INCOME TAX REPORTS (ITR)--PRINT AND ONLINE EDITION
ITR Volume 370 : Part 2 (Issue dated : 12-1-2015)
SUBJECT INDEX TO CASES REPORTED IN THIS PART
Search and seizure --Warrant of authorisation--Validity--Reason to believe existence of undisclosed assets--Writ--High Court--Can scrutinise file to find whether authority has appropriately recorded reasons for forming opinion--High Court without calling for file concluding warrant of authorisation issued without reason--Not sustainable--Matter remanded for decision afresh--Income-tax Act, 1961, s. 132(1)-- Union of India v. Agarwal Iron Industries . . . 180
Accounting --Business of precious and semi-precious stones--What should be a reasonable profit on account of trading transactions--Question of fact--Rejection of accounts--Assessee recording bogus purchases and opening and closing stocks not capable of verification in books--Application of higher gross profit rate justified--Income-tax Act, 1961, s. 145(3)-- Vimal Singhvi v. Asst. CIT (Raj) . . . 275
Assessment --Amalgamation of companies--Effect--Amalgamating company ceases to exist--Order of assessment on amalgamating company--Not valid--Not a procedural irregularity to be cured by section 292B--Income-tax Act, 1961, ss. 170, 176, 292B-- CIT v. Dimension Apparels P. Ltd. (Delhi) . . . 288
Business --Capital gains--Adventure in the nature of trade--Assessee acquiring right to sell property--No intention to hold property--Sale of property subsequently--Transaction constituted adventure in the nature of trade--Gains assessable as business income--Income-tax Act, 1961, ss. 28, 45-- CIT v. Shahrooq Ali Khan (Karn) . . . 246
Business expenditure --Capital or revenue expenditure--Expenses incurred on transmission lines and contribution paid to State power corporation--Expenses for facilitating the efficient conduct of assessee’s business--Revenue expenditure--Income-tax Act, 1961, s. 37(1)-- Addl. CIT v. Dhampur Sugar Mill P. Ltd. (All) . . . 194
----Mercantile system of accounting--Expenditure on contract work shown as work-in-progress for assessment years 1999-2000 and 2000-01--Termination of contract in October, 2002--Amount spent on contract work--Could not be shown as work-in-progress--Amount deductible--Income-tax Act, 1961-- Asia Power Projects P. Ltd. v. Deputy CIT (Karn) . . . 257
Business income --Capital gains--Agricultural land--Whether land is agricultural or a non-agricultural land--Question of fact--No evidence by assessee to substantiate claim of carrying out agricultural operations--Sale deed clearly showing assessee as absolute owner of residential land having converted its use from agricultural--Surplus assessable as business income--Income-tax Act, 1961, s. 2(14)(iii)-- Vimal Singhvi v. Asst. CIT (Raj) . . . 275
Cash credits --Arrack business--Security deposit from retail dealers--Source of income properly explained--Not undisclosed credit--Income-tax Act, 1961, s. 68-- CIT v. M. Venkateswara Rao (T & AP) . . . 212
----Burden of proof--Onus on assessee to prove genuineness of transaction and creditworthiness of creditors--No satisfactory explanation--Addition under section 68 justified--Income-tax Act, 1961, s. 68-- CIT v. T. S. Kishan and Co. Ltd. (Delhi) . . . 163
----Finding that assessee had reasonable explanation for cash credits--No addition on that account could be made--Income-tax Act, 1961, s. 68-- CIT v. ABT Ltd. (Mad) . . . 159
----Firm--Partners’ contributions of capital for business of firm--Firm cannot be called upon to explain source of income of partners--Income-tax Act, 1961, s. 68-- CIT v. M. Venkateswara Rao (T & AP) . . . 212
----No proper explanation regarding loan transactions--Addition of 10 per cent. of value of credits--Justified--Income-tax Act, 1961, s. 68-- CIT v. Bellary Steels and Alloys Ltd. (Karn) . . . 226
Deduction of tax at source --Contractor--State Government undertaking to pay wages to leader of group of workmen--Leader of group whether contractor--Matter remanded--Income-tax Act, 1961, s. 194C-- Karnataka Rural Infrastructure Development Ltd. v. ITO(Karn) . . . 222
Depreciation --Condition precedent for allowance--Rate of depreciation--Option exercised in terms of second proviso to rule 5(1A) in return filed under section 139(1)--No separate procedure necessary--Assessee entitled to depreciation on windmills at 80 per cent.--Income-tax Act, 1961, s. 32--Income-tax Rules, 1962, r. 5-- CIT v. ABT Ltd. (Mad) . . . 159
Exemption --Industrial undertaking--Exemption under section 10A--Condition precedent--Manufacture or production of article in electronic technology park--Manufacture or production should have commenced in previous year--Registration as STPI unit not a requirement--Income-tax Act, 1961, s. 10A-- CIT v. Soffia Software Ltd. (Mad) . . . 146
Export --Special deduction--Computation--Pharmaceuticals company--Assessee processing raw materials supplied to it by other manufacturing companies and handing over end products to such companies--Conversion charges--Not deductible for purpose of determining “profits of the business†--Income-tax Act, 1961, s. 80HHC-- Aurobindo Pharma Ltd. v.CIT (T & AP) . . . 216
Housing project --Special deduction--Condition precedent--Built-up area should not exceed 1,500 sq. ft--Meaning of “built-up area†--Same construction must be there--Open courtyard within compound wall--Not a built-up area--Assessee entitled to special deduction--Income-tax Act, 1961, s. 80-IB-- Commonwealth Developers v. Asst. CIT (Bom) . . . 265
Income --Computation of income--Disallowance of expenditure incurred for earning non-taxable income--Tribunal finding interest expenditure attributable to business income assessable to tax and could not be disallowed--Finding consistent with provisions--Income-tax Act, 1961, s. 14A-- Addl. CIT v. Dhampur Sugar Mill P. Ltd. (All) . . . 194
----Expenditure in relation to income not includible in taxable income--Assessee could not have debited dividend amount and expenses on interest in profit and loss account--Assessing Officer not satisfied with correctness of claim of assessee on basis of accounts and making total disallowance--Justified--Income-tax Act, 1961, s. 14A-- Dhampur Sugar Mills Ltd. v. CIT (All) . . . 187
----Principle of real income--Excess billing discovered by assessee and rectified--Rectification by making appropriate entries in account books--No income arises--Income-tax Act, 1961-- CIT v. Tyco Sanmar Ltd. (Mad) . . . 173
Income from undisclosed sources --Amount claimed as lease rental on purchase and lease back of assets--Transaction of lease purchase and lease back found to be bogus--Addition of amount claimed as deduction to total income of assessee--Justified--Income-tax Act, 1961-- CIT v. Bellary Steels and Alloys Ltd. (Karn) . . . 226
Interest on borrowed capital --Disallowance of interest deleted in earlier years--No distinction warranting to take a different view--Deletion of addition justified--Income-tax Act, 1961, s. 36(1)(iii)-- Addl. CIT v. Dhampur Sugar Mill P. Ltd. (All) . . . 194
----Finding that amount borrowed had been used for non-business purposes--Interest not deductible--Income-tax Act, 1961, s. 36(1)(iii)-- CIT v. Bellary Steels and Alloys Ltd. (Karn) . . . 226
Investment deposit account --Scope of section 32AB--Assessing Officer has power only to examine whether books of account are certified by authorities under Companies Act--Principles for determination of income under the Income-tax Act--Not applicable--Income-tax Act, 1961, s. 32AB-- Jindal Aluminium Ltd. v. Deputy CIT (Assessment) (Karn) . . . 235
Reassessment --Notice after four years--Conditions precedent--Notice on basis that disallowance of interest paid on borrowings for subsequent year--No indication in reasons that assessee failed to disclose truly and fully material facts necessary for assessment--Notice to stand or fall on basis of reasons recorded at time of issue--Notices not valid--Income-tax Act, 1961, ss. 147, 148-- Business India v. Joint CIT (Bom) . . . 154
Refund --Interest--Only where delay is on part of Department--Failure by assessee to furnish tax deduction at source certificates--Refund directed after filing of affidavit and indemnity bond with particulars by assessee--No delay by Department after furnishing indemnity bond--No interest payable--Income-tax Act, 1961, s. 244A(2)-- L. Madanlal Steels Ltd. v. Chief CIT (T & AP) . . . 205
Search and seizure --Block assessment--Assessment of third person--Condition precedent--Satisfaction of Assessing Officer that seized material belonged to third person--Meaning of “belong†--Reference to documents in searched material--No indication in satisfaction note that documents belonged to third person--No disclaimer by person in respect of whom search conducted that documents did not belong to him--Notice under section 153C not valid--Income-tax Act, 1961, s. 153C.-- Pepsico India Holdings P. Ltd. v. Asst. CIT (Delhi) . . . 295
----Block assessment--Undisclosed income--Cash credits against assessee reflected in books referable to concerned assessment years--Block assessment unsustainable--Income-tax Act, 1961, s. 158BB-- CIT v. Tharmandal Builders P. Ltd. (T & AP) . . . 209
SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
S. 2(14)(iii) --Business income--Capital gains--Agricultural land--Whether land is agricultural or a non-agricultural land--Question of fact--No evidence by assessee to substantiate claim of carrying out agricultural operations--Sale deed clearly showing assessee as absolute owner of residential land having converted its use from agricultural--Surplus assessable as business income-- Vimal Singhvi v. Asst. CIT (Raj) . . . 275
S. 10A --Exemption--Industrial undertaking--Exemption under section 10A--Condition precedent--Manufacture or production of article in electronic technology park--Manufacture or production should have commenced in previous year--Registration as STPI unit not a requirement-- CIT v. Soffia Software Ltd. (Mad) . . . 146
S. 14A --Income--Computation of income--Disallowance of expenditure incurred for earning non-taxable income--Tribunal finding interest expenditure attributable to business income assessable to tax and could not be disallowed--Finding consistent with provisions-- Addl. CIT v. Dhampur Sugar Mill P. Ltd. (All) . . . 194
----Income--Expenditure in relation to income not includible in taxable income--Assessee could not have debited dividend amount and expenses on interest in profit and loss account--Assessing Officer not satisfied with correctness of claim of assessee on basis of accounts and making total disallowance--Justified-- Dhampur Sugar Mills Ltd. v. CIT (All) . . . 187
S. 28 --Business--Capital gains--Adventure in the nature of trade--Assessee acquiring right to sell property--No intention to hold property--Sale of property subsequently--Transaction constituted adventure in the nature of trade--Gains assessable as business income-- CIT v.Shahrooq Ali Khan (Karn) . . . 246
S. 32 --Depreciation--Condition precedent for allowance--Rate of depreciation--Option exercised in terms of second proviso to rule 5(1A) in return filed under section 139(1)--No separate procedure necessary--Assessee entitled to depreciation on windmills at 80 per cent.-- CIT v. ABT Ltd. (Mad) . . . 159
S. 32AB --Investment deposit account--Scope of section 32AB--Assessing Officer has power only to examine whether books of account are certified by authorities under Companies Act--Principles for determination of income under the Income-tax Act--Not applicable-- Jindal Aluminium Ltd. v. Deputy CIT (Assessment) (Karn) . . . 235
S. 36(1)(iii) --Interest on borrowed capital--Disallowance of interest deleted in earlier years--No distinction warranting to take a different view--Deletion of addition justified-- Addl. CIT v.Dhampur Sugar Mill P. Ltd. (All) . . . 194
----Interest on borrowed capital--Finding that amount borrowed had been used for non-business purposes--Interest not deductible-- CIT v. Bellary Steels and Alloys Ltd. (Karn) . . . 226
S. 37(1) --Business expenditure--Capital or revenue expenditure--Expenses incurred on transmission lines and contribution paid to State power corporation--Expenses for facilitating the efficient conduct of assessee’s business--Revenue expenditure-- Addl. CIT v.Dhampur Sugar Mill P. Ltd. (All) . . . 194
S. 45 --Business--Capital gains--Adventure in the nature of trade--Assessee acquiring right to sell property--No intention to hold property--Sale of property subsequently--Transaction constituted adventure in the nature of trade--Gains assessable as business income-- CIT v.Shahrooq Ali Khan (Karn) . . . 246
S. 68 --Cash credits--Arrack business--Security deposit from retail dealers--Source of income properly explained--Not undisclosed credit-- CIT v. M. Venkateswara Rao (T & AP) . . . 212
----Cash credits--Burden of proof--Onus on assessee to prove genuineness of transaction and creditworthiness of creditors--No satisfactory explanation--Addition under section 68 justified-- CIT v. T. S. Kishan and Co. Ltd. (Delhi) . . . 163
----Cash credits--Finding that assessee had reasonable explanation for cash credits--No addition on that account could be made-- CIT v. ABT Ltd. (Mad) . . . 159
----Cash credits--Firm--Partners’ contributions of capital for business of firm--Firm cannot be called upon to explain source of income of partners-- CIT v. M. Venkateswara Rao(T & AP) . . . 212
----Cash credits--No proper explanation regarding loan transactions--Addition of 10 per cent. of value of credits--Justified-- CIT v. Bellary Steels and Alloys Ltd. (Karn) . . . 226
S. 80HHC --Export--Special deduction--Computation--Pharmaceuticals company--Assessee processing raw materials supplied to it by other manufacturing companies and handing over end products to such companies--Conversion charges--Not deductible for purpose of determining “profits of the business†-- Aurobindo Pharma Ltd. v. CIT (T & AP) . . . 216
S. 80-IB --Housing project--Special deduction--Condition precedent--Built-up area should not exceed 1,500 sq. ft--Meaning of “built-up area†--Same construction must be there--Open courtyard within compound wall--Not a built-up area--Assessee entitled to special deduction-- Commonwealth Developers v. Asst. CIT (Bom) . . . 265
S. 132(1) --Search and seizure--Warrant of authorisation--Validity--Reason to believe existence of undisclosed assets--Writ--High Court--Can scrutinise file to find whether authority has appropriately recorded reasons for forming opinion--High Court without calling for file concluding warrant of authorisation issued without reason--Not sustainable--Matter remanded for decision afresh-- Union of India v. Agarwal Iron Industries (SC). . . 180
S. 145(3) --Accounting--Business of precious and semi-precious stones--What should be a reasonable profit on account of trading transactions--Question of fact--Rejection of accounts--Assessee recording bogus purchases and opening and closing stocks not capable of verification in books--Application of higher gross profit rate justified-- Vimal Singhvi v. Asst. CIT (Raj) . . . 275
S. 147 --Reassessment--Notice after four years--Conditions precedent--Notice on basis that disallowance of interest paid on borrowings for subsequent year--No indication in reasons that assessee failed to disclose truly and fully material facts necessary for assessment--Notice to stand or fall on basis of reasons recorded at time of issue--Notices not valid--Business India v. Joint CIT (Bom) . . . 154
S. 148 --Reassessment--Notice after four years--Conditions precedent--Notice on basis that disallowance of interest paid on borrowings for subsequent year--No indication in reasons that assessee failed to disclose truly and fully material facts necessary for assessment--Notice to stand or fall on basis of reasons recorded at time of issue--Notices not valid--Business India v. Joint CIT (Bom) . . . 154
S. 153C --Search and seizure--Block assessment--Assessment of third person--Condition precedent--Satisfaction of Assessing Officer that seized material belonged to third person--Meaning of “belong†--Reference to documents in searched material--No indication in satisfaction note that documents belonged to third person--No disclaimer by person in respect of whom search conducted that documents did not belong to him--Notice under section 153C not valid-- Pepsico India Holdings P. Ltd. v. Asst. CIT (Delhi) . . . 295
S. 158BB --Search and seizure--Block assessment--Undisclosed income--Cash credits against assessee reflected in books referable to concerned assessment years--Block assessment unsustainable-- CIT v. Tharmandal Builders P. Ltd. (T & AP) . . . 209
S. 170 --Assessment--Amalgamation of companies--Effect--Amalgamating company ceases to exist--Order of assessment on amalgamating company--Not valid--Not a procedural irregularity to be cured by section 292B-- CIT v. Dimension Apparels P. Ltd. (Delhi) . . . 288
S. 176 --Assessment--Amalgamation of companies--Effect--Amalgamating company ceases to exist--Order of assessment on amalgamating company--Not valid--Not a procedural irregularity to be cured by section 292B-- CIT v. Dimension Apparels P. Ltd. (Delhi) . . . 288
S. 194C --Deduction of tax at source--Contractor--State Government undertaking to pay wages to leader of group of workmen--Leader of group whether contractor--Matter remanded-- Karnataka Rural Infrastructure Development Ltd. v. ITO (Karn) . . . 222
S. 244A(2) --Refund--Interest--Only where delay is on part of Department--Failure by assessee to furnish tax deduction at source certificates--Refund directed after filing of affidavit and indemnity bond with particulars by assessee--No delay by Department after furnishing indemnity bond--No interest payable-- L. Madanlal Steels Ltd. v. Chief CIT (T & AP) . . . 205
S. 292B --Assessment--Amalgamation of companies--Effect--Amalgamating company ceases to exist--Order of assessment on amalgamating company--Not valid--Not a procedural irregularity to be cured by section 292B-- CIT v. Dimension Apparels P. Ltd.(Delhi) . . . 288
R. 5 --Depreciation--Condition precedent for allowance--Rate of depreciation--Option exercised in terms of second proviso to rule 5(1A) in return filed under section 139(1)--No separate procedure necessary--Assessee entitled to depreciation on windmills at 80 per cent.-- CIT v. ABT Ltd. (Mad) . . . 159
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