Western India Regional Council of
The Institute of Chartered Accountants of India

(Setup by an Act of Parliament)

June 28, 2019

CA. Paras K. Savla, CA. Hemant R. Shah

Explanation to Section 73: Amendment is effective prospectively

It was held that the amendment which was brought by Parliament to the Explanation to Section 73 by the Finance (No 2) Act 2014 was with effect from 1 April 2015. In its legislative wisdom, the Parliament amended Section 43(5) with effect from 1 April 2006 in relation to the business of trading in derivatives, Parliament brought about a specific amendment in the Explanation to Section 73, insofar as trading in shares is concerned, with effect from 1 April 2015. The latter amendment was intended to take effect from the date stipulated by Parliament and we see no reason to hold either that it was clarificatory or that the intent of Parliament was to give it retrospective effect - Snowtex Investment Limited Appellant v. PCIT Civil Appeal No(s). 4483 of 2019 Date of order April 30, 2019.

S. 32 Deprecation on intangible

The assessee had made payments to him to ward of competence and to protect its existing business. Receiver of sums, in turn, had agreed not to solicit contract or seek business from or to a person whose business relationship is with the assesse, would not solicit directly or indirectly any employee of the assesse and he would not disclose any confidential information which would include the past and current plan, operation of the existing business, trade secretes lists etc. It was held that the rights acquired by the assesse under the said agreement not only give enduring benefit, protected the assessee’s business against competence, that too from a person who had closely worked with the assessee in the same business. The expression “or any other business or commercial rights of similar nature” used in Explanation 3 to sub-section 32(1)(ii) is wide enough to include the present situation - PCIT v. Piramal Glass Limited ITA No. 556 of 2017 order dt. 11 June 2019 (Bombay High Court).

S. 244 Interest on refund arising pursuant to additional claim before ITAT

The assessee had not claimed certain expenditure before the Assessing Officer but eventually raised such a claim before the Tribunal. Upon which, the Tribunal remanded the proceedings to the CIT(A). As such stage, the additional benefit claimed by the assessee was granted. This resulted in refund and the question of payment of interest on such refund. According to the Revenue, by virtue of Section 244A(2), since the delay in the proceedings resulting in the refund was attributable to the assessee, the assessee would not be entitled to such interest. It was held that there is no allegation or material on record to suggest that any of the proceedings hit the assessee’s appeal before the Tribunal or remanded the proceedings before the CIT(A) whether in any manner delayed on accounts of the reasons attributable to the assesse and accordingly allowed the interest to the assessee – CIT vs. Melstar Information Technologies Ltd. [2019] 106 taxmann.com 142 (Bombay)

S. 139(5) Post amalgamation as per the scheme, revised return can be filed irrespective of the time limit specified u/s. 139(5)

Pursuant to the approval of scheme of Arrangement and Amalgamation by hon’ble NCLT, companies filed revised return beyond the time allowed u/s. 139(5) and said returns were rejected by the revenue. On the writ petitions Madras High Court directed revenue to receive the revised returns of income filed by the respective petitioners pursuant to the scheme of arrangement and amalgamation approved by the National Company Law Tribunal, Chennai and complete the assessment for the assessment years 2015-2016 and 2016-2017 in accordance with law within a period of twelve [12] weeks from the date of receipt of the revised returns of income from the respective petitioners. It also observed that

(a) The scheme of arrangement and amalgamation approved by the National Company Law Tribunal under Section 391 of the Companies Act gives statutory force to enable the respective petitioners to file the revised returns of income beyond the prescribed period and Section 139(5) of the Income Tax Act, 1961 is not applicable for cases where revised returns of income have been filed pursuant to approval of scheme of arrangement and amalgamation by the Competent Court.
(b) The Circular issued under Section 119(2)(b) of the income tax act, namely, Circular No.9 of 2015 is not applicable for filing of revised returns of income pursuant to a scheme of arrangement and amalgamation approved by the Court under Section 391 of the Companies Act.

(c) Rule 12(3) of the Income Tax Rules which requires filing of revised returns of income electronically is not applicable to cases where revised return of income has been filed by the assessee pursuant to scheme of arrangement and amalgamation approved by the Court.

Dalmia Power Ltd. vs. ACIT [2019] 105 taxmann.com 28 (Madras).

S. 54F Deduction cannot be denied when assessee is joint owner in two house

The legislature has used the word “a” before the words “residential house”. It must mean a complete residential house and would not include shared interest in a residential house. Where the property owned by more than one person, it cannot be said that any one of them is the owner of the property. In such a case, no individual person of his own can sell the entire property. No doubt, he can sell his share of interest in the property but as far as the property is considered, it would continue to be owned by co-owners. Joint ownership is different from absolute ownership. In the case of residential unit, none of the co-owners can claim that he is the owner of residential house. Ownership of a residential house, means ownership to the exclusion of all others. Therefore, where a house is jointly owned by two or more persons, none of them can be said to be the owner of that house. the legislature has consciously not amended the provisions of section 54F, it has to be held that the word “own” in Section 54-F would include only the case where a residential house is fully and wholly owned by the assessee and consequently would not include a residential house owned by more than one person. It was held that in such circumstances, assessee could not be treated as ‘absolute owner’ of the residential flat and the exemption u/s 54F of the Act cannot be denied to the assesse – Ashok G. Chauhan vs. ACIT [2019] 105 taxmann.com 204 (Mumbai - Trib.)

Power to make Rules or remove difficulties can be exercise by the Central Government only after the date when Act is in force

Parliament in its wisdom enacted the Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 and expressly provided therein that save as otherwise provided in the said Act, it shall come into force on the 1st day of April, 2016. There is, therefore, no gainsaying the legal position that, the power to make Rules or remove difficulties under the provisions of Sections 85 and 86 of the said Act, could only be exercised by the Central Government, once the said Act came into force on the 1st April, 2016, the date expressly stipulated by Parliament in this behalf, and not prior thereto.

A fortiori the Central Government further could not have, prior to the said Act coming into force, altered the date on which the enactment came into force i.e. 1st April, 2016 by exercising the powers available to it under Sections 85 and 86 of the said Act by advancing it to 1st July, 2015 – Gautam Khaitan vs. UOI [2019] 105 taxmann.com 276 (Delhi).