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19.05.2017 - Voice of CA presents - Updates
Friday, May 19, 2017

  I. Headlines Today:   

  1. A quick guide to India GST rates in 2017  (Click for detail)
  2. GST Council clears all 9 rules for new tax regime at Srinagar meeting  (Click for detail)
  3. GST council to decide today how much tax you will pay for services  (Click for detail)
  4. Direct Tax Press Release: Income Tax Department launches Operation Clean Money Portal  (Click for detail)
  5. Company Law Circular: Clarification regarding applicability of Section 16 (1)(a) of the Companies Act. 2013 with reference to cases under corresponding provisions of Companies Act,1956  (Click for detail)
  6. MCA Circular: Transfer of Shares to IEPF Authority  (Click for detail)
  7. Black money fight: Operation Clean Money off to a middling start, tax collections up but number being investigated falls from 17.9 lakh to 60,000  (Click for detail)
  8. ICAI: Announcement on Advertising by members in practice engaged in Coaching/Teaching Activities (Click for detail)
  II. Direct Taxes Case Laws: 

1.  Raj Dadarkar & Associates Vs. ACIT, Civil Appeal No. 6455-6460 of 2017, Date of Judgement: 09.05.2017, Supreme Court of India

Whether simply showing a particular object in the object clause of the business can be considered as determinative factor to conclude that the rental income is to be treated as income from business and not income from house property?

Held: No

Brief Facts:
The assessee is a partnership firm. In 1993, it acquired the right to conduct the market on a plot on a monthly license basis from Municipal Corporation Greater Bombay (“MCGB”). The appellant constructed 95 shops and 30 stalls of different carpet areas on the plot under the market name “Saibaba Shopping Centre”. It had further sub-licensed the area and collected Compensation from sub-licensees, leave & license fees, Service Charges for providing various services, including security charges, utilities, etc. from the sub-licensees. The appellant filed the returns of income from the year 1999 till 2004 and it had been offering the income from the aforesaid shops and stalls sub-licensed by it under the head “PGBP” of the Act.

The income was also assessed accordingly. However, the case of FY 1999-2000 was reopened by the ld. AO by issuing notice u/s 148 of the Act. In Reassessment order, ld. AO computed the income from the shops, and the stalls under head “Income from House Property” of the Act by contending that the appellant was “deemed owner” of the premises u/s 27(iib) of the Act as it had acquired leasehold right in the land for more than 12 years. Being aggrieved by that Reassessment order, the assessee filed an appeal before the CIT (A). CIT (A) allowed the appeal of the assessee and reversed the action of the Ld. AO. However, on appeal before ITAT, the ITAT reversed the order of the CIT (A) and confirmed the action of the Ld. AO. Being aggrieved by the order of the ITAT, the appellant preferred an appeal before the Hon’ble High Court. The Hon’ble High Court, by its order dated 19.09.2014, dismissed the appeal filed by the assessee. Accordingly, against the judgment of the Hon’ble High Court, the assessee preferred further appeal before the Hon’ble Supreme Court.

In this case, the Hon’ble Supreme Court said that merely because there is an entry in the object clause of the business showing a particular object, would not be the determinative factor to arrive at a conclusion that the income is to be treated as income from business. Such a question would depend upon the circumstances of each case. Wherever there is an income from leasing out of premises and collecting rent, normally such an income is to be treated as income from house property, in case provisions of Section 22 of the Act are satisfied with primary ingredient that the assessee is the owner of the said building or lands appurtenant thereto. Section 22 of the Act makes ‘annual value’ of such a property as income chargeable to tax under this head.

How annual value is to be determined is provided in Section 23 of the Act. ‘Owner of the house property’ is defined in Section 27 of the Act which includes certain situations where a person not actually the owner shall be treated as deemed owner of a building or part thereof. In the present case, the appellant is held to be “deemed owner” of the property in question by virtue of Section 27(iiib) of the Act. On the other hand, under certain circumstances, where the income may have been derived from letting out of the premises, it can still be treated as business income if letting out of the premises itself is the business of the assessee.
Therefore, the appeal of the assessee was dismissed.

(Please click here for judgment)


2.  CIT Vs. M/S Pashupati Nath Agro Food Products Pvt. Ltd., Income Tax Appeal No. 165 of 2010, Date of Judgement: 04.05.2017, High Court of Allahabad

Whether the AO can make any addition on account of income earned out of undisclosed sources, where the books of account have not been rejected?

Held: No

Brief Facts:
An order of assessment was passed against the respondent assessee by making the addition of Rs.30,73,542/- on account of sale of rice out of books of Rs.28,76,125/- for investment in stock out of undisclosed sources and the additions of Rs.27,84,611/- towards investment in stock of wheat purchased out of books. However, in appeal before the Hon’ble ITAT, the tribunal deleted the addition vide order dated 27/10/2009 and ordered that the assessee has maintained the books of accounts in accordance with the prescribed standard as per Section 145 of the Income Tax Act, 1961 as the account books have not been rejected by the assessing officer. Therefore, an appeal was filed by revenue before the Hon’ble High Court against the order of the Tribunal.

The Hon’ble High Court confirmed the order of the Hon’ble ITAT while affirming that where Books of account are not rejected by AO, then the account books are expected to be maintained in the prescribed accounting standard as per Section 145 of the Act. Thereafter, the AO could not have made any additions towards the sale of rice treating it to be outside the books of accounts or towards investing in stock of rice and wheat outside the books of accounts.
Therefore, the appeal of the revenue was dismissed.

(Please click here for judgment)

Golden Rules:

  "If you can't find the right words for certain situations, just give a smile.
Words may confuse, but a smile always convinces"


Thanks & Regards


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