Tax Updates- February '20

TAX UPDATES – FEBRUARY ‘20 ROUND UP
CA. REETIKA G AGARWAL
NEWS
DIRECT TAX
1. CBDT notify the rules for making permanent
account number inoperative.
[Ref: Notification No.11/2020/F.No. 370149/
166/2019-TPL]
2. Procedure of PAN allotment through Common
Application Form (CAF) along with registration
of Foreign Portfolio Investors (FPIs) with SEBl
under Department of Economic Affairs and KYC
for opening Bank and Demat Account.
[Ref: Notification No.11/2020/F.No. Pr. DGIT
(S)/ ADG (S)-1/FPI/04/2019-20/Part]
3. CBDT issues clarification on the applicability of
TDS provisions on Mutual Fund dividend.
[Ref: https://www.incometaxindia.gov.in/
Pages/press-releases.aspx]
4. CBDT issues clarification on the new provision
pertaining to residence in India.
[Ref: https://www.incometaxindia.gov.in/
Pages/press-releases.aspx]
5. CBDT revises definition of ‘Unauthorised
Colony’ for the purpose exemption u/s 56(2)(x).
[Ref: NOTIFICATION G.S.R. 124(E) [NO.
12/2020/F. NO. 370142/29/2019-TPL], DATED
17-2-2020]
6. CBDT notifies Forms to exercise option under
new regime of section 115BAA and 115BAB
[Ref: NOTIFICATION G.S.R. 110(E) [NO.
10/2020/F.NO./370142/34/2019-TPL], DATED
12-2-2020]
7. CBDT notifies ‘Pr. DGIT (System)’ as ‘specified
Income-tax authority’ for furnishing info. to
SEBI.
[Ref: ORDER NO. [F. NO.
225/297/2019/ITA.II], DATED 10-2-2020]
8. CBDT releases MLI synthesised text for India-
Malta & India-Georgia tax treaties.
[Ref: incometaxindia.gov.in]
9. Govt. approves protocol amending India-Sri
Lanka DTAA
[Ref: PRESS RELEASE, DATED 12-2-2020]
10. CBDT releases MLI synthesised text for India-
Luxembourg tax treaty.
[Ref: incometaxindia.gov.in]
*********
OECD
[Ref:-https://www.oecd.org]
1. BEPS Action 14: OECD releases stage 1 peer
review reports on dispute resolution for Brunei
Darussalam, Curaçao, Guernsey, Isle of Man,
Jersey, Monaco, San Marino and Serbia.
2. Mali joins the Global Forum on Tax
Transparency.
3. OECD releases Transfer Pricing Guidance on
Financial Transactions.
***********
Page 1

DOMESTIC TAX CASE LAWS
SUPREME COURT
1. SLP granted against High Court ruling that
where assessee had set up a captive power
generating unit and provided electricity to its
another unit and claimed deduction under
section 80-IA in respect of profits arising out of
such activity, valuation of electricity provided to
another unit should be at rate at which
electricity distribution companies were allowed
to supply electricity to consumers. [CIT v
Reliance Industries Ltd. [2020] 114
taxmann.com 320 (SC)]
2. SLP dismissed as withdrawn due to low tax
effect against High Court ruling that where
assessee made payment of non-compete fee to
two of its directors, since advantage of
restraining individuals from engaging in
competition was in field of facilitating
assessee's own business and rendering it more
profitable and there was no increase in fixed
capital, payment in question was to be allowed
as revenue expenditure. [Jt. CIT v Hatsun Agro
Products Ltd. [2020] 114 taxmann.com 172
(SC)]
3. A newly registered Trust is entitled for
registration under section 12AA on basis of its
objects, without any activity having been
undertaken. [Ananda Social & Educational
Trust v CIT [2020] 114 taxmann.com 693 (SC)]
provisions of section 115JB as it stood prior to
its amendment by virtue of Finance Act, 2012,
would not be applicable to a banking company
governed by provisions of Banking Regulation
Act, 1949. [Pr. CIT v Bank of India [2020] 114
where in respect of share capital received from
various shareholders, assessee failed to
establish identity, genuineness and
creditworthiness of said persons, revenue
authorities were justified in adding amount in
question to assessee's taxable income under
section 68. [Jet Lite (India) Ltd. v CIT [2020] 114
6. SLP dismissed as withdrawn due to low tax
effect against High Court ruling that where
assessee-company carrying on business of
broadcasting of television channels, paid
placement charges to cable operators for
placing signals on a preferred band, it was a
part of work of broadcasting and telecasting
covered by sub-clause (b) of clause (iv) of
Explanation to section 194C and thus, assessee
was justified in deducting tax at source under
section 194C while making payments in
question. [CIT v Disney Broadcasting (India)
Ltd. [2020] 114 taxmann.com 249 (SC)]
7. Where High Court upheld Tribunal's order
deleting addition made in case of assessee
under section 68 on account of share
application money in assessment under section
153C, read with section 143(3) on ground that
during search, no incriminating material was
found to support such addition, SLP filed against
order said was to be granted. [Pr. CIT v
Dhananjay International Ltd. [2020] 114
holding that amount paid by assessee to 'G'
towards vacating its premises was to be
regarded as revenue expenditure, SLP filed
against said order was to be dismissed. [CIT v
Hongkong & Shanghai Banking Corporation
Ltd. [2020] 114 taxmann.com 276 (SC)]
holding that interest under section 244A was to
be allowed on self assessment tax refunded to
assessee, SLP filed against said order was to be
granted. [Pr. CIT v Bank of India [2020] 114
10. Where In appellate proceedings, High Court
held that provisions of section 115JB, as it stood
at relevant time, would not apply to Banking
Companies or Insurance Companies, SLP filed
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against said order was to be granted. [Pr. CIT v
New India Assurance Co. Ltd. [2020] 114
holding that reassessment proceedings could
not be initiated on ground that only one fourth
of expenses on acquisition of film rights could
be allowed as deduction because said issue had
been examined at time of assessment itself, SLP
filed against said order was to be dismissed. [Pr.
CIT v Zee Media Corpn. Ltd. [2020] 114
12. Where in case of assessee, a public charitable
trust, reassessment proceedings were initiated
on ground that it did not offer anonymous cash
donations to tax under section 115BBC and,
validity of said reassessment proceedings were
challenged by filing a writ petition, High Court
justifiably held that it would not be appropriate
to exercise jurisdiction under article 226 as
similar issue was already pending before
Commissioner (Appeals) for subsequent
assessment year. [Shri Saibaba Sansthan Trust
(Shirdi) v UOI [2020] 114 taxmann.com 489
(SC)]
allowing assessee's claim for registration under
section 12AA by taking a view that entire
expenditure incurred by assessee was for
purposes of running a school only, SLP filed
against order of running of High Court was to be
dismissed. [CIT v Rural Education And Women
Welfare Society Sas Nagar [2020] 114
holding that certain amount received by
assessee, a director of 'C' Ltd., from said
company constituted deemed dividend under
section 2(22)(e) and not as advance in respect
of sale of land, SLP filed against said order was
to be dismissed. [Vikram Krishna v Pr. CIT
[2020] 114 taxmann.com 197 (SC)]
15. Where High Court held that assessee
undertaking which carried out 'substantial
expansion' within specified window period i.e.
between 7-1-2003 and 1-4-2012, would be
entitled to deduction on profits at rate of 100
per cent, under section 80-IC post said
expansion, SLP filed against said order was to be
dismissed. [Pr. CIT v SBS Biotech Unit-I [2020]
114 taxmann.com 100 (SC)]
16. Where High Court finding that in view of
dispute relating to amount received in violation
of provisions of section 269SS, impugned
penalty order passed under section 271D was to
be set aside and, matter was to be remanded
back for disposed afresh, SLP filed against said
order was to be dismissed. [Dy. CIT v Asian
Consolidated Industrial Ltd. [2020] 114
holding that in case of assessee, a builder,
expenses incurred on brokerage and
commission on booking of properties being a
finance/selling expenses, were allowable in full,
SLP filed against said order was to be dismissed.
[Pr. CIT v DLF Home Developers Ltd. [2020] 114
18. SLP granted against High Court ruling that while
considering claim made by an assessee-society
for deduction under section 80P after
introduction of sub-section (4) thereof,
Assessing Officer cannot extend benefits
available, by merely looking at class of society
as per certificate of registration issued under
Central or State Co-operative Societies Act and
Rules made thereunder, rather he has to
conduct an enquiry into factual situation as to
activities of assessee-society and arrive at a
conclusion whether benefits can be extended or
not in light of provisions under sub-section (4)
of section 80P. [Mavilayi Service Cooperative
Bank Ltd. v CIT [2020] 114 taxmann.com 85
(SC)]
19. SLP dismissed due to low tax effect against High
Court ruling that mere charging of fee from
members or non-members for rendering
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services like training, conducting seminars
would not ipso-facto lead to denial of
exemption under section 11 when dominant
object of assessee remained charitable and
aforesaid activities were only incidental to main
activity of assessee. [Pr. CIT v Fertilizer
Association of India [2020] 114 taxmann.com
83 (SC)]
holding that search carried in case of assessee
was valid because warrant had been issued in
name of individual who was actively involved in
affairs of assessee-firm, SLP filed against said
order was to be dismissed. [Chekkattu Chitty
Funds v CIT [2020] 113 taxmann.com 606 (SC)]
21. Where High Court, merely following principle of
consistency, upheld Tribunal's order setting
aside revisional order passed by Commissioner
under section 263, SLP filed against said order
was to be granted. [Pr. CIT v Indian Farmers
Fertilizers Cooperative Ltd. [2020] 113
holding that Assessing Officer could not have
initiated and passed an assessment order under
section 153C for relevant assessment year as
same was beyond period of six years from end
of financial year in which satisfaction note was
recorded by Assessing Officer, SLP filed against
said order was to be dismissed. [Pr. CIT v Raj
Buildworth (P.) Ltd. [2020] 113 taxmann.com
601 (SC)]
23. Where High Court Confirmed levy of penalty
under section 271(1)(c) on ground that assessee
had wrongly debited certain amount in profit
and loss account as loss in dealing with non-
banking business even though said amount was
not an expense but an appropriation of profit,
[Hamirpur District Cooperative Bank Ltd. v CIT
[2020] 113 taxmann.com 447 (SC)]
24. Where Hight Court upheld Tribunal's order
deleting penalty imposed under section 158
BFA on ground that addition to undisclosed
income of assessee was on estimate basis
rather than on account of deliberate
suppression of income, SLP filed against said
order was to be dismissed due to low tax effect.
[CIT v Bagga Distilleries Hyderabad (P.) Ltd.
[2020] 113 taxmann.com 603 (SC)]
where assessee, engaged in business of
manufacturing of ENA (Extra Neutral Alcohol),
gave an affidavit to Excise department that
excise verification issued by Excise Authority of
importing State would be submitted within 90
days of exporting ENA from its distillery, since
assessee failed to comply with said condition,
payment made in respect of discharging
contractual obligation to indemnify Excise
department could not be regarded as penal in
nature and, thus, assessee's claim for deduction
of same under section 37(1) was to be allowed.
[Pr. CIT v Agribiotech Industries Ltd. [2020] 113
26. SLP dismissed against High Court ruling that
where assessee educational society, set up with
various aims and objects including
improvement in standard of education of
backward students of rural areas, was running a
school and Commissioner had not doubted
genuineness of its aims and objects, application
under section 12A could not be rejected merely
on ground that secretary of society was getting
lease rent for land given to society for running
school or his wife who had requisite
qualification was teaching in school and was
being paid salary. [CIT v Ambala Public
Educational Society [2020] 113 taxmann.com
404 (SC)]
27. Unutilised credit under MODVAT scheme does
not qualify for deductions under section 43B.
[Maruti Suzuki India Ltd. v CIT [2020] 114
when in terms of section 151(2), sanction to
issue notice under section 148 has to be issued
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by Additional Commissioner, reopening of
assessment with approval of Commissioner was
unsustainable. [CIT v Aquatic Remedies (P.) Ltd.
[2020] 113 taxmann.com 451 (SC)]
29. Where High Court held that in case of assessee,
a non-resident company, which executed
projects in India, it was obligation of payer to
deduct entire tax at source and, assessee was
not liable to pay any advance tax and, thus,
interest under section 234B could not be
charged from it, SLP filed against said order was
to be granted. [CIT v Andritz AG [2020] 113
where Tribunal set aside directions issued by
Commissioner (Appeals) to Assessing Officer to
conduct enquiries for verifying genuineness of
certain purchases made by assessee, in view of
fact that Tribunal being last fact finding
authority, should have considered materials on
record, especially, when it had came on record
subsequently that parties in question had not
filed return of income impugned order passed
by it was to be set aside. [Meerut Roller Flour
Mills (P.) Ltd. v Pr. CIT [2020] 113
there is no bar for an assessee or declarant to
claim credit of advance tax and TDS paid
previously relating to assessment years for
which it seeks benefit under Income Declaration
Scheme, 2016. [Central Board of Direct Taxes v
Kumudam Publications (P.) Ltd. [2020] 113
*************
HIGH COURT
1. Mere acquittal of assessee in criminal
proceedings could not itself result in deletion of
addition in assessee's hands in income-tax
proceedings; authorities under Act should arrive
at their own findings on basis of material
collected during criminal proceedings. [CIT v
R.N. Jayaprakash [2020] 114 taxmann.com 169
(Madras)]
2. Where PCIT considering wilful evasion of
payments of tax, rejected assessee's application
for waiver of interest under section 220(2A),
since there was no error apparent on record,
review petition filed by assessee was to be
dismissed. [Mansukhlal v ITD [2020] 114
taxmann.com 177 (Madhya Pradesh)]
3. Interest paid on foreign currency loan is exempt
under section 10(15)(f) even when assessee-
company has utilised said loan for repayment of
another loan taken earlier towards its working
capital requirement meaning that loan was
utilised indirectly for industrial development in
India; there would be no disallowance under
section 40(a). [CIT v Seven Seas Distillery (P.)
Ltd. [2020] 114 taxmann.com 166 (Madras)]
4. Where assessee member's club claimed that
interest on fixed deposits with bank security
deposits was outside purview of taxation on
principle of mutuality and assessment was
completed accordingly but proceedings were
initiated under section 147 as after expiry of
four years from end of relevant assessment
year on basis of subsequent judgment dated 14-
1-2013, of Supreme Court in case of M/s
Bangalore Club v. Commissioner of Income Tax
& Anr. reported in (2013) 29 taxmann.com 29
(SC) holding that income earned by way of
interest for corporate members of a club is
taxable income and does not come under ambit
of mutuality principle and therefore, interest
earned on deposits with bank which were
members of club was taxable, since subsequent
decision of Supreme Court reversing legal
position prevailing at time of regular
assessment cannot be called an omission or
Page 5

failure on part of assessee in disclosing fully and
truly material facts necessary for relevant
assessment impugned proceedings were to be
quashed. [Calcutta Club Ltd. v ITO [2020] 114
taxmann.com 560 (Calcutta)]
5. Where assessee trust's object was to pay
pension to employees of GCDA or their
dependents from corpus created out of
contributions made by said employees
themselves, such an object could not be an
object of general public utility, therefore,
registration under section 12AA could not be
granted to assessee. [GCDA Employees Pension
Fund Trust v CIT [2020] 114 taxmann.com 170
(Kerala)]
6. Assessment proceeding concluded without
proper determination of facts by proper
exchange and flow of correspondence between
assessee and Assessing Officer were to be set
aside, as, in view of introduction of E-
Governance for conduct of assessment
proceedings electronically, assessment
proceedings no longer involved human
interaction and were based on records alone.
Thus, such proceedings could lead to erroneous
assessment if officers were not able to
understand transactions and statement of
accounts of an assessee without a personal
hearing. [Salem Sree Ramavilas Chit Company
(P.) Ltd. v Dy. CIT [2020] 114 taxmann.com 492
(Madras)]
7. Amendment brought in section 115BBE(2) by
Finance Act, 2016 whereby set off of losses
against income referred to in section 68 was
denied, would be effective from 1-4-2017.
[Vijaya Hospitality and Resorts Ltd. v CIT
[2020] 114 taxmann.com 91 (Kerala)]
8. Where India Habitat Centre, inter alia set up
with primary aim and objective to promote
habitat concept, was registered as a charitable
trust, principle of mutuality for computation of
its income was not required to be gone into as
income was to be computed as per sections 11,
12 and 13. [CIT v India Habitat Centre [2020]
114 taxmann.com 84 (Delhi)]
9. Assessment order for purpose of chapter XIX-A,
could be said to have been made when it was
served upon assessee concerned, not when it
was passed and dispatched through post. [M3M
India Holdings (P.) Ltd. v ITSC [2020] 114
taxmann.com 92 (Punjab & Haryana)]
10. Where in course of survey operation under
section 133A of the Income-tax Act, 1961,
revenue authorities found that petitioner
helped in tax evasion by facilitating payments
against bogus bills and invoices raised to 'P' Ltd.
by entities based in foreign jurisdiction and,
thus, proceedings for Look Out Circular (LOC)
were initiated against him under section 53, in
view of fact that petitioner had joined
investigation as and when called by IO and his
statements had already been recorded wherein
he had made some admissions as well, it was
opined that there was no justification in
keeping the LOC alive and same was, therefore,
directed to be recalled by the issuing authority.
[Lakshmi Satyanarayana Dutt Tadikonda v UOI
[2020] 114 taxmann.com 424 (Delhi)]
11. Where appellant-company alleged that member
of ICAI i.e. 'J' was guilty of professional
misconduct on account of verifying audit report
containing false statements in respect of seven
companies, in view of fact that appellant had no
dealing with said companies and complaint was
made after seven years of last audit report
being signed by 'J' in respect of said companies,
Director (Discipline) of ICAI was justified in
dismissing complaint filed by appellant.
[Wholesale Trading Services (P.) Ltd. v ICAI
[2020] 114 taxmann.com 39 (Delhi)]
12. Where assessee's appeal challenging penalty
imposed under section 271(1)(c) was pending
for disposal before Tribunal, and meanwhile
application for stay of demand of penalty was
filed by assessee, it was obligatory on part of
Assessing Officer to consider said application
subject to decision of Tribunal. [Sasken
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Technologies Ltd. v Jt. CIT [2020] 113
taxmann.com 589 (Karnataka)]
13. Where assessee was unable to cull out requisite
details from books of account furnished during
assessment proceedings and further accounts
of assesses were voluminous and complex to
handle for Assessing Officer and, further, a fact
of diversion of funds by assesses had also came
out in forensic audit report of SEBI, Assessing
Officer was justified in issueing notice for
special audit under section 142(2A). [Religare
Finvest Ltd. Dy. CIT [2020] 113 taxmann.com
573 (Delhi)]
14. Where remand made by Tribunal to Assessing
Officer was a complete and wholesale remand
for framing a fresh assessment, Assessing
Officer could not deny evaluating fresh claim
raised by assessee during remand assessment
proceedings. [Curewel (India) Ltd. v ITO [2020]
113 taxmann.com 583 (Delhi)]
15. Where in case of assessee, engaged in business
of real estate, Assessing Officer initiated
reassessment proceedings on ground that EDC
paid by assessee to Haryana Urban
Development Authority (HUDA) were subject to
TDS under section 194 and in absence of TDS,
amount would be subject to disallowance under
section 40(a)(ia), in view of fact that Assessing
Officer had not given any basis for forming his
opinion that how EDC which was in nature of
statutory fee, was subject to deduction of tax at
source under section 194, impugned
reassessment proceedings deserved to be
quashed. [BPTP Ltd. v Pr. CIT [2020] 113
taxmann.com 587 (Delhi)]
16. Unless an order finally adjudicates lis, it cannot
be treated as an order from which appeal lies
and hence, an appeal against interim order
passed by Single Judge would not be
maintainable. [Amolak Singh Bhatia v Pr. CIT
[2020] 113 taxmann.com 576 (Chhattisgarh)]
17. Where there was no record of satisfaction by
Assessing Officer in relation to any concealment
of income or furnishing of inaccurate particulars
by assessee in notice issued for initiation of
penalty proceedings under section 271(1)(c),
same being sine qua non for initiation of such
proceedings, Tribunal had rightly ordered to
drop penalty proceedings. [Pr. CIT v Goa
Coastal Resorts and Recreation (P.) Ltd. [2020]
113 taxmann.com 574 (Bombay)]
18. Where assessee an army officer with a bona
fide mistake paid income tax on his income
from disability pension which was completely
exempted from tax, such amount was to be
refunded to assessee. [Madan Gopal Singh Nagi
v CIT [2020] 113 taxmann.com 581 (Madhya
Pradesh)]
19. Assessee's plea of genuine hardship for waiver
of interest under section 220(2A) could not
have been rejected by revenue without calling
for additional particulars, just by citing reason,
that assessee was having land and machineries
as even balance sheet of assessee did not
reflect any liquid cash, deposit, share capital or
debentures in name of assessee. [TCV
Engineering Ltd. v Asst. CIT [2020] 113
taxmann.com 578 (Madras)]
20. Where assessee statutory authority was
constituted under provision of Karnataka Urban
Development Authority Act, 1987 with an
object of planing and promoting and securing
development of an urban area and for that
purpose to acquire, hold, manage and dispose
off movable and immovable property and to
carry out building and engineering operations
for development of an urban area, activity of
assessee would be considered as charitable
activity as per section 2(15). [CIT v Hubli
Dharwad Urban Development Authority [2020]
113 taxmann.com 580 (Karnataka)]
21. Where Assessing Officer issued notice under
section 148 on ground that income chargeable
to tax had escaped assessment doubting
genuineness of transaction of issue of shares by
assessee-company to its existing shareholders,
since said issue was subject matter of regular
Page 7

assessment proceedings under section 143(3), it
was case of change of opinion by Assessing
Officer, therefore, impugned notice was to be
quashed. [Uni VTL Precision (P.) Ltd. v Dy. CIT
[2020] 113 taxmann.com 533 (Bombay)]
22. Interest paid on borrowed funds utilized for
investment in group companies for strategic
business purpose was allowable as deduction
under section 36(1)(iii). [CIT v KEC International
Ltd. [2020] 113 taxmann.com 532 (Madras)]
23. Where in case of assessee, Assessing Officer
initiated reassessment proceedings on ground
that assessee had received accommodation
entries in form of share capital from two sham
companies, in view of fact that even though
identity of investor companies might have been
established, neither financial capacity/
creditworthiness of said investor companies,
nor genuineness of transaction was examined
at time of assessment, validity of impugned
reassessment proceedings deserved to be
upheld. [RDS Project Ltd. v Asst CIT [2020] 113
taxmann.com 534 (Delhi)]
24. Where AO had already considered one-time
settlement by assessee with its banker during
original scrutiny assessment proceedings as
capital receipt, thereafter AO could not initiate
reassessment proceedings merely on basis of
change of opinion that said relief was revenue
receipt. [Pr. CIT v Everlon Synthetics (P.) Ltd.
[2020] 113 taxmann.com 442 (Bombay)]
25. Where assessee accepted that it was providing
accommodation entries to various parties and
for same it had opened a fictitious bank account
in which amounts were deposited and later on
transferred to an assessee's concern, merely
because these amounts were included in total
turnover would not ipso facto shut out an
inquiry into credits, thus, addition of peak credit
under section 68 was justified. [CIT v JRD Stock
Brokers (P.) Ltd. [2020] 113 taxmann.com 453
(Delhi)]
26. Where High Court quashed assessment order
passed in case of assessee with direction to
make fresh assessment but on appeal, Supreme
Court stayed High Court's order, fresh
assessment order could not have been passed
by AO. [Anju Singh v Asst. CIT [2020] 113
taxmann.com 383 (Patna)]
27. Where in case of assessee, a contractor,
Assessing Officer made addition in respect of
two bills which were raised by assessee but not
accounted for in its return even though it was
following mercantile system of accounting, in
view of fact that one of said bill was raised after
termination of contract whereas nothing was
received in respect of second bill because payer
was in severe financial crisis, impugned addition
was to be deleted. [CIT v Bechtel International
Inc. [2020] 113 taxmann.com 514 (Bombay)]
28. Where appellant failed to Furnish report of
audit in prescribed form accompanied with a
further report by an Accountant in prescribed
form, however, failed to prove that there
existed no 'sufficient cause' for failure or that
there existed any 'reasonable cause' for such
failure, order of penalty was justified.
[Peroorkkada Service Co-operative Bank Ltd. v
ITO [2020] 114 taxmann.com 18 (Kerala)]
29. Prior to working out disallowance under section
14A by applying Rule 8D, Assessing Officer must
record a conclusion that he is not satisfied with
suo motu disallowance offered by assessee. [Pr.
CIT v Bombay Stock Exchange Ltd.n [2020] 113
taxmann.com 303 (Bombay)]
30. Where penalty was imposed on assessee-
society under sections 271D and 271E, in view
of weak financial position, appeal was directed
to be passed within three months and till then
recovery was kept in abeyance. [Panniyankara
Service Co-operative Bank Kallai, Kozhikode-
673-003 v Jt. CIT [2020] 113 taxmann.com 335
(Kerala)]
31. Where there was a clear admission by assessee
firm that excess stock found during survey was
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added in its stock register but no corresponding
entry was passed in books of account, it could
be considered that investment in such stock
was made out of undisclosed source, thus,
addition was to be made under section 69B in
respect of such excess stock. [SVS Oil Mills v
Asst CIT (non-Corporate) [2020] 113
taxmann.com 388 (Madras)]
*************
INCOME TAX APPELLATE TRIBUNAL
1. Where assessee owned property which
remained vacant throughout relevant year due
to obstruction caused by ongoing Metro Project
just before entrance of premises, no addition
on account of notional rent was warranted.
[Empire Capital (P.) Ltd. v. Asst. CIT [2020] 114
taxmann.com 180 (Mumbai - Trib.)]
2. Where assessee sold shares to a non-resident
company and Assessing Officer observing
difference between share premium received in
excess of valuation as determined under rule
11UA treated same as income from other
sources as per provisions of section 56(2)(viib),
since those very shares were sold in next
financial year at much higher amount to a non-
resident buyer and, further, there was no case
of unaccounted money being brought in by
assessee in garb of stated share premium,
impugned addition under section 56(2)(viib)
was unjustified. [Clearview Healthcare (P.) Ltd.
v ITO [2020] 114 taxmann.com 167 (Delhi -
Trib.)]
3. Where assessee, an export oriented
undertaking, earned interest from fixed
deposits from profits of business, even though
it did not partake character of profit and gain
from sale of article, it was income derived from
consideration realized by export of article,
therefore, receipt of such interest income was
allowable as exemption under section 10A.
[Affliated Computer Services of India (P.) Ltd. v
Dy. CIT [2020] 114 taxmann.com 178
(Bangalore - Trib.)]
4. Where assessee sought a stay on
collection/recovery of outstanding tax and
interest in respect of demand created as a
result of assessment under section 143(3) read
with section 144C(13) and Commissioner
(International Taxation) had already granted
stay on collection of disputed demands till
disposal of appeal on condition that assessee
paid 30 per cent of demand, since authorities
below had dealt with stay petitions of assessee
in a reasonable manner and there was no
Page 9

perversity or unreasonableness in their
approach, no occasion was there for Tribunal to
interfere in impugned matter. [Kersiwood
Holdings Ltd. v Asst. CIT [2020] 114
5. Tribunal cannot review and amend its own
decision unless it is permitted to do so by
statute. [Sujauddian kasimsab Sayyed v ITO
[2020] 114 taxmann.com 168 (Mumbai - Trib.)]
6. Where assessee made provision for leave
encashment on actuarial basis, same being in
nature of ascertained liability, could not be
added back for purpose of determining 'book
profit' under section 115JB. Further, In terms of
clause (a) of 'Explanation' to section 115JB
''amount of incometax paid or payable, and
provision therefore'' is liable to be added for
computing 'book profit' under section 115JB,
however, as there is no such provision for
making addition with regard to wealth tax,
Assessing Officer cannot add same for
computing 'book profit' of assessee company
under section 115JB. [Caprihans India Ltd. v Dy.
CIT [2020] 114 taxmann.com 538 (Mumbai -
Trib.)]
7. Assessee engaged in import of diamonds for re-
export from SEZ unit, same being trading
activity falling within ambit of 'services' as per
SEZ Rules, was entitled to deduction under
section 10AA. [Solitaire Diamond Exports v ITO
8. Amendment brought in by Finance Act 2013 in
Explanation 1 to section 10 (10D) is prospective
in nature and, thus, where keyman insurance
policy taken by a company in name of
assessee's husband was assigned to assessee in
year 2013, it would continue to be an ordinary
policy and consequently, sum received by her
on maturity of said policy would not be taxable
by virtue of amended section 10(10D). [Smt.
Harleen Kaur Bhatia v Pr. CIT [2020] 114
taxmann.com 183 (Indore - Trib.)]
9. Assessee Company was primarily engaged in
business of trading and manufacturing of
mobile handsets, spare parts and accessories. It
entered into an agreement for supply of cellular
mobile phones with HCL and from this
agreement between assessee and HCL, it was
evident that relationship between assessee and
HCL was that of principal to principal and not
that of principal to agent and discount which
was offered to distributors was given for
promotion of sales. There was absence of a
principal-agent relationship and thus, benefit
extended to distributors could not be treated as
commission liable for withholding tax under
section 194H. [Nokia India (P.) Ltd. v Dy. CIT
[2020] 114 taxmann.com 442 (Delhi - Trib.)]
10. Where AO made addition to assessee's income
under section 68 on ground that assessee had
taken accommodation entry from a penny stock
company i.e. 'U' Ltd., in view of fact that there
was no reference whatsoever to fact that SEBI
had held 'U' Ltd. to be a bogus/sham company
for its activities during relevant period,
impugned addition was to be set aside. [Smt.
Rajbir Kaur v ITO [2020] 114 taxmann.com 82
(Chandigarh - Trib.)]
11. Merely where in return of income assessee did
not offer capital gain on receipt of new
residential flat against surrender of old flat but
claimed deduction only during assessment that
too under wrong section 54F, same would not
disentitle him from availing deduction under
section 54. [Satish S. Prabhu v Asst. CIT [2020]
114 taxmann.com 88 (Mumbai - Trib.)]
12. Period of six months as mentioned in section
54EC is to be considered as six calendar months
and not 180 days for considering eligibility for
exemption. [Kartick Chandra Mondal v Pr. CIT
[2020] 113 taxmann.com 586 (Kolkata - Trib.)]
13. Assessee not having exhausted deduction under
section 10A for ten consecutive assessment
years on date of introduction of section 10AA as
was available to him under section 10A on
commencement of SEZ Act, 2005 will be
entitled for additional period of deduction for
Page 10

five years as is allowed to SEZ units by
provisions of section 10AA(1)(ii), subject to
fulfilment of other conditions for grant of
deduction under section 10AA. [Classic Linens
International (P.) Ltd. v Dy. CIT [2020] 113
taxmann.com 590 (Chennai - Trib.)]
14. Disclosure of additional income in statement
recorded under section 132(4) itself is not
sufficient to levy penalty under section 271AAB
until and unless income so disclosed by
assessee falls in definition of undisclosed
income defined in Explanation to section
271AAB(1). [Padam Chand Pungliya v Asst. CIT
[2020] 113 taxmann.com 446 (Jaipur - Trib.)]
15. Where AO finding that there was debit balance
in one of partner's current account and at same
time assessee-firm had paid interest on
borrowed capital, made disallowance of
interest paid on borrowed capital by assessee,
in view of fact that debit balance in one of
partner's current account was appearing for last
several years and in none of earlier years any
such hypothetical income had been subjected
to tax in hands of assessee, following principle
of consistency, impugned disallowance was to
be deleted. [Dy. CIT v India Housing [2020] 113
taxmann.com 535 (Kolkata - Trib.)]
16. Where on account of non-payment of corporate
loan as per agreed terms, a charge on
mortgaged property was created by assessee
himself in terms of section 13(2) of SARFAESI
Act, 2002, in such a case, upon sale of property
so mortgaged, assessee could not claim
deduction of principal amount of loan either as
expenditure under section 48 or as 'diversion of
income by overriding title'. [Perfect Thread
Mills Ltd. v Dy. CIT [2020] 113 taxmann.com
384 (Mumbai - Trib.) (TM)]
17. Interest received on enhanced compensation
under section 28 of Land Acquisition Act, 1894
is eligible for exemption under section 10(37).
[Smt. Lakshmamma v ITO [2020] 113
taxmann.com 572 (Bangalore - Trib.)]
18. Mere fact that assessee was associated with the
builder would not disentitle his claim of Sec.
54F exemption. [Lalitkumar Kesarimal Jain v
Dy. CIT [2020] 113 taxmann.com 387 (Pune -
Trib.)]
19. Where assessee-company received share
capital money from several individuals and filed
various evidences and details to prove identity
of share subscribers and share capital monies
were directly paid to assessee by cash out of
sufficient bank balances available in their bank
accounts, thus, creditworthiness of subscribers
and genuiness of transactions were also proved,
Assessing Officer was unjustified in making
addition in respect of such share capital money
under section 68. [Tradelink Carrying (P.) Ltd. v
ITO [2020] 113 taxmann.com 520 (Kolkata -
Trib.)]
20. Action of Assessing Officer accepting assessee's
computation of value of shares issued at
premium could not be considered as erroneous
or prejudicial to interest of revenue where
Commissioner had neither conducted any
enquiry on issue nor recorded finding that
assessee's calculation was unsustainable in law.
[Trimex Fiscal Services (P.) Ltd. v Pr. CIT [2020]
113 taxmann.com 441 (Kolkata - Trib.)]
21. Where remittance of TDS was made online on
prescribed date, credit to Government's
account was instant and thus, no interest could
be levied under section 201(1A) for delay in
remitting TDS to credit of Government even if
online portal showed a delayed date. [Moody's
Analytics Knowledge Services (India) (P.) Ltd. v
ITO [2020] 113 taxmann.com 448 (Bangalore -
Trib.)]
22. Where receipts of rents as recorded in books of
account was in consonance with agreement
between assessee and lessee and no defect
whatsoever had been pointed out by revenue
authorities in books of account, no addition to
income is warranted in hands of assessee owing
to difference in income based on Form No.
26AS and income as reflected in books of
Page 11

account maintained by assessee. [D M Estates
(P.) Ltd. v Dy. CIT [2020] 113 taxmann.com 386
23. Where facts sufficiently demonstrated that
delay of 615 days in filing appeal was non-
deliberate and by filing of appeal late, assessee
had not derived any undue advantage, Tribunal
was justified in condoning delay. [Emsons
Organics Ltd. v Dy. CIT [2020] 113
taxmann.com 269 (Chandigarh - Trib.)]
24. Where assessee filed an original return claiming
carry forward of loss of certain amount but
without filing an audit report and,
subsequently, assessee voluntarily filed a
revised return claiming said loss at a lesser
figure along with audit report, impugned
revision so as to hold return of income filed
originally as defective and denying benefit of
carry forward of loss to assessee in terms of
section 139(1) read with sections 139(3) and 80,
was unjustified. [B.E. Billimoria & Co. Ltd. v Pr.
CIT [2020] 113 taxmann.com 444 (Mumbai -
Trib.)]
25. Additional Commissioner can function as an
Assessing Officer only when jurisdiction has
been assigned to him by virtue of directions or
orders issued under section 120(4)(b); there
being no directions or orders under section
120(4)(b), assessment order passed by
Additional Commissioner was illegal and
without jurisdiction. [Nasir Ali v Addl. CIT
26. Income from mushroom spawn grown in
nursery qualifies as agricultural income as per
section 2(1A), Explanation 3, and is, therefore,
eligible for exemption under section 10(1); on
facts issue restored to file of Assessing Officer
to determine whether spawn was actually
grown by assessee. [Doon Valley Foods (P.) Ltd.
v ITO [2020] 113 taxmann.com 516
(Chandigarh - Trib.)]
27. Where assessee engaged in business of real
estate development paid certain amount to
associated concern for providing and securing
of fund requirements, bank guarantee and
technical expertise in successful completion of
project, since it was accepted even by revenue
authorities that said associated concern made
substantial contribution towards completion of
project by providing financing and technical
expertise, providing brand name and other
technical assistance for completion of project,
payment in question made to said concern was
not subject to disallowance under section
30A(2)(b). [Asst. CIT v Vishnu Apartments (P.)
Ltd. [2020] 114 taxmann.com 2 (Delhi - Trib.)]
28. Where assessee claimed deduction under
section 24(b) on account of interest paid on
borrowed fund while computing income from
house property, in view of fact that assessee
had utilized loan amount for construction of
commercial property a part of which was let out
and, Assessing Officer had not pointed out any
major deficiency in allocation of interest
expenditure between area used for commercial
purpose and area let out, assessee's claim for
deduction was to be allowed. [Alpex
International (P.) Ltd. v Asst. CIT [2020] 113
29. When it is consciously decided by assessee to
not avail of right of filing appeal and instead
only avail of right of filing cross objection, then
fact that revenue did not file appeal, and
thereby did not present assessee with an
opportunity for filing cross objection, cannot
constitute 'sufficient cause' for assessee for not
filing appeal within time limit prescribed under
section 253(3). [Boutique Hotels India (P.) Ltd.
v Asst. CIT [2020] 113 taxmann.com 381 (Delhi
- Trib.)]
30. Where parent company was not holding whole
of share capital of subsidiary company along
with nominees, transaction of buy back of
shares was not covered under section 47(iv).
[Acciona Wind Energy (P.) Ltd. v Dy. CIT (Intl.
Taxn.) [2020] 113 taxmann.com 443
Page 12

31. Disallowance of expenses under section 14A
read with rule 8D of 1962 Rules cannot be made
in absence of exempt income. [Dy. CIT v Asian
Grantio India Ltd. [2020] 113 taxmann.com 445
(Ahmedabad - Trib.)]
**********
INTERNATIONAL TAXATION
where assessee earned interest income and
offered same to tax at reduced rate relying on
DTAA between India and Cyprus and disclosed
all material facts pertaining to interest income
at time of scrutiny assessment, Assessing
Officer's reference to further exercise
undertaken while carrying out scrutiny
assessment for subsequent year where he
decided to tax assessee at higher rate would
not enable Assessing Officer to reopen
assessment beyond 4 years. [Dy. CIT v Precilion
Holdings Ltd. [2020] 114 taxmann.com 173
(SC)]
holding that amount received by assessee for
licence of its product, which was embedded
software, was not royalty rather it was business
income, SLP filed against said order was to be
granted. [CIT v Bently Nevada LLC [2020] 114
holding that payment received by assessee for
use or right to use scientific or commercial
equipment, was not royalty within meaning of
section 9(1)(vi), Explanation (2)(iii) and (iva) as
well as article 12(3) of India-USA DTAA, SLP filed
against said order was to be granted. [CIT v
Intelsat Corporation [2020] 113 taxmann.com
597 (SC)]
4. No Indo-Mauritius DTAA benefit as Co. was set-
up in Mauritius to route funds for South African
based holding Cos. [Bid Services Division
(Mauritius) Ltd., In re [2020] 114 taxmann.com
434 (AAR - Mumbai)]
5. Introduction of Explanation 4 to section 9(1)(vi)
with retrospective effect would make payment
for transfer of use or right to use computer a
royalty; however, in absence of corresponding
amendment in Indo-Belgium DTAA, such
payment could not be treated as royalty liable
to tax. [Agfa Healthcare NV v Dy. CIT [2020]
114 taxmann.com 89 (Mumbai - Trib.]
Page 13

6. Grant of non-exclusive non-transferable license
in computer software with no right to sub-lease
or transfer would fall within purview of 'Royalty'
both under India Italy DTAA as well as under
section 9(1)(vi) and would be chargeable to
income-tax under provisions of Act. [Asst. CIT v
Saipem India Projects (P.) Ltd. [2020] 113
taxmann.com 592 (Chennai - Trib.)]
7. Where assessee foreign company received an
amount towards subscription fees from its
customers in India for providing certain
services, since in assessee's own case for earlier
assessment year, Tribunal held that amount
received by assessee from its customers in India
was in nature of royalty as per article 13(3) of
India-UK Tax treaty, facts being similar,
impugned amount received by assessee was to
be considered to be in nature of royalty.
[Reuters Transaction Services Ltd. v Dy. CIT
8. Fees for technical services received by assessee
a Swiss entity from an Indian company is
taxable on gross basis under article 12(2) of
Indo Swiss tax treaty. [AGT International GmbH
v Dy. CIT [2020] 114 taxmann.com 51 (Mumbai
- Trib.)]
9. Where assessee, a Singapore based company,
opened a Liaison Office (LO) in India, in view of
fact that LO was not only involved in
preparatory and auxiliary activities but also
actively involved in ascertaining customer
requirements, price negotiations obtaining of
purchase orders, etc., it could be concluded
that said LO Constituted assessee's PE in India in
terms of articles 5 of India-Singapore DTAA.
[Hitachi High Technologies Singapore Pte Ltd. v
Dy. CIT [2020] 113 taxmann.com 327 (Delhi -
Trib.)]
*************
TRANSFER PRICING CASE LAWS
holding that in case of assessee, providing
internet based medical health related services,
a company rendering high end online software
solutions, could not be accepted as comparable,
SLP filed against order of High Court was to be
dismissed on ground of low tax effect. [Pr. CIT v
Inductis India (P.) Ltd. [2020] 114 taxmann.com
352 (SC)]
holding that in case of assessee-company acting
as investment sub-advisor to AE, companies
operating as merchant bankers or investment
bankers could not be accepted as comparables,
[Pr. CIT v Blackstone Advisors India (P.) Ltd.
[2020] 114 taxmann.com 221 (SC)]
3. Where TPO made addition towards interest on
delayed payment, however perusal of
transactions undertaken by assessee with AE
showed no pattern discernible which would
suggest any arrangement or understanding
between assessee and its AE that would qualify
said transaction as an international transaction,
no addition could have been made. [Pr. CIT v
Amadeus India (P.) Ltd. [2020] 113
taxmann.com 393 (Delhi)-HC]
4. Where office copies of draft assessment order
passed against assessee was duly stamped and
signed by Assessing Officer and copy of said
order forwarded to assessee was not signed
due to inadvertent mistake, such non-signing of
draft assessment order forwarded to assessee
would not invalidate final assessment order
passed under section 143(3) read with section
144C(13). [Reuters Transaction Services Ltd. v
Dy. CIT [2020] 113 taxmann.com 536 (Mumbai
- Trib.)]
5. Where assessee paid trademark royalty at rate
of 1 per cent over and above technical know-
how royalty paid at rate of 1.25 per cent to an
entity, since same had been approved by RBI,
Page 14

TPO was not justified in disallowing trademark
royalty being of view that technical know-how
royalty subsumes royalty for trademark.
[Mondelez India Foods (P.) Ltd. v Addl. CIT
6. Where TPO proposed an addition of certain
amount in respect of interest receivable on
funds advanced by assessee to its AE, since
assessee had given more than one calculation
for charging such interest, issue was to be
restored to file of Assessing Officer/TPO to
adjudicate issue afresh. [Jindal Dyechem
Industries (P.) Ltd. v Addl. CIT [2020] 114
taxmann.com 174 (Delhi - Trib.)]
7. Payments of royalty could not be bundled with
transactions of import of raw materials, for
transfer pricing adjustments. [Sika India (P.)
Ltd. v Dy. CIT [2020] 114 taxmann.com 182
(Kolkata - Trib.)]
8. ALP of charges paid by assessee to AE for intra
group services could not be determined as NIL
on ground of difficulty in allocation of expenses
between assessee and its AE. [Sika India (P.)
Ltd. v Dy. CIT [2020] 114 taxmann.com 182
(Kolkata - Trib.)]
9. Where assessee was rendering software
development services to AE, a company
engaged in rendering IT services and in
development of software products without
there being support segmental information,
could not be accepted as comparable.
[Symantec Software India (P.) Ltd. v Dy. CIT
[2020] 114 taxmann.com 435 (Pune - Trib.)]
10. Where assessee availed certain intra-group
services from its AE and Commissioner
(Appeals) computed ALP of such services being
30 per cent of value, since incurring of
expenditure by assessee was not in dispute and
only reason given by Revenue authorities was
that assessee did not need such services as
same were duplicative and that assessee did
not file sufficient details to establish that it
received some benefit, order of Commissioner
(Appeals) was to be set aside and AO/TPO was
to be directed to delete addition. [Cargill Global
Trading India (P.) Ltd. v Dy. CIT [2020] 113
taxmann.com 389 (Delhi - Trib.)]
11. Company earning revenue from goods
transport, bus operation, sale of wind power
and air charter business about which segmental
accounts were also not clear could not be
accepted as comparable for assessee company
engaged in business of international air and
ocean export and imports shipments. [JAS
Forwarding Worldwide (P.) Ltd. v Dy. CIT
12. Even when assessee was eligible for tax
exemption at rate of hundred percent under
section 10A/10B, then also arm's length price
on its international transactions deserved to be
determined under section 92C. [Doshi
Accounting Services (P.) Ltd. v Dy. CIT [2020]
113 taxmann.com 521 (Ahmedabad - Trib.)]
13. Where assessee, engaged as a sub-agent in
business of providing services for distribution of
channels to Star Ltd., paid certain amount as
brand fee for brand name and design of
channels featuring Star marks and Star
Corporate mark, in view of fact that said fee
had been approved by RBI, ITO was not justified
in determining ALP of said payment at nil. [Star
India (P.) Ltd. v Asst. CIT [2020] 113
14. Dispute Resolution Panel can only confirm,
reduce or enhance variations proposed by TPO
in draft assessment order but cannot set aside
issue to Assessing Officer/TPO for passing
altogether fresh order. [Capstone Securities
Analysis (P.) Ltd. v Dy. CIT [2020] 113
taxmann.com 518 (Pune - Trib.)]
*********
Disclaimer: Above said information are taken
from publically available resources and believed
to be accurate.
Page 15

Tax Updates- February '20

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