INCOME TAX REPORTS (ITR)
HIGH COURTSAdvance tax --Interest--Failure by payer to deduct tax at source--Interest cannot be levied on assessee--Income-tax Act, 1961, s. 234B-- DIT (International Taxation) v. Chiron Bearing GmbH and Co. (Bom) . . . 115
Block assessment --Undisclosed income--Finding as to ownership of a particular business is a finding of fact--Revenue accepting Commissioner (Appeals) finding in case of assessee’s wife from assessment year 1997-98 that she was owner of business and on that basis filed her return--No addition as undisclosed income in hands of assessee on ground business belonged to him--Income-tax Act, 1961, s. 158BC-- CIT v . Kuldeep Sood (Delhi) . . . 166
Business expenditure --Disallowance--Expenditure on maintenance of transit house--Not deductible--Income-tax Act, 1961, s. 37-- CIT v. Rassi Cements Ltd .
(AP) . . . 169
----Firm--Disallowance--Remuneration to partners--Excessive and unreasonable payments--Partnership deed specifically providing for payment of remuneration to working partners--Remuneration paid to partners within statutory fixed limit--No disallowance on ground expenditure excessive--Income-tax Act, 1961, ss. 40(b)(v), 40A(2)(a)-- CIT v. Great City Manufacturing Co . (All) . . . 156
----Loss on account of change in rates of foreign exchange--Notional loss--Tests--Matter remanded to Assessing Officer to decide whether claim allowable--Income-tax Act, 1961, s. 37-- CIT v . Wipro Finance Ltd . (Karn) . . . 153
----Purchase of raw materials from undisclosed sources--Estimation of profit element--Tribunal applying twelve and half per cent.--Justified--Income-tax Act, 1961, s. 37-- CIT v. Sathyanarayan P. Rathi (Guj) . . . 150
Capital gains --Exemption--Transfer--Assessee contending that transfer of property was of agricultural land but failing to produce photographs showing coconut trees and water tank before Assessing Officer--Purchaser converting property into apartment complex--Assessee not establishing land was being used for agricultural purpose for a period of two years prior to date of transfer--Exemption not available--Income-tax Act, 1961, ss. 54B, 54F-- Smt. Asha George v . ITO (Ker) . . . 123
Capital or revenue expenditure --Corporate membership to golf club--Expenditure should bring into existence an asset or an advantage for enduring benefit of a trade--Membership fee paid to club--No capital asset is created or comes into existence--Membership obtained for running business with a view to produce profit--Revenue expenditure--Income-tax Act, 1961-- CIT v . Groz Beckert Asia Ltd .
[FB] (P&H) . . . 196
----Royalty--Technical assistance agreement--Assessee allowed to use know-how and information--Royalty deductible--Income-tax Act, 1961, s. 37-- CIT v . Artos Breweries Ltd . (AP) . . . 133
Charitable trust --Exemption--Denial of exemption--Department disputing genuineness of transaction--Contributor to assessee denying transaction--Opportunity should be given to assessee to cross-examine disputant--Income-tax Act, 1961, s. 10(22)-- Sri Krishna Educational and Social Trust v . ITO (Mad) . . . 178
Deduction of tax at source --Short deduction of tax--Payment to contractors--Two separate tax deduction account numbers for deductor’s M and B units--Certificate for deduction at lower rate issued to principal officer of M unit--Assessee not in default merely on ground certificate not issued in name of B unit--Income-tax Act, 1961, ss. 194C, 197-- CIT (TDS) v. Parle Biscuits Pvt. Ltd. (P&H) . . . 138
Double taxation avoidance --Non-resident--Royalty--Fees for technical services--Assessee, a person liable to pay tax in Germany--Assessee considered a taxable entity under taxation laws of Germany--Assessee entitled to benefit under article 12(2)--Double Taxation Avoidance Agreement between India and Germany, art. 12(2)-- DIT (International Taxation) v. Chiron Bearing GmbH and Co. (Bom) . . . 115
Exemption --Educational institution--Conditions precedent--Institution should exist wholly for education--Incidental surplus--Upgrading facilities of college including for purchase of library books and improvement of infrastructure--Not a ground for denial of exemption--Income-tax Act, 1961, s. 10(23C)(vi)-- Tolani Education Society v . Dy. DIT (Exemptions) (Bom) . . . 184
Export of computer software --Special deduction--Assessee transmitting customized electronic data to its clients--Work carried out by assessee not a news agency--Job of data entry notified as computer software service--Assessee entitled to special deduction--Income-tax Act, 1961, s. 80HHE-- CIT v . Malhar Information Services
(Bom) . . . 119
Income or capital --Power subsidy received from State Government--Subsidy given year after year on actual power consumption--Revenue receipt--Income-tax Act, 1961-- CIT v . Rassi Cements Ltd. (AP) . . . 169
Penalty --Recovery of tax--Notice of demand--Stay--Appeal before Commissioner (Appeals) pending--Demand stayed pending disposal of appeal--Income-tax Act, 1961, ss. 220(6), 271(1)(c)-- Deloitte Consulting India Pvt. Ltd. v. Asst. CIT
(Bom) . . . 160
Search and seizure --Block assessment--Undisclosed income--Statement under section 132(4)--No evidence to establish that admission was incorrect in any way--Addition made on basis of statement justified--Income-tax Act, 1961, s. 132(4)-- Bhagirath Aggarwal v . CIT (Delhi) . . . 143
----Warrant of authorisation--Authority should take utmost care and exercise sufficient caution while making decision to issue warrant--Income-tax Act, 1961, s. 132-- Dr. P. G. Viswanathan v . DIT (Investigation) (Mad) . . . 217
----Warrant of authorisation--Reason to believe--Scope of judicial review--Only to see whether materials available before authority adequate--Court cannot examine sufficiency of materials--Court can see whether satisfaction is due to mala fide reasons or based on extraneous factors or mere rumours--Income-tax Act, 1961, s. 132--Constitution of India, art. 226-- Dr. P. G. Viswanathan v . DIT (Investigation)
(Mad) . . . 217
----Warrant of authorisation--Validity--Dissolution of firm composed of assessee and his wife--Business continued by assessee as sole proprietor--Discovery that firm had submitted false accounts and amounts had been accumulated in fixed deposits--Warrant of authorisation in names of firm, assessee and his wife--Firm deemed to continue--Warrant of authorisation--Valid--Income-tax Act, 1961, ss. 132, 189-- Hemendra Ranchhoddas Merchant v. DIT (Investigation) (Bom) . . . 206
Writ --High Court--Search and seizure--Warrant of authorisation--Authority entertaining belief that assessee secreted certain documents relevant for purpose of investigation of matter relating to evasion of tax--Assessee cannot stall proceedings on ground of lack of jurisdiction to issue warrant--Assessee to raise all grounds available in his defence during enquiry and subsequent proceedings--Income-tax Act, 1961, s. 132--Constitution of India, art. 226-- Dr. P. G. Viswanathan v . DIT (Investigation)
(Mad) . . . 217
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Constitution of India :
Art. 226 --Search and seizure--Warrant of authorisation--Reason to believe--Scope of judicial review--Only to see whether materials available before authority adequate--Court cannot examine sufficiency of materials--Court can see whether satisfaction is due to mala fide reasons or based on extraneous factors or mere rumours-- Dr. P. G. Viswanathan v . DIT (Investigation) (Mad) . . . 217
----Writ--High Court--Search and seizure--Warrant of authorisation--Authority entertaining belief that assessee secreted certain documents relevant for purpose of investigation of matter relating to evasion of tax--Assessee cannot stall proceedings on ground of lack of jurisdiction to issue warrant--Assessee to raise all grounds available in his defence during enquiry and subsequent proceedings-- Dr. P. G. Viswanathan v . DIT (Investigation) (Mad) . . . 217
Double Taxation Avoidance Agreement between India and Germany :
Art. 12(2) --Double taxation avoidance--Non-resident--Royalty--Fees for technical services--Assessee, a person liable to pay tax in Germany--Assessee considered a taxable entity under taxation laws of Germany--Assessee entitled to benefit under article 12(2)-- DIT (International Taxation) v. Chiron Bearing GmbH and Co.
(Bom) . . . 115
Income-tax Act, 1961 :
S. 10(22) --Charitable trust--Exemption--Denial of exemption--Department disputing genuineness of transaction--Contributor to assessee denying transaction--Opportunity should be given to assessee to cross-examine disputant-- Sri Krishna Educational and Social Trust v . ITO (Mad) . . . 178
S. 10(23C)(vi) --Exemption--Educational institution--Conditions precedent--Institution should exist wholly for education--Incidental surplus--Upgrading facilities of college including for purchase of library books and improvement of infrastructure--Not a ground for denial of exemption-- Tolani Education Society v . Dy. DIT (Exemptions)
(Bom) . . . 184
S. 37 --Business expenditure--Disallowance--Expenditure on maintenance of transit house--Not deductible-- CIT v. Rassi Cements Ltd . (AP) . . . 169
----Business expenditure--Loss on account of change in rates of foreign exchange--Notional loss--Tests--Matter remanded to Assessing Officer to decide whether claim allowable-- CIT v . Wipro Finance Ltd . (Karn) . . . 153
----Business expenditure--Purchase of raw materials from undisclosed sources--Estimation of profit element--Tribunal applying twelve and half per cent.--Justified-- CIT v. Sathyanarayan P. Rathi (Guj) . . . 150
----Capital or revenue expenditure--Royalty--Technical assistance agreement--Assessee allowed to use know-how and information--Royalty deductible-- CIT v . Artos Breweries Ltd . (AP) . . . 133
S. 40(b)(v) --Business expenditure--Firm--Disallowance--Remuneration to partners--Excessive and unreasonable payments--Partnership deed specifically providing for payment of remuneration to working partners--Remuneration paid to partners within statutory fixed limit--No disallowance on ground expenditure excessive-- CIT v. Great City Manufacturing Co . (All) . . . 156
S. 40A(2)(a) --Business expenditure--Firm--Disallowance--Remuneration to partners--Excessive and unreasonable payments--Partnership deed specifically providing for payment of remuneration to working partners--Remuneration paid to partners within statutory fixed limit--No disallowance on ground expenditure excessive-- CIT v. Great City Manufacturing Co . (All) . . . 156
S. 54B --Capital gains--Exemption--Transfer--Assessee contending that transfer of property was of agricultural land but failing to produce photographs showing coconut trees and water tank before Assessing Officer--Purchaser converting property into apartment complex--Assessee not establishing land was being used for agricultural purpose for a period of two years prior to date of transfer--Exemption not available-- Smt. Asha George v . ITO (Ker) . . . 123
S. 54F --Capital gains--Exemption--Transfer--Assessee contending that transfer of property was of agricultural land but failing to produce photographs showing coconut trees and water tank before Assessing Officer--Purchaser converting property into apartment complex--Assessee not establishing land was being used for agricultural purpose for a period of two years prior to date of transfer--Exemption not available-- Smt. Asha George v . ITO (Ker) . . . 123
S. 80HHE --Export of computer software--Special deduction--Assessee transmitting customized electronic data to its clients--Work carried out by assessee not a news agency--Job of data entry notified as computer software service--Assessee entitled to special deduction-- CIT v . Malhar Information Services (Bom) . . . 119
S. 132 --Search and seizure--Warrant of authorisation--Authority should take utmost care and exercise sufficient caution while making decision to issue warrant-- Dr. P. G. Viswanathan v . DIT (Investigation) (Mad) . . . 217
----Search and seizure--Warrant of authorisation--Reason to believe--Scope of judicial review--Only to see whether materials available before authority adequate--Court cannot examine sufficiency of materials--Court can see whether satisfaction is due to mala fide reasons or based on extraneous factors or mere rumours-- Dr. P. G. Viswanathan v. DIT (Investigation) (Mad) . . . 217
----Search and seizure--Warrant of authorisation--Validity--Dissolution of firm composed of assessee and his wife--Business continued by assessee as sole proprietor--Discovery that firm had submitted false accounts and amounts had been accumulated in fixed deposits--Warrant of authorisation in names of firm, assessee and his wife--Firm deemed to continue--Warrant of authorisation--Valid-- Hemendra Ranchhoddas Merchant v. DIT (Investigation) (Bom) . . . 206
----Writ--High Court--Search and seizure--Warrant of authorisation--Authority entertaining belief that assessee secreted certain documents relevant for purpose of investigation of matter relating to evasion of tax--Assessee cannot stall proceedings on ground of lack of jurisdiction to issue warrant--Assessee to raise all grounds available in his defence during enquiry and subsequent proceedings-- Dr. P. G. Viswanathan v. DIT (Investigation) (Mad) . . . 217
S. 132(4) --Search and seizure--Block assessment--Undisclosed income--Statement under section 132(4)--No evidence to establish that admission was incorrect in any way--Addition made on basis of statement justified-- Bhagirath Aggarwal v . CIT
(Delhi) . . . 143
S. 158BC --Block assessment--Undisclosed income--Finding as to ownership of a particular business is a finding of fact--Revenue accepting Commissioner (Appeals) finding in case of assessee’s wife from assessment year 1997-98 that she was owner of business and on that basis filed her return--No addition as undisclosed income in hands of assessee on ground business belonged to him-- CIT v . Kuldeep Sood
(Delhi) . . . 166
S. 189 --Search and seizure--Warrant of authorisation--Validity--Dissolution of firm composed of assessee and his wife--Business continued by assessee as sole proprietor--Discovery that firm had submitted false accounts and amounts had been accumulated in fixed deposits--Warrant of authorisation in names of firm, assessee and his wife--Firm deemed to continue--Warrant of authorisation--Valid-- Hemendra Ranchhoddas Merchant v . DIT (Investigation) (Bom) . . . 206
S. 194C --Deduction of tax at source--Short deduction of tax--Payment to contractors--Two separate tax deduction account numbers for deductor’s M and B units--Certificate for deduction at lower rate issued to principal officer of M unit--Assessee not in default merely on ground certificate not issued in name of B unit-- CIT (TDS) v. Parle Biscuits Pvt. Ltd. (P&H) . . . 138
S. 197 --Deduction of tax at source--Short deduction of tax--Payment to contractors--Two separate tax deduction account numbers for deductor’s M and B units--Certificate for deduction at lower rate issued to principal officer of M unit--Assessee not in default merely on ground certificate not issued in name of B unit-- CIT (TDS) v. Parle Biscuits Pvt. Ltd. (P&H) . . . 138
S. 220(6) --Penalty--Recovery of tax--Notice of demand--Stay--Appeal before Commissioner (Appeals) pending--Demand stayed pending disposal of appeal-- Deloitte Consulting India Pvt. Ltd. v. Asst. CIT (Bom) . . . 160
S. 234B --Advance tax--Interest--Failure by payer to deduct tax at source--Interest cannot be levied on assessee-- DIT (International Taxation) v. Chiron Bearing GmbH and Co. (Bom) . . . 115
S. 271(1)(c) --Penalty--Recovery of tax--Notice of demand--Stay--Appeal before Commissioner (Appeals) pending--Demand stayed pending disposal of appeal-- Deloitte Consulting India Pvt. Ltd. v. Asst. CIT (Bom) . . . 160
Agricultural income --Assessee filing letter explaining ownership of agricultural land purchased in 1986-87 and disclosing capital gains on sale thereof in subsequent year--Seized material not suggesting inflation of agricultural income--Income not to be treated as income from other sources-- Assistant CIT v. Mir Mazharuddin (Hyderabad) . . . 314
Amortisation of preliminary expenses --Expenses incurred in relation to issue of rights shares--Deduction of one-tenth of expenditure allowable--Income-tax Act, 1961, s. 35D-- Kansai Nerolac Paints Ltd. v. Deputy CIT (Mumbai) . . . 424
Business expenditure --Assessee failing to produce proper bills and vouchers for direct and indirect expenses--Assessing Officer was to restrict disallowance to 5 per cent. of cash payments-- Assistant CIT v. Mir Mazharuddin (Hyderabad) . . . 314
----Capital or revenue expenditure--Software licence fees--Software to enable business to be run more efficiently--Fees deductible--Income-tax Act, 1961, s. 37-- Eimco Elecon (India) Ltd. v. Additional CIT (Ahmedabad) . . . 380
----Catering business--Disallowance on ground of duplication of expenditure--No material to suggest same expenditure claimed in case of company--Assessee disclosing profit on catering services after claiming various expenses--Expenses claimed incurred for purpose of catering business and no duplication--Expenditure to be allowed-- Assistant CIT v. Mir Mazharuddin (Hyderabad) . . . 314
----Deduction only on actual payment--Provision for leave encashment--Disallowance under section 43B(f)--Section 43B(f) held invalid by High Court--Disallowance not valid--Income-tax Act, 1961, s. 43B(f)-- Eimco Elecon (India) Ltd. v. Additional CIT (Ahmedabad) . . . 380
----Depreciation--Operations of manufacture discontinued at one factory--Expenses incurred to protect business assets to be allowed--Assets of unit having already entered block of assets of assessee, depreciation not to be disallowed on ground of non-user--Income-tax Act, 1961, ss. 32, 37-- Kansai Nerolac Paints Ltd. v. Deputy CIT (Mumbai) . . . 424
Capital gains --Computation of capital gains--Assessee owning flat in co-operative housing society--Co-operative society allotted additional floor space--Transfer of development rights to builder by all flat owners--Transfer of capital asset--Gains not taxable as there was no cost of acquisition--Income-tax Act, 1961, ss. 45, 48-- Assistant CIT v. IGE India Ltd. (Mumbai) . . . 365
Cash credits --Dealer deposits received in assessment years 2003-04 and 2004-05--Addition cannot be made for subsequent year--Unsecured loans--Assessee producing creditors and creditors filing bank accounts--Assessing Officer satisfied as to genuineness of transaction and creditworthiness of creditors--Credits to be accepted--Onus on assessee to prove identity, creditworthiness of creditor, genuineness of transaction--Not to prove source of creditor--Where creditor neither attending office of Assessing Officer nor assessee producing creditor--Transaction not established--Loan obtained during financial year 1995-96 and still outstanding--Credit could have been added in year of receipt but not during this year--Creditor not produced before Assessing Officer and remand report of Assessing Officer silent on this issue--Matter remanded--Income-tax Act, 1961, s. 68-- Harish Kawadmal Bajaj v. ITO (Pune) . . . 411
----Income estimated by Assessing Officer--Addition under section 68 permissible--Income-tax Act, 1961, s. 68-- Assistant CIT v. Mir Mazharuddin (Hyderabad) . . . 314
Company --Dividend--Income--Mutual concern--Assessee owning flat in co-operative housing society--Co-operative society allotted additional floor space--Portion of floor space index allotted to assessee--Value not assessable as dividend--Principle of mutuality applicable--Value not assessable in hands of assessee--Income-tax Act, 1961-- Assistant CIT v. IGE India Ltd. (Mumbai) . . . 365
Deduction of tax at source --Hire charges for machinery--Not contract for carrying out any work--Section 194C not applicable--Meaning of rent in section 194-I-- Explanation (i) to section 194-I including hire for machinery inserted w.e.f. 13-7-2006--Not applicable to assessment year under consideration--Income-tax Act, 1961, ss. 194C, 194-I, Expln (i) -- Assistant CIT v. Kiran Constructions (Hyderabad) . . . 356
Dispute Resolution Panel --Order of Dispute Resolution Panel should give reasons--Non-speaking order--Not valid--Income-tax Act, 1961, s. 144C-- Panasonic Consumer India P. Ltd. v. Assistant CIT (Delhi) . . . 390
Export --Exemption--Hundred per cent. export-oriented undertaking--Determination of quantum of profits derived by undertaking from exports--General principles--Interest on monies in fixed deposit with bank for availing of credit facilities--Allowable if part of a normal business arrangement by bank for extending non-fund based credit facilities to its constituents and not mere collateral security--Interest on fixed deposits and bank accounts on surplus funds not derived from assessee’s business and to be excluded--Sales tax refund and excise duty drawback not “derived“ from business, as flows from Government policy--Profit from sale of scrap--Assessee’s business direct source of profit--“Canteen recovery“--Assessing Officer to verify and allow relief to extent amount went to reduce expenditure already claimed and allowed--“Fine from the workers“ not integral part of assessee’s business--Discount--If not an independent receipt but only reduces purchase cost to that extent part of profits derived from eligible business--Income-tax Act, 1961, s. 10B-- Tessitura Monti India P. Ltd. v. ITO (Mumbai) . . . 329
----Special deduction--90 per cent. of income such as, insurance claim, interest, rent to be excluded from profits of business--Amount of sale of raw material to be included in total turnover for purpose of computation of deduction--Income-tax Act, 1961, s. 80HHC-- Kansai Nerolac Paints Ltd. v. Deputy CIT (Mumbai) . . . 424
Income not included in total income --Disallowance of expenditure--Dividend and interest on tax-free bonds claimed exempt--Year prior to introduction of rule 8D--Expenses to be disallowed to be quantified by adopting reasonable method--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Kansai Nerolac Paints Ltd. v. Deputy CIT (Mumbai) . . . 424
Income --Computation of income--Disallowance of expenditure on earning non-taxable income--Interest on borrowed capital--Investment in shares--Investment out of own funds--Borrowed capital used for purposes of business--Disallowance cannot be made under section 14A--Income-tax Act, 1961, s. 14A-- Eimco Elecon (India) Ltd. v. Additional CIT (Ahmedabad) . . . 380
----Computation of income--Interest on borrowed capital--Business expenditure--Assessee dealing in shares and investment consultancy--Investment in shares and share application money placed with same company--Shares not purchased with intention of earning dividends--Interest on money borrowed cannot be disallowed under section 14A--Not disallowable under section 36(1)(iii)--No capital expenditure--Interest deductible--Income-tax Act, 1961, ss. 14A, 36, 37-- MSA Securities Services P. Ltd. v. Assistant CIT (Chennai) . . . 400
Interest on borrowed capital --Investment in shares for acquiring controlling interest in subsidiary companies--In case involving common funds, presumption that investments made from non-interest bearing funds-Interest paid to banks and on fixed deposits to be allowed--Income-tax Act, 1961, s. 36(1)(iii)-- Kansai Nerolac Paints Ltd. v. Deputy CIT (Mumbai) . . . 424
International transactions --Payment of royalty to Japanese company for use of technical know-how by assessee--Comparable uncontrolled price method followed by assessee to determine arm’s length price of royalty on ground that of similar payment of royalty made to two unrelated parties--Transfer Pricing Officer adopting arithmetic mean of royalty paid to two unrelated parties on domestic sales--Assessee not entitled to contend that one of parties not comparable--Domestic sales generated by assessee using technology of one of parties comparable with domestic sales generated from use of technology of associated enterprise--Whether any product actually manufactured by assessee with trade mark irrelevant--Income-tax Act, 1961, s. 92CA-- Kansai Nerolac Paints Ltd. v. Deputy CIT (Mumbai) . . . 424
Penalty --No valid return filed within time allowed under section 139 or notices issued under section 142--Entire assessed income to be considered as concealed income--Income-tax Act, 1961, s. 271(1)(c), Expln. 3 -- T. V. Magaadevan v. Deputy CIT (Chennai) . . . 343
Valuation of closing stock --Land purchased by assessee in dispute before civil court--Dispute having adverse impact on market value--No change in method of valuation--Department accepting value as value of opening stock in subsequent year--Additions made to value not proper--Income-tax Act, 1961-- Assistant CIT v. Satish Estate P. Ltd. (Chandigarh) . . . 349
Words and phrases --“Profits of business of undertaking†-- Tessitura Monti India P. Ltd. v. ITO (Mumbai) . . . 329
S. 10B --Export--Exemption--Hundred per cent. export-oriented undertaking--Determination of quantum of profits derived by undertaking from exports--General principles--Interest on monies in fixed deposit with bank for availing of credit facilities--Allowable if part of a normal business arrangement by bank for extending non-fund based credit facilities to its constituents and not mere collateral security--Interest on fixed deposits and bank accounts on surplus funds not derived from assessee’s business and to be excluded--Sales tax refund and excise duty drawback not “derived“ from business, as flows from Government policy--Profit from sale of scrap--Assessee’s business direct source of profit--“Canteen recovery“--Assessing Officer to verify and allow relief to extent amount went to reduce expenditure already claimed and allowed--“Fine from the workers“ not integral part of assessee’s business--Discount--If not an independent receipt but only reduces purchase cost to that extent part of profits derived from eligible business-- Tessitura Monti India P. Ltd. v. ITO (Mumbai) . . . 329
S. 14A --Income--Computation of income--Disallowance of expenditure on earning non-taxable income--Interest on borrowed capital--Investment in shares--Investment out of own funds--Borrowed capital used for purposes of business--Disallowance cannot be made under section 14A-- Eimco Elecon (India) Ltd. v. Additional CIT (Ahmedabad) . . . 380
----Income--Computation of income--Interest on borrowed capital--Business expenditure--Assessee dealing in shares and investment consultancy--Investment in shares and share application money placed with same company--Shares not purchased with intention of earning dividends--Interest on money borrowed cannot be disallowed under section 14A--Not disallowable under section 36(1)(iii)--No capital expenditure--Interest deductible-- MSA Securities Services P. Ltd. v. Assistant CIT (Chennai) . . . 400
----Income not included in total income--Disallowance of expenditure--Dividend and interest on tax-free bonds claimed exempt--Year prior to introduction of rule 8D--Expenses to be disallowed to be quantified by adopting reasonable method-- Kansai Nerolac Paints Ltd. v. Deputy CIT (Mumbai) . . . 424
S. 32 --Business expenditure--Depreciation--Operations of manufacture discontinued at one factory--Expenses incurred to protect business assets to be allowed--Assets of unit having already entered block of assets of assessee, depreciation not to be disallowed on ground of non-user-- Kansai Nerolac Paints Ltd. v. Deputy CIT (Mumbai) . . . 424
S. 35D --Amortisation of preliminary expenses--Expenses incurred in relation to issue of rights shares--Deduction of one-tenth of expenditure allowable-- Kansai Nerolac Paints Ltd. v. Deputy CIT (Mumbai) . . . 424
S. 36 --Income--Computation of income--Interest on borrowed capital--Business expenditure--Assessee dealing in shares and investment consultancy--Investment in shares and share application money placed with same company--Shares not purchased with intention of earning dividends--Interest on money borrowed cannot be disallowed under section 14A--Not disallowable under section 36(1)(iii)--No capital expenditure--Interest deductible-- MSA Securities Services P. Ltd. v. Assistant CIT (Chennai) . . . 400
S. 36(1)(iii) --Interest on borrowed capital--Investment in shares for acquiring controlling interest in subsidiary companies--In case involving common funds, presumption that investments made from non-interest bearing funds-Interest paid to banks and on fixed deposits to be allowed-- Kansai Nerolac Paints Ltd. v. Deputy CIT (Mumbai) . . . 424
S. 37 --Business expenditure--Capital or revenue expenditure--Software licence fees--Software to enable business to be run more efficiently--Fees deductible-- Eimco Elecon (India) Ltd. v. Additional CIT (Ahmedabad) . . . 380
----Business expenditure--Depreciation--Operations of manufacture discontinued at one factory--Expenses incurred to protect business assets to be allowed--Assets of unit having already entered block of assets of assessee, depreciation not to be disallowed on ground of non-user-- Kansai Nerolac Paints Ltd. v. Deputy CIT (Mumbai) . . . 424
----Income--Computation of income--Interest on borrowed capital--Business expenditure--Assessee dealing in shares and investment consultancy--Investment in shares and share application money placed with same company--Shares not purchased with intention of earning dividends--Interest on money borrowed cannot be disallowed under section 14A--Not disallowable under section 36(1)(iii)--No capital expenditure--Interest deductible-- MSA Securities Services P. Ltd. v. Assistant CIT (Chennai) . . . 400
S. 43B(f) --Business expenditure--Deduction only on actual payment--Provision for leave encashment--Disallowance under section 43B(f)--Section 43B(f) held invalid by High Court--Disallowance not valid-- Eimco Elecon (India) Ltd. v. Additional CIT (Ahmedabad) . . . 380
S. 45 --Capital gains--Computation of capital gains--Assessee owning flat in co-operative housing society--Co-operative society allotted additional floor space--Transfer of development rights to builder by all flat owners--Transfer of capital asset--Gains not taxable as there was no cost of acquisition-- Assistant CIT v. IGE India Ltd. (Mumbai) . . . 365
S. 48 --Capital gains--Computation of capital gains--Assessee owning flat in co-operative housing society--Co-operative society allotted additional floor space--Transfer of development rights to builder by all flat owners--Transfer of capital asset--Gains not taxable as there was no cost of acquisition-- Assistant CIT v. IGE India Ltd. (Mumbai) . . . 365
S. 68 --Cash credits--Dealer deposits received in assessment years 2003-04 and 2004-05--Addition cannot be made for subsequent year--Unsecured loans--Assessee producing creditors and creditors filing bank accounts--Assessing Officer satisfied as to genuineness of transaction and creditworthiness of creditors--Credits to be accepted--Onus on assessee to prove identity, creditworthiness of creditor, genuineness of transaction--Not to prove source of creditor--Where creditor neither attending office of Assessing Officer nor assessee producing creditor--Transaction not established--Loan obtained during financial year 1995-96 and still outstanding--Credit could have been added in year of receipt but not during this year--Creditor not produced before Assessing Officer and remand report of Assessing Officer silent on this issue--Matter remanded-- Harish Kawadmal Bajaj v. ITO (Pune) . . . 411
----Cash credits--Income estimated by Assessing Officer--Addition under section 68 permissible-- Assistant CIT v. Mir Mazharuddin (Hyderabad) . . . 314
S. 80HHC --Export--Special deduction--90 per cent. of income such as, insurance claim, interest, rent to be excluded from profits of business--Amount of sale of raw material to be included in total turnover for purpose of computation of deduction-- Kansai Nerolac Paints Ltd. v. Deputy CIT (Mumbai) . . . 424
S. 92CA --International transactions--Payment of royalty to Japanese company for use of technical know-how by assessee--Comparable uncontrolled price method followed by assessee to determine arm’s length price of royalty on ground that of similar payment of royalty made to two unrelated parties--Transfer Pricing Officer adopting arithmetic mean of royalty paid to two unrelated parties on domestic sales--Assessee not entitled to contend that one of parties not comparable--Domestic sales generated by assessee using technology of one of parties comparable with domestic sales generated from use of technology of associated enterprise--Whether any product actually manufactured by assessee with trade mark irrelevant-- Kansai Nerolac Paints Ltd. v. Deputy CIT (Mumbai) . . . 424
S. 144C --Dispute Resolution Panel--Order of Dispute Resolution Panel should give reasons--Non-speaking order--Not valid-- Panasonic Consumer India P. Ltd. v. Assistant CIT (Delhi) . . . 390
S. 194C --Deduction of tax at source--Hire charges for machinery--Not contract for carrying out any work--Section 194C not applicable--Meaning of rent in section 194-I-- Explanation (i) to section 194-I including hire for machinery inserted w.e.f. 13-7-2006--Not applicable to assessment year under consideration-- Assistant CIT v. Kiran Constructions (Hyderabad) . . . 356
S. 194-I, Expln (i) --Deduction of tax at source--Hire charges for machinery--Not contract for carrying out any work--Section 194C not applicable--Meaning of rent in section 194-I-- Explanation (i) to section 194-I including hire for machinery inserted w.e.f. 13-7-2006--Not applicable to assessment year under consideration-- Assistant CIT v. Kiran Constructions (Hyderabad) . . . 356
S. 271(1)(c), Expln. 3 --Penalty--No valid return filed within time allowed under section 139 or notices issued under section 142--Entire assessed income to be considered as concealed income-- T. V. Magaadevan v. Deputy CIT (Chennai) . . . 343
R. 8D --Income not included in total income--Disallowance of expenditure--Dividend and interest on tax-free bonds claimed exempt--Year prior to introduction of rule 8D--Expenses to be disallowed to be quantified by adopting reasonable method-- Kansai Nerolac Paints Ltd. v. Deputy CIT (Mumbai) . . . 424
VAT AND SERVICE TAX CASES (VST)
Additional sales tax--Sales tax--Rate of tax--Change of law with effect from August 1, 1997--Rate for period prior to that date to be under old law--Tamil Nadu Additional Sales Tax Act (14 of 1970), s. 3.--State of Tamil Nadu v. Sabarigiri Industries (Mad) P. 454
--See also Appeal (Mad) P. 454
Appeal--Appealable orders--Order of rectification to apply correct rate of additional tax--Is appealable--Tamil Nadu General Sales Tax Act (1 of 1959), ss. 31, 55.--State of Tamil Nadu v. Sabarigiri Industries (Mad) P. 454
--Sales tax--Condonation of delay--Principles stated--Dismissal by Tribunal of appeal filed along with application for condonation of delay of 85 days--On facts not sustainable--Limitation Act (36 of 1963), s. 5--Haryana General Sales Tax Act (20 of 1973).--S. R. Traders v. State of Haryana (P&H) P. 437
--See also Penalty (P&H) P. 427, Service tax (Guj) P. 431
Assessment--Sales tax--Natural justice--Objection by assessee to notice by assessing authority containing details of purchase of materials used in work order--Notice dated October 7, 2010, issued by subsequent assessing authority and assessee requesting time to produce further details--Assessment order passed without giving time stating assessee not replied to notice dated October 30, 2008--No such notice found to have been sent--Objections by assessee not considered--Order passed in violation of principles of natural justice--Quashed.--D. P. Mahesh v. Assistant Commissioner (CT) (Addl.) (Mad) P. 434
--Value added tax--Commissioner--Power to extend period of limitation--No power to Commissioner to extend period for framing assessment for 2005-06 beyond November 20, 2009--Punjab Value Added Tax Act (8 of 2005), s. 29(4), (4A).--State of Punjab v. Des Raj Bhim Sain (P&H) P. 395
Best judgment assessment--Sales tax--Estimation--High Court--Revision--Assessee found not maintaining register of finished goods as required under circular--Order making addition on estimation basis--No question of law involved--No interference warranted--U. P. Trade Tax Act (15 of 1948).--Steel Fabricators v. Commissioner of Trade Tax (All) P. 421
Central sales tax--See Declared goods (Gauhati) P. 412
Change of law--See Additional sales tax (Mad) P. 454
Check-post--See Penalty (P&H) P. 427
Commissioner--See Assessment (P&H) P. 395
Construction of taxing statutes--Plain reading in absence of doubt or difficulty.--State of Punjab v. Des Raj Bhim Sain (P&H) P. 395
Declared goods--Central sales tax--Refund--"Coke in all its forms"--Assessee engaged in conversion of raw petroleum coke, purchased on payment of tax, into calcined petroleum coke and sale in course of inter-State trade--Entitled to refund of tax paid--Central Sales Tax Act (74 of 1956) s. 14(ia)--Assam General Sales Tax Act (12 of 1993), s. 30.--Guwahati Carbon Ltd. v. State of Assam (Gauhati) P. 412
Deferment of tax--Sales tax--Interest-free sales tax deferral scheme--Diversification--Deferral to be with reference to increased volume of sales and production--Eligibility certificate from SIPCOT stating base production value and base sales value--Branch transfers, consignment sales and export sales not included in turnover for calculating concession--Dealer issued notice for recovery of tax on unauthorised availment of benefit by inclusion of such turnover in calculation of benefit--Writ petition challenging eligibility certificate after ten years--Delay not explained--Dealer bound by eligibility certificate--Tamil Nadu General Sales Tax Act (1 of 1959), s. 17A--Notification G. O. Ms. No. 119, Commercial Taxes and Religious Endowments Department, dated April 13, 1994--Notification G. O. Ms. No. 500, Industries (MIG.II) Department, dated May 14, 1990.--Tamilnadu Petroproducts Limited v. Deputy Commissioner (CT) (Mad) P. 381
Eligibility certificate--See Deferment of tax (Mad) P. 381, Exemption (All) P. 389
Estoppel--See Hotels and restaurants (AP) P. 458
Evasion of tax--See Penalty (P&H) P. 427
Exemption--Trade tax--New industrial unit--Retrospective amendment--Eligibility certificate granted for period from 2nd of June, 1988 to 1st of June, 1993, mentioning date of first sale as June 2, 1988--Benefit effective only from October 15, 1988, date of registration of petitioner's unit under Factories Act--Valid in view of retrospective amendment of definition of "new unit" by U. P. Act No. 28 of 1991--U. P. Trade Tax Act (15 of 1948), s. 4A--U. P. Sales Tax (Amendment and Validation) Act (28 of 1991)--Factories Act (63 of 1948).--Vaishma Plastic Industries v. State of U. P. (All) P. 389
--See also Deferment of tax (Mad) P. 381, Hotels and restaurants (AP) P. 458
Goods transport agency service--See Service tax (Ker) P. 399, (Jharkhand) P. 441
High Court--See Best judgment assessment (All) P. 421, Penalty (P&H) P. 427
Hotels and restaurants--Sales tax--Exemption--Interest--Refund--Amendment granting exemption on sale of soft drinks and food until September 13, 1985 pursuant to 46th amendment to Constitution--Supreme Court setting aside assessments, holding petitioner-dealers entitled to exemption on satisfying tax not levied or collected and directing refund of excess amount with interest--Memorandum dated March 18, 1992 directing that other dealers also be given benefit provided matter alive--Tribunal erred in holding interest payable in all cases--Grant of interest on refund by Appellate Deputy Commissioners pursuant to order by Tribunal valid but only for period from expiry of six months from date of order of Appellate Deputy Commissioners to date when refund granted--Claim for refund not necessary--Principles of res judicata or estoppel not applicable--Orders by authorities granting interest in revision where orders of assessing authorities denying interest challenged--Without jurisdiction--Dealers not entitled to interest--Andhra Pradesh General Sales Tax Act (6 of 1957), ss. 33, 33A, 33B, 33BB, 33E, 33F.--State of Andhra Pradesh v. Hotel Swapna Bar and Restaurant (AP) P. 458
Input-tax credit--Value added tax--Reduction of tax credit by four per cent on goods purchased under circumstances specified in three sub-clauses of clause (b) of sub-section (3) of section 11--Assessee purchasing furnace oil, natural gas and light diesel oil for manufacturing activity and transferring manufactured goods to branches outside State--Taxable goods purchased by assessee satisfied description of two sub-clauses--Denial of tax credit by four per cent as provided in clause (b) to be only once--Gujarat Value Added Tax Act, 2003 (1 of 2005), s. 11(3)(b)(i), (ii), (iii).--State of Gujarat v. Reliance Industries Ltd. (Guj) P. 376
Inter-State sales--See Declared goods (Gauhati) P. 412
Interest--See Hotels and restaurants (AP) P. 458, Revision (AP) P. 458, Service tax (Jharkhand) P. 441
Jurisdiction--See Hotels and restaurants (AP) P. 458, Revision (AP) P. 458
Legislative powers--State Legislature--Has power to make law with retrospective effect.--Vaishma Plastic Industries v. State of U. P. (All) P. 389
Limitation--See Appeal (P&H) P. 437, Assessment (P&H) P. 395
Natural justice--See Assessment (Mad) P. 434, Registration certificate (Mad) P. 417
New industrial unit--See Exemption (All) P. 389
Penalty--Sales tax--Failure to disclose turnover in return--Failure under bona fide belief that turnover not taxable--Penalty not leviable--Tamil Nadu General Sales Tax Act (1 of 1959), s. 12(5)(iii).--State of Tamil Nadu v. Majestic Exports (Mad) P. 423
--Value added tax--Evasion of tax--Appeal to High Court--Findings of Tribunal that goods receipt in question contained particulars of goods, entries made in form ELTA-12 and declaration in form 85--That driver left invoice covering part of goods in vehicle due to oversight and went back and picked them up and produced them before officer--Human mistake--Transaction voluntarily reported at check-post and not violative of provisions--No error in findings--No substantial question of law--Punjab Value Added Tax Act (8 of 2005), s. 51(7)(b).--State of Punjab v. Desai Brothers Limited (P&H) P. 427
--See also Reassessment (Mad) P. 370
Pre-deposit--See Service tax (Guj) P. 431
Rate of tax--See Additional sales tax (Mad) P. 454, Appeal (Mad) P. 454
Reassessment--Sales tax--Penalty--Condition precedent for levy of penalty--Finding of wilful non-disclosure--Dealer engaged in leasing--Dealer financing purchase of equipment--Dealer at no point of time interacting with supplier and acting only under instructions of lessee--Supplier found to be fictitious--No finding as regards wilful non-disclosure--Penalty not leviable--Tamil Nadu General Sales Tax Act (1 of 1959), ss. 3A(2)(b), 16(2).--Lakshmi Trade Credits Limited v. State of Tamil Nadu (Mad) P. 370
Rectification of mistake--See Appeal (Mad) P. 454
Refund--See Declared goods (Gauhati) P. 412, Hotels and restaurants (AP) P. 458, Service tax (Jharkhand) P. 441
Registered dealers--See Registration certificate (Mad) P. 417
Registration certificate--Value added tax--Registration of dealers--Cancellation of registration with retrospective effect on ground registration obtained on false information as to lease of business premises--No opportunity granted to dealer to substantiate claim--Dispute as to tenancy pending before civil court--Order set aside--Dealer given opportunity to place material substantiating claim and direction to authority to consider and pass orders in accordance with law--Tamil Nadu Value Added Tax Act (32 of 2006), s. 39.--S. Peermohamed v. Assistant Commissioner of Commercial Taxes (Mad) P. 417
Res judicata--See Hotels and restaurants (AP) P. 458
Retrospective legislation--See Exemption (All) P. 389, Legislative powers (All) P. 389, Service tax (Jharkhand) P. 441
Return--See Penalty (Mad) P. 423
Revision--Sales tax--Jurisdiction--Orders by authorities in revision filed after July 1, 1985 challenging orders of assessing authorities denying interest--Without jurisdiction--Andhra Pradesh General Sales Tax Act (6 of 1957), s. 20.--State of Andhra Pradesh v. Hotel Swapna Bar and Restaurant (AP) P. 458
--See also Best judgment assessment (All) P. 421
Sales Tax Tribunal--See Appeal (P&H) P. 437
Service tax--Appeal--Pre-deposit--Application for waiver--Dismissal of application for waiver for failure to appear on date of hearing despite notice and appeal for failure to deposit as directed by Tribunal--Applications for modification of order on pre-deposit and restoration of appeal also dismissed--Registrar of Tribunal conveying that orders dispatched returned with postal stamp of "non-delivery" pursuant to application under Right to Information Act--Assessee to be given opportunity to argue--Application for waiver of pre-deposit revived.--Protection & Security Services v. Union of India (Guj) P. 431
--Goods transport agency service--Liability--Recipients of service liable to tax only from May 13, 2005 when sub-section (2) of section 70 introduced and not prior to it--Finance Act (32 of 1994), ss. 65, 66, 68(2), 69(2), 70(2)--Service Tax Rules, 1994, r. 2(1)(d)(v). --Union of India v. Highland Produce Co. Ltd. (Ker) P. 399
--Goods transport service--Refund--Interest--Retrospective legislation--Tax paid by service recipient from November 16, 1997 to June 1, 1998 (prior to decision in Laghu Udyog Bharati v. Union of India [2005] 1 VST 24 (SC))--Refunded to service provider by Department pursuant to application for refund by provider with consent of recipient--Recovery of tax refunded in view of retrospective validation--Liability to tax continued to be on recipient of service without break--Benefit received due to order of court to be restored if order set aside--Refund of amount service provider received from account of recipient--To be recovered from service provider--Liability to pay interest not dependent on any further fact--Interest also recoverable from service provider--Finance Act (10 of 2000), s. 117--Finance Act (32 of 1994).--OTS Ltd. v. Commissioner of Central Excise (Jharkhand) P. 441
State Legislature--See Legislative powers (All) P. 389
Value added tax--See Assessment (P&H) P. 395, Input-tax credit (Guj) P. 376, Registration certificate (Mad) P. 417
Writs under Constitution--See Deferment of tax (Mad) P. 381
Change of law--See Service tax (CESTAT--Bang) P. 406
Construction of taxing statutes--Exemption--Notification to be construed on plain meaning of words used.--Gokaldas Images Pvt. Ltd. v. Commissioner of Service Tax (CESTAT--Bang) P. 406
Exemption--See Construction of taxing statutes (CESTAT--Bang) P. 406
Export of goods--See Service tax (CESTAT--Bang) P. 406
Limitation--See Service tax (CESTAT--Bang) P. 406
Refund--See Service tax (CESTAT--Bang) P. 406
Service tax--Refund--Limitation--Tax paid on services used for export of goods--Amending notification dated November 18, 2008 extending period of limitation from 60 days to "six months" from end of quarter during which goods exported--Not clarificatory or retrospective--Board's circular to that effect pertained to quarter April-June 2008--Not applicable to refund claim of tax paid on services used for export of goods during January to March 2008--Refund claim filed on June 10, 2008--Barred by limitation--Finance Act (32 of 1994), s. 93(1)--Notification No. 41/2007-S.T. dated October 6, 2007--Notification No. 32/2008-ST dated November 18, 2008.--Gokaldas Images Pvt. Ltd. v. Commissioner of Service Tax (CESTAT--Bang) P. 406
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