DCIT vs. UPS Jetair Express Pvt. Ltd. (TS-102-ITAT-2015(Mum.)) dated March 10, 2015

DCIT vs. UPS Jetair Express Pvt. Ltd. (TS-102-ITAT-2015(Mum.)) dated March 10, 2015

Facts of the case

The assessee M/s. UPS Jetair Express Pvt. Ltd. an Indian company is a joint venture between UPS Worldwide Forwarding Inc. USA (UPS WWF) and Jetair Pvt. Ltd. engaged in the business of international express delivery services.

During the year, the assessee had obtained debtor collection services from RMS USA and legal services from TITUS an Indian firm. The payment for such services was made by M/s. UPS WWF USA and later reimbursed by the assessee to UPS WWF on cost-to-cost basis without any mark-up. No TDS was deducted on such services.

The AO contended that the assessee failed to deduct TDS u/s. 195 r.w.s. 9(1)(vii) and made the disallowance of such expenses

u/s. 40(a)(ia).

In appeal, CIT(A) rejected assessee's contention and AO's order was upheld.

Being aggrieved, the assessee preferred an appeal before Mumbai ITAT.

Issues

Section 2(14), read with sections 2(47) and 54, of the Income-tax Act, 1961 - Capital gains

IT: Even where assessee acquired property by provisional booking, he was eligible for section 54 deduction for cost of improvement along with cost of investment
■■■
[2015] 55 taxmann.com 536 (Delhi)
HIGH COURT OF DELHI
Commissioner of Income-tax-XVI
v.
Ram Gopal*
S. RAVINDRA BHAT AND R. K. GAUBA, JJ.
IT APPEAL NO. 70 OF 2015†
FEBRUARY  9, 2015
Section 2(14), read with sections 2(47) and 54, of the Income-tax Act, 1961 - Capital gains - Capital asset (Immovable property) - Assessment year 2009-10 - Whether even booking rights or rights to purchase or rights to obtain title of property is also capital asset - Assessee sold capital assets - Assessee claimed that he acquired another property out of sale consideration and also claimed cost of improvement under section 54 - Assessing Officer held that in absence of an agreement to sell, rights acquired by provisional booking of property was not acquisition of new capital asset and cost of improvement was not deductible - Whether since right of acquiring of property by assessee amounted to capital asset, improvement cost was eligible for exemption along side cost of investments - Held, yes [Paras 5 and 7] [In favour of assessee]

Section 23 of the Income-tax Act, 1961 - Income from house property - Annual value (Interest free loans)

IT : Where assessee let out its hotel premises, in view of fact that apart from rent assessee also received interest free loan from tenant which had no nexus with leasing of property, notional interest on said loan could not be included while computing ALV of property
IT : Where letting out of furniture and fixture was incidental to letting out of hotel building, rental income derived in respect of same was to be taxed as 'income from house property'
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[2015] 55 taxmann.com 537 (Hyderabad - Trib.)
IN THE ITAT HYDERABAD BENCH 'B'
Care Institute of Medical Sciences Ltd.
v.
Deputy Commissioner of Income-tax, Circle-1 (2), Hyderabad*
B. RAMAKOTAIAH, ACCOUNTANT MEMBER
AND SAKTIJIT DEY, JUDICIAL MEMBER
IT APPEAL NO. 441 (HYD.) OF 2012
[ASSESSMENT YEAR 2007-08]
JANUARY  30, 2015
Section 23 of the Income-tax Act, 1961 - Income from house property - Annual value (Interest free loans) - Assessment year 2007-08 - Whether where assessee let out its hotel premises, in view of fact that apart from rent assessee also received interest free loan from tenant which had no nexus with leasing of property, notional interest on said loan could not be included while computing ALV of property - Held, yes [Para 11] [In favour of assessee]
Section 22, read with section 28(i), of the Income-tax Act, 1961 - Income from house property - Chargeable as (House property v. Business income) - Assessment year 2007-08 - Whether where letting out of furniture and fixture was incidental to letting out of hotel building, rental income derived in respect of same was to be taxed as 'income from house property' and not as business income - Held, yes - [Para 15] [Partly in favour of assessee]

Section 69A, read with sections 132 and 158BB, of the Income-tax Act, 1961 - Unexplained moneys (Seized documents

IT : Where Assessing Officer made addition to assessee's income on basis of a document seized in course of search, in view of fact that document seized was both undated and unsigned and even taken at face value did not lead to further enquiry on behalf of Assessing Officer, impugned order of Tribunal deleting addition was to be confirmed
IT : Where Assessing Officer in course of block assessment proceedings made addition in respect of unexplained investment relating to purchase of property, in absence of any incriminating evidence with respect to payment over and above reported amount, addition so made deserved to be deleted
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[2015] 56 taxmann.com 7 (Delhi)
HIGH COURT OF DELHI
Commissioner of Income-tax-XIV
v.
Vivek Aggarwal*
S. RAVINDRA BHAT AND R. K. GAUBA, JJ.
IT APPEAL NOS. 66 TO 69 & 75 TO 77 OF 2014†
FEBRUARY  9, 2015
I Section 69A, read with sections 132 and 158BB, of the Income-tax Act, 1961 - Unexplained moneys (Seized documents) - Block assessment years 2001-02 to 2007-08 - A search was carried out at assessee's premises in course of which Assessing Officer seized certain letters/e-mail - On basis of said documents, Assessing Officer made addition to assessee's income on account of undisclosed salary - Commissioner (Appeals) as well as Tribunal deleted addition holding that in absence of any corroborative material to link such e-mail letter or its contents with assessee, inference that some additional income was earned by him by way of salary, was incorrectly drawn - Whether since document seized was both undated and unsigned and even taken at face value did not lead to further enquiry on behalf of Assessing Officer, impugned order of Tribunal deleting addition was to be confirmed - Held, yes [Para 13] [In favour of assessee]
II - Section 69, read with section 158BB of the Income-tax Act, 1961 - Unexplained investments (Purchase of property) - Block assessment years 2001-02 to 2007-08 - Assessee purchased a property for a consideration of Rs. 3.70 lakh - During course of block assessment proceedings, Assessing Officer rejected transaction value and referred matter to AVO who in his report valued property at Rs. 10.65 lakh - Accordingly, addition of Rs. 6.95 lakh was made to assessee's income - Tribunal, however, set aside said addition - Whether in absence of any incriminating evidence with respect to payment over and above reported amount, it could not be concluded that transaction relating to property in question was undervalued, and, therefore, impugned order deleting addition was to be confirmed - Held, yes [Para 17] [In favour of assessee]

Section 158BD, read with section 254, of the Income-tax Act, 1961 - Block assessment in search

IT : There was an error apparent on record in Tribunal's order where Tribunal had not considered evidence of satisfaction recorded under section 158BD
IT : While recalling its order and placing it before a regular Bench to adjudicate/decide merits of appeal, Tribunal is not entitled to observe on merits of adjudication
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[2015] 55 taxmann.com 479 (Bombay)
HIGH COURT OF BOMBAY
Gyan Construction Co.
v.
Income Tax Appellate Tribunal, Mumbai Bench 'G'*
M.S. SANKLECHA AND G.S. KULKARNI, JJ.
WRIT PETITION NOS. 162 & 150 OF 2015†
JANUARY  23, 2015
Section 158BD, read with section 254, of the Income-tax Act, 1961 - Block assessment in search cases - Undisclosed income of any other person (Conditions precedent) - Tribunal by order, dated 29-12-2010 set aside assessment made under section 158BD in case of assessee on ground that no satisfaction under section 158BD was recorded by Assessing Officer of searched person in respect of assessee - While doing so Tribunal did not consider letter of Assessing Officer of searched person recording satisfaction of undisclosed income in case of assessee - On revenue's rectification application, Tribunal recalled order dated 29-12-10 and placed matter before regular bench for consideration by making observation that jurisdictional requirement to proceed against assessee was satisfied - Whether since there was an error apparent on record in Tribunal's order, dated 29-12-2010 as it did not consider communication recording satisfaction under section 158BD, Tribunal rightly recalled its order - Held, yes - Whether, however, while recalling its order it was impermissible for Tribunal to make observation on issue of jurisdiction and, therefore, such observation could not be upheld - Held, yes [Para 8] [In favour of revenue]
Section 254 of the Income-tax Act, 1961 - Appellate Tribunal - Orders of (Recall orders) - Whether once an order is recalled and appeal is to be placed before regular Bench for fresh consideration, it restores status quo ante - Held, yes - Whether, therefore, while recalling its order and placing it before a regular bench to adjudicate/decide merits of appeal, Tribunal is not entitled to observe on merits of adjudication - Held, yes [Para 12] [In favour of assessee]

Section 9 of the Income-tax Act, 1961 - Income - Deemed to accrue or arise in India

IT/ILT : Where assessee rendered services as senior drilling engineer at Nigeria to an Indian company, fees was received by assessee in foreign currency for rendering said services outside India could not be brought to tax in India
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[2015] 55 taxmann.com 484 (Hyderabad - Trib.)
IN THE ITAT HYDERABAD BENCH 'A'
Income-tax Officer (International Taxation)-I, Hyderabad
v.
Janardhan Pannir*
P.M. JAGTAP, ACCOUNTANT MEMBER
AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER
IT APPEAL NO. 721 (HYD.) OF 2014
[ASSESSMENT YEAR 2010-11]
DECEMBER  24, 2014
Section 9 of the Income-tax Act, 1961 - Income - Deemed to accrue or arise in India (Fee for technical services) - Assessment year 2010-11 - Whether where assessee was working as consultant-cum-independent contractor in order to render services as senior drilling/operation engineer at Nigeria (outside India) to an Indian company, amount received by assessee in foreign currency for rendering said services outside India could not be brought to tax in India - Held, yes [Para 14] [In favour of assessee]

Section 10(8A), read with section 271(1)(c), of the Income-tax Act, 1961

IT : Where assessee received certain amount from Asian Development Bank for rendering engineering consultancy services, in view of fact that assessee was under a bona fide belief that said amount was exempt from tax in terms of agreement between parties and having regard to obligation of Government to bear tax on behalf of assessee, AO could not pass penalty order under section 271(1)(c) taking a view that amount in question was taxable in assessee's hands
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[2015] 55 taxmann.com 407 (Delhi)
HIGH COURT OF DELHI
LEA International Ltd.
v.
Assistant Director of Income-tax*
SANJIV KHANNA AND V. KAMESWAR RAO, JJ.
IT APPEAL NO. 17 OF 2014†
SEPTEMBER  3, 2014
Section 10(8A), read with section 271(1)(c), of the Income-tax Act, 1961 - Consultant - Assessment year 2005-06 - Assessee was a foreign compay based in Canada - During relevant period, assessee was engaged in providing engineering consultancy services - Assessee received certain amount under a contract with Asian Development Bank (ADB), for providing consultancy service - In return of income, said amount was claimed as exempt from tax - Assessing Officer held that amount received from ADB was not exempt and was added to return income - He also passed penalty order under section 271(1)(c) - Tribunal noted that application for exemption under section 10(8A) was filed by assessee with Additional Secretary, Department of Economic Affairs, Ministry of Finance, Government of India, after filing of return and issue of notice under section 143(2) which showed lack of bona fides on part of assessee - Accordingly, penalty order was confirmed - It was noted that assessee was under bona fide belief that receipt was exempt on basis of agreement entered into between parties and having regard to obligation of Government of India to bear cost of any taxes etc. in India on behalf of assessee - Even otherwise, in return of income itself, assessee had taken care and caution to reveal full material facts relating to money received from ADB - Whether on facts, it was not a fit case for imposition of penalty and, thus, impugned order passed by Tribunal was to be set aside - Held, yes [Paras 9 and 10][In favour of assessee]
Ved Jain and Pranjal Srivastava, Advs. for the Appellant. Sanjeev Sabharwal, Sr. Adv., Ruchir Bhatia and Ms. Swati Thapa for the Respondent.

Section 43(5) of the Income-tax Act, 1961 - Speculative transactions (Currencies)

IT : Provisions of section 43(5) do not apply to currencies and, therefore, loss incurred by assessee in currency swap contract cannot be denied to be set off against other heads of income taking it as speculative loss
IT : Where assessee company had entered into currency swap contracts for working capital loans which was pre-requisite for its business of export and import of commodities, loss incurred in said contract being in respect of circulating/working capital was an allowable expense under section 37(1)
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[2015] 55 taxmann.com 375 (Ahmedabad - Trib.)
IN THE ITAT AHMEDABAD BENCH 'A'
Adani Enterprises Ltd.
v.
Additional Commissioner of Income-tax, Range-1, Ahmedabad*
SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER
AND N.S. SAINI, ACCOUNTANT MEMBER
IT APPEAL NO. 1545 (AHD.) OF 2014
[ASSESSMENT YEAR 2008-09]
JANUARY  30, 2015
Section 43(5) of the Income-tax Act, 1961 - Speculative transactions (Currencies) - Assessment year 2008-09 - Whether provisions of section 43(5) do not apply to currencies and, therefore, loss incurred by assessee in currency swap contract cannot be denied to be set off against other heads of income taking it as speculative loss - Held, yes [Para 4.10] [In favour of assessee]
Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of (Currency swap loss) - Assessment year 2008-09 - Whether where assessee company had entered into currency swap contracts for working capital loans which was pre-requisite for its business of export and import of commodities, loss incurred in said contract being in respect of circulating/working capital was to be allowed under section 37(1) - Held, yes [Para 4.6] [In favour of assessee]

Section 251 of the Income-tax Act, 1961 - Commissioner (Appeals)

IT : When a stay application is to be considered and decided, it would be required for concerned authority to record reasons and then to reach to ultimate conclusion as to whether stay should be granted or not and if yes on what condition
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[2015] 55 taxmann.com 408 (Gujarat)
HIGH COURT OF GUJARAT
Hitech Outsourcing Services
v.
Income-tax Officer-Ward 6 (2)*
JAYANT PATEL AND S.H. VORA, JJ.
SPECIAL CIVIL APPLICATION NO.12606 OF 2014
JANUARY  19, 2015
Section 251 of the Income-tax Act, 1961 - Commissioner (Appeals) - Powers of (Power to grant stay) - Assessment year 2011-12 - Whether when a stay application is to be considered and decided, it would be required for concerned authority to record reasons and then to reach to ultimate conclusion as to whether stay should be granted or not and if yes on what condition - Held, yes [Para 5] [In favour of assessee/Matter remanded]
Circulars and Notifications : Instruction No. 1914 dated 2-12-1993