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Monday, October 26, 2015

ITR (TRIB) Volume 43 : Part 3 (Issue dated : 19-10-2015)

 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Business expenditure --Payments through credit card--No evidence to show that assessee incurred expenditure for non-business purposes--Payments made by cheque by companies in which assessee director--Department accepting expenditure of companies--Commissioner (Appeals) rightly restricting disallowance to 5 per cent. of credit card expenses--Income-tax Act, 1961-- ITO v . Kanwar Deep Anand 
(Delhi) . . . 115

Capital gains --Exemption--Assessee purchasing land and putting up construction within three years--Facts showing capital gains received by assessee duly invested in purchase of land and construction of residential house--Assessee entitled to exemption--Income-tax Act, 1961, s. 54F-- ITO v . Kanwar Deep Anand 
(Delhi) . . . 115

Depreciation --Rate of depreciation--Assessee carrying on business of oil and gas exploration in drilling wells using rigs--Work-over rigs falling under category of heavy goods vehicle drilling rigs--Entitled to higher rate of depreciation at 40 per cent.--Income-tax Act, 1961, s. 32-- John Energy Ltd. v . Deputy CIT (Ahd) . . . 127

Income --Disallowance of expenditure in relation to income not forming part of total income--Share transactions--Purchase and sale of shares through bank account--Payment of securities transaction tax by cheque--Confirmation of transaction by ledger accounts--Disallowance by Assessing Officer not justified--Income-tax Act, 1961-- ITO v . Kanwar Deep Anand (Delhi) . . . 115

 

PRINT EDITION

Volume 43 : Part 3 (Issue dated : 19-10-2015)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Advance tax --Interest--Computation of interest--Interest under section 234C to be computed taking date of presentation of cheque as date of payment of tax not date of realisation of cheque--Income-tax Act, 1961, s. 234C-- Sandip Bhagat v . Asst. CIT 
(Delhi) . . . 270

Business expenditure --Amortisation of preliminary expenses--Deduction admissible in connection with issue for public subscription of shares or debentures of a company--Assessee increasing share capital by way of private placement with holding company--Deduction under section 35D not allowable--Income-tax Act, 1961, s. 35D-- Aditya Birla Finance Ltd. v. Asst. CIT (OSD) (Mumbai) . . . 373

----Deduction only on actual payment--Provision for leave encashment--Commissioner (Appeals) deleting disallowance holding that provision made on actuarial estimation--Matter remanded for fresh examination--Income-tax Act, 1961, s. 43B(f)-- Aditya Birla Finance Ltd. v. Asst. CIT (OSD) (Mumbai) . . . 373

----Disallowance--Payments liable to deduction of tax at source--Assessee depositing tax deducted at source in Government account before filing return of income--No disallowance can be made under section 40(a)(ia)--Income-tax Act, 1961, s. 40(a)(ia)-- Pushkar Construction Co. v. ITO (Ahd) . . . 293

----Disallowance--Payments liable to deduction of tax at source--Commission payments to non-residents--Deduction of tax at source only where income chargeable under provisions of 1961 Act to tax--No material on record to establish that non-resident agents carried out any part of their business in India--No findings that payments made to non-residents chargeable to tax under Act--Section 195 not applicable--No disallowance can be made--Income-tax Act, 1961, ss. 40(a)(i), 195-- Euroflex Transmissions (India) P. Ltd. v. Asst. CIT(Hyd) . . . 348

----Disallowance--Payments liable to deduction of tax at source--Failure by authorities to find whether payee included payment received from assessee as its income and paid tax on it--Matter remanded for re-examination--Income-tax Act, 1961, s. 40(a)(ia)-- Pushkar Construction Co. v. ITO (Ahd) . . . 293

----Interest on borrowed capital--Finding that unsecured loan fully covered by interest-free funds available with assessee--Failure by Department to controvert findings--Deletion of addition proper--Income-tax Act, 1961-- Asst. CIT v. Ruksh International (Lucknow) . . . 326

Business loss --Financial irregularities committed by employees in earlier years detected during previous year--Resulting in loss--Not a prior period expense--Expenditure allowable in current assessment year--Income-tax Act, 1961-- Asst. CIT v. Boots Piramal Health Care Ltd. (Mumbai) . . . 355

Capital or revenue expenditure --Expenditure incurred for purchase of licence for Windows application software--Revenue expenditure--Income-tax Act, 1961-- Asst. CIT v. Boots Piramal Health Care Ltd. (Mumbai) . . . 355

----Expenditure incurred on construction in leasehold premises--Applying test of Explanation 1 to section 32(1)--Expenditure capital in nature--Income-tax Act, 1961, s. 32, Expln. 1 --Continental Enterprise v. ITO (Chennai) . . . 260

----Expenditure incurred on repair and maintenance--No new assets--Revenue expenditure--Income-tax Act, 1961-- Asst. CIT v. Boots Piramal Health Care Ltd. 
(Mumbai) . . . 355

----Foreign exchange fluctuation loss--Revenue expenditure--Income-tax Act, 1961-- Asst. CIT v. Boots Piramal Health Care Ltd. (Mumbai) . . . 355

Charitable purpose --Application of income--Consideration from transfer of capital asset of trust for charitable purpose utilised for acquiring another capital asset--Capital gains arising from transfer deemed to be applied to charitable purposes--No condition that capital asset to be held till end of financial year--Income-tax Act, 1961, s. 11(1A)-- South Point Education Society v. ITO (Exemption)-II (Kolkata) . . . 287

----Special deduction--Application for approval under section 80G--Failure by Commissioner to examine whether or not expenditure on religious purpose incurred by assessee exceeded 5 per cent. as prescribed under section 80G(5B)--Matter remanded for fresh examination--Income-tax Act, 1961, s. 80G(5B)-- International Pentecostal Church of God v. ITO(Chennai) . . . 332

Charitable trust --Depreciation--Cost of assets allowed as application of income for charitable purpose--Depreciation on assets to be allowed--Income-tax Act, 1961, s. 12A--ITO (E) v. Our Lady of Milagres Church (Bang) . . . 380

Co-operative society --Special deduction--Disqualification applicable only to co-operative banks--Assessee entitled to deduction--Income-tax Act, 1961, s. 80P(2)(a)(i)-- ITO v. Jamkhandi Taluka School Teachers Co-operative Credit Society Ltd. 
(Bang) . . . 365

Deduction of tax at source --Assessee obtaining certificate of no deduction from Assessing Officer--Not required to deduct tax at source for reimbursement--Assessee deducting tax at source wherever required--Disallowance of expenditure not proper--Income-tax Act, 1961--Asst. CIT v. Boots Piramal Health Care Ltd. 
(Mumbai) . . . 355

Depreciation --Additional depreciation on reconditioned imported machinery--Assessee reconditioning machine with substantial percentage of new parts--Such machine to be treated as new machine--Depreciation allowable--Income-tax Act, 1961-- Asst. CIT v. Ruksh International (Lucknow) . . . 326

----Assessing Officer disallowing depreciation on drum and paddle on basis of purchase date--Material date is date of installation and not date of acquisition--Installation of material in previous year--Depreciation allowable--Income-tax Act, 1961-- Asst. CIT v. Ruksh International (Lucknow) . . . 326

----Goodwill--Is an asset--Assessee entitled to depreciation on goodwill--Income-tax Act, 1961, s. 32(1)(ii)-- PPG Asian Paints P. Ltd. v. Asst. CIT (LTU) 
(Mumbai) . . . 307

----Plant and machinery--Effluent plant--Cost of construction of tank forming integral part of effluent treatment plant--Depreciation allowable at rate applicable for plant and machinery--Chrome recovery plant--Depreciation allowable at 50 per cent., since plant used for less than 180 days--Income-tax Act, 1961--Income-tax Rules, 1962, r. 5-- Asst. CIT v. Ruksh International (Lucknow) . . . 326

Exemption --Charitable purpose--Educational institution--Application for renewal of exemption under section 10(23C)(vi) rejected by competent authority and matter pending before High Court--Assessee seeking income to be considered under section 11--Ground raised by assessee not maintainable--Income-tax Act, 1961, s. 10(23C)(vi)-- South Point Education Society v. ITO (Exemption)-II (Kolkata) . . . 287

Housing project --Special deduction--Assessee selling four flats each less than 1500 sq.ft. to different purchasers--Owners combining four flats into two resulting in excess in area of 1500 sq.ft.--Deduction under section 80-IB(10) cannot be denied on ground that assessee selling flat in excess of 1500 sq.ft.--Income-tax Act, 1961, s. 80-IB(10)-- Pushkar Construction Co. v. ITO (Ahd) . . . 293

----Special deduction--Condition precedent--Agreement to construct three blocks in single project--Section 80-IB(10) not specifying size or number of housing project undertaken on a plot having minimum area of one acre--Assessee fulfilling all conditions stipulated under section 80-IB(10)--Deduction cannot be denied on ground that area of project less than one acre--Assessee entitled to deduction--Income-tax Act, 1961, s. 80-IB(10)-- Pushkar Construction Co. v. ITO (Ahd) . . . 293

----Special deduction--Condition precedent--Assessee completing only three blocks out of six blocks within stipulated period of five years--Assessee eligible to claim deduction--Assessing Officer to determine whether deduction claimed for entire project or only for completed blocks--Matter remanded to decide quantum of deduction--Income-tax Act, 1961, s. 80-IB(10)-- Vertex Homes P. Ltd. v. Deputy CIT (Hyd) . . . 340

Income --Accrual of income--Advances received by actor--Income not crystallised to assessee--Advances not assessable as income--Addition to be deleted--Income-tax Act, 1961-- R. S. Suriya v. Asst. CIT (Chennai) . . . 309

----Disallowance of expenditure relating to exempt income--Rule 8D not applicable prior to 2008-09--Disallowance under rule 8D can be invoked if Assessing Officer not satisfied with correctness of claim made by assessee in respect of expenditure--Matter remanded to Assessing Officer to examine suo motu disallowance by assessee--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Aditya Birla Finance Ltd. v. Asst. CIT (OSD) (Mumbai) . . . 373

Penalty --Business expenditure--Payments to Employees’ Provident Fund and Employees’ State Insurance after due date but before due date for furnishing return of income--Allowable--Penalty cannot be imposed--Income-tax Act, 1961, ss. 36(1)(va), 139(1), 43B, 271(1)(c)-- Tristar Intech P. Ltd. v. Asst. CIT (Delhi) . . . 279

----Concealment of income and furnishing of inaccurate particulars of income--Distinction--Assessee discharging onus by accepting mistakes and rectifying them in revised return--Bona fide error by assessee--Mere disallowances not conclusive evidence of concealment--Not fit case for levy of penalty--Income-tax Act, 1961, s. 271(1)(c)-- Tristar Intech P. Ltd. v. Asst. CIT (Delhi) . . . 279

Rectification of mistakes --Issues which require detailed examination and analysis cannot be rectified--Commissioner (Appeals) holding assessee entitled to exemption--Assessing Officer has no power to restore original assessment order in guise of modification under section 154--Income-tax Act, 1961, ss. 11, 12A, 13, 154-- Deputy DIT (Exemptions)-II v. Shadan Educational Society (Hyd) . . . 318

Special deduction --Deduction in respect of interest on loan taken for higher education--Son of assessee pursuing higher education in United States of America--No stipulation under section 80E that education should be in India--Assessee entitled to deduction--Income-tax Act, 1961, s. 80E-- Nitin Shantilal Muthiyan v. Deputy CIT 
(Pune) . . . 335

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961

S. 10(23C)(vi) --Exemption--Charitable purpose--Educational institution--Application for renewal of exemption under section 10(23C)(vi) rejected by competent authority and matter pending before High Court--Assessee seeking income to be considered under section 11--Ground raised by assessee not maintainable-- South Point Education Society v. ITO (Exemption)-II (Kolkata) . . . 287

S. 11 --Rectification of mistakes--Issues which require detailed examination and analysis cannot be rectified--Commissioner (Appeals) holding assessee entitled to exemption--Assessing Officer has no power to restore original assessment order in guise of modification under section 154-- Deputy DIT (Exemptions)-II v. Shadan Educational Society(Hyd) . . . 318

S. 11(1A) --Charitable purpose--Application of income--Consideration from transfer of capital asset of trust for charitable purpose utilised for acquiring another capital asset--Capital gains arising from transfer deemed to be applied to charitable purposes--No condition that capital asset to be held till end of financial year-- South Point Education Society v. ITO (Exemption)-II (Kolkata) . . . 287

S. 12A --Charitable trust--Depreciation--Cost of assets allowed as application of income for charitable purpose--Depreciation on assets to be allowed-- ITO (E) v. Our Lady of Milagres Church (Bang) . . . 380

----Rectification of mistakes--Issues which require detailed examination and analysis cannot be rectified--Commissioner (Appeals) holding assessee entitled to exemption--Assessing Officer has no power to restore original assessment order in guise of modification under section 154-- Deputy DIT (Exemptions)-II v. Shadan Educational Society (Hyd) . . . 318

S. 13 --Rectification of mistakes--Issues which require detailed examination and analysis cannot be rectified--Commissioner (Appeals) holding assessee entitled to exemption--Assessing Officer has no power to restore original assessment order in guise of modification under section 154-- Deputy DIT (Exemptions)-II v. Shadan Educational Society(Hyd) . . . 318

S. 14A --Income--Disallowance of expenditure relating to exempt income--Rule 8D not applicable prior to 2008-09--Disallowance under rule 8D can be invoked if Assessing Officer not satisfied with correctness of claim made by assessee in respect of expenditure--Matter remanded to Assessing Officer to examine suo motu disallowance by assessee-- Aditya Birla Finance Ltd. v. Asst. CIT (OSD) (Mumbai) . . . 373

S. 32, Expln. 1 --Capital or revenue expenditure--Expenditure incurred on construction in leasehold premises--Applying test of Explanation 1 to section 32(1)--Expenditure capital in nature-- Continental Enterprise v. ITO (Chennai) . . . 260

S. 32(1)(ii) --Depreciation--Goodwill--Is an asset--Assessee entitled to depreciation on goodwill-- PPG Asian Paints P. Ltd. v. Asst. CIT (LTU) (Mumbai) . . . 307

S. 35D --Business expenditure--Amortisation of preliminary expenses--Deduction admissible in connection with issue for public subscription of shares or debentures of a company--Assessee increasing share capital by way of private placement with holding company--Deduction under section 35D not allowable-- Aditya Birla Finance Ltd. v. Asst. CIT (OSD)(Mumbai) . . . 373

S. 36(1)(va) --Penalty--Business expenditure--Payments to Employees’ Provident Fund and Employees’ State Insurance after due date but before due date for furnishing return of income--Allowable--Penalty cannot be imposed-- Tristar Intech P. Ltd. v. Asst. CIT (Delhi) . . . 279

S. 40(a)(i) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Commission payments to non-residents--Deduction of tax at source only where income chargeable under provisions of 1961 Act to tax--No material on record to establish that non-resident agents carried out any part of their business in India--No findings that payments made to non-residents chargeable to tax under Act--Section 195 not applicable--No disallowance can be made-- Euroflex Transmissions (India) P. Ltd. v. Asst. CIT (Hyd) . . . 348

S. 40(a)(ia) --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Assessee depositing tax deducted at source in Government account before filing return of income--No disallowance can be made under section 40(a)(ia)-- Pushkar Construction Co. v. ITO (Ahd) . . . 293

----Business expenditure--Disallowance--Payments liable to deduction of tax at source--Failure by authorities to find whether payee included payment received from assessee as its income and paid tax on it--Matter remanded for re-examination-- Pushkar Construction Co. v. ITO (Ahd) . . . 293

S. 43B --Penalty--Business expenditure--Payments to Employees’ Provident Fund and Employees’ State Insurance after due date but before due date for furnishing return of income--Allowable--Penalty cannot be imposed-- Tristar Intech P. Ltd. v. Asst. CIT (Delhi) . . . 279

S. 43B(f) --Business expenditure--Deduction only on actual payment--Provision for leave encashment--Commissioner (Appeals) deleting disallowance holding that provision made on actuarial estimation--Matter remanded for fresh examination-- Aditya Birla Finance Ltd. v. Asst. CIT (OSD) (Mumbai) . . . 373

S. 80E --Special deduction--Deduction in respect of interest on loan taken for higher education--Son of assessee pursuing higher education in United States of America--No stipulation under section 80E that education should be in India--Assessee entitled to deduction-- Nitin Shantilal Muthiyan v. Deputy CIT (Pune) . . . 335

S. 80G(5B) --Charitable purpose--Special deduction--Application for approval under section 80G--Failure by Commissioner to examine whether or not expenditure on religious purpose incurred by assessee exceeded 5 per cent. as prescribed under section 80G(5B)--Matter remanded for fresh examination-- International Pentecostal Church of God v. ITO (Chennai) . . . 332

S. 80-IB(10) --Housing project--Special deduction--Assessee selling four flats each less than 1500 sq.ft. to different purchasers--Owners combining four flats into two resulting in excess in area of 1500 sq.ft.--Deduction under section 80-IB(10) cannot be denied on ground that assessee selling flat in excess of 1500 sq.ft.-- Pushkar Construction Co. v. ITO (Ahd) . . . 293

----Housing project--Special deduction--Condition precedent--Agreement to construct three blocks in single project--Section 80-IB(10) not specifying size or number of housing project undertaken on a plot having minimum area of one acre--Assessee fulfilling all conditions stipulated under section 80-IB(10)--Deduction cannot be denied on ground that area of project less than one acre--Assessee entitled to deduction-- Pushkar Construction Co. v. ITO (Ahd) . . . 293

----Housing project--Special deduction--Condition precedent--Assessee completing only three blocks out of six blocks within stipulated period of five years--Assessee eligible to claim deduction--Assessing Officer to determine whether deduction claimed for entire project or only for completed blocks--Matter remanded to decide quantum of deduction-- Vertex Homes P. Ltd. v. Deputy CIT (Hyd) . . . 340

S. 80P(2)(a)(i) --Co-operative society--Special deduction--Disqualification applicable only to co-operative banks--Assessee entitled to deduction-- ITO v. Jamkhandi Taluka School Teachers Co-operative Credit Society Ltd. (Bang) . . . 365

S. 139(1) --Penalty--Business expenditure--Payments to Employees’ Provident Fund and Employees’ State Insurance after due date but before due date for furnishing return of income--Allowable--Penalty cannot be imposed-- Tristar Intech P. Ltd. v. Asst. CIT (Delhi) . . . 279

S. 154 --Rectification of mistakes--Issues which require detailed examination and analysis cannot be rectified--Commissioner (Appeals) holding assessee entitled to exemption--Assessing Officer has no power to restore original assessment order in guise of modification under section 154-- Deputy DIT (Exemptions)-II v. Shadan Educational Society(Hyd) . . . 318

S. 195 --Business expenditure--Disallowance--Payments liable to deduction of tax at source--Commission payments to non-residents--Deduction of tax at source only where income chargeable under provisions of 1961 Act to tax--No material on record to establish that non-resident agents carried out any part of their business in India--No findings that payments made to non-residents chargeable to tax under Act--Section 195 not applicable--No disallowance can be made-- Euroflex Transmissions (India) P. Ltd. v. Asst. CIT (Hyd) . . . 348

S. 234C --Advance tax--Interest--Computation of interest--Interest under section 234C to be computed taking date of presentation of cheque as date of payment of tax not date of realisation of cheque-- Sandip Bhagat v . Asst. CIT (Delhi) . . . 270

S. 271(1)(c) --Penalty--Business expenditure--Payments to Employees’ Provident Fund and Employees’ State Insurance after due date but before due date for furnishing return of income--Allowable--Penalty cannot be imposed-- Tristar Intech P. Ltd. v. Asst. CIT (Delhi) . . . 279

----Penalty--Concealment of income and furnishing of inaccurate particulars of income--Distinction--Assessee discharging onus by accepting mistakes and rectifying them in revised return--Bona fide error by assessee--Mere disallowances not conclusive evidence of concealment--Not fit case for levy of penalty-- Tristar Intech P. Ltd. v. Asst. CIT (Delhi) . . . 279

Income-tax Rules, 1962

R. 5 --Depreciation--Plant and machinery--Effluent plant--Cost of construction of tank forming integral part of effluent treatment plant--Depreciation allowable at rate applicable for plant and machinery--Chrome recovery plant--Depreciation allowable at 50 per cent., since plant used for less than 180 days-- Asst. CIT v. Ruksh International (Lucknow) . . . 326

R. 8D --Income--Disallowance of expenditure relating to exempt income--Rule 8D not applicable prior to 2008-09--Disallowance under rule 8D can be invoked if Assessing Officer not satisfied with correctness of claim made by assessee in respect of expenditure-- Matter remanded to Assessing Officer to examine suo motu disallowance by assessee-- Aditya Birla Finance Ltd. v. Asst. CIT (OSD) (Mumbai) . . . 373

 

__._,_.___

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

Friday, October 23, 2015

How To Avoid Skulduggery In Appointment Of Judges + Four Imp Verdicts On Core Issues

 

Dear Subscriber,

Good Riddance To The Judges Appointment Act But How To Prevent Skulduggery In Appointment Of Judges?

The author, an eminent senior advocate, compliments the Supreme Court for having struck down the National Judicial Appointments Commission Act. He warns that the Act would have, if upheld, grossly undermined judicial independence. He, however, candidly concedes that the existing Collegium system of appointment of Judges has several deficiencies and that it has enabled undeserving candidates to be elevated to high judicial positions. He has identified those deficiencies and offered suggestions on how they can be resolved


Mangalore Ganesh Beedi Works vs. CIT (Supreme Court)

S. 32: Even prior to the insertion of "intangible assets" in s. 32, intellectual property rights such as trademarks, copyrights and know-how constitute "plant" for purposes of depreciation. The department is not entitled to rewrite the terms of a commercial agreement

The question is, would intellectual property such as trademarks, copyrights and know-how come within the definition of 'plant' in the 'sense which people conversant with the subject-matter with which the statute is dealing, would attribute to it'? In our opinion, this must be answered in the affirmative for the reason that there can be no doubt that for the purposes of a large business, control over intellectual property rights such as brand name, trademark etc. are absolutely necessary. Moreover, the acquisition of such rights and know-how is acquisition of a capital nature, more particularly in the case of the Assessee. Therefore, it cannot be doubted that so far as the Assessee is concerned, the trademarks, copyrights and know-how acquired by it would come within the definition of 'plant' being commercially necessary and essential as understood by those dealing with direct taxes


Pr. CIT vs. G & G Pharma India Ltd (Delhi High Court)

S. 147: Reopening only on the basis of information received that the assessee has introduced unaccounted money in the form of accommodation entries without showing in what manner the AO applied independent mind to the information renders the reopening void

Without forming a prima facie opinion, on the basis of such material, it was not possible for the AO to have simply concluded: "it is evident that the assessee company has introduced its own unaccounted money in its bank by way of accommodation entries". In the considered view of the Court, in light of the law explained with sufficient clarity by the Supreme Court in the decisions discussed hereinbefore, the basic requirement that the AO must apply his mind to the materials in order to have reasons to believe that the income of the Assessee escaped assessment is missing in the present case


Thomson Press (India) Ltd vs. CIT (Delhi High Court)

S. 263: Claim that notional interest on funds placed by the s. 10A eligible unit with the H.O. is allowable as a deduction to the H.O. and is exempt in the hands of the s. 10A unit is an "unsustainable view" justifying revision action

The Assessee has not derived any interest income. Therefore, reducing such notional income – which has neither been accrued nor received – from the Assessee's total income is completely alien to the scheme of the Act. Such notional interest could never form a part of the Assessee's income and thus the Assessee's claim that the same is to be excluded under Section 10A of the Act is flawed and wholly unsustainable in law. The view as canvassed on behalf of the Assessee is not, even remotely, plausible


Alabra Shipping Pte Ltd vs. ITO (ITAT Rajkot)

Law on applicability of Article 24 of the India-Singapore DTAA (Limitation of Benefits) to a case where the income is not remitted to, or received in Singapore, explained

The benefit of treaty protection is restricted to the amount of income which is eventually subject matter of taxation in the source country. This is all the more relevant for the reason that in a situation in which territorial method of taxation is followed by a tax jurisdiction and the taxability for income from activities carried out outside the home jurisdiction is restricted to the income repatriated to such tax jurisdiction, as in the case of Singapore, the treaty protection must remain confined to the amount which is actually subjected to tax. Any other approach could result in a situation in which an income, which is not subject matter of taxation in the residence jurisdiction, will anyway be available for treaty protection in the source country


Regards,

 

Editor,

 

itatonline.org

---------------------

Latest:

Former Supreme Court Judge Levels Serious Allegation Of Corruption Against Chief Justice Of India


Fwd: Link of Rachnatmak Sankalp

---------- Forwarded message ----------
From: "sankalp patrika" <sankalppatrika@yahoo.com>
Date: Oct 22, 2015 12:30 PM
Subject: Link of Rachnatmak Sankalp
To:
Cc:

"इंस्टीट्यूट ऑफ चार्टर्ड एकाउंटेंट्स की चुनावी राजनीति में अहमदाबाद में पराग रावल, पुरुषोत्तम खंडेलवाल व अनिकेत तलति के बीच बने गठजोड़ में सुबोध केडिया के लिए उम्मीद पुरुषोत्तम खंडेलवाल के अपने निजी 'एजेंडे' में छिपी है क्या ?" शीर्षक रिपोर्ट पढ़ने के लिए Please click the Link :

Fwd: Presentation on TDS


---------- Forwarded message ----------
From: Hegde, N. C. (IN - Mumbai) <nhegde@deloitte.com>
Date: Fri, Oct 16, 2015 at 2:54 PM
Subject: Presentation on TDS
To:


Dear Professional Colleagues,

 

Please find a presentation on TDS that may be useful for you.

 

Click here for PPT. https://drive.google.com/file/d/0B8GyRsbVIg8gSmgwaGxTdWpEcXZBaFhqdzNEU09HczF6cFdB/view?usp=sharing


Best regards

 

CA N.C.Hegde

This message (including any attachments) contains confidential information intended for a specific individual and purpose, and is protected by law. If you are not the intended recipient, you should delete this message and are hereby notified that any disclosure, copying, or distribution of this message, or the taking of any action based on it, is strictly prohibited. When addressed to our clients any opinions or advice contained in this email are subject to the terms and conditions expressed in the governing client engagement letter.


Monday, October 12, 2015

ITR Volume 377 : Part 5 (Issue dated : 12-10-2015)



 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Return --Revised return--When can be filed--Amount shown in original return as income from sales of property--Sales not materialising--Revised return showing nil income from transactions--Valid--Income-tax Act, 1961, s. 139-- CIT v. Lok Housing and Constructions Ltd. (Bom) . . . 235

Scientific research --Expenditure on scientific research--Effect of section 35--Expenditure must be approved by prescribed authority--Decision of prescribed authority is final--Assessing Officer and Dispute Resolution Panel cannot overrule such decisions--Income-tax Act, 1961, s. 35(2AB), (3), 43(4)-- Tejas Networks Ltd. v. Deputy CIT (Karn) . . . 240

Search and seizure --Block assessment--Meaning of undisclosed income in section 158B--Income disclosed under Voluntary Disclosure Scheme and in a return three years prior to search--Amount cannot be as undisclosed income in block assessment proceedings--Income-tax Act, 1961, s. 158B-- CIT v. H. M. Exports (Karn) . . . 228

Writ --Existence of alternate remedy not an absolute bar for issue of writ--Constitution of India, art. 226-- Tejas Networks Ltd. v. Deputy CIT (Karn) . . . 240

 

PRINT EDITION

ITR Volume 377 : Part 5 (Issue dated : 12-10-2015)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

HIGH COURTS

Advance tax --Interest payable by assessee--Waiver of interest--Powers of Chief Commissioner--Levy of interest confirmed by Tribunal--Case of assessee not covered by notification dated 26-6-2006--Chief Commissioner could not waive interest--Income-tax Act, 1961, ss. 119, 234C--Notification dated 26-6-2006-- Fertilizers and Chemicals Travancore Ltd. v. Deputy CIT (Ker) . . . 591

Appeal to Appellate Tribunal --Revision--Powers of Tribunal --Valid order of revision--Tribunal has no power to reappraise material and set aside order--Income-tax Act, 1961, ss. 254, 263-- CIT v. Varanasi Khanta Rao, Prop. Sri Sai Srinivasa Modern Rice Mill (T & AP) . . . 602

Appeal to High Court --Duty of Tribunal--Duty to follow direction of High Court--Income-tax Act, 1961, s. 254-- Dr. Nassar Yusuf v. CIT (Ker) . . . 595

Business expenditure --Disallowance--Disallowance of expenditure on ground that tax has not been deducted at source on payment--Effect of insertion of second proviso to section 40(a)(ia)--Payee filing income-tax return and offering sum received for taxation--Disallowance of sum not justified--Income-tax Act, 1961, ss. 40(a)(ia), 201(1)-- CIT v. Ansal Land Mark Township P. Ltd. (Delhi) . . . 635

----Disallowance--Payments otherwise than by account payee cheque or account payee bank draft--Assessment on basis of estimate--Disallowance cannot be made under section 40A(3)--Income-tax Act, 1961, s. 40A(3)-- CIT v. Amman Steel and Allied Industries (Mad) . . . 568

Cash credits --Burden of proof--Share application money--Assessee must prove creditworthiness of applicants and genuineness of transactions--No such proof--Addition of amount in income of assessee--Justified--Income-tax Act, 1961, s. 68-- Riddhi Promoters P. Ltd. v. CIT (Delhi) . . . 641

Charitable purposes --Charitable trust--Exemption--Conditions precedent--Income of trust should be spent on objects enumerated in trust deed--Object of trust improvement of Ayurvedic system and allowing for help from allopathic system--Income from allopathic system much higher than that from Ayurvedic system--Not material--Trust granted exemption for several years--No new facts in assessment year 2006-07--Denial of exemption for assessment year 2006-07--Not valid--Income-tax Act, 1961, s. 11-- Mool Chand Khairati Ram Trust v. DIT (Exemptions) (Delhi) . . . 650

Exemption --Educational institution--Conditions precedent for exemption--Actual existence of educational institution--Approval of prescribed authority--Question of application of funds not to be considered at stage of approval--Income-tax Act, 1961, s. 10(23C)-- American School of Bombay Education Trust v. Union of India (Delhi) . . . 645

High Court --Meaning of “obiter dicta†--Observations made in disposing of case cannot be considered to be “obiter dicta†-- Dr. Nassar Yusuf v. CIT (Ker) . . . 595

Income from house property --Business--Business income or income from house property--Firm engaged in export business--Construction of godowns for its business--Godowns let out when not required by assessee--No amenities provided to lessees--Rent from godowns assessable as income from property--Income-tax Act, 1961, ss. 22, 28-- CIT v. Sileman Khan Mahaboob Khan (T & AP) . . . 613

Income from undisclosed sources --Enquiry by excise authorities cannot be sole basis for estimation of income--Order of Commissioner of Excise after remand--Estimate based on such order--Justified--Income-tax Act, 1961-- CIT v. Amman Steel and Allied Industries(Mad) . . . 568

----Income-tax survey of hospital disclosing payments in cash to doctors--Statement on oath by employees of hospital confirming payments--High Court holding in assessment of hospital that its accounts were unreliable--Additions of amounts in hands of doctors--Justified--Income-tax Act, 1961-- Dr. Nassar Yusuf v. CIT (Ker) . . . 595

Income-tax --General principles--Exemption granted for several years--No new facts--Denial of exemption in subsequent year--Not justified-- Mool Chand Khairati Ram Trust v. DIT (Exemptions) (Delhi) . . . 650

Industrial undertaking --Special deduction under section 80-IA--Computation of special deduction--Losses and other deductions set off against income of previous year cannot be taken into consideration--Income-tax Act, 1961, s. 80-IA-- CIT v. Kongoor Textile Process(Mad) . . . 559

International transactions --Arm’s length price--Determination--General principles applicable--Comparison of international transaction with uncontrolled transaction under rule 10B--Wide range of services in information technology enabled services--Knowledge process outsourcing could not be compared to call centres--Income-tax Act, 1961, Chap. X--Rampgreen Solutions P. Ltd. v. CIT (Delhi) . . . 533

Precedent --Effect of decision of Supreme Court in American Hotel and Lodging Association Educational Institute v. CBDT [2008] 301 ITR 86 and decision of Delhi High Court inDigember Jain Society for Child Welfare v. DGIT (Exemptions) [2010] 329 ITR 459 (Delhi)--American School of Bombay Education Trust v. Union of India (Delhi) . . . 645

----Effect of decision of Supreme Court in Liberty India v. CIT [2009] 317 ITR 218-- CIT v.Kongoor Textile Process (Mad) . . . 559

Reassessment --Notice--Validity--Notice based solely on opinion of audit party--Not valid--Income-tax Act, 1961, ss. 147, 148-- Shree Ram Builders v. Asst. CIT (OSD) (Guj) . . . 631

----Validity--Reason for notice not furnished to assessee--Reassessment based on statement of third party--Assessee not given opportunity to be heard--Reassessment not valid--Income-tax Act, 1961, s. 147-- Kothari Metals v. ITO (Karn) . . . 581

Recovery of tax --Garnishee proceedings--Writ petition by person who was not the legal owner of assets in question--Not maintainable--Income-tax Act, 1961, s. 226(3)-- TRO v.Bhishma Pithamaha (Karn) . . . 584

----State reorganisation--Company carrying on business on behalf of Telangana State incorporated on 30-5-2014--Assets and properties of Andhra Pradesh Beverages Corporation not taken over by company--Not a successor in interest to Corporation--Tax dues of Andhra Pradesh Beverages Corporation for assessment year 2012-13 could not be recovered from company--Company was not an assessee in default nor a garnishee--Andhra Pradesh Reorganisation Act, 2014, ss. 53, 68--Income-tax Act, 1961, s. 226(3)--Telangana State Beverage Corporation Ltd. v. Union of India (T & AP) . . . 622

Revision --Condition precedent--Order of Assessing Officer erroneous and prejudicial to the Revenue--Commissioner discovering errors and passing order of revision after hearing assessee--Order valid--Income-tax Act, 1961, s. 263-- CIT v. Varanasi Khanta Rao, Prop. Sri Sai Srinivasa Modern Rice Mill (T & AP) . . . 602

Writ --Writ petition by person who was not legal owner of assets in question--Not maintainable--Constitution of India, art. 226-- TRO v. Bhishma Pithamaha (Karn) . . . 584

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Andhra Pradesh Reorganisation Act, 2014 :

S. 53 --Recovery of tax--State reorganisation--Company carrying on business on behalf of Telangana State incorporated on 30-5-2014 --Assets and properties of Andhra Pradesh Beverages Corporation not taken over by company--Not a successor in interest to Corporation--Tax dues of Andhra Pradesh Beverages Corporation for assessment year 2012-13 could not be recovered from company--Company was not an assessee in default nor a garnishee-- Telangana State Beverage Corporation Ltd. v. Union of India (T & AP) . . . 622

S. 68 --Recovery of tax--State reorganisation--Company carrying on business on behalf of Telangana State incorporated on 30-5-2014 --Assets and properties of Andhra Pradesh Beverages Corporation not taken over by company--Not a successor in interest to Corporation--Tax dues of Andhra Pradesh Beverages Corporation for assessment year 2012-13 could not be recovered from company--Company was not an assessee in default nor a garnishee-- Telangana State Beverage Corporation Ltd. v. Union of India (T & AP) . . . 622

Constitution of India :

Art. 226 --Writ--Writ petition by person who was not legal owner of assets in question--Not maintainable-- TRO v. Bhishma Pithamaha (Karn) . . . 584

Income-tax Act, 1961 :

S. 10(23C) --Exemption--Educational institution--Conditions precedent for exemption--Actual existence of educational institution--Approval of prescribed authority--Question of application of funds not to be considered at stage of approval-- American School of Bombay Education Trust v. Union of India (Delhi) . . . 645

S. 11 --Charitable purposes--Charitable trust--Exemption--Conditions precedent--Income of trust should be spent on objects enumerated in trust deed--Object of trust improvement of Ayurvedic system and allowing for help from allopathic system--Income from allopathic system much higher than that from Ayurvedic system--Not material--Trust granted exemption for several years--No new facts in assessment year 2006-07--Denial of exemption for assessment year 2006-07--Not valid-- Mool Chand Khairati Ram Trust v. DIT (Exemptions)(Delhi) . . . 650

S. 22 --Income from house property--Business--Business income or income from house property--Firm engaged in export business--Construction of godowns for its business--Godowns let out when not required by assessee--No amenities provided to lessees--Rent from godowns assessable as income from property-- CIT v. Sileman Khan Mahaboob Khan(T & AP) . . . 613

S. 28 --Income from house property--Business--Business income or income from house property--Firm engaged in export business--Construction of godowns for its business--Godowns let out when not required by assessee--No amenities provided to lessees--Rent from godowns assessable as income from property-- CIT v. Sileman Khan Mahaboob Khan(T & AP) . . . 613

S. 40(a)(ia) --Business expenditure--Disallowance--Disallowance of expenditure on ground that tax has not been deducted at source on payment--Effect of insertion of second proviso to section 40(a)(ia)--Payee filing income-tax return and offering sum received for taxation--Disallowance of sum not justified-- CIT v. Ansal Land Mark Township P. Ltd. (Delhi) . . . 635

S. 40A(3) --Business expenditure--Disallowance--Payments otherwise than by account payee cheque or account payee bank draft--Assessment on basis of estimate--Disallowance cannot be made under section 40A(3)-- CIT v. Amman Steel and Allied Industries (Mad) . . . 568

S. 68 --Cash credits--Burden of proof--Share application money--Assessee must prove creditworthiness of applicants and genuineness of transactions--No such proof--Addition of amount in income of assessee--Justified-- Riddhi Promoters P. Ltd. v. CIT (Delhi) . . . 641

S. 80-IA --Industrial undertaking--Special deduction under section 80-IA--Computation of special deduction--Losses and other deductions set off against income of previous year cannot be taken into consideration-- CIT v. Kongoor Textile Process (Mad) . . . 559

Chap. X --International transactions--Arm’s length price--Determination--General principles applicable--Comparison of international transaction with uncontrolled transaction under rule 10B--Wide range of services in information technology enabled services--Knowledge process outsourcing could not be compared to call centres-- Rampgreen Solutions P. Ltd. v. CIT (Delhi) . . . 533

S. 119 --Advance tax--Interest payable by assessee--Waiver of interest--Powers of Chief Commissioner--Levy of interest confirmed by Tribunal--Case of assessee not covered by notification dated 26-6-2006--Chief Commissioner could not waive interest-- Fertilizers and Chemicals Travancore Ltd. v. Deputy CIT (Ker) . . . 591

S. 147 --Reassessment--Notice--Validity--Notice based solely on opinion of audit party--Not valid-- Shree Ram Builders v. Asst. CIT (OSD) (Guj) . . . 631

----Reassessment--Validity--Reason for notice not furnished to assessee--Reassessment based on statement of third party--Assessee not given opportunity to be heard--Reassessment not valid-- Kothari Metals v. ITO (Karn) . . . 581

S. 148 --Reassessment--Notice--Validity--Notice based solely on opinion of audit party--Not valid-- Shree Ram Builders v. Asst. CIT (OSD) (Guj) . . . 631

S. 201(1) --Business expenditure--Disallowance--Disallowance of expenditure on ground that tax has not been deducted at source on payment--Effect of insertion of second proviso to section 40(a)(ia)--Payee filing income-tax return and offering sum received for taxation--Disallowance of sum not justified-- CIT v. Ansal Land Mark Township P. Ltd. (Delhi) . . . 635

S. 226(3) --Recovery of tax--Garnishee proceedings--Writ petition by person who was not the legal owner of assets in question--Not maintainable-- TRO v. Bhishma Pithamaha (Karn) . . . 584

----Recovery of tax--State reorganisation--Company carrying on business on behalf of Telangana State incorporated on 30-5-2014--Assets and properties of Andhra Pradesh Beverages Corporation not taken over by company--Not a successor in interest to Corporation--Tax dues of Andhra Pradesh Beverages Corporation for assessment year 2012-13 could not be recovered from company--Company was not an assessee in default nor a garnishee-- Telangana State Beverage Corporation Ltd. v. Union of India (T & AP) . . . 622

S. 234C --Advance tax--Interest payable by assessee--Waiver of interest--Powers of Chief Commissioner--Levy of interest confirmed by Tribunal--Case of assessee not covered by notification dated 26-6-2006--Chief Commissioner could not waive interest-- Fertilizers and Chemicals Travancore Ltd. v. Deputy CIT (Ker) . . . 591

S. 254 --Appeal to Appellate Tribunal--Revision--Powers of Tribunal--Valid order of revision--Tribunal has no power to reappraise material and set aside order-- CIT v. Varanasi Khanta Rao, Prop. Sri Sai Srinivasa Modern Rice Mill (T & AP) . . . 602

----Appeal to High Court--Duty of Tribunal--Duty to follow direction of High Court-- Dr. Nassar Yusuf v. CIT (Ker) . . . 595

S. 263 --Appeal to Appellate Tribunal--Revision--Powers of Tribunal--Valid order of revision--Tribunal has no power to reappraise material and set aside order-- CIT v. Varanasi Khanta Rao, Prop. Sri Sai Srinivasa Modern Rice Mill (T & AP) . . . 602

----Revision--Condition precedent--Order of Assessing Officer erroneous and prejudicial to the Revenue--Commissioner discovering errors and passing order of revision after hearing assessee--Order valid-- CIT v. Varanasi Khanta Rao, Prop. Sri Sai Srinivasa Modern Rice Mill (T & AP) . . . 602

 

 

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

ITR (TRIB) Volume 43 : Part 2 (Issue dated : 12-10-2015)

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

PRINT EDITION

Volume 43 : Part 2 (Issue dated : 12-10-2015)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Appeal to Commissioner (Appeals) --Admission of fresh evidence--Reasonable opportunity to Assessing Officer to examine additional evidence--No violation of provisions of rule 46A--Income-tax Rules, 1962, r. 46A-- Xerces Technologies P. Ltd. v . Deputy CIT (Pune) . . . 166

Bad debts --Writing off--Assessee advancing money to farmers for business purpose--Claims outstanding for three to six years--Assessee writing off advanced money as bad debts--Debts connected with business income earned by assessee--Claim allowable under sections 36(1)(vii) and 37 if assessee had written off bad debts as irrecoverable in his accounts--Income-tax Act, 1961, ss. 36(1)(vii), 37-- Bhagwati Prasad v . Asst. CIT (Jaipur) . . . 134

Business expenditure --Amortisation of preliminary expenses--Condition precedent for allowing amortisation--Expenditure should be for commencement of business or for extension of undertaking or for setting up of new industrial undertaking--Expenditure on issue of global depository receipts--Assessee not entitled to amortisation of expenses--Income-tax Act, 1961, s. 35D-- Soma Textile and Industries Ltd. v. Addl. CIT (Ahd) . . . 205

----Assessee paying property tax and society charges in respect of premises used for business purpose--No material to show that payments made contrary to terms and conditions of agreement between assessee and owner--Failure by Assessing Officer to conduct enquiry--Assessee producing no evidence in support of its claim--Matter remanded for proper verification--Income-tax Act, 1961-- Kaybee P. Ltd. v. ITO 
(Mumbai) . . . 234

----Disallowance--Payments to non-residents--Failure by assessee to produce agreement entered into with foreign agents to show their appointment as commission agents and show nature of services rendered by non-resident agent--Nature of services rendered by non-resident agent cannot be decided without examining details--Assessing Officer to make necessary enquiry regarding nature of services rendered by non-resident agent and payments made thereof--Assessee to prove sales commission towards procurement of orders from abroad--Matter remanded--Income-tax Act, 1961, s. 40(a)(i)-- Chenitan Color Chem P. Ltd. v. Asst. CIT (Chennai) . . . 181

----Expenditure on remuneration of directors--Central Government giving approval for remuneration of directors--Remuneration paid to directors allowable--Income-tax Act, 1961--IMA PG India Ltd. v. Deputy CIT (Mumbai) . . . 155

Business loss --Loss on fluctuation in rate of foreign exchange--Loss on account of impact of fluctuation of rate of foreign exchange on funds raised by global depository receipts lying in foreign bank accounts as deposits--Loss purely an accounting loss--Loss cannot be capitalised--Income-tax Act, 1961-- Soma Textile and Industries Ltd. v. Addl. CIT (Ahd) . . . 205

Cash credits --Unsecured loans by director--Creditworthiness of director not established--Disallowance sustainable--Income-tax Act, 1961-- Xerces Technologies P. Ltd. v. Deputy CIT (Pune) . . . 166

Charitable purpose --Computation of income--Expenditure on asset treated as application of income to charitable purpose--Depreciation--Deduction for depreciation in respect of same expenditure would amount to double deduction and not allowable--Income-tax Act, 1961--Deputy DIT (Exemptions)-II v. The Chennai Custom House Agents Association (Chennai) . . . 145

----Meaning of--Law applicable--Effect of first proviso to section 2(15) inserted w.e.f. 1-4-2009--Assessee rendering services to its members to carry out their business or professional services--Commercial activity--Not charitable activity--Not entitled to exemption--Income-tax Act, 1961, ss. 2(15), 11-- Deputy DIT (Exemptions)-II v. The Chennai Custom House Agents Association (Chennai) . . . 145

Co-operative society --Special deduction--Interest from fixed deposits with financial institution--Interest income attributable to carrying on business of providing credit facilities to members--Deduction allowable--Income-tax Act, 1961, s. 80P(2)(a)(i)-- Jaoli Taluka Sahakari Patpedhi Maryadit v. ITO (Mumbai) . . . 138

Company --Book profits--Computation--Assessee transferring development rights on portion of land to its wholly owned Indian subsidiary--Profits arising on transfer of capital asset to wholly owned Indian subsidiary exempt--To be excluded from computation of book profit--Income-tax Act, 1961, s. 115JB-- Shivalik Venture P. Ltd. v. Deputy CIT (Mumbai) . . . 187

Income --Computation of income--Disallowance of expenditure on earning non-taxable income--Dividend--Failure by Assessing Officer to consider availability of interest-free funds--Assessing Officer to examine issue afresh considering availability of interest-free funds and average value of investments--Matter remanded--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Shivalik Venture P. Ltd. v. Deputy CIT 
(Mumbai) . . . 187

----Principle of mutuality--Contribution received by association from members and non-members to common fund--Concept of charity and principle of mutuality mutually exclusive--Principle of mutuality not applicable--Income-tax Act, 1961-- Deputy DIT (Exemptions)-II v. The Chennai Custom House Agents Association 
(Chennai) . . . 145

International transactions --Arm's length price--Determination--Commission received at different percentages by assessee in respect of textile and yarn procurement from its associated enterprises--Assessing Officer adopting percentage of commission on procurement of textiles in respect of yarn procurement--Failure by Assessing Officer to consider uncontrolled price or transaction--Arm's length price adopted by Assessing Officer not sustainable--Income-tax Act, 1961, s. 92C-- Kaybee P. Ltd. v. ITO 
(Mumbai) . . . 234

----Arm's length price--Determination--Interest on loan advanced to its subsidiary abroad claimed to be "quasi capital"--Arm's length price of loan to be ascertained even if loan given out of proceeds of global depository receipts abroad--Assessee not offering assistance on quantum of arm's length price adjustment in respect of transaction of amount--Assessee accepting LIBOR plus 2 per cent. interest rate in subsequent assessment years--No interference warranted--Income-tax Act, 1961, s. 92CA(3)-- Soma Textile and Industries Ltd. v. Addl. CIT (Ahd) . . . 205

----Associated enterprise--Definition--Common director participating in management of two companies--Conditions of section 92A(1) satisfied--Assessee and group company fall under meaning of associated enterprise--Income-tax Act, 1961, s. 92A(1), (2)-- Kaybee P. Ltd. v. ITO (Mumbai) . . . 234

Penalty --Concealment of income--Assessee entitled to obtain legal advice from any source--Claim made after scrutiny notice under section 143(2)--No inference that offer made by assessee not voluntary--No material on record to show that conduct of assessee not bona fide--Penalty cannot be levied--Income-tax Act, 1961, ss. 79, 271(1)(c)-- Atotech India Ltd. v. Asst. CIT (Delhi) . . . 253

----Deduction of tax at source--Failure to furnish permanent account numbers of deductees--Permanent account numbers not available at material time--Assessee furnishing necessary information and correcting lapse by furnishing particulars and revised statement--Reasonable cause--Penalty cannot be levied--Income-tax Act, 1961, ss. 139A(5B), 272B-- ITO (TDS) v. Executive Engineer, Provisional Division, Public Health (Delhi) . . . 162

----Failure to deduct tax at source-- Payment of interest--Payee being exempted under section 10(23C)(iiiab) eligible to receive payment without deduction of tax at source--Payee wholly or substantially financed by Government--No tax required to be deducted at source--Penalty not imposable--Income-tax Act, 1961, ss. 10(23C)(iiiab), 194A(3)(iii)(f), 197A, 271C--Asst. CIT (TDS) v. State Bank of India (PEC) 
(Chandigarh) . . . 129

Reassessment --Audit objection--Reopening of case on basis of factual error pointed out by internal auditor--Mere information about escapement of income to Assessing Officer--Reopening of assessment valid--Income-tax Act, 1961, s. 147-- Rollatainers Ltd. v. Asst. CIT(Delhi) . . . 217

----Validity--Business expenditure--Deduction only on actual payment--Assessee transferring assets and liabilities to subsidiary company including interest liability to financial institutions--Waiver of interest by financial institutions--Interest waived allowed by Assessing Officer in original proceedings--Reopening of assessment based on factual error pointed out by audit party that interest not actually paid--Deduction of interest not allowable--Reassessment valid--Income-tax Act, 1961, ss. 43B, 147, 148-- Rollatainers Ltd. v. Asst. CIT (Delhi) . . . 217

----Validity--Change of opinion--Assessing Officer not forming any opinion on deductibility of interest in original assessment proceedings--Challenge to initiation of reassessment proceedings on ground of change of opinion not sustainable--Reassessment valid--Income-tax Act, 1961, s. 147-- Rollatainers Ltd. v. Asst. CIT 
(Delhi) . . . 217

----Validity--Change of opinion--No new information coming to notice of Assessing Officer subsequent to original assessment--Assessment reopened on reappraisal of details forming part of original assessment proceedings to tax provision for construction expenses allowed as deduction--Change of opinion not permitted under provisions of law under section 147--Arbitrary exercise of powers--Reassessment proceedings invalid and to be quashed--Income-tax Act, 1961, s. 147-- Landbase India Ltd. v. Deputy CIT (Delhi) . . . 172

Words and phrases --"Actually paid"--"Change of opinion"--"Constructive payment"--Meanings of-- Rollatainers Ltd. v. Asst. CIT (Delhi) . . . 217

----"Associated enterprise"--Meaning of-- Kaybee P. Ltd. v. ITO 
(Mumbai) . . . 234

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961

S. 2(15) --Charitable purpose--Meaning of--Law applicable--Effect of first proviso to section 2(15) inserted w.e.f. 1-4-2009--Assessee rendering services to its members to carry out their business or professional services--Commercial activity--Not charitable activity--Not entitled to exemption-- Deputy DIT (Exemptions)-II v. The Chennai Custom House Agents Association (Chennai) . . . 145

S. 10(23C)(iiiab) --Penalty--Failure to deduct tax at source-- Payment of interest--Payee being exempted under section 10(23C)(iiiab) eligible to receive payment without deduction of tax at source--Payee wholly or substantially financed by Government--No tax required to be deducted at source--Penalty not imposable-- Asst. CIT (TDS) v. State Bank of India (PEC)(Chandigarh) . . . 129

S. 11 --Charitable purpose--Meaning of--Law applicable--Effect of first proviso to section 2(15) inserted w.e.f. 1-4-2009--Assessee rendering services to its members to carry out their business or professional services--Commercial activity--Not charitable activity--Not entitled to exemption-- Deputy DIT (Exemptions)-II v. The Chennai Custom House Agents Association (Chennai) . . . 145

S. 14A --Income--Computation of income--Disallowance of expenditure on earning non-taxable income--Dividend--Failure by Assessing Officer to consider availability of interest-free funds--Assessing Officer to examine issue afresh considering availability of interest-free funds and average value of investments--Matter remanded-- Shivalik Venture P. Ltd. v. Deputy CIT (Mumbai) . . . 187

S. 35D --Business expenditure--Amortisation of preliminary expenses--Condition precedent for allowing amortisation--Expenditure should be for commencement of business or for extension of undertaking or for setting up of new industrial undertaking--Expenditure on issue of global depository receipts--Assessee not entitled to amortisation of expenses--Soma Textile and Industries Ltd. v. Addl. CIT (Ahd) . . . 205

S. 36(1)(vii) --Bad debts--Writing off--Assessee advancing money to farmers for business purpose--Claims outstanding for three to six years--Assessee writing off advanced money as bad debts--Debts connected with business income earned by assessee--Claim allowable under sections 36(1)(vii) and 37 if assessee had written off bad debts as irrecoverable in his accounts-- Bhagwati Prasad v . Asst. CIT 
(Jaipur) . . . 134

S. 37 --Bad debts--Writing off--Assessee advancing money to farmers for business purpose--Claims outstanding for three to six years--Assessee writing off advanced money as bad debts--Debts connected with business income earned by assessee--Claim allowable under sections 36(1)(vii) and 37 if assessee had written off bad debts as irrecoverable in his accounts-- Bhagwati Prasad v . Asst. CIT (Jaipur) . . . 134

S. 40(a)(i) --Business expenditure--Disallowance--Payments to non-residents--Failure by assessee to produce agreement entered into with foreign agents to show their appointment as commission agents and show nature of services rendered by non-resident agent--Nature of services rendered by non-resident agent cannot be decided without examining details--Assessing Officer to make necessary enquiry regarding nature of services rendered by non-resident agent and payments made thereof--Assessee to prove sales commission towards procurement of orders from abroad--Matter remanded-- Chenitan Color Chem P. Ltd. v. Asst. CIT (Chennai) . . . 181

S. 43B --Reassessment--Validity--Business expenditure--Deduction only on actual payment--Assessee transferring assets and liabilities to subsidiary company including interest liability to financial institutions--Waiver of interest by financial institutions--Interest waived allowed by Assessing Officer in original proceedings--Reopening of assessment based on factual error pointed out by audit party that interest not actually paid--Deduction of interest not allowable--Reassessment valid-- Rollatainers Ltd. v. Asst. CIT (Delhi) . . . 217

S. 79 --Penalty--Concealment of income--Assessee entitled to obtain legal advice from any source--Claim made after scrutiny notice under section 143(2)--No inference that offer made by assessee not voluntary--No material on record to show that conduct of assessee not bona fide--Penalty cannot be levied-- Atotech India Ltd. v. Asst. CIT 
(Delhi) . . . 253

S. 80P(2)(a)(i) --Co-operative society--Special deduction--Interest from fixed deposits with financial institution--Interest income attributable to carrying on business of providing credit facilities to members--Deduction allowable-- Jaoli Taluka Sahakari Patpedhi Maryadit v. ITO(Mumbai) . . . 138

S. 92A(1), (2) --International transactions--Associated enterprise--Definition--Common director participating in management of two companies--Conditions of section 92A(1) satisfied--Assessee and group company fall under meaning of associated enterprise--Kaybee P. Ltd. v. ITO (Mumbai) . . . 234

S. 92C --International transactions--Arm's length price--Determination--Commission received at different percentages by assessee in respect of textile and yarn procurement from its associated enterprises--Assessing Officer adopting percentage of commission on procurement of textiles in respect of yarn procurement--Failure by Assessing Officer to consider uncontrolled price or transaction--Arm's length price adopted by Assessing Officer not sustainable-- Kaybee P. Ltd. v. ITO (Mumbai) . . . 234

S. 92CA(3) --International transactions--Arm's length price--Determination--Interest on loan advanced to its subsidiary abroad claimed to be "quasi capital"--Arm's length price of loan to be ascertained even if loan given out of proceeds of global depository receipts abroad--Assessee not offering assistance on quantum of arm's length price adjustment in respect of transaction of amount--Assessee accepting LIBOR plus 2 per cent. interest rate in subsequent assessment years--No interference warranted-- Soma Textile and Industries Ltd. v. Addl. CIT (Ahd) . . . 205

S. 115JB --Company--Book profits--Computation--Assessee transferring development rights on portion of land to its wholly owned Indian subsidiary--Profits arising on transfer of capital asset to wholly owned Indian subsidiary exempt--To be excluded from computation of book profit-- Shivalik Venture P. Ltd. v. Deputy CIT 
(Mumbai) . . . 187

S. 139A(5B) --Penalty--Deduction of tax at source--Failure to furnish permanent account numbers of deductees--Permanent account numbers not available at material time--Assessee furnishing necessary information and correcting lapse by furnishing particulars and revised statement--Reasonable cause--Penalty cannot be levied-- ITO (TDS) v. Executive Engineer, Provisional Division, Public Health 
(Delhi) . . . 162

S. 147 --Reassessment--Audit objection--Reopening of case on basis of factual error pointed out by internal auditor--Mere information about escapement of income to Assessing Officer--Reopening of assessment valid-- Rollatainers Ltd. v. Asst. CIT 
(Delhi) . . . 217

----Reassessment--Validity--Business expenditure--Deduction only on actual payment--Assessee transferring assets and liabilities to subsidiary company including interest liability to financial institutions--Waiver of interest by financial institutions--Interest waived allowed by Assessing Officer in original proceedings--Reopening of assessment based on factual error pointed out by audit party that interest not actually paid--Deduction of interest not allowable--Reassessment valid-- Rollatainers Ltd. v. Asst. CIT 
(Delhi) . . . 217

----Reassessment--Validity--Change of opinion--Assessing Officer not forming any opinion on deductibility of interest in original assessment proceedings--Challenge to initiation of reassessment proceedings on ground of change of opinion not sustainable--Reassessment valid-- Rollatainers Ltd. v. Asst. CIT (Delhi) . . . 217

----Reassessment--Validity--Change of opinion--No new information coming to notice of Assessing Officer subsequent to original assessment--Assessment reopened on reappraisal of details forming part of original assessment proceedings to tax provision for construction expenses allowed as deduction--Change of opinion not permitted under provisions of law under section 147--Arbitrary exercise of powers--Reassessment proceedings invalid and to be quashed-- Landbase India Ltd. v. Deputy CIT 
(Delhi) . . . 172

S. 148 --Reassessment--Validity--Business expenditure--Deduction only on actual payment--Assessee transferring assets and liabilities to subsidiary company including interest liability to financial institutions--Waiver of interest by financial institutions--Interest waived allowed by Assessing Officer in original proceedings--Reopening of assessment based on factual error pointed out by audit party that interest not actually paid--Deduction of interest not allowable--Reassessment valid-- Rollatainers Ltd. v. Asst. CIT (Delhi) . . . 217

S. 194A(3)(iii)(f) --Penalty--Failure to deduct tax at source-- Payment of interest--Payee being exempted under section 10(23C)(iiiab) eligible to receive payment without deduction of tax at source--Payee wholly or substantially financed by Government--No tax required to be deducted at source--Penalty not imposable-- Asst. CIT (TDS) v. State Bank of India (PEC)(Chandigarh) . . . 129

S. 197A --Penalty--Failure to deduct tax at source-- Payment of interest--Payee being exempted under section 10(23C)(iiiab) eligible to receive payment without deduction of tax at source--Payee wholly or substantially financed by Government--No tax required to be deducted at source--Penalty not imposable-- Asst. CIT (TDS) v. State Bank of India (PEC)(Chandigarh) . . . 129

S. 271(1)(c) --Penalty--Concealment of income--Assessee entitled to obtain legal advice from any source--Claim made after scrutiny notice under section 143(2)--No inference that offer made by assessee not voluntary--No material on record to show that conduct of assessee not bona fide--Penalty cannot be levied-- Atotech India Ltd. v. Asst. CIT (Delhi) . . . 253

S. 271C --Penalty--Failure to deduct tax at source-- Payment of interest--Payee being exempted under section 10(23C)(iiiab) eligible to receive payment without deduction of tax at source--Payee wholly or substantially financed by Government--No tax required to be deducted at source--Penalty not imposable-- Asst. CIT (TDS) v. State Bank of India (PEC)(Chandigarh) . . . 129

S. 272B --Penalty--Deduction of tax at source--Failure to furnish permanent account numbers of deductees--Permanent account numbers not available at material time--Assessee furnishing necessary information and correcting lapse by furnishing particulars and revised statement--Reasonable cause--Penalty cannot be levied-- ITO (TDS) v. Executive Engineer, Provisional Division, Public Health (Delhi) . . . 162

Income-tax Rules, 1962

R. 8D --Income--Computation of income--Disallowance of expenditure on earning non-taxable income--Dividend--Failure by Assessing Officer to consider availability of interest-free funds--Assessing Officer to examine issue afresh considering availability of interest-free funds and average value of investments--Matter remanded-- Shivalik Venture P. Ltd. v. Deputy CIT(Mumbai) . . . 187

R. 46A --Appeal to Commissioner (Appeals)--Admission of fresh evidence--Reasonable opportunity to Assessing Officer to examine additional evidence--No violation of provisions of rule 46A-- Xerces Technologies P. Ltd. v . Deputy CIT 
(Pune) . . . 166

 

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