{{{{{$$$ 1 CIT v.

Laxman Das Khandelwal (2019) 417 ITR 325 (SC) Supreme Court Issues Involved:- The issue under consideration is whether the
Assessing Officer’s omission to issue notice under section 143(2) is a defect not curable under section 292BB in spite of participation by the
assessee in assessment proceedings. Analysis/observation:- The law on the point as regards applicability of the requirement of issue of notice under
section 143(2) is quite clear. According to section 292BB, if the assessee had participated in the proceedings, by way of legal fiction, notice issued
would be deemed to be valid even if there be infractions as detailed in the said section. The scope of the provision is to make service of notice having
certain infirmities to be proper and valid if there was requisite participation on the part of the assessee. It is, however, to be noted that the section
does not save complete absence of issue of notice. For section 292BB to apply, the notice must have emanated from the Department. It is only the
infirmities in the manner of service of notice that the section seeks to cure. The section is not intended to cure complete absence of notice itself.
Conclusion:- The Supreme Court held that non-issuance of notice under section 143(2) is not a curable defect under section 292BB inspite of
participation by the assessee in assessment proceedings. Readers Note:
{{{{{$$$ 2 Pr. CIT v. Maruti Suzuki India Ltd. [2019] 416 ITR 613 (SC) Supreme Court The assessee-company, S, filed its return of income on
November 28, 2012 (when no amalgamation has taken place). On January 29, 2013, the High Court approved the Scheme for Amalgamation of S
(amalgamating company) with M (amalgamated company) w.e.f. April 1, 2012. On April 2, 2013, the amalgamated company, M, intimated the
Assessing Officer of the amalgamation. Notice under section 143(2) was issued to S on September 26, 2013, followed by a notice under section
142(1). The Transfer Pricing Officer (TPO) passed an order making an adjustment in respect of royalty. A draft assessment order was passed in the
name of the amalgamating company, S. The amalgamated company, M, participated in the assessment proceedings and also filed an appeal before
the Dispute Resolution Panel (DRP) as successor in interest of S. No objection was taken by M before the DRP that the draft assessment order was
passed in the name of S. The DRP issued its final assessment order on October 31, 2016 in the name of S. In appeal before the Tribunal, the
assessee, M, raised the objection that the assessment proceedings were continued in the name of the non-existent entity S and that the final
assessment order which was also made in the name of a non-existent entity would be invalid. The Tribunal set aside the final assessment order on
the ground that it was void ab initio, having been passed in the name of a non-existent entity. The High Court affirmed the decision of the Tribunal.
Issues Involved:- Whether issue of notice by the Assessing Officer in the name of the amalgamating company (S, in this case), after such company
has amalgamated with another company (M, in this case) and after he has been so informed of such amalgamation, is a defect curable under section
292B? Would participation of the amalgamated company, M, in the assessment proceedings operate as an estoppel against law?
Analysis/observation:- In the present case, despite the fact that the Assessing Officer was informed of the amalgamating-company (S) having
ceased to exist as a result of the approved scheme of amalgamation, the jurisdictional notice was issued in the name of S, the amalgamating
company. The basis on which jurisdiction was invoked was fundamentally at odds with the legal principle that the amalgamating entity ceases to exist
upon the approved scheme of amalgamation. Conclusion:- The Supreme Court held that the initiation of assessment proceedings on a non-existent
entity (S, in this case) was void-ab-initio and participation in the proceedings by the appellant-amalgamated company (M, in this case) in the
circumstances cannot operate as an estoppel against law. Readers Note:
{{{{{$$$ 3 CIT v. A. A. Estate Pvt. Ltd. [2019] 413 ITR 438 (SC) Supreme Court The High Court, without itself framing the substantial question of law
at the time of admission of appeal, issued notices, heard both the parties and decided the appeal affirming the order of the Tribunal based on the
questions raised by the appellant Issues Involved:- While deciding an appeal, is it mandatory for the High Court to frame a substantial question of law
or can it decide the case on the basis of the question of law urged by the appellant under section 260A(2)(c)? . Analysis/observation:- The appeal is
heard only on the questions formulated by the High Court and not on the questions proposed by the appellant. In case if the High Court is of the view
that the appeal did not involve any substantial question of law, it should have recorded a categorical finding to that effect that the questions proposed
by the appellant either do not arise in the case or/and are not substantial questions of law so as to attract the rigour of section 260A for its admission
and accordingly, should have dismissed the appeal in limine. However, this was not done in this case. Instead, the appeal was heard only on the
questions urged by the appellant u/s 260A(2)(c). Conclusion:- The High Court, therefore, did not decide the appeal in conformity with the mandatory
procedure prescribed in section 260A. The Supreme Court, therefore, considered it just and proper to remand the case to the High Court for deciding
the appeal afresh, on merits of the case in accordance with procedure prescribed in section 260A. Readers Note:* 3
{{{{{$$$ 4 Pr. CIT v. Aarham Softronics [2019] 412 ITR 623 (SC) Supreme Court The assessee had started availing exemption under section 80-IC
on setting up of new industrial unit in Himachal Pradesh. The assessee had availed deduction of 100% of profits for a period of 5 years. From sixth
year, in normal course, deduction is admissible at 25% of the profits and gains, for next five years. However, the assessee, after the expiry of five
years, carried out substantial expansion of its existing unit. This substantial expansion is in accordance with the provisions of section 80-IC and there
is no dispute about the same. From the year of such substantial expansion, the assessee claimed deduction at 100% of profits, instead of 25% for
the period remaining out of ten years. Whether assessee is justified in claiming deduction at 100% again once substantial expansion is carried out?
Issues Involved:- Can an assessee who has set up a new industrial undertaking and availed deduction@100% of profits under section 80-IC(3) for
the first 5 years, be eligible to claim deduction@100% of profits once again on having undertaken “substantial expansion” thereof, for the period
remaining out of 10 years? Analysis/observation:- The Apex Court held that an undertaking or an enterprise which had set up a new unit of the nature
mentioned in section 80-IC(2)(a)(ii), would be entitled to deduction at the rate of 100% of the profits and gains for five assessment years commencing
with the "initial assessment year". For the next five years, the admissible deduction would be 25% or 30%, as the case may be, of the profits and
gains. However, in case substantial expansion is carried out as defined in section 80-IC(8)(ix) by such an undertaking or enterprise, within the
aforesaid period of 10 years, the said previous year in which the substantial expansion is undertaken would become "initial assessment year", and
from that assessment year the assessee shall be entitled to 100% deductions of the profits and gains. Such deduction, however, would be for the
period remaining out of 10 years, as provided in section 80-IC(6). Crux:- The crux of the Supreme Court ruling is explained in the following example.
If the substantial expansion is carried out in the 8th year, deduction would be 100% for the first 5 years, deduction at 25% for the next 2 years and at
100% again from the 8th year as this year becomes "initial assessment year" once again. This 100% deduction would be for the remaining 3 years
only, i.e., 8th, 9th and 10th assessment years. Readers Note:
{{{{{$$$ 5 CIT (Exemptions) v. Reham Foundation [2019] 418 ITR 205 (All [FB]) High Court An appeal was preferred by Revenue to challenge the
order of the Appellate Tribunal directing registration of the trust, where registration under section 12AA has been denied by the Commissioner of
Income-tax (CIT). Issues Involved:- The issue under consideration is whether the Appellate Tribunal has the power under section 254(1) to pass an
order directing CIT to grant registration under section 12AA or should it remand the case to the CIT for deciding the matter afresh. .
Analysis/observation:- A perusal of section 254 shows that the Appellate Tribunal has the power to pass such orders, as it thinks fit. The powers
under section 254 is to be read along with other provisions of the Act. Section 12AA requires satisfaction about the genuineness of the activities and
the object(s) of a trust by the CIT before its registration. Case where the Appellate Tribunal can direct registration of the trust without remand to the
CIT The High Court opined that the Tribunal can pass an order directing the CIT to grant registration, considering the specific facts of the case,
where – (i) the CIT has refused to accept the application for registration of trust after recording its finding, on the basis of the material on record
before him, that the activities and object(s) of the trust are not genuine; and (ii) the Appellate Tribunal, on the basis of the same material on record,
comes to the conclusion that the order of the CIT is perverse since it has been passed ignoring, misconstruing or misinterpreting such evidence.
In such a case, the Appellate Tribunal can direct registration of the trust without remanding the matter to the CIT, since such remand would be an
empty formality as the CIT cannot go against the conclusion arrived at and recorded by the Appellate Tribunal. In view of the unfettered power of the
Appellate Tribunal in terms of section 254(1), the Tribunal can very well record its satisfaction on the genuineness of the activities and object(s) of the
trust and direct registration of the trust without remand of case to the CIT, in case such satisfaction is recorded on the basis of documents and
material already available on record at the stage of examination by the CIT Cases where the Appellate Tribunal has to remand the case to the CIT :
In the following cases, however, the Appellate Tribunal has to remand the case to the CIT - (i) Where the Appellate Tribunal records such satisfaction
on the basis of material or documentary evidence which was not available before the CIT while exercising his powers under section 12AA; and (ii)
Where the CIT rejects the application on a technical ground without recording its opinion on facts or genuineness of the activities and object(s) of the
trust and such decision is overturned by the Appellate Tribunal, the case has to be remanded to the CIT for recording satisfaction in terms of section
12AA. The onus on the Appellate Tribunal to remand the matter in cases indicated hereinabove is in view of the strict interpretation of the powers of
the CIT under section 12AA; if the Appellate Tribunal is given wide powers to direct registration of trust in all or any circumstance, it would render the
provisions of section 12AA ineffective, which again cannot be the intention of the Legislature Conclusion:- Whether to remand the matter to the table
of CIT or not depends upon the facts of each case. Readers Note
{{{{{$$$ 6 Smt. Ritha Sabapathy v. DCIT [2019] 416 ITR 191 (Mad) High Court The assessee filed an appeal under section 260A before the High
Court against the order of the Appellate Tribunal dismissing the appeal due to non-appearance of the assessee on the appointed date of hearing.
Issues Involved:- Can the Appellate Tribunal dismiss an appeal, without deciding the case on its merits, solely on the ground that the assessee had
not appeared on the appointed date of hearing? . Analysis/observation:- The High Court noted the provisions of section 254, Rule 24 of the Income-
tax (Appellate Tribunal) Rules, 1963 and decisions of the Apex Court on the said issue. Accordingly, the High Court opined that even if the assessee
could not appear, the Tribunal could have decided the appeal only on merits, ex parte, after hearing the Revenue's contentions. It reiterates that the
fact finding Appellate Tribunal should not shirk its responsibility to decide a case on its merits. Cryptic orders, not touching the merits of the case,
would not give rise to any substantial question of law for consideration by the High Court under section 260A. The assessee's valuable right of
getting the issues decided on merits by the final fact finding body, viz., the Tribunal cannot be given short shrift in this manner. Conclusion:- A legal
and binding responsibility, therefore, lies upon the Tribunal to decide the appeal on merits, irrespective of the appearance or otherwise of the
assessee or his counsel before it. Readers Note:
{{{{{$$$ 7 Valsad District Central Co-operative Bank Ltd. v. ACIT [2019] 414 ITR 616 (Guj) High Court For the relevant assessment year, the
assessee-co-operative bank claimed deduction under section 36(1)(v) in respect of its contribution towards gratuity fund for the benefit of its
employees. No disallowance was made in respect of such contribution in assessment order passed under section 143(3). After four years, however,
the Assessing Officer issued a notice under section 148, recording reasons to believe that the assessee has not disclosed fully and truly all material
facts necessary for assessment, since it failed to produce Commissioner’s order of approval of the gratuity fund for the purpose of claiming deduction
under section 36(1)(v). Thus, he came to a conclusion that the income of the assessee to the extent of contribution towards gratuity fund has
escaped assessment under section 147. Assessee’s Objections: The assessee raised objections against the notice issued under section 148
pointing out that the gratuity scheme is being managed by the LIC, pursuant to an agreement between LIC and the trustees of the gratuity scheme.
The LIC had accepted the responsibility to manage the fund only after verifying that the scheme was duly approved by the Commissioner of Income-
tax. During the course of original assessment, assessee had produced the documents pertaining to the contribution made towards the fund and the
agreement with LIC to manage the fund. It was only after examining these documents, that the assessee’s claim of deduction was accepted. As the
scheme was framed in 1976, the assessee, at this point of time, did not have the Commissioner’s approval order (as there has been a long passage
of time since the year 1976). Nevertheless, it was on the basis of such approval that the assessee had been, year after year, claiming the deduction
which was also granted, in all assessment years, some of them after scrutiny. The assessee, therefore, contended that there was no failure on its
part to disclose truly and fully all material facts and that the reopening of the assessment amounted to change of opinion by the Assessing Officer.
Issues Involved:- The issue under consideration is whether, in this case, re-opening the assessment under section 148 was merely on account of a
change of opinion of the Assessing Officer, there being no failure on the part of the assessee to disclose truly and fully all material facts Provisions
Applicable:- Section 147
Analysis/observation:- The High Court noted that during the course of original assessment, the Assessing Officer has not pointedly examined this
aspect of gratuity, nor raised any queries thereto. The question of change of opinion may, therefore, not arise. The High Court held that merely
because the assessee is unable to produce a copy of the order of approval of the Gratuity Scheme by the Commissioner after long gap of time, it
cannot tantamount to failure on the part of the assessee to disclose truly and fully all material facts, since the assessee had produced a copy of the
agreement with LIC and the trustees of the gratuity scheme in the course of original assessment, in line with the documents produced in the course
of assessment in the earlier years. Conclusion:- Therefore, in the absence of failure on the part of the assessee to disclose truly and fully all material
facts, reopening of assessment by issue of notice under section 148 is not valid. Readers Note:
{{{{{$$$ 8 CIT (TDS) v. Eurotech Maritime Academy Pvt. Ltd. [2019]415 ITR 463(Ker) High Court The assessee, a trust registered under section
12AA, ran an educational institution. It paid rent for the building occupied by it. The Assessing Officer found that the tax deducted at source by the
assessee was deposited belatedly and imposed a penalty under section 271C equal to the amount of tax payable. The explanation offered by the
assessee for the delay is that the clerk failed to discharge her duties properly. It was also noticed that the assessee had been making the payments
piecemeal throughout the year and not deducting the tax on its payment in the respective months. The assessee contended that it is a trust
registered under section 12AA, and therefore, not obliged to carry out an audit as provided under section 44AB. Only those persons covered under
section 44AB would have to deduct tax at source under section 194-I. Issues Involved:- Can penalty under section 271C be levied for the non-
remittance of the tax deducted at source under Chapter XVII-B to the credit of the Central Government? Analysis/observation:- The second proviso to
section 194-I cannot be applicable to the assessee, because a trust cannot be included within the definition of "an individual or a Hindu undivided
family" and therefore, the monetary limits specified in clause (a) or (b) of section 44AB is not relevant in this case. There is no exemption as such for
other persons not covered under section 44AB. Hence, the trust is liable to deduct tax at source, irrespective of whether or not it was covered under
section 44AB. Regarding the delay in deposit, the Court took note of the decision of the Kerala High Court in case of Classic Concepts Home India
Pvt. Ltd. v. CIT [2016] 383 ITR 626 (Ker) which held that so far as failure on the part of the assessee to remit the tax recovered at source is
concerned, there cannot be any justifying circumstance for delay in remittance because the assessee cannot divert tax recovered for the Government
towards working capital or any other purpose. Thus, the defence available under section 273B does not cover failure in payment of recovered tax.
Conclusion:- Accordingly, the High Court held that, assessee is liable to pay penalty under section 271C for both non-deduction of tax at source and
non-remittance of tax deducted at source. Readers Note
{{{{{$$$ 9 Sunil Vasudeva & Others v. Sundar Gupta & Others[2019]415ITR 281(SC)
Supreme Court The effect of section 293 of the Income-tax Act, 1961 had been mistakenly omitted by the High Court while passing an order directing
pursuance of a civil suit. Accordingly, the said order was recalled for review and error apparent was corrected. Issues Involved:- Does the High
Court have the inherent power to review its own order to correct a mistake apparent from the record? Provisions Applicable:- Section 260A
Analysis/observation:- On the issue of whether the High Court can review its own order, the Supreme Court referred to its ruling in Kamlesh Verma v.
Mayawati (2013) 8 SCC 320, wherein the basic principles for entertaining a review application had been eloquently examined. As per the said
decision, the High Court can review its own order, where the grounds for review were: (i) discovery of new and important matter or evidence which,
after the exercise of due diligence, was not within knowledge of the petitioner or could not be produced by him; (ii) mistake or error apparent on the
face of the record; (iii) any other sufficient reason. A review will, however, not be maintainable in the following cases: (i) repetition of old and
overruled argument; (ii) minor mistakes of inconsequential import. (iii) The mere possibility of two views on the subject cannot be a ground for review.
Conclusion:- The effect of section 293 of the Income-tax Act, 1961 had been mistakenly omitted by the High Court while passing an order directing
pursuance of a civil suit and therefore, there was no error committed by the High Court in exercising its review jurisdiction calling for interference.
Readers Note:
{{{{{$$$ 10 CIT v. Metal and Chromium Plater (P) Ltd. [2019] 415 ITR 123 (Mad) High Court The assessee invested long-term capital gains in
eligible redeemable bonds and claimed exemption under section 54EC. The Assessing Officer did not question the eligibility of the assessee to such
exemption in regular computation but for purposes of computation of “book profit” for determination of minimum alternate tax (MAT) under section
115JB, the Assessing Officer denied relief under section 54EC by placing reliance on the judgment of the Supreme Court in the case of Apollo Tyres
Ltd. v. CIT [2002] 255 ITR 273 and the Bombay High Court in the case of CIT v. Veekaylal Investment Co. (P.) Ltd. [2001] 249 ITR 597. Issues
Involved:- The issue under consideration is, whether, while determining the “book profit” for purposes of section 115JB, can long-term capital gains
included in the statement of profit and loss be excluded since the same is eligible for exemption under section 54EC under the regular provisions of
the Income-tax Act, 1961. Analysis/observation:- Sub-section (5) of section 115JB allows for application of all other provisions contained in Income-
tax Act, 1961 except if specifically barred by that section itself. Thus, the “book profit” would be further eligible to the benefits set out in the other
provisions of the Act. Both the judgments relied upon by the Assessing Officer were rendered in the context of erstwhile section 115J which does not
contain a provision analogous to sub-section (4) of erstwhile section 115JA and sub-section (5) of section 115JB of the Act. Assessment under
erstwhile section 115J would be concluded exclusively on the basis of the book profit i.e., the net profit as adjusted by the items set out in the
Explanation thereunder. However, in an assessment in terms of section 115JB, the book profit would be further subjected to the effect of other
provisions of the Act that are specifically brought into play by virtue of sub-section (5) of section 115JB
Conclusion:- The High Court held that capital gains which forms part of the net profit in the statement of profit and loss of the assessee-company, in
respect of which exemption under section 54EC is available while computing total income under the regular provisions of the Income-tax Act, 1961,
should not be taken into account for calculation of minimum alternate tax on book profits under section 115JB. Readers Note:

{{{{{$$$ 11 Seshasayee Steels P. Ltd. v. ACIT [2020] 421 ITR 46 (SC) Supreme Court The assesse (Party of the first part) entered into an
“agreement to sell” on 15-05-1998 with a builder M/s. Vijay Santhi Builders Ltd (Party of the second Part) for sale of his property for a consideration
of Rs. Rs.6,10,00,000. It was further agreed that the consideration will be paid directly by the members on behalf of party of the second part or by the
party of the second part, whichever is earlier. The other important terms and conditions of such agreement are as under: 12. The Party of the First
Part has already handed over to the Party of the second part Xerox copies of all land documents of the schedule mentioned property for their legal
counsel's scrutiny and opinion. the party of the second part have also satisfied themselves about the title deeds. The party of the first part agree to
show the original title deed which are kept with them to the nominees of the second part as and when required after fixing prior appointment. 14. Both
the parties are entitled to specific performance of this agreement. 16. The Party of the First Part hereby gives permission to the party of the second
part to start advertising, selling, construction on the land herein mentioned. Advertisements, sales catalogues and leaflets shall be approved by the
party of the first part before publication or circulation. Pursuant to this agreement to sell, a Power of Attorney was executed on 27-11-1998, by which,
the assessee appointed one Chandan Kumar, Director of M/s. Vijay Santhi Builders Ltd. to execute and join in execution the necessary number of
sale agreements and/or sale deeds in respect of the schedule mentioned property after developing the same into flats. The Power of Attorney also
enabled the Builder to present before all the competent authorities such documents as were necessary to enable development on the property and
sale thereof to persons. Later on, compromise was entered into between the parties dated 19-07-2003. Under compromise deed sum of Rs. 50 lakh
is reduced from the total consideration of Rs. 6.10 Crores. Clause 3 of the said compromise deed confirms that the party of the first part, this is the
appellant, has received a sum of Rs. 4,68,25,644/- out of the agreed sale consideration. Clause 4 records that the balance Rs. 1.05 crores towards
full and final settlement in respect of the Agreement entered into would then be paid by 7 post-dated cheques. Clause 5 then states that the last two
cheques will be presented only upon due receipt of the discharge certificate from one M/s. Pioneer Homes. Accordingly, all the cheques as per
compromise deed have been encahsed including the last cheque which was dated 25-01-2004. The appellant did not file any Return for Assessment
Year 2004-2005. Apparently, it was detected later by the Assessing Officer, that the agreement to Sell had been entered into and that, subsequently,
a Memo of Compromise had also been entered into between the parties dated 19-7-2003. Based on the discovery of this fact, Notice dated 4-11-
2008 issued under section 148 of the Income-tax Act, 1961 was served on the assesse. Even in response to this notice, no Income-tax Return was
filed. A notice dated 8-9-2009 was issued under section 142(1) fixing the case for hearing on 20-9-2009. Here again, the assesse did not turn-up, as
a result of which, another notice was issued dated 23-10-2009, but this time again the assessee did not turn-up, so a third letter was issued on 11-
12-2009 fixing the case for hearing on 22-12-2009. In response to the aforesaid letter, the assessee, by letter dated 29-12-2009 stated as follows: - "I
refer to your letter dated 11-12-2009. I request you humbly and sincerely not to pass any order u/s 144 and to give me time for one month from
today. I shall positively submit all necessary statements and documents within 30 days of today to your satisfaction. I seek this time only because of
my very serious illness after an abdominal surgery."
Since time bar was foremost in the mind of the Assessing Officer, limitation falling on this transaction by 31-122009, a Best Judgment Assessment
Order was then passed under section 144 of the I.T. Act dated 31-12-2009. Vide this Order, the entire sale consideration was treated as a capital
gain and brought to tax. Issues Involved:- In which year transfer took place so as to levy capital gain tax? (a) The year in which possession has been
handed over under an agreement to sale i.e. previous year 1998-99 OR (b) The year in which the last cheque of compromise deed was encashed
i.e. previous year 2003-04. Analysis/observation:- “11. In order that the provisions of Section 53A of the T.P. Act be attracted, first and foremost,
the transferee must, in part performance of the contract, have taken possession of the property or any part thereof. Secondly, the transferee must
have performed or be willing to perform his part of the agreement. It is only if these two important conditions, among others, are satisfied that the
provisions of Section 53A can be said to be attracted on the facts of a given case. 13. Clause 16 is crucial, and the expression used in clause 16 is
that the party of the first part hereby gives 'permission' to the party of the second part to start construction on the land. 14. Clause 16 would,
therefore, lead to the position that a license was given to another upon the land for the purpose of developing the land into flats and selling the same.
Such license cannot be said to be 'possession' within the meaning of Section 53A, which is a legal concept, and which denotes control over the land
and not actual physical occupation of the land. This being the case, Section 53A of the T.P. Act cannot possibly be attracted to the facts of this case
for this reason alone. 15. We now turn to the argument of the learned senior counsel appearing on behalf of the assessee based on Section 2(47)(vi)
of the Income-tax Act. 17. Given the test stated in paragraph 25 of Commissioner of Income-tax v. Balbir Singh Maini [2018] 12 SCC 354 (SC), it is
clear that the expression "enabling the enjoyment of" must take colour from the earlier expression "transferring", so that it can be stated on the facts
of a case, that a de facto transfer of immovable property has, in fact, taken place making it clear that the de facto owner's rights stand extinguished. It
is clear that as on the date of the agreement to sell, the owner's rights were completely intact both as to ownership and to possession even de facto,
so that this Section equally, cannot be said to be attracted.” Conclusion:- “20. This being the case, it is clear that the assessee's rights in the said
immovable property were extinguished on the receipt of the last cheque, as also that the compromise deed could be stated to be a transaction which
had the effect of transferring the immovable property in question. 21. The pigeonhole, therefore, that would support the orders under appeal would be
Section 2(47)(ii) and (vi) of the I.T. Act in the facts of the present case.” Readers Note:
{{{{{$$$ 12 CIT v. Chetak Enterprises Pvt. Ltd. [2020] 423 ITR 267 (SC) Supreme Court An erstwhile partnership firm entered into an agreement with
the Rajasthan State Government for construction of road and collection of road or toll tax. The construction of road was completed by the said firm on
March 27, 2000 and the same was inaugurated on April 1, 2000. The firm was converted into a private limited company on March 28, 2000, viz., the
assessee, under the Companies Act, 1956. Upon conversion, intimation was given to the Chief Engineer (Roads), P.W.D., Rajasthan, Jaipur who
cancelled the registration of the firm and granted a fresh registration code to the assessee-company. For A.Y. 2002-03, the Assessing Officer
declined the claim of the assessee-company u/s 80-IA on the ground that the conditions of section 80-IA(4)(i) are not being fuflfilled Issues Involved:-
The issue under consideration is whether the relevant criteria laid down under sub-clauses (a) and (b) of section 80-IA(4)(i) are fulfilled by a
company, which has succeeded a firm upon its conversion into a private limited company, for claim of deduction thereunder Analysis/observation:-
The Supreme Court noted that the condition in clause (a) is fulfilled as the assesseecompany’s memorandum of association states that its main
object was to acquire as a going concern, and continue the business carried on by the firm. The effect of conversion of the firm into a company under
section 575 of the Companies Act, 1956, was that all the properties of the firm, in law, vested in the company and the firm ceased to exist and
assumed the status of a company after its registration as a company. A priori, it followed that the business was carried on by the enterprise owned by
a company registered in India. As the construction of the road was completed on March 27, 2000 and the same was inaugurated on April 1, 2000,
after which toll tax was being collected by the assessee-company, it can be inferred that the assessee is an enterprise carrying on business of (i)
developing, (ii) maintaining and operating or (iii) developing, maintaining and operating any infrastructure facility. Further, the requirements of clause
(b) are also fulfilled as the agreement was initially executed between the erstwhile partnership firm and the State Government, but with a 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 and include its successors and assignees. 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 assessee-company, which came into existence
on March 28, 2000. Conclusion:- The Supreme Court held that the assessee-company is qualified for the deduction under section 80-IA 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 assessee-company has succeeded in law after conversion of the partnership firm into a
company Readers Note:
{{{{{$$$ 13 Dalmia Power Ltd. & Anr. v. ACIT [2020] 420 ITR 339 (SC) Supreme Court The appellant No.1 and appellant No.2 were public limited
companies, incorporated under the Companies Act, 1956. They filed their original Return of Income under section 139 (1) for assessment year 2016-
17. The appellants (Transferee Companies/Amalgamated Companies) entered into 4 interconnected schemes of arrangement and amalgamation
with 9 companies (Transferor Companies/Amalgamating Companies) and their respective shareholders and creditors. The appointed date of the
Schemes was 1-1-2015 and would come into effect from 30-10-2018. The Schemes were duly approved and sanctioned by the NCLT. The
appellants/Transferee Companies manually filed revised Returns of Income on 27-11-2018, with the Department after the Schemes were sanctioned
and approval was granted by the NCLT. The revised Returns were based on the revised and modified computation of total income and tax liability of
the Transferor/Amalgamated Companies. The appellants submitted that the revised Returns were filed after the due date for filing revised Returns of
Income under section 139(5), since the NCLT passed the final Order on 1-5-2018. Consequently, it was an impossibility to file the revised Returns
before the prescribed date of 31-3-2018 11
On 4-12-2018, the Department issued a Notice under section 143(2) to give effect to the approval of the Scheme. On 5-12-2018, the Department
recalled the Notice dated 4-12-2018, on the ground that the appellants had belatedly filed their revised Returns without obtaining permission from the
Central Board of Direct Taxes (CBDT) for condonation of delay under section 119(2)(b), read with CBDT Circular No. 9/2015, dated 9-6-2015. Issues
Involved:- Can delay in submitting the revised return of the amalgamated company after receiving approval from NCLT, but beyond the time
stipulated u/s 139(5) of the Act, be permitted otherwise than by way of CBDT’s condonation u/s 119(2)(b)?Analysis/observation:- The schemes of
arrangement and amalgamation between the assessees and the nine companies enabled the assessees to file revised returns even after the
prescribed time limit for filing or revising such returns had lapsed, without incurring any liability on account of interest, penalty or any other sum. In
compliance with section 230(5) of the Companies Act, 2013, notices in form CAA.3 under rule 8(1) of the Companies (Compromises, Arrangements
and Amalgamations) Rules, 2016 had been sent to the Department. The Department had not raised any objection within the stipulated period of 30
days despite service of notice. Pursuant thereto, the schemes were sanctioned by NCLT and attained statutory force not only inter se the transferor
and transferee companies, but also in rem, since there was no objection raised either by the statutory authorities, the Department, or other regulators
or authorities, likely to be affected by the schemes. As a consequence, the amalgamating companies lost their separate identity and character, and
ceased to exist upon the approval of the schemes of amalgamation and their assets, profits and losses were transferred to the books of the
assessees. The schemes, which incorporated provisions for filing revised returns beyond the prescribed time limit, would come into force
retrospectively from the appointed date, i.e., January 1, 2015. Accordingly, the assessees filed their revised returns on November 27, 2018.
Conclusion:- The Supreme Court held that, in view of section 170(1), the Department was required to receive the revised returns of income for A.Y.
2016-17 and assess the income of the assessees taking into account the schemes of arrangement and amalgamation as sanctioned by the NCLT for
the following reasons: (a) Section 139(5) would not apply since the revised returns were not filed by the assessee on account of any omission or
wrong statement in the original return. The delay was due to the time taken to obtain sanction of the schemes from NCLT. It was an impossibility for
the assessee-companies to have filed the revised returns for A.Y.2016-17 before the due date of March 31, 2018, since NCLT passed the last orders
sanctioning the schemes only on April 22, 2018 and May 1, 2018; (b) Section 119(2)(b) would not be applicable where the assessee had
restructured its business, and filed a revised return of income with the prior approval and sanction of the NCLT, without any objection from the
Department. Readers Note:
{{{{{$$$ 14 Genpact India Pvt. Ltd. v. DCIT & Ors [2019] 419 ITR 440 (SC) Supreme Court On September 10, 2013, a scheme of arrangement was
approved by the Delhi High Court pursuant to which the assessee bought back 7,50,000 shares at the rate of Rs. 35,000 per share for a total
consideration of Rs.2,625 crores from its holding company. In its return for AY 2014-15, it declared the details of the transaction but denied the
liability to pay any tax. Pursuant to notice under section 143(2), an assessment order was passed rejecting the assessee's contention that the
transaction was not a buyback in terms of section 115QA but a buy-back pursuant to a scheme approved by the High Court, and holding the
assessee liable to pay tax at 20% under section 115QA on the distributed income of Rs.2,625 crores. The assessee filed a writ petition against this
portion of the assessment order. The Department submitted that since the remedy of appeal was available to the assessee, the writ petition should
not be entertained. The assessee submitted that the demand under section 115QA could not be considered as forming part of the assessment order
and it must be something separate from the order of assessment and therefore remedy of appeal is not available under section 246A of the Act.
Issues Involved:- Whether appeal would be maintainable before CIT(A) against the determination of liability under section 115QA?
Analysis/observation:- The Supreme Court noted the situations referred to in section 246A(1)(a) of the Act, namely: (i) An order against the
assessee, where the assessee denies his liability to be assessed under this Act, or (ii) An intimation under sub-section (1) or sub-section (1B) of
section 143, where the assessee objects to the making of adjustments, or (iii) Any order of assessment under sub-section (3) of section 143 or
section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed,
or to the status under which he is assessed. The Supreme Court observed that contingencies detailed in (ii) and (iii) hereinabove arise out of
assessment proceedings but the first contingency is a standalone postulate and is not dependent purely on the assessment proceedings either under
section 143 or section 144 of the Act. The expression "denies his liability to be assessed" as held by this Court in Kanpur Coal Syndicate is quite
comprehensive to take within its fold every case where the assessee denies his liability to be assessed under the Act. Conclusion:- The Supreme
Court held that any determination u/s 115QA, be it regarding quantification of the liability or the question whether such company is liable or not,
would fall within the ambit of the first postulate referred to hereinabove i.e., "an order against the assessee, where the assessee denies his liability to
be assessed under this Act". The computation and extent of liability determined under the provisions of section 115QA would squarely get covered
under the said expression. Accordingly, an appeal u/s 246A to Commissioner (Appeals) would be maintainable against the determination of liability
under section 115QA.