Wednesday, December 21, 2016


2. FROM MY ARCHIVES- USEFUL ITAT , KOLKATA DECISIONS ( 2016 : Part 2) (download order fm

1. Abacus Foundation vs. CIT (Exemption)[ITANos.02&03/Kol/2016];order dated  23.09.2016
Carrying on charitable activity at the stage of application before CIT (Exemption) is not relevant to decide whether such trust / institution is entitled for registration u/s 12AA

Sec 12AA

As per the provision of Section 12AA of the Income Tax Act, 1961, on receipt of an application for registration of a trust or institution, CIT (Exemption) shall call for such documents or information from the trust or institution as he thinks necessary in order to satisfy himself about the genuineness of activities of the trust or institution and may also make such inquiries as he may deem necessary in this behalf. After satisfying himself about the objects of the trust or institution and the genuineness of its activities, CIT shall pass an order in writing registering the trust or institution and if he is not satisfied, pass an order in writing refusing to register the trust or institution.
In the instant case, the assessee-trust after rejection of the application for  registration u/s 12AA carried the matter in appeal before the ld. Tribunal.
As regards granting the registration to the assessee at the commencement stage, the powers of the  CIT are limited to the aspect of examining  whether or not the objects of trust are charitable in nature and since the Trust was formed on 12.12.2014 and the application for registration was made on 17.04.2015, though the activities commenced to some extent though less, it is not open for the CIT to go into the quantitative aspect of the activities of the Trust.
Reference was made to the following judgments:
(i) Dharma Sansthapak  Sangh (Nivas) vs. CIT  [(2008) 118 TTJ (Del.) 823]
(ii) Vivekananda Welfare Trust vs. DIT(E)  [ITA Nos. 2095/KOL/2008 and 27/KOL/2009]
(iii) M/s Ginia Devi Todi Charitable Trust, Kolkata vs. Director of Income Tax  [ITA No.738/Kol/2010]
(iv) Bani Mittra Charitable Trust, Kolkata vs. Director of Income Tax   [ITA Nos. 1154 & 1155/Kol/2009]

2.   ITO vs. M/s. Chitravali Sales (P) Ltd. [ITA No.1258/Kol/2010]; order dated 10.08.2016   

Monies received as trade advances and the same having been proved by the assessee as against supply of material booked as sales, the same cannot be the subject matter of addition under sec 68

Sec 68
As per the provision of section 68 of the Act, where any sum is found credited in the books of an assessee maintained for any previous year and assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the ld. AO, satisfactory, the sum so credited may be charged to income tax as the income of the assessee of that previous year.
In the instant case, the assessee took advances of Rs. 7,75,34,884/- from 470 customers for supply of sand to them for which sales have been effected subsequently. The details of total advances were furnished by the assessee before the AO containing the name, address, mode of payment, bank name, amount etc. The  AO proceeded to issue notices u/s. 133(6) of the Act. All the 470 customers responded owning the payment of advances to the assessee and squaring off the entire advances against supply of sand made by the assessee.
The assessee had duly discharged its initial onus of explaining the nature and source of credit, identity of the creditors, genuineness of the transactions. Assessee only received trade deposit from customers which has been adjusted against supplies of sand. In this case, the provisions of section 68 of the Act could not be invoked in respect of trade deposits received from customers.
Reliance was placed on the following judgments:
(i)                ITO vs. Laxman das Makhija (2009) 116 ITD 47 (TM)
(ii)             CIT vs. Bhital Das Modi (2005) 276 ITR 517 (All)
(iii)           CIT vs. Tulip Finance Ltd. (2009) 178 Taxman 182 (Del)
(iv)           CIT vs. Chemi Kleen India (P) Ltd. (1990) 181 ITR 198 (Del)
(v)              CIT vs. S.D. Investment & Trading Co. (2008) 306 ITR 31 (Bom)
(vi)           Crystal Networks (P) Ltd. vs. CIT ITA No. 158 of 2002 dated 29.07.2010 (Calcutta HC)

Note: It is pertinent to note that the Calcutta High Court in the case of Crystal Networks (P) Ltd. (supra) has gone to the extent of holding that no adverse inference can be drawn in respect of trade advance where the summons issued by the AO to the customers were returned unserved but the assessee is able to prove that ultimately goods were supplied against the advance received.

3.  St. Joseph’s Convent Educational Society vs. JCIT  [ITA No. 1695/Kol/2012]; order dated 11.05.2016

Whether the donation given by one charitable institution to another out of current year’s income is permitted as an application of income under sec 11 ?

Sec 11 r.w sec. 13(1)(c)(ii)/ sec. 13(3)
It is well settled that when the donation is given by one charitable trust to another trust out of current year’s income the same is permitted in sec. 11 as an application of income and the same cannot be curtailed by another provision of the Act i.e. sec. 13(1)(c)(ii) r.w. sec. 13(3) of the Act as it would defeat the very purpose of such provision.
It is pertinent to note here that as per sec. 13(1)(c)(ii), any income of a charitable institution cannot be used for the benefit of restricted category of persons as provided in sec. 13(3) viz., founder, a person making substantial contribution to the institution, trustee, any relative of these persons, any concern in which they have substantial interest.
In the instant case, the charitable trust is constituted for charitable purposes with a philanthropic mind to give donation. The payment made for benevolent cause is always a charity.
The payment of donation by assessee trust to another registered public charitable trust is not in violation of sec. 13(1)(c) as the said payment is not made for the benefit of any person either directly or indirectly referred to in sec. 13(3). Admittedly, the donee trust is a registered public charitable trust and there is no question of any individual holding substantial interest in the said trust.
Reliance was placed on the following judgments :
(i)                 CIT vs. Hindustan Charity Trust (1983) 139 ITR 913 (Cal)
(ii)               CIT vs. Trustees of the Jadi Trust (1982) 133 ITR 494 (Bom)
(iii)             CIT vs. Sarladevi Sarabhai Trust No. 2 (1988) 172 ITR 698 (Guj)

4. Quality Bags Exporters (P) Ltd. vs. A.C.I.T  [ITA Nos. 2787 to 2790/Kol/2013]; order dated 02.09.2016

Whether unusual delay in filing appeal (say 2380 days) due to wrong legal advice can be condoned by the appellate authority?

Sec 250
Facts: Assessee’s original assessment was completed u/s 143(3) after allowing deduction u/s 80HHC of the Income Tax Act, 1961 on DEPB licence. Later the case was reopened on the ground that excess deduction under 80HHC was allowed in respect of export incentive in the form of sale of DEPB License  in view of the amended provision of section 80HHC brought out by Taxation Laws Amendment Act of 2005. Finally the re-assessment was completed by disallowing the deduction u/s 80HHC to the tune of Rs. 14,27,543/-.
The assessee approached its regular CA for advice. He advised that there is no point in filing appeal since according to him, withdrawal of excess deduction u/s. 80HHC in respect of export incentive were in conformity with the amended provision of sec. 80HHC brought out by Taxation Laws amendment Act of 2005.
Much later, after passing of around 2380 days, the assessee approached an advocate to suggest measures for the stay of income for demand as the I.T. Department was pressing hard for recover of the same. The advocate expressed the opinion that in view of the decision of the Hon’ble Supreme Court in the case of Topman Exports vs. CIT 342 ITR 49, the assessee was entitled to the benefit of deduction u/s. 80HHC. The assessee filed the appeal with a proper petition for condonation of delay. The appeal was dismissed by the CIT(A) on the ground of unreasonable delay in filing appeal.
On appeal before the Tribunal, it was held-
In the instant case, the assessee company filed an appeal before CIT(A) with a delay of 2300 days. The reason of delay is non availability of a proper professional advice. Assessee company would be entitled to get deduction u/s 80HHC but delay of filing appeal would be the only hurdle in not getting such benefit.
In my view, in some identical cases, courts have condoned delays in filing appeals due to wrong legal advice and the appeals of the assessees were allowed.
Reliance was placed on the following judgments :
(i) Pahilajrai Jaidishin vs JCIT in ITA No.1398/M-um/2012 order dated 28.08.2013
(ii)  Surajmall Exports in ITA No.410/Kol/2013 order dated 30.11.2015
(iii)  Magnum Export in ITA NO.1111/Kol/2012 order dated  08.02.2013
 Reference was also made to the case of Shri Anupam Biswas vs. ITO, ITA No. 2198/Kol/2014 order dated 09.12.2015, where Hon’ble ITAT, Kolkata Bench  held that where in view of the strong merit of the case, the liability of the assessee is non-existent and the assessee has properly explained the reasons for the delay, the unusual delay in filing appeal should be condoned.

Saturday, December 10, 2016


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1.       ITO vs. M/s. Raj Kumar Suresh Kumar Jaiswal  [I.T.A Nos. 128 to 133/kol/2013]
           ITO vs. M/s. Raj Kumar Jaiswal  [I.T.A Nos. 134 to 139/kol/2013]
           ITAT, “C” Bench, Kolkata; Order Dated : 09.11.2016

Section 206C :
Held :
(i)                  Where scrap purchased by the assessee is segregated and some useful separate products are obtained and when such separate  products are sold – No obligation for collecting TCS.

(ii)                Proviso to S. 206C(6) – It is pari materia to second proviso to S. 40a(ia) – the ratio laid down by DHC in Ansal Landmark Township (about retrospectivity) will apply.

2.     Shri Mukul Dutta vs. ITO
         [I.T.A No. 486/Kol/2015]
        ITAT, “D” Bench, Kolkata; Order Dated : 16.11.2016

Held :
Contractual receipts not disclosed in the books cannot be taxed fully – only net profit percent can be added back. Department has to prove that expenses relating to such income has been debited in the books.

3.      Shri Suraj Sonar vs. ACIT  [IT (SS) A. No. 132/Kol/2014]
         Smt. Mina Sonar vs. ACIT  [IT (SS) A.No.133/Kol/2014]
         Shri Bharat Sonar, HUF vs. ACIT  [IT (SS) A. No. 134/Kol/2014]
         Shri Bharat Sonar vs. ACIT  [IT (SS) A. No. 135/Kol/2014]
         ITAT, “C” Bench, Kolkata; Order Dated : 09.11.2016
Held :
(i)                  Once substantive  assessment is confirmed, protective  addition  cannot be sustained.

(ii)                Assessed income can go below the returned income depending upon facts and circumstances.

               I.T.A. No. 1064/Kol/2010; C.O. No. 153/Kol/2010 & I.T.A No. 1064/Kol/2010
              ITAT, “A” Bench, Kolkata; Order Dated : 16.11.2016

Capital Gains vs. Stock-in-Trade
Held :
Assessee dealt in 185 companies’ shares but assessee held the shares as investment, received decent dividend, Board Resolution was passed, no borrowed funds were taken and revenue accepted holdings as investment in earlier years u/s. 143(1) – Surplus to be treated as Capital Gains.

5.           ACIT vs. M/s. Winro Commercial (India) Ltd.  [ITA No. 1468/Kol/2012]
              DCIT vs. M/s. Winro Commercial (India) Ltd.  [ITA No. 804/Kol/2013]
              M/s. Winro Commercial (India) Ltd. vs. CIT-1  [ITA No. 1590/Kol/2013]
               ITAT, “B” Bench, Kolkata; Order Dated :21.07.2016
S. 14A R.W Rule 8D :
Held :
Where the CIT(A) gave relief on the ground that borrowed funds were utilized for giving loans and not for acquiring shares and the capital of the appellant including share capital and reserves and surplus exceeded the amount of investment in shares & units and CIT(A) held that the case of Dhanuka & sons 339 ITR 319(Cal) is distinguishable on these facts and he finally deleted additions made u/s. 14A r.w. Rule 8D, there is no mistake in the order of CIT(A) and the same cannot be interfered with.