INCOME TAX REPORTS (ITR)
Volume 326 : Part 4 (Issue dated 6-9-2010)
Accounting --Rejection of accounts--Estimate of income--Estimate based on proper criteria--Valid--Income-tax Act, 1961, s. 44AD-- CGT v. A. Vajjiram and Bros. (Mad) . . . 551
Appeal to Appellate Tribunal --Circular--Revised monetary limits for litigation by Revenue--Tax liability shorter than revised monetary limit--Case not falling within exceptions of circular--Appeal rightly dismissed--Income-tax Act, 1961--Circular F. No. 279/126/98-IT dated March 27, 2000-- CIT v. Excel Finance (Mad) . . . 537
Assessment --General principles--Principles of consistency--Fundamental facts remaining the same through different assessment years--Mode of assessment cannot be changed without reason--Income-tax Act, 1961-- CIT v. Haryana State Industrial Development Corporation Ltd. (P&H) . . . 640
Bad debts --Bank--Advances made by rural branches--Tribunal finding claim consistent with provisions of section 36(1)(viia)--Special leave petition filed against order of High Court affirming Tribunal dismissed by Supreme Court--No question of law--Income-tax Act, 1961, s. 36(1)(viia)-- CIT v. Bank of Rajasthan Ltd .(Bom) . . . 526
Block assessment --Restoration of matter to Assessing Officer--Contention that after remand, same authority dealing with matter again--Authority suffering no judicial bias--Income-tax act, 1961-- Mahashwari Synthetics Pvt. Ltd. v. CIT (P&H) . . . 591
Business expenditure --Deduction only on actual payment--Contribution to provident fund and ESI within grace period allowed by statutes--Payments could not be disallowed--Income-tax Act, 1961, s. 37-- CIT v. WMI Cranes Ltd. (Bom) . . . 523
Business income or income from other sources --Interest from deposits--Is income from other sources--Income-tax Act, 1961-- CIT v. Venad Conductors P. Ltd . (Ker) . . . 513
Capital gains --Exemption--Investment of gains in specified bonds--Notification prescribing limitation for particular bond--Constitutional validity--Subsequent amendment of section 54EC incorporating limit on amount of investment in bonds in section itself--Writ petition filed prior to amendment--Infructuous--Income-tax Act, 1961, ss. 50, 54EC--Constitution of India, arts. 14, 226, 265-- Areva T and D India Ltd . v. Asst. CIT (Mad) . . . 540
Capital or revenue expenditure --Expenditure incurred on issue of bonus shares--Revenue expenditure--Income-tax Act, 1961, s. 37-- CIT v. WMI Cranes Ltd. (Bom) . . . 523
Deduction of tax at source --Application for certificate of deduction at lower rate--Conditions for grant--Failure to file eTDS returns--Delayed payment of tax deducted at source--Not grounds for rejection of application for determination of withholding of tax at lower rate on payments to be received--Income-tax Act, 1961, s. 197-- Larsen and Toubro Ltd . v. Asst. CIT (TDS) (Bom) . . . 514
----Application for certificate of deduction at lower rate--Financial statements of assessee in three earlier years--Only for purpose of determination of rate--That statements not available--Not ground to reject application--Income-tax Act, 1961, s. 197--Income-tax Rules, 1962, r. 28AA-- Larsen and Toubro Ltd . v. Asst. CIT (TDS) (Bom) . . . 514
Export --Special deduction--Deduction only if positive profits earned--Income-tax Act, 1961, s. 80HHC--Circular No. 636, dated August 31, 1992-- Universal Cold Storage Ltd. v. Deputy CIT (Mad) . . . 533
Foreign exchange --Preliminary investigation under FEMA--Person appearing in response to summons under FEMA--No right to be accompanied by advocate--Foreign Exchange Management Act, 1999, s. 37--Income-tax Act, 1961, s. 131-- P. Giribabu v. Deputy Director of Enforcement (Mad) . . . 575
Income --Bank--Excess cash received at cash counters--Liable to be repaid when customers demand--Tribunal holding not income of assessee--No question of law--Income-tax Act, 1961-- CIT v. Bank of Rajasthan Ltd. (Bom) . . . 526
----Interest--Interest on Government securities--Accrues only when it is due--Income-tax Act, 1961-- CIT v. Bank of Rajasthan Ltd. (Bom) . . . 526
Method of accounting --Change in method--Income from commission, exchange and discount, including locker rent accounted on receipt basis in previous year--Finding that change bona fide and consistently followed--Findings of fact--Income-tax Act, 1961, s. 145(2)-- CIT v. Bank of Rajasthan Ltd. (Bom) . . . 526
Precedent --Effect of decision of Supreme Court in CIT v. Kamalini Khatau [1994] 209 ITR 101-- H. H. Maharaja Shri Jyotindrasinhji v. Asst. CIT (Guj) . . . 594
Reassessment --Notice--Reasons for notice furnished to assessee--Objections by assessee and request for information--Assessing Officer to consider objections and pass a speaking order before proceeding with reassessment--Income-tax Act, 1961, ss. 147, 148-- Keshav Shares and Stocks Ltd. v. ITO (Delhi) . . . 553
Representative assessee --Trustee--Assessment of beneficiary--Scope of section 166--Discretionary trust executed in UK for benefit of persons in India--Trustee in UK not distributing income to beneficiaries in relevant accounting years--Trustees assessed in UK--Income from trusts not assessable in hands of beneficiaries in India--Income-tax Act, 1961, s. 166-- H. H. Maharaja Shri Jyotindrasinhji v. Asst. CIT (Guj) . . . 594
Revision --Commissioner--Deduction of tax at source--Application for certificate of deduction at lower rate--Order of rejection of application under section 197--Order requiring application of mind and recording of reasons--Is an "order" amenable to revision--Income-tax Act, 1961, ss. 197, 264-- Larsen and Toubro Ltd . v. Asst. CIT (TDS) (Bom) . . . 514
Settlement of cases --Penalty--Concealment of income--Power of Settlement Commission to reduce penalty--Power must be exercised judiciously--Imposition of penalty of less than 10 per cent. of minimum leviable--Order not justified--Income-tax Act, 1961, s. 245H-- CIT v. Income-tax Settlement Commission (Bom) . . . 626
Settlement of cases --Procedure--Copy of application for settlement and documents furnished must be forwarded to Commissioner and report of Commissioner must be obtained--Application for settlement--Application revised subsequently--Revised application not forwarded to Commissioner--Objection not raised at that time by Revenue--Order accepting application for settlement could not be set aside--Final order set aside and matter remanded--Income-tax Act, 1961, ss. 245C, 245D--Income-tax Settlement Commission (Procedure) Rules 1997, r. 9-- CIT v. Income-tax Settlement Commission (Bom) . . . 626
Valuation of stock --Change in method--Bona fide need for change--Changed method followed in subsequent years--No undervaluation of stock--Income-tax Act, 1961-- CIT v. WMI Cranes Ltd. (Bom) . . . 523
Non-resident --Special provisions--Exploration, etc. of mineral oils--Seismic data acquisition--Bareboat charter agreement--Agreement executed and delivery of vessel outside--Presence of vessel in Indian waters--Income not from source in India--Amount paid to providers of vessels taxable in India in respect of periods for which vessel in India at time of execution of agreement and profits to be computed under section 44BB--Income-tax Act, 1961, ss. 9(1)(vi), 44BB--Double Taxation Avoidance Agreement between India and Cyprus-- Seabird Exploration FZ, LLC, UAE , In re . . . 558
Arts. 14, 226, 265 --Capital gains--Exemption--Investment of gains in specified bonds--Notification prescribing limitation for particular bond--Constitutional validity--Subsequent amendment of section 54EC incorporating limit on amount of investment in bonds in section itself--Writ petition filed prior to amendment--Infructuous-- Areva T and D India Ltd . v. Asst. CIT (Mad) . . . 540
S. 9(1)(vi) --Non-resident--Special provisions--Exploration, etc. of mineral oils--Seismic data acquisition--Bareboat charter agreement--Agreement executed and delivery of vessel outside--Presence of vessel in Indian waters--Income not from source in India--Amount paid to providers of vessels taxable in India in respect of periods for which vessel in India at time of execution of agreement and profits to be computed under section 44BB--Double Taxation Avoidance Agreement between India and Cyprus-- Seabird Exploration FZ, LLC, UAE , In re(AAR) . . . 558
S. 36(1)(viia) --Bad debts--Bank--Advances made by rural branches--Tribunal finding claim consistent with provisions of section 36(1)(viia)--Special leave petition filed against order of High Court affirming Tribunal dismissed by Supreme Court--No question of law-- CIT v. Bank of Rajasthan Ltd .(Bom) . . . 526
S. 37 --Business expenditure--Deduction only on actual payment--Contribution to provident fund and ESI within grace period allowed by statutes--Payments could not be disallowed-- CIT v. WMI Cranes Ltd. (Bom) . . . 523
----Capital or revenue expenditure--Expenditure incurred on issue of bonus shares--Revenue expenditure-- CIT v. WMI Cranes Ltd. (Bom) . . . 523
S. 44AD --Accounting--Rejection of accounts--Estimate of income--Estimate based on proper criteria--Valid-- CGT v. A. Vajjiram and Bros. (Mad) . . . 551
S. 44BB --Non-resident--Special provisions--Exploration, etc. of mineral oils--Seismic data acquisition--Bareboat charter agreement--Agreement executed and delivery of vessel outside--Presence of vessel in Indian waters--Income not from source in India--Amount paid to providers of vessels taxable in India in respect of periods for which vessel in India at time of execution of agreement and profits to be computed under section 44BB--Double Taxation Avoidance Agreement between India and Cyprus-- Seabird Exploration FZ, LLC, UAE , In re(AAR) . . . 558
S. 50 --Capital gains--Exemption--Investment of gains in specified bonds--Notification prescribing limitation for particular bond--Constitutional validity--Subsequent amendment of section 54EC incorporating limit on amount of investment in bonds in section itself--Writ petition filed prior to amendment--Infructuous-- Areva T and D India Ltd . v. Asst. CIT (Mad) . . . 540
S. 54EC --Capital gains--Exemption--Investment of gains in specified bonds--Notification prescribing limitation for particular bond--Constitutional validity--Subsequent amendment of section 54EC incorporating limit on amount of investment in bonds in section itself--Writ petition filed prior to amendment--Infructuous-- Areva T and D India Ltd . v. Asst. CIT (Mad) . . . 540
S. 80HHC --Export--Special deduction--Deduction only if positive profits earned--Circular No. 636, dated August 31, 1992-- Universal Cold Storage Ltd. v. Deputy CIT (Mad) . . . 533
S. 131 --Foreign exchange--Preliminary investigation under FEMA--Person appearing in response to summons under FEMA--No right to be accompanied by advocate--Foreign Exchange Management Act, 1999, s. 37-- P. Giribabu v. Deputy Director of Enforcement (Mad) . . . 575
S. 145(2) --Method of accounting--Change in method--Income from commission, exchange and discount, including locker rent accounted on receipt basis in previous year--Finding that change bona fide and consistently followed--Findings of fact-- CIT v. Bank of Rajasthan Ltd. (Bom) . . . 526
S. 147 --Reassessment--Notice--Reasons for notice furnished to assessee--Objections by assessee and request for information--Assessing Officer to consider objections and pass a speaking order before proceeding with reassessment-- Keshav Shares and Stocks Ltd. v. ITO (Delhi) . . . 553
S. 148 --Reassessment--Notice--Reasons for notice furnished to assessee--Objections by assessee and request for information--Assessing Officer to consider objections and pass a speaking order before proceeding with reassessment-- Keshav Shares and Stocks Ltd. v. ITO (Delhi) . . . 553
S. 166 --Representative assessee--Trustee--Assessment of beneficiary--Scope of section 166--Discretionary trust executed in UK for benefit of persons in India--Trustee in UK not distributing income to beneficiaries in relevant accounting years--Trustees assessed in UK--Income from trusts not assessable in hands of beneficiaries in India-- H. H. Maharaja Shri Jyotindrasinhji v. Asst. CIT (Guj) . . . 594
S. 197 --Deduction of tax at source--Application for certificate of deduction at lower rate--Conditions for grant--Failure to file eTDS returns--Delayed payment of tax deducted at source--Not grounds for rejection of application for determination of withholding of tax at lower rate on payments to be received-- Larsen and Toubro Ltd . v. Asst. CIT (TDS) (Bom) . . . 514
----Deduction of tax at source--Application for certificate of deduction at lower rate--Financial statements of assessee in three earlier years--Only for purpose of determination of rate--That statements not available--Not ground to reject application-- Larsen and Toubro Ltd . v. Asst. CIT (TDS) (Bom) . . . 514
----Revision--Commissioner--Deduction of tax at source--Application for certificate of deduction at lower rate--Order of rejection of application under section 197--Order requiring application of mind and recording of reasons--Is an "order" amenable to revision-- Larsen and Toubro Ltd . v. Asst. CIT (TDS) (Bom) . . . 514
S. 245C --Income-tax Settlement Commission (Procedure) Rules 1997, r. 9--Settlement of cases--Procedure--Copy of application for settlement and documents furnished must be forwarded to Commissioner and report of Commissioner must be obtained--Application for settlement--Application revised subsequently--Revised application not forwarded to Commissioner--Objection not raised at that time by Revenue--Order accepting application for settlement could not be set aside--Final order set aside and matter remanded-- CIT v. Income-tax Settlement Commission (Bom) . . . 626
S. 245D --Settlement of cases--Procedure--Copy of application for settlement and documents furnished must be forwarded to Commissioner and report of Commissioner must be obtained--Application for settlement--Application revised subsequently--Revised application not forwarded to Commissioner--Objection not raised at that time by Revenue--Order accepting application for settlement could not be set aside--Final order set aside and matter remanded-- CIT v. Income-tax Settlement Commission (Bom) . . . 626
S. 245H --Settlement of cases--Penalty--Concealment of income--Power of Settlement Commission to reduce penalty--Power must be exercised judiciously--Imposition of penalty of less than 10 per cent. of minimum leviable--Order not justified-- CIT v. Income-tax Settlement Commission (Bom) . . . 626
S. 264 --Revision--Commissioner--Deduction of tax at source--Application for certificate of deduction at lower rate--Order of rejection of application under section 197--Order requiring application of mind and recording of reasons--Is an "order" amenable to revision-- Larsen and Toubro Ltd . v. Asst. CIT (TDS) (Bom) . . . 514
R. 28AA --Deduction of tax at source--Application for certificate of deduction at lower rate--Financial statements of assessee in three earlier years--Only for purpose of determination of rate--That statements not available--Not ground to reject application-- Larsen and Toubro Ltd . v. Asst. CIT (TDS) (Bom) . . . 514
Business income --Computation of profits--Assessee engaged in wholesale grocery trade--Rate of net profit less than in retail trade--Net profit rate to be modified to 3 per cent.--Deduction not allowable on expenses--Income-tax Act, 1961, s. 44AF-- Kushalraj Devi Chand Oswal v. Asst. CIT (Bangalore) . . . 118
Capital gains --Full value of consideration--Investment in bonds--Exemption --Departmental Valuation Officer valuing property at figure much lower than value fixed by stamp valuation authority--Assessing Officer to adopt consideration under valuation report of Departmental Valuation Officer--Agreement not registered--Section 50C not applicable--Sale consideration as admitted in return of income to be accepted--Income-tax Act, 1961, ss. 50C(1), (3), 54EC-- ITO v. Ms. Kumudini Venugopal (Chennai) . . . 145
Capital or revenue expenditure --Fees paid to architect--Capital expenditure -- Tecumseh India P. Ltd. v. Addl. CIT [SB] (Delhi) . . . 150
----Fees paid to Registrar of Companies for increase of authorized capital--Capital expenditure-- Tecumseh India P. Ltd. v. Addl. CIT [SB] (Delhi) . . . 150
----Real estate business--Construction of building and sale of built-up space subsequent to acquisition of development rights--Development rights intrinsically linked with stock-in-trade in form of built-up area--Development rights not continuing intangible asset--Revenue expenditure--Income-tax Act, 1961, s. 37-- Asst. CIT v. Shriram Properties and Constructions (Chennai) Ltd. (Chennai) . . . 141
----Tests--Non-compete fee--Not always on revenue account--Sum paid as part of agreement to takeover assets of company--Is on capital account--Not allowable--Income-tax Act, 1961, s. 37-- Tecumseh India P. Ltd. v. Addl. CIT [SB] (Delhi) . . . 150
Charitable purpose --Registration--Object of trust charitable--Even if school run without requisite permission not fatal for grant of registration--Assessee-trust filing Form No. 10B along with return of income--Trust genuine and carrying on educational activities--Direction to grant registration--Income-tax Act, 1961, s. 12AA-- Sri Elumalayan Educational Trust v. CIT (Chennai) . . . 127
Depreciation --Fees paid to architect--Absence of details--Depreciation cannot be allowed-- Tecumseh India P. Ltd. v. Addl. CIT [SB] (Delhi) . . . 150
Penalty --Concealment of income--Penalty on basis of addition on account of capital loss and gift--Explanation of assessee substantiated by documentary evidence--Inconsistencies in purchase agreement not sufficient to hold transaction sham--No material fact for computation of income withheld by assessee--No material to prove gift received not genuine--Not a case for penalty--Income-tax Act, 1961, s. 271(1)(c)-- Dinesh B. Thakkar v. Asst. CIT (Ahmedabad) . . . 120
Search and seizure --Block assessment--Unexplained investment--Fixed deposits and interest on deposits not disclosed in return of income--Source of deposits not proved--To be treated as undisclosed income--Cash as well as withdrawals for expenses not independent funds but recycled through bank transactions--Repeated transactions of deposit and withdrawals not reconciled--Not to be treated as independent items of undisclosed income but to be accounted against cash turnover--Income-tax Act, 1961, ss. 69, 132, 158BC-- Dr. M. Somashekar v. Asst. CIT (Bangalore) . . . 129
S. 12AA --Charitable purpose--Registration--Object of trust charitable--Even if school run without requisite permission not fatal for grant of registration--Assessee-trust filing Form No. 10B along with return of income--Trust genuine and carrying on educational activities--Direction to grant registration-- Sri Elumalayan Educational Trust v. CIT (Chennai) . . . 127
S. 37 --Capital or revenue expenditure--Real estate business--Construction of building and sale of built-up space subsequent to acquisition of development rights--Development rights intrinsically linked with stock-in-trade in form of built-up area--Development rights not continuing intangible asset--Revenue expenditure-- Asst. CIT v. Shriram Properties and Constructions (Chennai) Ltd. (Chennai) . . . 141
----Capital or revenue expenditure--Tests--Non-compete fee--Not always on revenue account--Sum paid as part of agreement to takeover assets of company--Is on capital account--Not allowable-- Tecumseh India P. Ltd. v. Addl. CIT [SB] (Delhi) . . . 150
S. 44AF --Business income--Computation of profits--Assessee engaged in wholesale grocery trade--Rate of net profit less than in retail trade--Net profit rate to be modified to 3 per cent.--Deduction not allowable on expenses-- Kushalraj Devi Chand Oswal v. Asst. CIT (Bangalore) . . . 118
S. 50C(1) --Capital gains--Full value of consideration--Investment in bonds--Exemption --Departmental Valuation Officer valuing property at figure much lower than value fixed by stamp valuation authority--Assessing Officer to adopt consideration under valuation report of Departmental Valuation Officer--Agreement not registered--Section 50C not applicable--Sale consideration as admitted in return of income to be accepted-- ITO v. Ms. Kumudini Venugopal (Chennai) . . . 145
S. 50C(3) --Capital gains--Full value of consideration--Investment in bonds--Exemption--Departmental Valuation Officer valuing property at figure much lower than value fixed by stamp valuation authority--Assessing Officer to adopt consideration under valuation report of Departmental Valuation Officer--Agreement not registered--Section 50C not applicable--Sale consideration as admitted in return of income to be accepted-- ITO v. Ms. Kumudini Venugopal (Chennai) . . . 145
S. 54EC --Capital gains--Full value of consideration--Investment in bonds--Exemption--Departmental Valuation Officer valuing property at figure much lower than value fixed by stamp valuation authority--Assessing Officer to adopt consideration under valuation report of Departmental Valuation Officer--Agreement not registered--Section 50C not applicable--Sale consideration as admitted in return of income to be accepted-- ITO v. Ms. Kumudini Venugopal (Chennai) . . . 145
S. 69 --Search and seizure--Block assessment--Unexplained investment--Fixed deposits and interest on deposits not disclosed in return of income--Source of deposits not proved--To be treated as undisclosed income--Cash as well as withdrawals for expenses not independent funds but recycled through bank transactions--Repeated transactions of deposit and withdrawals not reconciled--Not to be treated as independent items of undisclosed income but to be accounted against cash turnover-- Dr. M. Somashekar v. Asst. CIT (Bangalore) . . . 129
S. 132 --Search and seizure--Block assessment--Unexplained investment--Fixed deposits and interest on deposits not disclosed in return of income--Source of deposits not proved--To be treated as undisclosed income--Cash as well as withdrawals for expenses not independent funds but recycled through bank transactions--Repeated transactions of deposit and withdrawals not reconciled--Not to be treated as independent items of undisclosed income but to be accounted against cash turnover-- Dr. M. Somashekar v. Asst. CIT (Bangalore) . . . 129
S. 158BC --Search and seizure--Block assessment--Unexplained investment--Fixed deposits and interest on deposits not disclosed in return of income--Source of deposits not proved--To be treated as undisclosed income--Cash as well as withdrawals for expenses not independent funds but recycled through bank transactions--Repeated transactions of deposit and withdrawals not reconciled--Not to be treated as independent items of undisclosed income but to be accounted against cash turnover-- Dr. M. Somashekar v. Asst. CIT (Bangalore) . . . 129
S. 271(1)(c) --Penalty--Concealment of income--Penalty on basis of addition on account of capital loss and gift--Explanation of assessee substantiated by documentary evidence--Inconsistencies in purchase agreement not sufficient to hold transaction sham--No material fact for computation of income withheld by assessee--No material to prove gift received not genuine--Not a case for penalty-- Dinesh B. Thakkar v. Asst. CIT (Ahmedabad) . . . 120
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