1.

SC upholds linking of Aadhaar number with PAN:

[Justice K.S. Puttaswamy (RETD.) v. Union of India [2018] 97 taxmann.com 585 (SC)]

The Finance Act, 2017 inserted a new section 139AA in the Income-tax Act, 1961. With effect from July
1, 2017 this provision requires every eligible person to link the Aadhaar no. with PAN and quote the
Aadhaar number in the Income-tax return. If any person does not possess the Aadhaar Number but he
has applied for the Aadhaar card then he has to quote Enrolment ID of such Aadhaar application in the
ITR.

The Supreme Court had already upheld the validity of Section 139AA by repelling the contention raised
on Articles 14 and 19 of the Constitution of India in the case of Binoy Viswam v. Union of India [2017] 82
taxmann.com 211 (SC). However, Section 139AA was not examined in the context of privacy rights
enshrined in Article 21 of the Constitution. The Supreme Court in the case of K S Puttaswamy v. Union
of India writ petition (civil) no 494 of 2012 held that, though privacy is a fundamental right, yet it is not
an absolute right and is subject to certain limitations. The following are the triple tests which need to be
satisfied for judging the permissible limits for invasion of privacy while testing the validity of any
legislation:

a) Existence of a law

b) Legitimate State interest

c) Test of Proportionality

The first requirement stands satisfied as section 139AA is a statutory provision and, therefore, there is a
backing of law. Insofar as requirement of ‘legitimate State interest’ is concerned, Section 139AA seeks to
safeguard the following interest:

“To prevent income tax evasion by requiring, through an amendment to the Income Tax Act, that the
Aadhaar number be linked with the PAN.”

Regarding the aspect of proportionality, there was specific discussion on that aspect in Binoy Viswam’s
case (supra) as well. Therefore, the provision of Section 139AA has successfully met the triple test of
right to privacy.

2. Discounts offered by Flipkart.com to buyers aren’t intangible assets: ITAT:

[Flipkart India Private Limited v. ACIT [2018] 92 taxmann.com 387 (Bangalore - Trib.)]

The assessee-co., a wholesale dealer, acquired goods from various persons and immediately sold them
to retail seller - WS Retail Services Pvt. Ltd. The retail seller ultimately sold those goods from e-
commerce platform ‘Flipkart.Com’. To increase the volume of sale, assessee was purchasing goods, say,
at Rs. 100 and selling them to the retailers at discount, say, at Rs. 80. The strategy to forego the profit
had resulted in assessee-co. became a loss making company.

The Assessing Officer held that the profits foregone by selling goods at less than cost price were to be
regarded as expenditure incurred in creating intangibles/brand value or goodwill. Thus, only
depreciation claim could be allowed on it.
The Tribunal held in favour of assessee that one couldn’t proceed on the basis of presumption that the
profit foregone would be deemed as expenditure to acquire an intangible asset, being brand value or
goodwill. For creation of an intangible asset, i.e., goodwill, it is not possible to ascertain the cost of
acquisition of goodwill. It was, therefore, not possible to say that profits foregone created goodwill or
any other intangibles or brand value to assessee.

Since assessee did not incur any expenditure in creating intangibles, being brand value or goodwill,
discounts offered by selling goods at less than cost price were to be treated as revenue expenditures
and, accordingly, deduction was allowable.

3. Gift received by an individual from HUF isn't exempt: ITAT:

[Gyanchand M. Bardia v. ITO [2018] 93 taxmann.com 144 (Ahmedabad - Trib.)]

The assessee claimed that gift of certain amount received from his Hindu undivided family (HUF) was
exempt from tax under section 56(2)(vii). However, the Assessing Officer held that the term 'relative' in
Explanation (e) to Section 56(2)(vii) does not include HUF as donor and, therefore, added the impugned
amount to assessee's income under Section 68.

On further appeal, the Tribunal held in favour of revenue that as per Explanation to Section 56(2)(vii)
members of an HUF are its relatives. Therefore, if HUF receives any sum from any of its member, such
sum shall not be chargeable to tax. However, in vice-versa cases when member receives any sum from
the HUF, same would be chargeable to tax as the term ‘relatives’ defined under said Explanation does
not include HUF as a relative of such individual. The legislative intent is very clear that an HUF is not to
be taken as a donor in case of an individual recipient. Thus, the assessee's plea of having received a valid
gift from his HUF was rightly declined and impugned addition was to be upheld.

4. Sec. 68 additions not tenable on grounds that relatives gave gift without any occasion: High Court:

[Pendurthi Chandrasekhar v. DCIT [2018] 91 taxmann.com 229 (Hyderabad)]

In the Instant case, additions were made under section 68 on the grounds that assessee had failed to
show why, without any occasion, Rs. 73 Lakhs had been gifted by the maternal aunt without any
consideration. The appellate authorities also upheld the action of the Assessing Officer. On further
apeal, the High Court held in favour of assessee that an occasion is not necessary to accept a gift from a
relative. Section 56 does not envisage any occasion for a relative to give a gift, it was almost
impermissible for any authority and even for the Court to import the concept of occasion and develop a
theory based on such concept.

The Court further held that when donor had given a confirmation letter that she had transferred Rs. 73
lakhs to her nephew as a gift out of natural love and affection, the AO should not have further doubted
her. The donor in instant case was assessee's own maternal aunt and was covered within the definition
of 'relative' defined under explanation to section 56(2)(v). Therefore, unexplained addition under
section 68 with respect to gift of Rs. 73 lakh received by assessee from his maternal aunt was to be
deleted.
5. MasterCard shall have a PE in India and its fees for processing card payments taxable as business
income: AAR:

[MasterCard Asia Pacific Pte. Ltd., In re. [2018] 94 taxmann.com 195 (AAR - New Delhi)]

The Applicant, MasterCard Asia Pacific, is a Singaporean company engaged in processing of electronic
payments. Customers are provided with a MasterCard Interface Processor (MIP) that connects to
MasterCard's Network and processing centres. Indian subsidiary owns and maintains MlPs placed at
Customers' locations in India. The applicant approached the AAR to decide if it had a PE in India

The Authority for Advance Rulings held that MasterCard has a PE in India under provisions of Article 5 of
India-Singapore DTAA in respect of services rendered with regard to use of a global network and
infrastructure to process card payment for Customers in India. It was held that the applicant has fixed
place PE, service PE and dependent agency PE in India.

The applicant was held to have a PE in India because the MIPs in India play a crucial role while
facilitating the authorization of payment. AAR concluded that the preliminary verification of payment
request and transmission of data, which is crucial to authorization, happens in India through MIP. These
initial verification and validation of details are important and are crucial functions in the context of
overall functions performed by the applicant to facilitate authorization. These functions cannot be called
preparatory or auxiliary in nature.

6. Market value of other business assets not relevant to determine FMV value of unlisted shares of a
co.:

[Minda S M Technocast (P.) Ltd. v. ACIT [2018] 92 taxmann.com 29 (Delhi - Trib.)]

The assessee-company was deriving its income under the head 'rental and interest income'. It acquired
shares of another entity at Rs. 5 per share. The value of such shares was derived on basis of book value
of assets of issuing co. in accordance with Rule 11UA of the I-T Rules. Valuation Report from a CA firm
was also produced in support of claim.

The Assessing Officer was of the view that the fair market value (FMV) of the land as per the circle rate
should be taken into consideration while determining the value of the shares of issuing co. Accordingly,
he substituted the book value of the land with FMV of the land as per the circle rate and determined the
value of shares at Rs. 45.72 per share.

The Tribunal held in favour of assessee that Rule 11UA contains the provisions for determination of fair
market value of a property, other than an immovable property. Rule 11UA provides that while valuing
the shares the book value of the assets and liabilities declared by the issuing co. should be taken into
consideration. There is no provision in Rule 11UA as to substitute the FMV of land with its book value
while calculating the FMV of shares. Therefore, the share price calculated by the assessee of issuing co.
at Rs. 5 per share had rightly been determined in accordance with the provisions of Rule 11UA.

7. Domain registration fee received by 'GoDaddy' is taxable as royalty: ITAT:

[Godaddy.com LLC v. ACIT [2018] 92 taxmann.com 241 (Delhi - Trib.)]

The assessee-co. was engaged as accredited domain name registrar authorized by Internet Corporation
for Assigned Names and Numbers. The assessee had income from domain registration fees which was
claimed to be not taxable in India. However, the Assessing Officer assessed the same as royalty, which
was confirmed by the Dispute Resolution Panel (DRP). The aggrieved-assessee filed the instant appeal
before the ITAT. It was submitted by assessee that it merely facilitated getting domain registered in the
name of the customer who paid for availing of such services. Hence, the receipt in respect of domain
name registration was not in the nature of royalty under Explanation 2 to section 9.

The ITAT ruled in favour of revenue on basis of a judgment delivered by the Apex Court in the case of
Satyam Infoway Ltd. v. Siffynet Solutions (P.) Ltd. AIR 2004 SC 3540. In the instant case, the Supreme
Court held that the domain name is a valuable commercial right and has all the characteristics of a
trademark and, accordingly, domain names are subject to legal norms applicable to trademarks.

Thus, the rendering of services for domain registration was equivalent to rendering of services in
connection with the use of an intangible property which was similar to trademark. Therefore, charges
received by the assessee for said services in respect of domain name was royalty as per Explanation 2 to
section 9(1)(vi).

8. HC upheld additions on basis of ‘window-dressed’ financials prepared for bank loans:

[Binod Kumar Agarwala v. CIT [2018] 94 taxmann.com 422 (Calcutta)]

The assessee approached a bank to obtain the credit facilities on basis of books of account prepared by
a firm of Chartered Accountants. Subsequently, different financial statements were presented before
Income-tax Dept. which were audited by another Chartered Accountants Firm. The financials for
Income-tax purposes were not commensurate with what was reflected in the books of account
presented before Bank. The Assessing Officer made additions due to difference in two audited balance
sheets.

The High Court held in favour of revenue that once assessee presents the financial statements, as
certified by a Chartered Accountant, for obtaining bank loan, he can’t subsequently backtrack from such
position at the time of filing annual accounts for purpose of taxation. The assessee can’t argue that that
earlier accounts had been prepared on estimation basis for presentation thereof to bank.

When financial statement of an assessee is accompanied by a certificate as to its fairness, it couldn’t be

tailor-made to suit a particular purpose or window-dressed to make it attractive for bankers to rely
thereupon. Thus, it was open to the Assessing Officer and income tax authorities to pin assessee down
on basis of assessee's representation contained in earlier balance-sheet and make additions.

9. ‘Sachin Tendulkar’ entitled to vacancy allowance as he failed to find tenant for vacant flat:

[Sachin R. Tendulkar v. DCIT [2018] 96 taxmann.com 253 (Mumbai - Trib.)]

The Assessee, Mr. Sachin Tendulkar, owned two properties in Pune – Flat S and Flat T. Flat T was let out,
however, Flat S was vacant for the whole year as suitable tenant couldn’t be found. He claimed that the
said flat had remained vacant throughout the year despite his reasonable effort to let out the same. In
this regard, he submitted three letters written to the builder. In first letter, he thanked the builder for
identifying the tenant for the flat at Flat T and also requested to identify tenant for Flat S. Subsequently,
the assessee had written second letter and after that third letter being reminders for identifying the
tenant to let out Flat S.

Therefore, he claimed vacancy allowance under Section 23(1)(c) for Flat S and declared nil income.
During the course of assessment proceedings, the Assessing Officer made additions for the notional
rental income from Flat S, which was also upheld by the CIT(A).

The ITAT held in favour of assessee when same builder had helped the assessee to find tenant for
another flat, it couldn’t be said that these letters to the same builder to help him identify one more
tenant, to be considered as fake, defied logic. Therefore, if a property was held with an intention to let
out in the relevant year coupled with efforts made for letting it out, the same would fall within the
purview of section 23(1)(c).

10. Sum received on relinquishment of 'right to sue' is non-taxable capital receipt: ITAT:

[Bhojison Infrastructure (P.) Ltd. v. ITO [2018] 99 taxmann.com 26 (Ahmedabad - Trib.)]

The assessee-company entered into a development agreement by virtue of which a right in land was
created in its favour by owner of land. Assessee's case was that despite development agreement
entered into by landlord, the landlord had decided to sell said land to other parties. The assessee filed a
suit in the Courts of law for specific performance of pre-emptive right to purchase the land. Later on, it
received damages from the potential purchaser for relinquishment of 'right to sue' in the Courts of law
for breach of development agreement. The assessee claimed that 'right to sue' was a personal right
which would not fall within sweep of definition of 'capital asset' under section 2(14). Consequently,
damages received from potential purchaser were treated as non-taxable capital receipts.

The ITAT held in favour of assessee as under:

The essence of long list of judicial pronouncements cited by assessee was that section 6 of the Transfer
of Property Act which uses the same expression 'property of any kind' in the context of transferability
makes an exception in the case of a mere right to sue. The decisions thereunder make it abundantly
clear that the 'right to sue' for damages is not an actionable claim. It cannot be assigned. Transfer of
such a right is opposed to public policy as it tantamount to gambling in litigation.

Hence, such a 'right to sue' does not constitute a 'capital asset ' which, in turn, has to be 'an interest in
property of any kind'. Despite the definition of expression 'capital asset ' in the widest possible terms in
Section 2(14), a right to a capital asset must fall within the expression 'property of any kind' subject to
certain exclusions.

Notwithstanding widest import assigned to the term 'property' which signifies every possible interest
which a person can hold and enjoy, the ' right to sue' was a right in personam and such right could
certainly not be transferred. In order to attract the charge of tax on capital gains, the sine qua non is
that the receipt must have originated in a 'transfer ' within the meaning of section 45, read with section
2(47) of I-T Act. In the absence of its transferability, damages received by assessee couldn’t be assessed
as capital gains.

11. AO should apprise counsel on all facts to avoid delays in disposal of cases: HC:

[PCIT v. Grasim Industries Ltd [2018] 94 taxmann.com 81 (Bombay)]

The Bombay High Court held that it is primary duty of the Assessing Officer to apprise the Counsel about
all facts involved in matter, more particularly facts which may have surfaced after passing of impugned
order of Tribunal so as to avoid unnecessary delays in disposing of cases pending before Court. Officers
of revenue should not believe that once matter is in Court, it is sole responsibility of revenues counsel to
protect the interest of State.

Thus, it is appropriate to suggest to CBDT to consider holding of a training programme, where leading
advocates could address domain-expert on ethics, obligation and standard expected of advocates before
they start representing State. It would ensure that revenue is properly represented to serve greater
cause of justice and fair play.

12. Mushroom farming is an agricultural operation even if vertical space is used instead of horizontal
space on soil:

[DCIT v. Inventaa Industries (P.) Ltd. [2018] 95 taxmann.com 162 (Hyderabad - Trib.)]

The assessee-co. was engaged in business of manufacture of bulk drugs. It also derived income from
growing mushroom and treated it as agriculture income exempt from tax under Section 10(1). The
Assessing Officer disallowed the exemption on the contention that growing mushrooms is not an
agriculture operation. He contended that mushrooms are produced under 'controlled conditions' in
racks placed on shelves above land. Hence, the activity was not an agricultural activity.

The assessee-co. raised the following issue before special bench of ITAT:

‘Whether income from production and sale of Mushrooms could be termed as 'agricultural income' if
instead of horizontal use on soil, vertical space was used?’

The ITAT special bench held in favour of assessee as under:

'Soil' is a part of the land. Land is also part of earth. The upper strata of the land is soil and this is
cultured and made fit for production of crops, vegetables and fruits, etc., by enriching the soil. When
such soil is placed on trays, it does not cease to be land and when operations are carried out on this
‘soil’, it would be agricultural activity carried upon land itself.

For the purpose of understanding the nexus between an agricultural operation and an agricultural land,
what needs to be inferred from the term 'land' is that, the cultured top layer of the earth, which is fit for
any sort of cultivation, is land for this purpose. Hence, the soil which was placed on the vertical space
above the land in trays was also land and the income arising from the sale of Mushrooms was
agricultural income exempt from tax.

13. Delhi HC directs I-T Dept. to allow filing of ITR without Aadhaar No.:

[Shreyasen, & Anr. v. Union of India & ORS [2018] 95 taxmann.com 256 (Delhi)]

The petitioners filed a writ in the Delhi High Court to seek directions that I-T Dept. should allow filing of
Income-tax return (ITR) without complying with the condition of providing Aadhaar Number.

Section 139AA of the Income-tax, Act 1961 requires every eligible person to quote his Aadhaar number
in the ITR. If any person does not possess the Aadhaar Number but has applied for the Aadhaar then he
can quote Enrolment ID of Aadhaar application Form in the ITR. This provision also requires the linking
of Aadhaar number with PAN of the taxpayer[ The CBDT vide order [f.no.225/270/2017/ita.ii], dated
June 30, 2018, extended the last date for linking of Aadhaar number with PAN till March 31, 2019.].

Petitioners argued that, though CBDT had provided relief to taxpayers by deferring last date to link their
Aadhaar number with PAN, yet no such relief was provided in case of filing of ITR. Quoting of Aadhaar
number or Enrolment ID of Aadhaar application form in I-T return is mandatory to file ITR online. E-Filing
portal of Income-tax dept. doesn’t accept any return if Aadhaar number isn’t mentioned in ITR.

Various High Courts had also allowed taxpayers to file their Income-tax returns manually without
furnishing the Aadhaar number or enrolment ID of Aadhaar application form. Thus, they should be
permitted to file their returns for the Assessment Year 2018-19 without furnishing Aadhaar in ITR.

Considering the issue, the Delhi HC issued directions to the CBDT to issue appropriate directions and to
create a platform by amending the digital forms or substituting them properly to enable ‘opt out’ option
from the mandatory requirement of furnishing Aadhaar Number for the duration till the exemption
subsists, i.e., till 31-03-2019.

Subsequent to the directions issued by the Delhi High Court, the Income-tax Dept. updated the ITR
utilities and e-filing platform which enabled the taxpayer to file the return without furnishing the
Aadhaar or Enrolment Id.

14. No capital gain tax on ‘Power of Attorney’ holder just because real owner didn’t file ITR: ITAT:

[Samir Trikambhai Patel v. ITO [2018] 96 taxmann.com 291 (Ahmedabad - Trib.)]

During the assessment proceedings, the Assessing Officer noted that the assessee had sold immovable
properties and earned long-term capital gains. The assessee submitted that he had only signed the
documents by virtue of Power of Attorney (POA) executed by Mr. A and Mr. B, the original vendors of
such sale transactions who were Non-resident Indian.

The Assessing Officer concluded that as assessee failed to furnish the residential address of the vendors
and vendors didn’t file returns of income, he shall be considered as owner of the properties.
Accordingly, the assessee was held liable to be taxed on the capital gain arising from sale of these
properties.

On further appeal, the ITAT held in favour of assessee. It held that the copy of purchase agreement,
power of attorney and sale deeds produced before AO, mentioned nowhere that the assessee was the
real owner of the property or the consideration had been received by him. The residential address of the
actual vendors was also mentioned in the Sale Deed as well as in the Power of Attorney. In spite of
information about the residential address of real owner, the AO had not taken any initiative to make an
enquiry with an intent to impose tax on capital gain upon them. Instead of doing so, he made the
assessee liable for payment of tax. Therefore, as the properties didn’t belong to the assessee, capital
gain arising from those properties couldn’t be taxed in his hands solely on the ground that the person
being the real owners hadn’t filed their income-tax returns.

15. Brand promotion by ‘Shilpa Shetty’ not an international transaction in absence of prerequisite
agreement:

[Shilpa Shetty v. ACIT [2018] 96 taxmann.com 443 (Mumbai - Trib.)]

The assessee, Mrs. Shilpa Shetty, was resident of India and was engaged in film acting and had also
acted as a brand ambassador for various products. A share purchase agreement (SPA) was signed by the
shareholders of EMSHL, a Mauritian company, to transfer a portion of the shareholding to Kuki
Investments Ltd. (Kuki) represented by Raj Kundra and under the same SPA, Kuki was also to subscribe
additional shares to be issued by company EMSHL.

Assessee was neither a buyer nor a seller of shares of EMSHL in SPA. However, under SPA, she
undertook to provide brand ambassadorship services without charges to Jaipur IPL Cricket Private
Limited (JICPL), an Indian Company that was a 100 per cent subsidiary of EMSHL, in relation to
promotional activities of 'Rajasthan Royals', an IPL cricket team owned by JICPL. The AO held that there
was a deemed 'international transaction' between assessee and JICPL, therefore, adjustment should
made in assessee's income on basis of ALP.

The ITAT held in favour of assessee that Section 92B(2) deems a transaction between two non-AEs as
'international transaction' if there exists a prior agreement in relation to the relevant transaction
between one of the non-AE’s and AE of an assessee. Section 92B(2) couldn’t be applied to hold that
transaction between assessee and JICPL was an 'International transaction' as neither of the parties to
the SPA was an AE of the assessee nor JICPL had entered into a prior agreement with AE of assessee
(JICPL was not a party to SPA). Thus, in absence of a prior agreement between non-AE and AE of an
assessee, no adjustments could be made.

16. Compensation received by ‘Jackie Shroff’ for withdrawing criminal case was capital receipt and not
taxable:

[ACIT v. Jackie Shroff - [2018] 97 taxmann.com 277 (Mumbai - Trib.)]

Shares held by the assessee, Mr. Jackie Shroff, in a company were sold due to forged signature by
another person. Assessee filed a criminal complaint before the Economic Offences Wing. After filing of
complaint, the accused came forward for amicable settlement of dispute and a settlement deed was
executed in order to settle the dispute. As per the terms of settlement deed, assessee received Rs. 6.97
crores as compensation in lieu of withdrawing the criminal complaint.

Assessee treated said compensation as capital in nature and did not offer it for taxation at the time of
filing of return. However, during assessment proceedings, the Assessing Officer treated the
compensation as income and added it to income of assessee.

The Mumbai ITAT held in favour of assessee that the compensation received by the assessee was not for
his professional activities but for settlement of dispute between him and some other party resulting in
filing of a criminal complaint. The amount received towards compensation could not fit in to the
definition of income as per section 2(24), read with section 4 of the Income-tax Act, 1961.

The Bombay High Court in the case of CIT v. Amar Dye Chem Ltd. [1994] 74 Taxman 254 also held that
the amount received towards compensation or damage for settlement of dispute was capital receipt
which was not taxable. Thus, compensation received by assessee for withdrawing criminal complaint
was a capital receipt and couldn’t be treated as income.
17. Reopening of cases of Rahul Gandhi and Sonia Gandhi is valid as they failed to disclose shares
allotted in excess of FMV: HC:

[Sonia Gandhi v. ACIT [2018] 97 taxmann.com 150 (Delhi)]

The assessees, Mr. Rahul Gandhi and Mrs. Sonia Gandhi, extended a loan to the National Herald to write
off the accumulated debts and recommence the newspaper publication. The said loan was assigned by
the assessee to a newly incorporated non-profit company ‘Young India’ (YI) and in lieu of that they were
allotted shares of YI. However, in Income-tax returns, they failed to pay tax on the shares allotted by
Young India. The assessees argued that the allotment of shares did not trigger any taxing event. It was
also argued that since they were shareholders of a non-profit and charitable company, they were under
no obligation to disclose the value of shares.

The High Court held in favour of revenue that sub-clause (ii) of clause (c) of Section 56(2) provides that if
certain shares or property are acquired at a price which is less than its aggregate fair market value by an
amount exceeding Rs. 50,000, the fair market value as reduced by the considered paid shall be charged
to tax. In the instant case, the assessee bought the shares at Rs. 100 per share which could not be
deemed as its fair market value. The assesse had nowhere disclosed the fair market value of such shares
and had not recorded the facts relating to above taxing event. Further, it couldn’t be held that the
individual was exempted altogether from disclosing her or his interest in the acquisition of shares
merely because shares were of not-for-profit Company. Therefore, the AO was justified in reopening the
cases.

18. ITAT grants stay of demand for non-deduction of tax by ‘Uber’ from payment made to drivers:

[Uber India Systems (P.) Ltd. v. JCIT [2018] 98 taxmann.com 199 (Mumbai - Trib.)]

The assessee, UBER India, was providing marketing and support services to a Dutch company, Uber BV.
It was collecting payments on behalf of said company and making disbursements to driver-partners as
per directions of Uber BV. A survey was conducted at the registered office of assessee-co. and it was
observed that assessee had not complied with provisions of section 194C on pay-outs to Driver-Partners.
Accordingly, the assessee was treated in-default and a demand notice of Rs. 24.92 crores and Rs. 84.13
crores for assessment years 2016-17 and 2017-18 were raised and penalty proceedings initiated. The
assessee denied his liability to deduct TDS under section 194C on ground that it was not a 'person
responsible for making payment' to Driver-Partners as contract was between Uber B.V. and Driver-
Partners. It filed an application before ITAT for stay of demand.

The Mumbai ITAT held in favour of assessee. The ITAT referred to the submission made by the assessee
as to its modus operandi of collecting the payments on behalf of the Dutch company, which were made
by way of debit or credit cards or collected by the Driver-Partners directly from the customers. It was
stated that there were practical difficulties as it was not possible for the assessee to collect TDS on the
cash payments received by the Driver-Partners directly. Since the assessee had proved that the facts of
the case were not properly and thoroughly examined and verified by the lower authorities. Demand
raised by the revenue had to be stayed subject to deposit of Rs. 20 Crore till the disposal of appeal by
the tribunal so that the business of the assessee was not adversely impacted.
19. Excess share premium not taxable in hands of closely held co. if its shareholders are relatives:
ITAT:

[Vaani Estates (P.) Ltd. v. ITO [2018] 98 taxmann.com 92 (Chennai - Trib.)]

The assessee-company had only two shareholders 'S' and her husband. On passing away of husband, his
shares devolved on their daughter 'V'. The assessee proposed to acquire an immovable property at
approximately Rs. 23.09 crores. 'S' brought in money into the company in lieu of allotment of fresh
10,100 shares with a share premium of Rs. 23.31 crores.

The Assessing Officer opined that company had received excess price/share premium for the shares
allotted to 'S' over and above the face value of shares. Accordingly, he brought Rs. 23.31 crores to tax in
the hands of the company under Section 56(2)(viib).

The ITAT held in favour of assessee as under:

When 'S' introduced money into the company for allotment of shares at an exorbitant premium in
contrast to its intrinsic value of just Rs. 10 per share, the benefit of such investment had only passed on
to her daughter because there were only two shareholders in the company at that point of time. Had 'S'
gifted the money to her daughter 'V' and thereafter if daughter had brought the same into the company
for allotment of equity shares at face value, question of invoking of the provisions of section 56(2)(viib)
would not have arisen.

Provisions of section 56(2)(viib) couldn’t be invoked in the case of the assessee-co. because by virtue of
introducing cash in the company by 'S' for allotment of equity shares with unrealistic premium the
benefit had only passed on to her daughter 'V' and there was no scope in the Act to tax when cash or
asset was transferred by a mother to her daughter.

20. No concealment penalty if assessee has bonafide belief that notional income isn’t taxable: ITAT:

[DCIT v. Shah Rukh Khan [2018] 93 taxmann.com 320 (Mumbai - Trib.)]

The assessee, Mr. Shah Rukh Khan, had received a villa at Dubai as gift and offered an amount of Rs. 14
lakhs as the notional income of the villa for tax in his return of income for the year under consideration.
During the course of assessment proceedings, assessee claimed that Article 6 of India-UAE tax treaty
doesn’t expressly recognize the right of the resident State to tax the income from immovable property
situated in the source State. Therefore, the notional income of the villa owned by him in Dubai could not
be subjected to tax in India.

The ITAT held that claim raised by the assessee being clearly backed up by a bonafide belief on his part
that the notional income of the villa was not liable to be taxed in India, no penalty for concealment of
income could be validly imposed on the assessee.

21. Australia has taxing rights under Australia-India DTAA even if there is no provision in its domestic
law: Australian Court:

[Satyam Computer Services Ltd. (Now Tech Mahindra Limited) v. Commissioner of Taxation [2018] 98
taxmann.com 358 (FC-Australia)]
The Applicant, Tech Mahindra, had offices in Sydney and Melbourne through which it provided software
products and information technology services to entities in Australia. Payments received by applicant
for the services provided in Australia by the employees located in India were treated as ‘Royalties’ as per
Article 12(3)(g) of the Australia-India DTAA .

Applicant argued that, though Australia was allocated the right to tax the ‘Royalties’ by the Indian
Agreement but it could only exercise that right if it had the right to impose tax on those amounts under
Australia’s domestic law. As of now, the domestic law does not give any right to Australia to tax such
income.

The Federal Court of Australia held as under:

The language of Article 23 should be given effect to according to its terms and the context. Article 23
provides that that income derived by a resident of one contracting States may be deemed to be income
from sources in other contracting state for purpose of law of that other State. Therefore, royalty income
was to be included in the applicant’s assessable income because it was income from an Australian
source by reason of Article 23 of the Australia-India DTAA. The Court rejected the argument that the tax
treaties can only be used as shields not swords. It held that the tax treaties also provide standalone
taxing power and independent imposing of tax to a particular income.

22. Madras HC quashes proceedings initiated under Black Money Act against Chidambaram family:

[Srinidhi Karti Chidambaram v. PCIT [2018] 99 taxmann.com 181 (Madras)]

The Madras High Court held that the foreign assets in the instant case were acquired with money that
was disclosed in the books of account of the assessee and that was remitted through banking channels.
There was no allegation of black money or unaccounted money or money that had escaped tax or
money that was remitted through illegal channels. It was not disputed by the Income-tax department
that the source of investment was tax paid money remitted through banking channels in accordance
with schemes approved by the RBI. Further, foreign assets were disclosed in Schedule FA in
Original/Revised return of income. Therefore, the offence under section 50 of the Black Money
(Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015 was not tenable.

23. Sum received by Sushmita Sen as compensation for being sexually harassed not taxable:

[Sushmita Sen v. ACIT [2018] 99 taxmann.com 252 (Mumbai - Trib.)]

The assessee, Sushmita Sen, received a sum of Rs. 145 lakhs from Coca Cola India Limited. Out of total
sum, she offered to pay tax only on Rs. 50 Lacs and claimed that balance Rs. 95 lakhs was capital receipt.
She claimed that Rs. 95 lakhs represented the compensation received towards damages caused to her
reputation.

The Mumbai ITAT held that compensation received by the assessee was not income liable to tax. Though
she had received total amount of Rs. 145 lacs in lieu of settlement for breach of terms of celebrity
engagement contract, yet only an amount of Rs. 50 lakhs was due to assessee under the contractual
terms, and additional amount of Rs. 95 lakhs did not arise out of exercise of profession. Rs. 95 lacs was
received towards damages arising out of her being sexually harassed by CCIL employee, disparaging her
professional reputation by false allegations and for the repudiatory breach of contract by CCIL. Such
compensation could not be termed as any benefit, perquisite arising to assessee out of exercise of
profession, hence, it couldn't be construed to be assessee's income either under section 2(24) or under
section 28.

24. Payment of advance salary to defeat purpose of demonetisation won't come under purview of
benami transaction:

[G. Bahadur v. ACIT [2018] 100 taxmann.com 179 (PBPTA – AT)]

The appellant was employed in a College run by a Trust. He received Rs. 50 thousand as advance salary
from the said trust. The appellant deposited entire amount in his bank account, which was subsequently
withdrawn by him and used for own purposes.

The Initiating Officer (IO) assumed that Chairman of trust had forced employees to distribute, deposit
and retain their own money in demonetized currency in guise of loan received, which had to be repaid
after some time in new currency. Thus, IO held chairman of college as beneficial owner and appellant as
benamidar and passed order provisionally attaching bank account of appellant.

The Appellate Tribunal held in favour of appellant as under:

Every cash transaction couldn't be termed as a 'benami' transaction. As per section 2(9) of Benami Act
the following twin conditions are needed to be satisfied to construe any transaction as benami: (1) the
property being held by a person who has not provided the consideration, (2) the property is held by that
person for the immediate or future benefit, direct or indirect of the person who has provided the said
consideration.

The characteristic of a 'benami' transaction is that there must be a mere lending of name without any
intention to benefit the person in whose name it is made, i.e., a mere name lender. The mischiefs sought
to be punished by the Act are only such transactions which have a name lending element without
deriving any benefit therein, i.e., 'benami' transactions.

The transaction where cash was paid to person in lieu of a future promise couldn't be a 'benami'
transaction, as there was no lending of name. There could be no 'benami' transaction if the future
benefit was due from the person who was also the holder of property.

The impugned order was not sustainable as it intended to punish the appellants for wanting to defeat
the purpose of demonetization and was beyond the purview of the Act.

25. Priyanka Chopra shall pay tax on car gifted to her by 'Toyota' for brand promotion: Mumbai ITAT:

[Priyanka Chopra v. DCIT [2018] 89 taxmann.com 286 (Mumbai - Trib.)]

The assessee, Priyanka Chopra, had entered into agreement with NDTV for promoting the causes of
environmental issues in association with Toyota. She was given a Toyota Prius hybrid luxury sedan car
for being the brand ambassador of NDTV-Toyota Greenathon Campaign. The Assessing Officer taxed the
market value of such car in the hands of assessee as business income under section 28(iv). However, the
assessee contended that the remuneration received against her services as brand ambassador had been
offered to tax in the year of receipt. Since she didn’t render any services to Toyota Company, the value
of the car given to her for promotional purpose couldn’t be taxed in her hands.
The Mumbai ITAT held in favour revenue that assessee had done the promotional activity by rendering
the services as a brand ambassador of NDTV Toyota Greenathon Campaign, which had also promoted
the brand of Toyota. Therefore, value of Toyota car in this connection had rightly been added in her
hands under Section 28(iv). Further, the argument that there was no agreement between Toyota and
the assessee was totally irrelevant and unsustainable.