INCOME TAX REPORTS (ITR)
Volume 326 : Part 3 (Issue dated 30-8-2010)
HIGH COURTSAppeal to Appellate Tribunal --Duties of Tribunal--Duty to consider facts--Export--Special deduction--Order on revision on ground that certain amounts did not constitute business income--Tribunal mechanically following decision of High Court which was not applicable to the facts--Tribunal's order not valid--Matter remanded to Commissioner--Income-tax Act, 1961, ss. 80HHC, 254, 263-- CIT v. Damodar Mangalji Mining Co . (Bom) . . . 437
----Revised monetary limits for litigation by revenue--Tax liability less than revised monetary limits--Dismissal of appeal by Tribunal justified--Income-tax Act, 1961--Circular F. No. 279/126/98-IT dated 27-3-2000-- CIT v. Hospital Superintendent, Government Head Quarters, Mettur Dam (Mad) . . . 511
Assessment --Notice under section 143(2)--Limitation--Affidavit by assessee that notice not received within limitation--Onus on Revenue to prove that notice served in time--Income-tax Act, 1961, s. 143(2)-- CIT v. Silver Streak Trading P. Ltd. (Delhi) . . . 418
Bad debt --Condition precedent--Amount should have been shown in accounts of earlier year to be written off in later year--Business loss--Amount relating to transactions of earlier years not deductible trading loss--Matter remanded to permit assessee to prove claim of bad debt--Income-tax Act, 1961, ss. 28, 36-- CIT v. Popular Vehicles and Services Ltd. (Ker) . . . 387
Block assessment --Agricultural income--Whether additional income already part of undisclosed income--Matter remanded--Income-tax Act, 1961-- CIT v. Shrimati Ram Devi (Delhi) . . . 421
Business expenditure --Deduction only on actual payment--Bonus--Law applicable--Effect of omission of second proviso to section 43B w. e. f. 1-4-1989--Payment of bonus to irrevocable trust before omission of proviso--Amount could not be disallowed--Income-tax Act, 1961, s. 43B(c)-- CIT v. Sri Venkatesa Mills Ltd. (Mad) . . . 508
----Deduction only on actual payment--Excise duty paid on goods manufactured but not sold and lying in closing stock--Cannot be disallowed--Income-tax Act, 1961, s. 43B-- CIT v. Motor Industries Co. Ltd. (Karn) . . . 358
----Deduction only on actual payment--Payment towards provident fund and employees' State insurance made after due date specified in Explanation appended below section 36(1)(va)--Not entitled to deduction--Income-tax Act, 1961, ss. 36(1)(va) Expln., 43B-- B. S. Patel v. Deputy CIT (MP) . . . 457
----Deduction only on actual payment--Sales tax and provident fund contribution--Paid within permissible time--Entitled to deduction--Income-tax Act, 1961, s. 43B-- CIT v. Vijay Foundary and Engg. Works (MP) . . . 378
----Deduction only on actual payment--Sales tax paid within due time but after close of accounting year--Cannot be disallowed--Income-tax Act, 1961, s. 43B-- CIT v. Paliwal Glass Works (All) . . . 407
----State owned financial corporation--Expenditure at instance of State on "model villages" to promote infrastructural facilities and new markets in villages--Expenditure for business purposes of assessee--Deductible--Income-tax Act, 1961, s. 37-- CIT v. Karnataka Financial Corporation (Karn) . . . 355
Business income --Amalgamation of companies--Assessee acquiring company at price below book value--Subsequent to amalgamation sale by assessee of shares held by that company--Cost of shares to be taken at proportion of total price paid by assessee for takeover of assets--Not book value shown in books--Income-tax Act, 1961, s. 41(2)-- CIT v. Mahindra and Co. Ltd. (Raj) . . . 465
Capital or revenue expenditure --Corporate membership fee to club--Expenditure wholly and exclusively for purposes of business and not towards capital account--Deductible as revenue expenditure--Income-tax Act, 1961, s. 37-- CIT v. Samtel Color Ltd. (Delhi) . . . 425
----Expenditure on load extension and purchase of distribution panels--Finding that expenditure was of recurring nature and no asset of enduring nature obtained--Expenditure deductible--Income-tax Act, 1961, s. 37-- CIT v. Lakhani Rubber Works (P&H) . . . 415
----Interest liability in respect of borrowings in foreign exchange--Increased liability on account of foreign exchange rate fluctuation--On revenue account--Income-tax Act, 1961-- CIT v. Indian Toners and Developers Ltd. (Delhi) . . . 435
----Registration and stamp duty on lease deed for taking plant on lease--Revenue expenditure--Income-tax Act, 1961, s. 37-- CIT v. Gopal Associates (HP) . . . 413
----Take over of business--Amount paid to transfer for deprivation of business--Revenue expenditure--Income-tax Act, 1961-- CIT v. Hindustan Zinc Ltd. (Raj) . . . 474
Charitable purposes --Exemption--Amount advanced to cement trader claimed to be for construction of pilgrim centre--No concrete proposal and immediate requirement of cement--Amount advanced only form of investment or deposit--Not entitled to exemption--Income-tax Act, 1961, ss. 11(1)(a), 12, 13(1)(d)-- CIT v. Shree P. Subramoniam Religious Trust (Ker) . . . 393
Company --Tax on undistributed profits--Failure to declare dividend--Finding that plea of losses by assessee not acceptable--Assessment made at positive income in preceding year--Invocation of section 104--Justified--Income-tax Act, 1961, s. 104-- Thakur Devi Investments (P.) Ltd. v. CIT (P&H) . . . 396
Deduction of tax at source --Interest--Interest on enhanced compensation for agricultural land--Tax deductible at source on interest--Income-tax Act, 1961, ss. 194A, 194LA-- Karnail Singh v. State of Haryana (P&H) . . . 501
Depreciation --Actual cost--Subsidy received from Central Government--Not to be deducted from cost of assets for allowing depreciation--Income-tax Act, 1961, s. 43(1)-- CIT v. Standard Fireworks P. Ltd. (Mad) . . . 498
----Actual cost--Subsidy received from State Government for specific purpose of purchase of generator set--Subsidy to be deducted in computing actual cost--Rate of depreciation--Generator--General rate applicable--Income-tax Act, 1961, ss. 32, 43(1)-- CIT v. Paliwal Glass Works (All) . . . 407
Exemption --Educational institution--Surplus funds must be used for objects of institution within five years for claiming exemption--Income-tax Act, 1961, s. 10(23C)(vi)-- Dr. Maharaj Krishana Kapur Educational Charitable Trust and Managment Society v. Union of India (P&H) . . . 385
Export --Special deduction--Computation of total turnover for purposes of section 80HHC--Amount received by sale of scrap in domestic market--Includible--Excise duty on scrap--Not includible--Matter remanded--Income-tax Act, 1961, s. 80HHC-- CIT v. Motor Industries Co. Ltd . (Karn) . . . 358
----Special deduction--Computation of total turnover for purposes of section 80HHC--Receipt on account of exchange fluctuation--Includible--Income-tax Act, 1961, s. 80HHC-- CIT v. Amber Exports (India) (Bom) . . . 455
----Special deduction--Turnover--Computation--Sales tax and excise duty not to be included in total turnover--Income-tax Act, 1961, s. 80HHC-- CIT v. Standard Fireworks P. Ltd . (Mad) . . . 498
Income --Accrual of income--Accounting--Principle of real income--Amount due to assessee in terms of royalty agreement--Dispute between parties and arbitration proceedings pending--No accrual of income--Assessment only on completion of arbitration proceedings--Income-tax Act, 1961-- FGP Ltd. v. CIT (Bom) . . . 444
Income from undisclosed sources --Commissioner (Appeals) and Tribunal finding only suppression of sale consideration--Addition only in respect of profit--Concurrent finding--Income-tax Act, 1961-- CIT v. Samir Synthetics Mill (Guj) . . . 410
Interest-tax --Chargeable interest--Interest earned on refinancing operations--To be excluded from chargeable interest--Interest-tax Act, 1974, s. 2(5)-- CIT v. Punjab State Industrial Development Corporation (P&H) . . . 390
Interpretation of taxing statutes --Rule against retrospectivity-- B. S. Patel v. Deputy CIT (MP) . . . 457
Kar Vivad Samadhan Scheme --Application for settlement under KVSS--Condition precedent--Proceedings for appeals, references or revisions which are pending--Revision application filed beyond time with prayer for condonation of delay--Revision petition not rejected--Revision proceedings were pending--Application for settlement valid--Income-tax Act, 1961, s. 264--Finance (No. 2) Act, 1998 s. 95(i)(c)--Kar Vivad Samadhan Scheme, 1998-- Sheela Ashokkumar Goenka v. Designated Authority under Kar Vivad Samadhan Scheme (Guj) . . . 402
Offences and prosecution --Purchase of immovable property by Central Government--Failure to file Form 37-I--Purchase of immovable properties by individual and his wife and sale thereof by individual deeds--Sale prices could not be aggregated--Individual value less than prescribed limit--Prosecution under section 276AB--Not valid--Income-tax Act, 1961, ss. 269UC, 269UL, 276AB-- Banumathi v. ITO (Mad) . . . 368
Penalty --Concealment of income--Claim for special deduction under section 80-IA--Details regarding special deduction furnished--Claim whether allowable debatable issue--Law later settled by subsequent ruling of High Court and Supreme Court--No concealment of income or furnishing of inaccurate particulars--Penalty could not be levied--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Arisudana Spinning Mills Ltd. (P&H) . . . 429
Reassessment --Original return accepted under section 143(1) --Consideration of material filed in response to notices under sections 143(2) and 142(1) in reassessment proceedings--Not a case of change of opinion--Reassessment proceedings cannot be set aside--Income-tax Act, 1961, ss. 142, 143, 147, 148-- CIT v. Ravindran Prabhakar (Mad) . . . 363
Royalty from foreign enterprise --Special deduction--Assessee a professor developing educational material in form of CDs and in book form and exporting to students abroad--No new invention or design in respect of educational materials--Not entitled to special deduction--Income-tax Act, 1961, s. 80-O-- P. C. Thomas v. Asst. CIT (Ker) . . . 388
Undisclosed income --Assessment based on documents seized--Findings that investment cannot be treated as income and commission alone to be treated as income earned from sale--Findings of fact--Income-tax Act, 1961-- CIT v. Dhani Ram (P&H) . . . 399
Wealth-tax --Asset--Assessee purchasing flat before 1-4-1993 and admitted as member of housing society--Transfer not registered in books of society--Not relevant--Value of flat includible in net wealth of assessee --Wealth-tax Act, 1957, s. 4(7)-- Bennett Coleman and Co. Ltd. v. Asst. CWT (Bom) . . . 447
----Asset--Right to purchase property at a fixed rate--Not an asset for purposes of wealth-tax--Wealth-tax Act, 1957-- Ardeshir Behram Dubash v. WTO (Bom) . . . 451
Deduction of tax at source --Income-tax Act, 1961, s. 195-- Bharati AXA General Insurance Co. Ltd. , In re . . . 477
Non-resident --Agreement with resident for assistance such as business support, marketing information technology support services and strategy support, etc.--Non-resident having no permanent establishment in India--Payments made to non-resident as a mark up of expenses--Whether taxable in India--"Royalty", scope of--Avoidance of Double Taxation between India and Singapore, art. 12(3), (4)-- Bharati AXA General Insurance Co. Ltd. , In re . . . 477
----Non-profit organization--Providing accreditation to conformity assessment bodies--Fees received by non-profit organization for certification from bodies in India--Whether non-profit organization liable to tax in India--Agreement for Avoidance of Double Taxation between India and Australia, arts. 7(1), 12--Income-tax Act, 1961, s. 9(1)(vii)-- Joint Accreditation System of Australia and New Zealand , In re . . . 487
Words and phrases --"Fees for technical services", "royalty, meanings of-- Bharati AXA General Insurance Co. Ltd. , In re . . . 477
Arts. 7(1), 12 --Non-resident--Non-profit organization--Providing accreditation to conformity assessment bodies--Fees received by non-profit organization for certification from bodies in India--Whether non-profit organization liable to tax in India-- Joint Accreditation System of Australia and New Zealand , In re(AAR) . . . 487
Art. 12(3), (4) --Non-resident--Agreement with resident for assistance such as business support, marketing information technology support services and strategy support, etc.--Non-resident having no permanent establishment in India--Payments made to non-resident as a mark up of expenses--Whether taxable in India--"Royalty", scope of-- Bharati AXA General Insurance Co. Ltd. , In re(AAR) . . . 477
S. 95(i)(c) --Kar Vivad Samadhan Scheme--Application for settlement under KVSS--Condition precedent--Proceedings for appeals, references or revisions which are pending--Revision application filed beyond time with prayer for condonation of delay--Revision petition not rejected--Revision proceedings were pending--Application for settlement valid----Kar Vivad Samadhan Scheme, 1998-- Sheela Ashokkumar Goenka v. Designated Authority under Kar Vivad Samadhan Scheme (Guj) . . . 402
S. 9(1)(vii) --Non-resident--Non-profit organization--Providing accreditation to conformity assessment bodies--Fees received by non-profit organization for certification from bodies in India--Whether non-profit organization liable to tax in India--Agreement for Avoidance of Double Taxation between India and Australia, arts. 7(1), 12-- Joint Accreditation System of Australia and New Zealand , In re (AAR) . . . 487
S. 10(23C)(vi) --Exemption--Educational institution--Surplus funds must be used for objects of institution within five years for claiming exemption-- Dr. Maharaj Krishana Kapur Educational Charitable Trust and Managment Society v. Union of India (P&H) . . . 385
S. 11(1)(a) --Charitable purposes--Exemption--Amount advanced to cement trader claimed to be for construction of pilgrim centre--No concrete proposal and immediate requirement of cement--Amount advanced only form of investment or deposit--Not entitled to exemption-- CIT v. Shree P. Subramoniam Religious Trust (Ker) . . . 393
S. 12 --Charitable purposes--Exemption--Amount advanced to cement trader claimed to be for construction of pilgrim centre--No concrete proposal and immediate requirement of cement--Amount advanced only form of investment or deposit--Not entitled to exemption-- CIT v. Shree P. Subramoniam Religious Trust (Ker) . . . 393
S. 13(1)(d) --Charitable purposes--Exemption--Amount advanced to cement trader claimed to be for construction of pilgrim centre--No concrete proposal and immediate requirement of cement--Amount advanced only form of investment or deposit--Not entitled to exemption-- CIT v. Shree P. Subramoniam Religious Trust (Ker) . . . 393
S. 28 --Bad debt--Condition precedent--Amount should have been shown in accounts of earlier year to be written off in later year--Business loss--Amount relating to transactions of earlier years not deductible trading loss--Matter remanded to permit assessee to prove claim of bad debt-- CIT v. Popular Vehicles and Services Ltd. (Ker) . . . 387
S. 32 --Depreciation--Actual cost--Subsidy received from State Government for specific purpose of purchase of generator set--Subsidy to be deducted in computing actual cost--Rate of depreciation--Generator--General rate applicable-- CIT v. Paliwal Glass Works (All) . . . 407
S. 36 --Bad debt--Condition precedent--Amount should have been shown in accounts of earlier year to be written off in later year--Business loss--Amount relating to transactions of earlier years not deductible trading loss--Matter remanded to permit assessee to prove claim of bad debt-- CIT v. Popular Vehicles and Services Ltd. (Ker) . . . 387
S. 36(1)(va) Expln. --Business expenditure--Deduction only on actual payment--Payment towards provident fund and employees' State insurance made after due date specified in Explanation appended below section 36(1)(va)--Not entitled to deduction-- B. S. Patel v. Deputy CIT (MP) . . . 457
S. 37 --Business expenditure--State owned financial corporation--Expenditure at instance of State on "model villages" to promote infrastructural facilities and new markets in villages--Expendi-ture for business purposes of assessee--Deductible-- CIT v. Karnataka Financial Corporation (Karn) . . . 355
----Capital or revenue expenditure--Corporate membership fee to club--Expenditure wholly and exclusively for purposes of business and not towards capital account--Deductible as revenue expenditure-- CIT v. Samtel Color Ltd. (Delhi) . . . 425
----Capital or revenue expenditure--Expenditure on load extension and purchase of distribution panels--Finding that expenditure was of recurring nature and no asset of enduring nature obtained--Expenditure deductible-- CIT v. Lakhani Rubber Works (P&H) . . . 415
----Capital or revenue expenditure--Registration and stamp duty on lease deed for taking plant on lease--Revenue expenditure-- CIT v. Gopal Associates (HP) . . . 413
S. 41(2) --Business income--Amalgamation of companies--Assessee acquiring company at price below book value--Subsequent to amalgamation sale by assessee of shares held by that company--Cost of shares to be taken at proportion of total price paid by assessee for takeover of assets--Not book value shown in books-- CIT v. Mahindra and Co. Ltd. (Raj) . . . 465
S. 43(1) --Depreciation--Actual cost--Subsidy received from Central Government--Not to be deducted from cost of assets for allowing depreciation-- CIT v. Standard Fireworks P. Ltd. (Mad) . . . 498
Income-tax Act, 1961, S. 043(1)--Depreciation--Actual cost--Subsidy received from State Government for specific purpose of purchase of generator set--Subsidy to be deducted in computing actual cost--Rate of depreciation--Generator--General rate applicable-- CIT v. Paliwal Glass Works (All) . . . 407
S. 43B --Business expenditure--Deduction only on actual payment--Excise duty paid on goods manufactured but not sold and lying in closing stock--Cannot be disallowed-- CIT v. Motor Industries Co. Ltd. (Karn) . . . 358
----Business expenditure--Deduction only on actual payment--Payment towards provident fund and employees' State insurance made after due date specified in Explanation appended below section 36(1)(va)--Not entitled to deduction-- B. S. Patel v. Deputy CIT (MP) . . . 457
----Business expenditure--Deduction only on actual payment--Sales tax and provident fund contribution--Paid within permissible time--Entitled to deduction-- CIT v. Vijay Foundary and Engg. Works (MP) . . . 378
----Business expenditure--Deduction only on actual payment--Sales tax paid within due time but after close of accounting year--Cannot be disallowed-- CIT v. Paliwal Glass Works (All) . . . 407
S. 43B(c) --Business expenditure--Deduction only on actual payment--Bonus--Law applicable--Effect of omission of second proviso to section 43B w.e.f. 1-4-1989--Payment of bonus to irrevocable trust before omission of proviso--Amount could not be disallowed-- CIT v. Sri Venkatesa Mills Ltd. (Mad) . . . 508
S. 80HHC --Appeal to Appellate Tribunal--Duties of Tribunal--Duty to consider facts--Export--Special deduction--Order on revision on ground that certain amounts did not constitute business income--Tribunal mechanically following decision of High Court which was not applicable to the facts--Tribunal's order not valid--Matter remanded to Commissioner-- CIT v. Damodar Mangalji Mining Co . (Bom) . . . 437
----Export--Special deduction--Computation of total turnover for purposes of section 80HHC--Amount received by sale of scrap in domestic market--Includible--Excise duty on scrap--Not includible--Matter remanded-- CIT v. Motor Industries Co. Ltd . (Karn) . . . 358
----Export--Special deduction--Computation of total turnover for purposes of section 80HHC--Receipt on account of exchange fluctuation--Includible-- CIT v. Amber Exports (India) (Bom) . . . 455
----Export--Special deduction--Turnover--Computation--Sales tax and excise duty not to be included in total turnover-- CIT v. Standard Fireworks P. Ltd . (Mad) . . . 498
S. 80-O --Royalty from foreign enterprise--Special deduction--Assessee a professor developing educational material in form of CDs and in book form and exporting to students abroad--No new invention or design in respect of educational materials--Not entitled to special deduction-- P. C. Thomas v. Asst. CIT (Ker) . . . 388
S. 104 --Company--Tax on undistributed profits--Failure to declare dividend--Finding that plea of losses by assessee not acceptable--Assessment made at positive income in preceding year--Invocation of section 104--Justified-- Thakur Devi Investments (P.) Ltd. v. CIT (P&H) . . . 396
S. 142 --Reassessment--Original return accepted under section 143(1)--Consideration of material filed in response to notices under sections 143(2) and 142(1) in reassessment proceedings--Not a case of change of opinion--Reassessment proceedings cannot be set aside-- CIT v. Ravindran Prabhakar (Mad) . . . 363
S. 143 --Reassessment--Original return accepted under section 143(1)--Consideration of material filed in response to notices under sections 143(2) and 142(1) in reassessment proceedings--Not a case of change of opinion--Reassessment proceedings cannot be set aside-- CIT v. Ravindran Prabhakar (Mad) . . . 36
S. 143(2) --Assessment--Notice under section 143(2)--Limitation--Affidavit by assessee that notice not received within limitation--Onus on Revenue to prove that notice served in time-- CIT v. Silver Streak Trading P. Ltd. (Delhi) . . . 418
S. 147 --Reassessment--Original return accepted under section 143(1)--Consideration of material filed in response to notices under sections 143(2) and 142(1) in reassessment proceedings--Not a case of change of opinion--Reassessment proceedings cannot be set aside-- CIT v. Ravindran Prabhakar (Mad) . . . 363
S. 148 --Reassessment--Original return accepted under section 143(1)--Consideration of material filed in response to notices under sections 143(2) and 142(1) in reassessment proceedings--Not a case of change of opinion--Reassessment proceedings cannot be set aside-- CIT v. Ravindran Prabhakar (Mad) . . . 363
S. 194A --Deduction of tax at source--Interest--Interest on enhanced compensation for agricultural land--Tax deductible at source on interest-- Karnail Singh v. State of Haryana (P&H) . . . 501
S. 194LA --Deduction of tax at source--Interest--Interest on enhanced compensation for agricultural land--Tax deductible at source on interest-- Karnail Singh v. State of Haryana (P&H) . . . 501
S. 195 --Deduction of tax at source-- Bharati AXA General Insurance Co. Ltd. , In re (AAR) . . . 477
S. 254 --Appeal to Appellate Tribunal--Duties of Tribunal--Duty to consider facts--Export--Special deduction--Order on revision on ground that certain amounts did not constitute business income--Tribunal mechanically following decision of High Court which was not applicable to the facts--Tribunal's order not valid--Matter remanded to Commissioner-- CIT v. Damodar Mangalji Mining Co . (Bom) . . . 437
S. 263 --Appeal to Appellate Tribunal--Duties of Tribunal--Duty to consider facts--Export--Special deduction--Order on revision on ground that certain amounts did not constitute business income--Tribunal mechanically following decision of High Court which was not applicable to the facts--Tribunal's order not valid--Matter remanded to Commissioner-- CIT v. Damodar Mangalji Mining Co . (Bom) . . . 437
S. 264 --Kar Vivad Samadhan Scheme--Application for settlement under KVSS--Condition precedent--Proceedings for appeals, references or revisions which are pending--Revision application filed beyond time with prayer for condonation of delay--Revision petition not rejected--Revision proceedings were pending--Application for settlement valid----Kar Vivad Samadhan Scheme, 1998-- Sheela Ashokkumar Goenka v. Designated Authority under Kar Vivad Samadhan Scheme (Guj) . . . 402
S. 269UC --Offences and prosecution--Purchase of immovable property by Central Government--Failure to file Form 37-I--Purchase of immovable properties by individual and his wife and sale thereof by individual deeds--Sale prices could not be aggregated--Individual value less than prescribed limit--Prosecution under section 276AB--Not valid-- Banumathi v. ITO (Mad) . . . 368
S. 269UL --Offences and prosecution--Purchase of immovable property by Central Government--Failure to file Form 37-I--Purchase of immovable properties by individual and his wife and sale thereof by individual deeds--Sale prices could not be aggregated--Individual value less than prescribed limit--Prosecution under section 276AB--Not valid-- Banumathi v. ITO (Mad) . . . 368
S. 271(1)(c) --Penalty--Concealment of income--Claim for special deduction under section 80-IA--Details regarding special deduction furnished--Claim whether allowable debatable issue--Law later settled by subsequent ruling of High Court and Supreme Court--No concealment of income or furnishing of inaccurate particulars--Penalty could not be levied-- CIT v. Arisudana Spinning Mills Ltd. (P&H) . . . 429
S. 276AB --Offences and prosecution--Purchase of immovable property by Central Government--Failure to file Form 37-I--Purchase of immovable properties by individual and his wife and sale thereof by individual deeds--Sale prices could not be aggregated--Individual value less than prescribed limit--Prosecution under section 276AB--Not valid-- Banumathi v. ITO (Mad) . . . 368
S. 2(5) --Interest-tax--Chargeable interest--Interest earned on refinancing operations--To be excluded from chargeable interest-- CIT v. Punjab State Industrial Development Corporation (P&H) . . . 390
S. 4(7) --Wealth-tax--Asset--Assessee purchasing flat before 1-4-1993 and admitted as member of housing society--Transfer not registered in books of society--Not relevant--Value of flat includible in net wealth of assessee-- Bennett Coleman and Co. Ltd. v. Asst. CWT (Bom) . . . 447
Advance tax --Interest--Book profits--Provision brought subsequently with retrospective effect covering assessment year that deferred tax to be added back--Impossible to pay differential advance tax in relevant previous year--Assessee not liable to interest on differential tax--Income-tax Act, 1961, ss. 115JB, Expln. 1(h), 234B-- JSW Steel Ltd. v. Asst. CIT (Bangalore) . . . 31
Agricultural income --Exemption--Assessee engaged in research, production and sale of hybrid seeds--Method of contract farming and basic seeds sown in leasehold land--Basic as well as secondary agricultural operations carried on by assessee--Entire income is agricultural income--Assessee entitled to exemption--Income-tax Act, 1961, s. 2(1A)-- Advanta India Ltd. v. Deputy CIT (Bangalore) . . . 57
Bad debt --Condition precedent for deduction--Condition that debt should have been taken into account in computing income of previous year or earlier year --Share broker--Sums receivable from clients for transactions undertaken on their behalf--Is trading debt of assessee--Commission taken to profit and loss account --Deduction allowable--Income-tax Act, 1961, s. 36(1)(vii), (2)(i)-- Deputy CIT v. Shreyas S. Morakhia [SB] (Mumbai) . . . 1
Book profits --Computation of--Debenture redemption reserve--Debenture redemption reserve capital in nature--Proceeds not treated as income but loans--Amount set apart to meet ascertained liability--Not deductible--Income-tax Act, 1961, s. 115JB, Expln. 1(b)-- JSW Steel Ltd. v. Asst. CIT (Bangalore) . . . 31
Business expenditure --Capital or revenue expenditure--Work-in-progress expenses in relation to development of designs and drawings used for manufacture of transformers--Amount disclosed in profit and loss account on yearly basis as percentage of revenue expenditure--Amount written off--Allowable--Income-tax Act, 1961, s. 37-- Deputy CIT v. Current Electricals Ltd. (Chennai) . . . 25
----Expenditure incurred on temporary structures on site--Disallowance owing to incompletion of project in 2002-03--Commissioner (Appeals)'s direction to allow deduction in subsequent years on completion of project attaining finality--Order not to be disturbed--Income-tax Act, 1961, s. 37-- Nathpa Jhakri Joint Venture v. Asst. CIT (Mumbai) . . . 75
----Foreign travel expenses--Expenses incurred on foreign trip of doctor's wife who is not a doctor--No proof that business purpose not served--Deduction allowable--Income-tax Act, 1961, s. 37-- Lincoln Pharmaceuticals Ltd. v. ITO (Ahmedabad) . . . 64
----Inter-corporate deposits--Written off--Tribunal's order allowing deduction in earlier year--To be followed--Income-tax Act, 1961-- JSW Steel Ltd. v. Asst. CIT (Bangalore) . . . 31
Business income --Computation--Change in rate of foreign currency--Loss arising from foreign exchange forward contracts--Foreign exchange borrowings for purchase of plant and machinery--Settlement of foreign exchange forward contracts in previous year--Adjustment of loss to be made in previous year--Amount of loss to be added to cost of asset--Income-tax Act, 1961, s. 43A (amended with effect from 1-4-2003)-- JSW Steel Ltd. v. Asst. CIT (Bangalore) . . . 31
Deduction of tax at source --Reimbursement of expenses to non-resident--Liability to deduct tax at source only when payment to non-resident chargeable to tax--Reimbursement of expenses not income--Not taxable in hands of non-resident--Assessee not liable to deduct tax at source--Income-tax Act, 1961, ss. 40(a)(i), 195-- Nathpa Jhakri Joint Venture v. Asst. CIT (Mumbai) . . . 75
Depreciation --Actual cost--Fluctuation in foreign exchange rate--Depreciation on enhanced value of capital assets allowable--Income-tax Act, 1961, ss. 32, 43A-- JSW Steel Ltd. v. Asst. CIT (Bangalore) . . . 31
Exemption --Export oriented unit--Computation of export turnover--Brought forward loss and unabsorbed depreciation of earlier years to be set off before allowing deduction--Income-tax Act, 1961, s. 10A-- Intellinet Technologies India P. Ltd. v. ITO (Bangalore) . . . 96
Export --Special deduction--Computation of--Total turnover--Exclusion of excise duty and sales tax from total turnover--Justified--Income-tax Act, 1961, s. 80HHC-- Lincoln Pharmaceuticals Ltd. v. ITO (Ahmedabad) . . . 64
Income --Accrual--Accounting--Mercantile system of accounting--Application for refund of terminal excise duty on construction material utilised in project--Right accrues when application for refund filed--Amount liable to tax in instant year--Income-tax Act, 1961-- Nathpa Jhakri Joint Venture v. Asst. CIT (Mumbai) . . . 75
Industrial undertaking --Special deduction--DEPB credit--Not part of net profit--Income-tax Act, 1961, s. 80-IA-- Lincoln Pharmaceuticals Ltd. v. ITO (Ahmedabad) . . . 64
----Special deduction--Interest on fixed deposits--Deposits for obtaining letter of credit--No direct relation with business--Interest not derived from business--Not deductible--Income-tax Act, 1961, s. 80-IA-- Lincoln Pharmaceuticals Ltd. v. ITO (Ahmedabad) . . . 64
----Special deduction--Interest received on late payment of sale proceeds--Income derived from business--Deductible--Income-tax Act, 1961, s. 80-IA-- Lincoln Pharmaceuticals Ltd. v. ITO (Ahmedabad) . . . 64
----Special deduction--No material evidencing purchase rates lower than market rates--Intention of parties to transfer profits from supplier company to assessee to claim higher deduction not proved--Reduction of deduction not justified--Income-tax Act, 1961, s. 80-IA-- Lincoln Pharmaceuticals Ltd. v. ITO (Ahmedabad) . . . 64
International transactions --Arm's length price--Computation of--More than one price not used for each transaction--Specific one year LIBOR rate held as arm's length price for transaction--Cannot be equated with more than one price for each transaction--Benefit of 5 per cent. not allowable--Income-tax Act, 1961, s. 92C(2), prov.-- Perot Systems TSI (India) Ltd. v. Deputy CIT . (Delhi) . . . 106
----Arm's length price--Special provision--Interest free loans advanced to foreign associated enterprises--Transaction debt and not quasi-equity--Lending or borrowing money between two associated enterprises covered within ambit of international transaction--Reserve Bank's approval not a seal on true character of transaction from perspective of transfer pricing regulation--Profits shifted to tax havens or low tax regimes to bring down aggregate tax incidence of multinational group--Case of violation of transfer pricing norms--Transaction not at arm's length--Income-tax Act, 1961, s. 92B-- Perot Systems TSI (India) Ltd. v. Deputy CIT (Delhi) . . . 106
Loss --Speculation business--Loss arising out of valuation of shares--Loss in nature of speculation loss--Cannot be excluded from purview of Explanation to section 73--Direction by Commissioner (Appeals) to allow loss as business loss while computing total income--Not proper--Income-tax Act, 1961, s. 73, Expln-- ITO v. Big Apple Clothing P. Ltd. (Delhi) . . . 44
Penalty --Concealment of income--Depreciation claimed on building without reducing value of land--Bifurcation of land and building--Excess depreciation claimed and allowed since past three years due to inadvertent mistake--Assessee offering depreciation attributable to land portion to tax--Not a case of concealment of income--Penalty to be deleted--Income-tax Act, 1961, s. 271(1)(c)-- Namaste Voyages P. Ltd. v. ITO (Delhi) . . . 90
----Concealment of income--Special deduction--Tour operator--Profits transferred to reserve for use in business--Assessee under bona fide belief that purchase of new motor cycles amounts to utilisation for purpose specified under section 80HHD--Assessee not guilty of concealment or furnishing of inaccurate particulars --Penalty to be deleted--Income-tax Act, 1961, ss. 80HHD, 271(1)(c)-- Namaste Voyages P. Ltd. v. ITO (Delhi) . . . 90
Revision --Commissioner--Effect of declaration of law by High Court--Judgment dates back to date of enactment--Assessment order rendered erroneous and prejudicial to interests of Revenue--Revision order valid--Income-tax Act, 1961, ss. 10A, 263-- Intellinet Technologies India P. Ltd. v. ITO (Bangalore) . . . 96
S. 2(1A) --Agricultural income--Exemption--Assessee engaged in research, production and sale of hybrid seeds--Method of contract farming and basic seeds sown in leasehold land--Basic as well as secondary agricultural operations carried on by assessee--Entire income is agricultural income--Assessee entitled to exemption-- Advanta India Ltd. v. Deputy CIT (Bangalore) . . . 57
S. 10A --Exemption--Export oriented unit--Computation of export turnover--Brought forward loss and unabsorbed depreciation of earlier years to be set off before allowing deduction-- Intellinet Technologies India P. Ltd. v. ITO (Bangalore) . . . 96
----Revision--Commissioner--Effect of declaration of law by High Court--Judgment dates back to date of enactment--Assessment order rendered erroneous and prejudicial to interests of Revenue--Revision order valid-- Intellinet Technologies India P. Ltd. v. ITO (Bangalore) . . . 96
S. 32 --Depreciation--Actual cost--Fluctuation in foreign exchange rate--Depreciation on enhanced value of capital assets allowable-- JSW Steel Ltd. v. Asst. CIT (Bangalore) . . . 31
S. 36(1)(vii), (2)(i) --Bad debt--Condition precedent for deduction--Condition that debt should have been taken into account in computing income of previous year or earlier year --Share broker--Sums receivable from clients for transactions undertaken on their behalf--Is trading debt of assessee--Commission taken to profit and loss account --Deduction allowable-- Deputy CIT v. Shreyas S. Morakhia [SB] (Mumbai) . . . 1
S. 37 --Business expenditure--Capital or revenue expenditure--Work-in-progress expenses in relation to development of designs and drawings used for manufacture of transformers--Amount disclosed in profit and loss account on yearly basis as percentage of revenue expenditure--Amount written off--Allowable-- Deputy CIT v. Current Electricals Ltd. (Chennai) . . . 25
----Business expenditure--Expenditure incurred on temporary structures on site--Disallowance owing to incompletion of project in 2002-03--Commissioner (Appeals)'s direction to allow deduction in subsequent years on completion of project attaining finality--Order not to be disturbed-- Nathpa Jhakri Joint Venture v. Asst. CIT (Mumbai) . . . 75
----Business expenditure--Foreign travel expenses--Expenses incurred on foreign trip of doctor's wife who is not a doctor--No proof that business purpose not served--Deduction allowable-- Lincoln Pharmaceuticals Ltd. v. ITO (Ahmedabad) . . . 64
S. 40(a)(i) --Deduction of tax at source--Reimbursement of expenses to non-resident--Liability to deduct tax at source only when payment to non-resident chargeable to tax--Reimbursement of expenses not income--Not taxable in hands of non-resident--Assessee not liable to deduct tax at source-- Nathpa Jhakri Joint Venture v. Asst. CIT (Mumbai) . . . 75
S. 43A --Depreciation--Actual cost--Fluctuation in foreign exchange rate--Depreciation on enhanced value of capital assets allowable-- JSW Steel Ltd. v. Asst. CIT (Bangalore) . . . 31
S. 43A (amended with effect from 1-4-2003)--Business income--Computation--Change in rate of foreign currency--Loss arising from foreign exchange forward contracts--Foreign exchange borrowings for purchase of plant and machinery--Settlement of foreign exchange forward contracts in previous year--Adjustment of loss to be made in previous year--Amount of loss to be added to cost of asset-- JSW Steel Ltd. v. Asst. CIT (Bangalore) . . . 31
S. 73, Expln. --Loss--Speculation business--Loss arising out of valuation of shares--Loss in nature of speculation loss--Cannot be excluded from purview of Explanation to section 73--Direction by Commissioner (Appeals) to allow loss as business loss while computing total income--Not proper-- ITO v. Big Apple Clothing P. Ltd. (Delhi) . . . 44
S. 80HHC --Export--Special deduction--Computation of--Total turnover--Exclusion of excise duty and sales tax from total turnover--Justified-- Lincoln Pharmaceuticals Ltd. v. ITO (Ahmedabad) . . . 64
S. 80HHD --Penalty--Concealment of income--Special deduction--Tour operator--Profits transferred to reserve for use in business--Assessee under bona fide belief that purchase of new motor cycles amounts to utilisation for purpose specified under section 80HHD--Assessee not guilty of concealment or furnishing of inaccurate particulars--Penalty to be deleted-- Namaste Voyages P. Ltd. v. ITO (Delhi) . . . 90
S. 80-IA --Industrial undertaking--Special deduction--DEPB credit--Not part of net profit-- Lincoln Pharmaceuticals Ltd. v. ITO (Ahmedabad) . . . 64
----Industrial undertaking--Special deduction--Interest on fixed deposits--Deposits for obtaining letter of credit--No direct relation with business--Interest not derived from business--Not deductible-- Lincoln Pharmaceuticals Ltd. v. ITO (Ahmedabad) . . . 64
----Industrial undertaking--Special deduction--Interest received on late payment of sale proceeds--Income derived from business--Deductible-- Lincoln Pharmaceuticals Ltd. v. ITO (Ahmedabad) . . . 64
----Industrial undertaking--Special deduction--No material evidencing purchase rates lower than market rates--Intention of parties to transfer profits from supplier company to assessee to claim higher deduction not proved--Reduction of deduction not justified-- Lincoln Pharmaceuticals Ltd. v. ITO (Ahmedabad) . . . 64
S. 92B --International transactions--Arm's length price--Special provision--Interest free loans advanced to foreign associated enterprises--Transaction debt and not quasi-equity--Lending or borrowing money between two associated enterprises covered within ambit of international transaction--Reserve Bank's approval not a seal on true character of transaction from perspective of transfer pricing regulation--Profits shifted to tax havens or low tax regimes to bring down aggregate tax incidence of multinational group--Case of violation of transfer pricing norms--Transaction not at arm's length-- Perot Systems TSI (India) Ltd. v. Deputy CIT (Delhi) . . . 106
S. 92C(2), prov. --International transactions--Arm's length price--Computation of--More than one price not used for each transaction--Specific one year LIBOR rate held as arm's length price for transaction--Cannot be equated with more than one price for each transaction--Benefit of 5 per cent. not allowable-- Perot Systems TSI (India) Ltd. v. Deputy CIT (Delhi) . . . 106
S. 115JB, Expln. 1(b) --Book profits--Computation of--Debenture redemption reserve--Debenture redemption reserve capital in nature--Proceeds not treated as income but loans--Amount set apart to meet ascertained liability--Not deductible-- JSW Steel Ltd. v. Asst. CIT (Bangalore) . . . 31
S. 115JB, Expln. 1(h) --Advance tax--Interest--Book profits--Provision brought subsequently with retrospective effect covering assessment year that deferred tax to be added back--Impossible to pay differential advance tax in relevant previous year--Assessee not liable to interest on differential tax-- JSW Steel Ltd. v. Asst. CIT (Bangalore) . . . 31
S. 195 --Deduction of tax at source--Reimbursement of expenses to non-resident--Liability to deduct tax at source only when payment to non-resident chargeable to tax--Reimbursement of expenses not income--Not taxable in hands of non-resident--Assessee not liable to deduct tax at source-- Nathpa Jhakri Joint Venture v. Asst. CIT (Mumbai) . . . 75
S. 234B --Advance tax--Interest--Book profits--Provision brought subsequently with retrospective effect covering assessment year that deferred tax to be added back--Impossible to pay differential advance tax in relevant previous year--Assessee not liable to interest on differential tax-- JSW Steel Ltd. v. Asst. CIT (Bangalore) . . . 31
S. 263 --Revision--Commissioner--Effect of declaration of law by High Court--Judgment dates back to date of enactment--Assessment order rendered erroneous and prejudicial to interests of Revenue--Revision order valid-- Intellinet Technologies India P. Ltd. v. ITO (Bangalore) . . . 96
S. 271(1)(c) --Penalty--Concealment of income--Depreciation claimed on building without reducing value of land--Bifurcation of land and building--Excess depreciation claimed and allowed since past three years due to inadvertent mistake--Assessee offering depreciation attributable to land portion to tax--Not a case of concealment of income--Penalty to be deleted-- Namaste Voyages P. Ltd. v. ITO (Delhi) . . . 90
----Penalty--Concealment of income--Special deduction--Tour operator--Profits transferred to reserve for use in business--Assessee under bona fide belief that purchase of new motor cycles amounts to utilisation for purpose specified under section 80HHD--Assessee not guilty of concealment or furnishing of inaccurate particulars--Penalty to be deleted-- Namaste Voyages P. Ltd. v. ITO (Delhi) . . . 90
-CA.RAJU SHAH
