Section 139

Section 139 — the law in short

What the courts have decided on section 139, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CBDT v Vasudeva Adigas Fast Food P Ltd Supreme CourtHelps taxpayerValidity unconfirmed
  The CBDT rejected my condonation application without dealing with my reasons. Can I challenge that?
  Yes. A rejection that does not properly consider the reasons advanced and the documents filed is not a proper exercise of the s.119(2)(b) power. Where the delay was demonstrably beyond the assessee's control — prolonged promoter-investor litigation — the High Court was entitled to set the rejection aside and direct that the application be allowed, and the Supreme Court dismissed the Revenue's SLP.
• PCIT v Wipro Ltd Supreme CourtHelps department
  A declaration was required by the due date and you filed it late. Is that fatal?
  Yes. Both limbs — furnishing the declaration, and doing so before the due date for the original return — are mandatory, not directory. A claim made only in a belated revised return does not qualify.
• Goetze (India) Ltd v CIT Supreme CourtHelps department
  You want to make a claim you missed, but the time to revise the return has gone. Can you just write to the officer?
  Not to the Assessing Officer — a claim before him needs a revised return. But the Court expressly said this does not touch the Tribunal's power under s.254, so the appellate route stays open.
• Marshall Sons & Co (India) Ltd v ITO Supreme CourtHelps taxpayer
  Our amalgamation says it takes effect from an earlier appointed date, but the court sanctioned it two years later. Which date does the Department have to work from?
  The date in the scheme. The Supreme Court held that every scheme must specify a date from which the amalgamation or transfer takes effect, that the court sanctioning it may fix a different date and if it does that date governs, but that where the court merely sanctions the scheme as presented, the transfer date in the scheme is the date of amalgamation. It cannot be otherwise. Proceedings before the court necessarily take time, the transferor may go on trading meanwhile, and that trading is deemed to be for and on behalf of the transferee. Notices calling on the transferor to file returns for later years were therefore unwarranted.
• Brij Mohan v CIT Supreme CourtHelps department
  The penalty provision was made harsher after my assessment year but before I filed the return. Which version applies to my concealment penalty?
  The one in force when you filed. The Supreme Court held that a penalty is imposed for the commission of a wrongful act, so it is the law operating on the date the wrongful act is committed that determines the penalty. Where the penalty is for concealment of particulars of income, the concealment occurs when the return is filed, and the law ruling on that date applies. It is wholly immaterial that the concealed income falls to be assessed for an earlier year. The substituted clause brought in by the Finance Act, 1968 therefore governed a return filed in April 1968.
• CIT v Manmohan Das (Deceased) Supreme CourtHelps taxpayer
  In the loss year the officer recorded that the loss could not be carried forward, and we did not appeal. The officer of the set-off year now says that finding is final against us. Is it?
  No. The Supreme Court held that whether a loss may be carried forward to the following year and set off is to be determined by the Income-tax Officer dealing with the assessment of that subsequent year, and that a decision recorded in the loss year — under s.24(3) of the 1922 Act, the provision now corresponding to s.157 — that the loss cannot be set off is not binding on the assessee. Failure to appeal the loss year order therefore does not forfeit the claim.
• Kohinoor Educational Services v Union of India High CourtHelps departmentValidity unconfirmed
  My payee refuses to sign the accountant's certificate for Form 26A. Can I get a writ compelling him to issue it?
  No, not where the records the certificate must rest on no longer exist. The deductor wanted a mandamus against the Airports Authority of India to issue the accountant's certificate in Annexure A to Form 26A under rule 31ACB, so as to bring itself within the first proviso to section 201(1) and escape disallowance under section 40(a)(ia). The Authority's answer was that its records for the period before April 2013 had been lost in floods in 2015 and could not be retrieved from the legacy system after migration. The Delhi High Court held that a mandamus enforces a clear legal right and a corresponding public duty, and does not lie to command an authority to issue a factual certification when the records on which such a certification must rest are not there. Replies under the Right to Information showing that returns had been filed did not fill the gap, because proof that a return was filed is not proof that a particular receipt from a particular payer was accounted for in it. The review petition was dismissed.
• Kohinoor Educational Services Pvt Ltd v Union of India High CourtHelps department
  The payee will not give me the accountant's certificate in Form 26A, so I am stuck as an assessee in default. Can the High Court order it to sign?
  Not where the payee does not have the records to certify from. The Delhi High Court held that the Form 26A certificate is not a routine administrative letter but a certification of specific statutory facts made after examining the payee's return, accounts and documents. Mandamus lies to enforce a clear legal right and a corresponding public duty; it does not lie to command an authority to certify facts it cannot verify. Proof that the payee filed its return, and bank statements showing receipts, are not proof that the particular sum was taken into account in computing its income. The review petition was dismissed, no error apparent being shown.
• Anurag Bagaria v Income Tax Department High CourtHelps taxpayerValidity unconfirmed
  After a search I filed revised returns giving up a capital gains claim and paid the tax. Can I still be prosecuted under s.276C(1) for wilful evasion?
  Not on those facts. The Karnataka High Court quashed the s.276C(1) prosecution, holding that a claim of deduction which the revenue does not accept is not by itself a wilful evasion of tax — an incorrect or erroneous claim can come from a wrong reading of the law. The department's special leave petition against that order was dismissed.
• Kunal Structure (India) Pvt Ltd v Dy CIT High CourtHelps taxpayer
  My return was defective and I cured the defect ten months later. Does the s.143(2) clock run from the original filing or from the day I removed the defect?
  From the original filing. Where the defect is removed within the time the Assessing Officer allowed, the return relates back to the date on which it was originally furnished, and the six-month limitation for a s.143(2) notice is counted from the end of the financial year in which that original return was filed. On the facts the scrutiny notice was issued nearly a year after that period had run out and was held barred. The Revenue's special leave petition was dismissed.
• Humayun Suleman Merchant v CCIT High CourtHelps departmentValidity unconfirmed
  I never deposited the unspent sale proceeds in a capital gains account. Can I still claim 54F?
  No, not for the unspent part. Section 54F(4) requires the amount not utilised towards the new house to be deposited in the notified account before the due date under section 139(1), and failure to do so confines the exemption to what was actually spent.
• Court On Its Own Motion v CIT High CourtHelps taxpayer
  CPC has refused my TDS credit and adjusted the refund against an old demand. What did the Delhi High Court actually direct?
  Taking up the problem on its own motion, the Delhi High Court issued directions on both limbs. A TDS claim supported by the deductor's certificate is not to be rejected merely because the uploaded information does not tally, and unmatched challans are to be verified and corrected within a fixed time. And s.245 is a two-stage provision: prior intimation of the proposed adjustment, a reply from the assessee, consideration of that reply by the Assessing Officer, an order under s.245, and communication of the outcome. A computerised set-off without that sequence does not comply with the section.
• CIT v Govind Nagar Sugar Ltd High CourtHelps taxpayerValidity unconfirmed
  The return was filed late, so the officer has refused to carry forward everything — including unabsorbed depreciation. Is depreciation really caught by the late return bar?
  No. The Delhi High Court held that s.80 and s.139(3) apply to business losses and not to unabsorbed depreciation, which is governed exclusively by s.32(2). There is accordingly no obligation to file the return within the prescribed time in order to carry forward depreciation.
• Manish Kumar Vijay v ITO ITATHelps taxpayer
  CPC added income because Form 26AS shows more receipts than my 44AD turnover. Can they do that?
  Not on the 26AS entry alone. Form 26AS is a third-party information source and is subject to error; here the deductor had reported the TDS against the wrong PAN, so the figure evidenced no receipt at all. An adjustment made without verifying the underlying transaction was deleted.
• International Fresh Farm Products (India) Ltd v ITO ITATHelps taxpayerValidity unconfirmed
  CPC has refused to let me carry forward my s.35AD specified-business loss because the return went in late. Can the officer of the loss year decide that at all?
  On this Tribunal's view, no. Carry forward and set off are two separate stages: the officer of the loss year determines and notifies the loss, and it is the officer of the later year, when set-off is actually claimed, who decides whether s.80 read with s.139(3) bars it. The Bench set aside the CIT(A)'s order and directed the AO/CPC to remove the direction denying carry forward, expressly leaving the due-date objection alive for the year of set-off.
• Motorola Inc v DCIT ITATHelps taxpayerValidity unconfirmed
  The Assessing Officer issued me a notice under section 142(1) calling for a return after the assessment year had already ended. Is the assessment made on that notice valid?
  No. The Delhi Special Bench held that a notice under section 142(1)(i) calling for a return cannot be issued after the end of the relevant assessment year. Where no return has been filed and the year has closed, the case is one of escaped assessment and the Assessing Officer must proceed under section 148 after satisfying section 147 - recording reasons and forming a reason to believe. Allowing him to call for a return under section 142(1)(i) instead would let those requirements be sidestepped, and the two provisions cannot operate in the same field at the same time. The notices in Motorola's and Ericsson's cases were issued after the year ended, so those assessments were invalid.
• In re Vanenburg Group B.V. Advance RulingHelps taxpayerValidity unconfirmed
  Our Dutch company is moving its Indian subsidiary's shares to another group company in the Netherlands. If the gain is exempt under the treaty, do we still have to withhold, file a return and do a transfer pricing study?
  No, on all four counts. The Authority ruled that no taxable capital gain arose in India on Vanenburg Group B.V.'s proposed transfer of its shares in Cordys R&D (India) Pvt Ltd to Cordys Holding B.V., because article 13(5) of the India-Netherlands agreement leaves such gains taxable in the Netherlands where the transfer is part of a corporate reorganisation and the alienator holds at least ten per cent of the transferee. It followed that the transferee need not withhold under section 195, that no return was required under section 139, and that the transfer pricing provisions in sections 92 to 92F did not apply. The ruling binds only Vanenburg.
• In re Dun and Bradstreet Espana S.A. Advance RulingHelps taxpayerValidity unconfirmed
  We buy standardised business information reports from a Spanish company and resell them here. Do we have to withhold tax on what we pay, as royalty or technical fees?
  No. The Authority ruled that the payments made by Dun and Bradstreet Information Services India for electronic purchases of business information reports from its Spanish associate were the Spanish company's business profits within article 7 of the India-Spain agreement; that the Spanish company had no permanent establishment in India under article 5; that it was therefore not taxable in India on those profits; and that the Indian company was not required to withhold tax under section 195. Buying a finished report was likened to buying a book, not to acquiring intellectual property or a service. Three of the seven questions were not pressed. The ruling binds only that applicant.
• In re Fidelity Advisor Series VIII Advance RulingHelps taxpayerSuperseded by amendment
  Our US fund buys and sells Indian shares through local brokers and a custodian bank. Are our gains business profits or capital gains, and does the custodian give us a permanent establishment?
  Business profits, and no permanent establishment - so the fund won. The Authority ruled that the gains arising to Fidelity Advisor Series VIII from sales of its portfolio investments in India were its business profits covered by article 7 of the India-US convention, the shares and securities being held as business assets. It further ruled that the fund had no permanent establishment in India under article 5: it had no branch, office, employee or dependent agent here, and Standard Chartered Bank, its domestic custodian, was an independent agent within paragraph 5 of article 5. Without a permanent establishment the fund was not taxable in India under the convention. The ruling binds only that applicant.
• Statutory position — s.194P: the specified senior citizen, the declaration, and relief from filing CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  My client is 78, has only pension and interest from the same bank, and does not want to file a return. Does s.194P get him out of filing, and what does the bank need from him?
  Yes, but only if every condition is met, and the relief is a consequence of the bank's deduction and not of the client's age. Section 194P(2) provides that s.139 shall not apply to a specified senior citizen for the assessment year relevant to the previous year in which tax has been deducted under sub-section (1) — so if the bank does not compute and deduct, the return obligation remains. Sub-section (1) requires a 'specified bank' to compute the total income after giving effect to Chapter VI-A deductions and the s.87A rebate and to deduct tax on that total income at the rates in force, and the Explanation confines a 'specified senior citizen' to a resident individual aged seventy-five or more at any time during the previous year, whose income consists of pension and no other income except interest received or receivable from an account maintained by him in the SAME specified bank in which he receives his pension, and who has furnished the prescribed declaration to that bank.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.