CIT vs. SMCC Construction India Ltd (Delhi High Court)
by editorAlthough the payment is spread over a period of 10 years, it does not make the Assessee the owner of the technical knowhow. The very nature of the license agreement is that it is not of a permanent nature. The benefit to the Assessee as a result of payment of royalty for technical knowhow was not of an enduring nature, and therefore cannot be construed to be a capital expenditure
CIT vs. SMCC Construction India Ltd (Delhi High Court)
COURT: | Delhi High Court |
CORAM: | I. S. Mehta J, S. Muralidhar J |
SECTION(S): | 37(1) |
GENRE: | Domestic Tax |
CATCH WORDS: | capital vs. revenue expenditure, technical knowhow |
COUNSEL: | Abhimanyu Jhamba |
DATE: | July 3, 2015 (Date of pronouncement) |
DATE: | July 15, 2015 (Date of publication) |
AY: | 2008-09, 2009-10, 2010-11 |
FILE: | Click here to download the file in pdf format |
CITATION: | |
S. 37(1): The very nature of a license agreement is that it is not of a permanent nature. The fact that the payment is spread over a period of 10 yearst does not make the assessee the owner of the technical knowhow. The payment is not of an enduring nature |
The department argued before the High Court that the reliance placed by the ITAT on the decisions in Premier Automobiles Ltd. vs. CIT, (1984) 150 ITR 28 (Bom) and Travancore Sugars and Chemicals Ltd. vs. CIT (1966) 62 ITR 566 (SC), to hold that the payment of technical knowhow fees is revenue in nature is misplaced because in those cases the assessees were manufacturing units and therefore different considerations would apply. It was urged that inasmuch as the essential business of the Assessee was entirely dependent on the technical knowhow provided by SMCL, the benefit to the Assessee was of an enduring nature and the expenditure incurred should be treated as capital expenditure. HELD by the High Court dismissing the appeal:
A perusal of the TCA shows that the payment by the Assessee to SMCL is for the technical knowhow given to the Assessee as a Licensee. Although the payment is spread over a period of 10 years, it does not make the Assessee the owner of the technical knowhow. The very nature of the license agreement is that it is not of a permanent nature. The view taken by the CIT (Appeals), and concurred with by the ITAT, cannot in the circumstances be said to be improbable or contrary to the settled legal position. The Court, therefore, concurs with the view of the CIT (A) and the ITAT that the benefit to the Assessee as a result of payment of royalty for technical knowhow was not of an enduring nature, and therefore cannot be construed to be a capital expenditure.
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Deccan Education Society vs. ACIT (ITAT Pune)
by editorNone of the persons who have deposed against the assessee by stating that they had given donation for the purpose of getting admission has complained to the Government for any such violation by the society. It is also to be noted that those persons have filled up the requisite proforma stating that they have given donation to the assessee voluntarily and not for seeking admission. Even some of them claimed deduction u/s.80G, a fact stated by the assessee and not controverted by the Departmental Representative. Therefore, changing the stands after their wards completed their education from the institutions run by the assessee trust are contradictory
Deccan Education Society vs. ACIT (ITAT Pune)
COURT: | ITAT Pune |
CORAM: | R. K. Panda (AM), Vikas Awasthy (JM) |
SECTION(S): | 10(23C)(iiiab) |
GENRE: | Domestic Tax |
CATCH WORDS: | capitation fee, donation, educational institution, exemption |
COUNSEL: | Sunil Pathak |
DATE: | July 13, 2015 (Date of pronouncement) |
DATE: | July 15, 2015 (Date of publication) |
AY: | 2008-09 |
FILE: | Click here to download the file in pdf format |
CITATION: | |
S. 10(23C) (iiiab): Law on treating an educational institution as running with a profit motive and treating the donations received by it as "capitation fee" on the basis of the allegation of the persons who have made the said donation explained |
(i) The exemption u/s 10(23C) (iiiab) is available to the society as a whole which has been formed for the sole purpose of establishing, running, managing or assisting schools and colleges in different fields. It is the trust or the society that has to apply for registration and claim exemption. Had it been the intention of the legislature to grant exemption only to the institutions individually or independently and not to the society as a whole, the language would have been different. The society or trust may run more than one institutions. Therefore, the argument of the Revenue that it should be institution specific and not the Society as a whole in our opinion is not correct.
(ii) As regards the question whether the trust is for profit motive, it is the allegation of the Revenue that the assessee trust was collecting the capitation fee in the garb of donation and was therefore running with a profit motive. We find the Assessing Officer has not reported the violation, if any, by the assessee trust to the Government of Maharashtra for taking any action for violation of The Maharashtra Educational Institutions (Prohibition of Capitation Fee) Act, 1987. None of the persons who have deposed against the assessee by stating that they had given donation for the purpose of getting admission has complained to the Government for any such violation by the society. It is also to be noted that those persons have filled up the requisite proforma stating that they have given donation to the assessee voluntarily and not for seeking admission. Even some of them claimed deduction u/s.80G, a fact stated by the assessee and not controverted by the Departmental Representative. Therefore, changing the stands after their wards completed their education from the institutions run by the assessee trust are contradictory. Further, it is also a fact that all donations received by the assessee trust are recorded in the books of account. There is no allegation by the Revenue that any part of such donation has been siphoned off for the benefit of any of the trustees or related persons. Nothing has been brought on record that any student has been denied admission for not giving donation. Merely because some of the donors stated that they have given the donation for admission the same in our opinion will not disentitle the society from getting exemption which is existing solely for educational purposes and which is otherwise entitled to the exemption (Chief CIT Vs. Geetanjali University Trust 352 ITR 433, Shikshana Prasaraka Mandali Vs. CIT Central Pune vide ITA Nos.1348 and 1349/PN/2010 order dated 27-03-2014, Sadvidya Educational Institution Vs. Add.CIT, Padanilam Welfare Trust Vs. Dy.CIT 10 ITR 479, Queen's Educational Society vs. CIT Civil Appeal No.5167/2008 order dated 16-03-2015, Pine Grove International Charitable Trust Vs. Union of India 327 ITR 73 followed)
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ITO vs. Late Som Nath Malhotra (ITAT Delhi)
COURT: | ITAT Delhi |
CORAM: | D. Manmohan VP, N. K. Saini (AM) |
SECTION(S): | 143(3), 292BB |
GENRE: | Domestic Tax |
CATCH WORDS: | dead person, null & void |
COUNSEL: | Piyush Kaushik |
DATE: | July 2, 2015 (Date of pronouncement) |
DATE: | July 15, 2015 (Date of publication) |
AY: | 2003-04 |
FILE: | Click here to download the file in pdf format |
CITATION: | |
S. 148/ 292BB: Issue of notice in the name of the deceased person renders the assessment order null and void even if the order is passed in the name of the legal heir. The fact that the legal heir attended the proceedings does not make it a curable defect u/s 292BB |
The AO recorded the reasons for issuing the notice u/s 148 of the Act in the name of the deceased assessee and got the approval of the Addl. CIT also in the same name. The AO issued notice dated 31.03.2010 u/s 148 of the Act in the name of the deceased assessee and also mentioned in the body of the assessment order that the notice u/s 148 of the Act was issued and served upon the assessee by Post within the statutory time period prescribed. Though the legal heir of the deceased assessee informed the AO that the assessee had expired and the return in the name of deceased assessee was filed by the legal heir, the AO did not issue any notice u/s 148 of the Act or 143(2) of the Act in the name of the legal heir. Therefore, the assessment framed by the AO on the basis of the notice issued u/s 148 of the Act in the name of the deceased assessee was invalid and void ab initio ( CIT Vs Suresh Chand Jaiswal 325 ITR 563 (All.) followed)
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ITO vs. Late Som Nath Malhotra (ITAT Delhi)
by editorThe AO issued notice dated 31.03.2010 u/s 148 of the Act in the name of the deceased assessee and also mentioned in the body of the assessment order that the notice u/s 148 of the Act was issued and served upon the assessee by Post within the statutory time period prescribed. Though the legal heir of the deceased assessee informed the AO that the assessee had expired and the return in the name of deceased assessee was filed by the legal heir, the AO did not issue any notice u/s 148 of the Act or 143(2) of the Act in the name of the legal heir. Therefore, the assessment framed by the AO on the basis of the notice issued u/s 148 of the Act in the name of the deceased assessee was invalid and void ab initio
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