Gujarat high court on i) Duty of AO to verify expenses: from available details
ii) Deemed dividend u/s 2(22)(e) : search admission : beneficial share holder
iii)Survey u/s 133A Statement of son of assessee and reopening us 148
iv) Section 40(b) Partner remuneration : computation of base profits
Duty of AO to verify expenses: from available details
NET 4 NUTS LTD IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 311 of 2013 Date : 30/04/2013 10. Having heard learned counsel for the parties, we notice that undisputedly, the assessee had developed a software which had a special application. In fact, such
software was also registered as trademark. Assessing Officer's objection that, on mere development of a new software depreciation as an intangible asset cannot be granted therefore would not survive. The sole basis in the further proceedings, therefore, was that the expenditure incurred in development such software was not established by the assessee. 11. In this respect, the CIT(A) as well as the Tribunal have not accepted the Assessing Officer's version. It is true that such expenditure and the details thereof were placed by the assessee before the CIT(A) in the original
assessment for the assessment year 2006-07. The revenue has not questioned such details supplied. More importantly, in the reopened proceeding, full facts were before the Assessing Officer. In the original assessment as well as in the fresh assessments, the accounts of the
assessee would be available. The assessee has been contending at the outset that the software was developed in house and the expenditure incurred in development of such software was capitalized. If that be so, the same could have been verified by the Assessing Officer from
the assessee's profit and loss accounts. He, instead proceeded to reject the entire claim merely on the ground that the assessee did not furnish the details of expenditure incurred in development of such software 13. In facts of the case, we are not inclined to interfere
Deemed dividend u/s 2(22)(e) : search admission : beneficial share holder
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 936 of 2012 KRUPESHBHAI N PATEL Date : 29/04/2013 Though two separate questions have been framed, issue is single namely of the decision of the Assessing Officer to tax a certain income in the hands of the respondentassessee as a deemed dividend under Section 2 (22) (e) of the Income Tax Act, 1961 ('the Act' for short). For the assessment year 2006-07, the Assessing Officer inquired with the assessee regarding the assessee's share holding in a company namely M/s. Amod Stampings Pvt. Ltd. (hereinafter to be referred to as 'the said
company'). The question is in the present circumstances, the Tribunal could have validly come to the conclusion that the assessee was not hit by Section 2(22)(e) of the Act.
In that context, we need to appreciate the Tribunal's conclusions on the basis of the requirements of the said section of the advance or loans made by the company to its shareholder and a person who was beneficial owner of the shares. To our mind, these two aspects cannot be separated and rightly therefore gave its due weight age by the Tribunal
It appears that during course of a search operation carried out by the department, it was noticed that the said company had given loans to various members including the assessee having share holding
and voting powers exceeding 10%. The assessee was, during the search operation, confronted with such shareholding pattern and the loans advanced. Assessee wrote a letter dated 19.03.2009 agreeing to accept a
sum of Rs. 881.71 lacs as deemed dividend under Section 2 (22)(e) of the Act. During the course of the assessment proceedings, however, it was asserted before the Assessing Officer that a trust was created on 16.01.2005, in which, the respondent-assessee and other family
members had settled an aggregate of 5.12 lacs of equity shares of the said company held by them. It was the case of the assessee that he did not hold any beneficial interest in the shares on the said company having more
than 10% of the total voting power. He, therefore, contended that Section 2 (22)(e) of the Act had no application. The Assessing Officer, however, gave detailed reasons to reject such a stand. He was of the opinion that neither the shares of the said company were transferred nor any
dividend was passed on to the trust. These facts led to a conclusion that the trust was not in existence at all. Learned counsel, Mr. Bhatt for the revenue vehemently contended that the Assessing Officer as well as the CIT(A) had examined the material on record and come to just aconclusion that the creation of the trust was not genuine. Even if the trust was created, as held, mere so-called transfer of the shares had never been acted upon. He highlighted several aspects of the matter, particularly, those projected by the CIT(A) in the appellate order to contend that the creation of the trust at best was an artificial devise to avoid tax liability. Learned counsel, Mr. Bhatt did contend that when the shares were not transferred in the name of the trust, the assessee continued to be the shareholder and also must be seen to have retained its beneficial ownership of the shares. To this aspect, we do not agree. The Tribunal, on the other hand, was influenced by the other factors namely that the trust deed was created on a stamp paper in the year 2005 i.e. nearly four years before the date of the search; that the same was duly notarized. The department did not carry out any inquiries with the notary public to establish the non-genuineness of the trust deed. The Tribunal also took into account other
facts, such as that the Companies Act would not permit transfer of the shares in the name of the trust; that there was no dividend declared by the Company and that the Trust, therefore, did not receive any income so as either to open a bank account or to file a return. Equally importantly the mere fact that the trust deed was not found at the time of search and that later on the assessee agreed to surrender tax on such dividend
income did not convince the Tribunal We have ourselves perused the said letter dated 19.03.2009 In such letter the assessee had stated that he had agreed to take such a stand to avoid any litigation. He however held a belief that the said income was not chargeable to tax as a deemed dividend.It was stated that the authority had expressed the opinion that since there was no financial transaction in the name of the trust and that the trust was not registered, it would not be possible to accept that the shares were settled in the said trust. It was for these reasons that the income was being surrendered.
Survey u/s 133A Statement of son of assessee and reopening us 148
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 57 of 2013 SHARDABEN K MODI Date : 30/04/2013 We have heard learned counsel, Mr. Manav Mehta for the revenue. The only question that has to be addressed to by this Court is whether the notice of re-opening issued is valid or not. It is argued by the learned counsel that in survey proceedings, son of the respondent-assessee, who was looking after business of the assessee, had admitted the huge amount of Rs. 12 lacs on behalf of the assesseerespondent and, therefore, the revenue was justified in seeking to reopen the assessment. He further urged that
not only the son had admitted such amount, assesseerespondent
also while admitting, confirmed that her son was looking after the business and therefore, the Tribunal has committed an error in allowing the appeal of the assessee and rejecting the say of the revenue. He further
made a grievance that other questions were also at large before the Tribunal which had not been gone into by the Tribunal and therefore, learned counsel urged for intervention. He has also produced, for our perusal, original file, where reasons are recorded while issuing the
notice under Section 148 of the Income Tax Act to substantiate his version: At the outset, it is necessary to reproduce the reasons recorded by the Income Tax Officer before he chose to issue the notice under Section 148 of the Income Tax Act seeking reassessment:
"In this case, survey u/s. 133A of the Act was carried out at the business premises of Ganesh Hall, Nr. Kasturba Hospital, Valsad on 03.01.2006. Several incriminating documents were found and impounded u/s. 131(3) of the Act. During the course of survey statement of her son, Shri
Tarun K. Modi, who is looking after day to day business being run by her was recorded and it is found that the income chargeable to tax has escaped assessment for the A.Y. 99-2000. I have therefore, reason to believe that income chargeable to tax has escaped assessment to the extent of investment made by her in various projects with her son. I therefore propose to assess/reassess the income of the assessee for the A.Y.99-2000."
As could be seen from the reasons recorded, the sole basis for issuance of the notice is, the statement made during the course of survey by Mr. Traun K. Modi, who happens to be the son of the assessee-respondent. The reasons do not give any further details as to what is the amount which had been accepted by the son of the assessee-respondent and how the same would bind the assessee. In absence of any independent material, record does not reveal as to how such statement recorded of the son of the assessee-respondent would form a valid basis for reopening the assessment of the assessee-herself. Any notice of the reopening issued under Section 148 would be required to be tested at the touchstone of the reasons recorded by the Assessing Officer, as could be noticed from the record itself, the very basis on which the revenue has sought to reopen the assessment is not found cannot be sustainable. Even without delving into the details of findings with regard to evidentiary value of the statement recorded under Section 133(A) and CBDT circular fundamentally relied upon by the Tribunal in denying the say of the revenue, we are convinced from the reasons recorded by the Assessing Officer alone that these proceedings under Section 147 and the notice issued under Section 148 cannot be permitted to be sustained. Tribunal's judgement, therefore, deserves no interference. It is also to be noted that the Tribunal having annulled the proceedings of the reassessment had rightly chosen not to enter into any further questions proposed before it.
Section 40(b) Partner remuneration : computation of base profits
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 316 of 2013 J J INDUSTRIES Date : 25/04/2013"Whether on the facts and in the circumstances of the case, the Tribunal was justified in taking view that whole income embedded in P & L account of assessee is to be taken into consideration for allowing deduction of
remuneration paid to partners under section 40(b) without excluding interest income credited to P & L account, even if it is not business income?" The question, therefore, arises whether the interest
income earned by the assessee-firm from the fixed deposit receipts should be ignored for the purpose of working-out the book profit to ascertain the ceiling of the partners' remuneration Counsel for the revenue vehemently contended that for the purpose of ascertaining the limit, only business
income would be relevant and not any other income. In the present case, however, we need not enter into such controversy. The assessee had held out that it is in the business of purchasing raw cotton and ginning the same. It is a seasonal business. The interest income was generated out of spare funds invested in the fixed deposit. Such income was declared as part of the business income and that is how even the Assessing Officer had accepted the same. That being the position, and the Assessing Officer in the assessment taxed such income as business income, we do not see any question of law arising.
__._,_.___
No comments:
Post a Comment