ITAT Upset At Roughneck Recovery Measures Of AO

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Maharashtra Housing & Area Development Authority vs. ADIT (ITAT Mumbai)

AO's action of recovering outstanding taxes without affording reasonable time to take remedial steps is a misuse of powers and a gross violation of the directions laid down by the Courts. AO has to refund the taxes recovered

The assessee received the order of the CIT(A) on 16.11.2013. It filed an appeal before the Tribunal on 18.11.2013 which was the next working day. The assessee also filed an application before the Tribunal requesting stay of demand. The said application was fixed for hearing on 22.11.2013. However, the AO, without awaiting the outcome of the stay application, attached the assessee's bank account u/s 226(3) on 18.11.2013 and withdrew Rs. 159.84 crore. The assessee argued before the Tribunal that the coercive action of the AO was wrong because (i) the AO had taken coercive action before the expiry of time of filing the appeal against the order of the CIT(A), (ii) the action was taken even prior to the disposal of the stay application by the Tribunal and (iii) no prior notice was given to the assessee before taking the recovery action u/s 226(3). HELD by the Tribunal:

The action of the AO in recovering the outstanding without affording the assessee minimum reasonable time to take remedial steps is a misuse of powers and a gross violation of the directions laid down by the Courts as well as the basic rule of law and principles of natural justice. Accordingly, we direct the Revenue to refund the entire amount of Rs. 159.84 crore to the assessee within 10 days from the receipt of this order (Mahindra & Mahindra Ltd UOI 59 ELT 505, Mahindra & Mahindra W.P. 2164/2007, UTI Mutual Fund 345 ITR 71 (Bom), RPG Enterprises 251 ITR 20 (Mum) & MSEB 81 ITD 299 (Mum) followed)

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Oracle India Pvt. Ltd vs. CIT (Delhi High Court)

S. 37(1): Expenditure on acquiring master copy of software subject to obsolescence is deductible as revenue expenditure

Vodafone TP: Tax Dept Should Not Cause Misery And Harass Taxpayers: Bombay High Court

 

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Vodafone India Services Pvt. Ltd (No. 2) vs. UOI (Bombay High Court)

Transfer Pricing: Existence of income is a jurisdictional requirement for the applicability of T. P. provisions. AO must deal with it after giving personal hearing before making reference to TPO. The dept should not treat the assessee as an adversary who has to be taxed, no matter what

The assessee, an Indian company, issued equity shares at the premium of Rs.8591 per share aggregating Rs.246.38 crores to its holding company. Though the transaction was reported as an "international transaction" in Form 3 CEB, the assessee claimed that the transfer pricing provisions did not apply as there was no income arising to it. The AO referred the issue to the TPO without dealing with the preliminary objection. The TPO held that he could not go into the issue whether income had arisen or not because his jurisdiction was limited to determine the ALP. He held that the assessee ought to have charged the NAV of the share (Rs. 53,775) and that the difference between the NAV and the issue price was a deemed loan from the assessee to the holding company for which the assessee ought to have received 13.5% interest. He accordingly computed the adjustment for the shares premium at Rs. 1308 crore and the interest thereon at Rs. 88 crore. The AO passed a draft assessment order u/s 144C(1) in which he held that he was bound u/s 92-CA(4) with the TPO's determination and could not consider the contention whether the transfer pricing provisions applied. The assessee filed a Writ Petition challenging the jurisdiction of the TPO/AO to make the adjustment. On the merits of the adjustment, the assessee filed objections before the DRP. Before the High Court the assessee argued that (i) it was a precondition before the transfer pricing provisions apply that there has to be income arising to the assessee. As the allotment of shares at a premium does not give rise to income, the transfer pricing provisions do not apply, (ii) there was a breach of natural justice because neither the TPO nor the AO had heard the assessee on, or decided, the fundamental issue as to whether the transfer pricing provisions applied at all, (iii) the DRP does not offer an alternative remedy because the DRP has no power to quash the draft assessment order even if it is satisfied that the same is without jurisdiction & (iv) the DRP cannot take an unbiased view because one of its members is the DIT (TP). HELD by the High Court:

(i) The assessee's contention that the DRP does not offer an alternative remedy because it does not have the power to quash the assessment order even if it is satisfied that the same is without jurisdiction is not acceptable because in Vodafone 37 taxmann.com 250 it was held that the DRP's power to confirm would include the power not to confirm and to annul the draft assessment order;

(ii) It is clear from s. 92(1) that there must be income arising/ potentially arising by an international transaction for the application of the transfer pricing provisions. This is a jurisdictional requirement and has to be dealt with by the AO when specifically raised by the assessee before making reference to the AO. Grant of personal hearing before referring the matter to the TPO has to be read into s. 92CA(1) in cases where the very jurisdiction to tax under Chapter X is challenged by the assessee (Veer Gems 351 ITR 35 (Guj) disagreed with to the extent it holds that no hearing is required at the stage of reference to the TPO even on jurisdictional issues). If, after the hearing the assessee, the AO holds that there is an international transaction, that would be binding on the TPO;

(iii) The department's contention, based on CBDT Instruction No.3 dated 20.05.2003, that the action of the AO in referring the international transaction is a mere administrative act is not acceptable. The AO is bound to hear the assessee in respect of jurisdictional issues before making the reference. The failure to do so is an illegality;

(iv) The assessee's contention that the DRP would not give a fair hearing as one of its members is the DIT (TP) is not acceptable because it overlooks the fact that these are not appeal proceedings but to finalize the draft assessment order. Also, the DIT(TP) who approved the TPO's order is not on the panel;

(v) The Revenue should keep in mind the sage advice of Nani Palkhivala that the department should not cause misery and harassment to the taxpayer and the gnawing feeling that he is made the victim of palpable injustice. In this case it would be natural for the assessee to feel harassed as neither the AO nor the TPO gave a hearing or dealt with the preliminary objection. It is hoped that the revenue will be more sensitive to the just demands of the assessee and not treat the assessee as an adversary who has to be taxed, no matter what;

(vi) The DRP should decide the assessee's objection regarding chargeability of alleged shortfall in share premium as a preliminary issue. In case the DRP's decision on the preliminary issue is adverse, the assessee shall be entitled to challenge it in a writ petition if it can show that the DRP's decision on the preliminary issue is patently illegal notwithstanding the availability of alternate remedy before the ITAT.

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Maharashtra Housing & Area Development Authority vs. ADIT (ITAT Mumbai)

AO's action of recovering outstanding taxes without affording reasonable time to take remedial steps is a misuse of powers and a gross violation of the directions laid down by the Courts. AO has to refund the taxes recovered

Deductibility Of Expenditure For Acquiring Software: High Court Explains Law

 

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Oracle India Pvt. Ltd vs. CIT (Delhi High Court)

S. 37(1): Expenditure on acquiring master copy of software subject to obsolescence is deductible as revenue expenditure

The assessee entered into a license agreement with Oracle Corp under which it acquired a non-exclusive & non-assignable right to duplicate software products which were owned by Oracle Corp and to sub-license the same to parties in India. The assessee paid recurring royalty of 30% for the said right. In addition to the royalty, the assessee periodically paid an amount towards "expenditure on import of software master copy". The said master copy was used to replicate the software. The assessee claimed that the said master copies were versions of Oracle's new product offerings which had very accelerated obsolescence and that at any point of time it was not possible to say whether the version will be current for one day or one month. The AO allowed a deduction for the recurring royalty but held that the expenditure for acquiring the software master copy was capital expenditure. On appeal, the CIT(A) reversed the AO on the ground that owing to obsolescence, there was no enduring benefit as there were frequent corrections and up-gradation of the software. On appeal by the department, the Tribunal reversed the CIT(A) and held that the expenditure was capital in nature on the ground that the master copy was an asset of enduring benefit. On appeal by the assessee, HELD reversing the Tribunal:

The assessee's claim that the master copies had high accelerated obsolescence and that even at the point of time of import it was difficult to say whether the version would be replaced by a new or updated version after one day or a month had not been disproved. Also the facts showed that there were periodical imports of the master copies and that the average price per copy was minimal. This was not a case where the master copies contained operating or system software, which normally did not require frequent up-gradation or changes. It is also not the case of an assessee which is the end user of software. It is a case where the assessee is required to repeatedly pay for the master copy media in view of frequent newer or updated versions of the application software from time to time. Once newer or better version of the application software is available, the earlier version is not saleable and does not have any market value for the seller i.e. the assessee. Also, as per the "matching concept" in accountancy, while determining whether expenditure is capital or revenue in nature, the question whether the expenditure would create an asset which is of value in further assessment periods and should be amortised (i.e. depreciated) as long as it has value (subject to the statutory provisions) requires to be considered. If the expenditure does lead to creation of an asset but of a limited or short life, it has to be treated as a liability and not as a fixed asset. The said expenditure cannot be valued for price for future financial years (Oracle Software 320 ITR 546 (SC), Ashahi India Safety Glass 346 ITR 329 (Del), G.E. Capital Services 300 ITR 420 (Del), O.K. Play 346 ITR 57 (P&H), IAEC Pumps 232 ITR 316 (SC) referred)

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CIT vs. Riyaz A. Sheikh (Bombay High Court)

Amount received by partner on his retirement is not chargeable to tax as capital gains

ITAT Duty-Bound To Deal With All Cited Judgements: Gujarat High Court

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Dattani & Co vs. ITO (Gujarat High Court)

ITAT duty-bound to deal with all judgements cited during hearing of appeal

The assessee filed an appeal against an addition for alleged bogus purchases/sales which was dismissed by the Tribunal. The assessee filed an appeal before the High Court claiming that he had relied on the judgement in CIT vs. President Industries 258 ITR 654 in the verbal and written submissions and that the Tribunal had not considered it. HELD by the High Court remanding the case to the Tribunal for fresh consideration:

Whenever any decision has been relied upon and/or cited by the assessee and/or any party, the authority/tribunal is bound to consider and/or deal with the same and opine whether in the facts and circumstances of the particular case, the same will be applicable or not. In the instant case, the Tribunal has failed to consider and/or deal with the aforesaid decision cited and relied upon by the assessee. Under the circumstances, all these appeals are required to be remanded to the Tribunal to consider the addition made by the AO towards alleged bogus purchases/sales and to take appropriate decision in accordance with law and on merits and after considering the decision of this Court in the case of CIT vs. President Industries 258 ITR 654.

See also Naresh K. Pahuja 224 CTR 284 (Bom), Inventure Growth 324 ITR 319 (BOM) (non cited judgements should not be referred to) & Shivsagar Veg. Restaurant (Bom). Contrast with Visvas Promoters 323 ITR 114 (Mad) & Geofin Investment 30 taxmann.com 73. See also Guidelines to Hon'ble Members of ITAT for drafting orders

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DIT vs. Infrasoft Ltd (Delhi High Court)

Non-exclusive & non-transferable license to use customized software not taxable as "royalty" under Article 12 of India-USA DTAA

Income From Supply Of Customized Software Not Taxable As Royalty: Delhi High Court

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DIT vs. Infrasoft Ltd (Delhi High Court)

Non-exclusive & non-transferable license to use customized software not taxable as "royalty" under Article 12 of India-USA DTAA

The assessee, a USA company, set up a branch office in India for the supply of software called "MX". The software was customized for the requirements of the customer (not "shrink wrap"). The Indian branch imported the software package in the form of floppy disks or CDs and delivered it to the customer. It also installed the software and trained the customers. The AO & CIT(A) held that the software was a "copyright" and the income from its license was assessable as "royalty" under Article 12 of the India-USA DTAA. On appeal by the assessee, the Tribunal held, following Motorola 270 ITR (AT) (SB) 62, that the income from license of software was not taxable as "royalty". Before the High Court, the Department argued that in view of CIT vs. Samsung Electronics 345 ITR 494 (Kar), the right to make a copy of the software and storing it amounted to copyright work u/s 14(1) of the Copyright Act and payment made for the grant of a license for the said purpose would constitute royalty. HELD by the High Court dismissing the appeal:

In order to qualify as a royalty payment under Article 12(3) of the India-USA DTAA, it is necessary to establish that there is a transfer of all or any rights (including the granting of any licence) in respect of a copyright of a literary, artistic or scientific work. There is a clear distinction between royalty paid on transfer of copyright rights and consideration for transfer of copyrighted articles. Right to use a copyrighted article or product with the owner retaining his copyright, is not the same thing as transferring or assigning rights in relation to the copyright. The enjoyment of some or all the rights which the copyright owner has, is necessary to invoke the royalty definition. Viewed from this angle, a non-exclusive and non-transferable licence enabling the use of a copyrighted product cannot be construed as an authority to enjoy any or all of the enumerated rights ingrained in Article 12 of DTAA. Where the purpose of the licence or the transaction is only to restrict use of the copyrighted product for internal business purpose, it would not be legally correct to state that the copyright itself or right to use copyright has been transferred to any extent. The parting of intellectual property rights inherent in and attached to the software product in favour of the licensee/customer is what is contemplated by the Treaty. Merely authorizing or enabling a customer to have the benefit of data or instructions contained therein without any further right to deal with them independently does not, amount to transfer of rights in relation to copyright or conferment of the right of using the copyright. The transfer of rights in or over copyright or the conferment of the right of use of copyright implies that the transferee/licensee should acquire rights either in entirety or partially co-extensive with the owner/ transferor who divests himself of the rights he possesses pro tanto. The license granted to the licensee permitting him to download the computer programme and storing it in the computer for his own use is only incidental to the facility extended to the licensee to make use of the copyrighted product for his internal business purpose. The said process is necessary to make the programme functional and to have access to it and is qualitatively different from the right contemplated by Article 12 because it is only integral to the use of copyrighted product. Apart from such incidental facility, the licensee has no right to deal with the product just as the owner would be in a position to do. Consequently there is no transfer of any right in respect of copyright by the assessee and it is a case of mere transfer of a copyrighted article. The payment is for a copyrighted article and represents the purchase price of an article and cannot be considered as royalty either under the Income-tax Act or under the DTAA (Ericson AB 343 ITR 370 (Del) & Nokia Networks OY 25 taxmann.com 225 followed; Samsung Electronics 345 ITR 494 (Kar) not followed)

Contrast with Reliance Infocom/ Lucent Technologies (ITAT Mum) where it was held that Ericson AB 343 ITR 370 (Del) & Nokia Networks OY 25 taxmann.com 225 applied only to cases where the software was embedded in the hardware and not to pure license cases

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Crores Of Revenue Locked Up In Litigation But No Money For ITAT Working?

High Court Lays Down Important Law On Taxability Of Equipment Rental As Royalty

 

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Poompuhar Shipping Corporation Ltd vs. ITO (Madras High Court)

S. 9(1)(vi)/ Article 12: Equipment rental is taxable as "royalty" even if payer does not have control. The retrospective insertion of Explanation 5 to s. 9(1)(vi) is purely clarificatory

The High Court had to consider the following issues in the context of a bare-boat charter of a shipping vessel from a foreign party, the income whereof was held assessable as "royalty" u/s 9(1)(vi) & Article 12 in the hands of the foreign party: (i) whether the expression 'use or right to use' in clause (iva) of Explanation 2 to s. 9(1)(vi) & Article 12 of the DTAA requires that there should be a "transfer of effective control for use" in favour of the lessee?, (ii) what is the impact of the retrospective insertion of Explanation 5 to s. 9(1)(vi) on the taxability of equipment royalty?, (ii) whether a ship can be regarded as "equipment"?, (iii) whether if the ship is used for plying between coastal waters, it can be said to be used for "international traffic"?, (iv) whether the two berths reserved for the ships chartered by the assessee can be said to be a "permanent establishment" of the foreign owner? & (v) whether a person who is treated as an "agent" u/s 163 can also be proceeded against u/s 201 for failure to deduct TDS? HELD by the High Court:

(i) The assessee's argument that in a case where physical possession is not with the transferee or the lessee or the hirer, the payment made for the use of or right to use of equipment would not constitute 'royalty' is not acceptable. Under clause (iva) of Explanation 2 to s. 9(1)(vi) 'royalty' means the consideration paid for "the use or right to use". Irrespective of whether there is any transfer or not, the consideration paid for use or right to use simpliciter is sufficient for the consideration being called as 'royalty'. The presence or absence of possession, effective/general control and custody with the assessee, even though may be matters of agreement, are not of any relevance to decide the character of payment. The same result applies under Article 12 of the DTAA (Gosalia Shipping 113 ITR 307 (SC), OECD Commentary referred);

(ii) Explanation 5, inserted by Finance Act, 2012, w.r.e.f. 01.06.1976 clarifies that irrespective of control or possession or use or location in India such right, property or information with the payer; the payment is taxable as royalty. The Revenue does not need the assistance of Explanation 5 because even if the possession of the ship is with the owner, he has parted with the "right to use" the ship and the consideration thereof constitutes "royalty" even without Explanation 5;

(iii) The assessee's argument that ship is not an "equipment" for purposes of s. 9(1)(vi) is not acceptable. The word 'any' preceding an equipment clearly points out the need for construing 'equipment' widely so as to embrace every article employed by the employer for the purposes of his business. A ship is "plant" u/s 43(3). "Plant" includes 'all equipment' used by a business man for carrying on his business. As a ship is used to carry on business, it is "equipment";

(iv) The argument that a ship used for plying between coastal lines on the Indian shore is used in "international traffic" is not acceptable in view of the OECD Commentary;

(v) On the question of permanent establishment, a moving ship is a place of business in the place where the ship is docked. The fact that the ship moved from one point to another is the result of the nature of business contract and the movement is an integrated one having business and geographical coherence. Accordingly, the foreign enterprise has a permanent establishment in India when its ships are in India and the berths are reserved for it. However, the royalties paid are not "effectively connected" or attributable to such permanent establishment. Accordingly, the payment falls for consideration only under Article 12 and not under Article 7;

(vi) The assessee's argument that a person who is treated as an "agent" u/s 163 cannot be proceeded against u/s 201 for failure to deduct TDS is not correct because the two provisions operate in different spheres. S. 195 casts an obligation on TDS on any person responsible for paying, whereas s. 163 is for assessment purposes. Proceedings u/s 201 has nothing to do with the status of the assessee as an agent u/s 160 and 163 which would assume significance only for assessment purposes (Premier Tyres 134 ITR 17 (Bom) noted)

Note: Consider the impact of this verdict on Kotak Mahindra Primus 105 TTJ (Mum) 578, Standard Chartered Bank 47 SOT 191, Yahoo India 140 TTJ 195 (Mum) & Right Florists 143 ITD 445 (Kol)

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CBEC VCES Clarification Circular No.174/9/2013

ITAT Irked By Lackluster Attempt Of Counsels

 

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Paresh S. Shah vs. ITO (ITAT Mumbai)

Failure to comply with the criterion necessary to represent the matter before the Tribunal, in time, renders appeal liable for dismissal

The assessee filed an appeal before the Tribunal but repeatedly sought adjournments. He also did not file a letter of authority authorizing his CAs to appear in the appeal. The Tribunal dismissed the appeal on the ground that the assessee is not interested in pursuing the appeal. Thereafter, the assessee filed a Miscellaneous Application seeking restoration of the appeal. The Tribunal restored the appeal even though no power of attorney was filed even at this stage. Even after recalling the appeals the assessee continued to seek adjournments on one pretext or the other. The Tribunal dismissed the appeals and also awarded costs. The assessee again filed a Miscellaneous Application seeking restoration of the appeal. At the hearing of the MA, the power of attorney of the Counsel was not filed. HELD by the Tribunal dismissing the MA:

(i) It deserves to be noticed here that in Mumbai, despite repeatedly pointing out in each and every case, learned counsels rarely follow the practice of filing the power of attorney and many Members of the Tribunal, who do not believe it be their obligation to verify the availability of power of attorney, may not point out the same to the counsels and it results in counsels appearing without filing a power of attorney. There are equal number of occasions where several other Members, including Members of this Bench, have had occasion to point out that there was no power of attorney and counsels filed xerox copies or take further time to file power of attorney. In fact some would go to the extent of stating that they assumed that the power of attorney is on record and when we verify the file (though it is their duty to file power of attorney) and inform the counsel that there is no power of attorney then fresh power of attorney is filed. Particularly in the bench which is presided over by the Vice President, the registry notes on the file that the power of attorney of a person, who is representing the matter, is not on record and then the power of attorney is filed, notwithstanding the fact that before filing the power of attorney the same counsel or Chartered Accountant must have already taken adjournments on several occasions.

(ii) On facts, there is no sufficient cause for restoration of the appeal under the proviso to Rule 24. The power of attorney has not been filed. The appeals were dismissed twice as adjournments were sought on spurious grounds. The assessee and his counsels have done lackluster attempt to represent the matters by not fulfilling all the criterion necessary to represent the matter before the Tribunal, in time.

Note: All practitioners are requested to strictly follow the Practical Guide To Appearing Before The Income-tax Appellate Tribunal to avoid a similar fate as the assessee herein

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S. 144C: CBDT Circular On Applicability Of DRP Law w.e.f. 1.10.2009

ITR (TRIB) VOL 28 PART 1

 

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB)) -- PRINT AND ONLINE EDITION

 

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Charitable purpose --Registration of trusts--Cancellation of registration--Activities of trust contrary to objects of trust--Collection of excess fee not accounted in books of account--Commissioner has power to cancel registration--Order of Commissioner justified--Income-tax Act, 1961, ss. 12A, 12AA(3)-- Joginpally BR Educational Society v. CIT (Central) (Hyderabad) . . . 639

Penalty --Acceptance or repayment of loans or deposits in cash exceeding specified limit--Assessee, a “shroff†, doing cheque-discounting business--Farmers selling their produce to traders, who made payment by way of post-dated crossed cheques--Agriculturists getting cheques discounted for cash by assessee--Transactions not loan or deposit in hands of assessee--Penalty not leviable--Income-tax Act, 1961, ss. 269SS, 269T, 271D, 271E-- ITO v. Dineshchandra Shantilal Shah (HUF) (Ahmedabad) . . . 647

PRINT EDITION

Volume 28 : Part 1 (Issue dated : 25-11-2013)

SUBJECT INDEX TO CASES REPORTED

Business expenditure --Accrued or contingent liability--Provision for service warranty--Allowable-- Assistant CIT v. L. G. Electronics India P. Ltd. (Delhi) . . . 1

----Disallowance--Expenditure on maintaining and running of branch--Similar issue decided in favour of assessee in assessment year 2006-07--To be allowed--Income-tax Act, 1961-- Emkay Share and Stock Brokers P. Ltd. v. Deputy CIT (No. 2) (Mumbai) . . . 64

----Disallowance--Payments liable to tax deduction at source--Assessee deposited tax deducted amount before due date for filing return--No disallowance under section 40(a)(ia)--Income-tax Act, 1961, s. 40(a)(ia)-- Madineni Mohan v. Income-tax Officer (Hyderabad) . . . 157

----Expenditure incurred on commission and foreign travel--Failure of assessee to demonstrate nature and extent of service rendered by agent--No full details with regard to foreign travel--Failure of assessee to produce proper evidence--Burden of proof on assessee not discharged--Disallowance of expenditure proper--Income-tax Act, 1961, s. 37-- Kanu Kitchen Kulture P. Ltd. v. Deputy CIT (Delhi) . . . 49

----Expenditure on acquisition of distribution rights of feature films--No income generated out of acquisition of film rights--Disallowance of expenditure justified--Income-tax Rules, 1962, r. 9B(4)-- Malayala Manorama Co. Ltd. v. Assistant CIT (Cochin) . . . 144

Capital gains --Computation of capital gains--Fair market value--Reference to Valuation Officer--Assessment adopting value according to stamp valuation authorities under section 50C--Report of Valuation Officer disclosing enhanced value received after completion of assessment--Assessing Officer cannot invoke section 155(15) to modify order in accordance with report of Departmental Valuation Officer--Departmental Valuation Officer’s value outside scope of section 155(15)--Income-tax Act, 1961, ss. 50C, 55A, 155(15)-- Additional CIT v. Rajkumar L. Daryanani (Mumbai) . . . 72

Capital or revenue expenditure --Expenditure incurred for consultancy charges for developing new line of business--Revenue expenditure--Income-tax Act, 1961-- Agrani Telecom Ltd. v. Assistant CIT (Mumbai) . . . 58

Debentures --Whether security or loan or deposit-- Deputy CIT v. Sahara India Commercial Corporation Ltd. (Delhi) . . . 108

Depreciation --Additional depreciation--Allowable only for assets used for purpose of manufacture--Assets for use in business of broadcasting--Not manufacture--Additional depreciation not allowable--Income-tax Act, 1961, s. 32(1)(iia)-- Malayala Manorama Co. Ltd. v. Assistant CIT (Cochin) . . . 144

----Condition precedent for allowance--User of asset for purpose of business--Purchase of equipment to start business of FM broadcasting--Licence obtained only in following year--Business not commenced in year in question--No material to show preparation of programmes--Depreciation not allowable in year in question--Income-tax Act, 1961, s. 32(1)-- Malayala Manorama Co. Ltd. v. Assistant CIT (Cochin) . . . 144

Exemption --Export--Expenditure incurred on communication charges--Excludible from export turnover and total turnover--Income-tax Act, 1961, s. 10A-- Cognizant Technology Services P. Ltd. v. Assistant CIT (Hyderabad) . . . 125

International transactions --Arm’s length price--Determination--Contribution towards global sponsorship of World Cup cricket tournament shared between assessee and parent company in ratio 40 : 60--Proper--Reimbursement of advertisement expenses of assessee by associated enterprises--Matter remanded for readjudication in light of Special Bench order--Remand would not change basis of adjustment made by Transfer Pricing Officer--Income-tax Act, 1961, s. 92CA-- Assistant CIT v. L. G. Electronics India P. Ltd. (Delhi) . . . 1

----Transfer pricing--Arm’s length price--Selection of comparables--Functionally different and super normal profit companies cannot be treated as comparables--Company with Rs. 200 crores turnover can be accepted as comparable when assessee’s turnover is above Rs. 151 crores--Direction to Assessing Officer to verify facts related to some comparables and to provide opportunity of being heard to assessee--Income-tax Act, 1961-- Cognizant Technology Services P. Ltd. v. Assistant CIT (Hyderabad) . . . 125

Non-resident --Income deemed to accrue or arise in India--Deduction of tax at source--Fees for technical services--Definition--Assessee making use of assistance rendered by foreign company in decision making process of management--Foreign company also giving training to assessee’s employees--Service falls under definition of technical services--Assessee liable to deduct tax at source on payment therefor--Income-tax Act, 1961, ss. 9(1)(vii), 40(a)(ia), 195--Double Taxation Avoidance Agreement between India and the U. S. A., art. 12(4)(b)-- US Technology Resources P. Ltd. v. Assistant CIT (Cochin) . . . 26

Penalty --Acceptance of deposits otherwise than by crossed cheque--Optionally fully convertible debentures issued by company--Are security not loan or deposit--Section 269SS not applicable--Penalty not attracted--Income-tax Act, 1961, ss. 269SS, 271D-- Deputy CIT v. Sahara India Commercial Corporation Ltd. (Delhi) . . . 108

----Concealment of income--Disclosure and surrender of cash during search--Due date of filing of return not expired on date of surrender--Failure to declare sum in return but revised return filed and tax paid with interest--Inadvertent mistake--Assessee entitled to benefit of Explanation 5(2) to section 271(1)(c)--Income-tax Act, 1961, ss. 132, 271(1)(c), Expln. 5 -- Joint CIT (OSD) v. Bhagwan Dass Garg (Chandigarh) . . . 77

----Concealment of income--Sale of plot of land--No evidence to show payment of higher sale consideration than disclosed in sale deed--Enhancement of rates for making estimated addition--No penalty leviable for estimated addition--Income-tax Act, 1961, ss. 145(3), 271(1)(c)-- Joint CIT (OSD) v. Bhagwan Dass Garg (Chandigarh) . . . 77

Recovery of tax --Notice of demand--Levy of interest--Direction to Assessing Officer to verify whether interest has been charged under demand notice or original assessment--Matter remanded--Income-tax Act, 1961, s. 220(2)-- Emkay Share and Stock Brokers P. Ltd. v. Deputy CIT (No. 2) (Mumbai) . . . 64

Unexplained investment --Appeal to Commissioner (Appeals)--Additional evidence--Closing stock shown in audited balance-sheet on March 31 less than stock statement submitted to bank on March 30--Sales booked on March 31 and reconciliation statement produced before Commissioner (Appeals)--Either closing stock or additional evidence of sales should be accepted--No cogent reason for rejecting reconciliation statement--Income-tax Act, 1961, s. 69--Income-tax Rules, 1962, r. 46A-- Munish Kumar Bansal v. Joint CIT (Amritsar) . . . 89

Words and phrases --“Decision making†--Meaning of-- US Technology Resources P. Ltd. v. Assistant CIT (Cochin) . . . 26

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between India and the U. S. A.

Art. 12(4)(b) ----Income deemed to accrue or arise in India--Deduction of tax at source--Fees for technical services--Definition--Assessee making use of assistance rendered by foreign company in decision making process of management--Foreign company also giving training to assessee’s employees--Service falls under definition of technical services--Assessee liable to deduct tax at source on payment therefor-- US Technology Resources P. Ltd. v. Assistant CIT (Cochin) . . . 26

Income-tax Act, 1961

S. 9(1)(vii) --Non-resident--Income deemed to accrue or arise in India--Deduction of tax at source--Fees for technical services--Definition--Assessee making use of assistance rendered by foreign company in decision making process of management--Foreign company also giving training to assessee’s employees--Service falls under definition of technical services--Assessee liable to deduct tax at source on payment therefor-- US Technology Resources P. Ltd. v. Assistant CIT (Cochin) . . . 26

S. 10A --Exemption--Export--Expenditure incurred on communication charges--Excludible from export turnover and total turnover-- Cognizant Technology Services P. Ltd. v. Assistant CIT (Hyderabad) . . . 125

S. 32(1) --Depreciation--Condition precedent for allowance--User of asset for purpose of business--Purchase of equipment to start business of FM broadcasting--Licence obtained only in following year--Business not commenced in year in question--No material to show preparation of programmes--Depreciation not allowable in year in question-- Malayala Manorama Co. Ltd. v. Assistant CIT (Cochin) . . . 144

S. 32(1)(iia) --Depreciation--Additional depreciation--Allowable only for assets used for purpose of manufacture--Assets for use in business of broadcasting--Not manufacture--Additional depreciation not allowable-- Malayala Manorama Co. Ltd. v. Assistant CIT (Cochin) . . . 144

S. 37 --Business expenditure--Expenditure incurred on commission and foreign travel--Failure of assessee to demonstrate nature and extent of service rendered by agent--No full details with regard to foreign travel--Failure of assessee to produce proper evidence--Burden of proof on assessee not discharged--Disallowance of expenditure proper-- Kanu Kitchen Kulture P. Ltd. v. Deputy CIT (Delhi) . . . 49

S. 40(a)(ia) --Business expenditure--Disallowance--Payments liable to tax deduction at source--Assessee deposited tax deducted amount before due date for filing return--No disallowance under section 40(a)(ia)-- Madineni Mohan v. Income-tax Officer (Hyderabad) . . . 157

----Non-resident--Income deemed to accrue or arise in India--Deduction of tax at source--Fees for technical services--Definition--Assessee making use of assistance rendered by foreign company in decision making process of management--Foreign company also giving training to assessee’s employees--Service falls under definition of technical services--Assessee liable to deduct tax at source on payment therefor-- US Technology Resources P. Ltd. v. Assistant CIT (Cochin) . . . 26

S. 50C --Capital gains--Computation of capital gains--Fair market value--Reference to Valuation Officer--Assessment adopting value according to stamp valuation authorities under section 50C--Report of Valuation Officer disclosing enhanced value received after completion of assessment--Assessing Officer cannot invoke section 155(15) to modify order in accordance with report of Departmental Valuation Officer--Departmental Valuation Officer’s value outside scope of section 155(15)-- Additional CIT v. Rajkumar L. Daryanani (Mumbai) . . . 72

S. 55A --Capital gains--Computation of capital gains--Fair market value--Reference to Valuation Officer--Assessment adopting value according to stamp valuation authorities under section 50C--Report of Valuation Officer disclosing enhanced value received after completion of assessment--Assessing Officer cannot invoke section 155(15) to modify order in accordance with report of Departmental Valuation Officer--Departmental Valuation Officer’s value outside scope of section 155(15)-- Additional CIT v. Rajkumar L. Daryanani (Mumbai) . . . 72

S. 69 --Unexplained investment--Appeal to Commissioner (Appeals)--Additional evidence--Closing stock shown in audited balance-sheet on March 31 less than stock statement submitted to bank on March 30--Sales booked on March 31 and reconciliation statement produced before Commissioner (Appeals)--Either closing stock or additional evidence of sales should be accepted--No cogent reason for rejecting reconciliation statement-- Munish Kumar Bansal v. Joint CIT (Amritsar) . . . 89

S. 92CA --International transactions--Arm’s length price--Determination--Contribution towards global sponsorship of World Cup cricket tournament shared between assessee and parent company in ratio 40 : 60--Proper--Reimbursement of advertisement expenses of assessee by associated enterprises--Matter remanded for readjudication in light of Special Bench order--Remand would not change basis of adjustment made by Transfer Pricing Officer-- Assistant CIT v. L. G. Electronics India P. Ltd. (Delhi) . . . 1

S. 132 --Penalty--Concealment of income--Disclosure and surrender of cash during search--Due date of filing of return not expired on date of surrender--Failure to declare sum in return but revised return filed and tax paid with interest--Inadvertent mistake--Assessee entitled to benefit of Explanation 5(2) to section 271(1)(c)-- Joint CIT (OSD) v. Bhagwan Dass Garg (Chandigarh) . . . 77

S. 145(3) --Penalty--Concealment of income--Sale of plot of land--No evidence to show payment of higher sale consideration than disclosed in sale deed--Enhancement of rates for making estimated addition--No penalty leviable for estimated addition-- Joint CIT (OSD) v. Bhagwan Dass Garg (Chandigarh) . . . 77

S. 155(15) --Capital gains--Computation of capital gains--Fair market value--Reference to Valuation Officer--Assessment adopting value according to stamp valuation authorities under section 50C--Report of Valuation Officer disclosing enhanced value received after completion of assessment--Assessing Officer cannot invoke section 155(15) to modify order in accordance with report of Departmental Valuation Officer--Departmental Valuation Officer’s value outside scope of section 155(15)-- Additional CIT v. Rajkumar L. Daryanani (Mumbai) . . . 72

S. 195 --Non-resident--Income deemed to accrue or arise in India--Deduction of tax at source--Fees for technical services--Definition--Assessee making use of assistance rendered by foreign company in decision making process of management--Foreign company also giving training to assessee’s employees--Service falls under definition of technical services--Assessee liable to deduct tax at source on payment therefor)-- US Technology Resources P. Ltd. v. Assistant CIT (Cochin) . . . 26

S. 220(2) --Recovery of tax--Notice of demand--Levy of interest--Direction to Assessing Officer to verify whether interest has been charged under demand notice or original assessment--Matter remanded-- Emkay Share and Stock Brokers P. Ltd. v. Deputy CIT (No. 2) (Mumbai) . . . 64

S. 269SS --Penalty--Acceptance of deposits otherwise than by crossed cheque--Optionally fully convertible debentures issued by company--Are security not loan or deposit--Section 269SS not applicable--Penalty not attracted-- Deputy CIT v. Sahara India Commercial Corporation Ltd. (Delhi) . . . 108

S. 271(1)(c) --Penalty--Concealment of income--Sale of plot of land--No evidence to show payment of higher sale consideration than disclosed in sale deed--Enhancement of rates for making estimated addition--No penalty leviable for estimated addition-- Joint CIT (OSD) v. Bhagwan Dass Garg (Chandigarh) . . . 77

S. 271(1)(c), Expln. 5 --Penalty--Concealment of income--Disclosure and surrender of cash during search--Due date of filing of return not expired on date of surrender--Failure to declare sum in return but revised return filed and tax paid with interest--Inadvertent mistake--Assessee entitled to benefit of Explanation 5(2) to section 271(1)(c)-- Joint CIT (OSD) v. Bhagwan Dass Garg (Chandigarh) . . . 77

S. 271D --Penalty--Acceptance of deposits otherwise than by crossed cheque--Optionally fully convertible debentures issued by company--Are security not loan or deposit--Section 269SS not applicable--Penalty not attracted-- Deputy CIT v. Sahara India Commercial Corporation Ltd. (Delhi) . . . 108

Income-tax Rules, 1962

R. 9B(4) --Business expenditure--Expenditure on acquisition of distribution rights of feature films--No income generated out of acquisition of film rights--Disallowance of expenditure justified-- Malayala Manorama Co. Ltd. v. Assistant CIT (Cochin) . . . 144

R. 46A --Unexplained investment--Appeal to Commissioner (Appeals)--Additional evidence--Closing stock shown in audited balance-sheet on March 31 less than stock statement submitted to bank on March 30--Sales booked on March 31 and reconciliation statement produced before Commissioner (Appeals)--Either closing stock or additional evidence of sales should be accepted--No cogent reason for rejecting reconciliation statement-- Munish Kumar Bansal v. Joint CIT (Amritsar) . . . 89

 

ITR VOL 358 PART 4

 

INCOME TAX REPORTS (ITR)--PRINT AND ONLINE EDITION

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

HIGH COURTS

Business expenditure --Disallowance--Advertisement expenses--Assessee procuring usage rights for brand name--Expenditure incurred on advertisement of products manufactured by it under such brand name--No part of expenditure expended for any purpose other than for assessee’s business--That other persons incidentally benefited from advertisements issued by assessee--Not a ground for disallowance of expenditure--Income-tax Act, 1961, s. 37(2B)-- CIT v. Khambhatta Family Trust (Guj) . . . 485

Company --Book profit--Disallowance of expenditure in relation to exempted income--Addition to book profit of proportionate expenditure attributable to exempted income--Justified--Income-tax Act, 1961, s. 115JA-- CIT v. State Bank of Travancore (Ker) . . . 484

Search and seizure --Block assessment--Undisclosed income--Assessment of third person--Limitation--Assessment completed within two years from end of month in which notice issued under section 158BD--Not barred by limitation--Income-tax Act, 1961, ss. 158BD, 158BE(2)(b)-- CIT v. Bimbis Creams and Bakes (Ker) . . . 466

----Block assessment--Undisclosed income--Assessment of third person--Notice--Person against whom search conducted and third person assessed by same Assessing Officer--No question of transfer of file from one officer to another--Assessing Officer need not record satisfaction before issuing notice to assessee (third person)--Block assessment of assessee valid--Income-tax Act, 1961, ss. 158BC, 158BD-- CIT v. Bimbis Creams and Bakes (Ker) . . . 466

----Block assessment--Undisclosed income--Benami purchase of property--Possession of document is a relevant and important piece of evidence--Documents seized in residence of assessee including general power of attorney and agreement to sell signed by seller--No explanation from assessee relating to documents--Books of account of assessee not disclosing investment--Name of buyer not mentioned in documents--Presumption that property represented undisclosed income of assessee--Justified--Income-tax Act, 1961, s. 158BC-- CIT v. Jai Pal Aggarwal (Delhi) . . . 472

----Block assessment--Undisclosed income--Documents merely showing a figure without any details but details of fixed deposits made with bank given interest rate--Tribunal deleting addition on account of fixed deposits and treating it as dumb documents--Finding not perverse--Income-tax Act, 1961, s. 158BC-- CIT v. Jai Pal Aggarwal (Delhi) . . . 472

----Block assessment--Undisclosed income--Investment in business--Document seized from assessee’s nephew containing date-wise receipts of amounts from assessee--Assessee’s nephew employed some time with assessee and no business of his own prior to search--Tribunal without going into facts ought not to have deleted addition on investment in business--Income-tax Act, 1961, s. 158BC-- CIT v. Jai Pal Aggarwal (Delhi) . . . 472

----Block assessment--Undisclosed income--No explanation for cash deposit in assessee’s bank account--Tribunal relying on annexure containing explanation of assessee--Annexure not part of record--Whether addition sustainable--Matter remanded to Assessing Officer--Income-tax Act, 1961, s. 158BC-- CIT v. Jai Pal Aggarwal (Delhi) . . . 472

 

PRINT EDITION

ITR Volume 358 : Part 4 (Issue dated : 18-11-2013)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

SUPREME COURT

Penalty --Concealment of income--General principles--Voluntary surrender of income--No automatic immunity from penalty--Surrender “subject to non-initiation of penalty proceedings and prosecution†--Does not absolve assessee from liability to penalty--Whether assessee has offered an explanation for concealment or furnishing of inaccurate particulars of income to be seen--Surrender of income pursuant to notice calling for information in respect of documents found during survey of sister concern--Not voluntary--No intention to declare true income--Penalty proceedings justified--Income-tax Act, 1961, s. 271(1)(c), Expln. 1 -- MAK Data P. Ltd. v. CIT . . .593

----Concealment of income--Satisfaction of Assessing Officer--Need not be recorded in particular manner--Income-tax Act, 1961, s. 271(1)(c)-- MAK Data P. Ltd. v. CIT . . .593

HIGH COURTS

Appeal to Appellate Tribunal --Cash credits--Disallowance of gifts under section 68--Difference of opinion between Members of Tribunal whether addition to be under section 68 or section 69--Genuineness of gifts not considered on the merits--Reference to Third Member--Appeal of assessee dismissed as a result of opinion of Third Member--Not proper--Matter to be decided on the merits in the light of majority opinion--Income-tax Act, 1961, ss. 68, 69, 255(4)-- Smt. Renu Aggarwal v. ITO (All) . . . 483

----Difference of opinion between Members of two-Member Bench--Reference to Third Member--Decision of Tribunal not a decision of three-Member Bench--Amenable to rectification under section 254(2)--Income-tax Act, 1961, ss. 254(2), 255(4)-- Smt. Renu Aggarwal v. ITO (All) . . . 483

----Rectification of mistakes--Mistake apparent from record--Matter referred to Third Member on question of law with respect to addition made under section 68--Conscious omission to consider issue of genuineness of gifts on the merits--Not a mistake for rectification--Income-tax Act, 1961, ss. 68, 254(2)-- Smt. Renu Aggarwal v. ITO (All) . . . 483

Appeal to High Court --Powers of High Court--High Court has inherent power to review its decision--Income-tax Act, 1961, s. 260A-- Meghalaya Steels Ltd. v. CIT (Gauhati) . . . 551

----Procedure laid down in section 260A must be followed strictly--Failure to formulate substantial question of law--Error to be rectified--Income-tax Act, 1961, s. 260A-- Meghalaya Steels Ltd. v. CIT (Gauhati) . . . 551

Appeal to Supreme Court --Application for review to High Court--Subsequent condonation of delay and admission of special leave petition--High Court has jurisdiction to review its decision--Income-tax Act, 1961-- Meghalaya Steels Ltd. v. CIT (Gauhati) . . . 551

Business expenditure --Disallowance--Firm--Remuneration paid to partners--Ceiling on--Assessee engaged in seasonal business of ginning cotton--Income generated from spare funds invested in fixed deposits--Interest declared as part of business income and assessed as such--To be taken into account for purpose of ceiling on remuneration of partners--Whether only business income and no other income to be taken into account for this purpose not considered--Income-tax Act, 1961, s. 40(b)-- CIT v. J. J. Industries (Guj) . . . 531

Capital gains --Short-term or long-term capital gains--Conversion of leasehold rights into freehold rights--Conversion by way of improvement of title--No effect on the taxability of profits--Income-tax Act, 1961, s. 2(42B)-- CIT v. Smt. Rama Rani Kalia (All) . . . 499

Capital or revenue expenditure --Company--Expenditure on increase of share capital to augment working capital--Purpose of public issue not achieved on account of non-clearance from SEBI--Capital expenditure--Income-tax Act, 1961-- Mascon Technical Services Ltd. v. CIT (Mad) . . . 545

----Share issue expenses--Despatch and out of pocket expenses--Registration fees--Listing fees--Stationery expenses--Travelling and meeting expenses--Bank charges and commission--Prof. certificate--Revenue expenditure--Income-tax Act, 1961-- CIT v. Kreon Financial Services Ltd. (Mad) . . . 542

Charitable purpose --Charitable trust--Computation of income of trust--Depreciation on fixed assets of which cost had already been claimed as application of income--Allowable--Income-tax Act, 1961-- CIT v. Devi Sakuntala Tharal Charitable Foundation (MP) . . . 452

Depreciation --Intangible assets--Software development--Assessee developing software with special application and getting it registered as trade mark--Details of expenditure thereon produced--Assessee entitled to depreciation--Income-tax Act, 1961, s. 32-- CIT v. Net 4 Nuts Ltd. (Guj) . . . 535

----Investment allowance--Carry forward and set off--Unabsorbed depreciation and investment allowance could be set off against capital gains in assessment year 1992-93--Income-tax Act, 1961, ss. 32, 263-- CIT v. Kisan Engineering Works Ltd. (All) . . . 510

Export of computer software --Exemption--Registration under Software Technology Parks of India obtained after commencement of manufacture--Power of Software Technology Parks of India to convert domestic tariff area unit into Software Technology Parks of India unit--No export made prior to date of registration--Unit entitled to exemption--Income-tax Act, 1961, s. 10A--CBDT Circular No. 1 of 2005, dated 6-1-2005-- CIT v. Expert Outsource P. Ltd. (Karn) . . . 518

----Exemption--Unit existing from 1994 but obtaining registration as 100 per cent. export oriented unit for computer software in 2002--Entitled to deduction--Cannot be denied deduction on ground of transfer of plant and machinery previously used to export unit--Income-tax Act, 1961, s. 10A-- Nagesh Chundur v. CIT (Mad) . . . 521

Firm --Registration--Condition precedent--Division of profits not governed by statutory provision--Mistake in partnership deed regarding division of profits--Mistake rectified--Firm entitled to registration--Income-tax Act, 1961, ss. 184, 185--Indian Partnership Act, 1932-- CIT v. Alison Singh and Co. (All) . . . 458

Precedent --Effect of decisions of Supreme Court in M. Janardhana Rao v. Joint CIT [2005] 273 ITR 50 (SC) and Kunhayammed v. State of Kerala [2000] 245 ITR 360 (SC)-- Meghalaya Steels Ltd. v. CIT (Gauhati) . . . 551

----High Court--Pendency of appeal from order relied on by Tribunal--Not material-- CIT v. Net 4 Nuts Ltd. (Guj) . . . 535

Reassessment --Notice--Notice not to be issued on hypothesis or contingency which may emerge in future--†Has escaped assessment†indicating an event which has taken place--Notice issued on alternative basis for taxing income--Not valid--Income-tax Act, 1961, ss. 147, 148-- DHFL Venture Capital Fund v. ITO (Bom) . . . 471

Refund --Effect of section 245--Adjustment of refund against sums due from assessee--Adjustment cannot be made without prior intimation--Income-tax Act, 1961, s. 245-- Jeans Knit P. Ltd. v. Deputy CIT (Karn) . . . 505

Search and seizure --Block assessment--Undisclosed income of third person--Notice under section 153C--Condition precedent--Satisfaction that undisclosed income belonged to third person--Satisfaction should be reasonable but need not be conclusive--Income-tax Act, 1961, ss. 132, 153C-- CIT v. Classic Enterprises (All) . . . 465

Writ --High Court--Alternate remedy--International transactions--Transfer pricing--Arm’s length price--Final assessment following determination of arm’s length price by Dispute Resolution Panel--Remedy of appeal against order of assessment before Tribunal--Writ petition not maintainable--Income-tax Act, 1961, ss. 92CA, 144C(5)-- Lionbridge Technologies Pvt. Ltd. v. Deputy CIT (Bom). . .599

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 2(42B) --Capital gains--Short-term or long-term capital gains--Conversion of leasehold rights into freehold rights--Conversion by way of improvement of title--No effect on the taxability of profits-- CIT v. Smt. Rama Rani Kalia (All) . . . 499

S. 10A --Export of computer software--Exemption--Registration under Software Technology Parks of India obtained after commencement of manufacture--Power of Software Technology Parks of India to convert domestic tariff area unit into Software Technology Parks of India unit--No export made prior to date of registration--Unit entitled to exemption-- CIT v. Expert Outsource P. Ltd. (Karn) . . . 518

----Export of computer software--Exemption--Unit existing from 1994 but obtaining registration as 100 per cent. export oriented unit for computer software in 2002--Entitled to deduction--Cannot be denied deduction on ground of transfer of plant and machinery previously used to export unit-- Nagesh Chundur v. CIT (Mad) . . . 521

S. 32 --Depreciation--Intangible assets--Software development--Assessee developing software with special application and getting it registered as trade mark--Details of expenditure thereon produced--Assessee entitled to depreciation-- CIT v. Net 4 Nuts Ltd. (Guj) . . . 535

----Depreciation--Investment allowance--Carry forward and set off--Unabsorbed depreciation and investment allowance could be set off against capital gains in assessment year 1992-93-- CIT v. Kisan Engineering Works Ltd. (All) . . . 510

S. 40(b) --Business expenditure--Disallowance--Firm--Remuneration paid to partners--Ceiling on--Assessee engaged in seasonal business of ginning cotton--Income generated from spare funds invested in fixed deposits--Interest declared as part of business income and assessed as such--To be taken into account for purpose of ceiling on remuneration of partners--Whether only business income and no other income to be taken into account for this purpose not considered-- CIT v. J. J. Industries (Guj) . . . 531

S. 68 --Appeal to Appellate Tribunal--Cash credits--Disallowance of gifts under section 68--Difference of opinion between Members of Tribunal whether addition to be under section 68 or section 69--Genuineness of gifts not considered on the merits--Reference to Third Member--Appeal of assessee dismissed as a result of opinion of Third Member--Not proper--Matter to be decided on the merits in the light of majority opinion-- Smt. Renu Aggarwal v. ITO (All) . . . 483

----Appeal to Appellate Tribunal--Rectification of mistakes--Mistake apparent from record--Matter referred to Third Member on question of law with respect to addition made under section 68--Conscious omission to consider issue of genuineness of gifts on the merits--Not a mistake for rectification-- Smt. Renu Aggarwal v. ITO (All) . . . 483

S. 69 --Appeal to Appellate Tribunal--Cash credits--Disallowance of gifts under section 68--Difference of opinion between Members of Tribunal whether addition to be under section 68 or section 69--Genuineness of gifts not considered on the merits--Reference to Third Member--Appeal of assessee dismissed as a result of opinion of Third Member--Not proper--Matter to be decided on the merits in the light of majority opinion-- Smt. Renu Aggarwal v. ITO (All) . . . 483

S. 92CA --Writ--High Court--Alternate remedy--International transactions--Transfer pricing--Arm’s length price--Final assessment following determination of arm’s length price by Dispute Resolution Panel--Remedy of appeal against order of assessment before Tribunal--Writ petition not maintainable-- Lionbridge Technologies Pvt. Ltd. v. Deputy CIT (Bom). . .599

S. 132 --Search and seizure--Block assessment--Undisclosed income of third person--Notice under section 153C--Condition precedent--Satisfaction that undisclosed income belonged to third person--Satisfaction should be reasonable but need not be conclusive-- CIT v. Classic Enterprises (All) . . . 465

S. 144C(5) --Writ--High Court--Alternate remedy--International transactions--Transfer pricing--Arm’s length price--Final assessment following determination of arm’s length price by Dispute Resolution Panel--Remedy of appeal against order of assessment before Tribunal--Writ petition not maintainable-- Lionbridge Technologies Pvt. Ltd. v. Deputy CIT (Bom). . .599

S. 147 --Reassessment--Notice--Notice not to be issued on hypothesis or contingency which may emerge in future--†Has escaped assessment†indicating an event which has taken place--Notice issued on alternative basis for taxing income--Not valid-- DHFL Venture Capital Fund v. ITO (Bom) . . . 471

S. 148 --Reassessment--Notice--Notice not to be issued on hypothesis or contingency which may emerge in future--†Has escaped assessment†indicating an event which has taken place--Notice issued on alternative basis for taxing income--Not valid-- DHFL Venture Capital Fund v. ITO (Bom) . . . 471

S. 153C --Search and seizure--Block assessment--Undisclosed income of third person--Notice under section 153C--Condition precedent--Satisfaction that undisclosed income belonged to third person--Satisfaction should be reasonable but need not be conclusive-- CIT v. Classic Enterprises (All) . . . 465

S. 184 --Firm--Registration--Condition precedent--Division of profits not governed by statutory provision--Mistake in partnership deed regarding division of profits--Mistake rectified--Firm entitled to registration-- CIT v. Alison Singh and Co. (All) . . . 458

S. 185 --Firm--Registration--Condition precedent--Division of profits not governed by statutory provision--Mistake in partnership deed regarding division of profits--Mistake rectified--Firm entitled to registration-- CIT v. Alison Singh and Co. (All) . . . 458

S. 245 --Refund--Effect of section 245--Adjustment of refund against sums due from assessee--Adjustment cannot be made without prior intimation-- Jeans Knit P. Ltd. v. Deputy CIT (Karn) . . . 505

S. 254(2) --Appeal to Appellate Tribunal--Difference of opinion between Members of two-Member Bench--Reference to Third Member--Decision of Tribunal not a decision of three-Member Bench--Amenable to rectification under section 254(2)-- Smt. Renu Aggarwal v. ITO (All) . . . 483

----Appeal to Appellate Tribunal--Rectification of mistakes--Mistake apparent from record--Matter referred to Third Member on question of law with respect to addition made under section 68--Conscious omission to consider issue of genuineness of gifts on the merits--Not a mistake for rectification-- Smt. Renu Aggarwal v. ITO (All) . . . 483

S. 255(4) --Appeal to Appellate Tribunal--Cash credits--Disallowance of gifts under section 68--Difference of opinion between Members of Tribunal whether addition to be under section 68 or section 69--Genuineness of gifts not considered on the merits--Reference to Third Member--Appeal of assessee dismissed as a result of opinion of Third Member--Not proper--Matter to be decided on the merits in the light of majority opinion-- Smt. Renu Aggarwal v. ITO (All) . . . 483

----Appeal to Appellate Tribunal--Difference of opinion between Members of two-Member Bench--Reference to Third Member--Decision of Tribunal not a decision of three-Member Bench--Amenable to rectification under section 254(2)-- Smt. Renu Aggarwal v. ITO (All) . . . 483

S. 260A --Appeal to High Court--Powers of High Court--High Court has inherent power to review its decision-- Meghalaya Steels Ltd. v. CIT (Gauhati) . . . 551

----Appeal to High Court--Procedure laid down in section 260A must be followed strictly--Failure to formulate substantial question of law--Error to be rectified-- Meghalaya Steels Ltd. v. CIT (Gauhati) . . . 551

S. 263 --Depreciation--Investment allowance--Carry forward and set off--Unabsorbed depreciation and investment allowance could be set off against capital gains in assessment year 1992-93-- CIT v. Kisan Engineering Works Ltd. (All) . . . 510

S. 271(1)(c) --Penalty--Concealment of income--Satisfaction of Assessing Officer--Need not be recorded in particular manner-- MAK Data P. Ltd. v. CIT (SC). . .593

S. 271(1)(c), Expln. 1 --Penalty--Concealment of income--General principles--Voluntary surrender of income--No automatic immunity from penalty--Surrender “subject to non-initiation of penalty proceedings and prosecution†--Does not absolve assessee from liability to penalty--Whether assessee has offered an explanation for concealment or furnishing of inaccurate particulars of income to be seen--Surrender of income pursuant to notice calling for information in respect of documents found during survey of sister concern--Not voluntary--No intention to declare true income--Penalty proceedings justified-- MAK Data P. Ltd. v. CIT (SC). . .593