ITR Volume 371 : Part 2 (Issue dated : 23-2-2015)

From: CA RAJU SHAH shahmars@hotmail.com [NEXTGEN-CA] <NEXTGEN-CA-noreply@yahoogroups.com>

 

 

 

 

 

 

 

 

 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

HIGH COURTS

Deduction of tax at source --Non-payment of tax deducted at source--Assessing Officer has power to declare person “assessee in default†--Income-tax Act, 1961, ss. 200, 200A, 201-- CIT v. Kingfisher Airlines Ltd. (Karn) . . . 106

----Principles of natural justice--Non-payment of tax deducted at source--Person admitting liability but claiming inability to pay amount--No evidence of payment submitted to Assessing Officer or Commissioner (Appeals)--No complaint of denial of opportunity to be heard--No violation of principles of natural justice--Order passed under section 201 valid--Income-tax Act, 1961, s. 201-- CIT v. Kingfisher Airlines Ltd. (Karn) . . . 106

Reassessment --Notice--Housing project--Special deduction--Claim of assessee examined at length--Assessing Officer disallowing substantial portion of claim--Reopening on ground yet another element of claim not gone into--Impermissible--Income-tax Act, 1961, ss. 147, 148--Sarla Rajkumar Varma v. Asst. CIT (Guj) . . . 95

Unexplained expenditure --Trading in by-products of rice--Onus on assessee to produce material to establish purchase transactions--No material to substantiate payments made by cheque--Goods said to have been transported by a non-existent entity--Addition on account of purchases justified--Income-tax Act, 1961-- Rajesh Kumar v. CIT (P&H) . . . 87

PRINT EDITION

ITR Volume 371 : Part 2 (Issue dated : 23-2-2015)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Accounting --Rejection of accounts--Finding that there was no evidence that accounts were not reliable--Rejection of accounts not justified--Income-tax Act, 1961-- CIT v. Nuchem Ltd.(P&H) . . . 164

Amortisation of preliminary expenses --Expenditure on raising share capital--One-tenth of expenditure in assessment years 1994-95 to 1999-2000--Income-tax Act, 1961, s. 35D(2)(c)(iv)-- CIT v. Nuchem Ltd. (P&H) . . . 164

Appeal to Commissioner (Appeals) --Competency of appeal--Appeal maintainable only by aggrieved person--Assessee consenting to assessment--Subsequent penalty cancelled--Assessee was not an aggrieved person--Assessee not competent to appeal--Income-tax Act, 1961, s. 246A-- Deep Kukreti v. CIT (Uttarakhand) . . . 257

Appeal to High Court --Monetary ceiling limits--Exception--Revenue audit objection--No document to support--Tribunal finding appeal not maintainable on ground tax effect much less than prescribed limit--Justified--CBDT Instruction No. 3 of 2011, dated 9-2-2011--Income-tax Act, 1961, s. 268A-- CIT v. Shri Shanthinath Benefit Fund Ltd. (Mad) . . . 271

Business expenditure --Commercial expediency--Royalty payments to foreign principals--Deductible--Income-tax Act, 1961, s. 37(1)-- CIT v. Yum Restaurants India P. Ltd. (Delhi) . . . 139

----Deduction only on actual payment--Contributions to provident fund and employees’ State insurance--Provision that contribution should be paid before due date for filing return applicable to contribution by employees also--Income-tax Act, 1961, s. 43B-- CIT v. Magus Customers Dialog Pvt. Ltd. (Karn) . . . 242

----Delay in deposit of employees’ contribution to PF and ESI--Finding that there was no delay--Disallowance not justified--Income-tax Act, 1961, s. 36(1)(va)-- CIT v. Nuchem Ltd.(P&H) . . . 164

----Firm doing import and export--Foreign travel expenses of persons including a lady--Lady one of the founder partners travelling in that capacity with others--Expenditure incurred wholly and exclusively for the purpose of the business--Allowable deduction--Income-tax Act, 1961, s. 37-- CIT v. Irbaz Shoe Co. (Mad) . . . 215

----Guarantee commission--Deductible--Expenditure on maintenance of accommodation of employees--Deductible--Expenditure on inauguration of new centre--Deductible--Amount paid for market survey--Deductible--Income-tax Act, 1961, s. 37(2A), (3)-- CIT v. Nuchem Ltd.(P&H) . . . 164

----Mercantile system of accounting--Provision made based on past experience--Concurrent finding method not objectionable--Not a contingent liability--Provision allowable--Income-tax Act, 1961, s. 37-- CIT v. Yum Restaurants India P. Ltd. (Delhi) . . . 139

----Subsidiary company of assessee--Administrative expenses--Final effect is revenue-neutral--No allocation or apportionment of expenses could be made--Income-tax Act, 1961, s. 37(1)-- CIT v. Yum Restaurants India P. Ltd. (Delhi) . . . 139

Business income --Income from other sources--Assessee entering into franchise agreements with various entities to operate pizza and chicken restaurants--Services provided by assessee constituting a systematic organised activity conducted with a special purpose--Income therefrom is business income--Income-tax Act, 1961-- CIT v. Yum Restaurants India P. Ltd. (Delhi) . . . 139

Capital gains --Difference between short-term and long-term capital gains--Land held on lease for more than three years--Conversion into freehold and transfer thereafter--Gains assessable as long-term capital gains--Income-tax Act, 1961, s. 45-- Amar Nath Agrawal v.CIT (All) . . . 183

Capital or revenue expenditure --Restaurant business--Developing new recipes to develop clientele--Expenses for food tasting and trials--Revenue expenditure--Income-tax Act, 1961--CIT v. Yum Restaurants India P. Ltd. (Delhi) . . . 139

Charitable purposes --Charitable trust--Registration of trust--Cancellation of registration--Finding that trust was running several educational institutions and had not violated any of the conditions for claiming exemption--Assessee entitled to registration--Income-tax Act, 1961, ss. 11, 12, 12A-- CIT v. Karnataka Lingayat Education Society (Karn) . . . 249

Depreciation --Assessee purchasing assets for its employees’ benefit--Assessee as part of its emolument policy reimbursing expenses incurred by employees--Reimbursement only to extent of employees’ entitlement--Individual identity of asset lost in block--Expenses not personal to assessee’s employees--Entitled to depreciation--Income-tax Act, 1961-- CIT v. Yum Restaurants India P. Ltd. (Delhi) . . . 139

----Rate of depreciation--Broadcasting/exhibition rights and satellite rights in feature films amount to distribution rights--Assessee entitled to 100 per cent. depreciation--Income-tax Act, 1961, s. 32--Income-tax Rules, 1962, r. 9B-- CIT v. Smt. Achila Sabharwal (Delhi) . . . 219

Estimation of income --Application of net profit rate--Tribunal upholding exercise undertaken by Assessing Officer and Commissioner (Appeals) and rejecting assessee’s complaint--Tribunal after referring to comparable cases applying net profit at 8 per cent.--Pure finding of fact--Income-tax Act, 1961-- CIT v. Ratansingh M. Rathod (Bom) . . . 135

Industrial undertaking --Special deduction--Computation--Depreciation allowance and development rebate for past assessment years fully set off against total income for those assessment years--Not to be notionally carried forward and set off against income of current year--Income-tax Act, 1961, s. 80-I-- Carborundum Universal Ltd. v. Joint CIT (Mad) . . . 275

Penalty --Concealment of income--No satisfactory explanation as regards failure by assessee to disclose in original return gifts from non-resident Indians--Disclosure in revised return only after survey operation in business premises--Genuineness of gifts not proved--Levy of penalty justified--Income-tax Act, 1961, s. 271(1), Expln. 1(B) -- R. Padmanabhan v.Deputy CIT (Mad) . . . 211

Reassessment --Notice--Limitation--Notice after four years but before six years--Condition precedent--Satisfaction of Assessing Officer that income escaping assessment was likely to exceed one lakh rupees--No recording of such satisfaction--Notice barred by limitation--Income-tax Act, 1961, ss. 148, 149-- Amar Nath Agrawal v. CIT (All) . . . 183

----Notice--Validity--Notice based on audit objection--Notice not valid--Income-tax Act, 1961, ss. 147, 148-- Raajratna Metal Industries Ltd. v. Asst. CIT (Guj) . . . 222

----Notice--Validity--Notice for assessment year 2008-09 on ground that deduction under section 10A was found to be excessive in similar circumstances for assessment year 2009-10--Tribunal holding that deduction was not excessive--Notice not valid--Income-tax Act, 1961, ss. 147, 148-- A. T. Kearney India Ltd. v. ITO (Delhi) . . . 179

----Notice after four years--Validity--Failure to disclose material facts necessary for assessment--Gains shown in returns as long-term capital gains and details regarding transfer of capital asset given--Notice after four years to treat gains as short-term capital gains--Not valid--Income-tax Act, 1961, ss. 147, 148-- Amar Nath Agrawal v. CIT (All) . . . 183

----Notice within four years--Power to reassess not a power to review--Industrial undertaking--Special deduction--Allocation of expenditure between assessees’ three manufacturing units--Assessing Officer raising queries and accepting reply--Due application of mind by Assessing Officer to facts involved and opinion formed to allow claim--Reassessment with respect to allocation of expenditure--Change of opinion--No reason to believe that income chargeable to tax has escaped assessment--Reassessment not valid--Income-tax Act, 1961, ss. 80-IA, 80-IB, 147, 148-- GKN Sinter Metals Ltd. v. Ms. Ramapriya Raghavan, Asst. CIT (Bom) . . . 225

Recovery of tax --Stay of recovery proceedings--Prima facie case against order of assessment--Finding that recovery of amount demanded would cause irreparable injury to assessee--Conditional stay granted--Income-tax Act, 1961-- Nerka Chemicals P. Ltd. v.Union of India (Bom) . . . 280

Remuneration from foreign enterprise --Special deduction--Conditions precedent--Assessee conducting services for benefit of foreign companies--Services rendered “from India†and “in India†--Distinction--Report of survey submitted by assessee not utilised within India though received by foreign agency in India--Mere submission of report within India does not take assessee out of purview of benefit--Income-tax Act, 1961, s. 80-O-- CIT v. Peters and Prasad Association (T & AP) . . . 206

Search and seizure --Block assessment--Assessment of third person--Undisclosed income--Assessing Officer satisfied that undisclosed income discovered during search belonged to third person--Notice under section 158BD to such third person--Valid--Income-tax Act, 1961, ss. 158BC, 158BD-- Gyanendra Kumar Jain v. Asst. CIT (All) . . . 244

----Block assessment--Undisclosed income--Deletion of non-genuine gifts on ground amount already included--Benefit given to certain amount as past savings--Allowing certain value of jewellery as stridhan of assessee’s wife--Deletion of addition for unexplained jewellery on ground jewellery belonged to some one else--Pure findings of fact--Income-tax Act, 1961-- CIT v. Naresh Kumar Kohli (P&H) . . . 201

----Block assessment--Undisclosed income--Statement of managing partner of assessee recorded one-and-half months after search--Cannot be brought under purview of section 132(4)--Block assessment solely on basis of discrepancy between two registers referable to Central Excise Act--Registers can be taken into account for income-tax purposes only after ascertaining facts and conclusions from officials of Excise Department--Neither Assessing Officer nor Commissioner (Appeals) recording any finding that assessee suppressed sale of steel referable to discrepancy--Block assessment just on basis of surmises--Block assessment not valid--Income-tax Act, 1961, ss. 132(4), 158BC-- CIT v.Balaji Steel Profiles (T & AP) . . . 265

Shipping business --Tonnage tax company--Tonnage tax scheme--Tonnage income--Non qualifying ships--Computation--Income from slot charter operations--Includible--Income-tax Act, 1961, ss. 115VB, 115VC, 115VD-- Trans Asian Shipping Services P. Ltd. v. CIT (Ker) . . . 194

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 11 --Charitable purposes--Charitable trust--Registration of trust--Cancellation of registration--Finding that trust was running several educational institutions and had not violated any of the conditions for claiming exemption--Assessee entitled to registration-- CITv. Karnataka Lingayat Education Society (Karn) . . . 249

S. 12 --Charitable purposes--Charitable trust--Registration of trust--Cancellation of registration--Finding that trust was running several educational institutions and had not violated any of the conditions for claiming exemption--Assessee entitled to registration-- CITv. Karnataka Lingayat Education Society (Karn) . . . 249

S. 12A --Charitable purposes--Charitable trust--Registration of trust--Cancellation of registration--Finding that trust was running several educational institutions and had not violated any of the conditions for claiming exemption--Assessee entitled to registration-- CITv. Karnataka Lingayat Education Society (Karn) . . . 249

S. 32 --Depreciation--Rate of depreciation--Broadcasting/exhibition rights and satellite rights in feature films amount to distribution rights--Assessee entitled to 100 per cent. depreciation--CIT v. Smt. Achila Sabharwal (Delhi) . . . 219

S. 35D(2)(c)(iv) --Amortisation of preliminary expenses--Expenditure on raising share capital--One-tenth of expenditure in assessment years 1994-95 to 1999-2000-- CIT v.Nuchem Ltd. (P&H) . . . 164

S. 36(1)(va) --Business expenditure--Delay in deposit of employees’ contribution to PF and ESI--Finding that there was no delay--Disallowance not justified-- CIT v. Nuchem Ltd.(P&H) . . . 164

S. 37 --Business expenditure--Firm doing import and export--Foreign travel expenses of persons including a lady--Lady one of the founder partners travelling in that capacity with others--Expenditure incurred wholly and exclusively for the purpose of the business--Allowable deduction-- CIT v. Irbaz Shoe Co. (Mad) . . . 215

----Business expenditure--Mercantile system of accounting--Provision made based on past experience--Concurrent finding method not objectionable--Not a contingent liability--Provision allowable-- CIT v. Yum Restaurants India P. Ltd. (Delhi) . . . 139

S. 37(1) --Business expenditure--Commercial expediency--Royalty payments to foreign principals--Deductible-- CIT v. Yum Restaurants India P. Ltd. (Delhi) . . . 139

----Business expenditure--Subsidiary company of assessee--Administrative expenses--Final effect is revenue-neutral--No allocation or apportionment of expenses could be made-- CITv. Yum Restaurants India P. Ltd. (Delhi) . . . 139

S. 37(2A), (3) --Business expenditure--Guarantee commission--Deductible--Expenditure on maintenance of accommodation of employees--Deductible--Expenditure on inauguration of new centre--Deductible--Amount paid for market survey--Deductible-- CIT v. Nuchem Ltd.(P&H) . . . 164

S. 43B --Business expenditure--Deduction only on actual payment--Contributions to provident fund and employees’ State insurance--Provision that contribution should be paid before due date for filing return applicable to contribution by employees also-- CIT v. Magus Customers Dialog Pvt. Ltd. (Karn) . . . 242

S. 45 --Capital gains--Difference between short-term and long-term capital gains--Land held on lease for more than three years--Conversion into freehold and transfer thereafter--Gains assessable as long-term capital gains-- Amar Nath Agrawal v. CIT (All) . . . 183

S. 80-I --Industrial undertaking--Special deduction--Computation--Depreciation allowance and development rebate for past assessment years fully set off against total income for those assessment years--Not to be notionally carried forward and set off against income of current year-- Carborundum Universal Ltd. v. Joint CIT (Mad) . . . 275

S. 80-IA --Reassessment--Notice within four years--Power to reassess not a power to review--Industrial undertaking--Special deduction--Allocation of expenditure between assessees’ three manufacturing units--Assessing Officer raising queries and accepting reply--Due application of mind by Assessing Officer to facts involved and opinion formed to allow claim--Reassessment with respect to allocation of expenditure--Change of opinion--No reason to believe that income chargeable to tax has escaped assessment--Reassessment not valid-- GKN Sinter Metals Ltd. v. Ms. Ramapriya Raghavan, Asst. CIT (Bom) . . . 225

S. 80-IB --Reassessment--Notice within four years--Power to reassess not a power to review--Industrial undertaking--Special deduction--Allocation of expenditure between assessees’ three manufacturing units--Assessing Officer raising queries and accepting reply--Due application of mind by Assessing Officer to facts involved and opinion formed to allow claim--Reassessment with respect to allocation of expenditure--Change of opinion--No reason to believe that income chargeable to tax has escaped assessment--Reassessment not valid-- GKN Sinter Metals Ltd. v. Ms. Ramapriya Raghavan, Asst. CIT (Bom) . . . 225

S. 80-O --Remuneration from foreign enterprise--Special deduction--Conditions precedent--Assessee conducting services for benefit of foreign companies--Services rendered “from India†and “in India†--Distinction--Report of survey submitted by assessee not utilised within India though received by foreign agency in India--Mere submission of report within India does not take assessee out of purview of benefit-- CIT v. Peters and Prasad Association (T & AP) . . . 206

S. 115VB --Shipping business--Tonnage tax company--Tonnage tax scheme--Tonnage income--Non qualifying ships--Computation--Income from slot charter operations--Includible--Trans Asian Shipping Services P. Ltd. v. CIT (Ker) . . . 194

S. 115VC --Shipping business--Tonnage tax company--Tonnage tax scheme--Tonnage income--Non qualifying ships--Computation--Income from slot charter operations--Includible--Trans Asian Shipping Services P. Ltd. v. CIT (Ker) . . . 194

S. 115VD --Shipping business--Tonnage tax company--Tonnage tax scheme--Tonnage income--Non qualifying ships--Computation--Income from slot charter operations--Includible--Trans Asian Shipping Services P. Ltd. v. CIT (Ker) . . . 194

S. 132(4) --Search and seizure--Block assessment--Undisclosed income--Statement of managing partner of assessee recorded one-and-half months after search--Cannot be brought under purview of section 132(4)--Block assessment solely on basis of discrepancy between two registers referable to Central Excise Act--Registers can be taken into account for income-tax purposes only after ascertaining facts and conclusions from officials of Excise Department--Neither Assessing Officer nor Commissioner (Appeals) recording any finding that assessee suppressed sale of steel referable to discrepancy--Block assessment just on basis of surmises--Block assessment not valid-- CIT v. Balaji Steel Profiles (T & AP) . . . 265

S. 147 --Reassessment--Notice--Validity--Notice based on audit objection--Notice not valid--Raajratna Metal Industries Ltd. v. Asst. CIT (Guj) . . . 222

----Reassessment--Notice--Validity--Notice for assessment year 2008-09 on ground that deduction under section 10A was found to be excessive in similar circumstances for assessment year 2009-10--Tribunal holding that deduction was not excessive--Notice not valid-- A. T. Kearney India Ltd. v. ITO (Delhi) . . . 179

----Reassessment--Notice after four years--Validity--Failure to disclose material facts necessary for assessment--Gains shown in returns as long-term capital gains and details regarding transfer of capital asset given--Notice after four years to treat gains as short-term capital gains--Not valid-- Amar Nath Agrawal v. CIT (All) . . . 183

----Reassessment--Notice within four years--Power to reassess not a power to review--Industrial undertaking--Special deduction--Allocation of expenditure between assessees’ three manufacturing units--Assessing Officer raising queries and accepting reply--Due application of mind by Assessing Officer to facts involved and opinion formed to allow claim--Reassessment with respect to allocation of expenditure--Change of opinion--No reason to believe that income chargeable to tax has escaped assessment--Reassessment not valid--GKN Sinter Metals Ltd. v. Ms. Ramapriya Raghavan, Asst. CIT (Bom) . . . 225

S. 148 --Reassessment--Notice--Limitation--Notice after four years but before six years--Condition precedent--Satisfaction of Assessing Officer that income escaping assessment was likely to exceed one lakh rupees--No recording of such satisfaction--Notice barred by limitation-- Amar Nath Agrawal v. CIT (All) . . . 183

----Reassessment--Notice--Validity--Notice based on audit objection--Notice not valid--Raajratna Metal Industries Ltd. v. Asst. CIT (Guj) . . . 222

----Reassessment--Notice--Validity--Notice for assessment year 2008-09 on ground that deduction under section 10A was found to be excessive in similar circumstances for assessment year 2009-10--Tribunal holding that deduction was not excessive--Notice not valid-- A. T. Kearney India Ltd. v. ITO (Delhi) . . . 179

----Reassessment--Notice after four years--Validity--Failure to disclose material facts necessary for assessment--Gains shown in returns as long-term capital gains and details regarding transfer of capital asset given--Notice after four years to treat gains as short-term capital gains--Not valid-- Amar Nath Agrawal v. CIT (All) . . . 183

----Reassessment--Notice within four years--Power to reassess not a power to review--Industrial undertaking--Special deduction--Allocation of expenditure between assessees’ three manufacturing units--Assessing Officer raising queries and accepting reply--Due application of mind by Assessing Officer to facts involved and opinion formed to allow claim--Reassessment with respect to allocation of expenditure--Change of opinion--No reason to believe that income chargeable to tax has escaped assessment--Reassessment not valid--GKN Sinter Metals Ltd. v. Ms. Ramapriya Raghavan, Asst. CIT (Bom) . . . 225

S. 149 --Reassessment--Notice--Limitation--Notice after four years but before six years--Condition precedent--Satisfaction of Assessing Officer that income escaping assessment was likely to exceed one lakh rupees--No recording of such satisfaction--Notice barred by limitation-- Amar Nath Agrawal v. CIT (All) . . . 183

S. 158BC --Search and seizure--Block assessment--Assessment of third person--Undisclosed income--Assessing Officer satisfied that undisclosed income discovered during search belonged to third person--Notice under section 158BD to such third person--Valid--Gyanendra Kumar Jain v. Asst. CIT (All) . . . 244

----Search and seizure--Block assessment--Undisclosed income--Statement of managing partner of assessee recorded one-and-half months after search--Cannot be brought under purview of section 132(4)--Block assessment solely on basis of discrepancy between two registers referable to Central Excise Act--Registers can be taken into account for income-tax purposes only after ascertaining facts and conclusions from officials of Excise Department--Neither Assessing Officer nor Commissioner (Appeals) recording any finding that assessee suppressed sale of steel referable to discrepancy--Block assessment just on basis of surmises--Block assessment not valid-- CIT v. Balaji Steel Profiles (T & AP) . . . 265

S. 158BD --Search and seizure--Block assessment--Assessment of third person--Undisclosed income--Assessing Officer satisfied that undisclosed income discovered during search belonged to third person--Notice under section 158BD to such third person--Valid--Gyanendra Kumar Jain v. Asst. CIT (All) . . . 244

S. 246A --Appeal to Commissioner (Appeals)--Competency of appeal--Appeal maintainable only by aggrieved person--Assessee consenting to assessment--Subsequent penalty cancelled--Assessee was not an aggrieved person--Assessee not competent to appeal--Deep Kukreti v. CIT (Uttarakhand) . . . 257

S. 268A --Appeal to High Court--Monetary ceiling limits--Exception--Revenue audit objection--No document to support--Tribunal finding appeal not maintainable on ground tax effect much less than prescribed limit--Justified--CBDT Instruction No. 3 of 2011, dated 9-2-2011-- CIT v.Shri Shanthinath Benefit Fund Ltd. (Mad) . . . 271

S. 271(1), Expln. 1(B) --Penalty--Concealment of income--No satisfactory explanation as regards failure by assessee to disclose in original return gifts from non-resident Indians--Disclosure in revised return only after survey operation in business premises--Genuineness of gifts not proved--Levy of penalty justified-- R. Padmanabhan v. Deputy CIT (Mad) . . . 211

Income-tax Rules, 1962 :

R. 9B --Depreciation--Rate of depreciation--Broadcasting/exhibition rights and satellite rights in feature films amount to distribution rights--Assessee entitled to 100 per cent. depreciation--CIT v. Smt. Achila Sabharwal (Delhi) . . . 219

 

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Posted by: CA RAJU SHAH <shahmars@hotmail.com>

ITR (TRIB) Volume 37 : Part 6 (Issue dated : 9-2-2015)

 

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

 

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Bad debt --Condition precedent for deduction--Law applicable--Effect of section 36(1)(vii)--Sufficient if amount is written off in accounts--Not necessary to prove debt bad--Income-tax Act, 1961, s. 36(1)(vii)-- Ushodaya Enterprises Ltd. v. Asst. CIT (Hyd) . . . 114

Capital or revenue expenditure --Sum paid to VSNL for surrender of lease agreement in respect of transponders--Agreement terminated and sum paid to lessor towards premature termination of lease--Capital in nature--Income-tax Act, 1961-- Ushodaya Enterprises Ltd. v. Asst. CIT (Hyd) . . . 114

Charitable purpose --Computation of income--Carry forward and set off--Income to be computed on commercial principles--Deficit of trust allowed to be carried forward to be set off in subsequent years--Income-tax Act, 1961-- ITO (Exemption) v. Bhatia General Hospital (Mumbai) . . . 110

----Depreciation--Assessee running hospital--Assets which have outlived their useful life--Prohibition on sale as scrap according to rules governing hospital--Additional depreciation to be allowed--Income-tax Act, 1961, s. 11-- ITO (Exemption) v. Bhatia General Hospital (Mumbai) . . . 110

Depreciation --Higher rate of depreciation--Printers, scanners and modems are part of computer system and to be treated as computer--Entitled to higher rate of depreciation--Income-tax Act, 1961-- Ushodaya Enterprises Ltd. v. Asst. CIT (Hyd) . . . 114

 

PRINT EDITION

Volume 37 : Part 6 (Issue dated : 9-2-2015)

SUBJECT INDEX TO CASES REPORTED

Appeal to Commissioner (Appeals) --Powers of Commissioner (Appeals)--Co-extensive with those of Assessing Officer--Failure by Assessing Officer in recording proper satisfaction can be made good by Commissioner (Appeals)--Income-tax Act, 1961-- T and T Motors Ltd. v. Addl. CIT (Delhi) . . . 682

Business expenditure --Assessee engaging in drafting documents and sale of stamps--Duty of assessee to maintain proper books of account--Total receipts cannot be ascertained without proper records--Order restricting office expenses to forty per cent proper--Income-tax Act, 1961-- K. Govinda Pillai v. Deputy CIT (Cochin) . . . 772

----Disallowance--Expenditure on purpose which is illegal or offence--Fees paid to advocate for seeking bail for assessee’s driver on account of road accident--Not allowable--Expenditure incurred for certification of net worth of directors for obtaining loan--Allowable--Income-tax Act, 1961, s. 37(1)-- T and T Motors Ltd. v. Addl. CIT (Delhi) . . . 682

----Share of expenses on common effluent treatment plant--Amount payable by virtue of notice of demand issued by Government--Allowable as deduction--Income-tax Act, 1961-- T and T Motors Ltd. v. Addl. CIT (Delhi) . . . 682

Cash credit --Burden of proof--Burden on assessee to prove genuineness and creditworthiness of transaction and identity of parties--Failure by assessee to prove genuineness of transaction to extent of Rs. 7 lakhs--Addition proper--Income-tax Act, 1961--K. Govinda Pillai v. Deputy CIT (Cochin) . . . 772

Exemption --Charitable purposes--Chamber of Commerce--Assessee carrying out activities incidental to main object of association such as advancement and development of trade, commerce and industry in India--Activities not in nature of business and no motive to earn profit--Entitled to exemption under section 11--Assessee’s primary purpose advancement of objects of general public utility--Remains charitable even if activity incidental or ancillary to achieving main purpose profitable in nature--Not hit by section 2(15)--Income-tax Act, 1961, ss. 2(15), 11, 12A-- Indian Chamber of Commerce v. ITO (Exemption-I)(Kolkata) . . . 688

Income --Disallowance of expenditure in relation to exempt income--Interest towards investment in shares and mutual funds--Assessee's share capital with reserves and surpluses far in excess of amount invested in securities fetching exempt income--Interest cannot be disallowed--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- T and T Motors Ltd. v. Addl. CIT (Delhi) . . . 682

----Disallowance of expenditure in relation to exempt income--Rule 8D mandatory--Disallowance of amount equal to one-half per cent. of average of value of investment--Proper--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- T and T Motors Ltd. v. Addl. CIT (Delhi) . . . 682

Industrial undertaking --Special deduction--Computation--Determination of initial assessment year--Period of ten years to be reckoned from date assessee’s business started functioning--Income-tax Act, 1961, s. 80-IA-- Escapade Resorts P. Ltd. v. Asst. CIT (Cochin) . . . 766

International transactions --Arm’s length price--Determination--Corporate support and research and development services segments--Transactional net margin method--Selection of comparables--Companies having related party transactions to extent of more than 25 per cent. cannot be treated as comparable--Companies having outsourcing activity, functional dissimilarity, diversified activities and element of brand value associated with them not comparable--Company earning substantial revenue from research and development activity to be treated as comparable--Risk or working capital adjustment--Requiring verification by Transfer Pricing Officer--Matter remanded--Income-tax Act, 1961, s. 92CA-- International Speciality Products (I) P. Ltd. v. ITO (Hyd) . . . 787

Penalty --Concealment of income or furnishing of inaccurate particulars--Penalty based on addition to income--High Court admitting substantial question of law on question of addition--Penalty cannot be imposed on debatable question--Income-tax Act, 1961, s. 271(1)(c)--Schrader Duncan Ltd. v. Addl. CIT (Mumbai) . . . 674

Scientific research expenditure --Expenditure on research and development for production of new drugs--Procedure--Failure by Assessing Officer to follow correct procedure provided under section 35(3) to determine whether activity constitute scientific research--Tribunal cannot decide claim of deduction without following correct procedure--Matter remanded to Assessing Officer--Income-tax Act, 1961, s. 35(1), (3)-- Deputy CIT v. Bharat Biotech International Ltd. (Hyd) . . . 750

Search and seizure --Statement recorded in course of a search operation--Part of seized material--Income-tax Act, 1961, s. 132(4)-- K. Govinda Pillai v. Deputy CIT (Cochin) . . . 772

Words and phrases --†Business†--Meaning of-- Indian Chamber of Commerce v. ITO (Exemption-I) (Kolkata) . . . 688

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961

S. 2(15) --Exemption--Charitable purposes--Chamber of Commerce--Assessee carrying out activities incidental to main object of association such as advancement and development of trade, commerce and industry in India--Activities not in nature of business and no motive to earn profit--Entitled to exemption under section 11--Assessee’s primary purpose advancement of objects of general public utility--Remains charitable even if activity incidental or ancillary to achieving main purpose profitable in nature--Not hit by section 2(15)-- Indian Chamber of Commerce v. ITO (Exemption-I) (Kolkata) . . . 688

S. 11 --Exemption--Charitable purposes--Chamber of Commerce--Assessee carrying out activities incidental to main object of association such as advancement and development of trade, commerce and industry in India--Activities not in nature of business and no motive to earn profit--Entitled to exemption under section 11--Assessee’s primary purpose advancement of objects of general public utility--Remains charitable even if activity incidental or ancillary to achieving main purpose profitable in nature--Not hit by section 2(15)-- Indian Chamber of Commerce v. ITO (Exemption-I) (Kolkata) . . . 688

S. 12A --Exemption--Charitable purposes--Chamber of Commerce--Assessee carrying out activities incidental to main object of association such as advancement and development of trade, commerce and industry in India--Activities not in nature of business and no motive to earn profit--Entitled to exemption under section 11--Assessee’s primary purpose advancement of objects of general public utility--Remains charitable even if activity incidental or ancillary to achieving main purpose profitable in nature--Not hit by section 2(15)-- Indian Chamber of Commerce v. ITO (Exemption-I) (Kolkata) . . . 688

S. 14A --Income--Disallowance of expenditure in relation to exempt income--Interest towards investment in shares and mutual funds--Assessee's share capital with reserves and surpluses far in excess of amount invested in securities fetching exempt income--Interest cannot be disallowed-- T and T Motors Ltd. v. Addl. CIT (Delhi) . . . 682

----Income--Disallowance of expenditure in relation to exempt income--Rule 8D mandatory--Disallowance of amount equal to one-half per cent. of average of value of investment--Proper-- T and T Motors Ltd. v. Addl. CIT (Delhi) . . . 682

S. 35(1) --Scientific research expenditure--Expenditure on research and development for production of new drugs--Procedure--Failure by Assessing Officer to follow correct procedure provided under section 35(3) to determine whether activity constitute scientific research--Tribunal cannot decide claim of deduction without following correct procedure--Matter remanded to Assessing Officer-- Deputy CIT v. Bharat Biotech International Ltd.(Hyd) . . . 750

S. 35(3) --Scientific research expenditure--Expenditure on research and development for production of new drugs--Procedure--Failure by Assessing Officer to follow correct procedure provided under section 35(3) to determine whether activity constitute scientific research--Tribunal cannot decide claim of deduction without following correct procedure--Matter remanded to Assessing Officer-- Deputy CIT v. Bharat Biotech International Ltd.(Hyd) . . . 750

S. 37(1) --Business expenditure--Disallowance--Expenditure on purpose which is illegal or offence--Fees paid to advocate for seeking bail for assessee’s driver on account of road accident--Not allowable--Expenditure incurred for certification of net worth of directors for obtaining loan--Allowable-- T and T Motors Ltd. v. Addl. CIT (Delhi) . . . 682

S. 80-IA --Industrial undertaking--Special deduction--Computation--Determination of initial assessment year--Period of ten years to be reckoned from date assessee’s business started functioning-- Escapade Resorts P. Ltd. v. Asst. CIT (Cochin) . . . 766

S. 92CA --International transactions--Arm’s length price--Determination--Corporate support and research and development services segments--Transactional net margin method--Selection of comparables--Companies having related party transactions to extent of more than 25 per cent. cannot be treated as comparable--Companies having outsourcing activity, functional dissimilarity, diversified activities and element of brand value associated with them not comparable--Company earning substantial revenue from research and development activity to be treated as comparable--Risk or working capital adjustment--Requiring verification by Transfer Pricing Officer--Matter remanded-- International Speciality Products (I) P. Ltd. v. ITO (Hyd) . . . 787

S. 132(4) --Search and seizure--Statement recorded in course of a search operation--Part of seized material-- K. Govinda Pillai v. Deputy CIT (Cochin) . . . 772

S. 271(1)(c) --Penalty--Concealment of income or furnishing of inaccurate particulars--Penalty based on addition to income--High Court admitting substantial question of law on question of addition--Penalty cannot be imposed on debatable question-- Schrader Duncan Ltd. v. Addl. CIT (Mumbai) . . . 674

Income-tax Rules, 1962

R. 8D --Income--Disallowance of expenditure in relation to exempt income--Interest towards investment in shares and mutual funds--Assessee's share capital with reserves and surpluses far in excess of amount invested in securities fetching exempt income--Interest cannot be disallowed-- T and T Motors Ltd. v. Addl. CIT (Delhi) . . . 682

----Income--Disallowance of expenditure in relation to exempt income--Rule 8D mandatory--Disallowance of amount equal to one-half per cent. of average of value of investment--Proper-- T and T Motors Ltd. v. Addl. CIT (Delhi) . . . 682

 

IMP: High Court Decision - Late TDS return fees has to pay

High Court Decision - Late TDS return fees has to paid.

This would result in rejection of appeal already filed in this regard and clients has to pay the late fees for not filling TDS returns in time.

Rashmikant Kundalia Vs UOI : Bombay High Court

DATE: February 6, 2015 (Date of pronouncement)
DATE: February 9, 2015 (Date of publication)
AY: -

CITATION:
S. 234E: The late filing of TDS returns by the deductor causes inconvenience to everyone and s. 234E levies a fee to regularize the said late filing. The fee is not in the guise of a tax nor is it onerous. The levy is constitutionally valid

S. 234E of the Income-tax Act, 1961 inserted by the Finance Act, 2012 provides for levy of a fee of Rs. 200/- for each day’s delay in filing the statement of Tax Deducted at Source (TDS) or Tax Collected at Source (TCS). A Writ Petition to challenge the validity of s. 234E has been filed in the Bombay High Court. The Petition claims that assessees who are deducting tax at source are discharging an administrative function of the department and that they are a “honorary agent†of the department. It is stated that this obligation is onerous in nature and that there are already numerous penalties prescribed for a default. It is stated that the fee now levied by s. 234E is “exponentially harsh and burdensome†and also “deceitful, atrocious and obnoxious“. It is also claimed that Parliament does not have the jurisdiction or competence to impose such a levy on tax-payers. HELD by the High Court dismissing the Petition:

(i) On a perusal of sub-section (1) of section 234E, it is clear that a fee is sought to be levied inter alia on a person who fails to deliver or cause to be delivered the TDS return/statements within the prescribed time in sub-section (3) of section 200. The fee prescribed is Rs.200/- for every day during which the failure continues. Sub-section (2) further stipulates that the amount of fee referred to in sub-section (1) shall not exceed the amount of tax deductible or collectible as the case may be;

(ii) It is not in dispute that as per the existing provisions, a person responsible for deduction of tax (the deductor) is required to furnish periodical quarterly statements containing the details of deduction of tax made during the quarter, by the prescribed due date. Undoubtedly, delay in furnishing of TDS return/statements has a cascading effect. Under the Income Tax Act, there is an obligation on the Income Tax Department to process the income tax returns within the specified period from the date of filing. The Department cannot accurately process the return on whose behalf tax has been deducted (the deductee) until information of such deductions is furnished by the deductor within the prescribed time. The timely processing of returns is the bedrock of an efficient tax administration system. If the income tax returns, especially having refund claims, are not processed in a timely manner, then (i) a delay occurs in the granting of credit of TDS to the person on whose behalf tax is deducted (the deductee) and consequently leads to delay in issuing refunds to the deductee, or raising of infructuous demands against the deductee; (ii) the confidence of a general taxpayer on the tax administration is eroded; (iii) the late payment of refund affects the Government financially as the Government has to pay interest for delay in granting the refunds; and (iv) the delay in receipt of refunds results into a cash flow crunch, especially for business entities;

(iii) The Legislature took note of the fact that a substantial number of deductors were not furnishing their TDS retun/statements within the prescribed time frame which was absolutely essential. This led to an additional work burden upon the Department due to the fault of the deductor by not furnishing the information in time and which he was statutorily bound to furnish. It is in this light, and to compensate for the additional work burden forced upon the Department, that a fee was sought to be levied under section 234E of the Act. Looking at this from this perspective, we are clearly of the view that section 234E of the Act is not punitive in nature but a fee which is a fixed charge for the extra service which the Department has to provide due to the late filing of the TDS statements;

(iv) As stated earlier, the late submission of TDS statements means the Department is burdened with extra work which is otherwise not required if the TDS statements were furnished within the prescribed time. This fee is for the payment of the additional burden forced upon the Department. A person deducting the tax (the deductor), is allowed to file his TDS statement beyond the prescribed time provided he pays the fee as prescribed under section 234E of the Act. In other words, the late filing of the TDS return/statements is regularised upon payment of the fee as set out in section 234E. This is nothing but a privilege and a special service to the deductor allowing him to file the TDS return/statements beyond the time prescribed by the Act and/or the Rules. We therefore cannot agree with the argument of the Petitioners that the fee that is sought to be collected under section 234E of the Act is really nothing but a collection in the guise of a tax;

(v) We are therefore clearly of the view that the fee sought to be levied under section 234E of the Income Tax Act, 1961 is not in the guise of a tax that is sought to be levied on the deductor. We also do not find the provisions of section 234E as being onerous on the ground that the section does not empower the Assessing Officer to condone the delay in late filing of the TDS return/statements, or that no appeal is provided for from an arbitrary order passed under section 234E. It must be noted that a right of appeal is not a matter of right but is a creature of the statute, and if the Legislature deems it fit not to provide a remedy of appeal, so be it. Even in such a scenario it is not as if the aggrieved party is left remediless. Such aggrieved person can always approach this Court in its extra ordinary equitable jurisdiction under Article 226 / 227 of the Constitution of India, as the case may be. We therefore cannot agree with the argument of the Petitioners that simply because no remedy of appeal is provided for, the provisions of section 234E are onerous. Similarly, on the same parity of reasoning, we find the argument regarding condonation of delay also to be wholly without any merit.

-Regards
CA. C. V. PAWAR

ITR Volume 371 : Part 1 (Issue dated : 16-2-2015)

 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

SUPREME COURT

Search and seizure --Block assessment--Surcharge--Provision for levy of surcharge on income-tax in case of block assessments--Not clarificatory or declaratory--Not to have retrospective effect--Not to apply to block assessments pertaining to period prior to 1-6-2002--Income-tax Act, 1961, s. 113, proviso -- CIT v. K. Raheja Hotels and Estate Pvt. Ltd. . . . 63

HIGH COURTS

Agricultural income-tax (Assam) --Income from tea--Export--Special deduction--To be allowed on net income after apportionment under rule 8(1)--Effect of decision on assessments made under State Act--Assam Agricultural Income-tax Act, 1939--Income-tax Act, 1961, s. 80HHC--Income-tax Rules, 1962, r. 8-- Mcleod Russel India Ltd. v. State of Assam (Gauhati) . . . 73

Bad debts --Banking company--Provision for bad debts of advances by rural branches--Not deductible--Income-tax Act, 1961, s. 36-- CIT v. Federal Bank Ltd. (Ker) . . . 59

Depreciation --Investment in securities--Assessee entitled to depreciation--Income-tax Act, 1961, s. 32-- CIT v. Federal Bank Ltd. (Ker) . . . 59

Export --Special deduction--Calculation of profits--Amount earned on account of difference in rate of foreign exchange--To be taken into consideration--Income-tax Act, 1961, s. 80HHC-- CIT v. Alps Chemicals Pvt. Ltd. (Guj) . . . 61

Industrial undertaking --Special deduction--Amount received on sale of DEPB licence and foreign exchange fluctuation of rate difference--To be taken into consideration--Income-tax Act, 1961, s. 80-IA-- CIT v. Alps Chemicals Pvt. Ltd. (Guj) . . . 61

Interest --Accrual of income--Time of accrual--Interest credited to profit and loss account--Interest had not accrued and not assessable--Income-tax Act, 1961-- CIT v. Federal Bank Ltd. (Ker) . . . 59

PRINT EDITION

ITR Volume 371 : Part 1 (Issue dated : 16-2-2015)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Advance ruling --Evasion of tax--Transaction of sale in Mauritius of shares of Indian company to a foreign company--Consideration to be paid partly in a lump sum and partly as an “earn-out†--Commercial reasons for such transaction--No evasion of tax--Section 245R not applicable--Income-tax Act, 1961, s. 245R-- DIT (International Tax) v. Copal Research Ltd. (Delhi) . . . 114

Appeal to Commissioner (Appeals) --Powers--Construction of house property--Claim by assessee that construction took two to three years--Addition of amount of excess cost of construction under section 69--Commissioner (Appeals) justified in spreading the addition over two years--Income-tax Act, 1961-- CIT v. Shivlal (Mad) . . . 109

Appeal to High Court --Procedure--Cross-objections--No right to file cross-objection--Income-tax Act, 1961, s. 260A--Civil Procedure Code, 1908-- CICB-Chemicon P. Ltd. v. CIT(Karn) . . . 78

Business --Transactions in shares--Whether business transactions or investment--Concurrent finding that transaction in the nature of investment--Finding based on evidence and a possible view--Income-tax Act, 1961-- Joint CIT v. Bajranglal Chowdhury (Cal) . . . 17

Business expenditure --Capital or revenue expenditure--Expenditure on supply of demonstration equipment--Revenue expenditure--Income-tax Act, 1961, s. 37-- CIT v.Allergan India P. Ltd. (Karn) . . . 38

----Capital or revenue expenditure--State Government undertaking engaged in contract farming--Expenditure on development of land--Finding by Tribunal that land was fallow and expenses were incurred for business purposes--Expenditure deductible--Income-tax Act, 1961, s. 37-- CIT v. Punjab Agro Foodgrains Corporation (P&H) . . . 100

----Disallowance--Guest house--Depreciation--Rent and repairs--Expenditure on guest house disallowable--Income-tax Act, 1961, s. 37(4)-- CIT v. Kelvinator of India Ltd. (Delhi) . . . 51

Capital gains --Liability to tax--Sale of business--Finding that it was a slump sale--No liability to tax--Income-tax Act, 1961, s. 50-- CICB-Chemicon P. Ltd. v. CIT (Karn) . . . 78

Charitable purpose --Charitable trust--Registration--Condition precedent--Actual existence of institution for educational purpose--Institution need not comply with requirements in other provisos at the stage of registration--Profit element from activity--Not a ground to conclude that predominant object of activity of trust is to earn profit--Facts not properly analysed--Matter remanded to prescribed authority for consideration de novo--Income-tax Act, 1961, ss. 10(23C)(vi), 12AA-- Allahabad Young Men’s Christian Association v. Chief CIT (All) . . . 23

Depreciation --Condition precedent for allowance--Machinery should be owned by assessee and used for his business--Contract with firm for manufacture of articles--Machinery purchased and utilised in premises of firm--Finding by Tribunal that assessee owned machinery and used it for its business--Assessee entitled to depreciation--Income-tax Act, 1961, s. 32-- CIT v. Allergan India P. Ltd. (Karn) . . . 38

Exemption --Export--Export oriented undertaking--Condition precedent for exemption--Manufacture of article for export--Export of spare parts--No manufacturing activity--Profit from export of spare parts not entitled to exemption--Profits from sale of scrap--Scrap resulting from manufacturing activity--Profits from sale of scrap entitled to exemption--Income-tax Act, 1961, s. 10B-- GE BE P. Ltd. v. Asst. CIT (Karn) . . . 32

Income --Computation--Disallowance of expenditure on earning non-taxable income--Whether assessee furnished proper explanation as regards expenditure incurred for earning exempt income--Essentially question of fact--Concurrent finding that expenditure properly established--No disallowance could be made--Income-tax Act, 1961, s. 14A-- CIT v. Crish Park Vincom Ltd. (Cal) . . . 15

Industrial undertaking --Special deduction--Deeming provision--Power generation--Loss in year earlier to initial assessment year already absorbed against profit of other business--Not to be notionally brought forward and set off against profits in current year--Income-tax Act, 1961, s. 80-IA-- CIT v. Eastman Exports Global Clothing P. Ltd. (Mad) . . . 1

----Special deduction--Interest on fixed deposits, bank guarantees, deposits and miscellaneous receipts--Not entitled to deduction--Income-tax Act, 1961, s. 80-I-- CIT v.Kelvinator of India Ltd. (Delhi) . . . 51

----Special deduction--Interest received from customers due to late payment beyond credit period--Business income--Entitled to deduction--Income-tax Act, 1961, s. 80-I-- CIT v.Kelvinator of India Ltd. (Delhi) . . . 51

----Special deduction--LCD monitors--Description of information and communication technology devices--Assessing Officer without rejecting the accuracy of books of account or inspecting wages paid, electricity bills generated, nature of plant and machinery rejecting assessee’s claim to deduction--Rejection of claim merely on doubts and surmises--Assessee entitled to deduction--Income-tax Act, 1961, s. 80-IC-- CIT v. Tej Pal Singh Kohli(Delhi) . . . 11

Investment deposit account --Eligible business--Computation--Interest on debentures, loans and intercorporate deposits and dividend--To be taken into consideration--Income-tax Act, 1961, s. 32AB-- CIT v. Kelvinator of India Ltd. (Delhi) . . . 51

----Industrial undertaking--Eligible profits--Computation--Assessee having several units some eligible for deduction and others not--Deduction is on profits and not on aggregate of profits of all units--Income-tax Act, 1961, s. 32AB-- CIT v. Kelvinator of India Ltd. (Delhi) . . . 51

Non-resident --Income deemed to accrue or arise in India--Capital gains--Effect ofExplanation 5 to section 9(1)(i)--Sale in Mauritius of shares in Indian company to a foreign company--Value of shares derived only fractionally from assets in India--Capital gains not assessable in India--Income-tax Act, 1961, s. 9-- DIT (International Tax) v. Copal Research Ltd. (Delhi) . . . 114

Penalty --Concealment of income--Search and seizure--Voluntary disclosure--Assessee filing return but not disclosing amount surrendered voluntarily--Penalty leviable--Income-tax Act, 1961, s. 271(1)(c), Expln. 5A(a), (b) -- CIT v. Prasanna Dugar (Cal) . . . 19

Reassessment --Notice after four years--Conditions precedent--Satisfaction note not disclosing foundation of reasons to believe--Material not showing default by assessee to fully or truly disclose--Reopening on ground of excess claim of deduction--Mere change of opinion--Impermissible--Reassessment and consequential proceedings--Not valid--Income-tax Act, 1961, ss. 147, 148-- Donaldson India Filters Systems P. Ltd. v. Deputy CIT (Delhi) . . . 87

----Notice--Reason to believe--Tangible material--Original scrutiny assessment disallowing certain amounts including exemption under section 10(29) as well as certain categories of income and purchase--First reassessment set aside in appeal and order attaining finality--Second reassessment--Concurrent finding that material or explanation in respect of issues in second reassessment were part of original record--Second reassessment not valid--Income-tax Act, 1961, ss. 147, 148-- CIT v. Central Warehousing Corporation (Delhi) . . . 81

Search and seizure --Block assessment--Assessment of third person--Undisclosed income--Sale of gift articles to assessee by group companies reflected in their books of account--Not fictitious sales--Purchase of gift articles shown in assessee’s books and return and accepted by Assessing Officer for relevant assessment--Block assessment treating cost of gift articles as undisclosed income of assessee--Not valid--Income-tax Act, 1961, ss. 158BB, 158BD-- CIT v. Sunny Liquors P. Ltd. (T & AP) . . . 45

----Income-tax survey--Block assessment--No incriminating material found during search--Incriminating material found during income-tax survey but no evidence that it related to assessee--Amounts based on income-tax survey not includible in block assessment--Income-tax Act, 1961-- CIT v. Smt. Yashoda Shetty (Karn) . . . 75

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 9 --Non-resident--Income deemed to accrue or arise in India--Capital gains--Effect ofExplanation 5 to section 9(1)(i)--Sale in Mauritius of shares in Indian company to a foreign company--Value of shares derived only fractionally from assets in India--Capital gains not assessable in India-- DIT (International Tax) v. Copal Research Ltd. (Delhi) . . . 114

S. 10(23C)(vi) --Charitable purpose--Charitable trust--Registration--Condition precedent--Actual existence of institution for educational purpose--Institution need not comply with requirements in other provisos at the stage of registration--Profit element from activity--Not a ground to conclude that predominant object of activity of trust is to earn profit--Facts not properly analysed--Matter remanded to prescribed authority for consideration de novo--Allahabad Young Men’s Christian Association v. Chief CIT (All) . . . 23

S. 10B --Exemption--Export--Export oriented undertaking--Condition precedent for exemption--Manufacture of article for export--Export of spare parts--No manufacturing activity--Profit from export of spare parts not entitled to exemption--Profits from sale of scrap--Scrap resulting from manufacturing activity--Profits from sale of scrap entitled to exemption-- GE BE P. Ltd. v. Asst. CIT (Karn) . . . 32

S. 12AA --Charitable purpose--Charitable trust--Registration--Condition precedent--Actual existence of institution for educational purpose--Institution need not comply with requirements in other provisos at the stage of registration--Profit element from activity--Not a ground to conclude that predominant object of activity of trust is to earn profit--Facts not properly analysed--Matter remanded to prescribed authority for consideration de novo--Allahabad Young Men’s Christian Association v. Chief CIT (All) . . . 23

S. 14A --Income--Computation--Disallowance of expenditure on earning non-taxable income--Whether assessee furnished proper explanation as regards expenditure incurred for earning exempt income--Essentially question of fact--Concurrent finding that expenditure properly established--No disallowance could be made-- CIT v. Crish Park Vincom Ltd. (Cal) . . . 15

S. 32 --Depreciation--Condition precedent for allowance--Machinery should be owned by assessee and used for his business--Contract with firm for manufacture of articles--Machinery purchased and utilised in premises of firm--Finding by Tribunal that assessee owned machinery and used it for its business--Assessee entitled to depreciation-- CIT v.Allergan India P. Ltd. (Karn) . . . 38

S. 32AB --Investment deposit account--Eligible business--Computation--Interest on debentures, loans and intercorporate deposits and dividend--To be taken into consideration--CIT v. Kelvinator of India Ltd. (Delhi) . . . 51

----Investment deposit account--Industrial undertaking--Eligible profits--Computation--Assessee having several units some eligible for deduction and others not--Deduction is on profits and not on aggregate of profits of all units-- CIT v. Kelvinator of India Ltd. (Delhi) . . . 51

S. 37 --Business expenditure--Capital or revenue expenditure--Expenditure on supply of demonstration equipment--Revenue expenditure-- CIT v. Allergan India P. Ltd. (Karn) . . . 38

----Business expenditure--Capital or revenue expenditure--State Government undertaking engaged in contract farming--Expenditure on development of land--Finding by Tribunal that land was fallow and expenses were incurred for business purposes--Expenditure deductible-- CIT v. Punjab Agro Foodgrains Corporation (P&H) . . . 100

S. 37(4) --Business expenditure--Disallowance--Guest house--Depreciation--Rent and repairs--Expenditure on guest house disallowable-- CIT v. Kelvinator of India Ltd. (Delhi) . . . 51

S. 50 --Capital gains--Liability to tax--Sale of business--Finding that it was a slump sale--No liability to tax-- CICB-Chemicon P. Ltd. v. CIT (Karn) . . . 78

S. 80-I --Industrial undertaking--Special deduction--Interest on fixed deposits, bank guarantees, deposits and miscellaneous receipts--Not entitled to deduction-- CIT v.Kelvinator of India Ltd. (Delhi) . . . 51

----Industrial undertaking--Special deduction--Interest received from customers due to late payment beyond credit period--Business income--Entitled to deduction-- CIT v. Kelvinator of India Ltd. (Delhi) . . . 51

S. 80-IA --Industrial undertaking--Special deduction--Deeming provision--Power generation--Loss in year earlier to initial assessment year already absorbed against profit of other business--Not to be notionally brought forward and set off against profits in current year--CIT v. Eastman Exports Global Clothing P. Ltd. (Mad) . . . 1

S. 80-IC --Industrial undertaking--Special deduction--LCD monitors--Description of information and communication technology devices--Assessing Officer without rejecting the accuracy of books of account or inspecting wages paid, electricity bills generated, nature of plant and machinery rejecting assessee’s claim to deduction--Rejection of claim merely on doubts and surmises--Assessee entitled to deduction-- CIT v. Tej Pal Singh Kohli (Delhi) . . . 11

S. 147 --Reassessment--Notice after four years--Conditions precedent--Satisfaction note not disclosing foundation of reasons to believe--Material not showing default by assessee to fully or truly disclose--Reopening on ground of excess claim of deduction--Mere change of opinion--Impermissible--Reassessment and consequential proceedings--Not valid--Donaldson India Filters Systems P. Ltd. v. Deputy CIT (Delhi) . . . 87

----Reassessment--Notice--Reason to believe--Tangible material--Original scrutiny assessment disallowing certain amounts including exemption under section 10(29) as well as certain categories of income and purchase--First reassessment set aside in appeal and order attaining finality--Second reassessment--Concurrent finding that material or explanation in respect of issues in second reassessment were part of original record--Second reassessment not valid-- CIT v. Central Warehousing Corporation (Delhi) . . . 81

S. 148 --Reassessment--Notice after four years--Conditions precedent--Satisfaction note not disclosing foundation of reasons to believe--Material not showing default by assessee to fully or truly disclose--Reopening on ground of excess claim of deduction--Mere change of opinion--Impermissible--Reassessment and consequential proceedings--Not valid--Donaldson India Filters Systems P. Ltd. v. Deputy CIT (Delhi) . . . 87

----Reassessment--Notice--Reason to believe--Tangible material--Original scrutiny assessment disallowing certain amounts including exemption under section 10(29) as well as certain categories of income and purchase--First reassessment set aside in appeal and order attaining finality--Second reassessment--Concurrent finding that material or explanation in respect of issues in second reassessment were part of original record--Second reassessment not valid-- CIT v. Central Warehousing Corporation (Delhi) . . . 81

S. 158BB --Search and seizure--Block assessment--Assessment of third person--Undisclosed income--Sale of gift articles to assessee by group companies reflected in their books of account--Not fictitious sales--Purchase of gift articles shown in assessee’s books and return and accepted by Assessing Officer for relevant assessment--Block assessment treating cost of gift articles as undisclosed income of assessee--Not valid-- CITv. Sunny Liquors P. Ltd. (T & AP) . . . 45

S. 158BD --Search and seizure--Block assessment--Assessment of third person--Undisclosed income--Sale of gift articles to assessee by group companies reflected in their books of account--Not fictitious sales--Purchase of gift articles shown in assessee’s books and return and accepted by Assessing Officer for relevant assessment--Block assessment treating cost of gift articles as undisclosed income of assessee--Not valid-- CITv. Sunny Liquors P. Ltd. (T & AP) . . . 45

S. 245R --Advance ruling--Evasion of tax--Transaction of sale in Mauritius of shares of Indian company to a foreign company--Consideration to be paid partly in a lump sum and partly as an “earn-out†--Commercial reasons for such transaction--No evasion of tax--Section 245R not applicable-- DIT (International Tax) v. Copal Research Ltd. (Delhi) . . . 114

S. 260A --Appeal to High Court--Procedure--Cross-objections--No right to file cross-objection-- CICB-Chemicon P. Ltd. v. CIT (Karn) . . . 78

S. 271(1)(c), Expln. 5A(a), (b) --Penalty--Concealment of income--Search and seizure--Voluntary disclosure--Assessee filing return but not disclosing amount surrendered voluntarily--Penalty leviable-- CIT v. Prasanna Dugar (Cal) . . . 19