All directors disqualifies if company not files annual returns or audited financial statements for 3 years:Onus of annual reports on directors source Times of india

http://timesofindia.indiatimes.com/business/india-business/Onus-of-annual-reports-on-directors/articleshow/34343840.cms

Onus of annual reports on directors

M Allirajan, TNN | Apr 29, 2014, 01.18AM IST

The new Companies Act spells serious trouble for directors of

any private or public company that has not filed for three years its annual returns or audited financial statements, and the board's report. The new Act, which came into effect from April 1, disqualifies such directors for a period of five years, including the company in which the default has occurred. Private companies were not included in disqualification provisions under the Companies Act, 1956. 

About 13.95 lakh companies were registered with the Registrar of Companies (RoC) at the end of March 2014. Of this, about 9.52 lakh companies remain active. Interestingly, just 25 directors were disqualified under the Companies Act, 1956, till March 25, according to data with the ministry of corporate affairs (MCA). Of these, 16 were disqualified as their companies failed to file annual accounts and returns, the MCA data showed. 

About 25-30% of the active registered companies would be in default if the new provisions are applied, says K S Ravichandran, partner, KSR & Co Company Secretaries. Many private and public companies have not filed returns, statements and reports for several years.

Under the previous law, such a draconian provision was applicable only to defaults in public companies and only if both the returns as well as reports were not filed. "Taking advantage of such a law, many companies had filed only annual returns so that their directors would not suffer any disqualification on that count," Ravichandran says.

 

"Moreover, under the previous law, disqualification did not result in vacation of office of that director. He would continue as a director even in the public company in which the default had occurred," he says. Now the rules governing such defaults have become stringent. "It applies to directors of any company that has defaulted in filing with RoC, either the annual returns or the financial statements and reports or both in three consecutive years," Ravichandran says. 

G Karthikeyan, a Coimbatore-based chartered accountant, says, "Private limited companies were formed only for statutory purposes in many cases. It (the new Act) is a welcome step. But these measures will increase compliance costs. Small companies will be adversely affected. They will have to restrict their business." 

 

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ITR (TRIB) Volume 31 : Part 3 (Issue dated : 28-4-2014)

 

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

 

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Assessment --Business expenditure--Disallowance--Failure by assessee to prove that Assessing Officer not provided opportunity of hearing--Appeal to be dismissed--Income-tax Act, 1961-- Indivision Investment Advisors Ltd. v. Assistant CIT (Mumbai) . . . 452

Business expenditure --Prior period expenses on freight and breakage--Failure by Department to show that liability for each expenditure crystallised in year under consideration--Matter remanded to Commissioner (Appeals) to readjudicate and decide issue in accordance with law--Income-tax Act, 1961-- Millennium Beer Industries Ltd. v. Deputy CIT (Delhi) . . . 462

Business loss --Business--Setting up of business--Claim of loss on account of first year of operation--Assessing Officer holding business had not commenced--No finding as to date of setting up of business--Order set aside and matter remanded for consideration afresh whether expenses allowable and extent thereof to which-- Indivision Investment Advisors Ltd. v. Assistant CIT (Mumbai) . . . 452

Depreciation --Goodwill--Is asset eligible for depreciation under Explanation 3(b) to section 32(1)--Income-tax Act, 1961, s. 32(1), Expln. 3(b) -- Millennium Beer Industries Ltd. v. Deputy CIT (Delhi) . . . 462

Income --Expenditure in relation to incomes not forming part of total income--Dividend--To be considered on judicial pronouncements--Order set aside and matter remanded for decision afresh--Income-tax Act, 1961, s. 14A-- Millennium Beer Industries Ltd. v. Deputy CIT (Delhi) . . . 462

Rebate --Securities transaction tax--Rebate allowable where income assessed on book profit basis under section 115JB--But only with reference to tax on business income by way of securities transactions disclosed by assessee and assessed as such--Income-tax Act, 1961, ss. 88E, 115JB-- Deputy CIT v. Arcadia Share and Stock Brokers P. Ltd. (Mumbai) . . . 459

 

PRINT EDITION

Volume 31 : Part 3 (Issue dated : 28-4-2014)

SUBJECT INDEX TO CASES REPORTED

Business expenditure --Capital or revenue expenditure--Amortisation of preliminary expenses--Stamp duty charges including charges pertaining to issue of bonus shares and initial public offering--Expenditure relating to issue of bonus shares revenue in nature--Stamp duty charges included within scope of section 35D--Income-tax Act, 1961, s. 35D-- OnMobile Global Ltd. v. Additional CIT (Bangalore) . . . 348

Capital or revenue expenditure --Expenses incurred for filing patent application--To protect patent and not create patent--Expenses are revenue in nature--Deduction allowable--Income-tax Act, 1961, s. 37(1)-- OnMobile Global Ltd. v. Additional CIT (Bangalore) . . . 348

----Legal and professional charges incurred in connection with acquisition of company in France--Expenditure revenue in nature--Deduction allowable--Income-tax Act, 1961, s. 37(1)-- OnMobile Global Ltd. v. Additional CIT (Bangalore) . . . 348

Depreciation --Rate of depreciation--Purchase of media resource boards--Media resource boards operate along with servers and computers--Fit into definition of “computer component“--To be classified as “computers“--Depreciation at rate of 60 per cent. allowable--Income-tax Act, 1961-- OnMobile Global Ltd. v. Additional CIT (Bangalore) . . . 348

Exemption --Export--Assessee’s activity of “developing content“ and “conversion of procured content into mobile readable format“ qualify to be classified as “content development“ or “data processing“ specified in notification--Assessee rendering information technology enabled services--Satisfying conditions of export of computer software and repatriation of exports proceeded in convertible foreign exchange--Assessee entitled to deduction under section 10A--Income-tax Act, 1961, s. 10A--Notification S. O. No. 890(E) (FR. No. 142/49/2000-TPL), dated 26.9.2000-- OnMobile Global Ltd. v. Additional CIT (Bangalore) . . . 348

Income --Computation of income--Disallowance of expenditure related to exempt income--Expenses incurred at place of location of manufacturing facilities directly related to manufacturing activities--Expenses not related to investment activities--Selling and distribution expenses, salary paid to directors and motor car expenses incurred by assessee directly related to manufacturing activities--Salary paid to accountant and telephone expenses of director indirectly related to exempted income--Expenditure incurred on payment of rent relating to director's residence and godown--Disallowance can be calculated only after considering all expenditure incurred by assessee--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Elegant Marbles and Grani Industries Ltd. v. Deputy CIT (Mumbai) . . . 338

----Computation--Disallowance of expenditure in relation to exempt income--Principles governing--Shares held as stock-in-trade--Disallowance of expenditure permissible--Shares held both as investment and as stock-in-trade--Apportionment of expenditure relating to taxable and exempt income--Direct expenditure to be set off against relevant income and apportionment to be done for indirect expenditure--Rule 8D applies--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- D. H. Securities P. Ltd. v. Deputy CIT (Mumbai) . . . 381

Industrial undertaking --Special deduction--Deduction in respect of employment of new workmen--Assessee engaged in development and manufacture of software covered within definition of industrial undertaking--Payments to workmen not employed in supervisory capacity--Assessee entitled to deduction--Income-tax Act, 1961, s. 80JJAA-- OnMobile Global Ltd. v. Additional CIT (Bangalore) . . . 348

International transactions --Associated enterprise--Contention of assessee that entity in question was not associated enterprise in year in question--Failure by Assessing Officer to ascertain relationship of associated enterprise from documents--Matter remanded--Income-tax Act, 1961-- Oren Hydrocarbons P. Ltd. v. Assistant CIT (Chennai) . . . 343

Non-resident --Fees for technical services--Permanent establishment--Local office only facilitating communication of head office with Indian company and not involved in supervisory activities--Local office not allowed to do trading, commercial or industrial activity--Not a supervisory permanent establishment in India--Income taxable as fees for technical services and liable to tax at 20 per cent.--Double Taxation Avoidance agreement between India and Japan, arts. 7, 12(2), (5)-- Sumitomo Corporation v. Deputy CIT (Delhi) . . . 310

Penalty --Concealment of income--Search and seizure--Penalty imposed based on seized document--Document relating to group of companies not assessee alone--Assessing Officer acted upon misconception--Penalty to be cancelled--Income-tax Act, 1961, s. 271(1)(c)-- Concorde Housing Corporation v. Deputy CIT (Bangalore) . . . 299

Rebate --Securities transaction tax--Minimum alternate tax--Book profits--Assessee entitled to rebate in computation of liability under section 115JB--Income-tax Act, 1961, ss. 88E, 115JB-- D. H. Securities P. Ltd. v. Deputy CIT (Mumbai) . . . 381

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance agreement between India and Japan

Art. 7 --Non-resident--Fees for technical services--Permanent establishment--Local office only facilitating communication of head office with Indian company and not involved in supervisory activities--Local office not allowed to do trading, commercial or industrial activity--Not a supervisory permanent establishment in India--Income taxable as fees for technical services and liable to tax at 20 per cent.-- Sumitomo Corporation v. Deputy CIT (Delhi) . . . 310

Arts. 12(2) --Non-resident--Fees for technical services--Permanent establishment--Local office only facilitating communication of head office with Indian company and not involved in supervisory activities--Local office not allowed to do trading, commercial or industrial activity--Not a supervisory permanent establishment in India--Income taxable as fees for technical services and liable to tax at 20 per cent.-- Sumitomo Corporation v. Deputy CIT (Delhi) . . . 310

Arts. 12(5) --Non-resident--Fees for technical services--Permanent establishment--Local office only facilitating communication of head office with Indian company and not involved in supervisory activities--Local office not allowed to do trading, commercial or industrial activity--Not a supervisory permanent establishment in India--Income taxable as fees for technical services and liable to tax at 20 per cent.-- Sumitomo Corporation v. Deputy CIT (Delhi) . . . 310

 

Income-tax Act, 1961

S. 10A --Exemption--Export--Assessee’s activity of “developing content“ and “conversion of procured content into mobile readable format“ qualify to be classified as “content development“ or “data processing“ specified in notification--Assessee rendering information technology enabled services--Satisfying conditions of export of computer software and repatriation of exports proceeded in convertible foreign exchange--Assessee entitled to deduction under section 10A-- OnMobile Global Ltd. v. Additional CIT (Bangalore) . . . 348

----Income--Computation of income--Disallowance of expenditure related to exempt income--Expenses incurred at place of location of manufacturing facilities directly related to manufacturing activities--Expenses not related to investment activities--Selling and distribution expenses, salary paid to directors and motor car expenses incurred by assessee directly related to manufacturing activities--Salary paid to accountant and telephone expenses of director indirectly related to exempted income--Expenditure incurred on payment of rent relating to director's residence and godown--Disallowance can be calculated only after considering all expenditure incurred by assessee-- Elegant Marbles and Grani Industries Ltd. v. Deputy CIT (Mumbai) . . . 338

S. 14A --Income--Computation--Disallowance of expenditure in relation to exempt income--Principles governing--Shares held as stock-in-trade--Disallowance of expenditure permissible--Shares held both as investment and as stock-in-trade--Apportionment of expenditure relating to taxable and exempt income--Direct expenditure to be set off against relevant income and apportionment to be done for indirect expenditure--Rule 8D applies-- D. H. Securities P. Ltd. v. Deputy CIT (Mumbai) . . . 381

S. 35D --Business expenditure--Capital or revenue expenditure--Amortisation of preliminary expenses--Stamp duty charges including charges pertaining to issue of bonus shares and initial public offering--Expenditure relating to issue of bonus shares revenue in nature--Stamp duty charges included within scope of section 35D-- OnMobile Global Ltd. v. Additional CIT (Bangalore) . . . 348

S. 37(1) --Capital or revenue expenditure--Expenses incurred for filing patent application--To protect patent and not create patent--Expenses are revenue in nature--Deduction allowable-- OnMobile Global Ltd. v. Additional CIT (Bangalore) . . . 348

----Capital or revenue expenditure--Legal and professional charges incurred in connection with acquisition of company in France--Expenditure revenue in nature--Deduction allowable-- OnMobile Global Ltd. v. Additional CIT (Bangalore) . . . 348

S. 80JJAA --Industrial undertaking--Special deduction--Deduction in respect of employment of new workmen--Assessee engaged in development and manufacture of software covered within definition of industrial undertaking--Payments to workmen not employed in supervisory capacity--Assessee entitled to deduction-- OnMobile Global Ltd. v. Additional CIT (Bangalore) . . . 348

S. 88E --Rebate--Securities transaction tax--Minimum alternate tax--Book profits--Assessee entitled to rebate in computation of liability under section 115JB-- D. H. Securities P. Ltd. v. Deputy CIT (Mumbai) . . . 381

S. 115JB --Rebate--Securities transaction tax--Minimum alternate tax--Book profits--Assessee entitled to rebate in computation of liability under section 115JB-- D. H. Securities P. Ltd. v. Deputy CIT (Mumbai) . . . 381

S. 271(1)(c) --Penalty--Concealment of income--Search and seizure--Penalty imposed based on seized document--Document relating to group of companies not assessee alone--Assessing Officer acted upon misconception--Penalty to be cancelled-- Concorde Housing Corporation v. Deputy CIT (Bangalore) . . . 299

 

Income-tax Rules, 1962

R. 8D --Income--Computation--Disallowance of expenditure in relation to exempt income--Principles governing--Shares held as stock-in-trade--Disallowance of expenditure permissible--Shares held both as investment and as stock-in-trade--Apportionment of expenditure relating to taxable and exempt income--Direct expenditure to be set off against relevant income and apportionment to be done for indirect expenditure--Rule 8D applies-- D. H. Securities P. Ltd. v. Deputy CIT (Mumbai) . . . 381

----Income--Computation of income--Disallowance of expenditure related to exempt income--Expenses incurred at place of location of manufacturing facilities directly related to manufacturing activities--Expenses not related to investment activities--Selling and distribution expenses, salary paid to directors and motor car expenses incurred by assessee directly related to manufacturing activities--Salary paid to accountant and telephone expenses of director indirectly related to exempted income--Expenditure incurred on payment of rent relating to director's residence and godown--Disallowance can be calculated only after considering all expenditure incurred by assessee-- Elegant Marbles and Grani Industries Ltd. v. Deputy CIT (Mumbai) . . . 338

 

ITR Volume 363 : Part 1 (Issue dated : 28-4-2014)

 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

HIGH COURTS

Appeal to Appellate Tribunal --Powers of Tribunal--Tribunal has inherent power to direct refund of amount collected illegally--Income-tax Act, 1961--Dy CIT v. ITAT (P&H) . . . 326

----Rectification of mistakes--Application for rectification of mistakes--Appeal from order of Tribunal in appeal merging in order of High Court--Application for rectification thereafter not maintainable--Income-tax Act, 1961, s. 254(2)-- Saroj Ceramics Industries v. ITO (Guj) . . . 350

Appeal to High Court --Appeal to Appellate Tribunal--Powers of Tribunal--Power to remand--Commissioner revising order on ground that no reasons had been given for the order--Tribunal setting aside order of Commissioner and remanding matter to Assessing Officer--No prejudice to assessee--No question of law arose from order of Tribunal--Income-tax Act, 1961, ss. 254, 260A, 263-- Fibres and Fabrics International P. Ltd. v. CIT (Karn) . . . 345

----Competency of appeal--Order of Tribunal rejecting application for rectification of its mistakes--No order on merits--Appeal not competent from such order--Income-tax Act, 1961, ss. 254(2), 260A-- Saroj Ceramics Industries v. ITO (Guj) . . . 350

Cash credits --Amounts shown as loans from directors--Finding that creditworthiness of directors not proved--Addition of amount under section 68--Justified--Income-tax Act, 1961, s. 68-- Classic Products P. Ltd. v. CIT (P&H) . . . 336

Industrial park --Special deduction under section 80-IA--Effect of rule 18C--Approval of industrial park given by Commerce Ministry--Duty of CBDT to notify such industrial park for benefits under section 80-IA--CBDT has no power to conduct inquiry--Income-tax Act, 1961, s. 80-IA--Income-tax Rules, 1962, r. 18C-- Creative Infocity Ltd. v. Under Secretary (ITA-I) (Guj) . . . 322

Recovery of tax --Double Taxation Avoidance Agreement between USA and India--Garnishee proceedings--Proceedings under mutual agreement under Double Taxation Avoidance Agreement--Stay order subject to condition that it would not seek adjournment of appeal before Tribunal--Tribunal adjourning appeal because another appeal by assessee was pending before Special Bench of Tribunal--No violation of condition by assessee--Garnishee proceedings against bank--Not valid--Income-tax Act, 1961--Double Taxation Avoidance Agreement between USA and India-- Dy CIT v. ITAT (P&H) . . . 326

 

PRINT EDITION

ITR Volume 363 : Part 1 (Issue dated : 28-4-2014)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Advance tax --Interest--Mandatory--Shortfalls taxable--Levy of interest justified--Income-tax Act, 1961, s. 234B-- South Indian Bank Ltd. v. CIT (Ker) . . . 111

Appeal to Appellate Tribunal --Power to rectify mistakes on record--Tribunal satisfied that assessee’s claim reasonable, but rejecting it relying on decision of court without analysing facts--Tribunal justified in exercising its power under section 254(2)--Income-tax Act, 1961, s. 254(2)-- CIT v. TTG Industries Ltd. (Mad) . . . 44

Appeal to High Court --Powers of High Court--Power to remand--Disallowance of bad debts by Assessing Officer--Order of revision without considering issue of bad debts--Consequent order by Assessing Officer--Appeal against disallowance of bad debts--Disallowance set aside by Commissioner (Appeals) and confirmed by Tribunal--Appeal to High Court--Matter remanded to Commissioner (Appeals)--Income-tax Act, 1961-- CIT v. Canara Bank (Karn) . . . 156

Assessment --Estimate of income--Ginning factory--Gross profit--No rejection of books of account either on ground of difference in invisible loss projected or failure to maintain day-to-day stock book--No evidence to show that gross profit disclosed low--No material to support rejection of explanation of assessee for fall in gross profit--Revenue failing to make verification--Determination of gross profit on basis of figure for preceding year--Not justified--Income-tax Act, 1961-- G. V. D. I. and Co. v. Deputy CIT (Mad) . . . 27

Association of persons --Income or loss of an association of persons not dependent on section 80--Association of persons failing to file return of loss within time--No determination of loss in hands of association of persons--Member cannot claim to carry forward and set of off loss--Income-tax Act, 1961, ss. 67A(2), 80-- N. Jagadeesan v. Asst. CIT (Mad) . . . 140

Bad debt --Non-banking finance company--Loans and advances --Non-performing assets--Diminution in value of investments--Assessing Officer directed to reconsider claim in light of decisions of Supreme Court--Income-tax Act, 1961, s. 36(1)(vii)-- CIT v. Amrutanjan Finance Ltd. (Mad) . . . 135

Business expenditure --Deduction only on actual payment--Contributions to provident and other funds--Exclusion from disallowance--Law applicable--Effect of amendment of section 43B w.e.f 1-4-2004--Amendment has retrospective effect--Contributions paid after due dates under respective Acts but before due date for filing of return--Amounts could not be disallowed--Income-tax Act, 1961, ss. 36, 43B-- CIT v. State Bank of Bikaner and Jaipur (Raj) . . . 70

----Deduction only on actual payment--Provision for leave encashment--Claim enclosed with original return as well as revised return--No inadvertent mistake in not claiming it--Revised return filed after due date as provided under section 139(5)--Disallowable--Income-tax Act, 1961, s. 43B(f)-- South Indian Bank Ltd. v. CIT (Ker) . . . 111

----Disallowance--Payments to non-resident--Failure to deduct tax at source--Assessee’s agents had their own offices in foreign country--Agreement for procuring orders not involving any managerial services-- Explanation to section 9(2) not applicable--No disallowance of commission payments can be made--Income-tax Act, 1961, ss. 9(1)(vii), 40(a)(i), 195-- CIT v. Model Exims (All) . . . 66

----Disallowance--Payments to non-resident--Failure to deduct tax at source--Circular in force during relevant year not obliging assessee to deduct tax at source--Circular issued later withdrawing earlier circulars operative only from date of issue--Circular binding on Department--No obligation to deduct tax at source on commission paid to non-resident agents--Expenditure allowable--Income-tax Act, 1961, ss. 9(1)(vii), 40(a)(i), 195-- CIT v. Allied Exims (All) . . . 62

Capital gains --Short-term or long-term capital gains--Allotment of flat to assessee and payment of first instalment--Allottee obtains a right to hold property and period of holding to be reckoned from this date--Identification of a particular flat and delivery of possession consequential acts--Sale of flat three years after date of allotment letter and payment of first instalment--Amount received from sale of flat--Long-term capital gains--Income-tax Act, 1961-- Mrs. Madhu Kaul v. CIT (P&H) . . . 54

----Short-term or long-term capital gains--Assessee acquiring possession of plot in 2005 and selling it in 2008--Date of execution of conveyance deed in favour of assessee not relevant--Date of allotment of plot to assessee to be considered for purposes of capital gains--Income-tax Act, 1961, s. 54EC-- CIT v. K. Ramakrishnan (Delhi) . . . 59

Capital or revenue expenditure --Share issue expenses--Directly related to expansion of capital base--Capital expenditure--Not deductible--Income-tax Act, 1961-- South Indian Bank Ltd. v. CIT (Ker) . . . 111

Capital or revenue receipt --Subsidy--Power tariff concession--Not given upon establishment of unit but for facilitating business operations--Revenue receipt-- Brakes India Ltd. v. Joint CIT (Mad) . . . 13

Company --Book profits--Computation--Effect of section 115J--Provision does not affect carry forward of losses, unabsorbed depreciation, etc.--Income-tax Act, 1961, s. 115J-- Deccan Cements Ltd. v. CIT (AP) . . . 100

Depreciation --Higher rate of depreciation--Renewal energy devices--Wind mill--Generator sets would alone qualify for hundred per cent. depreciation--Drilling machines--Boring machines--Lathe machines--Entitled to depreciation at twenty-five per cent.--Income-tax Rules, 1962, Appx. I, r. 5, cl. (10A)(xviii)--Income-tax Act, 1961, s. 32-- CIT v. TTG Industries Ltd. (Mad) . . . 44

----Rate of depreciation--Partitions and structures--Temporary wooden structure and partition for running computer centres--Entitled to hundred per cent. depreciation--Income-tax Act, 1961, s. 32-- CIT v. Amrutanjan Finance Ltd. (Mad) . . . 135

Exemption --Warehousing corporation--Condition precedent for grant of exemption--Income from house property, bank receipts, income on loans and advances to staff, interest on bank deposits and dividend, not derived from activities enumerated in section 10(29)--Not eligible for exemption--Supervision charges, fumigation service charges, weighbridge receipts, income from sale of tender forms and interest on belated refund of advances--Income from activities incidental to warehousing of produce for storage, processing or facilitating the marketing of commodities--Eligible for exemption--Income-tax Act, 1961, s. 10(29)-- Tamilnadu Warehousing Corporation v. ITO (OSD) (Mad) . . . 1

Export --Special deduction--Total turnover--Scrap sales--Not to be included--Income-tax Act, 1961, s. 80HHC-- Brakes India Ltd. v. Joint CIT (Mad) . . . 13

Income --Disallowance of expenditure in relation to exempt income--Method for determining quantum of such expenditure--Expenditure for earning interest on tax free bonds and dividends exempted under section 10--Disallowable--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- South Indian Bank Ltd. v. CIT (Ker) . . .111

----Principle of mutuality--Conditions for application--Chit funds scheme--Assessee participating in a scheme offered by third party wherein others also joined--Principle of mutuality does not arise--Dividend received over and above what was contributed by assessee--Assessable as income--Income-tax Act, 1961, s. 28(iii)-- V. Rajkumar v. CIT (Mad) . . . 21

----Trading receipt--Excess cash received by branches of bank--Amounts refundible on demand to customers--Includible in total income of bank--Income-tax Act, 1961-- South Indian Bank Ltd. v. CIT (Ker) . . . 111

Precedent --Effect of decision of Supreme Court in Karnataka Small Scale Industries Development Corpn. v. CIT [2002] 258 ITR 770 (SC)-- Deccan Cements Ltd. v. CIT (AP) . . . 100

----Effect of Supreme Court decision in CIT v. Alom Extrusions [2009] 319 ITR 306 (SC)-- CIT v. State Bank of Bikaner and Jaipur (Raj) . . . 70

Revision --Commissioner--Powers--Assessee not challenging jurisdiction of Commissioner but only absence of word “erroneous†in notice--Assessment treating proceeds of sale of immovable property sale proceeds as long-term capital gains instead of short-term capital gains prejudicial to interests of Revenue--Expression “resulted into an order which is prejudicial to the interests of the Revenue--Sufficient compliance for issuing notice--Income-tax Act, 1961, s. 263-- Hemanth Kumar Bothra v. CIT (Mad) . . . 33

Search and seizure --Block assessment--Assessment of third person--Assessment based on materials gathered in course of search conducted in case of two other assessees residing in same premises as assessee--Assessee understanding this and participating in assessment--Assessment not invalid on ground no search conducted against assessee--Income-tax Act, 1961, ss. 158BC, 158BD-- Kailash Sarda v. CIT (Mad) . . . 36

----Block assessment--Meaning of undisclosed income--Law applicable--Amendment of section 158B with retrospective effect from 1-7-1995--Inclusion of amount representing false claim for deduction--Meaning of “false†--Claim for depreciation on building given on rent--False claim--Amount of claim assessable as undisclosed income--Income-tax Act, 1961, s. 158B-- Medical Land v. CIT (Appeals) (Ker) . . . 81

----Block assessment--Penalty--Return filed under section 158BC--No provision for filing revised return--Revised return filed disclosing additional undisclosed income--Penalty imposable on such additional undisclosed income--Income-tax Act, 1961, Chapter XIV-B, ss. 158BC, 158BFA-- CIT v. Hitech Chemical P. Ltd. (Jharkhand) . . . 145

----Block assessment--Undisclosed income--Addition based on admission by assessee--Valid--Income-tax Act, 1961, s. 158B-- Medical Land v. CIT (Appeals) (Ker) . . . 81

----Block assessment--Undisclosed income--No evidence to show amount sent by assessee’s mother and brothers--No material to indicate source of income of donors--Amount assessable as undisclosed income of block period--Income-tax Act, 1961, s. 69-- Mrs. Kumari Kanagam v. CIT (Mad) . . . 105

----Block assessment--Unexplained investment--Assessee a person not ordinarily resident in India--Onus on assessee to prove that income accruing outside India not from business controlled or a profession set up in India--Mere claim will not suffice--No proof that income accrued or arisen outside India not on account of any business interest or trade in India--Proviso to section 5(1)(c) not applicable--Income-tax Act, 1961, s. 5(1)(c)-- Mrs. Kumari Kanagam v. CIT (Mad) . . . 105

Writ --High Court--Alternative remedy--Revision--Show-cause notice under section 263--Assessee to submit his reply to notice and raise all contentions available before authority--Constitution of India, art. 226--Income-tax Act, 1961, s. 263-- Hemanth Kumar Bothra v. CIT (Mad) . . . 33

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Constitution of India :

Art. 226 --Writ--High Court--Alternative remedy--Revision--Show-cause notice under section 263--Assessee to submit his reply to notice and raise all contentions available before authority-- Hemanth Kumar Bothra v. CIT (Mad) . . . 33

Income-tax Act, 1961 :

S. 5(1)(c) --Search and seizure--Block assessment--Unexplained investment--Assessee a person not ordinarily resident in India--Onus on assessee to prove that income accruing outside India not from business controlled or a profession set up in India--Mere claim will not suffice--No proof that income accrued or arisen outside India not on account of any business interest or trade in India--Proviso to section 5(1)(c) not applicable-- Mrs. Kumari Kanagam v. CIT (Mad) . . . 105

S. 9(1)(vii) --Business expenditure--Disallowance--Payments to non-resident--Failure to deduct tax at source--Assessee’s agents had their own offices in foreign country--Agreement for procuring orders not involving any managerial services-- Explanation to section 9(2) not applicable--No disallowance of commission payments can be made-- CIT v. Model Exims (All) . . . 66

----Business expenditure--Disallowance--Payments to non-resident--Failure to deduct tax at source--Circular in force during relevant year not obliging assessee to deduct tax at source--Circular issued later withdrawing earlier circulars operative only from date of issue--Circular binding on Department--No obligation to deduct tax at source on commission paid to non-resident agents--Expenditure allowable-- CIT v. Allied Exims (All) . . . 62

S. 10(29) --Exemption--Warehousing corporation--Condition precedent for grant of exemption--Income from house property, bank receipts, income on loans and advances to staff, interest on bank deposits and dividend, not derived from activities enumerated in section 10(29)--Not eligible for exemption--Supervision charges, fumigation service charges, weighbridge receipts, income from sale of tender forms and interest on belated refund of advances--Income from activities incidental to warehousing of produce for storage, processing or facilitating the marketing of commodities--Eligible for exemption-- Tamilnadu Warehousing Corporation v. ITO (OSD) (Mad) . . . 1

S. 14A --Income--Disallowance of expenditure in relation to exempt income--Method for determining quantum of such expenditure--Expenditure for earning interest on tax free bonds and dividends exempted under section 10--Disallowable-- South Indian Bank Ltd. v. CIT (Ker) . . .111

S. 28(iii) --Income--Principle of mutuality--Conditions for application--Chit funds scheme--Assessee participating in a scheme offered by third party wherein others also joined--Principle of mutuality does not arise--Dividend received over and above what was contributed by assessee--Assessable as income-- V. Rajkumar v. CIT (Mad) . . . 21

S. 32 --Depreciation--Higher rate of depreciation--Renewal energy devices--Wind mill--Generator sets would alone qualify for hundred per cent. depreciation--Drilling machines--Boring machines--Lathe machines--Entitled to depreciation at twenty-five per cent.-- CIT v. TTG Industries Ltd. (Mad) . . . 44

----Depreciation--Rate of depreciation--Partitions and structures--Temporary wooden structure and partition for running computer centres--Entitled to hundred per cent. depreciation-- CIT v. Amrutanjan Finance Ltd. (Mad) . . . 135

S. 36 --Business expenditure--Deduction only on actual payment--Contributions to provident and other funds--Exclusion from disallowance--Law applicable--Effect of amendment of section 43B w.e.f 1-4-2004--Amendment has retrospective effect--Contributions paid after due dates under respective Acts but before due date for filing of return--Amounts could not be disallowed-- CIT v. State Bank of Bikaner and Jaipur (Raj) . . . 70

S. 36(1)(vii) --Bad debt--Non-banking finance company--Loans and advances--Non-performing assets--Diminution in value of investments--Assessing Officer directed to reconsider claim in light of decisions of Supreme Court-- CIT v. Amrutanjan Finance Ltd. (Mad) . . . 135

S. 40(a)(i) --Business expenditure--Disallowance--Payments to non-resident--Failure to deduct tax at source--Assessee’s agents had their own offices in foreign country--Agreement for procuring orders not involving any managerial services-- Explanation to section 9(2) not applicable--No disallowance of commission payments can be made-- CIT v. Model Exims (All) . . . 66

----Business expenditure--Disallowance--Payments to non-resident--Failure to deduct tax at source--Circular in force during relevant year not obliging assessee to deduct tax at source--Circular issued later withdrawing earlier circulars operative only from date of issue--Circular binding on Department--No obligation to deduct tax at source on commission paid to non-resident agents--Expenditure allowable-- CIT v. Allied Exims (All) . . . 62

S. 43B --Business expenditure--Deduction only on actual payment--Contributions to provident and other funds--Exclusion from disallowance--Law applicable--Effect of amendment of section 43B w.e.f 1-4-2004--Amendment has retrospective effect--Contributions paid after due dates under respective Acts but before due date for filing of return--Amounts could not be disallowed-- CIT v. State Bank of Bikaner and Jaipur (Raj) . . . 70

S. 43B(f) --Business expenditure--Deduction only on actual payment--Provision for leave encashment--Claim enclosed with original return as well as revised return--No inadvertent mistake in not claiming it--Revised return filed after due date as provided under section 139(5)--Disallowable-- South Indian Bank Ltd. v. CIT (Ker) . . . 111

S. 54EC --Capital gains--Short-term or long-term capital gains--Assessee acquiring possession of plot in 2005 and selling it in 2008--Date of execution of conveyance deed in favour of assessee not relevant--Date of allotment of plot to assessee to be considered for purposes of capital gains-- CIT v. K. Ramakrishnan (Delhi) . . . 59

S. 67A(2) --Association of persons--Income or loss of an association of persons not dependent on section 80--Association of persons failing to file return of loss within time--No determination of loss in hands of association of persons--Member cannot claim to carry forward and set off of loss-- N. Jagadeesan v. Asst. CIT (Mad) . . . 140

S. 69 --Search and seizure--Block assessment--Undisclosed income--No evidence to show amount sent by assessee’s mother and brothers--No material to indicate source of income of donors--Amount assessable as undisclosed income of block period-- Mrs. Kumari Kanagam v. CIT (Mad) . . . 105

S. 80 --Association of persons--Income or loss of an association of persons not dependent on section 80--Association of persons failing to file return of loss within time--No determination of loss in hands of association of persons--Member cannot claim to carry forward and set off of loss-- N. Jagadeesan v. Asst. CIT (Mad) . . . 140

S. 80HHC --Export--Special deduction--Total turnover--Scrap sales--Not to be included-- Brakes India Ltd. v. Joint CIT (Mad) . . . 13

S. 115J --Company--Book profits--Computation--Effect of section 115J--Provision does not affect carry forward of losses, unabsorbed depreciation, etc.-- Deccan Cements Ltd. v. CIT (AP) . . . 100

Chapter XIV-B --Search and seizure--Block assessment--Penalty--Return filed under section 158BC--No provision for filing revised return--Revised return filed disclosing additional undisclosed income--Penalty imposable on such additional undisclosed income-- CIT v. Hitech Chemical P. Ltd. (Jharkhand) . . . 145

S. 158B --Search and seizure--Block assessment--Meaning of undisclosed income--Law applicable--Amendment of section 158B with retrospective effect from 1-7-1995--Inclusion of amount representing false claim for deduction--Meaning of “false†--Claim for depreciation on building given on rent--False claim--Amount of claim assessable as undisclosed income-- Medical Land v. CIT (Appeals) (Ker) . . . 81

----Search and seizure--Block assessment--Undisclosed income--Addition based on admission by assessee--Valid-- Medical Land v. CIT (Appeals) (Ker) . . . 81

S. 158BC --Search and seizure--Block assessment--Assessment of third person--Assessment based on materials gathered in course of search conducted in case of two other assessees residing in same premises as assessee--Assessee understanding this and participating in assessment--Assessment not invalid on ground no search conducted against assessee-- Kailash Sarda v. CIT (Mad) . . . 36

----Search and seizure--Block assessment--Penalty--Return filed under section 158BC--No provision for filing revised return--Revised return filed disclosing additional undisclosed income--Penalty imposable on such additional undisclosed income-- CIT v. Hitech Chemical P. Ltd. (Jharkhand) . . . 145

S. 158BD --Search and seizure--Block assessment--Assessment of third person--Assessment based on materials gathered in course of search conducted in case of two other assessees residing in same premises as assessee--Assessee understanding this and participating in assessment--Assessment not invalid on ground no search conducted against assessee-- Kailash Sarda v. CIT (Mad) . . . 36

S. 158BFA --Search and seizure--Block assessment--Penalty--Return filed under section 158BC--No provision for filing revised return--Revised return filed disclosing additional undisclosed income--Penalty imposable on such additional undisclosed income-- CIT v. Hitech Chemical P. Ltd. (Jharkhand) . . . 145

S. 195 --Business expenditure--Disallowance--Payments to non-resident--Failure to deduct tax at source--Assessee’s agents had their own offices in foreign country--Agreement for procuring orders not involving any managerial services-- Explanation to section 9(2) not applicable--No disallowance of commission payments can be made-- CIT v. Model Exims (All) . . . 66

----Business expenditure--Disallowance--Payments to non-resident--Failure to deduct tax at source--Circular in force during relevant year not obliging assessee to deduct tax at source--Circular issued later withdrawing earlier circulars operative only from date of issue--Circular binding on Department--No obligation to deduct tax at source on commission paid to non-resident agents--Expenditure allowable-- CIT v. Allied Exims (All) . . . 62

S. 234B --Advance tax--Interest--Mandatory--Shortfalls taxable--Levy of interest justified-- South Indian Bank Ltd. v. CIT (Ker) . . . 111

S. 254(2) --Appeal to Appellate Tribunal--Power to rectify mistakes on record--Tribunal satisfied that assessee’s claim reasonable, but rejecting it relying on decision of court without analysing facts--Tribunal justified in exercising its power under section 254(2)-- CIT v. TTG Industries Ltd. (Mad) . . . 44

S. 263 --Revision--Commissioner--Powers--Assessee not challenging jurisdiction of Commissioner but only absence of word “erroneous†in notice--Assessment treating proceeds of sale of immovable property sale proceeds as long-term capital gains instead of short-term capital gains prejudicial to interests of Revenue--Expression “resulted into an order which is prejudicial to the interests of the Revenue--Sufficient compliance for issuing notice-- Hemanth Kumar Bothra v. CIT (Mad) . . . 33

----Writ--High Court--Alternative remedy--Revision--Show-cause notice under section 263--Assessee to submit his reply to notice and raise all contentions available before authority-- Hemanth Kumar Bothra v. CIT (Mad) . . . 33

Income-tax Rules, 1962 :

R. 8D --Income--Disallowance of expenditure in relation to exempt income--Method for determining quantum of such expenditure--Expenditure for earning interest on tax free bonds and dividends exempted under section 10--Disallowable-- South Indian Bank Ltd. v. CIT (Ker) . . .111

Appx. I, r. 5, cl. (10A)(xviii) --Depreciation--Higher rate of depreciation--Renewal energy devices--Wind mill--Generator sets would alone qualify for hundred per cent. depreciation--Drilling machines--Boring machines--Lathe machines--Entitled to depreciation at twenty-five per cent.-- CIT v. TTG Industries Ltd. (Mad) . . . 44

 

ITR Volume 362 : Part 4 (Issue dated : 14-4-2014)

 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

HIGH COURTS

Advance tax --Interest--Interest for default in paying advance tax--Interest mandatory--Income-tax Act, 1961, s. 234B-- Oracle India P. Ltd. v. CIT (Delhi) . . . 302

----Interest--Default in payment of advance tax--Income earned by non-resident--Claim that income was not assessable in India--Assessee changing stand before Commissioner (Appeals) and contending that Indian payer should have deducted tax at source--Principles of equity applicable--Assessee liable to pay interest--Income-tax Act, 1961, ss. 234A, 234B, 234C-- Director of Income-tax, International Taxation v. Alcatel Lucent USA Inc. (Delhi) . . . 276

Business expenditure --Capital or revenue expenditure--General principles--Computer--Assessee entering into agreement of licence for duplicating software and selling it--Amount spent on importing software master copies--Master copies having high obsolescence--Expenditure deductible--Income-tax Act, 1961, s. 37-- Oracle India P. Ltd. v. CIT (Delhi) . . . 302

Charitable purposes --Charitable institution--Exemption--Denial of exemption--Investment or deposit in mode not specified in section 11--Loan to another charitable institution--Not an investment or deposit--Exemption cannot be denied--Income-tax Act, 1961, ss. 11, 13-- CIT v. Kanpur Subhash Shiksha Samiti (All) . . . 271

Exemption --Income from letting out warehouses to facilitate marketing of commodities--Scope of section 10(29)--Income from fumigation and disinfestation--Entitled to exemption--Income-tax Act, 1961, s. 10(29)-- Karnataka State Warehousing Corporation v. Deputy CIT (Karn) . . . 295

Interpretation of taxing statutes --Principles of equity when applicable-- Director of Income-tax, International Taxation v. Alcatel Lucent USA Inc. (Delhi) . . . 276

Precedent --Effect of decision of Supreme Court in Orissa State Warehousing Corporation v. CIT [1999] 237 ITR 589 (SC)-- Karnataka State Warehousing Corporation v. Deputy CIT (Karn) . . . 295

 

PRINT EDITION

ITR Volume 362 : Part 4 (Issue dated : 14-4-2014)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Accounting --Rejection of accounts--Estimation of profits--Question of fact--Deductions not allowable on estimated net profit--Income-tax Act, 1961, s. 145-- CIT v. Sahu Construction P. Ltd. (All) . . . 609

Advance tax --Interest--Firm--Partners--Depreciation of a firm cannot be allocated to the benefit of partners personally and it shall revert to firm--Decision of Supreme Court much prior to submission of returns by partners--Returns ought to have been filed showing correct income--Advance tax not paid--Partners liable to pay interest--Income-tax Act, 1961 , s. 234B -- Chief CIT v. George P. Mathews (Ker) . . . 660

Appeal to Appellate Tribunal --Bad debts--Law after 1-4-1989--Tribunal finding not deductible on ground assessee not establishing such advances had become bad--Application for rectification--Apparent mistake of law--Tribunal erred in not rectifying mistake apparent from record--Matter remanded to Tribunal to pass fresh order under section 254(2)--Income-tax Act, 1961, s. 254(2)-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

Appeal to High Court --Powers of Tribunal--Rectification of mistakes--Rejection of application for rectification--Appeal to High Court not maintainable from such order--Writ petition against such order maintainable--Constitution of India, art. 226--Income-tax Act, 1961, ss. 254(2), 260A-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

Bad debt --Law after 1-4-1989--Debt need no longer be proved to have turned bad--Merely writing off such advances or debts as bad debts in books of account and debiting in profit and loss account--Sufficient compliance--Income-tax Act, 1961, s. 36(1)(vii)-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

Business expenditure --Accounting--Lease equalisation charges--Accounting standards of Central Government followed--Lease equalisation charges deductible--Income-tax Act, 1961-- CIT, Large Taxpayers Unit v. Indian Railway Finance Corporation Ltd. (Delhi) . . . 548

----Capital or revenue expenditure--Bond issue expenses--Bonds issued for purposes of business--Expenditure deductible--Income-tax Act, 1961, s. 37-- CIT, Large Taxpayers Unit v. Indian Railway Finance Corporation Ltd. (Delhi) . . . 548

Capital gains --Exemption--Depreciable asset--Gains on transfer of long-term capital asset invested in specified assets--Effect of deeming fiction in section 50--Section 50 does not restrict exemption--Income-tax Act, 1961, ss. 50, 54EC-- CIT v. Aditya Medisales Ltd. (Guj) . . . 600

Charitable purposes --Meaning of--Law applicable--Effect of first proviso to section 2(15) inserted w. e. f. 1-4-2009--Charitable trust carrying on activities for profit--Not entitled to exemption--Incidental income would not disentitle trust to exemption--Trust for breeding and improving quality of cattle--Object charitable--Finding that income was incidental--Trust entitled to exemption--Income-tax Act, 1961, ss. 2(15), 11, 12-- Director of Income-tax (Exemption) v. Sabarmati Ashram Gaushala Trust (Guj) . . . 539

Company --Book profit--Computation of income under section 115JB--Lease equalisation charges cannot be disallowed--Income-tax Act, 1961, s. 115JB-- CIT, Large Taxpayers Unit v. Indian Railway Finance Corporation Ltd. (Delhi) . . . 548

Depreciation --Condition precedent--Ownership of asset--Finding that assessee had acquired possession of asset and was using it for purposes of business--Assessee entitled to depreciation--Income-tax Act, 1961, s. 32-- CIT, Large Taxpayers Unit v. Indian Railway Finance Corporation Ltd. (Delhi) . . . 548

----Condition precedent--Ownership of assets--Ownership for purposes of section 32 does not mean possession of title deeds--Dominion over assets and user as its own would be sufficient--Assets transferred to assessee-trust by State Government--Transfer recorded in books of account of assessee--Use of such assets by assessee in its activities--Assessee entitled to depreciation--Income-tax Act, 1961, s. 32-- CIT v. Jawahar Kala Kendra (Raj) . . . 515

----Ownership of asset--Transfer of business--Transferee put in possession of building, plant and machinery in terms of agreement to sell and running undertaking in its own right--Entitled to depreciation--That legal title conveyed under lease agreement and deed of sale executed in subsequent years not material--Income-tax Act, 1961, s. 32-- CIT v. WEP Peripherals Ltd. (Karn) . . . 508

Income-tax Department --Duty to maintain assessment records properly to ensure accuracy--Records not to be interpolated or changed--Need for proper numbering and indexing of proceedings and order sheets-- BBC World News Ltd. v. Asst. Director of Income-tax (Delhi) . . . 577

Industrial undertaking --Special deduction--Sale of business by sale of building, plant and machinery before expiry of period of exemption--Transferee entitled to deduction for remaining period--Income-tax Act, 1961, s. 80-IB-- CIT v. WEP Peripherals Ltd. (Karn) . . . 508

Investment allowance --Hotel building--Not a plant--Not entitled to investment allowance--Income-tax Act, 1961, s. 32A-- CIT v. SB Properties and Enterprises Ltd. (Raj) . . . 483

Penalty --Concealment of income--Effect of Explanation 1 to section 271(1)(c)--Explanation regarding computation of income found to be false--Income deemed to be concealed--Depreciation claimed on basis of lease--Lease transaction found to be bogus--Levy of penalty--Valid--Income-tax Act, 1961, s. 271(1)(c)-- CIT v. BPL Sanyo Finance Ltd. (Karn) . . . 630

----Loan or deposit in cash exceeding specified limit--Contributions by twelve persons in cash--Audit report and balance sheet of assessee showing outstanding amount as loan received from twelve persons--Imposition of penalty justified--Income-tax Act, 1961, ss. 269SS, 271DD-- Soundarya Textiles v. Asst. CIT (Ker) . . . 488

Precedent --Effect of Supreme Court decision in Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775 (SC)-- CIT v. Jawahar Kala Kendra (Raj) . . . 515

Reassessment --Notice--Audit party--Objection that non-charging of interest on advances resulted in short levy of tax--Assessing Officer not accepting objection but issuing notice solely on basis thereof--Notice not valid--Income-tax Act, 1961, s. 148-- N. K. Roadways P. Ltd. v. ITO (OSD) (Guj) . . . 522

----Notice--Audit party--Whether asset for which depreciation claimed put to use before September 30 of year under consideration require re-examination--Ground for reopening assessment brought to notice of Assessing Officer by audit party but Assessing Officer on application of mind convinced with reason--Assessing Officer not acting at instance of audit party--No dispute that issue requires reconsideration--Notice valid--Income-tax Act, 1961, s. 148-- N. K. Industries Ltd. v. ITO (OSD) (Guj) . . . 502

----Notice--No limitation on number of times notice can be issued--But subject to limitation of not being permissible on change of opinion--Reassessment notice issued in first instance to bring to tax guaranteed return and bonus on keyman insurance policy--Proceedings dropped--Inference that Assessing Officer took view that addition of sums not sustainable on substantive ground--Second notice to bring same sums to tax--Not permissible--Income-tax Act, 1961, ss. 147, 148-- Kunal Organics P. Ltd. v. Deputy CIT (Guj) . . . 530

----Notice--Not permissible upon mere change of opinion--Profits upon sale of plots of factory land converted into stock-in-trade--Assessment after full enquiry and after calling for explanation of assessee why income should be treated as capital gains and not business income--Communications by assessee in reply to notice--Assessment of income as capital gains--Reopening of assessment to assess income as business income--Not permissible--That assessment order did not record reasons for accepting assessee’s stand not relevant--Income-tax Act, 1961, ss. 28, 45, 147, 148-- Spunpipe and Construction Co. v. Asst. CIT (Guj) . . . 559

----Notice after four years--Failure by assessee to disclose material facts--Assertion of assessee that detailed submissions filed during assessment--That assessment order makes no mention of assessee’s submissions--Not ground to infer assessee did not file them--Assessee’s assertion that it filed submissions to be accepted, on facts--No failure by assessee to disclose--Reassessment invalid--Income-tax Act, 1961, ss. 147, 148-- BBC World News Ltd. v. Asst. Director of Income-tax (Delhi) . . . 577

----Notice after four years--Not permissible on change of opinion--Non-resident--Assessee stating in assessment proceedings that it had incurred loss on worldwide basis and even if income or loss attributable to Indian operations on proportionate basis, net result would be loss--Assessment order reasonably detailed and incorporating assessee’s chart listing out activities carried out in India and outside India--Assessment made at loss figure attributing 20 per cent. of global loss to Indian operations--Assessment made on similar basis for preceding year by same officer--Criteria for computing expenses of Indian operations changed in subsequent years--Not ground for reopening assessment after four years--Income-tax Act, 1961, ss. 147, 148-- BBC World News Ltd. v. Asst. Director of Income-tax (Delhi) . . . 577

Search and seizure --Assessment in search cases--Condition precedent--Assessing Officer making contradictory references to assessee being subjected to search or not--In the absence of search authorisation, Tribunal factually finding assessment orders against assessee invalid--Income-tax Act, 1961, s. 153A-- CIT v. Ramesh D. Patel (Guj) . . . 492

----Assessment in search cases--Undisclosed income--Jewellery business--Estimate slip reflecting actual purchase and sale of gold but sale bill always for lesser quantity than reflected in estimate slip--Presumption as to nature of accounting and assessee’s modus operandi in maintaining records--No requirement that Department to collect information and evidence for each and every one of six previous years--Income-tax Act, 1961, s. 153A-- Sunny Jacob Jewellers and Wedding Centre v. Dy. CIT (Ker). . .664

----Block assessment--Limitation--Starting point for limitation--Date of last authorisation for search to be taken into account--Second warrant of authorisation issued on 27-8-2003--Limitation started from the end of that month--Income-tax Act, 1961, s. 158BE-- CIT (Dy.) v. Rakesh Sarin (Mad) . . . 619

----Block assessment--Undisclosed income--Admission that apart from business in rectified spirits no other business was carried on--Claim to set off part of undisclosed income against miscellaneous receipts recorded in books--No evidence to support claim--Amount could not be reduced from undisclosed income--Income-tax Act, 1961, s. 158BC-- CIT v. Sri Lakshmi Narasimha Distilleries P. Ltd. (Karn) . . . 573

Unexplained investment --Purchase of land--Agreements claimed to be cancelled by executors found during search--No evidence to show that assessee paid on-money for purchase of land--Nothing on record to show that agreements were acted upon--No trace of cash payment in excess of amount shown in registered documents--Addition on basis of agreements not sustainable--Income-tax Act, 1961, s. 69B-- CIT v. Fairdeal Textile Park P. Ltd. (Guj) . . . 497

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Constitution of India :

Art. 226 --Appeal to High Court--Powers of Tribunal--Rectification of mistakes--Rejection of application for rectification--Appeal to High Court not maintainable from such order--Writ petition against such order maintainable-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

Income-tax Act, 1961 :

S. 2(15) --Charitable purposes--Meaning of--Law applicable--Effect of first proviso to section 2(15) inserted w. e. f. 1-4-2009--Charitable trust carrying on activities for profit--Not entitled to exemption--Incidental income would not disentitle trust to exemption--Trust for breeding and improving quality of cattle--Object charitable--Finding that income was incidental--Trust entitled to exemption-- Director of Income-tax (Exemption) v. Sabarmati Ashram Gaushala Trust (Guj) . . . 539

S. 11 --Charitable purposes--Meaning of--Law applicable--Effect of first proviso to section 2(15) inserted w. e. f. 1-4-2009--Charitable trust carrying on activities for profit--Not entitled to exemption--Incidental income would not disentitle trust to exemption--Trust for breeding and improving quality of cattle--Object charitable--Finding that income was incidental--Trust entitled to exemption-- Director of Income-tax (Exemption) v. Sabarmati Ashram Gaushala Trust (Guj) . . . 539

S. 12 --Charitable purposes--Meaning of--Law applicable--Effect of first proviso to section 2(15) inserted w. e. f. 1-4-2009--Charitable trust carrying on activities for profit--Not entitled to exemption--Incidental income would not disentitle trust to exemption--Trust for breeding and improving quality of cattle--Object charitable--Finding that income was incidental--Trust entitled to exemption-- Director of Income-tax (Exemption) v. Sabarmati Ashram Gaushala Trust (Guj) . . . 539

S. 28 --Reassessment--Notice--Not permissible upon mere change of opinion--Profits upon sale of plots of factory land converted into stock-in-trade--Assessment after full enquiry and after calling for explanation of assessee why income should be treated as capital gains and not business income--Communications by assessee in reply to notice--Assessment of income as capital gains--Reopening of assessment to assess income as business income--Not permissible--That assessment order did not record reasons for accepting assessee’s stand not relevant-- Spunpipe and Construction Co. v. Asst. CIT (Guj) . . . 559

S. 32 --Depreciation--Condition precedent--Ownership of asset--Finding that assessee had acquired possession of asset and was using it for purposes of business--Assessee entitled to depreciation-- CIT, Large Taxpayers Unit v. Indian Railway Finance Corporation Ltd. (Delhi) . . . 548

----Depreciation--Condition precedent--Ownership of assets--Ownership for purposes of section 32 does not mean possession of title deeds--Dominion over assets and user as its own would be sufficient--Assets transferred to assessee-trust by State Government--Transfer recorded in books of account of assessee--Use of such assets by assessee in its activities--Assessee entitled to depreciation-- CIT v. Jawahar Kala Kendra (Raj) . . . 515

----Depreciation--Ownership of asset--Transfer of business--Transferee put in possession of building, plant and machinery in terms of agreement to sell and running undertaking in its own right--Entitled to depreciation--That legal title conveyed under lease agreement and deed of sale executed in subsequent years not material-- CIT v. WEP Peripherals Ltd. (Karn) . . . 508

S. 32A --Investment allowance--Hotel building--Not a plant--Not entitled to investment allowance-- CIT v. SB Properties and Enterprises Ltd. (Raj) . . . 483

S. 36(1)(vii) --Bad debt--Law after 1-4-1989--Debt need no longer be proved to have turned bad--Merely writing off such advances or debts as bad debts in books of account and debiting in profit and loss account--Sufficient compliance-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

S. 37 --Business expenditure--Capital or revenue expenditure--Bond issue expenses--Bonds issued for purposes of business--Expenditure deductible-- CIT, Large Taxpayers Unit v. Indian Railway Finance Corporation Ltd. (Delhi) . . . 548

S. 45 --Reassessment--Notice--Not permissible upon mere change of opinion--Profits upon sale of plots of factory land converted into stock-in-trade--Assessment after full enquiry and after calling for explanation of assessee why income should be treated as capital gains and not business income--Communications by assessee in reply to notice--Assessment of income as capital gains--Reopening of assessment to assess income as business income--Not permissible--That assessment order did not record reasons for accepting assessee’s stand not relevant-- Spunpipe and Construction Co. v. Asst. CIT (Guj) . . . 559

S. 50 --Capital gains--Exemption--Depreciable asset--Gains on transfer of long-term capital asset invested in specified assets--Effect of deeming fiction in section 50--Section 50 does not restrict exemption-- CIT v. Aditya Medisales Ltd. (Guj) . . . 600

S. 54EC --Capital gains--Exemption--Depreciable asset--Gains on transfer of long-term capital asset invested in specified assets--Effect of deeming fiction in section 50--Section 50 does not restrict exemption-- CIT v. Aditya Medisales Ltd. (Guj) . . . 600

S. 69B --Unexplained investment--Purchase of land--Agreements claimed to be cancelled by executors found during search--No evidence to show that assessee paid on-money for purchase of land--Nothing on record to show that agreements were acted upon--No trace of cash payment in excess of amount shown in registered documents--Addition on basis of agreements not sustainable-- CIT v. Fairdeal Textile Park P. Ltd. (Guj) . . . 497

S. 80-IB --Industrial undertaking--Special deduction--Sale of business by sale of building, plant and machinery before expiry of period of exemption--Transferee entitled to deduction for remaining period-- CIT v. WEP Peripherals Ltd. (Karn) . . . 508

S. 115JB --Company--Book profit--Computation of income under section 115JB--Lease equalisation charges cannot be disallowed-- CIT, Large Taxpayers Unit v. Indian Railway Finance Corporation Ltd. (Delhi) . . . 548

S. 145 --Accounting--Rejection of accounts--Estimation of profits--Question of fact--Deductions not allowable on estimated net profit-- CIT v. Sahu Construction P. Ltd. (All) . . . 609

S. 147 --Reassessment--Notice--No limitation on number of times notice can be issued--But subject to limitation of not being permissible on change of opinion--Reassessment notice issued in first instance to bring to tax guaranteed return and bonus on keyman insurance policy--Proceedings dropped--Inference that Assessing Officer took view that addition of sums not sustainable on substantive ground--Second notice to bring same sums to tax--Not permissible-- Kunal Organics P. Ltd. v. Deputy CIT (Guj) . . . 530

----Reassessment--Notice--Not permissible upon mere change of opinion--Profits upon sale of plots of factory land converted into stock-in-trade--Assessment after full enquiry and after calling for explanation of assessee why income should be treated as capital gains and not business income--Communications by assessee in reply to notice--Assessment of income as capital gains--Reopening of assessment to assess income as business income--Not permissible--That assessment order did not record reasons for accepting assessee’s stand not relevant-- Spunpipe and Construction Co. v. Asst. CIT (Guj) . . . 559

----Reassessment--Notice after four years--Failure by assessee to disclose material facts--Assertion of assessee that detailed submissions filed during assessment--That assessment order makes no mention of assessee’s submissions--Not ground to infer assessee did not file them--Assessee’s assertion that it filed submissions to be accepted, on facts--No failure by assessee to disclose--Reassessment invalid-- BBC World News Ltd. v. Asst. Director of Income-tax (Delhi) . . . 577

----Reassessment--Notice after four years--Not permissible on change of opinion--Non-resident--Assessee stating in assessment proceedings that it had incurred loss on worldwide basis and even if income or loss attributable to Indian operations on proportionate basis, net result would be loss--Assessment order reasonably detailed and incorporating assessee’s chart listing out activities carried out in India and outside India--Assessment made at loss figure attributing 20 per cent. of global loss to Indian operations--Assessment made on similar basis for preceding year by same officer--Criteria for computing expenses of Indian operations changed in subsequent years--Not ground for reopening assessment after four years-- BBC World News Ltd. v. Asst. Director of Income-tax (Delhi) . . . 577

S. 148 --Reassessment--Notice--Audit party--Objection that non-charging of interest on advances resulted in short levy of tax--Assessing Officer not accepting objection but issuing notice solely on basis thereof--Notice not valid-- N. K. Roadways P. Ltd. v. ITO (OSD) (Guj) . . . 522

----Reassessment--Notice--Audit party--Whether asset for which depreciation claimed put to use before September 30 of year under consideration require re-examination--Ground for reopening assessment brought to notice of Assessing Officer by audit party but Assessing Officer on application of mind convinced with reason--Assessing Officer not acting at instance of audit party--No dispute that issue requires reconsideration--Notice valid-- N. K. Industries Ltd. v. ITO (OSD) (Guj) . . . 502

----Reassessment--Notice--No limitation on number of times notice can be issued--But subject to limitation of not being permissible on change of opinion--Reassessment notice issued in first instance to bring to tax guaranteed return and bonus on keyman insurance policy--Proceedings dropped--Inference that Assessing Officer took view that addition of sums not sustainable on substantive ground--Second notice to bring same sums to tax--Not permissible-- Kunal Organics P. Ltd. v. Deputy CIT (Guj) . . . 530

----Reassessment--Notice--Not permissible upon mere change of opinion--Profits upon sale of plots of factory land converted into stock-in-trade--Assessment after full enquiry and after calling for explanation of assessee why income should be treated as capital gains and not business income--Communications by assessee in reply to notice--Assessment of income as capital gains--Reopening of assessment to assess income as business income--Not permissible--That assessment order did not record reasons for accepting assessee’s stand not relevant-- Spunpipe and Construction Co. v. Asst. CIT (Guj) . . . 559

----Reassessment--Notice after four years--Failure by assessee to disclose material facts--Assertion of assessee that detailed submissions filed during assessment--That assessment order makes no mention of assessee’s submissions--Not ground to infer assessee did not file them--Assessee’s assertion that it filed submissions to be accepted, on facts--No failure by assessee to disclose--Reassessment invalid-- BBC World News Ltd. v. Asst. Director of Income-tax (Delhi) . . . 577

----Reassessment--Notice after four years--Not permissible on change of opinion--Non-resident--Assessee stating in assessment proceedings that it had incurred loss on worldwide basis and even if income or loss attributable to Indian operations on proportionate basis, net result would be loss--Assessment order reasonably detailed and incorporating assessee’s chart listing out activities carried out in India and outside India--Assessment made at loss figure attributing 20 per cent. of global loss to Indian operations--Assessment made on similar basis for preceding year by same officer--Criteria for computing expenses of Indian operations changed in subsequent years--Not ground for reopening assessment after four years-- BBC World News Ltd. v. Asst. Director of Income-tax (Delhi) . . . 577

S. 153A --Search and seizure--Assessment in search cases--Condition precedent--Assessing Officer making contradictory references to assessee being subjected to search or not--In the absence of search authorisation, Tribunal factually finding assessment orders against assessee invalid-- CIT v. Ramesh D. Patel (Guj) . . . 492

----Search and seizure--Assessment in search cases--Undisclosed income--Jewellery business--Estimate slip reflecting actual purchase and sale of gold but sale bill always for lesser quantity than reflected in estimate slip--Presumption as to nature of accounting and assessee’s modus operandi in maintaining records--No requirement that Department to collect information and evidence for each and every one of six previous years-- Sunny Jacob Jewellers and Wedding Centre v. Dy. CIT (Ker). . .664

S. 158BC --Search and seizure--Block assessment--Undisclosed income--Admission that apart from business in rectified spirits no other business was carried on--Claim to set off part of undisclosed income against miscellaneous receipts recorded in books--No evidence to support claim--Amount could not be reduced from undisclosed income-- CIT v. Sri Lakshmi Narasimha Distilleries P. Ltd. (Karn) . . . 573

S. 158BE --Search and seizure--Block assessment--Limitation--Starting point for limitation--Date of last authorisation for search to be taken into account--Second warrant of authorisation issued on 27-8-2003--Limitation started from the end of that month-- Dy. CIT v. Rakesh Sarin (Mad) . . . 619

S. 234B --Advance tax--Interest--Firm--Partners--Depreciation of a firm cannot be allocated to the benefit of partners personally and it shall revert to firm--Decision of Supreme Court much prior to submission of returns by partners--Returns ought to have been filed showing correct income--Advance tax not paid--Partners liable to pay interest-- Chief CIT v. George P. Mathews (Ker) . . . 660

S. 254(2) --Appeal to Appellate Tribunal--Bad debts--Law after 1-4-1989--Tribunal finding not deductible on ground assessee not establishing such advances had become bad--Application for rectification--Apparent mistake of law--Tribunal erred in not rectifying mistake apparent from record--Matter remanded to Tribunal to pass fresh order under section 254(2)-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

----Appeal to High Court--Powers of Tribunal--Rectification of mistakes--Rejection of application for rectification--Appeal to High Court not maintainable from such order--Writ petition against such order maintainable-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

S. 260A --Appeal to High Court--Powers of Tribunal--Rectification of mistakes--Rejection of application for rectification--Appeal to High Court not maintainable from such order--Writ petition against such order maintainable-- Madhav Marbles and Granites v. ITAT (Raj) . . . 647

S. 269SS --Penalty--Loan or deposit in cash exceeding specified limit--Contributions by twelve persons in cash--Audit report and balance-sheet of assessee showing outstanding amount as loan received from twelve persons--Imposition of penalty justified-- Soundarya Textiles v. Asst. CIT (Ker) . . . 488

S. 271(1)(c) --Penalty--Concealment of income--Effect of Explanation 1 to section 271(1)(c)--Explanation regarding computation of income found to be false--Income deemed to be concealed--Depreciation claimed on basis of lease--Lease transaction found to be bogus--Levy of penalty--Valid-- CIT v. BPL Sanyo Finance Ltd. (Karn) . . . 630

S. 271DD --Penalty--Loan or deposit in cash exceeding specified limit--Contributions by twelve persons in cash--Audit report and balance sheet of assessee showing outstanding amount as loan received from twelve persons--Imposition of penalty justified-- Soundarya Textiles v. Asst. CIT (Ker) . . . 488