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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.
Held:
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.
Held:
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)
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