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