Section 68 Helps Nail Jayalalitha’s Corruption Cash Credits

 

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S. 68 Helps Nail Jayalalitha's Corruption Cash Credits

The Hindu has made available a copy of the judgement of John Michael Cunha J. in the case of State vs. Selvi. J. Jayalalitha (pdf). The judgement exposes the intricate arrangements that were made to launder the huge amount of cash credits that were received by J. Jayalalitha (former Chief Minister of Tamil Nadu) from alleged corrupt means. The judgement also raises disturbing questions as to the role of the auditors of the front companies in seeking to camouflage the true nature of the transactions. A few passages from the judgement are noteworthy.

(i) As in s. 68 of the Income-tax Act, the onus is on the accused to explain the nature and source of the investment & cash credits because he has special knowledge about how a particular asset was acquired or an investment therein was made. Such proof includes proof of the identity of the person who according to the accused provided the source, capacity of such person to advance or spend the money, and lastly, the genuineness of the transaction. On facts, the accused have failed to offer any satisfactory explanation as to the enormous unexplained credits entered into their bank accounts. Whatever explanation offered by the accused by way of confirmatory letters are proved to be false and bogus. The identity of the persons who provided the source is not proved. The transactions which resulted in the cash credit is also not established (Kale Khan Mohammed Hanif (1963) 50 ITR 1 (SC) followed);

(ii) The auditors examined by the accused are found to be propped up to support the false defence set up by the accused. It is proved in evidence that the auditors examined by the accused did not handle their accounts during the check period and they were not conversant with the true facts. It is also proved in evidence that, the returns and the balance sheet and the profit and loss account were maneuvred solely with a view to offer an explanation to the huge unexplained credits entered in their respective bank accounts;

(iii) Mere declaration of property in the Income Tax returns does not amount to showing the same was acquired from the known source of income. The prosecution could show that, there was no real source of income with the assessees and the public servant is the real source. In the instant case, the prosecution has succeeded in proving beyond reasonable doubt that the only source for the acquisition of the large assets is A-1 (J. Jayalalitha) herself.

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CIT vs. Fortune Hotels and Estates Pvt. Ltd (Bombay High Court)

S. 271(1)(c): Non-offering of stamp duty/DVO value as consideration for capital gains does not attract penalty if facts are on record

SC Comes To Rescue Of ‘Wait-Listed’ ITAT Member Candidate Overlooked By UOI For 7 Years

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Inturi Rama Rao vs. UOI (Supreme Court)

As the UOI has continued the process of appointment of Tribunal Members without amending the Rules, the Petitioner, who was wait-listed in 2007, deserves to be considered for appointment within 30 days

The Selection Committee finalized a list of 18 persons, 13 for the post of Accountant Member and 5 for the post of Judicial Member. The Petitioner, Inturi Rama Rao, was placed in a 'Waiting List' appointment as Accountant Member. The Select List was approved by the Appointment Committee of the Cabinet (ACC) and 11 vacancies of Accountant Members were filled up whereas 5 vacancies of Judicial Members were also filled up. Two vacancies of Accountant Members remained vacant as the two candidates who were selected were not cleared by the Vigilance. The Petitioner, who was in the Waiting List, perceived a right to be appointed against one of the vacant posts of Accountant Member. As appointment was not forthcoming, the Petitioner moved the Central Administrative Tribunal. Appropriate relief was granted by the CAT. The order of the CAT was affirmed by the Delhi High Court. However, the appeals filed by the UOI against the said order of the CAT and High Court were allowed by the Supreme Court on the ground that there was a difference between the main list of selected candidates and the wait-listed candidates. As appointments of the candidates in the main list (16 in number) had already been made, the Supreme Court thought it proper not to affirm the directions for appointment of the wait-listed candidates as made by the CAT and the High Court. It accepted the contentions made by the UOI that further appointments would be made only after amendment of the Rules pertained to the eligibility of the candidates. However, as the amendment to the Rules has not been effected till date and instead, the UOI initiated fresh selection process in the year 2013 on the basis of the unamended Rules and the selection process was completed and the appointments are awaited, the Petitioner filed a fresh Writ Petition. HELD by the Court allowing the Petition:

What we find is that notwithstanding the statement made on behalf of the Union of India before this Court that vacancies in the future will be made only after the amendments in the Rules are carried out, the Union of India has initiated a process to make further appointments without amending the Rules. If persons eligible under the then existing Rules which are in force even today are to be considered for appointment, surely, the petitioner, who is a wait-listed candidate, will also have to be considered for appointment by consideration of his entitlement for appointment as in the year 2007 when the appointments on the main-list were made and the two vacancies arose giving rise to the issue of operation of the waiting list. What follows from the above is that even accepting the order dated 17.11.2011 passed by this Court, in view of the subsequent facts and events that have occurred, namely, action of the Union of India in resorting to a fresh process of selection and appointment without amendment of the Rules, the right of the petitioner to be considered for appointment on the basis of his position in the Waiting List has once again come to fore which needs to be resolved by an appropriate order. We, therefore, allow this writ petition and direct consideration of the case of the petitioner for appointment on the basis of his position in the Waiting List against one of the two vacancies that had arisen on account of two of the candidates in the merit list not having been granted the vigilance clearance. This will be done by the concerned Authority within 30 days from the date of receipt of a copy of this order.

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The Solapur District Central Co-op. Bank Ltd vs. ACIT (ITAT Pune)

Interest on NPAs, even if credited to the Profit & loss account, is not chargeable to tax

No Disallowance u/s 14A & Rule 8D For Exempt Income Earned On Strategic Investments : ITAT Delhi

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Interglobe Enterprises Ltd vs. DCIT (ITAT Delhi)

No disallowance u/s 14A & Rule 8D can be made towards exempt income earned on strategic investments

The assessee had made significant investments in the shares of subsidiary companies which are definitely not for the purpose of earning exempt income. Strategic investment has to be excluded for the purpose of arriving at disallowance under Rule 8D(iii). The disallowance under Rule 8D(iii) has to be computed by excluding the value of strategic investments. No disallowance under Rule 8D(i) and 8D(ii) is also warranted (REI Agro (ITAT Kol) followed)

See also Oriental Structural Engineers (Del HC), Garware Wall Ropes (ITAT Mum), JM Financial (ITAT Mum) & EIH Associated Hotels (ITAT Chennai)

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Raajratna Metal Industries Ltd vs. ACIT (Gujarat High Court)

S. 147: If AO contests the audit objection but still reopens to comply with the audit objection, it means he has not applied his mind independently and the reopening is void

No Disallowance u/s 14A & Rule 8D For Exempt Income Earned On Strategic Investments : ITAT Delhi

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Interglobe Enterprises Ltd vs. DCIT (ITAT Delhi)

No disallowance u/s 14A & Rule 8D can be made towards exempt income earned on strategic investments

The assessee had made significant investments in the shares of subsidiary companies which are definitely not for the purpose of earning exempt income. Strategic investment has to be excluded for the purpose of arriving at disallowance under Rule 8D(iii). The disallowance under Rule 8D(iii) has to be computed by excluding the value of strategic investments. No disallowance under Rule 8D(i) and 8D(ii) is also warranted (REI Agro (ITAT Kol) followed)

See also Oriental Structural Engineers (Del HC), Garware Wall Ropes (ITAT Mum), JM Financial (ITAT Mum) & EIH Associated Hotels (ITAT Chennai)

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Raajratna Metal Industries Ltd vs. ACIT (Gujarat High Court)

S. 147: If AO contests the audit objection but still reopens to comply with the audit objection, it means he has not applied his mind independently and the reopening is void

Two Important Verdicts On S. 147 Reopening + Disallowance U/s 14A And Rule 8D

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The following important judgements are available for download at itatonline.org.

Raajratna Metal Industries Ltd vs. ACIT (Gujarat High Court)

S. 147: If AO contests the audit objection but still reopens to comply with the audit objection, it means he has not applied his mind independently and the reopening is void

To satisfy ourselves, whether the reassessment proceedings have been initiated at the instance of the audit party and solely on the ground of audit objections ….. On a perusal of the files, the noting made therein and the relevant documents, it appears that the assessment is sought to be reopened at the instance of the audit party, solely on the ground of audit objections. It is also found that, as such, the AO tried to sustain his original assessment order and submitted to the audit party to drop the audit objections …. … if the reassessment proceedings are initiated merely and solely at the instance of the audit party and when the Assessing Officer tried to justify the Assessment Orders and requested the audit party to drop the objections and there was no independent application of mind by the Assessing Officer with respect to subjective satisfaction for initiation of the reassessment proceedings, the impugned reassessment proceedings cannot be sustained and the same deserves to be quashed and set aside

Geojit Investment Services Ltd vs. ACIT (ITAT Cochin)

S. 14A: In applying Rule 8D(2)(ii) interest expenses directly attributable to tax exempt income as also directly attributable to taxable income, are required to be excluded from computation of common interest expenses to be allocated.

(6) In our opinion, it is only the interest on borrowed funds that would be apportioned and the amount of expenditure by way of interest that will be taken (as 'A' in the formula) will exclude any expenditure by way of interest which is directly attributable to any particular income or receipt. Therefore, it is not only the interest directly attributable to tax exempt income, i.e. under rule 8D(2)(i), but also interest directly relatable to taxable income, which is to be excluded from the definition of variable 'A' in formula as per rule 8D(2)(ii), and rightly so, because it is only then that common interest expenses, which are to be allocated as indirectly relatable to taxable income and tax exempt income, can be computed.

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CBDT Order On Transfers And Postings Of ACsIT And DCsIT

Vide Order No. 182 dated 10.10.2014, the CBDT has transferred and posted several officers in the grade of Assistant / Deputy Commissioners of Income-tax with immediate effect and until further orders.

Two Important Verdicts + CBDT Transfer Order Of ACsIT And DCsIT

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CIT vs. N.G.C. Network (India) P. Ltd (Bombay High Court)

Advertisement expenditure incurred by agent to popularize the business of the channel run by the foreign principal is allowable as there is a direct business between the expenditure and the assessee's business as agent. The fact that the foreign principals also benefited does not entail right to deny deduction under section 37(1)

Advertisers who advertise on these channels act through media houses and advertising agencies and they work to media plans designed in the manner so as to maximise value for the advertiser. They will evaluate expenditure with channel penetration in the market place inasmuch as only channels with high viewership would justify the higher advertising rates which is normally sold in seconds. Merely having high quality content will not ensure high viewership. This content has to be publicized. The great reach of the publicity, the higher chances of larger viewership. The larger the viewership, the better chances of obtaining higher advertisement revenue. The higher advertisement revenue, the higher will be commission earned by the assessee. Accordingly, we have no doubt that there is a direct nexus between advertising expenditure and revenue albeit the fact that there may be a lean period before revenue picks up notwithstanding high amount spent on such publicity. This justifies the higher expenditure vis-a-vis revenue noticed by the department.

DCIT vs. Owens Corning Industries (India) Pvt. Ltd (ITAT Hyderabad)

TPO cannot question commercial expediency of payment to AE. RBI approval to a transaction implies it is at arms' length price

We are of the opinion that the TPO was incorrect in going into the business expediency of payment of royalty and arriving at the conclusion of the quantum of the royalty. We find support for this proposition in the decision of Hon'ble Delhi High Court in CIT vs. EKL Appliances (345 ITR 241) (Del) wherein the Hon'ble Delhi High Court had occasion to consider the disallowance of royalty by TPO and held that if the expenditure has been incurred or laid out for the purposes of business it is no concern of the TPO to disallow the same on any extraneous reasons. In the case of Ericsson India Pvt. Ltd. vs. DCIT (ITA No. 5141/Del/2011) the Delhi High Court decision in CIT vs. EKL Appliances (supra) was followed wherein it was held that "it would be wrong to hold that the expenditure should be disallowed only on the ground that these expenses were not required to be incurred by the assessee".

CBDT Order On Transfers And Postings Of ACsIT And DCsIT

Vide Order No. 182 dated 10.10.2014, the CBDT has transferred and posted several officers in the grade of Assistant / Deputy Commissioners of Income-tax with immediate effect and until further orders.

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Change In Bombay High Court's Tax Bench Constitution w.e.f 27.10.2014

Taxability Of Interest On NPAs Credited To P And L A/c: ITAT Explains Law

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The Solapur District Central Co-op. Bank Ltd vs. ACIT (ITAT Pune)

Interest on NPAs, even if credited to the Profit & loss account, is not chargeable to tax

While constructing its Profit & Loss Account to arrive at its net Profit or Loss, a Co-operative Society is required to show interest accrued/accruing on amounts of Overdue Loans separately. This is precisely what has been done by the assessee in the present case. The aforesaid requirement of the manner of construction of Profit & Loss Account, prescribed under the Rules of the Maharashtra Co-operative Societies Act, 1960, has prompted the assessee to draw up its Profit & Loss Account in the manner we have noted above qua the interest on NPAs. Therefore, it cannot be accepted that the manner or presentation of account which ostensibly is in compliance with the statutory provisions governing the assessee, can be a factor to evaluate assessability or otherwise of an income. In our considered opinion, it would inappropriate to be merely guided by a presentation in the annual financial statements to infer assessee's perception that an income had accrued, without considering the entries made in the financial statements in toto. In the present case, it is quite clear that assessee has drawn up its annual financial statement in compliance with the requirements of the statutes under which it functions and/or is incorporated. Therefore, the issue with regard to non-recognition of income on NPAs is required to be adjudicated having regard to the relevant legal position and not on the basis of the presentation in the annual financial statements. At this stage, we may also refer to the judgement of the Hon'ble Supreme Court in the case of CIT vs. Shoorji Vallabhdas & Co., (1962) 46 ITR 144 (SC) for the proposition that a mere book keeping entry cannot be assessed as income unless it can be shown that income has actually resulted. In the present case, the crediting of gross interest in the Profit & Loss Account, which includes interest on NPAs cannot be taken as a proof that such income has accrued to the assessee unless the statutory guidelines applicable on the said subject are ignored. Obviously, when the banking institutions following mercantile system accounting are permitted to treat the income on NPAs as assessable on receipt basis, such a position cannot be ignored in the case of present assessee merely because of a presentation in the annual financial statements. Even otherwise, we notice that the RBI guidelines permit that interest income on NPAs be parked in a suspense account and it is not necessary that it has to be brought to the Profit & Loss Account by the assessee. However, in the present case, as seen earlier, assessee has credited the gross amount of interest on credit side of the Profit & Loss Account and simultaneously shown on the debit side of the Profit & Loss Account, the amount of interest on NPAs. In other words, instead of netting of the interest the two amounts have been shown separately one on the credit side and other on the debit side. The net effect of the said presentation is the same. Therefore, in our view, the lower authorities have misguided themselves in rejecting the claim of the assessee for non-recognition of interest income on NPAs.

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Charu Home Products Pvt. Ltd vs. CIT (Delhi High Court)

Stay of demand in high-pitched assessments should be considered as per observations in Soul v. DCIT 323 ITR 305 (Delhi)

Improper Service Of Notice Renders Assessment Null And Void: ITAT Mumbai

 

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Sanjay Badani vs. DCIT (ITAT Mumbai)

A strict procedure has to be followed for service by affixture. If done improperly, the notice and the resultant assessment order are null and void.

(i) As per sub-section (1) of section 282, the notice is to be served on the person named therein either by post or as if it was a summons issued by Court under the Code of Civil Procedure, 1908 (V of 1908). The relevant provision for effecting of service by different modes are contained in rules 17, 19 and 20 of Order V of CPC. Rules 17, 19 and 20 of Order V of CPC lay down the procedure for service of summons/notice and, therefore, the procedure laid down therein cannot be surpassed because the intention of the legislature behind these provisions is that strict compliance of the procedure laid down therein has to be made. The expression after using all due and reasonable diligence' appearing in rule 17 has been considered in many cases and it has been held that unless a real and substantial effort has been made to find the defendant after proper enquiries, the Serving Officer cannot be deemed to have exercised 'due and reasonable diligence'. Before taking advantage of rule 17, he must make diligent search for the person to be served. He therefore, must take pain to find him and also to make mention of his efforts in the report. Another requirement of rule 17 is that the Serving Officer should state that he has affixed the copy of summons as per this rule. The circumstances under which he did so and the name and address of the person by whom the house or premises were identified and in whose premises the copy of the summon was affixed. These facts should also be verified by an affidavit of the Serving Officer.

(ii) The reason for taking all these precautions is that service by affixture is substituted service and since it is not direct or personal service upon the defendant, to bind him by such mode of service the mere formality of affixture is not sufficient. Since the service has to be done after making the necessary efforts, in order to establish the genuineness of such service, the Serving Officer is required to state his full action in the report and reliance can be placed on such report only when it sets out all the circumstances which are also duly verified by the witnesses in whose presence the affixture was done and thus the affidavit of the Serving Officer deposing such procedure adopted by him would also be essential. In the instant case, the whole thing had been done in one stroke. It was not known as to why and under which circumstances another entry for service of notice by affixture was made on 27-7-2012 when sufficient time was available through normal service till 30-9-2012. Nor there is any entry in the note-sheet by the AO directing the Inspector for service by affixture and had only recorded the fact that the notice was served by the affixture. It appears that the report of the Inspector was obtained without issuing any prior direction for such process or mode. ….. In view of the above, it is clear that there was no valid service of notice u/s.143(2) by way of affixation and the assessment made on the basis of such invalid notice could not be treated to be valid assessment and, hence, such assessment order deserves to be treated as null and void and liable to be quashed and annulled.

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New Holland Tractors (India) Pvt. Ltd vs. CIT (Delhi High Court)

The High Court decided the merits against the assessee. However, while deleting the levy of penalty u/s 271(1)(c), the High Court has made important observations:

__._,_.___

ITAT Explains Imp Law On S. 271(1)(c) vs. Section 158BFA Penalty + High Court View On Stay In High-Pitch Assessments

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Mohd. Khasim vs. ACIT (ITAT Bangalore)

There is a perceptional difference in the operative force of section 271(1)(c) vis-à-vis section 158BFA(2). The charge against the assessee u/s 158BFA(2) could be, why they failed to compute true disclosed income out of the seized material.

On a comparative study of the scheme of assessment of undisclosed income for the purpose of block period, penalty impossible u/s 271(1)(i)(c) and penalty impossible on the undisclosed income in the block period, we find that income for the block period has to be determined on the basis of material seized during the course of search. This material was to be supplied to the assessee before he could be asked to submit his return in response to the notice issued u/s 158BC meaning thereby the material goads any person to compute true undisclosed income. The material is already available with the Assessing Officer. From that very material, true and undisclosed income has to be computed by the assessee and to be disclosed in the block return in response to the notice received u/s 158BC. Thus there is a perceptional difference in the operative force of section 271(1)(i)(c) vis-à-vis section 158BFA(2). The charge against the assessee u/s 158BFA(2) could be, why they failed to compute true disclosed income out of the seized material. Whether the assessees have made a deliberate attempt to disclose nil undisclosed income or they have sufficient reasoning for forming belief that no undisclosed income is available in their hands which is to be disclosed in response to the notice received u/s 158BC.

The question before us is, whether at the time of filing the return, a man of ordinary prudence can form a belief that he has no undisclosed income on the basis of seized material supplied to him. Whether such formation of belief is a bonafide one having regard to the material on the record or it is merely a Performa explanation. It is to be kept in mind that if a claim was not made in the return, then the assessee would be foreclosing his right to dispute the claim and would accept the stand of the Revenue. The Hon'ble Supreme Court in the case of Reliance Petro Products Ltd [2010] 322 ITR 158 (SC) has observed that making incorrect claim does not amount to concealment of particulars, because the assessee wants to take a particular stand on the given facts.

Charu Home Products Pvt. Ltd vs. CIT (Delhi High Court)

Stay of demand in high-pitched assessments should be considered as per observations in Soul v. DCIT 323 ITR 305 (Delhi)

The learned counsel for the petitioner has also taken us through the instruction No. 96 of 1969 as well as instruction No. 1914 of 1993. We have also examined the decision of this court in the case of Soul v. DCIT: 323 ITR 305 (Delhi) and, in particular, paragraph 8 thereof where the above mentioned two instructions have been considered as also the earlier decision of this court in Valvoline Cummins v. DCIT: 307 ITR 103 (Delhi). Considering the same, we feel that it would be appropriate if the ACIT reconsiders the application of the petitioner for stay in the light of the observations contained in the said decision [Soul v. DCIT (supra)]. This is so because according to the petitioner the assessment is a high pitched one inasmuch as it is approximately 17 times of the returned income.

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Sanjay Badani vs. DCIT (ITAT Mumbai)

A strict procedure has to be followed for service by affixture. If done improperly, the notice and the resultant assessment order are null and void.

High Court Irked By ITAT Remand + Dept Apologizes For Wilful Disobedience Of Law

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Coca-Cola India Private Limited vs. ITAT (Bombay High Court)

S. 254(1): Unnecessary remand by the ITAT causes prejudice and amounts to a failure to exercise jurisdiction

The Tribunal should not have refused to consider and decide the issue relating to service charges, more so, when an identical view taken by it earlier has not found favour of this Court. This Court repeatedly reminded the Tribunal of its duty as a last fact finding authority of dealing with all factual and legal issues. The Tribunal failed to take any note of the caution which has been administered by this Court and particularly of not remanding cases unnecessarily and without any proper direction. A blanket remand causes serious prejudice to parties. None benefits by non-adjudication or non-consideration of an issue of fact and law by an Appellate Authority and by wholesale remand of the case back to the original authority. This is a clear failure of duty which has to be performed by the Appellate Authority in law. Once the Appellate Authority fails to perform such duty and is corrected on one occasion by this Court, and in relation to the same assessee, then, the least that was expected from the Tribunal was to follow the order and direction of this Court and abide by it even for this later assessment year. If the same claim and which was dealt with by the Court earlier and for which the note of caution was issued, then, the Tribunal was bound in law to take due note of the same and follow the course for the later assessment years. We are of the view that the refusal of the Tribunal to follow the order of this Court and equally to correct its obvious and apparent mistake is vitiated as above. It is vitiated by a serious error of law apparent on the face of the record. The Tribunal has misdirected itself completely and in law in refusing to decide and consider the claim in relation to service charges.

ACIT vs. M/s. Veena Developers (ITAT Mumbai)

S. 253: Filing appeals in disregard & wilful disobedience to the law laid down constitutes gross abuse of power and deserves to be punished for contempt of court and by award of exemplary costs. Action not pursued in view of written apology of concerned officials

(i) This case is one of gross misuse of powers by the lower authorities. The AO in complete disregard and disobedience to the orders of the Tribunal as well as of the Hon'ble High Court again confirmed the disallowance while framing assessment u/s 153A without any incriminating material being found during the search. The act of negating the orders of the higher authorities in the very same case and thereby disallowing the claim of the assessee in the s. 153A proceedings without any new evidence or incriminating material being found amounts to the gross abuse of process of law in complete disregard and disobedience to the orders of the higher authorities and is an act which tends to lower down the authority of the higher courts. We may observe that if at all the issue will be decided by the Hon'ble Supreme Court in favour of the Revenue, then the orders of the lower authorities in that event would automatically merge in the order of the Supreme Court and implemented accordingly. However, the mere filing of appeal before the Hon'ble Supreme Court gives no authority to the AO to negate, disobey and disrespect to the orders of the higher authorities in the very same case. We may further notice that even after the decision of the CIT(A) in favour of assessee, the concerned CIT-Admin has given approval for filing the second round of appeal in the same case ignoring and in complete disregard and disobedience to the orders of the Tribunal as well as of the High Court vide which the issue in dispute has already been settled;

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DCIT vs. SAP Labs India Pvt. Ltd (ITAT Bangalore)

AO's action of giving effect to a quashed s. 263 revision order termed "assault on rule of law" & "contempt of court"

ITR Volume 367 : Part 2 (Issue dated : 22-9-2014)

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

HIGH COURTS

Capital gains --Long-term capital gains--Full value of consideration--Sale of property--Reference to Valuation Officer--Tribunal not to reject report without providing opportunity to Valuation Officer to be heard--Matter remanded--Wealth-tax Act, 1957, s. 24(5)--Income-tax Act, 1961, s. 50C(2)-- CIT v. Prabhu Steel Industries Ltd. (Bom) . . . 229

Income --Accrual of income--Interest on Kisan Vikas Patras--Kisan Vikas Patra Rules permitting premature encashment--Interest payable after one year--Effect of Circular No. 687, dated 19-8-1994--Kisan Vikas Patras purchased more than two and half years prior to accounting year relevant to assessment year 2007-08--Interest had accrued and was assessable in assessment year 2007-08--Income-tax Act, 1961--Kisan Vikas Patra Rules, 1988--Circular No. 687, dated 19-8-1994-- Sureshchandra M. Shah v. Asst. CIT (Guj) . . . 236

Reassessment --Notice--Objections--Merely extracting section 147 and saying reasons for reopening assessment are just and reasonable--Non-application of mind--Submissions made and points urged to be dealt with at least briefly--Assessing Officer to consider all pleas of assesseeand pass an order assigning reasons and findings--Income-tax Act, 1961, s. 148--Jeans Knit P. Ltd. v. Deputy CIT (No. 1 ) (Karn) . . . 218

----Notice--Reasons to believe that assessee wrongly claimed deduction under section 10B--Reasons based upon reasonable grounds including direct or circumstantial evidence--Belief entertained neither arbitrary nor irrational but on examination of facts--Whether statement obtained from employee under coercion or otherwise to be answered after enquiry--Notice valid--Income-tax Act, 1961, ss. 147, 148-- Jeans Knit P. Ltd. v. Deputy CIT (No. 2 ) (Karn) . . . 225

 

PRINT EDITION

ITR Volume 367 : Part 2 (Issue dated : 22-9-2014)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Appeal to Appellate Tribunal --Duty of Tribunal--Duty to follow decision of jurisdictional High Court--Income-tax Act, 1961, s. 254-- CIT v. Shah Ravindra Derogarh (Guj) . . . 223

----Powers of Tribunal--Power to rectify mistakes in its order--Delay in filing return--Application to Commissioner under section 119 to condone delay--Rejection of application--Tribunal correct in upholding order of Commissioner--Tribunal not correct in rectifying order and directing Commissioner to consider application--Income-tax Act, 1961, ss. 119, 254-- CITv. Shah Ravindra Derogarh (Guj) . . . 223

Business --Business income or income from house property--Building constructed on leasehold land--Lessee not owner of property--Income from building assessable as business income--Income-tax Act, 1961, ss. 28, 56-- CIT v. Smt. S. Premalata (T & AP) . . . 298

Business expenditure --Capital or revenue expenditure--Expenditure on construction of building on leasehold land--Revenue expenditure--Income-tax Act, 1961, s. 37-- CIT v. Smt. S. Premalata (T & AP) . . . 298

----Deduction only on actual payment--Sugar factory--Interest payable on purchase tax but not paid actually--Not deductible--Income-tax Act, 1961, s. 43B-- CIT v. Andhra Sugars Ltd.(T & AP) . . . 195

----Disallowance--Payments exceeding prescribed limit otherwise than by crossed cheque or crossed bank draft--Assessee placing proof of payment of consideration, in cash, in excess of prescribed limit, for its transaction to seller and latter admitting payment--No disallowance of such payment--Income-tax Act, 1961, s. 40A(3)--Income-tax Rules, 1962, r. 6DD-- Sri Laxmi Satyanarayana Oil Mill v. CIT (T & AP) . . . 200

Capital gains --Capital loss--Set-off of capital loss--Effect of section 10(38)--Loss on sale of capital assets covered by section 10(38)--Loss could not be set off against capital gains assessable under section 45--Income-tax Act, 1961, ss. 10(38), 45-- Kishorebhai Bhikhabhai Virani v. Asst. CIT (Guj) . . . 261

----Computation of capital gains--Reference to Departmental Valuation Officer--Sale of property in July 2005--Value of asset supplied by estimate of registered valuer--Consideration reflected in sale deed higher than valuation adopted by stamp valuation authority--Reference to Departmental Valuation Officer not justified--Income-tax Act, 1961, ss. 48, 55A-- CIT v. Gauranginiben S. Shodhan (Guj) . . . 238

Cash credit --Private limited company--Share application money--Genuineness and creditworthiness of transactions--Assessee unable to produce directors and principal officers of six shareholder companies--Tribunal merely reproducing order of Commissioner (Appeals) and affirming deletion of addition--Decision relied upon a co-ordinate Bench overturned by High Court --Matter remanded--Income-tax Act, 1961, s. 68-- CIT v. Navodaya Castles Pvt. Ltd. (Delhi) . . . 306

----Share application money--Burden of proof--Assessee must prove genuineness of credits and creditworthiness of depositors--Genuineness of transaction and creditworthiness of applicants proved--Amount not assessable under section 68--Income-tax Act, 1961, s. 68--CIT v. Vacmet Packaging (India) P. Ltd. (All) . . . 217

Charitable trust --Exemption--Condition precedent--Application of income for charitable purposes--Option under clause (2) of Explanation to section 11(1)--Option to accumulate 15 per cent. of income--Option exercised before last date for filing return--Mistake in figures rectified--Finding that rectification was genuine--Assessee entitled to exemption of entire income--Income-tax Act, 1961, s. 11-- CIT v. Industrial Extension Bureau (Guj) . . . 270

Company --Book profits--Depreciation--Assessee entitled to adopt rates as provided under Income-tax Rules in drawing profit and loss account--Assessing Officer--Not entitled to redraw profit and loss account--Income-tax Act, 1961, s. 115J(1)-- Deccan Tools Industries P. Ltd. v. CIT (AP) . . . 295

----Dividend--Deemed dividend--Loans to shareholders by closely held company--Scope of section 2(22)(e)--Recipient must be a shareholder--Income-tax Act, 1961, s. 2(22)(e)-- CITv. Impact Containers P. Ltd. (Bom) . . . 346

Dividend --Deemed dividend--Loan to shareholder--Company taking on rent premises owned by assessee-shareholder--Company incurring substantial expenditure on repair and renovation of premises--Asset of assessee may have enhanced in value by virtue of repairs and renovation--Not a case of advance or loan--Not a payment by company on behalf of assessee or for his individual benefit--No deemed dividend in shareholder’s hands--Income-tax Act, 1961, s. 2(22)(e)-- CIT v. Vir Vikram Vaid (Bom) . . . 365

Exemption --Educational institution--Condition precedent--Institution having other objects--Does not mean institution not existing solely for educational purposes--Prescribed authority not considering conditions stipulated in section 10(23C)(vi)--Prescribed authority considered findings of Assessing Officer which were set aside in appeal--Order refusing approval of exemption not sustainable--Income-tax Act, 1961, s. 10(23C)(vi)-- Simpkins School v.Director General of Income-tax (Investigation)
(All) . . . 335

Income from undisclosed sources --Firm--Claim that amounts shown in accounts represented contributions by partners--No evidence that partners had independent sources of income--Concurrent finding by Assessing Officer, Commissioner (Appeals) and Tribunal that amount belonged to firm--Addition of amount in income of firm--Justified--Income-tax Act, 1961-- Mukand Cold Storage v. CIT (P&H) . . . 281

Industrial undertaking --Special deduction under section 80-IB --Condition precedent--Filing of audit report in Form 10CCB--Form 10CCB cannot be filed for first time before High Court in an appeal under section 260A--Assessee not entitled to deduction under section 80-IB--Income-tax Act, 1961, ss. 80-IB, 260A-- Panasonic Energy India Co. Ltd. v. Asst. CIT (Guj) . . . 245

Kar Vivad Samadhan Scheme --Commissioner is designated authority as well as authority prescribed to hear revision filed by assessee--Commissioner knowing fully well that revision application pending before him taking up revision first and dismissing it--Commissioner refusing to extending benefit under Scheme citing dismissal--Dismissal of revision not basis to deny benefit under Scheme--Finance (No. 2) Act, 1998--Income-tax Act, 1961, s. 264(3)--East India Petroleum Ltd. v. CIT (T & AP) . . . 293

Non-resident --Income deemed to accrue or arise in India--Electronic distribution services to travel industry--Profits attributable to India operations--High Court not approving reasoning of Tribunal that globalisation resulted or would result in change in attribution of profits--Determination of quantum of income attributable to India in case of assessee followed by High Court in earlier years--In absence of new data and facts on issue of profits attributable to India operations--Tribunal not justified in remitting matter to Assessing Officer by adopting globalisation and commercial test--Income-tax Act, 1961, s. 9(1)(i)-- Galileo Nederland BV v.Asst. Director of Income-tax (International Taxation) (Delhi) . . . 319

----Shipping--International traffic--Assessee charging freight from place inside India where goods picked up up to point of destination port--Income from inland haulage charges--Part of income derived from operation of ships--Not taxable--Double Taxation Avoidance Agreement between India and Belgium, art. 8(2)(b)(ii), (c)--Income-tax Act, 1961, s. 44B-- Director of Income-tax (International Taxation) v. Safmarine Container Lines NV (Bom) . . . 209

Precedent --Binding nature of judgment of jurisdictional High Court-- CIT v. Universal Medicare P. Ltd. [2010] 324 ITR 263 decided correctly--Decision binding on Bombay High Court-- CIT v. Impact Containers P. Ltd. (Bom) . . . 346

----Effect of Supreme Court decision in CIT v. Harprasad and Co. P. Ltd. [1975] 99 ITR 118 (SC)-- Kishorebhai Bhikhabhai Virani v. Asst. CIT (Guj) . . . 261

Reassessment --Notice--Validity--Information and subsequent enquiry showing expenditure shown in accounts false--Notice of reassessment--Valid--Income-tax Act, 1961, ss. 147, 148-- Chokhani Brother v. Joint CIT (All) . . . 230

----Notice--Validity--Notice issued but proceedings dropped due to technical reasons--Second notice could be issued--Income-tax Act, 1961, ss. 147, 148-- Chokhani Brother v.Joint CIT (All) . . . 230

----Notice--Validity--Reasons for notice recorded--Question regarding rate of depreciation on meters and capacitors not considered in original assessment--Notice to withdraw excess depreciation--Valid--Income-tax Act, 1961, ss. 32, 147, 148-- Torrent Power Sec Ltd. v. Asst. CIT (Guj) . . . 276

----Notice--Validity--Validity to be determined with reference to recorded reasons--Exemption from capital gains granted under section 54 in original assessment--Notice to withdraw exemption under section 54E--Reference to section 54E in notice not a typographical error--Notice not valid--Income-tax Act, 1961, ss. 54, 54E, 147, 148-- Dhruv Parulbhai Patel v.Asst. CIT (Guj) . . . 234

Recovery of tax --Recovery from director of private company--Condition precedent--Revenue must establish that recovery could not be made from company--Income-tax Act, 1961, s. 179-- Suresh Narain Bhatnagar v. ITO (Guj) . . . 254

----Recovery from director of private company--Plea that company was deemed to be a public company--Plea not considered--Recovery proceedings under section 179--Not justified--Income-tax Act, 1961, s. 179-- Suresh Narain Bhatnagar v. ITO (Guj) . . . 254

Revision --Commissioner--Industrial undertaking--Special deduction--Small scale industrial undertaking--Assessee satisfying conditions in initial year--Entitled to benefit for ten consecutive assessment years--Cannot be denied benefit on ground it ceased to be a small scale undertaking--Revision not justified--Income-tax Act, 1961, ss. 80-IB, 263-- ACE Multi Axes Systems Ltd. v. Deputy CIT (Karn) . . . 266

Search and seizure --Block assessment--Undisclosed income--Payment of advance tax--Does not absolve assessee of obligation to file return disclosing total income for relevant assessment year--Income can be treated as undisclosed--Income-tax Act, 1961, s. 154BH--CIT v. Vimal Chand Jain (T & AP) . . . 290

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Double Taxation Avoidance Agreement between India and Belgium :

Art. 8(2)(b)(ii), (c) --Non-resident--Shipping--International traffic--Assessee charging freight from place inside India where goods picked up up to point of destination port--Income from inland haulage charges--Part of income derived from operation of ships--Not taxable--Director of Income-tax (International Taxation) v. Safmarine Container Lines NV (Bom) . . . 209

Income-tax Act, 1961 :

S. 2(22)(e) --Company--Dividend--Deemed dividend--Loans to shareholders by closely held company--Scope of section 2(22)(e)--Recipient must be a shareholder-- CIT v. Impact Containers P. Ltd. (Bom) . . . 346

----Dividend--Deemed dividend--Loan to shareholder--Company taking on rent premises owned by assessee-shareholder--Company incurring substantial expenditure on repair and renovation of premises--Asset of assessee may have enhanced in value by virtue of repairs and renovation--Not a case of advance or loan--Not a payment by company on behalf of assessee or for his individual benefit--No deemed dividend in shareholder’s hands-- CITv. Vir Vikram Vaid (Bom) . . . 365

S. 9(1)(i) --Non-resident--Income deemed to accrue or arise in India--Electronic distribution services to travel industry--Profits attributable to India operations--High Court not approving reasoning of Tribunal that globalisation resulted or would result in change in attribution of profits--Determination of quantum of income attributable to India in case of assessee followed by High Court in earlier years--In absence of new data and facts on issue of profits attributable to India operations--Tribunal not justified in remitting matter to Assessing Officer by adopting globalisation and commercial test-- Galileo Nederland BV v. Asst. Director of Income-tax (International Taxation) (Delhi) . . . 319

S. 10(23C)(vi) --Exemption--Educational institution--Condition precedent--Institution having other objects--Does not mean institution not existing solely for educational purposes--Prescribed authority not considering conditions stipulated in section 10(23C)(vi)--Prescribed authority considered findings of Assessing Officer which were set aside in appeal--Order refusing approval of exemption not sustainable-- Simpkins School v. Director General of Income-tax (Investigation) (All) . . . 335

S. 10(38) --Capital gains--Capital loss--Set-off of capital loss--Effect of section 10(38)--Loss on sale of capital assets covered by section 10(38)--Loss could not be set off against capital gains assessable under section 45-- Kishorebhai Bhikhabhai Virani v. Asst. CIT (Guj) . . . 261

S. 11 --Charitable trust--Exemption--Condition precedent--Application of income for charitable purposes--Option under clause (2) of Explanation to section 11(1)--Option to accumulate 15 per cent. of income--Option exercised before last date for filing return--Mistake in figures rectified--Finding that rectification was genuine--Assessee entitled to exemption of entire income-- CIT v. Industrial Extension Bureau (Guj) . . . 270

S. 28 --Business--Business income or income from house property--Building constructed on leasehold land--Lessee not owner of property--Income from building assessable as business income-- CIT v. Smt. S. Premalata (T & AP) . . . 298

S. 32 --Reassessment--Notice--Validity--Reasons for notice recorded --Question regarding rate of depreciation on meters and capacitors not considered in original assessment--Notice to withdraw excess depreciation--Valid-- Torrent Power Sec Ltd. v. Asst. CIT (Guj) . . . 276

S. 37 --Business expenditure--Capital or revenue expenditure--Expenditure on construction of building on leasehold land--Revenue expenditure-- CIT v. Smt. S. Premalata (T & AP) . . . 298

S. 40A(3) --Business expenditure--Disallowance--Payments exceeding prescribed limit otherwise than by crossed cheque or crossed bank draft--Assessee placing proof of payment of consideration, in cash, in excess of prescribed limit, for its transaction to seller and latter admitting payment--No disallowance of such payment-- Sri Laxmi Satyanarayana Oil Mill v. CIT (T & AP) . . . 200

S. 43B --Business expenditure--Deduction only on actual payment--Sugar factory--Interest payable on purchase tax but not paid actually--Not deductible-- CIT v. Andhra Sugars Ltd. (T & AP) . . . 195

S. 44B --Non-resident--Shipping--International traffic--Assessee charging freight from place inside India where goods picked up up to point of destination port--Income from inland haulage charges--Part of income derived from operation of ships--Not taxable-- Director of Income-tax (International Taxation) v. Safmarine Container Lines NV (Bom) . . . 209

S. 45 --Capital gains--Capital loss--Set-off of capital loss--Effect of section 10(38)--Loss on sale of capital assets covered by section 10(38)--Loss could not be set off against capital gains assessable under section 45-- Kishorebhai Bhikhabhai Virani v. Asst. CIT (Guj) . . . 261

S. 48 --Capital gains--Computation of capital gains--Reference to Departmental Valuation Officer--Sale of property in July 2005--Value of asset supplied by estimate of registered valuer--Consideration reflected in sale deed higher than valuation adopted by stamp valuation authority--Reference to Departmental Valuation Officer not justified-- CIT v. Gauranginiben S. Shodhan (Guj) . . . 238

S. 54 --Reassessment--Notice--Validity--Validity to be determined with reference to recorded reasons--Exemption from capital gains granted under section 54 in original assessment--Notice to withdraw exemption under section 54E--Reference to section 54E in notice not a typographical error--Notice not valid-- Dhruv Parulbhai Patel v. Asst. CIT (Guj) . . . 234

S. 54E --Reassessment--Notice--Validity--Validity to be determined with reference to recorded reasons--Exemption from capital gains granted under section 54 in original assessment--Notice to withdraw exemption under section 54E--Reference to section 54E in notice not a typographical error--Notice not valid-- Dhruv Parulbhai Patel v. Asst. CIT (Guj) . . . 234

S. 55A --Capital gains--Computation of capital gains--Reference to Departmental Valuation Officer--Sale of property in July 2005--Value of asset supplied by estimate of registered valuer--Consideration reflected in sale deed higher than valuation adopted by stamp valuation authority--Reference to Departmental Valuation Officer not justified-- CIT v. Gauranginiben S. Shodhan (Guj) . . . 238

S. 56 --Business--Business income or income from house property--Building constructed on leasehold land--Lessee not owner of property--Income from building assessable as business income-- CIT v. Smt. S. Premalata (T & AP) . . . 298

S. 68 --Cash credit--Private limited company--Share application money--Genuineness and creditworthiness of transactions--Assessee unable to produce directors and principal officers of six shareholder companies--Tribunal merely reproducing order of Commissioner (Appeals) and affirming deletion of addition--Decision relied upon a co-ordinate Bench overturned by High Court --Matter remanded-- CIT v. Navodaya Castles Pvt. Ltd. (Delhi) . . . 306

----Cash credit--Share application money--Burden of proof--Assessee must prove genuineness of credits and creditworthiness of depositors--Genuineness of transaction and creditworthiness of applicants proved--Amount not assessable under section 68-- CIT v.Vacmet Packaging (India) P. Ltd. (All) . . . 217

S. 80-IB --Industrial undertaking--Special deduction under section 80-IB --Condition precedent--Filing of audit report in Form 10CCB--Form 10CCB cannot be filed for first time before High Court in an appeal under section 260A--Assessee not entitled to deduction under section 80-IB-- Panasonic Energy India Co. Ltd. v. Asst. CIT (Guj) . . . 245

----Revision--Commissioner--Industrial undertaking--Special deduction--Small scale industrial undertaking--Assessee satisfying conditions in initial year--Entitled to benefit for ten consecutive assessment years--Cannot be denied benefit on ground it ceased to be a small scale undertaking--Revision not justified-- ACE Multi Axes Systems Ltd. v. Deputy CIT (Karn) . . . 266

S. 115J(1) --Company--Book profits--Depreciation--Assessee entitled to adopt rates as provided under Income-tax Rules in drawing profit and loss account--Assessing Officer--Not entitled to redraw profit and loss account-- Deccan Tools Industries P. Ltd. v. CIT (AP) . . . 295

S. 119 --Appeal to Appellate Tribunal--Powers of Tribunal--Power to rectify mistakes in its order--Delay in filing return--Application to Commissioner under section 119 to condone delay--Rejection of application--Tribunal correct in upholding order of Commissioner--Tribunal not correct in rectifying order and directing Commissioner to consider application-- CIT v.Shah Ravindra Derogarh (Guj) . . . 223

S. 147 --Reassessment--Notice--Validity--Information and subsequent enquiry showing expenditure shown in accounts false--Notice of reassessment--Valid-- Chokhani Brother v.Joint CIT (All) . . . 230

----Reassessment--Notice--Validity--Notice issued but proceedings dropped due to technical reasons--Second notice could be issued-- Chokhani Brother v. Joint CIT (All) . . . 230

----Reassessment--Notice--Validity--Reasons for notice recorded --Question regarding rate of depreciation on meters and capacitors not considered in original assessment--Notice to withdraw excess depreciation--Valid-- Torrent Power Sec Ltd. v. Asst. CIT (Guj) . . . 276

----Reassessment--Notice--Validity--Validity to be determined with reference to recorded reasons--Exemption from capital gains granted under section 54 in original assessment--Notice to withdraw exemption under section 54E--Reference to section 54E in notice not a typographical error--Notice not valid-- Dhruv Parulbhai Patel v. Asst. CIT (Guj) . . . 234

S. 148 --Reassessment--Notice--Validity--Information and subsequent enquiry showing expenditure shown in accounts false--Notice of reassessment--Valid-- Chokhani Brother v.Joint CIT (All) . . . 230

----Reassessment--Notice--Validity--Notice issued but proceedings dropped due to technical reasons--Second notice could be issued-- Chokhani Brother v. Joint CIT (All) . . . 230

----Reassessment--Notice--Validity--Reasons for notice recorded--Question regarding rate of depreciation on meters and capacitors not considered in original assessment--Notice to withdraw excess depreciation--Valid-- Torrent Power Sec Ltd. v. Asst. CIT (Guj) . . . 276

----Reassessment--Notice--Validity--Validity to be determined with reference to recorded reasons--Exemption from capital gains granted under section 54 in original assessment--Notice to withdraw exemption under section 54E--Reference to section 54E in notice not a typographical error--Notice not valid-- Dhruv Parulbhai Patel v. Asst. CIT (Guj) . . . 234

S. 154BH --Search and seizure--Block assessment--Undisclosed income--Payment of advance tax--Does not absolve assessee of obligation to file return disclosing total income for relevant assessment year--Income can be treated as undisclosed-- CIT v. Vimal Chand Jain (T & AP) . . . 290

S. 179 --Recovery of tax--Recovery from director of private company--Condition precedent--Revenue must establish that recovery could not be made from company-- Suresh Narain Bhatnagar v. ITO (Guj) . . . 254

----Recovery of tax--Recovery from director of private company--Plea that company was deemed to be a public company--Plea not considered--Recovery proceedings under section 179--Not justified-- Suresh Narain Bhatnagar v. ITO (Guj) . . . 254

S. 254 --Appeal to Appellate Tribunal--Duty of Tribunal--Duty to follow decision of jurisdictional High Court-- CIT v. Shah Ravindra Derogarh (Guj) . . . 223

----Appeal to Appellate Tribunal--Powers of Tribunal--Power to rectify mistakes in its order--Delay in filing return--Application to Commissioner under section 119 to condone delay--Rejection of application--Tribunal correct in upholding order of Commissioner--Tribunal not correct in rectifying order and directing Commissioner to consider application-- CIT v. Shah Ravindra Derogarh (Guj) . . . 223

S. 260A --Industrial undertaking--Special deduction under section 80-IB--Condition precedent--Filing of audit report in Form 10CCB--Form 10CCB cannot be filed for first time before High Court in an appeal under section 260A--Assessee not entitled to deduction under section 80-IB-- Panasonic Energy India Co. Ltd. v. Asst. CIT (Guj) . . . 245

S. 263 --Revision--Commissioner--Industrial undertaking--Special deduction--Small scale industrial undertaking--Assessee satisfying conditions in initial year--Entitled to benefit for ten consecutive assessment years--Cannot be denied benefit on ground it ceased to be a small scale undertaking--Revision not justified-- ACE Multi Axes Systems Ltd. v. Deputy CIT (Karn) . . . 266

S. 264(3) --Kar Vivad Samadhan Scheme--Commissioner is designated authority as well as authority prescribed to hear revision filed by assessee--Commissioner knowing fully well that revision application pending before him taking up revision first and dismissing it--Commissioner refusing to extending benefit under Scheme citing dismissal--Dismissal of revision not basis to deny benefit under Scheme--Finance (No. 2) Act, 1998-- East India Petroleum Ltd. v. CIT (T & AP) . . . 293

Income-tax Rules, 1962 :

R. 6DD--Business expenditure--Disallowance--Payments exceeding prescribed limit otherwise than by crossed cheque or crossed bank draft--Assessee placing proof of payment of consideration, in cash, in excess of prescribed limit, for its transaction to seller and latter admitting payment--No disallowance of such payment-- Sri Laxmi Satyanarayana Oil Mill v. CIT (T & AP) . . . 200

Volume 34 : Part 5 (Issue dated : 22-9-2014)

 

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

 

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Co-operative society --Special deduction under section 80P(2)(a)(i)--Credit facilities to associate members--Term “member†includes “associate member†--Assessee entitled to deduction--Income-tax Act, 1961, s. 80P(2)(a)(i)-- S -6608 Narasingapuram PACB Ltd. v. ITO (Chennai) . . . 246

Penalty --Concealment of income--Refund of redemption fine paid to Customs Department pursuant to order of Tribunal--Appeal of Customs Department pending before High Court--Matter not attaining finality--Refund not taxable--Not a case of concealment of income and furnishing of inaccurate particulars--Penalty deleted--Income-tax Act, 1961, s. 271(1)(c)--Viraj Impex P. Ltd. v. Asst. CIT (Mumbai) . . . 250

PRINT EDITION

Volume 34 : Part 5 (Issue dated : 22-9-2014)

SUBJECT INDEX TO CASES REPORTED

Business expenditure --Amortisation of preliminary expenses--Assessee executing infrastructure projects on build-operate-transfer basis--Assessee building road and collecting toll tax--Assets owned by State Government and used for public purpose--Claim to deduction of expenditure on basis of terms and condition of contract and estimated toll receipts during toll period of respective project--Entitled to be amortised on matching principle of accountancy--Income-tax Act, 1961, s. 35D-- Asst. CIT v. TCI Infrastructure Finance Ltd.(Jaipur) . . . 628

Business income or income from house property --Lease of building--No business activity--Rental income assessable under income from house property--Depreciation not allowable--Income-tax Act, 1961-- Amalgam Foods Ltd. v. Deputy CIT (Cochin) . . . 691

Capital gains --Deduction under section 54B--Sale of agricultural land in joint names of assessee and his son and purchase of new land in assessee’s son’s name--Assessee entitled to deduction--Income-tax Act, 1961, s. 54B-- Bant Singh v. ITO(Chandigarh) . . . 679

Capital or revenue expenditure --Software expenses--Expenditure on upgrading software--Revenue expenditure--Income-tax Act, 1961-- Deputy CIT v. Madras Engineering Industries P. Ltd. (Chennai) . . . 703

Deduction of tax at source --Assessee hiring tankers on contract--Forms 15-I and 15-J filed before prescribed authority and in time--Disallowance not permissible under section 40(a)(ia)--Income-tax Act, 1961, s. 40(a)(ia)-- Deputy CIT v. Vikas Sharma (Chandigarh) . . . 617

----Co-operative bank--Failure by assessee to deduct tax on payment of interest to depositors--Declarations in Forms 15G and 15H filed depositors--ITO cannot reject declarations filed before Commissioner--Quantum of amount not remitted to Government not mentioned--Matter remanded--Income-tax Act, 1961, ss. 194A, 197A(1A), 201(1), (1A)--Ernakulam District Co-op. Bank Ltd. v. ITO (Cochin) . . . 662

----Payment towards transmission of electricity--Not fees for technical services--Section 194J not applicable--Income-tax Act, 1961, s. 194J-- Deputy CIT v. Delhi Transco Ltd. (Delhi) . . . 669

Depreciation --Lease of plant and machinery with building--Assessing Officer failing to examine whether assessee carried manufacturing activity--Matter remanded to Assessing Officer--Income-tax Act, 1961, s. 32-- Amalgam Foods Ltd. v. Deputy CIT (Cochin) . . . 691

Exemption --Export--Gains due to fluctuation of foreign exchange rates--Excluded from both export as well as total turnover--Income-tax Act, 1961, s. 10AA-- Deputy CIT v. Madras Engineering Industries P. Ltd. (Chennai) . . . 703

----Export--Travelling expenses and communication charges--Travel expenses and communication charges to be excluded both from export as well as total turnover--Income-tax Act, 1961, s. 10B-- Asst. CIT v. Triad Software P. Ltd. (Chennai) . . . 605

Export --Exemption--Telecommunication, insurance and expenses incurred in foreign exchange to be excluded from export turnover and total turnover--Income-tax Act, 1961, s. 10A-- Asst. CIT v. Think Soft Global Services P. Ltd. (Chennai) . . . 633

Income --Accrual--Interest--Non-banking financial company--Mercantile system of accounting--Borrower-companies having substantial assets--Interest not illusory--Failure by assessee to show that loan became non-performing asset--Prudential norms not applicable--Interest accrued to assessee and assessable--Income-tax Act, 1961, s. 5-- ITO v. Tradelink Securities Ltd. (Kolkata) . . . 641

----Disallowance of expenditure in relation to exempt income--Assessee not claiming expenditure in its profit and loss account--Onus on Assessing Officer to prove that out of expenditure incurred under various heads sums in question related to earning of exempt income--Provisions of rule 8D should not be applied in mechanical way--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Asst. CIT v. Iqbal M. Chagala (Mumbai) . . . 636

Income from undisclosed sources --Cash deposit--Assessee declaring professional receipts--Approval of cash flow statement by Tribunal--Addition to be deleted--Income-tax Act, 1961-- Dr. Binoy Kumar Singh (HUF) v. Asst. CIT (Patna) . . . 717

----Rent--Commissioner (Appeals) estimating floor-wise rent taking rent received from bank as basis--Other flats let for residential purposes--Estimation on basis of rent received on commercial basis not justified--No evidence to show assessee collected higher rent than that declared--Addition to be deleted--Income-tax Act, 1961-- Dr. Binoy Kumar Singh (HUF) v. Asst. CIT (Patna) . . . 717

Industrial undertaking --Special deduction under section 80-IA--Commissioner (Appeals) allowing deduction following decision of Tribunal--That Department challenged decision of Tribunal before High Court not ground to disallow deduction--Income-tax Act, 1961, s. 80-IA(4)-- Asst. CIT v. JWC Logistics Park P. Ltd. (Pune) . . . 598

International transactions --Arm’s length price--Advertisement, marketing and promotion leading to brand building--Business promotion expenses to be treated as directly connected with sales--Only advertisement expenses liable to be considered for purpose of advertisement, marketing and promotion leading to brand building--Transfer Pricing Officer to pass consequential order after verification--Matter remanded--Income-tax Act, 1961--Panasonic Sales and Services (I) Company Ltd. v. Asst. CIT (Chennai) . . . 683

----Arm’s length price--Determination--Purchase of goods from associated enterprises for sale in domestic market--Cash discounts in nature of incentives for early payments for sales made by assessee--Cash discount, outward freight and storage charges to be treated as selling and distribution expenses and not to be reduced from selling price--Income-tax Act, 1961-- Panasonic Sales and Services (I) Company Ltd. v. Asst. CIT (Chennai) . . . 683

----Arm’s length price--Determination--Transactional net margin method--Failure by Department to provide list of comparables considered for determination of arm’s length price--Objections before Department with respect to business activities of comparables not addressed--Failure of natural justice--Order set aside and matter remanded--Income-tax Act, 1961, s. 92CA(3)-- OKS Prepress Services P. Ltd. v. ITO (Chennai) . . . 648

----Arm’s length price--Determination--Transactional net margin method--Software development services--Selection of comparables--Functionally different companies to be excluded from comparables--Income-tax Act, 1961, s. 92CA-- Open Solutions Software Services P. Ltd. v. ITO (Delhi) . . . 609

Loss --Business loss--Foreign currency loan--Failure of Assessing Officer to examine whether assessee repaid loan or loan outstanding--Matter remanded--Income-tax Act, 1961, s. 43A-- Deputy CIT v. Madras Engineering Industries P. Ltd. (Chennai) . . . 703

Penalty --Concealment of income--Additions deleted by Tribunal--No penalty imposable under section 271(1)(c)--Income-tax Act, 1961, s. 271(1)(c)-- Deputy CIT v. Delhi Transco Ltd.(Delhi) . . . 669

----Limitation--Repayment of loan otherwise than by bank draft or cheque--Penalty to be levied by Joint Commissioner, but Assessing Officer in first instance to be satisfied of contravention and refer matter--Period of limitation to be counted from date of initiation of penalty proceedings by Assessing Officer not date of notice by Joint Commissioner--Penalty proceedings barred by limitation--Income-tax Act, 1961, ss. 269T, 271E, 275(1)(c)-- ITO v. Dinesh Jain (Delhi) . . . 709

----Repayment of loan otherwise than by cheque or bank draft--Assessee assigning loan by way of journal entry to his wife--Only a substitution of one debtor by another debtor--No actual repayment of loan--No violation of section 269T--Assessee not liable to be penalised--Income-tax Act, 1961, ss. 269T, 271E-- ITO v. Dinesh Jain (Delhi) . . . 709

Precedent --Appellate Tribunal--Order of Special Bench--Binding--Pendency of appeal before High Court not to affect binding nature-- Asst. CIT v. Triad Software P. Ltd. (Chennai) . . . 605

Reassessment --Notice--Reopening of assessment on identical facts as original assessment--Not permissible--Income-tax Act, 1961, ss. 147, 148-- Deputy CIT v. Vikas Sharma (Chandigarh) . . . 617

----Notice--Validity--Conversion of firm to company--Notice issued in name of firm after conversion--Not relevant that Assessing Officer aware of dissolution of firm--Issue of notice in name of dead person void--Income-tax Act, 1961, s. 148-- Asst. CIT v. DLF Cyber City Developers Ltd. (Delhi) . . . 696

Unexplained investment --Cost of construction of property--Assessing Officer not recording reasons for making reference to Departmental Valuation Officer--No evidence found in search with regard to undisclosed investment in construction--Report of registered valuer submitted by assessee not to be rejected--Addition not justified--Income-tax Act, 1961, s. 69-- Dr. Binoy Kumar Singh (HUF) v. Asst. CIT (Patna) . . . 717

Valuation of stock --Closing stock--Same material mentioned in profit and loss account in consumption and in sale--No difference between figures of consumption of raw material and sales on calculation--All invoices containing inputs sold as such without processing, entitling assessee to claim Cenvat credit--Failure by Assessing Officer to find discrepancy in documents filed by assessee--Addition on basis of conjectures and surmises to be deleted--Income-tax Act, 1961-- Deputy CIT v. Bry Air (Asia) P. Ltd. (Delhi) . . . 654

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961

S. 5 --Income--Accrual--Interest--Non-banking financial company--Mercantile system of accounting--Borrower-companies having substantial assets--Interest not illusory--Failure by assessee to show that loan became non-performing asset--Prudential norms not applicable--Interest accrued to assessee and assessable-- ITO v. Tradelink Securities Ltd. (Kolkata) . . . 641

S. 10A --Export--Exemption--Telecommunication, insurance and expenses incurred in foreign exchange to be excluded from export turnover and total turnover-- Asst. CIT v. Think Soft Global Services P. Ltd. (Chennai) . . . 633

S. 10AA --Exemption--Export--Gains due to fluctuation of foreign exchange rates--Excluded from both export as well as total turnover-- Deputy CIT v. Madras Engineering Industries P. Ltd. (Chennai) . . . 703

S. 10B --Exemption--Export--Travelling expenses and communication charges--Travel expenses and communication charges to be excluded both from export as well as total turnover-- Asst. CIT v. Triad Software P. Ltd. (Chennai) . . . 605

S. 14A --Income--Disallowance of expenditure in relation to exempt income--Assessee not claiming expenditure in its profit and loss account--Onus on Assessing Officer to prove that out of expenditure incurred under various heads sums in question related to earning of exempt income--Provisions of rule 8D should not be applied in mechanical way-- Asst. CIT v. Iqbal M. Chagala (Mumbai) . . . 636

S. 32 --Depreciation--Lease of plant and machinery with building--Assessing Officer failing to examine whether assessee carried manufacturing activity--Matter remanded to Assessing Officer-- Amalgam Foods Ltd. v. Deputy CIT (Cochin) . . . 691

S. 35D --Business expenditure--Amortisation of preliminary expenses--Assessee executing infrastructure projects on build-operate- transfer basis--Assessee building road and collecting toll tax--Assets owned by State Government and used for public purpose--Claim to deduction of expenditure on basis of terms and condition of contract and estimated toll receipts during toll period of respective project--Entitled to be amortised on matching principle of accountancy-- Asst. CIT v. TCI Infrastructure Finance Ltd. (Jaipur) . . . 628

S. 40(a)(ia) --Deduction of tax at source--Assessee hiring tankers on contract--Forms 15-I and 15-J filed before prescribed authority and in time--Disallowance not permissible under section 40(a)(ia)-- Deputy CIT v. Vikas Sharma (Chandigarh) . . . 617

S. 43A --Loss--Business loss--Foreign currency loan--Failure of Assessing Officer to examine whether assessee repaid loan or loan outstanding--Matter remanded-- Deputy CIT v. Madras Engineering Industries P. Ltd. (Chennai) . . . 703

S. 54B --Capital gains--Deduction under section 54B--Sale of agricultural land in joint names of assessee and his son and purchase of new land in assessee’s son’s name--Assessee entitled to deduction-- Bant Singh v. ITO (Chandigarh) . . . 679

S. 69 --Unexplained investment--Cost of construction of property--Assessing Officer not recording reasons for making reference to Departmental Valuation Officer--No evidence found in search with regard to undisclosed investment in construction--Report of registered valuer submitted by assessee not to be rejected--Addition not justified-- Dr. Binoy Kumar Singh (HUF) v. Asst. CIT (Patna) . . . 717

S. 80-IA(4) --Industrial undertaking--Special deduction under section 80-IA--Commissioner (Appeals) allowing deduction following decision of Tribunal--That Department challenged decision of Tribunal before High Court not ground to disallow deduction-- Asst. CIT v. JWC Logistics Park P. Ltd. (Pune) . . . 598

S. 92CA --International transactions--Arm’s length price--Determination--Transactional net margin method--Software development services--Selection of comparables--Functionally different companies to be excluded from comparables-- Open Solutions Software Services P. Ltd. v. ITO (Delhi) . . . 609

S. 92CA(3) --International transactions--Arm’s length price--Determination--Transactional net margin method--Failure by Department to provide list of comparables considered for determination of arm’s length price--Objections before Department with respect to business activities of comparables not addressed--Failure of natural justice--Order set aside and matter remanded-- OKS Prepress Services P. Ltd. v. ITO (Chennai) . . . 648

S. 147 --Reassessment--Notice--Reopening of assessment on identical facts as original assessment--Not permissible-- Deputy CIT v. Vikas Sharma (Chandigarh) . . . 617

S. 148 --Reassessment--Notice--Reopening of assessment on identical facts as original assessment--Not permissible-- Deputy CIT v. Vikas Sharma (Chandigarh) . . . 617

----Reassessment--Notice--Validity--Conversion of firm to company--Notice issued in name of firm after conversion--Not relevant that Assessing Officer aware of dissolution of firm--Issue of notice in name of dead person void-- Asst. CIT v. DLF Cyber City Developers Ltd.(Delhi) . . . 696

S. 194A --Deduction of tax at source--Co-operative bank--Failure by assessee to deduct tax on payment of interest to depositors--Declarations in Forms 15G and 15H filed depositors--ITO cannot reject declarations filed before Commissioner--Quantum of amount not remitted to Government not mentioned--Matter remanded-- Ernakulam District Co-op. Bank Ltd. v. ITO(Cochin) . . . 662

S. 194J --Deduction of tax at source--Payment towards transmission of electricity--Not fees for technical services--Section 194J not applicable-- Deputy CIT v. Delhi Transco Ltd. (Delhi) . . . 669

S. 197A(1A) --Deduction of tax at source--Co-operative bank--Failure by assessee to deduct tax on payment of interest to depositors--Declarations in Forms 15G and 15H filed depositors--ITO cannot reject declarations filed before Commissioner--Quantum of amount not remitted to Government not mentioned--Matter remanded-- Ernakulam District Co-op. Bank Ltd. v. ITO (Cochin) . . . 662

S. 201(1) --Deduction of tax at source--Co-operative bank--Failure by assessee to deduct tax on payment of interest to depositors--Declarations in Forms 15G and 15H filed depositors--ITO cannot reject declarations filed before Commissioner--Quantum of amount not remitted to Government not mentioned--Matter remanded-- Ernakulam District Co-op. Bank Ltd. v. ITO (Cochin) . . . 662

S. 201(1A) --Deduction of tax at source--Co-operative bank--Failure by assessee to deduct tax on payment of interest to depositors--Declarations in Forms 15G and 15H filed depositors--ITO cannot reject declarations filed before Commissioner--Quantum of amount not remitted to Government not mentioned--Matter remanded-- Ernakulam District Co-op. Bank Ltd. v. ITO (Cochin) . . . 662

S. 269T --Penalty--Limitation--Repayment of loan otherwise than by bank draft or cheque--Penalty to be levied by Joint Commissioner, but Assessing Officer in first instance to be satisfied of contravention and refer matter--Period of limitation to be counted from date of initiation of penalty proceedings by Assessing Officer not date of notice by Joint Commissioner--Penalty proceedings barred by limitation-- ITO v. Dinesh Jain (Delhi) . . . 709

----Penalty--Repayment of loan otherwise than by cheque or bank draft--Assessee assigning loan by way of journal entry to his wife--Only a substitution of one debtor by another debtor--No actual repayment of loan--No violation of section 269T--Assessee not liable to be penalised-- ITO v. Dinesh Jain (Delhi) . . . 709

S. 271(1)(c) --Penalty--Concealment of income--Additions deleted by Tribunal--No penalty imposable under section 271(1)(c)-- Deputy CIT v. Delhi Transco Ltd. (Delhi) . . . 669

S. 271E --Penalty--Limitation--Repayment of loan otherwise than by bank draft or cheque--Penalty to be levied by Joint Commissioner, but Assessing Officer in first instance to be satisfied of contravention and refer matter--Period of limitation to be counted from date of initiation of penalty proceedings by Assessing Officer not date of notice by Joint Commissioner--Penalty proceedings barred by limitation-- ITO v. Dinesh Jain (Delhi) . . . 709

----Penalty--Repayment of loan otherwise than by cheque or bank draft--Assessee assigning loan by way of journal entry to his wife--Only a substitution of one debtor by another debtor--No actual repayment of loan--No violation of section 269T--Assessee not liable to be penalised-- ITO v. Dinesh Jain (Delhi) . . . 709

S. 275(1)(c) --Penalty--Limitation--Repayment of loan otherwise than by bank draft or cheque--Penalty to be levied by Joint Commissioner, but Assessing Officer in first instance to be satisfied of contravention and refer matter--Period of limitation to be counted from date of initiation of penalty proceedings by Assessing Officer not date of notice by Joint Commissioner--Penalty proceedings barred by limitation-- ITO v. Dinesh Jain (Delhi) . . . 709

Income-tax Rules, 1962

R. 8D --Income--Disallowance of expenditure in relation to exempt income--Assessee not claiming expenditure in its profit and loss account--Onus on Assessing Officer to prove that out of expenditure incurred under various heads sums in question related to earning of exempt income--Provisions of rule 8D should not be applied in mechanical way-- Asst. CIT v. Iqbal M. Chagala (Mumbai) . . . 636