INCOME TAX REPORTS (ITR)
Volume 338 : Part 2 (Issue dated 24-10-2011)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
Accounting --Rejection of accounts--Hybrid system--Assessee publishing magazines showing receipts from subscriptions and advertisements on cash basis and income from sales of magazines on accrual basis--System accepted by Revenue--Change in accounting system to comply with provisions of company law--Not relevant--Assessee could continue hybrid system for income-tax purposes--Income-tax Act, 1961, s. 145-- Cyber Media (India) Ltd. v. CIT (Delhi) . . . 177
Appeal to Appellate Tribunal --Competency of appeal--CBDT Circular/Instruction prescribing monetary limits for appeals--Clarification allowing clubbing of tax arrears in common order--Tax arrears after clubbing above monetary value--Appeals maintainable--CBDT Instruction No. 1979, dated 27-3-2000 and clarification dated 29-6-2000--Income-tax Act, 1961-- CIT v. Eapen Nainan (Mad) . . . 263
Business expenditure --Disallowance--Excessive or unreasonable payments--Raw materials supplied to subsidiary company by holding company, a non-resident--Assessee furnishing proof that payment was reasonable--No material to show that payment was excessive--No part of payment could be disallowed--Income-tax Act, 1961, s. 40A(2)(b) -- CIT v. Samsung India Electronics Ltd. (Delhi) . . . 186
Depreciation --Higher rate of depreciation--Equipment purchased and leased back to vendor--No evidence that transaction a colourable device--Assessee entitled to depreciation on equipment--Income-tax Act, 1961, s. 32-- CIT v. Cosmo Films Ltd . (Delhi) . . . 266
Exemption --Hospital--Application under section 10(23C)(via) filed beyond time--Accounts not maintained properly--No evidence regarding activities--Registration under section 80G and exemption under section 12A in prior years not conclusive--Rejection of application--Justified--Income-tax Act, 1961, s. 10(23C)(via)-- All India J. D. Educational Society v. Director General of Income-tax (Exemptions) (Delhi) . . . 218
----Local authority--Criteria for local authority--U. P. Jal Nigam constituted under Water Supply and Sewerage Act, 1975--Local authority--Income-tax Act, 1961, s. 10(20)--General Clauses Act, 1897, s. 3-- U. P. Jal Nigam v. CIT (All) . . . 248
Export --Tea--Blending of tea--Amounts to processing--Export of blended tea--Assessee entitled to special deduction under section 80HHC--Income-tax Act, 1961, s. 80HHC-- Stewart Holl (India) Ltd. v. CIT (Cal) . . . 194
Insurance business --Computation of income--Provision for solvency margin--Deductible--Loss in Jeevan Suraksha Fund to be taken into account--Income-tax Act, 1961, s. 44, Sch. I, r. 2-- CIT v. Life Insurance Corporation of India Ltd . (Bom) . . . 212
Loss --Business loss--Loss due to theft--No evidence that theft had not occurred--Inability of police to recover articles--Not relevant--Loss deductible--Income-tax Act, 1961-- Dheeraj Associates P. Ltd . v. CIT (Cal) . . . 207
Non-resident --Presumptive tax--Mineral oil--Reimbursement of mobilization charges outside India--Includible in gross income--Reimbursement of expenses--Includible in gross revenue--Income-tax Act, 1961, s. 44BB-- CIT v. Atwood Oceanics Pacific Ltd. (Uttarakhand) . . . 156
----Presumptive tax--Mineral oil--Revenue received from charter of rig--Amount attributable to transportation of rigs outside territorial waters of India--Includible in gross income--Income-tax Act, 1961, s. 44BB-- CIT v. Sundowner Offshore International (Burmuda) Ltd. (Uttarakhand) . . . 147
----Presumptive tax--Mineral oil--Scope of section 44BB--Mobilization/demobilization charges in respect of voyage in Indian territorial waters or outside--Part of gross revenue--Income-tax Act, 1961, s. 44BB-- CIT v. R and B Falcon Drilling Co. (Uttarakhand) . . . 152
Penalty --Concealment of income and furnishing inaccurate particulars--Assessee claiming loss on receipt of debit notes twice--Explanation not bona fide--Assessee deliberately furnished inaccurate particulars of income--Penalty to be imposed--Income-tax Act, 1961, s. 271(1)(c)-- Sethi Industries Corporation v. Deputy CIT (P&H) . . . 243
----Failure to furnish annual information return regarding financial transactions--First notice issued on 17-12-2008 and second notice issued on 11-9-2009--Return filed on 12-10-2009--Assessee could not plead ignorance of law after first notice--Penalty leviable for period commencing from date of first notice--Income-tax Act, 1961, ss. 271FA, 285BA,-- Patan Nagrik Sahakari Bank Ltd . v. Director of Income-tax (CIB) (Guj) . . . 167
Precedent --Effect of decision of Supreme Court in Chowgule and Co. v. Union of India [1981] 47 STC 124-- Stewart Holl (India) Ltd. v. CIT (Cal) . . . 194
----Effect of decision of Supreme Court in Union of India v. R. C. Jain, AIR 1981 SC 951-- U. P. Jal Nigam v. CIT (All) . . . 248
Res judicata --Principle not applicable to income-tax law-- All India J. D. Educational Society v. Director General of Income-tax (Exemptions) (Delhi) . . . 218
Search and seizure --Block assessment--Assessment of third person--Action under section 158BD must be taken before completion of assessment of person searched--Satisfaction under section 158BD recorded after completion of block assessment under section 158BC--Proceedings against third person not valid--Income-tax Act, 1961, ss. 158BC, 158BD-- CIT v. Calcutta Knitwears (P&H) . . . 239
----Block assessment--Effect of section 158BB --Depreciation can be claimed--Income-tax Act, 1961, s. 158BB-- CIT v. Smt. C. Sabira (Ker) . . . 226
----Block assessment--Special audit--Appointment of special auditor under section 142(2A)--Permissible--Income-tax Act, 1961, ss. 142, 158BC-- Madhurapuri Chits and Finance Co. P. Ltd . v. CIT (Ker) . . . 202
----Block assessment--Special audit--Report of special auditor--Correctness of undisclosed income not considered--Matter remanded--Income-tax Act, 1961, ss. 142, 158BC-- Madhurapuri Chits and Finance Co. P. Ltd . v. CIT (Ker) . . . 202
----Block assessment--Undisclosed income--Addition only on basis of material discovered during search--Estimate of excess of cost of construction of property--Not valid--Finding that amount shown in particular entry erroneous--Amount not assessable as undisclosed income--Income-tax Act, 1961, Chap. XIV-B-- CIT v. Smt. C. Sabira (Ker) . . . 226
Writ --Powers of High Court--High Court cannot re-evaluate evidence--Constitution of India, art. 226-- All India J. D. Educational Society v. Director General of Income-tax (Exemptions) (Delhi) . . . 218
Non-resident --Exploration and production of mineral oils in India--Services connected with--Special provisions--Seismic data acquisition and processing--Income from services taxable under special provision--Income cannot be split up--Income-tax Act, 1961, ss. 9(1)(i), (vii), Expln. 2, 44BB--CBDT Instruction No. 1862 dated 22-10-1970-- Western Geco International Limited , In re . . . 161
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Art. 226 --Writ--Powers of High Court--High Court cannot re-evaluate evidence-- All India J. D. Educational Society v. Director General of Income-tax (Exemptions) (Delhi) . . . 218
S. 3 --Exemption--Local authority--Criteria for local authority--U. P. Jal Nigam constituted under Water Supply and Sewerage Act, 1975--Local authority-- U. P. Jal Nigam v. CIT (All) . . . 248
S. 9(1)(i), (vii), Expln. 2 --Non-resident--Exploration and production of mineral oils in India--Services connected with--Special provisions--Seismic data acquisition and processing--Income from services taxable under special provision--Income cannot be split up--CBDT Instruction No. 1862 dated 22-10-1970-- Western Geco International Limited , In re (AAR) . . . 161
S. 10(20) --Exemption--Local authority--Criteria for local authority--U. P. Jal Nigam constituted under Water Supply and Sewerage Act, 1975--Local authority-- U. P. Jal Nigam v. CIT (All) . . . 248
S. 10(23C)(via) --Exemption--Hospital--Application under section 10(23C)(via) filed beyond time--Accounts not maintained properly--No evidence regarding activities--Registration under section 80G and exemption under section 12A in prior years not conclusive--Rejection of application--Justified-- All India J. D. Educational Society v. Director General of Income-tax (Exemptions) (Delhi) . . . 218
S. 32 --Depreciation--Higher rate of depreciation--Equipment purchased and leased back to vendor--No evidence that transaction a colourable device--Assessee entitled to depreciation on equipment-- CIT v. Cosmo Films Ltd . (Delhi) . . . 266
S. 40A(2)(b) --Business expenditure--Disallowance--Excessive or unreasonable payments--Raw materials supplied to subsidiary company by holding company, a non-resident--Assessee furnishing proof that payment was reasonable--No material to show that payment was excessive--No part of payment could be disallowed-- CIT v. Samsung India Electronics Ltd. (Delhi) . . . 186
S. 44 --Insurance business--Computation of income--Provision for solvency margin--Deductible--Loss in Jeevan Suraksha Fund to be taken into account-- CIT v. Life Insurance Corporation of India Ltd . (Bom) . . . 212
S. 44BB --Non-resident--Exploration and production of mineral oils in India--Services connected with--Special provisions--Seismic data acquisition and processing--Income from services taxable under special provision--Income cannot be split up--CBDT Instruction No. 1862 dated 22-10-1970-- Western Geco International Limited , In re (AAR) . . . 161
----Non-resident--Presumptive tax--Mineral oil--Reimbursement of mobilization charges outside India--Includible in gross income--Reimbursement of expenses--Includible in gross revenue-- CIT v. Atwood Oceanics Pacific Ltd. (Uttarakhand) . . . 156
----Non-resident--Presumptive tax--Mineral oil--Revenue received from charter of rig--Amount attributable to transportation of rigs outside territorial waters of India--Includible in gross income-- CIT v. Sundowner Offshore International (Burmuda) Ltd. (Uttarakhand) . . . 147
----Non-resident--Presumptive tax--Mineral oil--Scope of section 44BB--Mobilization/demobilization charges in respect of voyage in Indian territorial waters or outside--Part of gross revenue-- CIT v. R and B Falcon Drilling Co. (Uttarakhand) . . . 152
S. 80HHC --Export--Tea--Blending of tea--Amounts to processing--Export of blended tea--Assessee entitled to special deduction under section 80HHC-- Stewart Holl (India) Ltd. v. CIT (Cal) . . . 194
S. 142 --Search and seizure--Block assessment--Special audit--Appointment of special auditor under section 142(2A)--Permissible-- Madhurapuri Chits and Finance Co. P. Ltd . v. CIT (Ker) . . . 202
----Search and seizure--Block assessment--Special audit--Report of special auditor --Correctness of undisclosed income not considered--Matter remanded-- Madhurapuri Chits and Finance Co. P. Ltd . v. CIT (Ker) . . . 202
S. 145 --Accounting--Rejection of accounts--Hybrid system--Assessee publishing magazines showing receipts from subscriptions and advertisements on cash basis and income from sales of magazines on accrual basis--System accepted by Revenue--Change in accounting system to comply with provisions of company law--Not relevant--Assessee could continue hybrid system for income-tax purposes-- Cyber Media (India) Ltd. v. CIT (Delhi) . . . 177
Chap. XIV-B --Search and seizure--Block assessment--Undisclosed income--Addition only on basis of material discovered during search--Estimate of excess of cost of construction of property--Not valid--Finding that amount shown in particular entry erroneous--Amount not assessable as undisclosed income-- CIT v. Smt. C. Sabira (Ker) . . . 226
S. 158BB --Search and seizure--Block assessment--Effect of section 158BB --Depreciation can be claimed-- CIT v. Smt. C. Sabira (Ker) . . . 226
S. 158BC --Search and seizure--Block assessment--Assessment of third person--Action under section 158BD must be taken before completion of assessment of person searched--Satisfaction under section 158BD recorded after completion of block assessment under section 158BC--Proceedings against third person not valid-- CIT v. Calcutta Knitwears (P&H) . . . 239
----Search and seizure--Block assessment--Special audit--Appointment of special auditor under section 142(2A)--Permissible-- Madhurapuri Chits and Finance Co. P. Ltd . v. CIT (Ker) . . . 202
----Search and seizure--Block assessment--Special audit--Report of special auditor--Correctness of undisclosed income not considered--Matter remanded-- Madhurapuri Chits and Finance Co. P. Ltd . v. CIT (Ker) . . . 202
S. 158BD --Search and seizure--Block assessment--Assessment of third person--Action under section 158BD must be taken before completion of assessment of person searched--Satisfaction under section 158BD recorded after completion of block assessment under section 158BC--Proceedings against third person not valid-- CIT v. Calcutta Knitwears (P&H) . . . 239
S. 271(1)(c) --Penalty--Concealment of income and furnishing inaccurate particulars--Assessee claiming loss on receipt of debit notes twice--Explanation not bona fide--Assessee deliberately furnished inaccurate particulars of income--Penalty to be imposed-- Sethi Industries Corporation v. Deputy CIT (P&H) . . . 243
S. 271FA --Penalty--Failure to furnish annual information return regarding financial transactions--First notice issued on 17-12-2008 and second notice issued on 11-9-2009 --Return filed on 12-10-2009--Assessee could not plead ignorance of law after first notice--Penalty leviable for period commencing from date of first notice-- Patan Nagrik Sahakari Bank Ltd . v. Director of Income-tax (CIB) (Guj) . . . 167
S. 285BA --Penalty--Failure to furnish annual information return regarding financial transactions--First notice issued on 17-12-2008 and second notice issued on 11-9-2009 --Return filed on 12-10-2009--Assessee could not plead ignorance of law after first notice--Penalty leviable for period commencing from date of first notice-- Patan Nagrik Sahakari Bank Ltd . v. Director of Income-tax (CIB) (Guj) . . . 167
Sch. I, r. 2 --Insurance business--Computation of income--Provision for solvency margin--Deductible--Loss in Jeevan Suraksha Fund to be taken into account-- CIT v. Life Insurance Corporation of India Ltd . (Bom) . . . 212
CA.RAJU SHAH
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