Shree Guru Kripa’s Institute of Management
“GyaanSmriti” – DIRECT TAX LAW UPDATES (Selected) –June 2014 Series
Updates in Direct Tax Law
1.  45 taxmann.com 445 (Delhi)
CTCI Overseas Corporation Ltd. v. Director of Income-tax-I, International Taxation
Issue: Whether the consortium agreement between CTCI and CINDA constitute an AOP for the purpose of the Income Tax Act, 1961 to be assessed as an separate entity.
Decision: Advance Ruling was set aside by the High Court with a direction that constitution of AOP in this case was to be examined on basis of principles laid down by the Delhi High Court recently in the case of Linde AG, Linde Engineering Division v. Dy. DIT and the same was set aside and the matter is remitted to the said authority.
Reasoning: It is obvious that unless the facts lead to a conclusion that there is sufficient joint participation for a common enterprise, it would not be appropriate to treat two or more persons as an Association of Persons for the purposes of assessing them as a separate taxable entity.
2.  45 taxmann.com 400 (Delhi)
Council For The Indian School, Certificate Examinations v. Director General of Income-tax
Issue#1:- Whether generating surplus by a charitable society or educational institution itself removes the exemption u/s 10(23)(vi) of the Income Tax Act, 1961.
Decision:- Increase in the fees for generating surplus would not by itself exclude the petitioner from the ambit of section 10(23C)(vi) of the Act.
Reasoning:- Generation of profit or surplus by an organization cannot be construed to mean that the purpose of the organization is generation of profit/surplus, as long as the surpluses generated are accumulated /utilized only for educational purposes. The same would not disable the institution from claiming exemption under section 10(23C)(vi) of the Act.
Issue#2:- Whether inefficient utilization of funds by a educational institution or a charitable society would mean that funds are not utilized for the specific object.
Decision:- Merely, because the funds of the petitioner may not have been utilized in the best possible manner cannot lead to a conclusion that they have not been applied to the object for which the petitioner has been established.
Reasoning:- It is not essential that all decisions made by the management of a society yield optimum results. A management of a society which is either negligent or has not performed its functions diligently with the requisite skill may be guilty of mismanaging the affairs of the society.
But it would be quite another thing to state that the funds have not been deployed wholly and exclusively for its objects.
3. INSTRUCTION NO.11/2014 [F.NO.279/MISC,/M-115/2013-ITJ], DATED 16-5-2014
The Commissioner of Income Tax (CIT) may, either of his own motion or on an application made by the assessee, revise an order passed by an authority subordinate to him. The CIT may, before revising such, order, make enquiry or cause such enquiry to be made and subject to the provisions of the Act, pass such order which is not prejudicial to the assessee.
4. NOTIFICATION NO. 26/2014 [F.NO.142/15/2013-TPL]/SO 1297(E), DATED 16-5-2014
Form 49A – Application for allotment of Permanent Account Number - In the case of Indian citizens/Indian companies/entities incorporated in India/unincorporated entities formed in India.
Form 49AA – Application for allotment of Permanent Account Number – Individuals not being a citizen of India/entities incorporated outside India/unincorporated entities formed outside India.