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29.03.2017 - Voice of CA presents - Updates
Wednesday, March 29, 2017

I. Headlines Today    

  1. Opposition plans to move amendments to Finance Bill in Rajya Sabha today  (Click for detail)
  2. IDS-II gets cold response  (Click for detail)
  3. CBDT: Petitions seeking condonation of delay in making payment of first instalment under the Income Disclosure Scheme, 2016  (Click for detail)
  4. CBDT Notification: Income tax (3rd Amendment) Rules, 2017  (Click for detail)
  5. CBEC Circular: Extension of e-payment deadline and of banking hours  (Click for detail)
  6. Land leasing, renting to attract GST from July 1  (Click for detail)
  7. Government eyes consensus on GST  (Click for detail)
  8. Here's how you can save tax in the last 2 days of current FY  (Click for detail)
  9. Sebi gets back discretionary powers on penalties  (Click for detail)
II.  Direct Taxes Case Law: 

1.  M/s. Mother Hospital Pvt. Ltd. Vs. CIT, Civil Appeal No. 3360 of 2006, Date of Pronouncement: 08.03.2017, Supreme Court of India

Whether assessee can be treated as the owner of a property for the purpose of Section 32 of the Income Tax Act, 1961 where a registered deed has not been executed for lease and merely construction cost is reimbursed by the assessee?

Brief facts
The assessee company was running a super specialty hospital in which shares are held by seven persons closely related to each other. Earlier a partnership firm Mother Hospital had been constituted and 4.3 acres of land belonged to the firm. The purpose of the partnership firm was to run a super specialty hospital and, accordingly, the firm started construction of the hospital building. Since it was felt expedient to form a private limited company to run and manage the hospital (then under construction), a company was formed for the said purpose and was incorporated on 30.12.1988. Thereafter, an agreement was entered into between the firm and the company by which it was agreed that the firm will complete the construction of the building and hand over possession of the same on completion, on the condition that the entire cost of construction of the building should be borne by the company and the firm had a lien on the building till the company will paid the full amount.

The company took possession of the building on its completion. Since the ownership of the land had to remain with the firm, it was also agreed that the land would be given on lease by the firm to the company and therefore assessee company charged depreciation on the same. However, the AO has rejected the claim on the grounds that the assessee had not become the owner of the property. Appeal preferred by the assessee before the CIT(A) met with the same fate. However, in further appeal before the ITAT, the assessee succeeded. However, the Revenue appealed before the Hon’ble High Court against the order of the ITAT and the Hon’ble High Court set aside the aforesaid order of ITAT. Being aggrieved with the same, the assessee preferred appeal before the Hon’ble Supreme Court.

The Hon’ble Supreme Court has affirmed the order of Hon’ble High Court and held that the title in the immovable property cannot pass when its value is more than Rs.100/- unless it is executed on a proper stamp paper and is also duly registered with the sub-Registrar. Nothing of the sort took place. In the absence thereof, it could not be said that the assessee had become the owner of the property. Explanation (1) to Section 32 of the Income Tax Act, attracts only when assessee holds a lease right or other right of occupancy and any capital expenditure is incurred by the assessee on the construction of the structure. However, In the instant case, records show that the construction was made by the firm. It is a different thing that the assessee had reimbursed the amount. The construction was not carried out by the assessee himself. Therefore, the explanation also would not come to the aid of the assessee.
Therefore, the appeal of the assessee is dismissed.

(Please click here for judgment)

2.  M/s. Andrew Telecommunications India Pvt. Ltd. Vs. PCIT, Writ Petition No. 1021 of 2016, Date of Order: 13.12.2016, High Court of Bombay

Whether demand raised in assessment year can be adjusted against pending refunds of earlier assessment years in order to comply with conditions for grating of stay and to what extent that adjustment can be made?

Held:Yes, only 15% of the demand may be adjusted, out of total amount due.

Brief Facts
The petitioner is engaged in the business of manufacturing base station antennas, microwave antennas etc. & trading in related products. The assessee filed a return for the AY 2012-13, declaring loss of Rs.10,23,16,807/- against which the petitioner was served with a notice of demand for Rs.16,90,79,380/- after scrutiny assessment. The assessee applied for an unconditional stay of demand until disposal of CIT (A), which was rejected. Further the authorities proceeded to adjust the total refund amount of Rs.12,25,45,340/- which is due to the petitioner for AYs 2006-07 & 2007-08 against the aforesaid demand as per O.M. dated 29.02.2016 issued by CBDT. Therefore, the assessee filed writ petition in the Hon’ble High court on the grounds that the assessing officer is obliged to grant stay of the demand on payment of 15% of the disputed amount and as per para 4(E)(iii) of the O.M., only 15% of the amount can be adjusted against any pending refund.

The Hon’ble High Court held that the impugned assessment order can be stayed subject to adjustment of an amount of Rs.2,53,61,907/- (15% of the total demand of Rs.16,90,79,380/-) being adjusted out of the refund. Thus, the petition is partly allowed. The impugned order, rejecting the application for stay, is set aside.

(Please click here for judgment)

III. A Useful Article:

1.  Key takeaways of 12th GST Council meeting

(Please click here)

( Contribution by CA. Bimal Jain and contributor is available at eMail-id: )


 Golden Rules:

  "Life is like making tea,
boils your ego,
evaporates your worries,
dilute your sorrow,
filter your mistake
and get taste of happiness"


  Thanks & Regards


Voice of CA 

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