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Wednesday, September 26, 2012

ITR VOL 348 PART 1 AND ITR (TRIB) VOL 19 PART 1


 

INCOME TAX REPORTS (ITR)

INCOME TAX REPORTS

Volume 348 Part 1 (Issue dated 1-10-2012)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

SUPREME COURT

Appeal to Supreme Court --Special leave petition--Government Department--Delay in filing--Condonation of delay--Principles governing-- Office of the Chief Post Master General v . Living Media India Ltd. . . . 7

HIGH COURTS

Appeal --Question of law can be raised at any stage in income-tax proceedings--Income-tax Act, 1961-- CIT v. St. Mary’s Malankara Seminary (Ker) . . . 69

Capital gains --Transfer of self-generated assets--Law applicable--Effect of amendment of section 55(2) w. e. f. 1-4-2002--Amendment not retrospective--Gains from transfer of trade mark and brand name prior to 1-4-2002--Not assessable as capital gains--Income-tax Act, 1961, ss. 45, 48, 55(2)-- CIT v. Fernhill Laboratories and Industrial Establishment (Bom) . . . 1

Exemption --Deduction--Newly established undertaking in free trade zone--Deduction to be given at the stage of computing profits and gains of business--Brought forward unabsorbed depreciation and losses of unit cannot be set off against current profits of unit--Income-tax Act, 1961, s. 10A-- CIT v . Black and Veatch Consulting Pvt. Ltd . 
(Bom) . . . 72

----Educational institution--Meaning of--Seminary imparting religious education--Educational institution within the meaning of section 10(23C)(iiiad)--Income-tax Act, 1961, s. 10(23C)(iiiad)-- CIT v. St. Mary’s Malankara Seminary (Ker) . . . 69

Interpretation of taxing statutes --Retrospective effect of provision-- CIT v. Fernhill Laboratories and Industrial Establishment (Bom) . . . 1

Search and seizure --Block assessment--Notice under section 158BC--Notice calling for return within fifteen days--Notice not valid--Assessee requesting further time and submitting return would not make notice valid--Notice void ab initio and consequent block assessment invalid--Section 292B not applicable--Income-tax Act, 1961, Chap. XIV-B-- CIT v . Micro Labs Ltd . (Karn) . . . 75

----Block assessment--Refund amount computed adjusted against amounts paid under VDIS--Taxes not paid voluntarily--Proviso to section 240 not applicable--Assessee entitled to refund--Income-tax Act, 1961, s. 240-- CIT v . Micro Labs Ltd. 
(Karn) . . . 75

AUTHORITY FOR ADVANCE RULINGS

Non-resident --Provision of inspection, verification, testing and certification services--Is technical services--Payment therefor taxable in India--Tax deductible at source--Non-resident to file return in India--Income-tax Act, 1961, ss. 9(1)(vii), 139, 195-- XYZ Ltd ., In re . . . 20

----Secondment of employees to Indian subsidiary--Seconded employees remaining employees of holding company--Payment to non-resident for their services not a case of reimbursement--Indian company liable to withhold tax at source--Payroll processing charge--Details insufficient to render ruling as to nature of payment--Income-tax Act, 1961, s. 195--Double Taxation Avoidance Agreement between India and U. S. A., art. 12-- Target Corporation India Pvt. Ltd ., In re . . . 61

----Taxability in India--Indian company formed as wholly owned subsidiary of non-resident to provide services to overseas entities--Employees of holding company seconded to Indian company to oversee operations--Employees remaining employees of holding company--Payment by Indian company to holding company compensation for managerial services--Not fees for technical services--Taxable as arising out of service permanent establishment--Tax deductible at source--Income-tax Act, 1961, ss. 9(1)(vii), 195--Double Taxation Avoidance Agreement between India and the United Kingdom, arts. 5(2)(k), 13(4)--Double Taxation Avoidance Agreement between India and Canada, arts. 5(2)(1), 12(4)-- Centrica India Offshore Private Ltd ., In re . . . 45

----Technical services--Definition--Provision of inspection, verification, testing and certification services--Is technical service--Payments in connection with costs incurred and recovery of administrative cost also fees for technical services--No technical knowledge made available--Outside scope of technical service where definition of Double Taxation Avoidance Agreement contains requirement of making available--Protocol to DTAA containing most favoured nation clause--Requirement of making available technical knowledge applicable--Where no specific provision governing taxability of fees for technical services in DTAA--Payments not chargeable--Where definition in DTAA identical with that in Act, payments chargeable--Returns to be filed--Income-tax Act, 1961, ss. 9(1)(vii), 139, 195-- XYZ, In re . . . 31

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))

Volume 19 : Part 1 (Issue dated : 1-10-2012)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Appeal to Appellate Tribunal --Constitution of Special Bench--Reference of one question by Division Bench--On request by assessee, entire appeal placed for disposal by Special Bench--Permissible--Income-tax Act, 1961, s. 255-- Sardar Sarovar Narmada Nigam Ltd. v. Assistant CIT [SB] (Ahmedabad) . . . 133

Appeal to Commissioner (Appeals) --Power to admit new claim--Transfer Pricing Officer determining arm’s length price on basis of comparables, including four selected by assessee--Assessee entitled to claim in appeal that four companies were not comparable--Assessee engaged in marketing support services--Companies carrying out turnkey engineering projects--Not comparable--To be excluded--Income-tax Act, 1961, s. 92CA-- Deputy CIT v. MCI Com India P. Ltd. (Delhi) . . . 42

Business --Commencement of business--Company set up to undertake execution of Sardar Sarovar Project and promote schemes for irrigation and water supply in State for utilisation of water from Sardar Sarovar--Project partly completed and water supplied through Narmada main canal--Supply of water contributes setting up of business--That entire stretch of canal up to desired destination not completed--That revenue not generated--Not relevant-- Sardar Sarovar Narmada Nigam Ltd. v. Assistant CIT [SB] (Ahmedabad) . . . 133

----Retail trade--Computation of income--Income on sales effected more than provided under section 44AF--Estimation of income--Justified--Income-tax Act, 1961, s. 44AF--Shanthi Fire Works v. ITO (Hyderabad) . . . 27

Business expenditure --Disallowance--Payments subject to tax deduction at source--Provision applies only to sums “payable†as on date of balance-sheet in question--Not to sums already paid during year without deduction of tax at source--Matter remanded--Income-tax Act, 1961, s. 40(a)(ia)-- S. S. Warad v. Additional CIT (Bangalore) . . . 35

----Expenditure wholly and exclusively incurred for business--Shares in assessee-company held by two family groups--Disputes resolved by family settlement--Expenditure on cancellation and purchase back of shares of minority shareholding group in terms of settlement--Facts showing disputes between shareholders had affected day-to-day business of assessee and settlement helped run business effectively enabling further growth--Expenditure deductible--Income-tax Act, 1961, s. 37-- Chemosyn Limited v.Assistant CIT (Mumbai) . . . 6

----Fines and penalties--Payment for delay in filing various statutory returns with Registrar of Companies--Late filing fees not penal in nature--Allowable--Income-tax Act, 1961-- ITO v. Virtue Financial Service P. Ltd. (Delhi) . . . 57

----Interest on borrowed capital--Assessee, a film actor--Borrowings used to maintain life style--Disallowance on ground advances used for personal purposes--Not justified--Income-tax Act, 1961, s. 36(1)(iii)-- Jackie Shroff v. ITO (Mumbai) . . . 83

----Professional charges--Assessee explaining circumstances of expenditure--Not to be disallowed--Income-tax Act, 1961-- ITO v. Virtue Financial Service P. Ltd. (Delhi) . . . 57

Business income --Method of accounting--Assessee, a film actor, following cash system of accounting--Advances received from producers offered to tax in year in which film released--Not proper--Claim that out of advances certain sums offered to tax in earlier years--Matter remanded for verification of claim--Income-tax Act, 1961, s. 145-- Jackie Shroff v. ITO (Mumbai) . . . 83

Capital or revenue expenditure --General principles--Expenditure incurred on replacing old worn-out mechanical yarn clearers with electronic yarn clearers--No new advantage to assessee--Is revenue expenditure--Income-tax Act, 1961-- Prabhu Spinning Mills P. Ltd. v. Deputy CIT (Chennai) . . . 106

Cash credits --Burden of proof--Sum paid as school fees claimed to have been paid by mother-in-law of assessee--Confirmation letter from mother-in-law not mentioning amount paid, details of bank account or mode of payment--No other corroborative evidence--Copy of bank statements from amount transmitted not filed--Sum rightly treated as income of assessee--Income-tax Act, 1961, s. 68-- Jackie Shroff v. ITO (Mumbai) . . . 83

Charitable purpose --Registration of trusts--Cancellation--Amendment of objects of society without informing Department--Original registration does not hold good--Registering Authority to decide after assessee submits amendments--Appeal not maintainable--Income-tax Act, 1961, ss. 12A, 253-- The Board of Control for Cricket in Indiav. ITO (Mumbai) . . . 91

Double taxation avoidance --Non-resident--Permanent establishment--Exact period of continuous activities in India to be ascertained--Matter remanded--Income-tax Act, 1961--Double Taxation Avoidance Agreement between India and Mauritius, art. 5(2)(i)-- GIL Mauritius Holdings Ltd. v. Assistant Director of Income-tax (International Taxation) (Delhi) . . . 63

Export --Special deduction--Appeal to Appellate Tribunal--Indirect cost computed in original assessment--Tribunal directing Assessing Officer to recompute deduction with respect to income from DEPB in light of amended provisions--Assessing Officer not entitled to recompute indirect cost of trading goods already computed in original assessment--Deduction under section 80HHC allowable in respect of incentives even if there was loss from export business--Deduction under section 80HHE not claimed in return or at time of appeal--Cannot be claimed at time of fresh assessment pursuant to remand by Tribunal--Income-tax Act, 1961, ss. 80HHC, 80HHE-- Computree Infotech P. Ltd. v. ITO (Mumbai) . . . 126

Income --Interest--Interest-free advances given by assessee--Finding that no expenditure claimed on this account--Notional interest cannot be added--Income-tax Act, 1961--ITO v. Virtue Financial Service P. Ltd. (Delhi) . . . 57

----Real income--Capital gains--Assessee owning two plots of land--Transfer of development rights in respect of one plot against consideration in form of money and construction on other plot free of cost--Both plots transferred to third party before construction under tripartite agreement--Consideration received in form of money alone to be taken into account for computing capital gains--Consideration in form of constructed area in terms of development agreement did not actually accrue to assessee--Market value of constructed area not to be taken into account for computing capital gains--Consideration from transfer of plots under tripartite agreement offered to tax in full in later assessment year--No loss to Revenue--Income-tax Act, 1961, s. 45-- Chemosyn Limited v. Assistant CIT (Mumbai) . . . 6

Income from undisclosed sources --Addition on account of unexplained purchases--Assessee giving plausible explanation--Addition to be deleted--Income-tax Act, 1961--Shanthi Fire Works v. ITO (Hyderabad) . . . 27

Industrial undertaking --Special deduction under section 80-IA--Computation--Profit on captive consumption of electricity--To be taken into account for computation of profits--Income-tax Act, 1961, s. 80-IA-- Prabhu Spinning Mills P. Ltd. v. Deputy CIT (Chennai) . . . 106

Penalty --Concealment of income--Additional income shown in revised return--No concealment detected--Penalty cannot be imposed--Income-tax Act, 1961, ss. 143(2), 271(1)(c)-- Assistant CIT v. Ashok Raj Nath (Delhi) . . . 70

Res judicata --Question whether business commenced in year in question--To be considered on facts for year in question--Will not amount to review of order of Tribunal for earlier years-- Sardar Sarovar Narmada Nigam Ltd. v. Assistant CIT [SB] (Ahmedabad) . . . 133

Return of income --Validity--No provision in Act or Rules making electronic filing of return mandatory--Direction by CBDT--Effect--Return filed manually before due date cannot be ignored--Denial of deduction under section 80-IC on ground electronic return filed only after due date--Not permissible--Income-tax Act, 1961, ss. 80AC, 80-IC, 139(1)-- Gemini Communication Ltd. v. Assistant CIT (Chennai) . . . 1

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between India and Mauritius :

Art. 5(2)(i) --Double taxation avoidance--Non-resident--Permanent establishment--Exact period of continuous activities in India to be ascertained--Matter remanded-- GIL Mauritius Holdings Ltd. v. Assistant Director of Income-tax (International Taxation) (Delhi) . . . 63

Income-tax Act, 1961 :

S. 12A --Charitable purpose--Registration of trusts--Cancellation--Amendment of objects of society without informing Department--Original registration does not hold good--Registering Authority to decide after assessee submits amendments--Appeal not maintainable-- The Board of Control for Cricket in India v. ITO (Mumbai) . . . 91

S. 36(1)(iii) --Business expenditure--Interest on borrowed capital--Assessee, a film actor--Borrowings used to maintain life style--Disallowance on ground advances used for personal purposes--Not justified-- Jackie Shroff v. ITO (Mumbai) . . . 83

S. 37 --Business expenditure--Expenditure wholly and exclusively incurred for business--Shares in assessee-company held by two family groups--Disputes resolved by family settlement--Expenditure on cancellation and purchase back of shares of minority shareholding group in terms of settlement--Facts showing disputes between shareholders had affected day-to-day business of assessee and settlement helped run business effectively enabling further growth--Expenditure deductible-- Chemosyn Limited v. Assistant CIT(Mumbai) . . . 6

S. 40(a)(ia) --Business expenditure--Disallowance--Payments subject to tax deduction at source--Provision applies only to sums “payable†as on date of balance-sheet in question--Not to sums already paid during year without deduction of tax at source--Matter remanded-- S. S. Warad v. Additional CIT (Bangalore) . . . 35

S. 44AF --Business--Retail trade--Computation of income--Income on sales effected more than provided under section 44AF--Estimation of income--Justified-- Shanthi Fire Works v. ITO (Hyderabad). . .27

S. 45 --Income--Real income--Capital gains--Assessee owning two plots of land--Transfer of development rights in respect of one plot against consideration in form of money and construction on other plot free of cost--Both plots transferred to third party before construction under tripartite agreement--Consideration received in form of money alone to be taken into account for computing capital gains--Consideration in form of constructed area in terms of development agreement did not actually accrue to assessee--Market value of constructed area not to be taken into account for computing capital gains--Consideration from transfer of plots under tripartite agreement offered to tax in full in later assessment year--No loss to Revenue-- Chemosyn Limited v. Assistant CIT (Mumbai) . . . 6

S. 68 --Cash credits--Burden of proof--Sum paid as school fees claimed to have been paid by mother-in-law of assessee--Confirmation letter from mother-in-law not mentioning amount paid, details of bank account or mode of payment--No other corroborative evidence--Copy of bank statements from amount transmitted not filed--Sum rightly treated as income of assessee-- Jackie Shroff v. ITO (Mumbai) . . . 83

S. 80AC --Return of income--Validity--No provision in Act or Rules making electronic filing of return mandatory--Direction by CBDT--Effect--Return filed manually before due date cannot be ignored--Denial of deduction under section 80-IC on ground electronic return filed only after due date--Not permissible-- Gemini Communication Ltd. v.Assistant CIT (Chennai) . . . 1

S. 80HHC --Export--Special deduction--Appeal to Appellate Tribunal--Indirect cost computed in original assessment--Tribunal directing Assessing Officer to recompute deduction with respect to income from DEPB in light of amended provisions--Assessing Officer not entitled to recompute indirect cost of trading goods already computed in original assessment--Deduction under section 80HHC allowable in respect of incentives even if there was loss from export business--Deduction under section 80HHE not claimed in return or at time of appeal--Cannot be claimed at time of fresh assessment pursuant to remand by Tribunal-- Computree Infotech P. Ltd. v. ITO (Mumbai) . . . 126

S. 80HHE --Export--Special deduction--Appeal to Appellate Tribunal--Indirect cost computed in original assessment--Tribunal directing Assessing Officer to recompute deduction with respect to income from DEPB in light of amended provisions--Assessing Officer not entitled to recompute indirect cost of trading goods already computed in original assessment--Deduction under section 80HHC allowable in respect of incentives even if there was loss from export business--Deduction under section 80HHE not claimed in return or at time of appeal--Cannot be claimed at time of fresh assessment pursuant to remand by Tribunal-- Computree Infotech P. Ltd. v. ITO (Mumbai) . . . 126

S. 80-IA --Industrial undertaking--Special deduction under section 80-IA--Computation--Profit on captive consumption of electricity--To be taken into account for computation of profits-- Prabhu Spinning Mills P. Ltd. v. Deputy CIT (Chennai) . . . 106

S. 80-IC --Return of income--Validity--No provision in Act or Rules making electronic filing of return mandatory--Direction by CBDT--Effect--Return filed manually before due date cannot be ignored--Denial of deduction under section 80-IC on ground electronic return filed only after due date--Not permissible-- Gemini Communication Ltd. v.Assistant CIT (Chennai) . . . 1

S. 92CA --Appeal to Commissioner (Appeals)--Power to admit new claim--Transfer Pricing Officer determining arm’s length price on basis of comparables, including four selected by assessee--Assessee entitled to claim in appeal that four companies were not comparable--Assessee engaged in marketing support services--Companies carrying out turnkey engineering projects--Not comparable--To be excluded-- Deputy CIT v. MCI Com India P. Ltd. (Delhi) . . . 42

S. 139(1) --Return of income--Validity--No provision in Act or Rules making electronic filing of return mandatory--Direction by CBDT--Effect--Return filed manually before due date cannot be ignored--Denial of deduction under section 80-IC on ground electronic return filed only after due date--Not permissible-- Gemini Communication Ltd. v.Assistant CIT (Chennai) . . . 1

S. 143(2) --Penalty--Concealment of income--Additional income shown in revised return--No concealment detected--Penalty cannot be imposed-- Assistant CIT v. Ashok Raj Nath (Delhi) . . . 70

S. 145 --Business income--Method of accounting--Assessee, a film actor, following cash system of accounting--Advances received from producers offered to tax in year in which film released--Not proper--Claim that out of advances certain sums offered to tax in earlier years--Matter remanded for verification of claim-- Jackie Shroff v. ITO(Mumbai) . . . 83

S. 253 --Charitable purpose--Registration of trusts--Cancellation--Amendment of objects of society without informing Department--Original registration does not hold good--Registering Authority to decide after assessee submits amendments--Appeal not maintainable-- The Board of Control for Cricket in India v. ITO (Mumbai) . . . 91

S. 255 --Appeal to Appellate Tribunal--Constitution of Special Bench--Reference of one question by Division Bench--On request by assessee, entire appeal placed for disposal by Special Bench--Permissible Sardar Sarovar Narmada Nigam Ltd. v. Assistant CIT [SB] (Ahmedabad) . . . 133

S. 271(1)(c) --Penalty--Concealment of income--Additional income shown in revised return--No concealment detected--Penalty cannot be imposed-- Assistant CIT v. Ashok Raj Nath (Delhi) . . . 70



Section 271(1)(c) Penalty: Supreme Court Takes Liberal View

---------- Forwarded message ----------
From: editor@itatonline.org <itatonline.org@gmail.com>
Date: Wed, Sep 26, 2012 at 3:49 PM
Subject: Message from EGroup of SolapurCAs S. 271(1)(c) Penalty: Supreme Court Takes Liberal View
To: editor@itatonline.org


 

Dear Subscriber,

 

The following important judgement is available for download at itatonline.org.

Price Waterhouse Coopers Pvt. Ltd vs. CIT (Supreme Court)


No s. 271(1)(c) penalty for a "bona fide/ inadvertent/ human error"

 

The assessee filed a ROI together with the Tax Audit Report. In the Tax Audit Report, it was disclosed that an amount of Rs. 23 lakhs towards provision for gratuity was not allowable u/s 40A(7). However, in the computation of income, the said amount was not disallowed. The AO also overlooked the item and omitted to make a disallowance. Subsequently, he reopened the assessment u/s 147, disallowed the expenditure and levied penalty u/s 271(1)(c). The assessee explained that the omission to make a disallowance had occurred because it had a separate accounts department and there was "some confusion" and that the return was prepared by a non-CA and was signed a director who proceeded on the basis that the return was correctly drawn up. The CIT (A), Tribunal and High Court affirmed the levy of penalty on the ground that since the assessee was a well known and reputed Chartered Accountant firm and a tax consultant, it was not expected to make such a mistake and that there had been a failure to discharge the strict liability to furnish true and correct particulars of income. On appeal by the assessee to the Supreme Court, HELD reversing all the lower authorities:


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CBDT Notification Regarding "Certificate of Tax Residency" For DTAA



Section 147 "Change of Opinion": Full Bench Reverses Full Bench Law

From: editor@itatonline.org <itatonline.org@gmail.com>
Date: Tue, Sep 25, 2012 at 12:32 PM
Subject: Message from EGroup of SolapurCAs S. 147 "Change of Opinion": Full Bench Reverses Full Bench Law
To: editor@itatonline.org


 

Dear Subscriber,

 

The following important judgement is available for download at itatonline.org.

CIT vs. Usha International Ltd (Delhi High Court – Full Bench)

S. 147: There is no "change of opinion" if AO does not specifically apply his mind

 

The Full Bench was constituted to consider the meaning of the expression "change of opinion" for purposes of s. 147 and whether, in the light of Kelvinator 256 ITR 1 (Del FB), as approved in 320 ITR 521 (SC), in a case where the assessee has furnished full and true particulars at the time of original assessment with reference to the income alleged to have escaped assessment, the AO, even within 4 years from the end of the AY, could be said to have formed an opinion and to have no jurisdiction to reopen the assessment even though he had not raised any query with respect to the issue. HELD by the Full Bench:


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Friday, September 21, 2012

Section 80-IB(10)(d) + Diversion By Overrding Title + Speculative Transaction

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From: editor@itatonline.org <itatonline.org@gmail.com>
Date: Thu, Sep 20, 2012 at 10:34 AM
Subject: Message from EGroup of SolapurCAs S. 80-IB(10)(d) + Diversion By Overrding Title + Speculative Transaction
To: editor@itatonline.org


 

Dear Subscriber,

 

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


 

ITO vs. Everest Home Construction (ITAT Mumbai)
S. 80-IB(10)(d) cap on commercial area inserted w.e.f. AY 2005-06 applies to projects approved earlier

Though the assessee's project, when it was commenced in the year 2003, was in compliance with s. 80-IB(10) as it then stood, the law prevailing in the year of completion of the project has to be seen. As the Project breached the ceiling of maximum commercial area imposed by s. 80-IB(10)(d) inserted w.e.f. 1.4.2005 (lesser of 2000 sq. ft or 5% of aggregate BU area), the assessee is not eligible for s. 80-IB(10) relief (Saroj Sales Corp vs. ITO 115 TTJ Mum 485 not followed; Brahma Associates 333 ITR 289 (Bom) & Reliance Jute 120 ITR 921 (SC) referred)

Shroff Eye Centre vs. ACIT (ITAT Delhi)
Concept of "diversion of income by overriding title" explained

As there was an absolute contractual obligation imposed on the continuing firm/partners by the partnership deed to pay an amount of 2% of the gross receipts subject to maximum of 3 lacs pa to the legal heir of the deceased partner, it was a first charge on the receipts of the continuing firm/partners and constituted a diversion of income by overriding title

ACIT vs. Arnav Akshay Mehta (ITAT Mumbai)
S. 43(5)(d): Notification treating MCX as "recognised stock exchange" on 22.5.2009 to be treated as retrospective and applying since 1.4.2006

Proviso to s. 43(5)(d) inserted w.e.f. 1.4.2006 provides that a derivative transaction on a recognized stock exchange shall not be a "speculative transaction". MCX Stock Exchange was notified as a recognized stock exchange on 22.5.2009. Though the recognition came later, MCX has to be treated as a recognized stock exchange w.e.f. 1.4.2006 because the provisions providing for recognition are purely procedural and will have retrospective effect.

DCIT vs. Mitchell Drilling International Pty. Ltd (ITAT Delhi)

Service tax is not part of "Gross Receipts" for purposes of s. 44BB

S. 44BB is a special provision, treating 10% of the aggregate amount specified in sub-s. (2) of s. 44BB as deemed profits and gains of the non-resident. The amount referred in sub-s. (2) of s. 44BB are the amounts (a) paid to the assessee (whether in or out of India) on account of the provision of services and facilities in connection with, or supply of plant and machinery on higher used, or to be used, in the prospecting for, or extraction or production of, mineral oils in India … etc. Service-tax is a statutory liability like custom duty and reimbursement of custom duty & service-tax paid by the assessee cannot form part of amount for the purpose of deemed profits u/s 44BB as oit does not involve any element of profit. Accordingly, it cannot be included in the total receipts for determining the presumptive income.

Lira Goswami vs. ACIT (ITAT Delhi)
If there is no doubt that expenditure has been incurred, disallowance is not sustainable

While computing the tax liability of an assessee the AO is obliged to compute the correct income of the assessee. Once in substance he is in agreement that the expenditure has been incurred for earning the professional income, no disallowances is sustainable in law. Nowhere the AO has doubted that the expenditure claimed as deduction has been incurred by the assessee. In alleging that the expenditure has been deducted in computing the income from other sources, the AO has ignored the fact that in the return of income, the gross amount of interest income, without any deduction, has been shown under the head "income from other sources" and the income under the head "profits and gains of business or profession" has been shown in the tax return on net basis after deducting the expenditure incurred.



Section 80-IB(10)(d): High Court Reverses Law On Commercial Area Restriction On Housing Projects


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Date: Thu, Sep 20, 2012 at 12:45 PM
Subject: Message from EGroup of SolapurCAs 80-IB(10)(d): High Court Reverses Law On Commercial Area Restriction On Housing Projects
To: editor@itatonline.org


 

Dear Subscriber,

 

The following important judgement is available for download at itatonline.org.


S. 80-IB(10)(d) ceiling on commercial area inserted w.e.f. 1.4.05 does not apply to projects approved before that date

 

The assessee's housing project was commenced pre 1.4.2005 when s. 80-IB(10) did not impose any ceiling on the commercial area that could be embedded in the project. S. 80-IB(10)(d) was inserted by the Finance (No.2) Act, 2004 to impose a ceiling on the extent of commercial area that could be contained in the housing project. The Tribunal held that as the assessee's project was completed after 1.4.2005, the question of eligibility for s. 80-IB(10) deduction had to be considered as per the law then prevailing and not at the time that the project was approved. As the commercial area exceeded the ceiling stipulated in s. 80-IB(10)(d), the claim for deduction was denied. On appeal by the assessee to the High Court, HELD reversing the Tribunal:


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S. 80-IB(10)(d) + Diversion By Overrding Title + Speculative Transaction


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Book Release: Digest Of Case Laws (Direct Taxes) 2003-2011


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From: editor@itatonline.org <itatonline.org@gmail.com>
Date: Fri, Sep 21, 2012 at 3:04 PM
Subject: Message from EGroup of SolapurCAs Book Release: Digest Of Case Laws (Direct Taxes) 2003-2011
To: editor@itatonline.org


 

Dear Subscriber,

Book Release: Digest Of Case Laws (Direct Taxes) 2003-2011


The ITAT Bar Association and the All India Federation of Tax Practitioners have released a book titled "Digest of Case Laws (Direct Taxes) 2003-2011". The salient features of the book are the following:

• Published by two prestigious non-profit professional organizations
• Complied by eminent professionals
• Captures at one place, in one volume, 10,224 cases of contemporaneous relevance
• Handpicked from 24 Repots; virtually all that is published in India on direct tax and allied laws
• Cases on the subject, delivered by different forums (SC,HC,ITAT & AAR) Act one place
• Each case is duly numbered and is digest of in brief
• At least three catch words for a quick reference
• Carries, wherever possible, the assessment year, an editorial note and the status of an SLP
• Citations highlight the respective judicial forums that delivered the decisions
• Robust case laws, section and subject indexes prepared with a high degree of precision
• Contents are accommodated in one volume by the use of the best quality paper
• Assists in research and practice of law
• "Best tool for managing the scarce resource; Time"


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Why Chidu Should Grab Vodafone's Settlement Offer & Run



Why Chidu Should Grab Vodafone’s Settlement Offer & Run

---------- Forwarded message ----------
From: editor@itatonline.org <itatonline.org@gmail.com>
Date: Fri, Sep 21, 2012 at 3:03 PM
Subject: Message from EGroup of SolapurCAs Why Chidu Should Grab Vodafone's Settlement Offer & Run
To: editor@itatonline.org


 

Dear Subscriber,

Why Chidu Should Grab Vodafone's Settlement Offer & Run

The author argues that Vodafone's offer to settle the controversy on payment of tax and waiver of interest & penalty is a god-sent opportunity for the Government to salvage the situation. It will save the Government the ignominy of the retrospective amendments being struck down in Court and also boost its image in the International community. If handled properly, even Manmohan Singh can be made to look like a real Statesman with vision and courage, adds the author


(Click Here To Read More)


Regards,


Editor,


itatonline.org

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Latest:

S. 80-IB(10)(d) + Diversion By Overrding Title + Speculative Transaction



Tuesday, September 18, 2012

ITR (TRIB) VOL 18 PART 5



 

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))

Volume 18 : Part 5 (Issue dated : 17-09-2012)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Appeal to Appellate Tribunal --Power to admit new plea--Assessing Officer bringing sum to tax as receipt for entering into negative covenant--Question whether payment taxable as normal business income--All facts before Tribunal--New plea purely legal and can be entertained--Income-tax Act, 1961, s. 28(va)-- Control and Switchgear Contractors Ltd. v. Deputy CIT (Delhi) . . . 520

----Powers of Tribunal--Notice--Refusal of notice by illiterate employee of assessee--Application to recall ex parte order passed by Tribunal--Principles of natural justice applicable--Ex parte order to be recalled--Income-tax Act, 1961, s. 254(2)-- Sudesh Pandey v. ITO (Indore) . . . 560

Capital gains --Loss on sale of shares--Not to be set off against capital gains--Income-tax Act, 1961-- Assistant CIT v. Lanco Infratech Ltd. (Hyderabad) . . . 579

Capital or revenue receipt --Assessee carrying on business in joint venture with foreign company--Foreign company incorporating new subsidiary in competition with assessee--Settlement entered into by foreign company to settle all legal disputes between parties--Payment under settlement--Not a payment for loss of source of income or for entering into negative covenants--No transfer of any right--Receipt is business income--Income-tax Act, 1961, ss. 28, 54EC-- Control and Switchgear Contractors Ltd. v. Deputy CIT (Delhi) . . . 520

Cash credit --Shares issued at premium and bought back by directors at discount--Finding that Assessing Officer failed to make enquiry about details of transactions--Matter remanded-- Income-tax Act, 1961, s. 68-- Righill Electricals P. Ltd. v. Assistant CIT (Indore) . . . 659

Deduction of tax at source --Failure to deduct--Treatment as assessee-in-default under section 201--Contention that recipient paid tax on income embedded in these payments--Assessing Officer to verify--Matter remanded--Income-tax Act, 1961, s. 201(1)-- Ramakrishna Vedantha Math v. ITO (Kolkata) . . . 603

Depreciation --Windmill--Higher rate of depreciation--Option exercised by assessee before due date for filing return by claiming higher rate of depreciation in return with audit report--Commissioner (Appeals) justified in directing Assessing Officer to allow higher depreciation--Income-tax Act, 1961, s. 32 --Income-tax Rules, 1962, r. 5, Appx I-- Assistant CIT v. P. ORR and Sons P. Ltd. (Chennai) . . . 565

Dividend --Deemed dividend--Share application money--No evidence to show that entries recorded in books of account false or without basis--Cannot be treated as loans or advances--Not taxable as deemed dividend--Income-tax Act, 1961, s. 2(22)(e)-- ITO v. Direct Information P. Ltd. (Mumbai) . . . 562

Exemption --Dividend--Claim to exemption on dividend received from investment in group company--Disallowance of interest paid to group company on loan--Not to be disallowed--Income-tax Act, 1961, s. 14A-- Assistant CIT v. Lanco Infratech Ltd. (Hyderabad) . . . 579

Housing project --Special deduction under section 80-IB--Agreement between owner of land and assessee--Assessee responsible for developing and building on property--Completion certificate of building given by local authority--Assessee entitled to special deduction under section 80-IB--Some residential units exceeding 1500 square feet--Proportionate deduction to be given--Income-tax Act, 1961, s. 80-IB-- Sanghvi and Doshi Enterprise v. ITO (Chennai) . . . 608

----Special deduction under section 80-IB--Conditions precedent--Undertaking should develop land and build houses--Completion certificate from local authority--Transfer of share in undivided land to prospective buyers of flats--Not an evidence that assessee was a works contractor--Corporation of Chennai is a local authority for purposes of section 80-IB--High profits from project--Not a ground for denying special deduction--Assessee entitled to special deduction under section 80-IB--Income-tax Act, 1961, s. 80-IB-- Deputy CIT v. Arihant Foundations and Housing Ltd. (Chennai) . . . 588

Income --Computation of income--Disallowance of expenditure relating to exempt income--Dividend--Expenditure on application for shares--Disallowance of part of expenditure--Justified--Income-tax Act, 1961, s. 14A-- Deputy CIT v. Arihant Foundations and Housing Ltd. (Chennai) . . . 588

Industrial undertaking --Special deduction--Direction to consider profitability of undertaking after opportunity to assessee of being heard--Matter remanded--Income-tax Act, 1961, s. 80-IA-- Assistant CIT v. Lanco Infratech Ltd. (Hyderabad) . . . 579

----Special deduction--Small scale industry--Investment in fixed assets in plant and machinery exceeding prescribed limit--Not entitled to deduction under section 80-IB--Income-tax Act, 1961, s. 80-IB--Industries (Development and Regulations) Act, 1951, s. 11B-- Sawaria Pipes P. Ltd. v. Assistant CIT (Hyderabad) . . . 573

Precedent --Tribunal must follow law laid down by High Court of different state if there is no contrary decision of any other High Court-- Sanghvi and Doshi Enterprise v. ITO (Chennai) . . . 608

Reassessment --Notice--Statement of director that shares issued at premium and bought back at discount--Reason to believe that income has escaped assessment--Reassessment valid--Income-tax Act, 1961, s. 147-- Righill Electricals P. Ltd. v. Assistant CIT (Indore) . . . 659

----Reason to believe--Original assessment made under section 143(1)--Reassessment permissible--Income-tax Act, 1961, ss. 143(1), (3), 147-- Control and Switchgear Contractors Ltd. v. Deputy CIT (Delhi) . . . 520

Return of income --Delay in filing return--Interest--Not in nature of penalty but to compensate revenue for non-deposit of tax by due date--Income-tax Act, 1961, s. 234A-- Epari Sadasiva Rao (HUF) v. Assistant CIT (Cuttack) . . . 569

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 2(22)(e) --Dividend--Deemed dividend--Share application money--No evidence to show that entries recorded in books of account false or without basis--Cannot be treated as loans or advances--Not taxable as deemed dividend-- ITO v. Direct Information P. Ltd. (Mumbai) . . . 562

S. 14A --Exemption--Dividend--Claim to exemption on dividend received from investment in group company--Disallowance of interest paid to group company on loan--Not to be disallowed-- Assistant CIT v. Lanco Infratech Ltd. (Hyderabad) . . . 579

----Income--Computation of income--Disallowance of expenditure relating to exempt income--Dividend--Expenditure on application for shares--Disallowance of part of expenditure--Justified-- Deputy CIT v. Arihant Foundations and Housing Ltd. (Chennai) . . . 588

S. 28 --Capital or revenue receipt--Assessee carrying on business in joint venture with foreign company--Foreign company incorporating new subsidiary in competition with assessee--Settlement entered into by foreign company to settle all legal disputes between parties--Payment under settlement--Not a payment for loss of source of income or for entering into negative covenants--No transfer of any right--Receipt is business income-- Control and Switchgear Contractors Ltd. v. Deputy CIT (Delhi) . . . 520

S. 28(va) --Appeal to Appellate Tribunal--Power to admit new plea--Assessing Officer bringing sum to tax as receipt for entering into negative covenant--Question whether payment taxable as normal business income--All facts before Tribunal--New plea purely legal and can be entertained-- Control and Switchgear Contractors Ltd. v. Deputy CIT (Delhi) . . . 520

S. 32 --Depreciation--Windmill--Higher rate of depreciation--Option exercised by assessee before due date for filing return by claiming higher rate of depreciation in return with audit report--Commissioner (Appeals) justified in directing Assessing Officer to allow higher depreciation-- Assistant CIT v. P. ORR and Sons P. Ltd. (Chennai) . . . 565

S. 54EC --Capital or revenue receipt--Assessee carrying on business in joint venture with foreign company--Foreign company incorporating new subsidiary in competition with assessee--Settlement entered into by foreign company to settle all legal disputes between parties--Payment under settlement--Not a payment for loss of source of income or for entering into negative covenants--No transfer of any right--Receipt is business income-- Control and Switchgear Contractors Ltd. v. Deputy CIT (Delhi) . . . 520

S. 68 --Cash credit--Shares issued at premium and bought back by directors at discount--Finding that Assessing Officer failed to make enquiry about details of transactions--Matter remanded-- Righill Electricals P. Ltd. v. Assistant CIT (Indore) . . . 659

S. 80-IA --Industrial undertaking--Special deduction--Direction to consider profitability of undertaking after opportunity to assessee of being heard--Matter remanded-- Assistant CIT v. Lanco Infratech Ltd. (Hyderabad) . . . 579

S. 80-IB --Housing project--Special deduction under section 80-IB--Agreement between owner of land and assessee--Assessee responsible for developing and building on property--Completion certificate of building given by local authority--Assessee entitled to special deduction under section 80-IB--Some residential units exceeding 1500 square feet--Proportionate deduction to be given-- Sanghvi and Doshi Enterprise v. ITO (Chennai) . . . 608

----Housing project--Special deduction under section 80-IB--Conditions precedent--Undertaking should develop land and build houses--Completion certificate from local authority--Transfer of share in undivided land to prospective buyers of flats--Not an evidence that assessee was a works contractor--Corporation of Chennai is a local authority for purposes of section 80-IB--High profits from project--Not a ground for denying special deduction--Assessee entitled to special deduction under section 80-IB-- Deputy CIT v. Arihant Foundations and Housing Ltd. (Chennai) . . . 588

----Industrial undertaking--Special deduction--Small scale industry--Investment in fixed assets in plant and machinery exceeding prescribed limit--Not entitled to deduction under section 80-IB-- Sawaria Pipes P. Ltd. v. Assistant CIT (Hyderabad) . . . 573

S. 143(1), (3) --Reassessment--Reason to believe--Original assessment made under section 143(1)--Reassessment permissible-- Control and Switchgear Contractors Ltd. v. Deputy CIT (Delhi) . . . 520

S. 147 --Reassessment--Notice--Statement of director that shares issued at premium and bought back at discount--Reason to believe that income has escaped assessment--Reassessment--Valid-- Righill Electricals P. Ltd. v. Assistant CIT (Indore) . . . 659

----Reassessment--Reason to believe--Original assessment made under section 143(1)--Reassessment permissible-- Control and Switchgear Contractors Ltd. v. Deputy CIT (Delhi) . . . 520

S. 201(1) --Deduction of tax at source--Failure to deduct--Treatment as assessee-in-default under section 201--Contention that recipient paid tax on income embedded in these payments--Assessing Officer to verify--Matter remanded-- Ramakrishna Vedantha Math v. ITO (Kolkata) . . . 603

S. 234A --Return of income--Delay in filing return--Interest--Not in nature of penalty but to compensate revenue for non-deposit of tax by due date-- Epari Sadasiva Rao (HUF) v. Assistant CIT (Cuttack) . . . 569

S. 254(2) --Appeal to Appellate Tribunal--Powers of Tribunal--Notice--Refusal of notice by illiterate employee of assessee--Application to recall ex parte order passed by Tribunal--Principles of natural justice applicable--Ex parte order to be recalled-- Sudesh Pandey v. ITO (Indore) . . . 560

Income-tax Rules, 1962 :

R. 5, Appx I --Depreciation--Windmill--Higher rate of depreciation--Option exercised by assessee before due date for filing return by claiming higher rate of depreciation in return with audit report--Commissioner (Appeals) justified in directing Assessing Officer to allow higher depreciation-- Assistant CIT v. P. ORR and Sons P. Ltd. (Chennai) . . . 565

Industries (Development and Regulations) Act, 1951 :

S. 11B --Industrial undertaking--Special deduction--Small scale industry--Investment in fixed assets in plant and machinery exceeding prescribed limit--Not entitled to deduction under section 80-IB-- Sawaria Pipes P. Ltd. v. Assistant CIT (Hyderabad) . . . 573