INCOME TAX REPORTS (ITR)
Volume 349 Part 3 (Issue dated 3-12-2012)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
Bad debt --Provision for non-performing asset--Not allowable as bad debt--Not allowable as business loss--Income-tax Act, 1961, ss. 28, 36(1)(viia), Expln .-- Sundaram Finance Ltd . v. Asst. CIT . . . 356
----State industrial development corporation--Promoting joint sector company--Company declared sick and eventually wound up--Bad debt to be allowed--Income-tax Act, 1961, s. 36(1)(vii), (2)(i)(b) (before amendment w. e. f. 1-4-1989)-- Kerala State Industrial Development Corporation Ltd . v . CIT . . . 365
Income --True legal character of receipt to be seen--Sums collected from customers towards possible sales tax liability on basis that sums refundable if assessee found not liable to sales tax--Not placed in separate interest-bearing account but forming part of business turnover--Sums constitute income-- Sundaram Finance Ltd . v . Asst. CIT . . . 356
Industrial undertaking --Undertaking having three units--Assessee maintaining consolidated accounts--Deduction claimed in respect of one unit--No provision prescribing accounts to be maintained unit-wise--But in interest of justice, direction to work out unit-wise profits and grant of deduction on basis thereof--Income-tax Act, 1961, ss. 80HH, 80-I-- CIT v. Bongaigaon Refinery and Petrochemical Ltd. . . . 352
Investment allowance --Condition precedent for grant--“Production†--Assessee must lead evidence to show process undertaken by it was production--Mining, polishing and export of granites--No evidence to show production--Matter remanded--Income-tax Act, 1961, s. 32A-- Vijay Granites P. Ltd . v. CIT . . . 350
Penalty --Concealment of income--Suit by bank settled by consent terms for sum less than sum shown as outstanding to bank in assessee’s books--Not a case of concealment of income or furnishing inaccurate particulars of income--Penalty not attracted--Income-tax Act, 1961, s. 271(1)(c)-- Northland Development and Hotel Corporation v . CIT . . . 363
Rectification of mistakes --Industrial undertaking--Special deduction--Computation of profits--Assessment allowing deduction on profits before setting off carried forward losses--Rectification to restrict deduction to profits after such set off--Matter debatable at the time--Rectification not permissible--Income-tax Act, 1961, ss. 80-IA, 154-- Dinosaur Steels Ltd. v . Joint CIT . . . 360
Appeal --Powers of appellate authorities--Appellate authorities have power to consider claim not made in return--Income-tax Act, 1961-- CIT v . Pruthvi Brokers and Shareholders P. Ltd . (Bom) . . . 336
Assessment --Intimation on basis of return--No power to disallow claim for lack of proof of claim--When proof is required notice for production of evidence in support of return to be issued--Order under section 143(1)(a) to be set aside--Income-tax Act, 1961, s. 143(1)(a), proviso (i), cl. (iii)-- Easter Industries Ltd . v . Union of India (Delhi) . . . 324
Business expenditure --Rents and rates--Expenditure on hiring space on hoardings--Not deductible as rent--Expenditure not deductible as advertisement or publicity or sales promotion--Not deductible as business expenditure--Income-tax Act, 1961, ss. 30, 37-- Bakelite Hylam Ltd. v . CIT (AP) . . . 317
----Statutory dues--Deduction only on actual payment--Assessee showing details of payment--Section 43B not applicable--Income-tax Act, 1961, s. 43B-- Easter Industries Ltd. v . Union of India (Delhi) . . . 324
Exemption --Export--Exemption under section 10A--Finding that unit in export processing zone was not formed by splitting up existing unit--Exemption granted in earlier years--No change in facts--Assessee entitled to exemption for subsequent years--Income-tax Act, 1961, s. 10A-- CIT v. Western Outdoor Interactive P. Ltd . (Bom) . . . 309
Export --Special deduction under section 80HHC--Condition precedent--Export of articles out of India and receipt of payment in convertible foreign exchange--Both conditions must be fulfilled--Sale of articles to UNICEF in India for use in India--Payment received in convertible foreign exchange but no export of articles out of India--Assessee not entitled to special deduction under section 80HHC--Income-tax Act, 1961, s. 80HHC-- Indian Del. P. Ltd . v. CIT (Delhi) . . . 330
Income-tax --General principles--Benefit granted for a number of years--No change in facts--Benefit not withdrawn--Assessee entitled to benefit in subsequent years-- CIT v . Western Outdoor Interactive P. Ltd . (Bom) . . . 309
Interpretation of taxing statutes --Strict interpretation-- Bakelite Hylam Ltd . v. CIT (AP) . . . 317
Precedent --Effect of decision of Supreme Court in CIT v. Gurjargravures P. Ltd . [1978] 111 ITR 1 (SC)-- CIT v . Pruthvi Brokers and Shareholders P. Ltd . (Bom) . . . 336
Search and seizure --Warrant of authorisation--Law applicable--Effect of amendment of section 132(1) w. e. f. 1-6-1994--Additional Director has power to issue authorisation--Income-tax Act, 1961, s. 132(1)-- CIT v . Trilochan Pratap Singh (All) . . . 314
Association of persons --Whether formed--To be decided on facts-- Alstom Transport SA , In re . . . 292
Contracts --Interpretation--To be read as whole-- Alstom Transport SA, In re . . . 292
International transactions --Transfer pricing--Provisions applicable although capital gains not chargeable in terms of DTAA--Income-tax Act, 1961, ss. 92 to 92F-- Armstrong World Industries Mauritius Multiconsult Ltd. , In re . . . 303
Non-resident --Capital gains--Buy back of shares by Indian subsidiary of shares held in it by holding Mauritius company--Gains not chargeable in India--That holding company incorporated in Mauritius and investment made through it to take advantage of the DTAA not ground to deny benefit under DTAA--Transaction not exempt under section 47(iv)--Income-tax Act, 1961, ss. 45, 47(iv), 90(2)--Double Taxation Avoidance Agreement between India and Mauritius, art. 13(4)-- Armstrong World Industries Mauritius Multiconsult Ltd ., In re . . . 303
----Taxability in India--Consortium of four bidding in tender and awarded contract for design, manufacture, supply, installation, testing and commissioning of signalling/train control and communication systems for Bangalore Metro Rail Corporation--Composite contract--Consortium taxable as association of persons--Applicant responsible for offshore services and supplies--Not entitled to divide contract and seek to be exempted--Income-tax Act, 1961, s. 2(31)--Double Taxation Avoidance Agreement between India and France-- Alstom Transport SA , In re . . . 292
ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))
Volume 20 : Part 3 (Issue dated : 3-12-2012)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
Assessment --Notice--Limitation--Return of income--Electronic filing--Time for transmitting to Centralised Processing Centre extended to December 31, 2010 or 120 days from date of uploading return whichever is later--Return uploaded on September 25, 2009 and form ITR-V received by Centralised Processing Centre on November 29, 2010--Within prescribed time--Date of filing of return relates back to date on which return was electronically uploaded--Notice under section 143(2) served beyond six months from end of financial year in which return furnished--Assessment invalid--Income-tax Act, 1961, s. 143(2)--Circular No. 3 of 2009 dated 21-5-2009--Centralised Processing of Returns Scheme, 2011-- E. K. K. and Co. v. Assistant CIT (Cochin) . . . 325
Bad debt --No evidence that debt was for purposes of business--Bad debt not deductible--Income-tax Act, 1961, s. 36-- Siltex India v. ITO (Mumbai) . . . 300
----Provision for doubtful debts made in profit and loss account--Claim allowable--Income-tax Act, 1961, s. 36(1)(vii)-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
Book profit --Export--Special deduction--Profit eligible for deduction under section 80HHC to be computed on basis of adjusted book profit not on basis of profit computed under normal provisions of the Act--Income-tax Act, 1961, ss. 80HHC, 115JA-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
Business expenditure --Payment of professional fees paid to consultant for upgradation of management information system in connection with existing business--As revenue expenditure--No adverse material doubting genuineness of work--Claim not to be disallowed merely there were no agreements--Correspondence and report of consultant placed on record--Claim to be allowed after verification of bills and quantum expenditure--Income-tax Act, 1961-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
----Pre-operative expenses in relation to foreign projects--Allowable--Income-tax Act, 1961-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
----Sales commission--Evidence that commission agents had rendered services--Sales commission deductible--Income-tax Act, 1961, s. 37-- Suzlon Energy Ltd. v. Deputy CIT (Ahmedabad) . . . 391
Business loss --No details furnished regarding loss--Loss not deductible--Income-tax Act, 1961-- Siltex India v. ITO (Mumbai) . . . 300
Capital or revenue expenditure --Expenses on payments under voluntary retirement scheme--Allowable as revenue expenditure-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
Cash credits --Appeal to Appellate Tribunal--Tribunal remanding matter to Assessing Officer--Assessing Officer enhancing amount relating to cash credits after verification--Justified--Income-tax Act, 1961-- Siltex India v. ITO (Mumbai) . . . 300
----Burden of proof--Burden on assessee to prove genuineness of credits--Names and details regarding seven credits furnished--No details furnished with regard to one credit--Details of seven creditors not verified--Duty of Commissioner (Appeals) to have got verification done--Matter remanded--Income-tax Act, 1961, s. 68-- Siltex India v. ITO (Mumbai) . . . 300
Deduction of tax at source --Fees for technical services--State electricity board unbundled into transmission company, power generation company and distribution companies--Transmission charges paid by distributing company to transmission company--Not fees for technical services or rent for use of assets--Load despatch centre formed as co-ordinating body and functioning with personnel on deputation from transmission company--Payment by distribution company for use of personnel under direction of State Government--Not payment for technical services--Income-tax Act, 1961, ss. 194-I, 194J, 201(1), (1A)-- Bangalore Electricity Supply Co. Ltd. v. ITO (TDS) (Bangalore) . . . 365
Depreciation --Debited in profit and loss account but not claimed--Total gross income to be computed in accordance to provisions of sections 30 to 43D--Income-tax Act, 1961, s. 32-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
Export --Special deduction--Profit from trading export and loss from manufacturing export--Deduction only from net profit from both activities--Income-tax Act, 1961, s. 80HHC-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
Income --Computation of income--Disallowance of expenditure incurred on earning non-taxable income--Computation of disallowance--Law applicable--Rule 8D applicable from assessment year 2008-09--Prior to assessment year 2008-09 reasonable amount to be disallowed--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Great Eastern Shipping Co. Ltd. v. Additional CIT (Mumbai) . . . 351
----Computation of income--Disallowance of expenditure on earning non-taxable income--No disallowance from dividends from foreign companies--No nexus between interest-bearing loans and investment in Indian subsidiaries--Interest cannot be disallowed--Proportionate disallowance of remuneration to directors--Income-tax Act, 1961, s. 14A-- Suzlon Energy Ltd. v. Deputy CIT (Ahmedabad) . . . 391
Industrial undertaking --Special deduction under section 80-IB--Computation of special deduction--Interest income not derived from industrial undertaking--Not includible for purpose of computation--Net interest to be reduced from profits of business--Duty drawback equal to duty paid--Includible for purposes of computation--Income-tax Act, 1961, s. 80-IB--Suzlon Energy Ltd. v. Deputy CIT (Ahmedabad) . . . 391
----Special deduction--Computation of--Electricity generated by assessee consumed captively or sold to Electricity Board at pre-determined price--Board selling electricity at higher rate which represents market value--Profit and gains for purpose of deduction to be computed on basis of such market value--Income-tax Act, 1961, s. 80-IA-- Sri Matha Spinning Mills P. Ltd. v. Deputy CIT (Chennai) . . . 317
Interest on borrowed capital --Investment in shares and mutual funds income from which exempt--Disallowance of interest paid on borrowings--Matter to be considered in light of section 14A--Quantum of adjustment for purpose of section 115JA to depend on actual interest disallowed--Matter remanded--Income-tax Act, 1961, ss. 14A, 115JA-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
Interest on borrowed fund --Advance of interest-free loans to subsidiary--Disallowance mostly on account of opening balance which had already been deleted by Tribunal in earlier year--Advances small compared to current profit--No justification for disallowance--Income-tax Act, 1961-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
Shipping --Computation of income--Interest attributable to non-tonnage business--Deductible--Income-tax Act, 1961-- Great Eastern Shipping Co. Ltd. v. Additional CIT (Mumbai) . . . 351
----Tonnage tax scheme--Write back of sundry credit balances and prior period expenses--Interest on loans to employees--Income from core activity and not taxable separately--Reimbursement of container costs--Not assessable--Interest on surplus funds assessable under section 56--Reasonable expenses deductible--Gains on sale of ships assessable as capital gains--Income-tax Act, 1961, ss. 45, 56, Chapter XII-G-- Shipping Corporation of India Ltd. v. Additional CIT (Mumbai) . . . 332
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
S. 14A --Income--Computation of income--Disallowance of expenditure incurred on earning non-taxable income--Computation of disallowance--Law applicable--Rule 8D applicable from assessment year 2008-09--Prior to assessment year 2008-09 reasonable amount to be disallowed-- Great Eastern Shipping Co. Ltd. v. Additional CIT (Mumbai) . . . 351
----Income--Computation of income--Disallowance of expenditure on earning non-taxable income--No disallowance from dividends from foreign companies--No nexus between interest-bearing loans and investment in Indian subsidiaries--Interest cannot be disallowed--Proportionate disallowance of remuneration to directors-- Suzlon Energy Ltd. v. Deputy CIT (Ahmedabad) . . . 391
----Interest on borrowed capital--Investment in shares and mutual funds income from which exempt--Disallowance of interest paid on borrowings--Matter to be considered in light of section 14A--Quantum of adjustment for purpose of section 115JA to depend on actual interest disallowed--Matter remanded-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
S. 32 --Depreciation--Debited in profit and loss account but not claimed--Total gross income to be computed in accordance to provisions of sections 30 to 43D-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
S. 36 --Bad debt--No evidence that debt was for purposes of business--Bad debt not deductible-- Siltex India v. ITO (Mumbai) . . . 300
S. 36(1)(vii) --Bad debt--Provision for doubtful debts made in profit and loss account--Claim allowable-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
S. 37 --Business expenditure--Sales commission--Evidence that commission agents had rendered services--Sales commission deductible-- Suzlon Energy Ltd. v. Deputy CIT (Ahmedabad) . . . 391
S. 45 --Shipping--Tonnage tax scheme--Write back of sundry credit balances and prior period expenses--Interest on loans to employees--Income from core activity and not taxable separately--Reimbursement of container costs--Not assessable--Interest on surplus funds assessable under section 56--Reasonable expenses deductible--Gains on sale of ships assessable as capital gains-- Shipping Corporation of India Ltd. v. Additional CIT (Mumbai) . . . 332
S. 56 --Shipping--Tonnage tax scheme--Write back of sundry credit balances and prior period expenses--Interest on loans to employees--Income from core activity and not taxable separately--Reimbursement of container costs--Not assessable--Interest on surplus funds assessable under section 56--Reasonable expenses deductible--Gains on sale of ships assessable as capital gains-- Shipping Corporation of India Ltd. v. Additional CIT (Mumbai) . . . 332
Chapter XII-G --Shipping--Tonnage tax scheme--Write back of sundry credit balances and prior period expenses--Interest on loans to employees--Income from core activity and not taxable separately--Reimbursement of container costs--Not assessable--Interest on surplus funds assessable under section 56--Reasonable expenses deductible--Gains on sale of ships assessable as capital gains-- Shipping Corporation of India Ltd. v. Additional CIT (Mumbai) . . . 332
S. 68 --Cash credits--Burden of proof--Burden on assessee to prove genuineness of credits--Names and details regarding seven credits furnished--No details furnished with regard to one credit--Details of seven creditors not verified--Duty of Commissioner (Appeals) to have got verification done--Matter remanded-- Siltex India v. ITO (Mumbai) . . . 300
S. 80HHC --Book profit--Export--Special deduction--Profit eligible for deduction under section 80HHC to be computed on basis of adjusted book profit not on basis of profit computed under normal provisions of the Act-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
----Export--Special deduction--Profit from trading export and loss from manufacturing export--Deduction only from net profit from both activities-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
S. 80-IA --Industrial undertaking--Special deduction--Computation of--Electricity generated by assessee consumed captively or sold to Electricity Board at pre-determined price--Board selling electricity at higher rate which represents market value--Profit and gains for purpose of deduction to be computed on basis of such market value-- Sri Matha Spinning Mills P. Ltd. v. Deputy CIT (Chennai) . . . 317
S. 80-IB --Industrial undertaking--Special deduction under section 80-IB--Computation of special deduction--Interest income not derived from industrial undertaking--Not includible for purpose of computation--Net interest to be reduced from profits of business--Duty drawback equal to duty paid--Includible for purposes of computation--Suzlon Energy Ltd. v. Deputy CIT (Ahmedabad) . . . 391
S. 115JA --Book profit--Export--Special deduction--Profit eligible for deduction under section 80HHC to be computed on basis of adjusted book profit not on basis of profit computed under normal provisions of the Act-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
----Interest on borrowed capital--Investment in shares and mutual funds income from which exempt--Disallowance of interest paid on borrowings--Matter to be considered in light of section 14A--Quantum of adjustment for purpose of section 115JA to depend on actual interest disallowed--Matter remanded-- KEC International Ltd. v. Deputy CIT (Mumbai) . . . 282
S. 143(2) --Assessment--Notice--Limitation--Return of income--Electronic filing--Time for transmitting to Centralised Processing Centre extended to December 31, 2010 or 120 days from date of uploading return whichever is later--Return uploaded on September 25, 2009 and form ITR-V received by Centralised Processing Centre on November 29, 2010--Within prescribed time--Date of filing of return relates back to date on which return was electronically uploaded--Notice under section 143(2) served beyond six months from end of financial year in which return furnished--Assessment invalid--Circular No. 3 of 2009 dated 21-5-2009--Centralised Processing of Returns Scheme, 2011-- E. K. K. and Co. v. Assistant CIT (Cochin) . . . 325
S. 194-I --Deduction of tax at source--Fees for technical services--State electricity board unbundled into transmission company, power generation company and distribution companies--Transmission charges paid by distributing company to transmission company--Not fees for technical services or rent for use of assets--Load despatch centre formed as co-ordinating body and functioning with personnel on deputation from transmission company--Payment by distribution company for use of personnel under direction of State Government--Not payment for technical services-- Bangalore Electricity Supply Co. Ltd. v. ITO (TDS) (Bangalore) . . . 365
S. 194J --Deduction of tax at source--Fees for technical services--State electricity board unbundled into transmission company, power generation company and distribution companies--Transmission charges paid by distributing company to transmission company--Not fees for technical services or rent for use of assets--Load despatch centre formed as co-ordinating body and functioning with personnel on deputation from transmission company--Payment by distribution company for use of personnel under direction of State Government--Not payment for technical services-- Bangalore Electricity Supply Co. Ltd. v. ITO (TDS) (Bangalore) . . . 365
S. 201(1) --Deduction of tax at source--Fees for technical services--State electricity board unbundled into transmission company, power generation company and distribution companies--Transmission charges paid by distributing company to transmission company--Not fees for technical services or rent for use of assets--Load despatch centre formed as co-ordinating body and functioning with personnel on deputation from transmission company--Payment by distribution company for use of personnel under direction of State Government--Not payment for technical services-- Bangalore Electricity Supply Co. Ltd. v. ITO (TDS) (Bangalore) . . . 365
S. 201(1A) --Deduction of tax at source--Fees for technical services--State electricity board unbundled into transmission company, power generation company and distribution companies--Transmission charges paid by distributing company to transmission company--Not fees for technical services or rent for use of assets--Load despatch centre formed as co-ordinating body and functioning with personnel on deputation from transmission company--Payment by distribution company for use of personnel under direction of State Government--Not payment for technical services-- Bangalore Electricity Supply Co. Ltd. v. ITO (TDS) (Bangalore) . . . 365
R. 8D --Income--Computation of income--Disallowance of expenditure incurred on earning non-taxable income--Computation of disallowance--Law applicable--Rule 8D applicable from assessment year 2008-09--Prior to assessment year 2008-09 reasonable amount to be disallowed-- Great Eastern Shipping Co. Ltd. v. Additional CIT (Mumbai) . . . 351
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