TR'S TRIBUNAL TAX REPORTS (ITR (TRIB))--PRINT AND ONLINE EDITION
SUBJECT INDEX TO CASES REPORTED
Business expenditure --Direction by Commissioner (Appeals) to Assessing Officer to allow deduction of all expenses--Assessing Officer disallowing research and development expenses without verification--Assessing Officer to examine allowabilty of research and development expenses--Matter remanded--Income-tax Act, 1961-- Assistant DIT (International Taxation) v. Nortel Networks India International Inc . (Delhi) . . . 1
Scientific research expenditure --Conditions precedent for grant of deduction--Expenditure must be for scientific research and must relate to business carried on by assessee--Assessee in business of developing vaccines and bio-pharmaceuticals--Assessee carrying out research in respect of molecules--Expenditure on interest on loans and cost of chemicals consumed--Business carried on by assessee not research and development--Expenditure incurred on interest payment and consumables before completion of product development and commercialisation of product to be treated as capital--Expenditure having nothing to do with scientific research but incurred for setting up facilities for commercial production of new product--Not eligible for deduction--Income-tax Act, 1961, s. 35(1)(i), (iv)-- Deputy CIT v.Bharat Biotech International Ltd. (Hyd) . . . 7
PRINT EDITION
Volume 33 : Part 1 (Issue dated : 14-7-2014)
SUBJECT INDEX TO CASES REPORTED
Business expenditure --Disallowance--Payments liable to deduction of tax at source--Management fee and royalty paid to foreign associated enterprises--Assessee deducting tax at 10 per cent of net amount--Failure to furnish details about deduction of tax at source and its resultant payment--Order set aside and matter remanded for decision afresh--Income-tax Act, 1961, s. 40(a)(ia)-- Deputy CIT v. Sergi Transformer Explosion Prevention P. Ltd . (Delhi) . . . 118
----Disallowance--Payments liable to deduction of tax at source--Payments to overseas institutions towards examination fees and course material--Evidence that fees paid towards study curriculum including teachers textbooks, teaching aids, associated marketing tools and materials--Failure by Department to prove payments as fees for technical services--Disallowance not justified--Income-tax Act, 1961, s. 40(a)(i)-- Assistant CIT v. Myrind School of Catering and Computer Management P. Ltd. (Chennai) . . . 138
----Disallowance--Unlawful expenditure--Deeming fiction--Distinction between cases where purpose of expenditure unlawful and cases where purpose lawful but procedural provisions not complied with--Payment of job-work charges by assessee-company to firm in which directors interested as partners--Not unlawful purpose--Failure to obtain prior approval of Central Government but approval obtained ex post facto--Payment cannot be disallowed--Income-tax Act, 1961, s. 37(1), Expln. --Companies Act, 1956, s. 297-- Jai Surgicals Ltd. v. Assistant CIT (Delhi) . . . 86
----Payment for obtaining no objection certificate and payment towards extension fees--Expenses incurred in normal course of business--Not penalty--Income-tax Act, 1961-- ITO v. Growel Energy Co. Ltd. (Mumbai) . . . 1
----Travelling and communication expenses--Commissioner (Appeals) considering details furnished by assessee and remand report and allowing expenditure--No interference--Deputy CIT v. Sergi Transformer Explosion Prevention P. Ltd. (Delhi) . . . 118
Business income or capital gains --Transaction between husband and wife--Husband and wife are separate entities for purposes of Act--No material to show that sale of property made by assessee not in nature of business transaction--Income from sale to be assessed as business income--Income-tax Act, 1961, s. 50C-- R. Bhoopathy v. Assistant CIT(Chennai) . . . 20
Capital gains --Short-term capital loss--Sale of motor car at price less than written down value--Assessee failing to give explanation--Claim of depreciation to be restricted--Income-tax Act, 1961, s. 50-- Assistant CIT (OSD) v. Sarkar Jewellers P. Ltd. (Ahmedabad) . . . 16
Capital or revenue expenditure --Expenditure incurred for repairs and maintenance of rented building--No part of expenditure show to be capital--Expenses allowable-- Assistant CIT (OSD) v. Sahitya Mundranalaya P. Ltd. (Ahmedabad) . . . 108
----Expenditure incurred on renovation and repairs to business premises taken on lease--No new asset--Expenditure revenue in nature--Income-tax Act, 1961, s. 37(1)-- Assistant CIT (OSD) v. Sarkar Jewellers P. Ltd. (Ahmedabad) . . . 16
----Expenditure incurred on replacement of old software and annual maintenance--Revenue expenditure--Income-tax Act, 1961, s. 37(1)-- Assistant CIT (OSD) v. Sarkar Jewellers P. Ltd. (Ahmedabad) . . . 16
----Purchase of software--Expenses incurred under fees and subscription--Expenditure not relating to software purchase--Fees and subscriptions are revenue in nature-- Deputy CIT v. Sergi Transformer Explosion Prevention P. Ltd. (Delhi) . . . 118
Cash credit --Share application money--Duly authorised person signing confirmation letter--Payments by cheque and permanent account number details on record--Section 68 not applicable--Income-tax Act, 1961, s. 68-- ITO v. Growel Energy Co. Ltd. (Mumbai) . . . 1
Charitable purpose --Exemption--Disqualification for exemption--Trustee holding shares in company to which contract for construction of school given--Whether shareholding substantial--Matter remanded--Income-tax Act, 1961, s. 11-- DIT (Exemption) v. Shree Nirman Foundation Charitable Trust (Ahmedabad) . . . 56
Deduction of tax at source --Salary or professional fee--Remuneration of consulting doctors--Appointment of doctors is contract for service and not contract of service--Service of doctor a professional service--No employer-employee relationship between assessee and professionals--Tax to be deducted at source from payment to doctors under section 196J not under section 192(1)--Assessee not in default--Income-tax Act, 1961, ss. 192(1), 196J, 201-- Assistant CIT v. Usha Mullapudi Cardiac Centre (Hyderabad) . . . 72
Depreciation --Goodwill--Depreciation allowable on goodwill-- Assistant CIT (OSD) v. Sahitya Mundranalaya P. Ltd. (Ahmedabad) . . . 108
Export --Exemption--Rejection of claim to deduction under section 10B--Alternate claim to deduction under section 10A made before Commissioner (Appeals)--Can be entertained--Matter remanded to Assessing Officer to decide according to law--Income-tax Act, 1961, s. 10A-- Cronos Consulting India P. Ltd. v. Assistant CIT (Cochin) . . . 33
Fringe benefits tax --Conveyance expenses--Assessee in production of computer software entitled to include only 5 per cent. of conveyance expenses to fringe benefits tax--Income-tax Act, 1961-- Deputy CIT v. Intelenet Global Services P. Ltd . (Mumbai) . . . 30
----Conveyance expenses of employees from residence to office and back--Exempt from fringe benefits tax--Income-tax Act, 1961--Circular No. 14 of 2006 dated 28.12.2006-- Deputy CIT v. Intelenet Global Services P. Ltd. (Mumbai) . . . 30
Housing project --Special deduction--No requirement to furnish completion certificate from local authority for housing project approved by competent authority prior to April 1, 2005--Claim allowable if assessee able to prove completion of housing project within prescribed period--Matter remanded--Income-tax Act, 1961, s. 80-IB(10)-- ITO v. Kura Homes P. Ltd.(Hyderabad) . . . 37
Income --Accrual--Assessee managing owner of shipping companies--Freight income--To be assessed in hands of companies--Not in hands of assessee--Income-tax Act, 1961--Assistant DIT (International Taxation) v. A. P. Moller (Mumbai) . . . 123
----Disallowance of expenditure in relation to exempt income--Dividend--Interest-free funds far in excess of investment made by assessee at year end --No disallowance--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Assistant CIT (OSD) v. Sahitya Mundranalaya P. Ltd. (Ahmedabad) . . . 108
Interpretation of taxing statutes --Deeming fiction--Restricted to purpose expressly stated--Jai Surgicals Ltd. v. Assistant CIT (Delhi) . . . 86
Non-resident --Fees for technical services--Payment of management fee between two non-resident companies--Not taxable in India--Income-tax Act, 1961-- Assistant DIT (International Taxation) v. A. P. Moller (Mumbai) . . . 123
----Permanent establishment--Entire activities of business enterprise of assessee managing by subsidiary in India--Subsidiary acting as service provider, sale outlet provider co-operating with after sale service and providing assistance requested by assessee--Activities of subsidiary in India constitute permanent establishment of assessee--Double Taxation Avoidance Agreement between India and the U. S. A, art. 5-- Nortel Networks India International Inc. v. Assistant DIT, International Taxation (Delhi) . . . 97
----Permanent establishment--Profit attributable to permanent establishment--Substantial deduction allowed for general and marketing expenses and research and development expenses--Attribution of 50 per cent. to permanent establishment justified--Income-tax Act, 1961-- Nortel Networks India International Inc. v. Assistant DIT, International Taxation(Delhi) . . . 97
Penalty --Concealment of income or furnishing of inaccurate particulars--Assessee declaring long-term capital gains and claiming exemption thereof in return--Denial of claim by Department does not make assessee liable for penalty of concealment of income--Facts disclosed by assessee not found to be incorrect--Imposition of penalty not justified--Income-tax Act, 1961, s. 271(1)(c)-- AAA Portfolios P. Ltd. v. Deputy CIT (Delhi) . . . 23
Revision --Condition precedent--Order should be erroneous and also prejudicial to Revenue--Failure by Assessing Officer to mention in body of assessment order all issues on which enquiry made--Not indication of lack of enquiry or non-application of mind--Order not erroneous and prejudicial to interests of Revenue--Income-tax Act, 1961, s. 263-- Lanco Kondapalli Power Ltd. v. Joint CIT (Hyd) . . . 142
----Condition precedent--Order should be erroneous and also prejudicial to Revenue--Amount received on sale of carbon emission reduction certificates--Capital receipt--Assessing Officer treating it as revenue income and allowing special deduction thereon--No prejudice to Revenue--Jurisdiction under section 263 cannot be invoked--Income-tax Act, 1961, ss. 80-IA, 263-- Lanco Kondapalli Power Ltd. v. Joint CIT (Hyd) . . . 142
----Condition precedent--Order should be erroneous and also prejudicial to Revenue--Reimbursement of advance tax--Not income of assessee--Not able to consider under provisions of section 115JB--Condition for invoking jurisdiction under section 263 not satisfied--Income-tax Act, 1961, ss. 115JB, 263-- Lanco Kondapalli Power Ltd. v. Joint CIT(Hyd) . . . 142
----Condition precedent--Order should be erroneous and also prejudicial to Revenue--View taken by Assessing Officer appearing incorrect to Commissioner--Jurisdiction under section 263 cannot be invoked--Income-tax Act, 1961, s. 263-- Lanco Kondapalli Power Ltd. v. Joint CIT (Hyd) . . . 142
Special deduction --Industrial undertaking--Assessment made allowing deduction on basis of auditor’s report in form 10CCB in old format--Revised audit report filed pursuant to notice of rectification--Should be taken into cognizance for examining allowability of claim for deduction--Matter remanded--Income-tax Act, 1961, s. 80-IB-- Oswin Plastics P. Ltd. v. Deputy CIT (Mumbai) . . . 133
Undisclosed investment --Discrepancies in cash, gold, silver and diamonds--Addition not permissible merely on conjectures or surmises--Shortage in gold, silver and diamond items can be treated as undisclosed sales not undisclosed investments--Section 69A not attracted--Income-tax Act, 1961, s. 69A-- ITO v. Subhas Brothers Jewellers P. Ltd. (Kolkata) . . . 66
Unexplained expenditure --Expenditure on professional fees shown under head capital work-in-progress--Deduction not claimed as business expenditure--Sum cannot be brought to tax as unexplained expenditure--Income-tax Act, 1961, s. 69C-- ITO v. Growel Energy Co. Ltd. (Mumbai) . . . 1
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
S. 297 --Business expenditure--Disallowance--Unlawful expenditure--Deeming fiction--Distinction between cases where purpose of expenditure unlawful and cases where purpose lawful but procedural provisions not complied with--Payment of job-work charges by assessee-company to firm in which directors interested as partners--Not unlawful purpose--Failure to obtain prior approval of Central Government but approval obtained ex post facto--Payment cannot be disallowed-- Jai Surgicals Ltd. v. Assistant CIT (Delhi) . . . 86
Double Taxation Avoidance Agreement between India and the U. S. A
Art. 5 --Non-resident--Permanent establishment--Entire activities of business enterprise of assessee managing by subsidiary in India--Subsidiary acting as service provider, sale outlet provider co-operating with after sale service and providing assistance requested by assessee--Activities of subsidiary in India constitute permanent establishment of assessee--Nortel Networks India International Inc. v. Assistant DIT, International Taxation (Delhi) . . . 97
S. 10A --Export--Exemption--Rejection of claim to deduction under section 10B--Alternate claim to deduction under section 10A made before Commissioner (Appeals)--Can be entertained--Matter remanded to Assessing Officer to decide according to law-- Cronos Consulting India P. Ltd. v. Assistant CIT (Cochin) . . . 33
S. 11 --Charitable purpose--Exemption--Disqualification for exemption--Trustee holding shares in company to which contract for construction of school given--Whether shareholding substantial--Matter remanded-- DIT (Exemption) v. Shree Nirman Foundation Charitable Trust (Ahmedabad) . . . 56
S. 14A --Income--Disallowance of expenditure in relation to exempt income--Dividend--Interest-free funds far in excess of investment made by assessee at year end --No disallowance-- Assistant CIT (OSD) v. Sahitya Mundranalaya P. Ltd. (Ahmedabad) . . . 108
S. 37(1) --Capital or revenue expenditure--Expenditure incurred on renovation and repairs to business premises taken on lease--No new asset--Expenditure revenue in nature-- Assistant CIT (OSD) v. Sarkar Jewellers P. Ltd. (Ahmedabad) . . . 16
----Capital or revenue expenditure--Expenditure incurred on replacement of old software and annual maintenance--Revenue expenditure-- Assistant CIT (OSD) v. Sarkar Jewellers P. Ltd. (Ahmedabad) . . . 16
S. 37(1), Expln. --Business expenditure--Disallowance--Unlawful expenditure--Deeming fiction--Distinction between cases where purpose of expenditure unlawful and cases where purpose lawful but procedural provisions not complied with--Payment of job-work charges by assessee-company to firm in which directors interested as partners--Not unlawful purpose--Failure to obtain prior approval of Central Government but approval obtained ex post facto--Payment cannot be disallowed-- Jai Surgicals Ltd. v. Assistant CIT (Delhi) . . . 86
S. 40(a)(i) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Payments to overseas institutions towards examination fees and course material--Evidence that fees paid towards study curriculum including teachers textbooks, teaching aids, associated marketing tools and materials--Failure by Department to prove payments as fees for technical services--Disallowance not justified-- Assistant CIT v. Myrind School of Catering and Computer Management P. Ltd. (Chennai) . . . 138
S. 40(a)(ia) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Management fee and royalty paid to foreign associated enterprises--Assessee deducting tax at 10 per cent of net amount--Failure to furnish details about deduction of tax at source and its resultant payment--Order set aside and matter remanded for decision afresh--Deputy CIT v. Sergi Transformer Explosion Prevention P. Ltd . (Delhi) . . . 118
S. 50 --Capital gains--Short-term capital loss--Sale of motor car at price less than written down value--Assessee failing to give explanation--Claim of depreciation to be restricted--Assistant CIT (OSD) v. Sarkar Jewellers P. Ltd. (Ahmedabad) . . . 16
S. 50C --Business income or capital gains--Transaction between husband and wife--Husband and wife are separate entities for purposes of Act--No material to show that sale of property made by assessee not in nature of business transaction--Income from sale to be assessed as business income-- R. Bhoopathy v. Assistant CIT (Chennai) . . . 20
S. 68 --Cash credit--Share application money--Duly authorised person signing confirmation letter--Payments by cheque and permanent account number details on record--Section 68 not applicable-- ITO v. Growel Energy Co. Ltd. (Mumbai) . . . 1
S. 69A --Undisclosed investment--Discrepancies in cash, gold, silver and diamonds--Addition not permissible merely on conjectures or surmises--Shortage in gold, silver and diamond items can be treated as undisclosed sales not undisclosed investments--Section 69A not attracted-- ITO v. Subhas Brothers Jewellers P. Ltd. (Kolkata) . . . 66
S. 69C --Unexplained expenditure--Expenditure on professional fees shown under head capital work-in-progress--Deduction not claimed as business expenditure--Sum cannot be brought to tax as unexplained expenditure-- ITO v. Growel Energy Co. Ltd. (Mumbai) . . . 1
S. 80-IA --Revision--Condition precedent--Order should be erroneous and also prejudicial to Revenue--Amount received on sale of carbon emission reduction certificates--Capital receipt--Assessing Officer treating it as revenue income and allowing special deduction thereon--No prejudice to Revenue--Jurisdiction under section 263 cannot be invoked-- Lanco Kondapalli Power Ltd. v. Joint CIT (Hyd) . . . 142
S. 80-IB --Special deduction--Industrial undertaking--Assessment made allowing deduction on basis of auditor’s report in form 10CCB in old format--Revised audit report filed pursuant to notice of rectification--Should be taken into cognizance for examining allowability of claim for deduction--Matter remanded-- Oswin Plastics P. Ltd. v. Deputy CIT (Mumbai) . . . 133
S. 80-IB(10) --Housing project--Special deduction--No requirement to furnish completion certificate from local authority for housing project approved by competent authority prior to April 1, 2005--Claim allowable if assessee able to prove completion of housing project within prescribed period--Matter remanded-- ITO v. Kura Homes P. Ltd. (Hyd) . . . 37
S. 115JB --Revision--Condition precedent--Order should be erroneous and also prejudicial to Revenue--Reimbursement of advance tax--Not income of assessee--Not able to consider under provisions of section 115JB--Condition for invoking jurisdiction under section 263 not satisfied-- Lanco Kondapalli Power Ltd. v. Joint CIT (Hyd) . . . 142
S. 192(1) --Deduction of tax at source--Salary or professional fee--Remuneration of consulting doctors--Appointment of doctors is contract for service and not contract of service--Service of doctor a professional service--No employer-employee relationship between assessee and professionals--Tax to be deducted at source from payment to doctors under section 196J not under section 192(1)--Assessee not in default-- Assistant CIT v. Usha Mullapudi Cardiac Centre (Hyd) . . . 72
S. 196J --Deduction of tax at source--Salary or professional fee--Remuneration of consulting doctors--Appointment of doctors is contract for service and not contract of service--Service of doctor a professional service--No employer-employee relationship between assessee and professionals--Tax to be deducted at source from payment to doctors under section 196J not under section 192(1)--Assessee not in default-- Assistant CIT v. Usha Mullapudi Cardiac Centre (Hyd) . . . 72
S. 201 --Deduction of tax at source--Salary or professional fee--Remuneration of consulting doctors--Appointment of doctors is contract for service and not contract of service--Service of doctor a professional service--No employer-employee relationship between assessee and professionals--Tax to be deducted at source from payment to doctors under section 196J not under section 192(1)--Assessee not in default-- Assistant CIT v. Usha Mullapudi Cardiac Centre (Hyd) . . . 72
S. 263 --Revision--Condition precedent--Order should be erroneous and also prejudicial to Revenue--Amount received on sale of carbon emission reduction certificates--Capital receipt--Assessing Officer treating it as revenue income and allowing special deduction thereon--No prejudice to Revenue--Jurisdiction under section 263 cannot be invoked-- Lanco Kondapalli Power Ltd. v. Joint CIT (Hyd) . . . 142
----Revision--Condition precedent--Order should be erroneous and also prejudicial to Revenue--Failure by Assessing Officer to mention in body of assessment order all issues on which enquiry made--Not indication of lack of enquiry or non-application of mind--Order not erroneous and prejudicial to interests of Revenue-- Lanco Kondapalli Power Ltd. v. Joint CIT(Hyd) . . . 142
----Revision--Condition precedent--Order should be erroneous and also prejudicial to Revenue--Reimbursement of advance tax--Not income of assessee--Not able to consider under provisions of section 115JB--Condition for invoking jurisdiction under section 263 not satisfied-- Lanco Kondapalli Power Ltd. v. Joint CIT (Hyd) . . . 142
----Revision--Condition precedent--Order should be erroneous and also prejudicial to Revenue--View taken by Assessing Officer appearing incorrect to Commissioner--Jurisdiction under section 263 cannot be invoked-- Lanco Kondapalli Power Ltd. v. Joint CIT(Hyd) . . . 142
S. 271(1)(c) --Penalty--Concealment of income or furnishing of inaccurate particulars--Assessee declaring long-term capital gains and claiming exemption thereof in return--Denial of claim by Department does not make assessee liable for penalty of concealment of income--Facts disclosed by assessee not found to be incorrect--Imposition of penalty not justified--AAA Portfolios P. Ltd. v. Deputy CIT (Delhi) . . . 23
R. 8D --Income--Disallowance of expenditure in relation to exempt income--Dividend--Interest-free funds far in excess of investment made by assessee at year end --No disallowance-- Assistant CIT (OSD) v. Sahitya Mundranalaya P. Ltd. (Ahmedabad) . . . 108
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