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16.03.2020 - Voice of CA presents - Useful Updates
Monday, March 16, 2020

  I. Headlines Today:   

  1. Outcomes of 39th Meeting of the GST Council  (Click for detail)
  2. RBI issues new rules for Debit/ credit cards  (Click for detail)
  3. RBI Notification: Implementation of Indian Accounting Standards  (Click for detail)
  4. RBI Press Release: Liquidity Operations under the Liquidity Adjustment Facility  (Click for detail)

II. Direct Taxes Case Laws: 

1.   CIT Vs. M/s Chetak Enterprises Pvt. Ltd., Civil Appeal No. 1764/2010, Date of Pronouncement: 05.03.2020, Supreme Court of India

“Whether in case of conversion of partnership firm into company, the assesse Company was right in finding that the assessee fulfilled the condition of sub-Section (4)(i)(b) of Section 80­IA and therefore eligible for deduction u/s 80-IA of the Act”

Held: Yes

The erstwhile partnership firm ­ M/s. Chetak Enterprises entered into an agreement with the Government of Rajasthan for construction of road and collection of road/toll tax. The construction of road was completed by the said firm on 27.3.2000 and the same was inaugurated on 1.4.2000.  The firm was converted into a private limited company on 28.3.2000 named as M/s. Chetak Enterprises (P) Ltd. (“the assesse Company”). On conversion of the firm into company, an intimation was given to the Chief Engineer (Roads), P.W.D., Rajasthan,   Jaipur. The   said authority noted the change and cancelled the registration of the firm and granted a fresh registration code to the assessee­Company.  As aforesaid, the road was inaugurated on 1.4.2000 and the assesse Company started collecting toll tax. For the relevant assessment year, the assessee­Company claimed deduction under Section 80­IA of the Income Tax Act, 1961. The assessing officer declined that claim of the assesse Company, which decision was reversed by the Commissioner of Income Tax (Appeals). The ITAT confirmed the decision of the first appellate authority. As a result, the department preferred an appeal before the Hon’ble High Court in respect of aforesaid question of law, wherein the Hon’ble High Court while upholding view taken by the CIT(A) and ITAT, dismissed the appeal. Being aggrieved, the department filed appeal before the Hon’ble Supreme Court.

The Hon’ble Apex Court held that In the present case, the agreement was initially executed between the erstwhile partnership   firm   and   the   State   Government,   but   with   clear understanding that as and when the partnership firm is converted into a company, the name of the company in the agreement so executed be recorded recognising the change.  Notably, the agreement itself   mentions   that   M/s.   Chetak   Enterprises   as   party   to   the agreement  was   meant  to include its   successors   and   assignee. Further, the State Government had granted sanction to the company and the original agreement entered into with the firm automatically stood converted in favour of the assessee­Company, which came into existence   on   28.3.2000   being   the   successor of the erstwhile partnership firm.  Thus understood, even the stipulation in clause (b) of Section 80­IA(4)(i) of the Act is fulfilled by the assessee­Company.  Therefore, it is qualified for the deduction   u/s 80­IA being an enterprise carrying on the stated business pertaining   to   infrastructure  facility   and   owned   by   a   Company registered in India on the basis of the agreement executed with the State Government to which the respondent/assessee­Company has succeeded in law after conversion of the partnership firm into a company.
As results, the revenue’s appeal was dismissed.

(Please click here for judgment)

2.  Arihant Technology Pvt. Ltd. Vs. PCIT, I.T.A. No. 5473/Del/2019, Date of Pronouncement: 03.03.2020, Delhi - ITAT

Whether the jurisdiction under Section 263 cannot be assumed by Pr. CIT for making roving enquiries on the issue that was already enquired by the AO, however, not expressly discussed in the assessment order passed by the AO.

Held: Yes
On the basis of information provided by the Investigation Wing that the assessee has received accommodation entry from companies floated by Sh. Surinder Kumar Jain and Sh. V. K. Jain, the case of the assesse was reopened by issue of notice u/s. 148 after recording the reasons. The AO completed he assessment u/s. 148/143 (3) accepting the returned loss. Subsequently, the Ld. Pr. CIT examined the assessment record and noted that the AO has not verified the information received from the DIT (Inv.)-“II”, New Delhi and therefore, issued notice u/s.263 asking the assessee to explain as to why the assessment order dated 29.09.2016 should not be revised u/s. 263 of the IT Act since the order passed by the AO is erroneous as well as prejudicial to the interest of the revenue.   The assessee explained that they had provided all the requisite details and the AO after considering the copy of income tax return, confirmation, balance sheet and bank statement of M/s. Sri Amarnath Finance Pvt. Ltd. and after considering the reply by the said company in response to notice u/s. 133 (6) completed the assessment u/s. 148 / 143 (3) by accepting the returned loss. It was submitted that action u/s. 263 can be taken only when there is no enquiry. However, if the evidences are examined and appreciated by the AO, no proceeding u/s. 263 is possible. Whereas the ld. PCIT held that the order passed by the AO is not only erroneous but also prejudicial to the interest of the revenue.  He, therefore, set aside the order of the AO and restored the same to his file for necessary verification and enquiry and complete the assessment de novo. Aggrieved with such order of the Pr. CIT, the assessee preferred appeal before the Hon’ble Tribunal.

The Hon’ble ITAT held that the AO has examined the documents / confirmation in detail and adopted a possible view that the assessee has established the identity and creditworthiness of the lender and the genuineness of the transaction.  The action u/s. 263 can be taken only when there is lack of enquiry or no enquiry. However, in the instant case necessary enquiry was conducted. Therefore, merely because the Ld. Pr. CIT does not agree with the manner of enquiry conducted by the AO he cannot substitute his own reasons and held the order to be erroneous and prejudicial to the interest of the revenue.

Therefore, the proceedings initiated by the Ld. Pr. CIT u/s. 263 of the IT Act, 1961 were quashed and the appeal filed by the assessee is allowed.  

(Please click here for judgment)


III. Useful Articles:

1.  HC: Dismiss 100% Budgetary support for area based exemption in post GST regime

     (Please click here)  

2.  AAAR: Breakwater is not ‘plant and machinery’ but a ‘civil structure’, not eligible for ITC

     (Please click here)  

[ Contribution by CA. Bimal Jain and contributor is available at eMail-id: bimaljain@ ]


Golden Rules:

  "Prayer is not an attempt to change the God's mind
but it is an attempt to let God change our mind" 


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