No Relief For Reimbursement Claims Made To Foreign Parent Without Expense Break-Up: Madras High Court

The Madras High Court has recently dismissed appeals filed by Cairn India Limited, now Vedanta Limited, and upheld tax demands over its failure to deduct tax at source (TDS) on payments remitted to its Australian parent company. While dismissing Cairn's plea, the court made it clear that a taxpayer cannot obtain relief merely by describing a lump-sum payment as a reimbursement. If the claim is that the payment represents reimbursement of expenses, the taxpayer must disclose what those expenses...

60% Tax Rate Under Section 115BBE Cannot Apply To Pre-1 April 2017 Income: Rajasthan High Court

The Rajasthan High Court on 27 May held that the enhanced tax rate of 60% introduced under Section 115BBE of the Income-tax Act through the Taxation Laws (Second Amendment) Act, 2016, cannot be applied retrospectively to income pertaining to Financial Year 2016–17, as the amendment was expressly made effective from 1 April 2017. The Division Bench of Justices Arun Monga and Sunil Beniwal held that the higher rate could operate only prospectively and could not govern income earned prior to its...

Partner Cannot Claim Deduction On Interest Paid For Capital Invested In Firm: Kerala High Court

The Kerala High Court on 20 May held that a partner cannot claim deduction under Section 36(1)(iii) of the Income Tax Act for interest paid on funds borrowed and contributed as capital to a partnership firm, since the borrowed capital was not used for the partner's own business. A Division Bench of Justices Devan Ramachandran and Basant Balaji dismissed the appeal filed by Alice Arun Thomas and upheld the order of the Income Tax Appellate Tribunal (ITAT), Cochin Bench. It held: "The provisions...

ITAT Ahmedabad Deletes ₹74.64 Lakh Addition After Waste Stock Discrepancy Was Adequately Explained

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) deleted a ₹74.64 lakh addition made against Shakti Polyweave Private Limited towards estimated gross profit. The tribunal held that the company had adequately explained the alleged discrepancy in wastage stock reported in its tax audit report and that rejection of its books of account was unjustified. The bench of Judicial Member Siddhartha Nautiyal and Accountant Member Annapurna Gupta partly allowed the assessee's appeals for...

'Left No Stone Unturned To Harass': Delhi HC On IT Dept's Delay In Releasing KVPs, IVPs

The Delhi High Court has pulled up the Income Tax Department for delaying the release of seized Kisan Vikas Patras (KVPs) and Indira Vikas Patras (IVPs) even after the assessee deposited the settlement amount, observing that the authorities had “left no stone unturned to harass” the petitioner.A division bench of Justices Dinesh Mehta and Om Prakash Shukla directed the tax authorities to compensate the petitioners for loss of interest caused due to wrongful retention of the instruments.The case...

Company's Car, Telephone Costs Not 'Personal' Despite Being Separate Legal Entity: Delhi High Court

The Delhi High Court has held that telephone and car expenses incurred by a company cannot be disallowed as “personal” expenses merely because a company is treated as a separate legal person.A division bench of Justices Dinesh Mehta and Vinod Kumar allowed the company's appeal and set aside an order of the Income Tax Appellate Tribunal (ITAT), which had upheld disallowance of one-sixth of the company's telephone and car expenses on the ground of possible personal use.The company argued that...

Huge Turnover Difference Between Taxpayer, Comparable Warrants Exclusion In Transfer Pricing Analysis: Delhi HC

The Delhi High Court has held that a company with a vastly different turnover and scale of operations may not be a proper comparable for transfer pricing analysis.A division bench of Justices V. Kameswar Rao and Vinod Kumar observed that huge differences between the tested entity and the comparable would necessarily require the exclusion of the comparable.The court made the observation while dealing with an appeal filed by the Income Tax Department against an order of the Income Tax Appellate...

Delhi High Court Quashes IT Order After Dept. Failed To Intimate Decision On Taxpayer's Adjournment Request

The Delhi High Court has quashed an income tax assessment order and demand notice after finding that a taxpayer was denied a fair hearing. The tax department failed to communicate whether his adjournment request had been accepted or rejected. It also passed the order without considering the reply he had filed. A Bench of Justice Dinesh Mehta and Justice Vinod Kumar observed, “It is clear that the petitioner's right of being heard has been infracted and the violation of petitioner's Fundamental...

Father Of Deceased Taxpayer Can Be Treated As Legal Representative Despite Not Being Legal Heir: Delhi HC

The Delhi High Court has held that the father of a deceased assessee can be treated as a “legal representative” under the Income Tax Act even if he is not a Class-I heir under the Hindu Succession Act.A Division Bench of Justices Dinesh Mehta and Amit Mahajan observed,“A person need not be a legal heir, much less a Class I heir under the Hindu Succession Act to fall within this definition. The test is not one of inheritance; it is one of representation vis-à-vis the estate of the deceased.”The...

No Rectification For Debatable Points Under Section 254(2) Of Income Tax Act: Allahabad High Court

The Allahabad High Court on 6 May held that only mistakes apparent from the record can be rectified under Section 254(2) of the Income Tax Act, 1961, and that debatable issues fall outside its scope. A Division Bench of Justices Shekhar B. Saraf and Abdhesh Kumar Chaudhary dismissed the appeal filed by Abusaad Ahmad, upholding the Income Tax Appellate Tribunal's refusal to rectify its earlier order rejecting condonation of delay. It held: “In order to attract the power to rectify under...

Bombay HC Waives Re-Verification Of Amended Pleadings Challenging Section 147A IT Act After SC Ruling

The Bombay High Court has waived re-verification of amended pleadings in pending writ petitions challenging income tax reassessment notices, where assessees now seek to challenge the newly inserted Section 147A following the Supreme Court's ruling in Income Tax Officer, Ward 2(1), Chandigarh v. Tej Pratap Singh. A Division Bench of Justice G.S. Kulkarni and Justice Aarti Sathe said re-verification need not be insisted upon, noting that a large number of similar reassessment matters were pending...

"Fishing Inquiry": Bombay High Court Upholds Quashing Of Income Tax Revision Against Impact Foundation

The Bombay High Court has dismissed the Income Tax Department's appeal against Impact Foundation (India), holding that revisionary proceedings under the Income Tax Act could not be sustained merely because the Commissioner believed the assessing officer should have conducted further enquiry. “The ITAT has therefore rightly come to the conclusion that the CIT (Exemptions), could not have initiated proceedings with a view to start de novo or a fishing inquiry in matters or orders which are...