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II. Direct Taxes Case Laws:
1. CIT Vs. Ramanbhai B Patel, Tax Appeal No. 207/208/210 of 2008, Date of Order: 20.07.2016, High Court of Gujarat
Issue:
Whether the admissions made by the assessee during the search
proceedings can be used as a conclusive proof against the assessee?
Held_No
Brief Facts:
AO had made addition on the basis of a statement recorded by the ADIT
under Section 131 of the Income Tax Act, 1961. In the statement
recorded, the assessee has admitted to have earned a certain amount in
cash on account of various projects. However, after two months, the
assessee has retracted from the statement giving the reasoning that the
same was obtained under threat. The new statement of the assessee was
not accepted by the assessee and the addition was sustained. However,
CIT (A) and Tribunal deleted the additions. Therefore, the revenue is in
appeal before the Hon’ble High Court.
Held:
It was held that the assessee was not allowed to cross-examine the
person, on the basis of whose statement the proceedings was initiated.
The admission made by the assessee is not a conclusive proof and such
admission can be used as evidence unless it is not retracted. While the
assessee in this case has already retracted the statement which in our
opinion is a valid retraction. Therefore, the appeal of the revenue is
dismissed and the order of the Tribunal is upheld.
(Please click here for judgment)
2. Grindwell Norton Ltd. Vs. Addl. CIT, I.T.A. No. 528/Mum/2012, Date of Order: 27.07.2016, ITAT - Mumbai
Issue:
Whether the surplus arising on prepayment of deferred sales tax
was a revenue receipt and liable to tax u/s.28(iv) of the Income-tax
Act?
Held_No
Brief Facts:
The assessee company is engaged in the business of manufacturing of
abrasives and refractory products and also deals in ceramics and
plastics. During the relevant Assessment Year, the assessee company had
made some gain on repayment of deferred sale tax and same had been
claimed as capital receipt and therefore not liable to tax. The AO
passed an order stating the amount of surplus on repayment of sales tax
to be taxed as business income u/s 41(1) of the Income Tax Act, 1961.
The CIT(A) contented that the amount of surplus is not equivalent to
remissions of liability and hence not taxable u/s 41(1) but he treated
the amount to be benefit accrued to the assessee and same taxable as
benefit u/s 28(iv). Aggrieved by which, the assessee is in appeal before
the Tribunal.
Held:
It was held that no benefit had accrued to the assessee, since
ultimate effect of the transaction is that the assessee paid present
value of a future liability. In case, the assessee would not have paid
this liability, the assessee could have utilized this amount during
these years for the purpose of business or for earning of interest
income. Instead of doing it like that, the assessee chose to pay it
upfront at a discounted value. By making payment of net present value of
a future liability, it cannot be said the financial benefit, in real
terms, has accrued to the assessee. It is noted that none of the
authorities had gone into this aspect and did not quantify, in financial
or monetary terms, if any amount could be worked out which could be
said to be a ‘benefit’ that had accrued to the assessee. Under these
circumstances, we are of this considered opinion that the impugned
amount cannot be brought into tax either u/s 41(1) or u/s 28(iv).
The appeal of the assessee is allowed.
(Please click here for judgment)
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