by the Assessee as stock-in-trade of its business of trading in shares. The Assessee made a claim for set off of carried forward business loss in A.Y.95-96 to the extent of dividend income which was assessable under the head "Income from other sources". The claim of the Assessee was that the business of the Assessee was purchase and sale of shares and the nature of the dividend income is income from business, though the same is assessed under the head "Income from other sources. The Assessee relied on the decision of the Hon'ble Supreme Court in the case of CIT Vs. Cocanada Radhaswmi Bank 57 ITR 306 (SC) wherein it was held that though income in the form of interest earned by an Assessee from its business of banking is assessed under the head "Interest on Securities", the same is nevertheless profits and gains of business and therefore carried forward business loss of earlier years can be set off against interest income. The Assessee also relied on the decision of the Hon'ble Calcutta High Court in the case of CIT Vs. New India Investment Corporation Ltd. 130 ITR 778 (Cal) laying down identical proposition.
11. The AO however rejected the claim of the Assessee for the reason that the decision of the Hon'ble Supreme Court was in relation to AY 49-50 and 63-64 when dividend income was treated as Interest on securities. According to the AO, from AY 91-92 the Act was amended and dividend income is being brought to tax under the head "Income from other Sources vide Sec. 56 (2)(i) of the Act, even though they are held as stock in trade of business by an Assessee. Hence the claim of the Assessee for set off was rejected by the AO.
12. Before CIT(A), the Assessee reiterated its stand as was made before AO and further relied on the decision of the Hon'ble Delhi High Court in the case of Excellent Commercial Enterprises and Investments Ltd. 197 CTR 187 (Del) in which similar claim made in relation to A.Y. 96-97 was directed to be allowed. The CIT(A) however held that the decision in the case before the Ho'ble Delhi Court related to a case where dividend income was taxed as business income and therefore Sec.72(1)(i) and 72(1)(ii) of the Act applied and set off was allowed. Whereas in the case of the Assessee, dividend income was offered to tax by the Assessee as income from other sources and was assessed as such and therefore prohibition u/s.72 of the Act clearly applied. He therefore confirmed the action of the AO. Hence, the appeal by the Assessee before the Tribunal.
13. We have heard the rival submissions. The learned counsel for the Assessee reiterated the stand of the Assessee as was put forth before the Revenue authorities. The learned D.R. relied on the orders of the Revenue authorities.
14. We have considered the rival submissions. The issue that arises for our consideration is as to whether the claim of the Assessee for set off of carried forward business loss against income in the form of dividend which was assessed under the head "Income from other sources", can be set off. The relevant provision under the which the Assessee made a claim for such set off was Sec.72(1)(i) of the Act, which is as follows:
"Sec.72(1) Where for any assessment year, the net result of the computation under the head "Profits and gains of business or profession" is a loss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set off against income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off or, where he has no income under any other head, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and - (i) It shall be set be off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year:"
15. The Hon'ble Supreme Court had an occasion to consider the question as to whether set off the business loss brought forward from the preceding year against interest income which was assessed under the head "interest on securities" could be allowed in the case of Cocanada Radhaswamy Bank (supra). The interest income arose on securities held by the Assesse in its business of banking. The said interest income, was however assessed under the head "Interest on securities". The question arose in the context of the Income Tax Act, 1922 (1922 Act) the relevant provisions equivalent to Sec.72 of the Act under the 1922 Act was Sec.24 of the 1922 Act and it read as follows:
"24. (1) Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year............
(2) Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st day of March, 1940, in any business, profession or vocation, and the loss cannot be wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee had no other head of income shall be carried forward to the following year and set off against the profits and gains, if any, of the assessee from the same business, profession or vocation for that year; and if it cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following year...........".
The Hon'ble Supreme Court held:

"While sub-section (1) of section 24 provides for setting off of the loss in a particular year under one of the heads mentioned in section 6 against the profits under a different head in the same year, sub-section (2) provides for the carrying forward of the loss of one year and setting off of the same against the profits or gains of the assessee from the same business in the subsequent year or years. The crucial words, therefore, are "profits and gains of the assessee from the same business", i.e., the business in regard to which he sustained loss in the previous year. The question, therefore, is whether the securities formed part of the trading assets of the business and the income there from was income from the business. The answer to this question depends upon the scope of section 6 of the Act. Section 6 of the Act classified taxable income under the following several heads: (i) salaries; (ii) interest on securities; (iii) income from property; (iv) profits and gains of business, profession or vocation; (v) income from other sources; and (vi) capital gains. The scheme of the Act is that income-tax is one tax. Section 6 only classifies the taxable income under different heads for the purpose of computation of the net income of the assessee. Though for the purpose of computation of the income, interest on securities is separately classified, income by way of interest from securities does not cease to be part of the income from business if the securities are part of the trading assets. Whether a particular income is part of the income from a business falls to be decided not on the basis of the provisions of section 6 but on commercial principles. To put it in other words, did the securities in the present case which yielded the income form part of the trading assets of the assessee? The Tribunal and the High Court found that they were the assessee's trading assets and the income there from was, therefore, the income of the business. If it was the income of the business, section 24(2) of the Act was immediately attracted. If the income from the securities was the income from its business, the loss could, in terms of that section, be set off against that income.
A comparative study of sub-sections (1) and (2) of section 24 yields the same result. While in sub-section (1) the expression "head" is used, in sub-section (2) the said expression is conspicuously omitted. This designed distinction brings out the intention of the legislature. The Act provides for the setting off of loss against profits in four ways. To illustrate, take the head "profits and gains of business, profession or vocation". An assessee may have two businesses. In ascertaining the income in each of the two business, he is entitled to deduct the losses incurred in respect of each of the said businesses. So calculated, if he has loss in one business and profit in the other both falling under the same head, he can set off the loss in one against the profit in the other in arriving at the income under that head. Even so, he may still sustain loss under the same head. He can then set off the loss under the head "business" against profits under another head, say "income from investments", even if investments are not part of the trading assets of the business. Notwithstanding this process he may still incur loss in his business. Section 24(2) says that in that event he can carry forward the loss to the subsequent year or years and set off the said loss against the profit in the business. Be it noted that clause (2) of section 24, in contradistinction to clause (1) thereof, is concerned only with the business and not with its heads under section 6 of the Act. Section 24, therefore, is enacted to give further relief to an assessee carrying on a business and incurring loss in the business though the income there from falls under different heads under section 6 of the Act."

16. We are of the view that the aforesaid decision of the Hon'ble Supreme Court will squarely apply to a claim of set off u/s.72(1)(i) of the Act, by the Assessee in the present case. In this regard, we find the provisions of the 1922 Act and the Act i.e., 1961 Act, to be identical, as can be seen from the chart given below:

1922 Act
Section 24 of the Income Tax Act, 1922:
"24. (1) Where any assessee sustains a loss of profits or gains in any year under any of the heads mentioned in section 6, he shall be entitled to have the amount of the loss set off against his income, profits or gains under any other head in that year............
(2) Where any assessee sustains a loss of profits or gains in any year, being a previous year not earlier than the previous year for the assessment for the year ending on the 31st day of March, 1940, in any business, profession or vocation, and the loss cannot be wholly set off under sub-section (1), so much of the loss as is not so set off or the whole loss where the assessee had no other head of income shall be carried forward to the following year and set off against the profits and gains, if any, of the assessee from the same business, profession or vocation for that year; and if it cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following year...........".
1961 Act
Section 72 of the Income Tax Act, 1961.
CARRY FORWARD AND SET OFF OF BUSINESS LOSSES.
(1) Where for any assessment year, the net result of the computation under the head "Profits and gains of business or profession" is a loss to the assessee, not being a loss sustained in a speculation business, and such loss cannot be or is not wholly set off against income under any head of income in accordance with the provisions of section 71, so much of the loss as has not been so set off or, where he has no income under any other head, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and - (i) It shall be set be off against the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year :
Provided that the business or profession for which the loss was originally computed continued to be carried on by him in the previous year relevant for that assessment year; and
(ii) If the loss cannot be wholly set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on

In the earlier part of Sec.72(1) the expression used is "under the head "Income from business and profession", while in clause (i) of Sec.72(1) the expression used is "the profits and gains, if any, of any business or profession carried on by him and assessable for that assessment year. Though for the purpose of computation of the income, dividend is classified as "Income from other Sources", income by way of Dividend was very much part of the income from business, because the shares on which dividend income was earned was stock in trade of business of trading in shares carried on by the Assessee and they formed part of the trading assets.

17. Under the 1922 Act, the question whether dividend income should be assessed under the head "income from Business" or "Income from other Sources" had come up before Hon'ble Courts for consideration. The view expressed in decided cases was that where the shares, on which dividend income is earned, if held as stock-in-trade, would be "business income". Otherwise it was assessed as "Income from other Sources". The Revenue has always been contending that merely holding of investments which yield dividend income can never be said to be carrying on "Business". The 1922 Act was therefore Amended by Finance Act, 1955, whereby Dividend Income was to be assessed as "income from other sources". Therefore dividend income even though it relates to shares held as stock-in-trade of business by an Assessee had necessarily to be assessed under the head "Income from business". Though for the purpose of computation of the income, dividend is separately classified, income by way of dividend does not cease to be part of the income from business, because the shares on which dividend income was earned were admitted part of the trading assets. Whether a particular income is part of the income from a business falls to be decided not on the basis of the provisions of section 14 of the Act, but on commercial principles.
18. The argument of the learned D.R. was that the decision of the Hon'ble Supreme Court in the case of Cocanada Radhaswamy Bank(supra) was rendered in the context of interest income which was assessed under the head "Interest on Securities" and w.e.f. 1-4-1989, Chapter IV of the Act, dealing with "Interest on Securities" was omitted and therefore the same analogy cannot be applied to "Dividend" income which is treated as "Income from other sources". In this regard, we find that by the Finance Act, 1988 w.e.f. 1-4-1989, "Interest on Securities" as a separate head of income enumerated u/s.14 of the Act, was omitted as a measure of rationalisation to treat all interest income as "Income from other sources". Prior to the above rationalisation, interest on securities held as investment was treated as "Income from other sources" and those held as stock-in-trade were treated as "Income from Business". It is thus seen that the reason for the change in law both for interest and dividend income are one and the same. Therefore there can be no basis to say that the decision in the case of cocanada Radhaswamy Bank(supra), will apply only in the context of interest income being treated as "Income from other sources".
19. Another argument of the learned D.R. was that Section 14 of the Act provides that "Save otherwise provided by this Act, all income shall, for the purpose of charge of income tax and computation of total income, be classified under the following heads of income.....". According to him, the corresponding provision in Sec.6 of the 1922 Act, did not contain such provision. We are afraid, the contention is without merit. Sec.6 of the 1922 Act, reads "Save as otherwise provided by this Act, the following heads of income, profits and gains, shall be chargeable to income-tax in the manner hereinafter appearing namely.....". The provisions of Sec.6 of the 1922 Act and the provisions of Sec.14 of the Act, in our view mean the one and the same thing viz., classification of different heads of income for the purpose of computation of total income. Another argument was that whatever a company does can be considered as business under the Companies Act, 1956 and that cannot hold good for the purposes of the Act. This argument runs contrary to the finding of the AO. The AO has not disputed that the shares which yielding dividend income formed part of the stock in trade of the Assessee.

20. For the reasons given above, we hold that the Assessee is entitled to the set off of its carried forward business loss against dividend income as claimed by it. The appeal of the Assessee is accordingly, allowed.

21. In the result, appeal of the revenue is dismissed while appeal of the Assessee is allowed.
Order pronounced in the open court on the 18th day of February 2011.

ITAT (MUM) : Premium amortised over the period remaining till maturity is allowable

Facts

• The Assessee had a unit at Bhopal which was not functioning since the assessment year 1997-98.

• The Bank of Rajasthan Ltd ('the assessee') was a company engaged in the business of banking.

• The assessee had filed its Return of Income claiming loss on valuation of investments which included an amount towards amortization of premium paid for securities held under 'Held to Maturity' (HTM) category.

• The Assessing Officer ("AO") held that securities held by the assessee under HTM category were in nature of investment and not stock in trade. Therefore, the claim for amortization of premium paid at the time of purchase of the securities was not allowed being in the nature of capital expenditure.

• The assessee contended that all the investments were stock-in-trade and this fact had been accepted by the income-tax authorities in the past, as diminution in the value of stock in trade had always been allowed as deduction. Further, the securities on which premium was paid at the time of purchase and which were held under HTM category were held as stock in trade and not as investments. All income/loss whatever arose on account of such securities has been treated as business income/loss and assessed accordingly in all past years by the income-tax authorities.

• The AO however rejected the claim and disallowed the deduction of premium amortized in respect of HTM securities.

• The CIT (A) upheld the assessee's claim. It held that as per the circular issued by the Central Board of Direct Taxes („the CBDT?), Circular No.17 dated 26/11/2008, investments classified under HTM category need not be marked to market and could be carried at acquisition cost unless it was more than the face value, in such case the premium should be amortized over the period remaining to maturity. Such premium was held allowable as revenue expenditure.

• Aggrieved by the above order, the AO preferred an appeal before the Tribunal.

Issues before the Tribunal

Whether premium paid in excess of the face value of investments classified under HTM category which has been amortised over the maturity period is allowable as business loss.

Observations and Ruling of the Tribunal

• There was no dispute in accepting the assessee's claim that all investments were in the nature of stock in trade. This was already accepted by the income-tax authorities in earlier years in the assessee's own case.

• Amortization of premium in respect of investments held in HTM was in accordance with the method of valuation prescribed the Reserve Bank of India and was consistently followed by the assessee. A consistently and regularly followed method of accounting cannot be disregarded.

• It referred to the Hon'ble Supreme Court decision in the case of UCO bank (240 ITR 355), wherein it was held that under the Banking Regulation Act, banks are required to disclose securities held, as investment, but that does not mean that they are to be treated as investment for all purposes. The HTM securities could be sold before maturity, in fact they had been sold in the subsequent year and income/loss was treated as business income/loss and not capital gain/loss.

• Further, reference was made to the decision of the Jodhpur Tribunal in Bank's own case in the earlier years, wherein it was held that investment was stock in trade and entire loss on account of diminution in value was allowable as a deduction. This judgment was accepted by the AO and not contested before the Rajasthan High Court.

• The Tribunal held that since the claim of assessee was as per RBI guidelines and the circular issued by the CBDT, the AO was directed to allow the assessee's claim.

Comments

The above decision lays down that in the case of banks the premium paid in excess of the face value of investments classified under HTM category, which has been amortised over the period till maturity, is allowable as revenue expenditure since the claim is as per RBI guidelines and the CBDT also has directed to allow such premium.

Source: ACIT v/s The Bank of Rajasthan Ltd (2011-TIOL-35-ITAT-MUM)

Source : ACIT v/s The Bank of Rajasthan Ltd (2011-TIOL-35-ITAT-MUM)

Link : ACIT v/s The Bank of Rajasthan Ltd (2011-TIOL-35-ITAT-MUM)

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ITAT(MUM):- Filing stay application before the lower authorities is directory and mandatory for filing stay application before ITAT

Filing stay application before the lower authorities is directory and mandatory for filing stay application before ITAT

In brief :- In the case of DHL Express (India) P Ltd. v. ACIT [SA No. 119/Mum/2010], dated 19 November, 2010, the Mumbai Income Tax Appellate Tribunal ("Tribunal") has held that stay application arising out of the assessment order passed by the Assessing Officer ("AO") in pursuance to the direction of the Dispute Resolution Panel ("DRP") under section 144C of the Income-tax Act, 1961 ("the Act"), is maintainable before the Tribunal. Filing of stay application before lower authorities is directory, and not mandatory, for filing stay application before the Tribunal.

Facts

• This is the first year wherein the assessee could have opted for DRP route instead of the conventional route (i.e., filing of an appeal before the Commissioner of Income tax (Appeals) against the assessment order passed by the AO.

• The assessee had adopted the DRP route. Accordingly, against the order of the AO, it had filed an appeal before the Tribunal.

• Thereafter, it filed a stay application before the Tribunal requesting for stay against recovery of outstanding demand raised by the AO. Further, it had not approached the revenue authorities viz., AO, Additional Commissioner and Commissioner of Income-tax requesting for stay against the recovery of outstanding demand.

Issue :*Whether the Tribunal is empowered to grant stay where the assessee had taken DRP route and had not filed any stay application before the revenue authorities.

Assessee's contentions

• In view of the procedure for filing of stay application, prescribed under Rule 35A of the Appellate Tribunal Rules, 1963 ("the Rules"), the assessee had taken a position that only in case a stay application is filed before the revenue authorities, the same is required to be filed alongwith the stay application before the Tribunal and not otherwise.

• In the assessee's case, since no stay application was filed before the revenue authorities, no correspondence was enclosed with the stay application to the Tribunal.

• The assessee had requested for full stay against recovery of outstanding demand and out-of-turn hearing of its appeal.

Revenue's contentions

• Relying on the Mumbai Tribunal decision in the case of RPG Enterprises Ltd. v. DCIT [2001] 74 TTJ 391 (Mum), the revenue insisted that the assessee ought to have approached the Commissioner for grant of stay of the disputed demand, which would give an opportunity to study the case, gather necessary data and protect revenue's interest.

• The assessee should be directed to pay forthwith the entire outstanding demand.


Tribunal

• In the instant case, the assessment order had been framed in conformity with the directions of the DRP under section 144C of the Act and therefore, the assessee had filed an appeal directly before the Tribunal.

• In the view of the Tribunal, it was not mandatory on the part of the assessee to move an application before revenue authorities for granting stay of outstanding demand. Such a requirement is directory and not mandatory.

• As the Tribunal was satisfied that the assessee had a prima facie case, the Tribunal directed the assessee to pay around 20% of the outstanding demand and stayed the recovery of the balance demand till the disposal of the appeal, or for a period of six months from the date of order, whichever is earlier.

• It also granted an out-of-turn hearing of the appeal.

Conclusion:-This decision of the Tribunal is the first decision adopting such an approach against an order passed by the AO in conformity with the directions of the DRP. Such an approach of the Tribunal will expedite the process of obtaining a stay order and also provide an early disposal of the quantum appeal before the Tribunal.

Source : DHL Express (India) P Ltd. v. ACIT [SA No. 119/Mum/2010]

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