Saturday, April 19, 2014

ITR Volume 362 : Part 4 (Issue dated : 14-4-2014)

 

INCOME TAX REPORTS (ITR)--PRINT AND ONLINE EDITION

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

HIGH COURTS

Advance tax --Interest--Interest for default in paying advance tax--Interest mandatory--Income-tax Act, 1961, s. 234B-- Oracle India P. Ltd. v. CIT (Delhi) . . . 302

----Interest--Default in payment of advance tax--Income earned by non-resident--Claim that income was not assessable in India--Assessee changing stand before Commissioner (Appeals) and contending that Indian payer should have deducted tax at source--Principles of equity applicable--Assessee liable to pay interest--Income-tax Act, 1961, ss. 234A, 234B, 234C-- Director of Income-tax, International Taxation v. Alcatel Lucent USA Inc. (Delhi) . . . 276

Business expenditure --Capital or revenue expenditure--General principles--Computer--Assessee entering into agreement of licence for duplicating software and selling it--Amount spent on importing software master copies--Master copies having high obsolescence--Expenditure deductible--Income-tax Act, 1961, s. 37-- Oracle India P. Ltd. v. CIT (Delhi) . . . 302

Charitable purposes --Charitable institution--Exemption--Denial of exemption--Investment or deposit in mode not specified in section 11--Loan to another charitable institution--Not an investment or deposit--Exemption cannot be denied--Income-tax Act, 1961, ss. 11, 13-- CIT v. Kanpur Subhash Shiksha Samiti (All) . . . 271

Exemption --Income from letting out warehouses to facilitate marketing of commodities--Scope of section 10(29)--Income from fumigation and disinfestation--Entitled to exemption--Income-tax Act, 1961, s. 10(29)-- Karnataka State Warehousing Corporation v. Deputy CIT (Karn) . . . 295

Interpretation of taxing statutes --Principles of equity when applicable-- Director of Income-tax, International Taxation v. Alcatel Lucent USA Inc. (Delhi) . . . 276

Precedent --Effect of decision of Supreme Court in Orissa State Warehousing Corporation v. CIT [1999] 237 ITR 589 (SC)-- Karnataka State Warehousing Corporation v. Deputy CIT (Karn) . . . 295

 

PRINT EDITION

ITR Volume 362 : Part 4 (Issue dated : 14-4-2014)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Accounting --Rejection of accounts--Estimation of profits--Question of fact--Deductions not allowable on estimated net profit--Income-tax Act, 1961, s. 145-- CIT v. Sahu Construction P. Ltd. (All) . . . 609

Advance tax --Interest--Firm--Partners--Depreciation of a firm cannot be allocated to the benefit of partners personally and it shall revert to firm--Decision of Supreme Court much prior to submission of returns by partners--Returns ought to have been filed showing correct income--Advance tax not paid--Partners liable to pay interest--Income-tax Act, 1961 , s. 234B -- Chief CIT v. George P. Mathews (Ker) . . . 660

Appeal to Appellate Tribunal --Bad debts--Law after 1-4-1989--Tribunal finding not deductible on ground assessee not establishing such advances had become bad--Application for rectification--Apparent mistake of law--Tribunal erred in not rectifying mistake apparent from record--Matter remanded to Tribunal to pass fresh order under section 254(2)--Income-tax Act, 1961, s. 254(2)-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

Appeal to High Court --Powers of Tribunal--Rectification of mistakes--Rejection of application for rectification--Appeal to High Court not maintainable from such order--Writ petition against such order maintainable--Constitution of India, art. 226--Income-tax Act, 1961, ss. 254(2), 260A-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

Bad debt --Law after 1-4-1989--Debt need no longer be proved to have turned bad--Merely writing off such advances or debts as bad debts in books of account and debiting in profit and loss account--Sufficient compliance--Income-tax Act, 1961, s. 36(1)(vii)-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

Business expenditure --Accounting--Lease equalisation charges--Accounting standards of Central Government followed--Lease equalisation charges deductible--Income-tax Act, 1961-- CIT, Large Taxpayers Unit v. Indian Railway Finance Corporation Ltd. (Delhi) . . . 548

----Capital or revenue expenditure--Bond issue expenses--Bonds issued for purposes of business--Expenditure deductible--Income-tax Act, 1961, s. 37-- CIT, Large Taxpayers Unit v. Indian Railway Finance Corporation Ltd. (Delhi) . . . 548

Capital gains --Exemption--Depreciable asset--Gains on transfer of long-term capital asset invested in specified assets--Effect of deeming fiction in section 50--Section 50 does not restrict exemption--Income-tax Act, 1961, ss. 50, 54EC-- CIT v. Aditya Medisales Ltd. (Guj) . . . 600

Charitable purposes --Meaning of--Law applicable--Effect of first proviso to section 2(15) inserted w. e. f. 1-4-2009--Charitable trust carrying on activities for profit--Not entitled to exemption--Incidental income would not disentitle trust to exemption--Trust for breeding and improving quality of cattle--Object charitable--Finding that income was incidental--Trust entitled to exemption--Income-tax Act, 1961, ss. 2(15), 11, 12-- Director of Income-tax (Exemption) v. Sabarmati Ashram Gaushala Trust (Guj) . . . 539

Company --Book profit--Computation of income under section 115JB--Lease equalisation charges cannot be disallowed--Income-tax Act, 1961, s. 115JB-- CIT, Large Taxpayers Unit v. Indian Railway Finance Corporation Ltd. (Delhi) . . . 548

Depreciation --Condition precedent--Ownership of asset--Finding that assessee had acquired possession of asset and was using it for purposes of business--Assessee entitled to depreciation--Income-tax Act, 1961, s. 32-- CIT, Large Taxpayers Unit v. Indian Railway Finance Corporation Ltd. (Delhi) . . . 548

----Condition precedent--Ownership of assets--Ownership for purposes of section 32 does not mean possession of title deeds--Dominion over assets and user as its own would be sufficient--Assets transferred to assessee-trust by State Government--Transfer recorded in books of account of assessee--Use of such assets by assessee in its activities--Assessee entitled to depreciation--Income-tax Act, 1961, s. 32-- CIT v. Jawahar Kala Kendra (Raj) . . . 515

----Ownership of asset--Transfer of business--Transferee put in possession of building, plant and machinery in terms of agreement to sell and running undertaking in its own right--Entitled to depreciation--That legal title conveyed under lease agreement and deed of sale executed in subsequent years not material--Income-tax Act, 1961, s. 32-- CIT v. WEP Peripherals Ltd. (Karn) . . . 508

Income-tax Department --Duty to maintain assessment records properly to ensure accuracy--Records not to be interpolated or changed--Need for proper numbering and indexing of proceedings and order sheets-- BBC World News Ltd. v. Asst. Director of Income-tax (Delhi) . . . 577

Industrial undertaking --Special deduction--Sale of business by sale of building, plant and machinery before expiry of period of exemption--Transferee entitled to deduction for remaining period--Income-tax Act, 1961, s. 80-IB-- CIT v. WEP Peripherals Ltd. (Karn) . . . 508

Investment allowance --Hotel building--Not a plant--Not entitled to investment allowance--Income-tax Act, 1961, s. 32A-- CIT v. SB Properties and Enterprises Ltd. (Raj) . . . 483

Penalty --Concealment of income--Effect of Explanation 1 to section 271(1)(c)--Explanation regarding computation of income found to be false--Income deemed to be concealed--Depreciation claimed on basis of lease--Lease transaction found to be bogus--Levy of penalty--Valid--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. BPL Sanyo Finance Ltd. (Karn) . . . 630

----Loan or deposit in cash exceeding specified limit--Contributions by twelve persons in cash--Audit report and balance sheet of assessee showing outstanding amount as loan received from twelve persons--Imposition of penalty justified--Income-tax Act, 1961, ss. 269SS, 271DD-- Soundarya Textiles v. Asst. CIT (Ker) . . . 488

Precedent --Effect of Supreme Court decision in Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775 (SC)-- CIT v. Jawahar Kala Kendra (Raj) . . . 515

Reassessment --Notice--Audit party--Objection that non-charging of interest on advances resulted in short levy of tax--Assessing Officer not accepting objection but issuing notice solely on basis thereof--Notice not valid--Income-tax Act, 1961, s. 148-- N. K. Roadways P. Ltd. v. ITO (OSD) (Guj) . . . 522

----Notice--Audit party--Whether asset for which depreciation claimed put to use before September 30 of year under consideration require re-examination--Ground for reopening assessment brought to notice of Assessing Officer by audit party but Assessing Officer on application of mind convinced with reason--Assessing Officer not acting at instance of audit party--No dispute that issue requires reconsideration--Notice valid--Income-tax Act, 1961, s. 148-- N. K. Industries Ltd. v. ITO (OSD) (Guj) . . . 502

----Notice--No limitation on number of times notice can be issued--But subject to limitation of not being permissible on change of opinion--Reassessment notice issued in first instance to bring to tax guaranteed return and bonus on keyman insurance policy--Proceedings dropped--Inference that Assessing Officer took view that addition of sums not sustainable on substantive ground--Second notice to bring same sums to tax--Not permissible--Income-tax Act, 1961, ss. 147, 148-- Kunal Organics P. Ltd. v. Deputy CIT (Guj) . . . 530

----Notice--Not permissible upon mere change of opinion--Profits upon sale of plots of factory land converted into stock-in-trade--Assessment after full enquiry and after calling for explanation of assessee why income should be treated as capital gains and not business income--Communications by assessee in reply to notice--Assessment of income as capital gains--Reopening of assessment to assess income as business income--Not permissible--That assessment order did not record reasons for accepting assessee’s stand not relevant--Income-tax Act, 1961, ss. 28, 45, 147, 148-- Spunpipe and Construction Co. v. Asst. CIT (Guj) . . . 559

----Notice after four years--Failure by assessee to disclose material facts--Assertion of assessee that detailed submissions filed during assessment--That assessment order makes no mention of assessee’s submissions--Not ground to infer assessee did not file them--Assessee’s assertion that it filed submissions to be accepted, on facts--No failure by assessee to disclose--Reassessment invalid--Income-tax Act, 1961, ss. 147, 148-- BBC World News Ltd. v. Asst. Director of Income-tax (Delhi) . . . 577

----Notice after four years--Not permissible on change of opinion--Non-resident--Assessee stating in assessment proceedings that it had incurred loss on worldwide basis and even if income or loss attributable to Indian operations on proportionate basis, net result would be loss--Assessment order reasonably detailed and incorporating assessee’s chart listing out activities carried out in India and outside India--Assessment made at loss figure attributing 20 per cent. of global loss to Indian operations--Assessment made on similar basis for preceding year by same officer--Criteria for computing expenses of Indian operations changed in subsequent years--Not ground for reopening assessment after four years--Income-tax Act, 1961, ss. 147, 148-- BBC World News Ltd. v. Asst. Director of Income-tax (Delhi) . . . 577

Search and seizure --Assessment in search cases--Condition precedent--Assessing Officer making contradictory references to assessee being subjected to search or not--In the absence of search authorisation, Tribunal factually finding assessment orders against assessee invalid--Income-tax Act, 1961, s. 153A-- CIT v. Ramesh D. Patel (Guj) . . . 492

----Assessment in search cases--Undisclosed income--Jewellery business--Estimate slip reflecting actual purchase and sale of gold but sale bill always for lesser quantity than reflected in estimate slip--Presumption as to nature of accounting and assessee’s modus operandi in maintaining records--No requirement that Department to collect information and evidence for each and every one of six previous years--Income-tax Act, 1961, s. 153A-- Sunny Jacob Jewellers and Wedding Centre v. Dy. CIT (Ker). . .664

----Block assessment--Limitation--Starting point for limitation--Date of last authorisation for search to be taken into account--Second warrant of authorisation issued on 27-8-2003--Limitation started from the end of that month--Income-tax Act, 1961, s. 158BE-- CIT (Dy.) v. Rakesh Sarin (Mad) . . . 619

----Block assessment--Undisclosed income--Admission that apart from business in rectified spirits no other business was carried on--Claim to set off part of undisclosed income against miscellaneous receipts recorded in books--No evidence to support claim--Amount could not be reduced from undisclosed income--Income-tax Act, 1961, s. 158BC-- CIT v. Sri Lakshmi Narasimha Distilleries P. Ltd. (Karn) . . . 573

Unexplained investment --Purchase of land--Agreements claimed to be cancelled by executors found during search--No evidence to show that assessee paid on-money for purchase of land--Nothing on record to show that agreements were acted upon--No trace of cash payment in excess of amount shown in registered documents--Addition on basis of agreements not sustainable--Income-tax Act, 1961, s. 69B-- CIT v. Fairdeal Textile Park P. Ltd. (Guj) . . . 497

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Constitution of India :

Art. 226 --Appeal to High Court--Powers of Tribunal--Rectification of mistakes--Rejection of application for rectification--Appeal to High Court not maintainable from such order--Writ petition against such order maintainable-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

Income-tax Act, 1961 :

S. 2(15) --Charitable purposes--Meaning of--Law applicable--Effect of first proviso to section 2(15) inserted w. e. f. 1-4-2009--Charitable trust carrying on activities for profit--Not entitled to exemption--Incidental income would not disentitle trust to exemption--Trust for breeding and improving quality of cattle--Object charitable--Finding that income was incidental--Trust entitled to exemption-- Director of Income-tax (Exemption) v. Sabarmati Ashram Gaushala Trust (Guj) . . . 539

S. 11 --Charitable purposes--Meaning of--Law applicable--Effect of first proviso to section 2(15) inserted w. e. f. 1-4-2009--Charitable trust carrying on activities for profit--Not entitled to exemption--Incidental income would not disentitle trust to exemption--Trust for breeding and improving quality of cattle--Object charitable--Finding that income was incidental--Trust entitled to exemption-- Director of Income-tax (Exemption) v. Sabarmati Ashram Gaushala Trust (Guj) . . . 539

S. 12 --Charitable purposes--Meaning of--Law applicable--Effect of first proviso to section 2(15) inserted w. e. f. 1-4-2009--Charitable trust carrying on activities for profit--Not entitled to exemption--Incidental income would not disentitle trust to exemption--Trust for breeding and improving quality of cattle--Object charitable--Finding that income was incidental--Trust entitled to exemption-- Director of Income-tax (Exemption) v. Sabarmati Ashram Gaushala Trust (Guj) . . . 539

S. 28 --Reassessment--Notice--Not permissible upon mere change of opinion--Profits upon sale of plots of factory land converted into stock-in-trade--Assessment after full enquiry and after calling for explanation of assessee why income should be treated as capital gains and not business income--Communications by assessee in reply to notice--Assessment of income as capital gains--Reopening of assessment to assess income as business income--Not permissible--That assessment order did not record reasons for accepting assessee’s stand not relevant-- Spunpipe and Construction Co. v. Asst. CIT (Guj) . . . 559

S. 32 --Depreciation--Condition precedent--Ownership of asset--Finding that assessee had acquired possession of asset and was using it for purposes of business--Assessee entitled to depreciation-- CIT, Large Taxpayers Unit v. Indian Railway Finance Corporation Ltd. (Delhi) . . . 548

----Depreciation--Condition precedent--Ownership of assets--Ownership for purposes of section 32 does not mean possession of title deeds--Dominion over assets and user as its own would be sufficient--Assets transferred to assessee-trust by State Government--Transfer recorded in books of account of assessee--Use of such assets by assessee in its activities--Assessee entitled to depreciation-- CIT v. Jawahar Kala Kendra (Raj) . . . 515

----Depreciation--Ownership of asset--Transfer of business--Transferee put in possession of building, plant and machinery in terms of agreement to sell and running undertaking in its own right--Entitled to depreciation--That legal title conveyed under lease agreement and deed of sale executed in subsequent years not material-- CIT v. WEP Peripherals Ltd. (Karn) . . . 508

S. 32A --Investment allowance--Hotel building--Not a plant--Not entitled to investment allowance-- CIT v. SB Properties and Enterprises Ltd. (Raj) . . . 483

S. 36(1)(vii) --Bad debt--Law after 1-4-1989--Debt need no longer be proved to have turned bad--Merely writing off such advances or debts as bad debts in books of account and debiting in profit and loss account--Sufficient compliance-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

S. 37 --Business expenditure--Capital or revenue expenditure--Bond issue expenses--Bonds issued for purposes of business--Expenditure deductible-- CIT, Large Taxpayers Unit v. Indian Railway Finance Corporation Ltd. (Delhi) . . . 548

S. 45 --Reassessment--Notice--Not permissible upon mere change of opinion--Profits upon sale of plots of factory land converted into stock-in-trade--Assessment after full enquiry and after calling for explanation of assessee why income should be treated as capital gains and not business income--Communications by assessee in reply to notice--Assessment of income as capital gains--Reopening of assessment to assess income as business income--Not permissible--That assessment order did not record reasons for accepting assessee’s stand not relevant-- Spunpipe and Construction Co. v. Asst. CIT (Guj) . . . 559

S. 50 --Capital gains--Exemption--Depreciable asset--Gains on transfer of long-term capital asset invested in specified assets--Effect of deeming fiction in section 50--Section 50 does not restrict exemption-- CIT v. Aditya Medisales Ltd. (Guj) . . . 600

S. 54EC --Capital gains--Exemption--Depreciable asset--Gains on transfer of long-term capital asset invested in specified assets--Effect of deeming fiction in section 50--Section 50 does not restrict exemption-- CIT v. Aditya Medisales Ltd. (Guj) . . . 600

S. 69B --Unexplained investment--Purchase of land--Agreements claimed to be cancelled by executors found during search--No evidence to show that assessee paid on-money for purchase of land--Nothing on record to show that agreements were acted upon--No trace of cash payment in excess of amount shown in registered documents--Addition on basis of agreements not sustainable-- CIT v. Fairdeal Textile Park P. Ltd. (Guj) . . . 497

S. 80-IB --Industrial undertaking--Special deduction--Sale of business by sale of building, plant and machinery before expiry of period of exemption--Transferee entitled to deduction for remaining period-- CIT v. WEP Peripherals Ltd. (Karn) . . . 508

S. 115JB --Company--Book profit--Computation of income under section 115JB--Lease equalisation charges cannot be disallowed-- CIT, Large Taxpayers Unit v. Indian Railway Finance Corporation Ltd. (Delhi) . . . 548

S. 145 --Accounting--Rejection of accounts--Estimation of profits--Question of fact--Deductions not allowable on estimated net profit-- CIT v. Sahu Construction P. Ltd. (All) . . . 609

S. 147 --Reassessment--Notice--No limitation on number of times notice can be issued--But subject to limitation of not being permissible on change of opinion--Reassessment notice issued in first instance to bring to tax guaranteed return and bonus on keyman insurance policy--Proceedings dropped--Inference that Assessing Officer took view that addition of sums not sustainable on substantive ground--Second notice to bring same sums to tax--Not permissible-- Kunal Organics P. Ltd. v. Deputy CIT (Guj) . . . 530

----Reassessment--Notice--Not permissible upon mere change of opinion--Profits upon sale of plots of factory land converted into stock-in-trade--Assessment after full enquiry and after calling for explanation of assessee why income should be treated as capital gains and not business income--Communications by assessee in reply to notice--Assessment of income as capital gains--Reopening of assessment to assess income as business income--Not permissible--That assessment order did not record reasons for accepting assessee’s stand not relevant-- Spunpipe and Construction Co. v. Asst. CIT (Guj) . . . 559

----Reassessment--Notice after four years--Failure by assessee to disclose material facts--Assertion of assessee that detailed submissions filed during assessment--That assessment order makes no mention of assessee’s submissions--Not ground to infer assessee did not file them--Assessee’s assertion that it filed submissions to be accepted, on facts--No failure by assessee to disclose--Reassessment invalid-- BBC World News Ltd. v. Asst. Director of Income-tax (Delhi) . . . 577

----Reassessment--Notice after four years--Not permissible on change of opinion--Non-resident--Assessee stating in assessment proceedings that it had incurred loss on worldwide basis and even if income or loss attributable to Indian operations on proportionate basis, net result would be loss--Assessment order reasonably detailed and incorporating assessee’s chart listing out activities carried out in India and outside India--Assessment made at loss figure attributing 20 per cent. of global loss to Indian operations--Assessment made on similar basis for preceding year by same officer--Criteria for computing expenses of Indian operations changed in subsequent years--Not ground for reopening assessment after four years-- BBC World News Ltd. v. Asst. Director of Income-tax (Delhi) . . . 577

S. 148 --Reassessment--Notice--Audit party--Objection that non-charging of interest on advances resulted in short levy of tax--Assessing Officer not accepting objection but issuing notice solely on basis thereof--Notice not valid-- N. K. Roadways P. Ltd. v. ITO (OSD) (Guj) . . . 522

----Reassessment--Notice--Audit party--Whether asset for which depreciation claimed put to use before September 30 of year under consideration require re-examination--Ground for reopening assessment brought to notice of Assessing Officer by audit party but Assessing Officer on application of mind convinced with reason--Assessing Officer not acting at instance of audit party--No dispute that issue requires reconsideration--Notice valid-- N. K. Industries Ltd. v. ITO (OSD) (Guj) . . . 502

----Reassessment--Notice--No limitation on number of times notice can be issued--But subject to limitation of not being permissible on change of opinion--Reassessment notice issued in first instance to bring to tax guaranteed return and bonus on keyman insurance policy--Proceedings dropped--Inference that Assessing Officer took view that addition of sums not sustainable on substantive ground--Second notice to bring same sums to tax--Not permissible-- Kunal Organics P. Ltd. v. Deputy CIT (Guj) . . . 530

----Reassessment--Notice--Not permissible upon mere change of opinion--Profits upon sale of plots of factory land converted into stock-in-trade--Assessment after full enquiry and after calling for explanation of assessee why income should be treated as capital gains and not business income--Communications by assessee in reply to notice--Assessment of income as capital gains--Reopening of assessment to assess income as business income--Not permissible--That assessment order did not record reasons for accepting assessee’s stand not relevant-- Spunpipe and Construction Co. v. Asst. CIT (Guj) . . . 559

----Reassessment--Notice after four years--Failure by assessee to disclose material facts--Assertion of assessee that detailed submissions filed during assessment--That assessment order makes no mention of assessee’s submissions--Not ground to infer assessee did not file them--Assessee’s assertion that it filed submissions to be accepted, on facts--No failure by assessee to disclose--Reassessment invalid-- BBC World News Ltd. v. Asst. Director of Income-tax (Delhi) . . . 577

----Reassessment--Notice after four years--Not permissible on change of opinion--Non-resident--Assessee stating in assessment proceedings that it had incurred loss on worldwide basis and even if income or loss attributable to Indian operations on proportionate basis, net result would be loss--Assessment order reasonably detailed and incorporating assessee’s chart listing out activities carried out in India and outside India--Assessment made at loss figure attributing 20 per cent. of global loss to Indian operations--Assessment made on similar basis for preceding year by same officer--Criteria for computing expenses of Indian operations changed in subsequent years--Not ground for reopening assessment after four years-- BBC World News Ltd. v. Asst. Director of Income-tax (Delhi) . . . 577

S. 153A --Search and seizure--Assessment in search cases--Condition precedent--Assessing Officer making contradictory references to assessee being subjected to search or not--In the absence of search authorisation, Tribunal factually finding assessment orders against assessee invalid-- CIT v. Ramesh D. Patel (Guj) . . . 492

----Search and seizure--Assessment in search cases--Undisclosed income--Jewellery business--Estimate slip reflecting actual purchase and sale of gold but sale bill always for lesser quantity than reflected in estimate slip--Presumption as to nature of accounting and assessee’s modus operandi in maintaining records--No requirement that Department to collect information and evidence for each and every one of six previous years-- Sunny Jacob Jewellers and Wedding Centre v. Dy. CIT (Ker). . .664

S. 158BC --Search and seizure--Block assessment--Undisclosed income--Admission that apart from business in rectified spirits no other business was carried on--Claim to set off part of undisclosed income against miscellaneous receipts recorded in books--No evidence to support claim--Amount could not be reduced from undisclosed income-- CIT v. Sri Lakshmi Narasimha Distilleries P. Ltd. (Karn) . . . 573

S. 158BE --Search and seizure--Block assessment--Limitation--Starting point for limitation--Date of last authorisation for search to be taken into account--Second warrant of authorisation issued on 27-8-2003--Limitation started from the end of that month-- Dy. CIT v. Rakesh Sarin (Mad) . . . 619

S. 234B --Advance tax--Interest--Firm--Partners--Depreciation of a firm cannot be allocated to the benefit of partners personally and it shall revert to firm--Decision of Supreme Court much prior to submission of returns by partners--Returns ought to have been filed showing correct income--Advance tax not paid--Partners liable to pay interest-- Chief CIT v. George P. Mathews (Ker) . . . 660

S. 254(2) --Appeal to Appellate Tribunal--Bad debts--Law after 1-4-1989--Tribunal finding not deductible on ground assessee not establishing such advances had become bad--Application for rectification--Apparent mistake of law--Tribunal erred in not rectifying mistake apparent from record--Matter remanded to Tribunal to pass fresh order under section 254(2)-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

----Appeal to High Court--Powers of Tribunal--Rectification of mistakes--Rejection of application for rectification--Appeal to High Court not maintainable from such order--Writ petition against such order maintainable-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

S. 260A --Appeal to High Court--Powers of Tribunal--Rectification of mistakes--Rejection of application for rectification--Appeal to High Court not maintainable from such order--Writ petition against such order maintainable-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

S. 269SS --Penalty--Loan or deposit in cash exceeding specified limit--Contributions by twelve persons in cash--Audit report and balance-sheet of assessee showing outstanding amount as loan received from twelve persons--Imposition of penalty justified-- Soundarya Textiles v. Asst. CIT (Ker) . . . 488

S. 271(1)(c) --Penalty--Concealment of income--Effect of Explanation 1 to section 271(1)(c)--Explanation regarding computation of income found to be false--Income deemed to be concealed--Depreciation claimed on basis of lease--Lease transaction found to be bogus--Levy of penalty--Valid-- CIT v. BPL Sanyo Finance Ltd. (Karn) . . . 630

S. 271DD --Penalty--Loan or deposit in cash exceeding specified limit--Contributions by twelve persons in cash--Audit report and balance sheet of assessee showing outstanding amount as loan received from twelve persons--Imposition of penalty justified-- Soundarya Textiles v. Asst. CIT (Ker) . . . 488

 


Thursday, April 17, 2014

ITAT Special Bench Lays Down Imp Law On S. 54EC Capital Gains + Two Imp HC Verdicts

 

Dear Subscriber,

 

The following important judgements are available for download at itatonline.org.

Alkaben B. Patel vs. ITO (ITAT Ahmedabad) (Special Bench)

The term "month" in s. 54E, 54EA, 54EB & 54EC does not mean "30 days" but the "calendar month". So, the expression "within a month" means "before the end of the calendar month"

Sections 54E, 54EA, 54EB & 54EC require the investment to be made "within a period of six months after the date of such transfer". The subtle question is that whether the word "month" refers in this section a period of 30 days or it refers to the month only. The term 'month' is not defined in the Income-tax Act. Therefore, its meaning has to be understood as per the General Clauses Act, 1897 which defines the word "month" to mean a month reckoned according to the British calendar. In Munnalal Shri Kishan Mainpuri 167 ITR 415 (All) it was held in the context of limitation u/s 256(2) that the word 'month' refers to a period of 30 days and, therefore, the reference to "six months" in s. 256(2) is to "six calendar months" and not "180 days". On some occasions, the Legislature had not used the term "Month" but has used the number of days to prescribe a specific period. For example, the First Proviso to s. 254(2A) provides that the Tribunal may pass an order granting stay but for a period not exceeding 180 days. This is an important distinction made in the statute while subscribing the limitation/ period. This distinction thus resolves the present controversy by itself


Crompton Greaves Limited vs. DCIT (Bombay High Court)

Write-off of irrecoverable advances is not a "transfer" and the loss cannot be claimed as a capital loss u/s 45

Having regard to the definitions of terms "capital asset" and "transfer" in sections 2(14) and 2(47), in order to be eligible for carry forward of capital loss, the capital asset should be of the nature defined in s. 2(14) and should be transferred in the manner defined in s. 2(47). Equally, it should be subjected to tax as per s. 45(1) of the Income-tax Act. The advances given to the said two parties and written off are not the capital assets nor there is any transfer. Therefore, they were not allowed to be carried forward to subsequent years. It is a capital loss and should be ignored (Ahmed G.H. Ariff 76 ITR 471 (SC) & Minor Bababhai 128 ITR 1 (Guj) distinguished)


CIT vs. Intervet India Pvt.Ltd (Bombay High Court)

S. 194-H TDS does not apply to all sales promotional expenditure if relationship is not that of principal & agent

The assessee had undertaken sales promotional scheme viz. Product discount scheme and Product campaign under which it offered an incentive on case to case basis to its stockists / dealers / agents. An amount of Rs.70 lakhs was claimed as a deduction towards expenditure incurred under the said sales promotional scheme. The relationship between the assessee and the distributor / stockists was that of principal to principal and in fact the distributors were the customers of the assessee to whom the sales were effected either directly or through the consignment agent. As the distributor / stockists were the persons to whom the product was sold, no services were offered by the assessee and what was offered by the distributor was a discount under the product distribution scheme or product campaign scheme to buy the assessee's product. The distributors / stockists were not acting on behalf of the assessee and that most of the credit was by way of goods on meeting of sales target, and hence, it could not be said to be a commission payment within the meaning of Explanation (i) to Section 194H of the Income-tax Act, 1961. The contention of the Revenue in regard to the application of Explanation (i) below Section 194H being applicable to all categories of sales expenditure cannot be accepted. Such reading of Explanation (i) below Section 194H would amount to reading the said provision in abstract. The application of the provision is required to be considered to the relevant facts of every case


Regards,

 

Editor,

 

itatonline.org

---------------------

Latest:

S. 10(2A): CBDT Issues Important Circular On Taxability Of Firms And Partners


Two Important High Court Verdicts On S. 80-IB(10) And S. 80HHC vs. 80-IA(9)

 

Dear Subscriber,

 

The following important judgements are available for download at itatonline.org.

CIT vs. Moon Star Developers (Gujarat High Court)

S. 80-IB(10): If developer does not (without just cause) develop to full extent of FSI, a part of the sale proceeds has to treated as being for sale of FSI and denied s. 80-IB(10) deduction

For any commercial activity of construction, be it residential or commercial complex maximum utilization of FSI is of great importance to the developer. Ordinarily, therefore, it would be imprudent for a developer to underutilize available FSI. Sale price of constructed properties is decided on the built up area. It can thus be seen that given the rate of constructed area remaining same, non-utilization of available FSI would reduce the profit margin of the developer. When a developer therefore utilizes only say 25% of FSI and sells the unit leaving 75% FSI still available for construction, he obviously works out the sale price bearing in mind this special feature. Thus, therefore, when a developer constructs residential unit occupying a fourth or half of usable FSI and sells it, his profits from the activity of development and construction of residential units and from sale of unused FSI are distinct and separate and rightly segregated by the AO


CIT vs. M/s Atul Intermediates (Gujarat High Court)

The effect of s. 80-IA(9) is that s. 80-IA deduction has to be reduced for s. 80HHC deduction in all cases and not only when the combined deduction exceeds the profits

Sub-section (9) of s. 80IA is aimed at restricting the successive claims of deduction of the same profit or gain under different provisions contained in sub-chapter C of Chapter VI of the Act. This provision, therefore, necessarily impacts other deduction provisions including s. 80HHC of the Act. Nothing contained in s. 80HHC suggests that the deduction provided therein was immune from any outside influence or that the provision was impregnable by any other statute or enactment. Accepting any such theory would lead to incongruous results. Even the assessee concedes that sub-section (9) of s. 80IA would operate as to limiting the combined deductions to a maximum of the profits and gains from an eligible business of the undertaking or enterprise. If s. 80HHC contained a protective shell making it immune from any outside influence, even this effect of sub-section (9) of s. 80IA could not be applied. This would completely render the provisions of sub-section (9) of s. 80IA redundant and meaningless.


Regards,

 

Editor,

 

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Latest:

A. T. Kearney India Pvt. Ltd vs. ITO (Delhi High Court)

S. 226: AO warned of contempt action for seeking to overreach ITAT's stay order


CBDT Circular On Taxation Of Firms/Partners + CBDT Action Plan

 

Dear Subscriber,

S. 10(2A): CBDT Issues Important Circular On Taxability Of Firms And Partners

The CBDT has issued Circular No. 08/2014 dated 30.03.2014 to deal with the controversial topic as to whether, if the income of the firm is Nil on account of an exemption under Chapter III or deduction under Chapter VI-A of the Act, the partners will also be entitled to claim exemption u/s 10(2A) of the Act with respect to their share in the profits of the firm. The CBDT has clarified that the term "total income" in s. 10(2A) includes income which is exempt or deductible under various provisions of the Act. It is stated that the income of a firm is taxable only in the hands of the firm and can under no circumstances be taxed in the hands of the partner. The CBDT has made it clear that the entire income credited to the partners' account in the firm would be exempt from tax in the hands of the partners, even if the firm is also not chargeable to tax on account of an exemption or deduction (Read analysis of Circular in Business Standard).


CBDT Creates Action Plan For Timely Disposal Of Important Matters

The CBDT has, in a letter dated 31.03.2014 to Chief Commissioners, set out a "Central Action Plan" for the April to June 2014 Quarter. The said Action Plan sets out a time frame for handling several important issues such as correction of demand, recovery of demand, disposal of high-demand appeals by CIT(A), completion of s. 147 assessments etc, etc. The Chief Commissioners have been directed to circulate the said Action Plan amongst the officers for necessary action.


Regards,

 

Editor,

 

itatonline.org

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Latest:

Tax Bar To File Writ Against Non-Removal Of Alleged 'Corrupt' ITAT Member

__._,_.___

High Court Warns AO Of Contempt Action For Hasty Tax Recovery + Book Review

 

Dear Subscriber,

A. T. Kearney India Pvt. Ltd vs. ITO (Delhi High Court)

S. 226: AO warned of contempt action for seeking to overreach ITAT's stay order

The assessee filed a stay application before the Tribunal and informed the AO about the same. Thereafter, the Tribunal heard the matter on 14.02.2014 and granted stay of the demand. Despite this, the AO attached the assessee's bank account on 19.02.2014 and withdrew the proceeds. The assessee filed a Writ Petition to challenge the attachment. The AO defended his action on the ground that he was not present during the hearing of the stay application and was not intimated of the stay granted by the Tribunal. HELD by the High Court allowing the Petition:

The income tax authorities were represented by the CIT-DR, before the Tribunal. The order on the stay application was also pronounced in open Court on that date. In these circumstances, the submission of the revenue that the concerned AO was not intimated cannot be accepted. If such an argument was made before this Court, where orders are pronounced in Court in the presence of counsel, it would certainly not be accepted, and in fact would be seriously viewed. In the facts of this case, it clearly amounts to overreach of the interim order of the Tribunal; in a similar situation, this Court itself would possibly be initiating contempt proceedings. In these circumstances, the Court is of the opinion that the respondent should lift the attachment and ensure that the amounts recovered are deposited back in the petitioner's account within a week from today. A copy of the present order shall be marked to the Central Board of Direct Taxes separately and communicated.

See also MHADA (Bom HC) where the "conscience of the Court was shocked" at the illegal coercive action of the AO. See also Bharti Airtel (ITAT Del) where a powerful argument has been made that an accountability mechanism should be set up to rein in irresponsible & lawless action of the AO

Get This Book If You Are Looking For The Meaning Of Words And Phrases

Hon'ble Justice R. V. Easwar rightly says that the book "Direct Taxes Glossary" by Hon'ble Shri. Rajendra, Accountant Member, ITAT, fulfils the long-felt need of tax practitioners for a handy digest of case laws

Regards,

 

Editor,

 

itatonline.org

---------------------

Latest:

Alkaben B. Patel vs. ITO (ITAT Ahmedabad) (Special Bench)

The term "month" in s. 54E, 54EA, 54EB & 54EC does not mean "30 days" but the "calendar month". So, the expression "within a month" means "before the end of the calendar month"


Fwd: Corporate Identification Number in letter heads and other all official communications.

Dear Corporate Clients,



OFFICIAL COMMUNICATIONS ONLY WITH  Corporate Identification Number 


Section 12(3)(c) of Companies Act 2013, which will come into force from 1.4.2014, provides that every company shall get its name, address of its registered office and the Corporate Identity Number along with telephone number, fax number, if any, e-mail and website addresses, if any, printed in all its business letters, billheads, letter papers and in all its notices and other official publications. 

Company's Corporate Identify Number can be taken from you Legal or Finance Department. One needs to keep it in mind while printing letter heads etc.

Section 12(3)(c ) of the Companies Act, 2013 which comes into effect from 1st April, 2014 provides that 

(3) Every company shall—

(c) get its name, address of its registered office and the Corporate Identity Number along with telephone number, fax number, if any, e-mail and website addresses, if any, printed in all its business letters, billheads, letter papers and in all its notices and other official publications; and (d) have its name printed on hundies, promissory notes, bills of exchange and such other documents as may be prescribed:
Provided that where a company has changed its name or names during the last two years, it shall paint or affix or print, as the case may be, along with its name, the former name or names so changed during the last two years as required under clauses (a) and (c):

Important Changes

The Corporate Identity Number which is a 21 digit number allotted by the Ministry of Corporate Affairs – this needs to be now printed in the company letter heads/ invoices and any other official documents of the company. 

Where there is a change in the name of the company during the last two years then the former name shall also be mentioned along with the current name. It can be mentioned as "erstwhile XYZ Private Limited" in brackets under the new name. The period for which the old name should be mentioned is not specifically stated, but from the language one would infer that it is a requirement for two years. 

The old name should also be mentioned in the name plates which is required to be prominently affixed outside the registered office of the company. 

So all companies are requested to please start complying with this new requirement from 1st April, 2014 onwards. 


Regards,
-------
CA.C.V.PAWAR
PATIL DAWARE GIRASE PAWAR & ASSOCIATES
CHARTERED ACCOUNTANTS
0253-2319641. M-9423961209

ITR (TRIB) Volume 30 : Part 6 (Issue dated : 31-3-2014)

 

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB)) -- PRINT AND ONLINE EDITION

 

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Appeal to Appellate Tribunal --Rectification of mistakes--Mistake apparent from record--Tribunal taking considered view that entire income earned by assessee from Indian projects taxable in India under article 7 of the Double Taxation Avoidance Agreement--No mistake apparent from record--Income-tax Act, 1961, s. 254--Double Taxation Avoidance Agreement between India and the United Kingdom, art. 7-- Linklaters and Paines v. ITO (International Taxation) (Mumbai) . . . 287

Double taxation relief --Shipping company--Assessee entering into joint pool agreement with other shipping companies to share space owned by others on vessel bound to India--Scope of article 8(4)--Assessee “otherwise liable to tax†in UAE and entitled to relief under DTAA--Nature of receipts of assessee not known--Matter remanded to determine nature of income and find if covered by article 8--Double Taxation Avoidance Agreement between India and the U. A. E., art. 8-- Additional Director of Income-tax (International Taxation) v. Simatech Shipping Forwarding LLC (Mumbai) . . . 303

 

PRINT EDITION

Volume 30 : Part 6 (Issue dated : 31-3-2014)

SUBJECT INDEX TO CASES REPORTED

Appeal to Appellate Tribunal --Right of respondent to support order appealed against “on any ground†decided against him--Scope of--Distinct from right to file cross appeal or cross-objections in appeal--Ground raised by assessee rejected by Commissioner (Appeals) but issue ultimately held in favour of assessee--Assessee can seek decision on ground as respondent before Tribunal--But other party must be put on notice--Income-tax Act, 1961, s. 253(4)--Income-tax (Appellate Tribunal) Rules, 1963, r. 27-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Business expenditure --Disallowance--Payments liable to deduction of tax at source--Deposit of tax deducted after due date--Individuals not required to deduct tax prior to June 1, 2007--Expenditure allowable--Income-tax Act, 1961, ss. 40(a)(ia), 194C-- Asst. CIT v. Smt. Pritam Kaur Kahlon (Chandigarh) . . . 710

----Disallowance--Payments liable to deduction of tax at source--Payments to non-residents--View of Special Bench of Tribunal in Merilyn Shipping and Transports v. Addl. CIT [2014] 16 ITR (Trib) 1 (Vishakapatnam) [SB] that disallowance attracted only to amounts remaining payable at year end--High Court in CIT v. Vector Shipping Services P. Ltd. [2013] 357 ITR 642 (All) refusing to consider question of law but observation approving Tribunal’s view--CBDT Circular expounding Department’s view to include amounts paid within year in scope of disallowance but to abide by High Court’s view in territories within court’s jurisdiction--Effect--Income-tax Act, 1961, s. 40(a)(ia)-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Disallowance--Payments to non-residents--Allowance of deduction subject to deduction of tax at source--Effect of failure to withhold tax--Disallowance attracted only when assessee had liability withhold tax, i.e., when income embedded in payment liable to tax in India--Income-tax Act, 1961, s. 40(a)(ia)-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Disallowance--Payments to non-residents--Failure to withhold tax--Payments towards development costs--Reimbursement of costs incurred by non-resident in development of product range of assessee--No income embedded in payment--No obligation on assessee to deduct tax at source--No disallowance--Income-tax Act, 1961, s. 40(a)(ia)-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payment to non-resident entity for professional services--That entity to which payment made owned by individual would not take payment outside ambit of fees for technical services--Provisions relating to individuals not applicable--Assessee bound to deduct tax from payments--Failure to do so attracts disallowance of payment--Income-tax Act, 1961, s. 40(a)(ia)--Taxation Avoidance Agreement between India and Belgium, arts. 12(3)(b), 14-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payments for purchase of goods--Vendors not having permanent establishment in India--Business profits not taxable in India--No liability to deduct tax at source--No disallowance under section 40(a)(i)--Income-tax Act, 1961, s. 40(a)(i)--Double Taxation Avoidance Agreement between India and Italy, art. 7-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payments of “design and development expenses†--Payments for purchase of goods--Recipients not having permanent establishment in India--Transactions not taxable in India--No obligation on assessee not to withhold tax--No disallowance under section 40(a)(i)--Income-tax Act, 1961, s. 40(a)(ia)--Double Taxation Avoidance Agreement between India and Spain, art. 7-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payments of “design and development expenses†--Whether Spanish recipient an entity or an individual having no permanent establishment in India, in which case, payments would be independent professional services and not taxable--Whether payments were for designs, sketches and photographs for product development by assessee--Matter remanded--Double Taxation Avoidance Agreement between India and Spain, arts. 13, 15-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payments to residents of Ireland, Denmark and Austria--Provisions of deduction neutrality non-discrimination attracted--Disallowance under section 40(a)(i) not permissible--Taxability of these payments in India not considered--Income-tax Act, 1961, s. 40(a)(ia)--Double Taxation Avoidance Agreement between India and Ireland, art. 24--Double Taxation Avoidance Agreement between India and Denmark, art. 24--Double Taxation Avoidance Agreement between India and Austria, art. 24-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Supply of samples and sketches to assessee to enable it to seek information in respect of fashion trends in Europe--Professional services rendered by individual--No fixed base in India--Payments not taxable as income under “independent personal services†--No disallowance--Income-tax Act, 1961, s. 40(a)(ia)--Double Taxation Avoidance Agreement between India and Italy, arts. 13, 15-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Wastage--Assessee manufacturing wheel nuts--Nut carved out of solid piece and balance usable only as scrap--Wastage to be estimated on reasonable basis--Direction to Assessing Officer to make total addition of on account instead of three additions--Matter remanded--Income-tax Act, 1961, s. 37-- Asst. CIT v. Smt. Pritam Kaur Kahlon (Chandigarh) . . . 710

Charitable purpose --Definition--Main object of assessee including medical research and informal education and communication on health and nutritional issues for urban slums and rural communities--Assessee carrying out techno-medical research support for research and compilation of data on account of “rota virus†project--Activity constituting education within meaning of section 2(15)--Circular clarifying that purpose of trust or institution is relief to poor, education on medical relief to poor, constitute “charitable purpose†even if it incidentally involves carrying on commercial activity--Assessee entitled to exemption--Income-tax Act, 1961, ss. 2(15), 11, 12--CBDT Circular No. 11 of 2008-- ITO (Exemption) v. Society for Essential Health Action and Training (Delhi) . . . 698

----Special deduction--Donation for charitable purposes--Approval of trust for purposes of section 80G--Provision in trust deed authorising trustees to make donations to other institutions--Donations made to established organisations and genuineness not in doubt--Direction to competent authority to consider grant of approval under section 80G(5)(vi) --Entitlement of trust to exemption under section 11 to be considered at time of assessment, not at time of approval for purpose of section 80G--Income-tax Act, 1961, s. 80G(5)(vi)-- Tewari Charitable Trust v. Director of Income-tax (Exemption) (Mumbai) . . . 705

Double taxation avoidance --Protocol integral part of Agreement--To be given effect in same manner as other substantive parts of Agreement--Protocol providing for most favoured nation clause--Restricted scope of taxation of fees for technical services--Effect--Non-discrimination clause for harsher pre-conditions for eligibility to deduction not applicable--Payments disallowable for failure to withhold tax--Double Taxation Avoidance Agreement between India and Spain, arts. 13, 15--Protocol dated February 8, 1993--Income-tax Act, 1961, s. 40(a)(ia)-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Provision against discrimination--Specific clauses on discrimination against deductions of payments--Pre-condition of tax withholding for deduction of payments to non-residents not permissible without similar pre-condition for deductibility of payments to residents--Pre-conditions ineffective by virtue of non-discrimination clause in Double Taxation Avoidance Agreements--Not to affect deduction--Provision in Agreement that national of one Contracting State should not be discriminated against “by reason of nationality†--Scope of--Residence not relevant--Comparison between nationals “in same circumstances and similar conditions†--Taxpayer who is resident of Contracting State and one who is not are not in same circumstances--Different pre-conditions for deductibility of payments to residents and non-residents permissible--Double Taxation Avoidance Agreement between India and Spain, art. 26--Double Taxation Avoidance Agreement between India and Italy, art. 25--Double Taxation Avoidance Agreement between India and Ireland, art. 24--Double Taxation Avoidance Agreement between India and United Kingdom, art. 26--Double Taxation Avoidance Agreement between India and Denmark, art. 24--Double Taxation Avoidance Agreement between India and Austria, art. 24--Double Taxation Avoidance Agreement between India and Belgium, art. 24-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Precedent --Double Taxation Avoidance Agreements--Interpretation--Decision in context of one Agreement not necessarily applicable for other Agreements where differently worded-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Search and seizure --Block assessment--Penalty--Limitation--Scope of section 158BFA--Failure to complete penalty proceedings within statutory time frame--Order set aside--Income-tax Act, 1961, s. 158BFA(2)-- Smt. G. Akila v. Deputy CIT (Chennai) . . . 732

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between India and Austria :

Art. 24 --Business expenditure--Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payments to residents of Ireland, Denmark and Austria--Provisions of deduction neutrality non-discrimination attracted--Disallowance under section 40(a)(i) not permissible--Taxability of these payments in India not considered-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Double taxation avoidance--Provision against discrimination--Specific clauses on discrimination against deductions of payments--Pre-condition of tax withholding for deduction of payments to non-residents not permissible without similar pre-condition for deductibility of payments to residents--Pre-conditions ineffective by virtue of non-discrimination clause in Double Taxation Avoidance Agreements--Not to affect deduction--Provision in Agreement that national of one Contracting State should not be discriminated against “by reason of nationality†--Scope of--Residence not relevant--Comparison between nationals “in same circumstances and similar conditions†--Taxpayer who is resident of Contracting State and one who is not are not in same circumstances--Different pre-conditions for deductibility of payments to residents and non-residents permissible-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Double Taxation Avoidance Agreement between India and Belgium :

Arts. 12(3)(b), 14 --Business expenditure--Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payment to non-resident entity for professional services--That entity to which payment made owned by individual would not take payment outside ambit of fees for technical services--Provisions relating to individuals not applicable--Assessee bound to deduct tax from payments--Failure to do so attracts disallowance of payment-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Art. 24 --Double taxation avoidance--Provision against discrimination--Specific clauses on discrimination against deductions of payments--Pre-condition of tax withholding for deduction of payments to non-residents not permissible without similar pre-condition for deductibility of payments to residents--Pre-conditions ineffective by virtue of non-discrimination clause in Double Taxation Avoidance Agreements--Not to affect deduction--Provision in Agreement that national of one Contracting State should not be discriminated against “by reason of nationality†--Scope of--Residence not relevant--Comparison between nationals “in same circumstances and similar conditions†--Taxpayer who is resident of Contracting State and one who is not are not in same circumstances--Different pre-conditions for deductibility of payments to residents and non-residents permissible-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Double Taxation Avoidance Agreement between India and Denmark :

Art. 24 --Business expenditure--Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payments to residents of Ireland, Denmark and Austria--Provisions of deduction neutrality non-discrimination attracted--Disallowance under section 40(a)(i) not permissible--Taxability of these payments in India not considered-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Double taxation avoidance--Provision against discrimination--Specific clauses on discrimination against deductions of payments--Pre-condition of tax withholding for deduction of payments to non-residents not permissible without similar pre-condition for deductibility of payments to residents--Pre-conditions ineffective by virtue of non-discrimination clause in Double Taxation Avoidance Agreements--Not to affect deduction--Provision in Agreement that national of one Contracting State should not be discriminated against “by reason of nationality†--Scope of--Residence not relevant--Comparison between nationals “in same circumstances and similar conditions†--Taxpayer who is resident of Contracting State and one who is not are not in same circumstances--Different pre-conditions for deductibility of payments to residents and non-residents permissible-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Double Taxation Avoidance Agreement between India and Ireland :

Art. 24 --Business expenditure--Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payments to residents of Ireland, Denmark and Austria--Provisions of deduction neutrality non-discrimination attracted--Disallowance under section 40(a)(i) not permissible--Taxability of these payments in India not considered-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Double taxation avoidance--Provision against discrimination--Specific clauses on discrimination against deductions of payments--Pre-condition of tax withholding for deduction of payments to non-residents not permissible without similar pre-condition for deductibility of payments to residents--Pre-conditions ineffective by virtue of non-discrimination clause in Double Taxation Avoidance Agreements--Not to affect deduction--Provision in Agreement that national of one Contracting State should not be discriminated against “by reason of nationality†--Scope of--Residence not relevant--Comparison between nationals “in same circumstances and similar conditions†--Taxpayer who is resident of Contracting State and one who is not are not in same circumstances--Different pre-conditions for deductibility of payments to residents and non-residents permissible-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Double Taxation Avoidance Agreement between India and Italy :

Art. 7 --Business expenditure--Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payments for purchase of goods--Vendors not having permanent establishment in India--Business profits not taxable in India--No liability to deduct tax at source--No disallowance under section 40(a)(i)-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Arts. 13, 15 --Business expenditure--Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Supply of samples and sketches to assessee to enable it to seek information in respect of fashion trends in Europe--Professional services rendered by individual--No fixed base in India--Payments not taxable as income under “independent personal services†--No disallowance-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Art. 25 --Double taxation avoidance--Provision against discrimination--Specific clauses on discrimination against deductions of payments--Pre-condition of tax withholding for deduction of payments to non-residents not permissible without similar pre-condition for deductibility of payments to residents--Pre-conditions ineffective by virtue of non-discrimination clause in Double Taxation Avoidance Agreements--Not to affect deduction--Provision in Agreement that national of one Contracting State should not be discriminated against “by reason of nationality†--Scope of--Residence not relevant--Comparison between nationals “in same circumstances and similar conditions†--Taxpayer who is resident of Contracting State and one who is not are not in same circumstances--Different pre-conditions for deductibility of payments to residents and non-residents permissible-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Double Taxation Avoidance Agreement between India and Spain :

Art. 7 --Business expenditure--Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payments of “design and development expenses†--Payments for purchase of goods--Recipients not having permanent establishment in India--Transactions not taxable in India--No obligation on assessee not to withhold tax--No disallowance under section 40(a)(i)-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Arts. 13, 15 --Business expenditure--Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payments of “design and development expenses†--Whether Spanish recipient an entity or an individual having no permanent establishment in India, in which case, payments would be independent professional services and not taxable--Whether payments were for designs, sketches and photographs for product development by assessee--Matter remanded-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Double taxation avoidance--Protocol integral part of Agreement--To be given effect in same manner as other substantive parts of Agreement--Protocol providing for most favoured nation clause--Restricted scope of taxation of fees for technical services--Effect--Non-discrimination clause for harsher pre-conditions for eligibility to deduction not applicable--Payments disallowable for failure to withhold tax-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Art. 26 --Double taxation avoidance--Provision against discrimination--Specific clauses on discrimination against deductions of payments--Pre-condition of tax withholding for deduction of payments to non-residents not permissible without similar pre-condition for deductibility of payments to residents--Pre-conditions ineffective by virtue of non-discrimination clause in Double Taxation Avoidance Agreements--Not to affect deduction--Provision in Agreement that national of one Contracting State should not be discriminated against “by reason of nationality†--Scope of--Residence not relevant--Comparison between nationals “in same circumstances and similar conditions†--Taxpayer who is resident of Contracting State and one who is not are not in same circumstances--Different pre-conditions for deductibility of payments to residents and non-residents permissible-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Double Taxation Avoidance Agreement between India and United Kingdom :

Art. 26 --Double taxation avoidance--Provision against discrimination--Specific clauses on discrimination against deductions of payments--Pre-condition of tax withholding for deduction of payments to non-residents not permissible without similar pre-condition for deductibility of payments to residents--Pre-conditions ineffective by virtue of non-discrimination clause in Double Taxation Avoidance Agreements--Not to affect deduction--Provision in Agreement that national of one Contracting State should not be discriminated against “by reason of nationality†--Scope of--Residence not relevant--Comparison between nationals “in same circumstances and similar conditions†--Taxpayer who is resident of Contracting State and one who is not are not in same circumstances--Different pre-conditions for deductibility of payments to residents and non-residents permissible-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Income-tax Act, 1961 :

S. 2(15) --Charitable purpose--Definition--Main object of assessee including medical research and informal education and communication on health and nutritional issues for urban slums and rural communities--Assessee carrying out techno-medical research support for research and compilation of data on account of “rota virus†project--Activity constituting education within meaning of section 2(15)--Circular clarifying that purpose of trust or institution is relief to poor, education on medical relief to poor, constitute “charitable purpose†even if it incidentally involves carrying on commercial activity--Assessee entitled to exemption-- ITO (Exemption) v. Society for Essential Health Action and Training (Delhi) . . . 698

S. 11 --Charitable purpose--Definition--Main object of assessee including medical research and informal education and communication on health and nutritional issues for urban slums and rural communities--Assessee carrying out techno-medical research support for research and compilation of data on account of “rota virus†project--Activity constituting education within meaning of section 2(15)--Circular clarifying that purpose of trust or institution is relief to poor, education on medical relief to poor, constitute “charitable purpose†even if it incidentally involves carrying on commercial activity--Assessee entitled to exemption-- ITO (Exemption) v. Society for Essential Health Action and Training (Delhi) . . . 698

S. 12 --Charitable purpose--Definition--Main object of assessee including medical research and informal education and communication on health and nutritional issues for urban slums and rural communities--Assessee carrying out techno-medical research support for research and compilation of data on account of “rota virus†project--Activity constituting education within meaning of section 2(15)--Circular clarifying that purpose of trust or institution is relief to poor, education on medical relief to poor, constitute “charitable purpose†even if it incidentally involves carrying on commercial activity--Assessee entitled to exemption-- ITO (Exemption) v. Society for Essential Health Action and Training (Delhi) . . . 698

S. 37 --Business expenditure--Wastage--Assessee manufacturing wheel nuts--Nut carved out of solid piece and balance usable only as scrap--Wastage to be estimated on reasonable basis--Direction to Assessing Officer to make total addition of on account instead of three additions--Matter remanded-- Asst. CIT v. Smt. Pritam Kaur Kahlon (Chandigarh) . . . 710

S. 40(a)(i) --Business expenditure--Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payments for purchase of goods--Vendors not having permanent establishment in India--Business profits not taxable in India--No liability to deduct tax at source--No disallowance under section 40(a)(i)-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

S. 40(a)(ia) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Deposit of tax deducted after due date--Individuals not required to deduct tax prior to June 1, 2007--Expenditure allowable-- Asst. CIT v. Smt. Pritam Kaur Kahlon (Chandigarh) . . . 710

----Business expenditure--Disallowance--Payments liable to deduction of tax at source--Payments to non-residents--View of Special Bench of Tribunal in Merilyn Shipping and Transports v. Addl. CIT [2014] 16 ITR (Trib) 1 (Vishakapatnam) [SB] that disallowance attracted only to amounts remaining payable at year end--High Court in CIT v. Vector Shipping Services P. Ltd. [2013] 357 ITR 642 (All) refusing to consider question of law but observation approving Tribunal’s view--CBDT Circular expounding Department’s view to include amounts paid within year in scope of disallowance but to abide by High Court’s view in territories within court’s jurisdiction--Effect-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Business expenditure--Disallowance--Payments to non-residents--Allowance of deduction subject to deduction of tax at source--Effect of failure to withhold tax--Disallowance attracted only when assessee had liability withhold tax, i.e., when income embedded in payment liable to tax in India-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Business expenditure--Disallowance--Payments to non-residents--Failure to withhold tax--Payments towards development costs--Reimbursement of costs incurred by non-resident in development of product range of assessee--No income embedded in payment--No obligation on assessee to deduct tax at source--No disallowance-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Business expenditure--Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payments of “design and development expenses†--Payments for purchase of goods--Recipients not having permanent establishment in India--Transactions not taxable in India--No obligation on assessee not to withhold tax--No disallowance under section 40(a)(i)-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Business expenditure--Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payment to non-resident entity for professional services--That entity to which payment made owned by individual would not take payment outside ambit of fees for technical services--Provisions relating to individuals not applicable--Assessee bound to deduct tax from payments--Failure to do so attracts disallowance of payment-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Business expenditure--Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Payments to residents of Ireland, Denmark and Austria--Provisions of deduction neutrality non-discrimination attracted--Disallowance under section 40(a)(i) not permissible--Taxability of these payments in India not considered-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Business expenditure--Disallowance--Payments to non-residents--Fees for technical services--Failure to withhold tax--Supply of samples and sketches to assessee to enable it to seek information in respect of fashion trends in Europe--Professional services rendered by individual--No fixed base in India--Payments not taxable as income under “independent personal services†--No disallowance-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

----Double taxation avoidance--Protocol integral part of Agreement--To be given effect in same manner as other substantive parts of Agreement--Protocol providing for most favoured nation clause--Restricted scope of taxation of fees for technical services--Effect--Non-discrimination clause for harsher pre-conditions for eligibility to deduction not applicable--Payments disallowable for failure to withhold tax-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

S. 80G(5)(vi) --Charitable purpose--Special deduction--Donation for charitable purposes--Approval of trust for purposes of section 80G--Provision in trust deed authorising trustees to make donations to other institutions--Donations made to established organisations and genuineness not in doubt--Direction to competent authority to consider grant of approval under section 80G(5)(vi)--Entitlement of trust to exemption under section 11 to be considered at time of assessment, not at time of approval for purpose of section 80G-- Tewari Charitable Trust v. Director of Income-tax (Exemption) (Mumbai) . . . 705

S. 158BFA(2) --Search and seizure--Block assessment--Penalty--Limitation--Scope of section 158BFA--Failure to complete penalty proceedings within statutory time frame--Order set aside-- Smt. G. Akila v. Deputy CIT (Chennai) . . . 732

S. 194C --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Deposit of tax deducted after due date--Individuals not required to deduct tax prior to June 1, 2007--Expenditure allowable-- Asst. CIT v. Smt. Pritam Kaur Kahlon (Chandigarh) . . . 710

S. 253(4) --Appeal to Appellate Tribunal--Right of respondent to support order appealed against “on any ground†decided against him--Scope of--Distinct from right to file cross appeal or cross-objections in appeal--Ground raised by assessee rejected by Commissioner (Appeals) but issue ultimately held in favour of assessee--Assessee can seek decision on ground as respondent before Tribunal--But other party must be put on notice-- Deputy CIT v. Gupta Overseas (Agra) . . . 738

Income-tax (Appellate Tribunal) Rules, 1963 :

R. 27 --Appeal to Appellate Tribunal--Right of respondent to support order appealed against “on any ground†decided against him--Scope of--Distinct from right to file cross appeal or cross-objections in appeal--Ground raised by assessee rejected by Commissioner (Appeals) but issue ultimately held in favour of assessee--Assessee can seek decision on ground as respondent before Tribunal--But other party must be put on notice-- Deputy CIT v. Gupta Overseas (Agra) . . . 738