INCOME TAX REPORTS (ITR)--PRINT AND ONLINE EDITION
(Issue dated 24-6-2013)
Subject index
High Courts
Amalgamation of companies --Date of amalgamation--Amalgamation sanctioned by court--Date mentioned in scheme would be date of amalgamation--Income-tax Act, 1961-- Torrent P. Ltd . v . CIT (Guj) . . . 34
----Effect--Dividend distributed by amalgamating company to amalgamated company after date of amalgamation--Company cannot pay dividend to itself--Deposit of dividend distribution tax--Amount to be refunded--Income-tax Act, 1961, s. 115-O-- Torrent P. Ltd. v. CIT (Guj) . . . 34
Appeal to High Court --Competency of appeal--Monetary limits--Instruction No. 2 of 2005, dated 24-10-2005 providing limit of net tax effect Rs. 4 lakhs for appeals by Department--Appeal filed by Revenue dismissed on ground net tax effect less than monetary limit prescribed under Instruction--Instruction No. 2 of 2005, dated 24-10-2005--Income-tax Act, 1961, s. 260A-- CIT v. Parimala Enterprises (Karn) . . . 57
Assessment --Scrutiny assessment--Appellate order--Must be given complete effect--Assessee filing return and declaring certain income--Appellate order deleting several disallowances--Assessment at a figure lower than returned income--No need to restrict to returned income--Income-tax Act, 1961-- CIT v . Milton Laminates Ltd .
(Guj) . . . 58
Business expenditure --Disallowance--Payments on which tax deductible at source--Language of provision clear--Even genuine and admissible expenses to be disallowed in case of omission to deduct tax at source--Provision meant to secure compliance--That it is harsh not ground to restrict scope of disallowance--Disallowance cannot be restricted to money which is yet to be paid--That Legislature used “credited or paid†in Bill and “payable†in provision as finally enacted of no relevance--Income-tax Act, 1961, s. 40(a)(ia)-- CIT v . Crescent Export Syndicate (Cal) . . . 1
Capital gains --Long-term or short-term capital gains--Scope of section 50--Transfer of land and building thereon--No depreciation allowed on land--Section 50 not applicable--Gains were long-term capital gains--Investment in specified securities--Assessee entitled to exemption--Income-tax Act, 1961, ss. 2(11), 32(1), 50(2), 54EC-- CIT v. I. K. International P. Ltd . (Delhi) . . . 64
Capital or revenue receipt --Non-compete fee--Insertion of section 28(va) with effect from 1-4-2003--Receipt of non-compete fee prior to 1-4-2003 not taxable--Income-tax Act, 1961, s. 28(va)-- CIT v. Bilagu Chandrashekar (Karn) . . . 54
Company --Dividend--Deemed dividend--Loan received by assessee-company from another company--Assessee not shareholder of company which gave loan--Shareholders common in both companies--Loan cannot be treated as deemed dividend--Income-tax Act, 1961, s. 2(22)(e)-- CIT v . AR Magnetics Pvt. Ltd. (Delhi) . . . 52
----Dividend--Dividends of private companies--Scope of section 115-O-- Torrent P. Ltd. v. CIT (Guj) . . . 34
Deemed dividend --Deposit received from company in which assessee not a shareholder--Cannot be treated as deemed dividend--Income-tax Act, 1961, s. 2(22)(e)-- CIT v . Daisy Packers Pvt. Ltd . (Guj) . . . 80
Interpretation of taxing statutes --Appellate Tribunal--Cannot supply casus omissus-- CIT v . Crescent Export Syndicate (Cal) . . . 1
----Comparison between draft law and law as enacted not permissible to regulate meaning-- CIT v . Crescent Export Syndicate (Cal) . . . 1
Penalty --Concealment of income--Survey detecting suppression of sales based on search conducted by excise authorities--Central Excise Settlement Commission waiving penalty--Return filed before issue of notice and tax due with interest paid--No concealment of income--Imposition of penalty not justified--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. Vega Auto Accessories Pvt. Ltd. (Karn) . . . 48
Reassessment --Income escaping assessment--Commission paid to directors allowed as business expenditure in original assessment--Order of Tribunal for later year that commission was in lieu of dividend and not allowable--Notice on basis of order--Not a mere change of opinion--Notice valid--Reasons for reopening recorded and notice issued by same Assessing Officer--Notice fixing hearing issued by succeeding Assessing Officer--Not to vitiate proceedings--Income-tax Act, 1961, s. 36(1)(ii), 37, 129, 147, 148-- Dalal and Broacha Stock Broking Pvt. Ltd . v. Asst. CIT
(Bom) . . . 25
Refund --Effect of section 237--Income-tax Act, 1961, s. 237-- Torrent P. Ltd . v. CIT (Guj) . . . 34
Revision --Powers of Commissioners--Commissioner cannot reject application under section 264 and decide the case on merits thereafter--Income-tax Act, 1961, ss. 263, 264-- Torrent P. Ltd. v. CIT (Guj) . . . 34
Search and seizure --Block assessment--Search in premises of firm and partners--Documents discovered disclosing agreement to sell firm--Capital gains not disclosed includible in block assessment--Income-tax Act, 1961, s. 158BC-- CIT v . Kamadhenu Milk Products (Ker) . . . 73
----Block assessment--Surcharge can be levied--Income-tax Act, 1961-- CIT v . Kamadhenu Milk Products (Ker) . . . 73
Volume 354 Part 5 (Issue dated 24-6-2013)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
HIGH COURTS
Assessment --Enquiry--Notice--Co-operative societies--Person--Definition--Includes co-operative society--Notice under section 142(1) to co-operative societies within jurisdiction--Difference between notices issued under sections 133(6) and 142(1)--Income-tax Act, 1961, ss. 2(31), 133(6), 142(1)-- Mangalam Service Co-operative Bank Ltd . v . ITO
(Ker) . . . 601
Business expenditure --Commission--No evidence of services by some of agents--Disallowance of part of commission--Justified--Income-tax Act, 1961-- CIT v . Suzlon Energy Ltd . (Guj) . . . 630
----Del credere selling agent--Brokerage--No necessity to engage service of sub-brokers--No money paid to sub-brokers for years together--No discharge of onus by assessee--Disallowance of brokerage justified--Income-tax Act, 1961, s. 37-- Gyan Chand Jain (Decd.) v . CIT (Raj) . . . 662
Capital gains or business income --Non-compete fee--Insertion of section 28(va) with effect from 1-4-2003--Receipt of non-compete fee prior to 1-4-2003 not taxable--No transfer of any capital asset--No transfer of any right to produce or manufacture any article--Receipt of consideration is for covenant not to compete--Section 55(2) not applicable--Income-tax Act, 1961, ss. 28(va), 55(2)-- CIT v . Sunil Kini K . (Karn) . . . 623
Exemption --Educational institution--Conditions precedent--Educational institution formed by assessee society after rejection of its application by CBSE--Assessee taking premises belonging to institution with infrastructure on lease to run school and paying rent to institution--No prohibition that institution should not receive royalty from assessee--Royalty is necessary to secure use of trade name and infrastructure--No diversion of funds--Assessee entitled to exemption--Income-tax Act, 1961, ss. 11, 13-- Chirec Education Society v . Asst. DIT (AP) . . . 605
Income --Business income--Remission or cessation of liabilities--Finding that there was no cessation of liabilities--Section 41 not applicable--Income-tax Act, 1961, s. 41(1)-- CIT v . Ravjibhai Becharbhai Dhameliya (Guj) . . . 533
----Computation--Disallowance of expenditure relating to non-taxable income--Interest expenses and administrative expenses on investments in subsidiaries--Finding that in respect of part of investment dividends were taxable and in respect of balance assessee had sufficient interest-free funds of its own--No disallowance could be made under section 14A--Income-tax Act, 1961, s. 14A-- CIT v . Suzlon Energy Ltd.
(Guj) . . . 630
Industrial undertaking --Special deduction--Computation of profits for purposes of deduction--Interest on late recovery of sale proceeds--Not deductible from profits--Income-tax Act, 1961, s. 80-IB-- CIT v . Suzlon Energy Ltd . (Guj) . . . 630
----Special deduction--Infrastructure facility--Disqualification where mere works contract undertaken--Authority entering into contract with assessee for repairs and maintenance to infrastructure by construction of permanent bank protection measures to water canals for a period of three years--Assessee to provide bank guarantee for mobilisation advance--Not a case of investment of money by assessee in development of infrastructure or operating and maintaining an infrastructure--Works contract--Assessee not entitled to deduction--Income-tax Act, 1961, s. 80-IA-- Yojaka Marine Pvt. Ltd . v . Asst. CIT (Karn) . . . 530
International transactions --Transfer pricing--Arm’s length price--Allocation of overhead expenses between two segments--No dispute that expenses incurred--No dispute that bifurcation of indirect expenses on basis of revenue appropriate allocation key--Tribunal finding expenses no relation with transfer pricing and not considering while computing arm’s length price--Finding of fact--Income-tax Act, 1961-- Marubeni India Pvt. Ltd. v . DIT (Delhi) . . . 638
----Transfer pricing--Arm’s length price--Amendment to section 92C by insertion of sub-section (2A) with retrospective effect from 1-4-2002--Tribunal finding benefit of 5 per cent. range not available to assessee--Finding of fact--Income-tax Act, 1961 s. 92C(2A)-- Marubeni India Pvt. Ltd . v. DIT (Delhi) . . . 638
----Transfer pricing--Arm’s length price--Closure of business--Compensation received on account of closure of Indian units--No impact on transfer pricing or in fixing of arm’s length price--Income-tax Act, 1961-- Marubeni India Pvt. Ltd. v. DIT
(Delhi) . . . 638
----Transfer pricing--Arm’s length price--Interest earned on deposits made out of surplus funds whether includible in operating income--Nature of business of assessee to be considered--Memorandum of association allowing assessee to earn interest by making investment--No relevance for purposes of transfer pricing regulations--Tribunal finding interest cannot be considered to be its operating income--Finding of fact--Income-tax Act, 1961, s. 92CA(3)-- Marubeni India Pvt. Ltd . v . DIT
(Delhi) . . . 638
----Transfer pricing--Arm’s length price--More than one price determined by most appropriate method--Arm’s length price to be arithmetical mean of such prices--Income-tax Act, 1961, ss. 92, 92C(2)-- CIT v . Mentor Graphics (Noida) Pvt. Ltd.
(Delhi) . . . 586
Interpretation of taxing statutes --Construction that would render a part of statute devoid of any meaning should be avoided-- Chirec Education Society v. Asst. DIT
(AP) . . . 605
Reassessment --Notice--Cellular telecommunication services--Mercantile system of accounting--Pre-paid services--Revenue recognised only when customer actually used network and services actually rendered--Income received in respect of which services not rendered treated as advance in original assessment--Reassessment on ground payments towards recharges not advance but accrued income--Reassessment not valid--Income-tax Act, 1961, ss. 147, 148-- Vodafone West Ltd . v. Asst. CIT (No. 3 )
(Guj) . . . 572
----Notice--†Reason to believe†--Cannot have two meanings one applicable where assessment earlier made under section 143(3) and another applicable where intimation earlier issued under section 143(1)--Assessing Officer believing escapement of income on going through return filed by assessee after accepting return under section 143(1) without scrutiny--Review of earlier proceedings--Reassessment not valid--Income-tax Act, 1961, ss. 147, 148-- CIT v . Orient Craft Ltd. (Delhi) . . . 536
----Notice--Reopening to disallow loss on account of foreign exchange fluctuation and expenses on account of data usage charges but no addition on both items--No reasons recorded that arm’s length price determined by assessee not correct--No addition could be made in reassessment--Income-tax Act, 1961, ss. 92CA, 147, 148-- CIT v. Cheil Communications India Pvt. Ltd. (Delhi) . . . 549
----Notice after four years--Conditions precedent--Commission paid to dealers on pre-paid sim cards and recharge vouchers without deducting tax at source--No dispute that tax was deducted at source and duly deposited with Government--Roaming charges paid to telecom service providers--Full details of such payments readily available with Assessing Officer--Amendment to section 115JB with retrospective effect, book profit to be reworked--Not a ground for reassessment after four years--Notice not valid--Income-tax Act, 1961, ss. 147, 148-- Vodafone West Ltd. v . Asst. CIT (No. 2 )
(Guj) . . . 562
----Notice after four years--Objections of assessee considered on merits--Assessee claiming deduction under section 10B in assessment year 2005-06--Admitting in 2008-09 that amount not yet realised in convertible foreign exchange--Non-disclosure of facts on part of assessee--Reassessment on ground assessee violating conditions of section 10B--Reassessment valid--Income-tax Act, 1961, ss. 10B, 147, 148-- Suntec Business Solutions P. Ltd . v. Union of India (Ker) . . . 657
Revision --Assessing Officer--Order passed to give effect to direction by Commissioner--Scope of section 263--Assessee maintaining two sets of accounts one for mentha business and another for cattle feed and green vegetable business--Accounts relating to mentha business audited--Revision confined to cattle feed and green vegetable business--Mentha business not subject matter of revision--Revision not an open remand order--Assessing Officer not justified in issuing questionnaires with view to passing fresh assessment order for mentha business--Income-tax Act, 1961, s. 263-- Smt. Shobha Govil v . Addl. CIT (All) . . . 668
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
Income-tax Act, 1961 :
S. 2(31) --Assessment--Enquiry--Notice--Co-operative societies--Person--Definition--Includes co-operative society--Notice under section 142(1) to co-operative societies within jurisdiction--Difference between notices issued under sections 133(6) and 142(1)-- Mangalam Service Co-operative Bank Ltd . v . ITO (Ker) . . . 601
S. 10B --Reassessment--Notice after four years--Objections of assessee considered on merits--Assessee claiming deduction under section 10B in assessment year 2005-06--Admitting in 2008-09 that amount not yet realised in convertible foreign exchange--Non-disclosure of facts on part of assessee--Reassessment on ground assessee violating conditions of section 10B--Reassessment valid-- Suntec Business Solutions P. Ltd . v. Union of India (Ker) . . . 657
S. 11 --Exemption--Educational institution--Conditions precedent--Educational institution formed by assessee society after rejection of its application by CBSE--Assessee taking premises belonging to institution with infrastructure on lease to run school and paying rent to institution--No prohibition that institution should not receive royalty from assessee--Royalty is necessary to secure use of trade name and infrastructure--No diversion of funds--Assessee entitled to exemption-- Chirec Education Society v . Asst. DIT (AP) . . . 605
S. 13 --Exemption--Educational institution--Conditions precedent--Educational institution formed by assessee society after rejection of its application by CBSE--Assessee taking premises belonging to institution with infrastructure on lease to run school and paying rent to institution--No prohibition that institution should not receive royalty from assessee--Royalty is necessary to secure use of trade name and infrastructure--No diversion of funds--Assessee entitled to exemption-- Chirec Education Society v . Asst. DIT (AP) . . . 605
S. 14A --Income--Computation--Disallowance of expenditure relating to non-taxable income--Interest expenses and administrative expenses on investments in subsidiaries--Finding that in respect of part of investment dividends were taxable and in respect of balance assessee had sufficient interest-free funds of its own--No disallowance could be made under section 14A-- CIT v . Suzlon Energy Ltd. (Guj) . . . 630
S. 28(va) --Capital gains or business income--Non-compete fee--Insertion of section 28(va) with effect from 1-4-2003--Receipt of non-compete fee prior to 1-4-2003 not taxable--No transfer of any capital asset--No transfer of any right to produce or manufacture any article--Receipt of consideration is for covenant not to compete--Section 55(2) not applicable-- CIT v . Sunil Kini K . (Karn) . . . 623
S. 37 --Business expenditure--Del credere selling agent--Brokerage--No necessity to engage service of sub-brokers--No money paid to sub-brokers for years together--No discharge of onus by assessee--Disallowance of brokerage justified-- Gyan Chand Jain (Decd.) v . CIT (Raj) . . . 662
S. 41(1) --Income--Business income--Remission or cessation of liabilities--Finding that there was no cessation of liabilities--Section 41 not applicable-- CIT v . Ravjibhai Becharbhai Dhameliya (Guj) . . . 533
S. 55(2) --Capital gains or business income--Non-compete fee--Insertion of section 28(va) with effect from 1-4-2003--Receipt of non-compete fee prior to 1-4-2003 not taxable--No transfer of any capital asset--No transfer of any right to produce or manufacture any article--Receipt of consideration is for covenant not to compete--Section 55(2) not applicable-- CIT v . Sunil Kini K . (Karn) . . . 623
S. 80-IA --Industrial undertaking--Special deduction--Infrastructure facility--Disqualification where mere works contract undertaken--Authority entering into contract with assessee for repairs and maintenance to infrastructure by construction of permanent bank protection measures to water canals for a period of three years--Assessee to provide bank guarantee for mobilisation advance--Not a case of investment of money by assessee in development of infrastructure or operating and maintaining an infrastructure--Works contract--Assessee not entitled to deduction-- Yojaka Marine Pvt. Ltd . v . Asst. CIT (Karn) . . . 530
S. 80-IB --Industrial undertaking--Special deduction--Computation of profits for purposes of deduction--Interest on late recovery of sale proceeds--Not deductible from profits-- CIT v . Suzlon Energy Ltd . (Guj) . . . 630
S. 92 --International transactions--Transfer pricing--Arm’s length price--More than one price determined by most appropriate method--Arm’s length price to be arithmetical mean of such prices-- CIT v . Mentor Graphics (Noida) Pvt. Ltd. (Delhi) . . . 586
S. 92C(2) --International transactions--Transfer pricing--Arm’s length price--More than one price determined by most appropriate method--Arm’s length price to be arithmetical mean of such prices-- CIT v . Mentor Graphics (Noida) Pvt. Ltd.
(Delhi) . . . 586
S. 92C(2A) --International transactions--Transfer pricing--Arm’s length price--Amendment to section 92C by insertion of sub-section (2A) with retrospective effect from 1-4-2002--Tribunal finding benefit of 5 per cent. range not available to assessee--Finding of fact-- Marubeni India Pvt. Ltd . v. DIT (Delhi) . . . 638
S. 92CA --Reassessment--Notice--Reopening to disallow loss on account of foreign exchange fluctuation and expenses on account of data usage charges but no addition on both items--No reasons recorded that arm’s length price determined by assessee not correct--No addition could be made in reassessment-- CIT v. Cheil Communications India Pvt. Ltd. (Delhi) . . . 549
S. 92CA(3) --International transactions--Transfer pricing--Arm’s length price--Interest earned on deposits made out of surplus funds whether includible in operating income--Nature of business of assessee to be considered--Memorandum of association allowing assessee to earn interest by making investment--No relevance for purposes of transfer pricing regulations--Tribunal finding interest cannot be considered to be its operating income--Finding of fact-- Marubeni India Pvt. Ltd . v . DIT
(Delhi) . . . 638
S. 133(6) --Assessment--Enquiry--Notice--Co-operative societies--Person--Definition--Includes co-operative society--Notice under section 142(1) to co-operative societies within jurisdiction--Difference between notices issued under sections 133(6) and 142(1)-- Mangalam Service Co-operative Bank Ltd . v . ITO (Ker) . . . 601
S. 142(1) --Assessment--Enquiry--Notice--Co-operative societies--Person--Definition--Includes co-operative society--Notice under section 142(1) to co-operative societies within jurisdiction--Difference between notices issued under sections 133(6) and 142(1)-- Mangalam Service Co-operative Bank Ltd . v . ITO (Ker) . . . 601
S. 147 --Reassessment--Notice--Cellular telecommunication services--Mercantile system of accounting--Pre-paid services--Revenue recognised only when customer actually used network and services actually rendered--Income received in respect of which services not rendered treated as advance in original assessment--Reassessment on ground payments towards recharges not advance but accrued income--Reassessment not valid-- Vodafone West Ltd . v. Asst. CIT (No. 3 ) (Guj) . . . 572
----Reassessment--Notice--†Reason to believe†--Cannot have two meanings one applicable where assessment earlier made under section 143(3) and another applicable where intimation earlier issued under section 143(1)--Assessing Officer believing escapement of income on going through return filed by assessee after accepting return under section 143(1) without scrutiny--Review of earlier proceedings--Reassessment not valid-- CIT v . Orient Craft Ltd. (Delhi) . . . 536
----Reassessment--Notice--Reopening to disallow loss on account of foreign exchange fluctuation and expenses on account of data usage charges but no addition on both items--No reasons recorded that arm’s length price determined by assessee not correct--No addition could be made in reassessment-- CIT v. Cheil Communications India Pvt. Ltd. (Delhi) . . . 549
----Reassessment--Notice after four years--Conditions precedent--Commission paid to dealers on pre-paid sim cards and recharge vouchers without deducting tax at source--No dispute that tax was deducted at source and duly deposited with Government--Roaming charges paid to telecom service providers--Full details of such payments readily available with Assessing Officer--Amendment to section 115JB with retrospective effect, book profit to be reworked--Not a ground for reassessment after four years--Notice not valid-- Vodafone West Ltd. v . Asst. CIT (No. 2 )
(Guj) . . . 562
----Reassessment--Notice after four years--Objections of assessee considered on merits--Assessee claiming deduction under section 10B in assessment year 2005-06--Admitting in 2008-09 that amount not yet realised in convertible foreign exchange--Non-disclosure of facts on part of assessee--Reassessment on ground assessee violating conditions of section 10B--Reassessment valid-- Suntec Business Solutions P. Ltd . v. Union of India (Ker) . . . 657
S. 148 --Reassessment--Notice--Cellular telecommunication services--Mercantile system of accounting--Pre-paid services--Revenue recognised only when customer actually used network and services actually rendered--Income received in respect of which services not rendered treated as advance in original assessment--Reassessment on ground payments towards recharges not advance but accrued income--Reassessment not valid-- Vodafone West Ltd . v. Asst. CIT (No. 3 ) (Guj) . . . 572
----Reassessment--Notice--†Reason to believe†--Cannot have two meanings one applicable where assessment earlier made under section 143(3) and another applicable where intimation earlier issued under section 143(1)--Assessing Officer believing escapement of income on going through return filed by assessee after accepting return under section 143(1) without scrutiny--Review of earlier proceedings--Reassessment not valid-- CIT v . Orient Craft Ltd. (Delhi) . . . 536
----Reassessment--Notice--Reopening to disallow loss on account of foreign exchange fluctuation and expenses on account of data usage charges but no addition on both items--No reasons recorded that arm’s length price determined by assessee not correct--No addition could be made in reassessment-- CIT v. Cheil Communications India Pvt. Ltd. (Delhi) . . . 549
----Reassessment--Notice after four years--Conditions precedent--Commission paid to dealers on pre-paid sim cards and recharge vouchers without deducting tax at source--No dispute that tax was deducted at source and duly deposited with Government--Roaming charges paid to telecom service providers--Full details of such payments readily available with Assessing Officer--Amendment to section 115JB with retrospective effect, book profit to be reworked--Not a ground for reassessment after four years--Notice not valid-- Vodafone West Ltd. v . Asst. CIT (No. 2 )
(Guj) . . . 562
----Reassessment--Notice after four years--Objections of assessee considered on merits--Assessee claiming deduction under section 10B in assessment year 2005-06--Admitting in 2008-09 that amount not yet realised in convertible foreign exchange--Non-disclosure of facts on part of assessee--Reassessment on ground assessee violating conditions of section 10B--Reassessment valid-- Suntec Business Solutions P. Ltd . v. Union of India (Ker) . . . 657
S. 263 --Revision--Assessing Officer--Order passed to give effect to direction by Commissioner--Scope of section 263--Assessee maintaining two sets of accounts one for mentha business and another for cattle feed and green vegetable business--Accounts relating to mentha business audited--Revision confined to cattle feed and green vegetable business--Mentha business not subject matter of revision--Revision not an open remand order--Assessing Officer not justified in issuing questionnaires with view to passing fresh assessment order for mentha business-- Smt. Shobha Govil v . Addl. CIT
(All) . . . 668
