RNM Tax Alert – Direct Tax for June 2024
Important Judicial Precedents
1. As per the settled position in law, interest accrued on compensation received
can be termed as capital receipt & hence, not taxable: HC
[2024-TIOL-960-HC-DEL-IT_ITA 1114/2018 _PCIT-4 Vs. INS FINANCE AND
INVESTMENT PVT LTD]
It is pertinent to point out that this amount cannot be characterized as compensation
granted by the Court on account of cancellation of the auction. Rather, such an amount was
a bonafide amount of the successful auction bidder, which he had deposited against the
purchase of the land. The amount so received by the assessee was the entitlement of the
successful bidder which was given back to the assessee vide an order of the Court. Thus, when the amount in question was not in the nature of compensation, then, as a natural
corollary, the interest accrued on the said amount cannot tantamount to revenue receipts
and hence, the same cannot be subjected to tax as per Section 56(2)(viii) of the Act.
2. Mere execution of sale deed without complete transfer of consideration does
not constitute transfer of property for purpose of levying capital gains: ITAT
[2024-TIOL-834-ITAT-DEL _ ITO Vs. DHARAMPAL,]
After giving thoughtful consideration to the matter on record, it comes up as an admitted
fact that at the time of execution of the sale deed in the year 2006, the assessee along with
his brothers had sold the agricultural land by way of five sale deeds for a total sale
consideration of Rs.4,95,76,932/- and a part payment of sum of Rs.1,24,05,662/- was paid by
way of cheque which was encashed. However, the balance sale consideration of
Rs.3,71,71,270/- was paid by post-dated cheques which were dishonoured and for which
there was litigation between the parties and, subsequently, compromise was effected on
21st March 2010 in furtherance of which the amount was paid and, thereafter, the physical
possession of the entire land was transferred to the prospective vendee. As a matter of fact,
on account of the court injunction, the title in the land was not conveyed under the
registered sale deed and the final and complete transfer only occurred in March 2010 when
the complete consideration was paid and possession was handed over to the prospective
vendee.
3. Revisionary order u/s 264 passed without considering assessee’s written
submissions; order relies on undisclosed information sourced from third
parties: HC
[2024-TIOL-1076-HC-KAR-IT_Writ Petition No. 4623 Of 2024 (T-IT)_MR SHAMEER
RAZAIK Vs. PCIT]
A perusal of the impugned order will also indicate that reliance is placed by PCIT on certain
information said to have been procured/prescribed from the Stock Exchange and Banks. In
this regard, the material on record would indicate that there is nothing to show that the said
information had been furnished to the petitioner for the purpose of enabling him to have his
say/explanation and as such impugned order is violative the principles of natural justice and
the same deserves to be set-aside.
4. CBDT rightly refused request for condonation of delay as assessee was
regularly filing belated returns: HC
[[2024] 163 taxmann.com 148 (Delhi-HC) Lava International Ltd. vs. CBDT]
Where assessee requested to condone delay in filing return for A.Y. 2020-21 due to COVID-19
pandemic, in view of fact that financials for relevant year were duly finalized and signed on
31-7-2020, however return of income was filed on 30-3-2021, furthermore, assessee was
regularly filing belated return, recital of said facts clearly demolished any assertion of
financial constraints that might have befallen assessee, and thus, impugned order refusing
to condone delay for late filing of return was justified.
5. AO cannot travel beyond the mandate, he cannot proceed to make any other
additions beyond the reasons recorded to reopen the assessment: ITAT
[2024-TIOL-789-ITAT-DEL_ITA No.2233/Del/2023_SUKH DARSHAN SINGH Vs. ITO]
We observe that the assessee has not made proper submissions during the reassessment
proceedings and appellate proceedings, it does not matter as long as the information is
coming from the proceedings. In this case, the AO was satisfied that the assessee owned
agricultural land and sold the same during this assessment year. Therefore, the mandate to
reopen the assessment was completed by bringing on record the relevant documents to
prove the sources of cash deposits. Therefore, the AO cannot travel beyond the mandate, he
cannot proceed to make any other additions beyond the reasons recorded to reopen the
assessment. Therefore, confirming the other additions beyond the mandate is uncalled for
Accordingly, the appeal filed by the assessee is allowed on merits.
6. Provision on account of ‘Customer Loyalty Points’ to be allowed if it was
created on scientific basis: ITAT
[2024] 164 taxmann.com 84 (Chennai – Trib.) _Titan Company Ltd. vs. ACIT]
Section 37(1) of the Income-tax Act, 1961 – Business expenditure – Allowability of (Provision) –
Assessment years 2009-10 to 2012-13 – Assessee had created customer loyalty points (CLP)
provision based on estimated percentage of redemption – Assessing Officer held that
assessee had not adopted any scientific method for creating this provision and this being
simpliciter provision, same was not allowable expenditure – It was observed that system
adopted by assessee was based on scientific method as propounded by Supreme Court in
case of Rotork Controls India Pvt. Ltd., v. CIT reported in [2009] 180 Taxman 422/314 ITR 62
(SC)(SC) – Assessee had been consistently following same method and even creation of
provision created based on remedy percentage of redemption was on scientific basis – As
regards to excess provision, difference between provisions created for a particular year and
actual expenditure incurred in subsequent year, difference was offered to tax – Whether in
view of aforesaid, CLP provision was to be allowed as deduction – Held, yes [Para 3.4] [In
favour of assessee]