INCOME TAX REPORTS (ITR)
Volume 336 : Part 2 (Issue dated 15-8-2011)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
Accounting --Rejection of accounts--Estimate of income--Rate of net profits applied by Assessing Officer--Enhancement by Commissioner (Appeals) and Tribunal--No discussion on material justifying enhancement--Enhancement set aside--Matter remanded--Income-tax Act, 1961-- Aggarwal Engineering Co. v. Asst. CIT (P&H) . . . 332
Appeal to Commissioner (Appeals) --Powers--Remand by Tribunal to determine quantum of income discovered in search proceedings--No power in Commissioner (Appeals) to consider new issues--Validity of search could not be gone into--Income-tax Act, 1961-- Jose Cyriac v. CIT (Ker) . . . 241
Business expenditure --Disallowance--Excessive and unreasonable payments--Payment to related person--Subsidiary company not a related person within the meaning of section 40A(2)--Higher price paid for raw materials to subsidiary company in consideration of assured supply of material of uniform quality--Finding that price not unreasonable--Part of price could not be disallowed--Income-tax Act, 1961, s. 40A(2)(b)-- CIT v. V. S. Dempo and Co. P. Ltd. (Bom) . . . 209
Business income or capital gains --Trading in shares or investment--Two separate portfolios--Permissible--Income-tax Act, 1961-- CIT v. Gopal Purohit (Bom) . . . 287
Capital gains --"Transfer"--Definition--Effect of amendment of section 2(47) w.e.f. 1-4-1988--Registration necessary for transfer--Amendment prospective--Part performance under agreement prior to amendment--No transfer giving rise to capital gains--Income-tax Act, 1961, ss. 2(47), 45--C. B. D. T. Circular No. 495, dated 22-9-1987-- CIT v. Rakesh Gupta (All) . . . 277
Capital or revenue expenditure --Membership fee payable to club--Whether revenue expenditure--Assessing Officer to reconsider matter afresh--Income-tax Act, 1961-- CIT v. Falcon Tyres Ltd. (Karn) . . . 200
Charitable purposes --Registration of trusts--Cancellation of registration--Law applicable--Effect of insertion of sub-section (3) in section 12AA w.e.f. 1-10-2004 providing for cancellation of registration--Provision not retrospective--Trust granted registration under section 12A prior to amendment--Cancellation of registration by order passed in March 2009 by Commissioner--Not valid--Income-tax Act, 1961, ss. 12A, 12AA-- CIT v. Manav Vikas Avam Sewa Sansthan (All) . . . 250
Company --Book profits--Losses brought forward--Losses on last date of immediately preceding year to be taken into account--Company having losses brought forward--Losses wiped out by reduction of capital subsequently--Not relevant--Losses brought forward deductible--Income-tax Act, 1961, s. 115JB, Expln. 1-- CIT v. Sumi Motherson Innovative Engineering Ltd. (Delhi) . . . 321
Exemption --Export--Condition precedent--Actual movement of goods outside India--Delivery of goods to a foreign buyer in India--Not export--Assessee not entitled to exemption--Income-tax Act, 1961, s. 10B-- Swayam Consultancy P. Ltd. v. ITO (AP) . . . 189
Export --Special deduction--Computation--Sales tax and excise duty--Not to form part of total turnover--Income-tax Act, 1961, ss. 80AB, 80HHC-- CIT v. Falcon Tyres Ltd. (Karn) . . . 200
Income --Accrual of income--Duty drawback--No accrual of income till claim of assessee quantified and verified by competent authority--Income-tax Act, 1961-- CIT v. Sriyansh Knitters P. Ltd. (P&H) . . . 235
----Accrual of income--Time of accrual--Export incentives--IPRS incentive allowed by Government after examining claim--Exports of goods at the end of accounting year on 22-3-1993--Incentive received in next accounting year--Amount did not accrue and not assessable in assessment year 1993-94--Income-tax Act, 1961-- CIT v. Manav Tools (India) P. Ltd. (P&H) . . . 237
----Nature of income--Entries in books of account not conclusive--Income-tax Act, 1961-- CIT v. Gopal Purohit (Bom) . . . 287
Income-tax --General principles--Consistent practice of treating transactions in shares as investment--Principle of consistency--Different view should not be taken for year under consideration--Income-tax Act, 1961-- CIT v. Gopal Purohit (Bom) . . . 287
Industrial undertaking --Special deduction under section 80-I--Computation--Unabsorbed losses and allowances to be set off before computing deduction--Income-tax Act, 1961, s. 80-I-- Shahbad Co-operative Sugar Mills Ltd. v. Deputy CIT (P & H) . . . 222
----Special deduction under section 80HHA--Small scale industrial undertaking in rural area--Meaning of rural area--Notification specifying distance of eight kilometres from municipal limits--Applicable--Assessing Officer denying relief on ground unit situate within fifteen kilometres from municipal limits--Not proper--Industrial undertaking entitled to special deduction--Income-tax Act, 1961, s. 80HHA-- CIT v. Friends Salt and Allied Industries (Guj) . . . 272
----Special deduction--Computation--Transfer of goods between units of same undertaking--Finding that transfers at market value--Sub-section (8) of section 80-I not applicable--Income-tax Act, 1961, s. 80-I(8)-- CIT v. Punjab Concast Steels Ltd. (P&H) . . . 248
Interpretation of taxing statutes --Literal interpretation-- CIT v. Sumi Motherson Innovative Engineering Ltd. (Delhi) . . . 321
Investment allowance --Industrial undertaking--Assessee manufacturing, supplying and erecting industrial equipment to public undertakings--Details furnished by assessee supported by material documents--Assessee is an industrial undertaking--Entitled to relief under sections 32A and 80-IA--Income-tax Act, 1961, ss. 32A, 80-IA-- CIT v. Aicam Engineering P. Ltd. (Mad) . . . 294
Legislative powers --State Legislature--Provision that income-tax payable by Members of Legislative Assembly on salary and allowances will be paid by State--No provision in income-tax law prohibiting payment of tax by person other than assessee--Law within competence of State Legislature--Discrimination--Classification of Members of Legislative Assembly as a separate category--Provision not discriminatory--Punjab State Legislative Assembly (Salaries and Allowances of Members) Act, 1942, s. 3AA--Constitution of India, art. 14, Sch. VII, List II, entries 38, 40-- Manmohan Singh v. State of Punjab (P&H) . . . 312
Non-resident --Income deemed to accrue or arise in India--Assessee providing electronic global distribution of services to airlines, hotels etc. by connecting to travel agents--Commission paid to agent in India--Finding that 15 per cent. of revenue accruing in respect of bookings made in India--Finding that after paying commission, no income or profits to tax in India--Findings of fact--Income-tax Act, 1961, ss. 5(2), 9(1)(i)--Circular No. 23 dated 23-7-1969--Double Taxation Avoidance Agreement between India and U. S. A.-- Director of Income-tax v. Galileo International Inc. (Delhi) . . . 264
Offences and prosecution --Wilful attempt to evade tax--Request for time to pay taxes--Part of tax deposited before request and entire amount paid subsequently--No attempt to evade tax--Prosecution not valid--Income-tax Act, 1961, s. 276C-- Sushil Kumar Saboo v. State of Bihar (Patna) . . . 202
Penalty --Concealment of income--Amount claimed to be gift--Gift discovered to be bogus--Assessee had furnished inaccurate particulars of his income--Penalty had to be levied--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Deep Chand (P&H) . . . 292
----Concealment of income--Bona fide claim for deduction--Not concealment or furnishing of inaccurate particulars--Penalty could not be imposed--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Raj Overseas (P&H) . . . 261
----Concealment of income--Surrender of income during survey--Finding by Tribunal that there was no material from which concealment of income could be inferred--Penalty could not be imposed--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Careers Education and Infotech P. Ltd. (P&H) . . . 257
----Concealment of income--Survey conducted in premises of company showing payments to relatives of directors--Assessee, wife of managing director--Undertaking by managing director to get additional income surrendered by assessee--Assessee not declaring additional income in return--Levy of penalty justified--Income-tax Act, 1961, s. 271(1)(c)-- Shveta Nanda v. CIT (P&H) . . . 298
Precedent --Effect of decision of Supreme Court in Distributors (Baroda) P. Ltd. v. UOI [1985] 155 ITR 120 and CIT v. Kotagiri Industrial Co-operative Tea Factory Ltd. [1997] 224 ITR 604-- Shahbad Co-operative Sugar Mills Ltd. v. Deputy CIT (P & H) . . . 222
Presumptive taxation --Civil contractor--Special provision for computing profits and gains of business--Assessing Officer determining net profit rate in terms of section 44AD on account of failure to maintain account books--Commissioner (Appeals) restricting addition on ground section 44AD not applicable--Tribunal directing Assessing Officer to complete assessment in accordance with books of account--No discussion in Tribunal's order regarding correctness of Commissioner (Appeals) order--Matter remanded--Income-tax Act, 1961, s. 44AD-- Kesar Singh v. CIT (P & H) . . . 205
Reassessment ----Notice--Validity--Notice based on subsequent decision of High Court--Decision of High Court reversed by Supreme Court--Notice not valid--Income-tax Act, 1961, s. 148-- Commercial Co-operative Bank Ltd. v. ITO (Guj) . . . 196
----Notice after four years--No failure to disclose material facts necessary for assessment--Notice based on subsequent two-judge decision of Supreme Court which was overruled by a larger Bench--Notice not valid--Income-tax Act, 1961 s. 148-- Surat People Co-op. Bank Ltd. v. ITO (Guj) . . . 218
----Notice after four years--No failure to disclose material facts necessary for assessment--Notice not valid--Income-tax Act, 1961, s. 148-- Commercial Co-operative Bank Ltd. v. ITO (Guj) . . . 196
Rectification of mistakes --Rectification based on decision of Supreme Court--Decision in 1997 relying on earlier decision in 1985--Legal position clarified in 1985--Rectification based on Supreme Court decision in 1994--Valid--Income-tax Act, 1961, s. 154-- Shahbad Co-operative Sugar Mills Ltd. v. Deputy CIT (P & H) . . . 222
Search and seizure --Block assessment--Assessment of third person--Satisfaction regarding undisclosed income of such person recorded before completion of assessment of person searched--Assessment proceedings of third person--Valid--Income-tax Act, 1961, ss. 158BC, 158BD-- CIT v. Girdhari Lal Bassi (P&H) . . . 255
----Block assessment--Undisclosed income--Unexplained investment--No satisfactory explanation--Addition to total income of assessee--Justified--Income-tax Act, 1961, s. 158B-- Hazari Lal v. CIT (P&H) . . . 290
----Validity of search--Search of a group of companies--Precise details about persons to be searched mentioned in warrant of authorisation--Search legal--Income-tax Act, 1961, ss. 132, 133A-- Jose Cyriac v. CIT (Ker) . . . 241
Status --Firm--Finding by Commissioner (Appeals) and Tribunal that no change in constitution of firm and assessee filed copy of partnership deed signed by all partners--Procedural requirement complied with--Assessee to be assessed in capacity of a firm--Income-tax Act, 1961-- CIT v. Nand Lal Labhu Ram (P&H) . . . 303
Undisclosed investment --Jewellery--Source of purchase of jewellery satisfactorily explained--Not undisclosed income of assessee--Income-tax Act, 1961-- Sonia Magu v. CIT (Delhi) . . . 227
Unexplained income --Firm--Unexplained credit entries in capital account of partners in books of account of assessee-firm--No explanation given by assessee for lower gross profit in current year--Amount of gifts almost equal to difference in gross profit declared--Gifts received undisclosed income of assessee--Income-tax Act, 1961-- CIT v. Deepak Iron and Steel Rolling Mills (P&H) . . . 307
Words and phrases --"Export"--Meaning of-- Swayam Consultancy P. Ltd. v. ITO (AP) . . . 189
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Art. 14, Sch. VII, List II, entries 38, 40 --Legislative powers--State Legislature--Provision that income-tax payable by Members of Legislative Assembly on salary and allowances will be paid by State--No provision in income-tax law prohibiting payment of tax by person other than assessee--Law within competence of State Legislature--Discrimination--Classification of Members of Legislative Assembly as a separate category--Provision not discriminatory-- Manmohan Singh v. State of Punjab (P&H) . . . 312
S. 2(47) --Capital gains--"Transfer"--Definition--Effect of amendment of section 2(47) w.e.f. 1-4-1988--Registration necessary for transfer--Amendment prospective--Part performance under agreement prior to amendment--No transfer giving rise to capital gains--C. B. D. T. Circular No. 495, dated 22-9-1987-- CIT v. Rakesh Gupta (All) . . . 277
S. 5(2) --Non-resident--Income deemed to accrue or arise in India--Assessee providing electronic global distribution of services to airlines, hotels etc. by connecting to travel agents--Commission paid to agent in India--Finding that 15 per cent. of revenue accruing in respect of bookings made in India--Finding that after paying commission, no income or profits to tax in India--Findings of fact--Circular No. 23 dated 23-7-1969--Double Taxation Avoidance Agreement between India and U. S. A.-- Director of Income-tax v. Galileo International Inc. (Delhi) . . . 264
S. 9(1)(i) --Non-resident--Income deemed to accrue or arise in India--Assessee providing electronic global distribution of services to airlines, hotels etc. by connecting to travel agents--Commission paid to agent in India--Finding that 15 per cent. of revenue accruing in respect of bookings made in India--Finding that after paying commission, no income or profits to tax in India--Findings of fact--Circular No. 23 dated 23-7-1969--Double Taxation Avoidance Agreement between India and U. S. A.-- Director of Income-tax v. Galileo International Inc. (Delhi) . . . 264
S. 10B --Exemption--Export--Condition precedent--Actual movement of goods outside India--Delivery of goods to a foreign buyer in India--Not export--Assessee not entitled to exemption-- Swayam Consultancy P. Ltd. v. ITO (AP) . . . 189
S. 12A --Charitable purposes--Registration of trusts--Cancellation of registration--Law applicable--Effect of insertion of sub-section (3) in section 12AA w.e.f. 1-10-2004 providing for cancellation of registration--Provision not retrospective--Trust granted registration under section 12A prior to amendment--Cancellation of registration by order passed in March 2009 by Commissioner--Not valid-- CIT v. Manav Vikas Avam Sewa Sansthan (All) . . . 250
S. 12AA --Charitable purposes--Registration of trusts--Cancellation of registration--Law applicable--Effect of insertion of sub-section (3) in section 12AA w.e.f. 1-10-2004 providing for cancellation of registration--Provision not retrospective--Trust granted registration under section 12A prior to amendment--Cancellation of registration by order passed in March 2009 by Commissioner--Not valid-- CIT v. Manav Vikas Avam Sewa Sansthan (All) . . . 250
S. 32A --Investment allowance--Industrial undertaking--Assessee manufacturing, supplying and erecting industrial equipment to public undertakings--Details furnished by assessee supported by material documents--Assessee is an industrial undertaking--Entitled to relief under sections 32A and 80-IA-- CIT v. Aicam Engineering P. Ltd. (Mad) . . . 294
S. 40A(2)(b) --Business expenditure--Disallowance--Excessive and unreasonable payments--Payment to related person--Subsidiary company not a related person within the meaning of section 40A(2)--Higher price paid for raw materials to subsidiary company in consideration of assured supply of material of uniform quality--Finding that price not unreasonable--Part of price could not be disallowed-- CIT v. V. S. Dempo and Co. P. Ltd. (Bom) . . . 209
S. 44AD --Presumptive taxation--Civil contractor--Special provision for computing profits and gains of business--Assessing Officer determining net profit rate in terms of section 44AD on account of failure to maintain account books--Commissioner (Appeals) restricting addition on ground section 44AD not applicable--Tribunal directing Assessing Officer to complete assessment in accordance with books of account--No discussion in Tribunal's order regarding correctness of Commissioner (Appeals) order--Matter remanded-- Kesar Singh v. CIT (P & H) . . . 205
S. 45 --Capital gains--"Transfer"--Definition--Effect of amendment of section 2(47) w.e.f. 1-4-1988--Registration necessary for transfer--Amendment prospective--Part performance under agreement prior to amendment--No transfer giving rise to capital gains--C. B. D. T. Circular No. 495, dated 22-9-1987-- CIT v. Rakesh Gupta (All) . . . 277
S. 80AB --Export--Special deduction--Computation--Sales tax and excise duty--Not to form part of total turnover-- CIT v. Falcon Tyres Ltd. (Karn) . . . 200
S. 80HHA --Industrial undertaking--Special deduction under section 80HHA--Small scale industrial undertaking in rural area--Meaning of rural area--Notification specifying distance of eight kilometres from municipal limits--Applicable--Assessing Officer denying relief on ground unit situate within fifteen kilometres from municipal limits--Not proper--Industrial undertaking entitled to special deduction-- CIT v. Friends Salt and Allied Industries (Guj) . . . 272
S. 80HHC --Export--Special deduction--Computation--Sales tax and excise duty--Not to form part of total turnover-- CIT v. Falcon Tyres Ltd. (Karn) . . . 200
S. 80-I --Industrial undertaking--Special deduction under section 80-I --Computation--Unabsorbed losses and allowances to be set off before computing deduction-- Shahbad Co-operative Sugar Mills Ltd. v. Deputy CIT (P & H) . . . 222
S. 80-I(8) --Industrial undertaking--Special deduction--Computation--Transfer of goods between units of same undertaking--Finding that transfers at market value--Sub-section (8) of section 80-I not applicable-- CIT v. Punjab Concast Steels Ltd.
(P&H) . . . 248
S. 80-IA --Investment allowance--Industrial undertaking--Assessee manufacturing, supplying and erecting industrial equipment to public undertakings--Details furnished by assessee supported by material documents--Assessee is an industrial undertaking--Entitled to relief under sections 32A and 80-IA-- CIT v. Aicam Engineering P. Ltd. (Mad) . . . 294
S. 115JB, Expln. 1 --Company--Book profits--Losses brought forward--Losses on last date of immediately preceding year to be taken into account--Company having losses brought forward--Losses wiped out by reduction of capital subsequently--Not relevant--Losses brought forward deductible-- CIT v. Sumi Motherson Innovative Engineering Ltd. (Delhi) . . . 321
S. 132 --Search and seizure--Validity of search--Search of a group of companies--Precise details about persons to be searched mentioned in warrant of authorisation--Search legal-- Jose Cyriac v. CIT (Ker) . . . 241
S. 133A --Search and seizure--Validity of search--Search of a group of companies--Precise details about persons to be searched mentioned in warrant of authorisation--Search legal-- Jose Cyriac v. CIT (Ker) . . . 241
S. 148 --Reassessment--Notice--Validity--Notice based on subsequent decision of High Court--Decision of High Court reversed by Supreme Court--Notice not valid-- Commercial Co-operative Bank Ltd. v. ITO (Guj) . . . 196
----Reassessment--Notice after four years--No failure to disclose material facts necessary for assessment--Notice based on subsequent two-judge decision of Supreme Court which was overruled by a larger Bench--Notice not valid-- Surat People Co-op. Bank Ltd. v. ITO (Guj) . . . 218
----Reassessment--Notice after four years--No failure to disclose material facts necessary for assessment--Notice not valid-- Commercial Co-operative Bank Ltd. v. ITO (Guj) . . . 196
S. 154 --Rectification of mistakes--Rectification based on decision of Supreme Court--Decision in 1997 relying on earlier decision in 1985--Legal position clarified in 1985--Rectification based on Supreme Court decision in 1994--Valid-- Shahbad Co-operative Sugar Mills Ltd. v. Deputy CIT (P&H) . . . 222
S. 158B --Search and seizure--Block assessment--Undisclosed income--Unexplained investment--No satisfactory explanation--Addition to total income of assessee--Justified-- Hazari Lal v. CIT (P&H) . . . 290
S. 158BC --Search and seizure--Block assessment--Assessment of third person--Satisfaction regarding undisclosed income of such person recorded before completion of assessment of person searched--Assessment proceedings of third person--Valid-- CIT v. Girdhari Lal Bassi (P&H) . . . 255
S. 158BD --Search and seizure--Block assessment--Assessment of third person--Satisfaction regarding undisclosed income of such person recorded before completion of assessment of person searched--Assessment proceedings of third person--Valid-- CIT v. Girdhari Lal Bassi (P&H) . . . 255
S. 271(1)(c) --Penalty--Concealment of income--Amount claimed to be gift--Gift discovered to be bogus--Assessee had furnished inaccurate particulars of his income--Penalty had to be levied-- CIT v. Deep Chand (P&H) . . . 292
----Penalty--Concealment of income--Bona fide claim for deduction--Not concealment or furnishing of inaccurate particulars--Penalty could not be imposed-- CIT v. Raj Overseas (P&H) . . . 261
----Penalty--Concealment of income--Surrender of income during survey--Finding by Tribunal that there was no material from which concealment of income could be inferred--Penalty could not be imposed-- CIT v. Careers Education and Infotech P. Ltd. (P&H) . . . 257
----Penalty--Concealment of income--Survey conducted in premises of company showing payments to relatives of directors--Assessee, wife of managing director--Undertaking by managing director to get additional income surrendered by assessee --Assessee not declaring additional income in return--Levy of penalty justified-- Shveta Nanda v. CIT (P&H) . . . 298
S. 276C --Offences and prosecution--Wilful attempt to evade tax--Request for time to pay taxes--Part of tax deposited before request and entire amount paid subsequently--No attempt to evade tax--Prosecution not valid-- Sushil Kumar Saboo v. State of Bihar (Patna) . . . 202
Punjab State Legislative Assembly (Salaries and Allowances of Members) Act, 1942 :
S. 3AA --Legislative powers--State Legislature--Provision that income-tax payable by Members of Legislative Assembly on salary and allowances will be paid by State--No provision in income-tax law prohibiting payment of tax by person other than assessee--Law within competence of State Legislature--Discrimination--Classification of Members of Legislative Assembly as a separate category--Provision not discriminatory-- Manmohan Singh v. State of Punjab (P&H) . . . 312
CA.RAJU SHAH
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