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Shri Asit Rameshchandra Shah Versus The Jt. CIT, Range-2 And DCIT, Cir. 1 (2) , Ahmedabad

Long term capital gain addition - FMV enhancement - reducing cost of acquisition of the impugned capital asset sold as on 01.04.1981 from ₹ 25,78,300/- @ ₹ 700/- per sq.yd. to ₹ 7,35,750/- only @ ₹ 250/- per sq.yd - Held that:- No reason or justification on assessee’s part in seeking to enhance fair market value of his plots sold to ₹ 700/- despite the fact that the same location suffers from various depreciating factors as well as its distance from main road seemin .....

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a different locality & scheme than the above sample plot. The assessee’s assertions in this regard based on coloured material and other documents are accordingly rejected. - Whether both the lower authorities have correctly valued assessee’s plot @Rs.250/- only than the above sample property sold on 01.10.1981 @Rs.484.10/- per sq.mtr.? - Held that:- Although the assessee’s valuation @Rs.700/- cannot be accepted in toto so are both the lower authorities’ findings drastically reducing the abo .....

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he above peculiar facts and circumstances shall not be treated as a precedent. The Assessing Officer shall accordingly finalize consequential computation. The assessee therefore partly succeeds on merits. - The assessee’s first plea is that the Assessing Officer could not have interfered in registered valuer’s report u/s.55A(a) of the Act since the amendment in question authorizing him to proceed on such basis w.e.f. 01.07.2012 does not apply with retrospective effect. We however notice that .....

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therefore rejected. - Section 54EC deduction disallowance - Held that:- Learned Departmental Representative strongly seeks to revive the impugned deduction disallowance on the ground that the assessee has invested his impugned capital gains in two sets of investments of ₹ 50lacs each in as many financial years; although within six months of the same arising from sale of the abovestated capital asset. We however notice that a co-ordinate bench in case of Jyotikaben Bhupendrbhai Shah (2 .....

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, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Assessee : Shri S. N. Divatia, A.R. For The Revenue : Shri K. Madhusudan, Sr. D.R. ORDER PER S. S. GODARA, JUDICIAL MEMBER This assessee and Revenue have initiated their instant cross appeals for assessment year 2011-12 against the CIT(A)-XX, Ahmedabad s order dated 30.09.2014, in case no. CIT(A)-VI/JCIT-R-2/242/13-14, inter alia confirming Assessing Officer s action making long term capital gain addition of ₹ 65,50,266/- a .....

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ce at the outset that the CIT(A) s findings under challenge comprise of a very detailed discussion, assessee s explanation and Assessing Officer s conclusion as follows: 4.1. During the course of appellate proceedings, the appellant filed written submission as under:- 3.0 FMV as on 01.04.1981 at ₹ 7,35,750/- instead of ₹ 25,78,300/-. 3.7 The first effective ground of appeal relates to the rejecting FMV as on 01.04.1981 shown at ₹ 25,78,300/- by the appellant as per registered v .....

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#8377; 91,65,957/- which resulted into addition of ₹ 65,50,266/-. 3.2 The appellant begs to submit that the impugned addition made by AO is wholly unjustified both on facts and in law as under : (a) Firstly, the AO has failed to appreciate that in order to ascertain a FMV as on 01.04.1981 of any capital asset for the purpose of computation of capital gain, the AO has to refer the same to valuation officer in accordance with the provisions of section 55A. The said section contemplate twin s .....

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aining FMV of any capital asset in case he differs from the valuation made by the regd. Valuer and the same rules out his power to estimate such value on his own for the reason that the AO is not an expert in the matter of valuation. This section provides expert assistance to the AO who is otherwise not in a position to counter or dislodge a claim made by the assessee when it is backed by the report of a regd. Valuer. (b) Secondly, even if the provisions of section 55A were to be invoked by AO, .....

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case, the valuation made by AO himself was not justified for the following reasons : (i) It is contended by AO that the plot bearing P.P.No. 840 was situated at Ashram Road which is 30.50 meters wide road (as against 30 feet width stated by the valuer) whereas the appellant's plot was about 2 km. inside main Ashram Road so that it cannot have higher commercial value. The appellant contents that the PUC was situated in well developed area abutting to Ashram Road and near Paldi junction as sta .....

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relating to P.P. No. 840 as given in valure's report shows that it admeausered about 2418 sq. Mt and sold during the period of ULC Act whereas the PUC was not covered under ULC Act as per the order dated 30.11,1982 of Dy. Collector and Competent Authority, ULC, Abad. Therefore, the PUC would naturally fetch higher value than P.P. No.840. It may be noted as observed by valuer in his clarification dated. 20.05,2014 that even in respect of plots nearby Ashram Road, the FMV was taken at ₹ .....

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be resorted. Decision: 4.2. I have considered the facts of the case and submission made by the appellant. The AO has made the addition of ₹ 65,50,266/- for the reason that the cost of the property sold was taken by the appellant at ₹ 91,65,857/- as against the AO's working at ₹ 26,15,591/-. On facts it is noticed that the appellant in the joint ownership with the 50% share in a property namely Bankers Bungalow in village Kochrab, Paldi, Ahmedabad containing land area of 24 .....

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transfer at ₹ 2,50,000/-. The cost of the acquisition of the property was taken by the appellant as on 1.4.1981 which was based upon the valuation report of the registered valuer Shri Induprasad C. Patel dtd. 30.10.2010. So as per valuation report dtd. 30.10.2010 the valuer determined the market value of the property at ₹ 25,78,300 as on 1.4.1981 on the basis of a sale instance of an another property at final Plot No.840 with area of 2418 Sqr.Mtrs sold on 1.10.1981 for a sum of S .....

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acquisition @ ₹ 700/- per sqr. yd. for the appellant's property which was higher as against the sale instance of final plot at ₹ 484.10 per sqr. Yd. Further during the course of assessment proceedings the AO made the necessary inquiries from the Municipal Corporation, registered valuer and from the appellant and it is found that the Plot No.850/1 of the appellant was situated inside 2 Kms. away from the Ashram Road at 40 Ft. wide road while the sale instance property as taken by .....

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the final plot No. 840 taken as a sale instance by the valuer. The detailed discussions about the inquiries and the outcome of such inquiries are discussed in the assessment order by the A.O. A copy of the T.P. Scheme No. obtained from the Ahmedabad Municipal Corporation has been made part of the assessment order also from which it is very much apparent that the locations of the sale instance property was well located and its value might have been much higher than the appellant's property v .....

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he appellant's working at ₹ 91,65,857/-. In the written submissions the appellant has taken the same grounds as were taken before the A.O. in the assessment proceedings. Firstly he has objected to the estimation of the cost of acquisition as on 1.4.1981 adopted by the A.O. @Rs.250/- per sqr. yd. for the reason that the AO did not have such expertise to value the property more particularly when the provision of Section 55A exists in the Act. The submission in this regard has been examin .....

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condition when the AO is of the opinion that value claimed by the appellant was less than its fair market value then the estimated by the registered valuer. Here in the instant case the value estimated by the registered valuer (of the appellant) was not less than the fair market value as estimated by the A.O. but it was excessive to the fair market value. Thus, the provisions of Section 55A in these circumstances does not apply for making a reference to the registered valuer. So in fact the pro .....

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would have been illegal in view of certain judgments quoted in the written submission. By saying this the appellant's thought that whatever rate he has adopted as a cost of acquisition i.e. R5.700/-/per sqr. Yd. as on 1.4.1981 became the final and neither the AO would estimate at his own considering the comparable instances, nor the registered valuer could have determined the fair market value as on 1.4.1981 u/s.55A of the I.T. Act which is totally against the provisions of law and never in .....

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roperty on 01.10.1981. So the sale instance was comparable and the sale rate needs to be adjusted according to the locations and the size of the road itself which the AO did in the assessment correctly. So there was nothing wrong in the stand of the A.O. for estimating the cost of acquisition at ₹ 250/- per sq.ft. as it was on the basis of the sale instance quoted by the appellant himself. In view of the aforesaid discussion, it is apparent that the appellant has made attempts to reduce it .....

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that Section 55A(a) as applicable in the impugned assessment year before its amendment by the Finance Act, 2012 w.e.f. 01.07.2012 nowhere envisages the Assessing Officer s interference with a registered valuer s report in case fair market value estimated therein of the capital asset sold is already more than the fair market value quoted at Assessing Officer s behest. Learned counsel refers to the above amendment provision containing crucial expression less than the fair market value before bein .....

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) 367 ITR 238 (Guj) CIT vs. Gauranginiben S. Shodhan Individual is also referred to buttress the above legal arguments. 5. Mr. Divatia thereafter refers to assessee s additional evidence application dated 16.11.2016 seeking to highlight location of two properties by way of various diagrams in coloured version and the fact that the sample property plot no.840 came under the Urban Ceiling Law whereas there was no such restriction in the impugned capital asset sold. He takes us to paper book pages .....

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nge arriving at the impugned fair market value. He takes us to the relevant annexure attached with the assessment order indicating inter alia the property in question to be situated on road having width of 40ft. only as against the sample property 840 situated on main Ashram Road having width of 30mtrs. His case is that the assessee s registered valuer stated this Ashram Road s width to be 30ft. only. He then once again asks us to stay back on the above town planning scheme annexure indicating a .....

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n 55A(b) of the Act then Clause (a) therein. And that there is no embargo upon an Assessing Officer in such a case to compulsorily make a reference to the DVO. We invited his attention to assessee s additional evidence (supra). His case is that both the lower authorities have rightly treated plot no.840 in the same scheme to be the benchmark in deciding fair market value of the capital asset in question as on 01.04.1981. He therefore seeks to reject assessee s submissions on merits as well. 8. W .....

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sidered plot no.840 having area measuring 248sq.mtr. @Rs.484.10 per sq.mtr. for arriving at the impugned valuation as on 01.04.1981 to be @Rs.700/- per sq.mtr. Site plan available in the case file makes it clear that assessee s plot is situated at a distance from the main Ashram Road whereas plot no. 840(supra) is on the main road itself having 30.5mtrs. width. Both these plots are in the same town planning scheme. Their size (supra) is also between 2000 to 3000 sq.mtrs. It has come on record th .....

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to be at least between 500 to 1kmtr. These crucial facts make it clear that the assessee s plot did not enjoy much commercial value since sandwiched between Sabarmati river on the one hand and Ashram Road on the other. There is further no material that the said plot s value in anyway suffered because of Urban Land Ceiling Law or its effect thereupon. We therefore do not find any justification in travelling further to adopt valuation of Natraj or G. S. Shodhan situated at much far distance in a d .....

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f the same scheme wherein one of them is situated on main Ashram Road and the other one falls in residential area as on 01.04.1981. The former property therefore can be held to be having commercial potential whereas assessee s plot is in purely residential area having its on value. We therefore consider it as an appropriate instance to observe that although the assessee s valuation @Rs.700/- cannot be accepted in toto so are both the lower authorities findings drastically reducing the above valu .....

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e peculiar facts and circumstances shall not be treated as a precedent. The Assessing Officer shall accordingly finalize consequential computation. The assessee therefore partly succeeds on merits. 10. We now advert to assessee s twin legal arguments. We do not find any merit in either of them. The assessee s first plea is that the Assessing Officer could not have interfered in registered valuer s report u/s.55A(a) of the Act since the amendment in question authorizing him to proceed on such bas .....

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t did suffer from apparent irregularities. The assessee s two legal contentions are therefore rejected. It case law (supra) is not found to be applicable in facts of the instant case as their lordships dealt with an instance of application of Section 55A(a). We therefore decline assessee s legal arguments. Its main case ITA No.2804/Ahd/2014 partly succeeds on merits. 11. We now proceed to deal with Revenue s appeal ITA No.3190/Ahd/2014 raising sole substantive ground in seeking to revive Section .....

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54EC by Finance Act, 2007. 5.2 A bare reading of the above provisions makes it clear that investment in Long Term Specified Assets has been restricted to ₹ 50,00,000/- by inserting of the first proviso to section 54EC. The assessee made investment in such assets at ₹ 1 crore and claimed exemption. Therefore the assessee vide this officer notice datred 23/09/2013 was requested to explain. 5.4 The above submissions of the assessee are considered carefully. It is seen that the assessee .....

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h of Hon'ble ITAT, Investment made by the assessee 20/04/2011 in NHAI Capital bonds are not eligible for deduction u/s. 54EC. Therefore deduction is restricted to ₹ 50,00, 000/-. This would mean an addition of ₹ 50,00,000/- to the assessee s income. 5.2. During the course of appellate proceedings the appellant filed written submission dtd. 08.09.2014 asunder:- 4.0 Investment U/S.54EC 4.1 The next ground of appeal relates to the denial of exemption u/s.54EC to the extent of ₹ .....

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n.com 75) (And), the same was binding upon AO and the exemption to the extent of further ₹ 50 lacs ought not to have been denied. The distinction brought out by AO is not correct in as much as, this contention has been dealt with in para 9 of the order. This decision has been consistently followed by various benches of Tribunal trough out India. Recently, IT AT, Panjim Bench has also held in favour of the assessee in case of ITO v. Ms Rania Faleiro (142 ITD 21) wherein the legal aspects ha .....

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e and other entities. This section permitted the assessee to make investment not exceeding ₹ 50 lacs in each financial year and it was not connected with the capital asset sold. In other words, the assessee may have sold different capital assets during the previous year but the ceiling of ₹ 50 lacs would not operate qua the capital assets. To illustrate, if the assessee has exhausted that limit by investing ₹ 50 lacs in financial year No. 1 and he again makes investment of S .....

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interpretation should be made so as to allow the benefit of exemption and wherever two views are possible, the view favourable to the assessee should be adopted as held in case of Vikrant Tyres Ltd ( 274 ITR 821)(SC) and Vegitables Products Ltd.(_88 ITR_92). In view of above, the exemption u/s.54EC to the extent of ₹ 50 lacs as denied by AO should be allowed. Decision: 5.5. I have considered the facts of the case and submission made by the appellant. The appellant has claimed the deductio .....

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of ₹ 50 lakhs only against the long term capital gain derived and accordingly the subsequent investment made by the appellant in the subsequent year was disallowed for the reasons discussed and relying upon the decision of the Hon'bel IT AT Jaipur Bench in the case of ACIT Vs. Rajkur Jain & Sons -HUF. 5.5. In the instant case the appellant has sold a plot of land on 28.10.2010 and on the capital gain arised thereupon the appellant has claimed the deduction u/s.54EC of ₹ 1 cr .....

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d upon the decision of Hon'ble ITAT in the case of ACIT, Cir.2, Ajmer Vs. Shri Rajkumar Jain & Sons (HUF) (2012) 50 SOT 21. 5.6 On the other side the appellant has claimed that the investment limit of ₹ 50lakhs is applicable to a financial year only and he can make another investment of ₹ 50 lakhs in the subsequent year also but within 6 months from the date of transfer of the property. He has mentioned that the language of the proviso to Section 54EC (w.e.f. 1.4.2007) that t .....

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ufacturing Industries Vs. ACIT, Circle, Baroda in IT appeal No.3226 of 2011 vide order dtd. 30.03.2012 the Hon'ble ITAT Bench-C, Ahmedabad has granted the deduction of ₹ 1 crore in two different financial years made but within six months from the transfer. Relevant portion of the findings are as under:- The dispute which is to be decided in this case is whether as per the provisions of section 54EC the assessee is entitled for exemption of ₹ 1 crore as six months period for inves .....

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ity to make an investment of ₹ 50 lakhs each in two different financial years and is able to claim exemption up to ₹ 1 crore under m 54EC. Since the wording of the proviso to section 54EC is clear, the benefits - which are available to the assessee cannot be denied. In view of above, assessee in instant case, was entitled for exemption of ₹ 1 crore as six months' period for investment in eligibly investments involved was two financial years. Now, Coming to the second aspect .....

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ances, the assessee was prevented by sufficient cause which was beyond his control in making investment in these bonds within the time prescribed. Further various judicial authorities have taken a view that exemption should be granted in such case where there is a delay in making investment due to non-availability of the bonds and have held that it is a reasonable cause and the exemption should be granted. Thus, it is held that the investment made by the assessee on 26.5.2008 beyond six months w .....

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s in two different financial years within six months period from date of transfer of capital asset, assessee was eligible to claim exemption up to ₹ 1 crore - Held, yes. Further in the case of ITO, Wd-2, Margas, Goad, Vs. Ms. Rania Faleiro [2013] 33 taxrnann.com 611 (Panaji - Trib.) Section 54EC of the Income-tax Act,1961 - Capital gains - Not to be charged on investment in certain bonds [Quantum of exemption] - Assessment year 2008-09 - Whether condition for availing of exemption under se .....

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In return of income for assessment year 2008-09, she claimed exemption under section 54EC of capital gain amounting to Rs. One crore - Whether assessee was eligible for exemption under section 50EC for Rs.one crore - Held, yes. Further in the case of Coromandel Industries (P) Ltd. Vs. Assistnat Commissioner of Income-tax, Company Circle 1(3), Chennai [2013] 36 taxmann.com 6 (Chennai - Trib.) Section 54EC of the Income-tax Act, 1961 - Capital gains - Not to be charged on investment in certain bon .....

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vested ₹ 50 lakhs eachin speckified assets in two different financial year but within six months from date of transfer of capital asset, restrictive proviso to section 54EC would not limit exemption claim to ₹ 50 lakhs only - Whether following same, exemption claimed by assessee upto ₹ 1 crore was allowed-Held, yes. Recently the Hon'ble ITAT, Ahmedabad B Bench has also decided this very issue in the case of Smt. Jyotikaben Bhupendrabhai Shah Vs. ACIT, Cir.10 Ahmedabad in IT .....

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.02.2008. The assessee investedRs.50 lakhs on 29.02.2008 i.e. F.Y. 2007-08 and ₹ 50 lakhs on 30.06.2008 i.e. FY 2008-09. Thus the assessee invested in ₹ 1 crore in specified bonds which are eligible for deduction u/s.54EC of the Act within six months from the date of the transfer of capital asset giving rise to Long Term Capital Gain in the hands of the assessee. Accordingly, the assessee claimed exemption of ₹ 1 crore u/s.54EC of the Act in the return filed for the Assessment .....

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stated that the Government decided to impose a ceiling on the quantum of investment that could be made in such bonds. Accordingly, the said section has been amended so as to provide for a ceiling on investment by an assesgee in such long-term specified assets. 12. On appeal, the Commissioner of Income-tax (Appeals) confirmed the action of the Assessing Officer. 13. Before us the Authorized Representative of the assessee submitted that the issue is covered in favour of the assessee by the followi .....

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e Tribunal in the case of ACIT v. Shri Raj Kumar Jain & Sons (HUF) (supra). 15. We find that the first proviso to section 54 EC, inserted by the Finance Act, 2007, w.e.f. 01.04.2007, reads as under :- Provided that the investment made on or after the 1st day ofApril1_2007 in the long-term specified asset by an assessee during any financial year does not exceed fifty lakh rupees. 16. The CBDT vide its Circular No. 3/2008 dated 12.03.2008 at paragraph 28. 2 thereon opined as under: 28.2 The qu .....

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cordingly, the said section has been amended so as to provide for a ceiling on investment by an assessee in such long- term specified assets. Investments in such specified assets to avail exemption under section 54EC, on or after 1st day of April, 2007 will not exceed fifty lakh rupees in a financial year. 17. Thus, a reading of the aforesaid proviso and Circular shows that the proviso has been inserted to limit the investment in eligible bonds to an amount of ₹ 50 lakhs in a financial yea .....

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original asset or assets are transferred and in the subsequent financial year does not exceed fifty lakh rupees. 18. We find that the decision of Jaipur Bench of the Tribunal in the case of Shri Raj Kumar Jain & Sons (HUF), which was cited by the Departmental Representative, was considered by the Bangalore Bench of the Tribunal in the case of Shri Vivek Jairazbhoy (supra) and thereafter it was held that the proviso to section 54EC does not limit the amount of exemption which is available as .....

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u/s 54EC in respect of both the investments i.e. ₹ 50 lakhs on 02.08.2008 and ₹ 50 lakhs on 30.06.2008. Thus, this ground of appeal of the assessee is allowed. 19. In the result, the appeal of the assessee is allowed. In view of the aforesaid discussion including the decision of jurisdictional ITAT which is binding upon this office on the identical issue, there is no case to make the disallowance of the second investment made in the subsequent year but within 6 months from the date o .....

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Highlight: Transfer of trading assets at cost price, the profit component also stood transferred to the outgoing Directors, which otherwise belonged to the Company - the fact that AO has made the addition in the hands of the Directors would not make any difference - additions confirmed - HC

Highlight: The interest u/s 234B of the Act cannot go beyond the stage of S.245D(I) before the Settlement Commission - HC

Highlight: Galvanized iron pipe is a different commercial commodity than a iron pipe, therefore the activity of galvanization in our considered opinion amounts to manufacture - Deduction u/s 80-IB allowed - HC

Highlight: Penalty u/s 271C - non deduction of TDS on interest paid to sister concerns in terms of Section 194A - Levy of penalty confirmed - HC

Highlight: Disallowance of interest - reference to section 179 - The legislature has also recognised, that the doctrine of lifting of veil in the matter of tax dues is to be applied to prevent fraud etc. and not where the company has suffered despite its normal bona fide function. - HC

News: RBI Reference Rate for US $

Notification: Amendment in Notification No. S.O. 3118(E), dated the 3rd October, 2016

Highlight: Discount on ESOP to be allowed as business expenditure u/s 37(1), during the years of vesting on the basis of percentage of vesting during such period, subject to upward or downward adjustment at the time of exercise of option.

Notification: Central Government appoints the 20th September, 2017 as the date on which proviso to clause (87) of section 2 of the Companies Act 2013, shall come into force

Notification: Companies (Restriction on number of layers) Rules, 2017

Highlight: Penalty u/s 271(1)(c) - additional income disclosure - surrender of income post survey u/s 133A - he disclosure made by the assessee is voluntary in nature, in the revised return - no penalty

Highlight: Reopening of assessment - notice u/s 148 issued on the directions of JCIT / CIT - a perusal of reasons for initiating reassessment proceedings clearly show that they are against the sprit of provisions u/s 147

Highlight: MAT - Adjustment to book profit - computation u/clause (f) of Explanation-1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A r.w.Rule 8D of I.T. Rules.

Highlight: Addition on account of alleged suppression of service value received - the addition made simply believing the Form 26AS will be an arbitrary exercise of power which cannot be sustained

Notification: Exempts intra state supply of heavy water and nuclear fuels from DAE to NPCIL

Notification: Seeks to amend notification No. 12/2017-UTT(R) to exempt right to admission to the events organised under FIFA U-17 World Cup 2017

Notification: Seeks to amend notification No. 11/2017- UTT(R) to reduce CGST rate on specified supplies of Works Contract Services

Highlight: Liability to pay duty on import of software - Though no authorization was given by the appellant to DHL, it is an undisputed position that the software has, in fact, been ordered by the appellant and have been delivered to them by DHL - the appellant is to be considered as the importer



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