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II. Direct Taxes Case Laws:
1. Oil
and Natural Gas Corporation Ltd. Vs. ACIT (TDS), Tax Appeal No. 368
& 371 of 2016, Date of Judgment: 15.09.2016, High Court of Gujarat
Issue:
Whether a mere prescription for dress code will qualify to be a
uniform for considering uniform allowance under Section 10(14)(i) of the
Income Tax Act, 1961?
Held_No
Brief Facts:
During the Financial year 2008-09, a survey operation was carried out
at the premises of the assessee company and lapses were noted in the
uniform allowances paid to the employees. During the Assessment Year
2010-11, AO contended that no TDS was deducted on such benefit given to
the employees and because no uniform was prescribed to the employees by
the employer, the said allowance would not be considered under Section
10(14)(i) of the Income Tax Act, 1961 read with Rule 2BB of the Income
Tax Rules, 1962. On enquiry made by the AO from the employees, it was
noted that the company had prescribed the uniform until only 11.11.1995,
after which the prescribed uniform was discontinued but the uniform
allowance was continued and such amount was adjusted towards additional
contribution of post retirement benefit scheme. Keeping the same reasons
on record, AO disallowed such expenditure for non deduction of TDS
under Section 194. CIT(A) upheld the order of AO. ITAT dismissed the
appeal of the assessee justifying the view taken by the AO. Aggrieved by
which, the assessee appealed before the Hon’ble High Court.
Held:
The assessee contended that ONGC had issued circular dated 05.12.1987
prescribing uniform for both male and female employees. It was held
that the specification provided by ONGC in relation to dressing would
fit into the meaning of dress code which implies minimum standard of
dressing depending on the place and occasion carrying a wide range of
choices. While uniform necessarily includes subtle instructions relating
to dress, design, and color which will create uniformity in dressing at
a work place. Further, as explained in the Webster’s Third New
International Dictionary, Uniform is marked by lack of variation,
diversity, and change in form, manner, and worth or degree, marked by
complete conformity to a rule or pattern or by salient detail or
practice; marked by unvaried and changeless appearance. Thus, the term
uniform carries a precise meaning different from broader concept general
dress code. Therefore, the appeal of the assessee is dismissed.
(Please click here for judgment)
2. CIT Vs. Shree Balaji Glass Manufacturing Pvt. Ltd., I.T.A. No. 23 of 2009, Date of Order: 13.07.2016, High Court of Calcutta
Issue:
Whether payment made in the ordinary course of business of money
lending which is substantial part of the business of the company would
fall within the mischief of Section 2(22)(e) of the Act.?
Held_No
Brief Facts:
The assessee borrowed money from Pushpak Commercial Finance Pvt Ltd
of Rs. 1.20 crores and Anjani Highrise Pvt Ltd of Rs. 1.79 crores. The
borrowed money representing share premium and accumulated profits. In
the case of Anjani High Rise Pvt Ltd there was no accumulated profit.
The money was lent from out of reserve and surplus constituted by share
premium account. Whereas in the case of Pushpak Commercial Finance Pvt
Ltd, the accumulated profits were only a sum of Rs.18,36,454.03/-. The
money lent was a sum of Rs.1,12,50,000/-. The balance sum admittedly was
from out of the share premium account. The ld AO has treated the
amounts representing share premium and accumulated profits as deemed
dividend. The finding of the AO was reversed by the CIT (A) and upheld
by the Tribunal. The necessary ingredients in order to impart character
of deemed dividend to any payment made by a company is that such payment
should have been made by the company from out of its accumulated
profits. The assessee claimed exception in respect to the amount
borrowed from the accumulated profits of Pushpak Commercial Finance Pvt.
Ltd, on the grounds that lending of money was a substantial part of the
business of the company and thus treated is as a loan in the ordinary
course of its business and Tribunal held that Unless the payment is made
from out of accumulated profits, the payment does not partake the
character of deemed dividend.
Held:
The question as to whether the learned Income Tax Appellate Tribunal
was justified in allowing the relief to the assessee when the money was
paid from out of reserve and surplus representing share premium is
answered in the affirmative because share premium does not constitute
accumulated profits or even profits of the company. The balance sum of
Rs.18 lakhs and odd paid from out of the accumulated profits would not
bring the payment made by Pushpak Commercial Finance Pvt Ltd. to the
assessee within the mischief of Section 2(22)(e) because the payment has
been held to have been made by Pushpak Commercial Financed Pvt Ltd in
the ordinary course of its business of money lending which is
substantial part of the business of the company. The appeal is, thus,
dismissed.
(Please click here for judgment)
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