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Wednesday, February 3, 2016

ITR (TRIB) Volume 45 : Part 5 (Issue dated : 1-2-2016)


 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Business expenditure--Deduction only on actual payment--Failure by assessee to deposit value added tax into Government account before close of year or before date of audit report--Whether amount deposited before due date of filing return of income as prescribed under section 139(1)--Matter remanded for verification--Income-tax Act, 1961, ss. 43B, 145A--Munaf Ibrahim Memon v. ITO (Pune) . . . 47

Capital gains--Long-term capital gains--Failure by assessee to produce document regarding transfer of property in his favour and document in support of cost of acquisition--Assessee himself admitting encroachment upon adjacent plot meant for primary school--Assessee not having title to property--Capital gains accrue only through sale or transfer of capital asset--Income cannot be taxed as long-term capital gains--Income-tax Act, 1961, ss. 2(14), 45-- ITO v. Bhagwan T. Fatnani (Mumbai) . . . 56

Words and phrases--"Any kind"--"Held"--Meanings of-- ITO v. Bhagwan T. Fatnani (Mumbai) . . . 56

 

PRINT EDITION

Volume 45 : Part 5 (Issue dated : 1-2-2016)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Accounting --Method of accounting--Assessee following cash basis of accounting for income arising from profession and mercantile system of accounting for income arising from business consistently--Not hybrid method of accounting--Two method of accounting allowable for two sources of income--Income-tax Act, 1961, s. 145-- Vishwanath Acharya v. Asst. CIT (Mumbai) . . . 554

Appeal to Appellate Tribunal --Additional evidence--Admission and consideration of ledger account as additional evidence--Assessee placing copy of ledger account during first appellate proceedings and assessment proceedings--No dispute regarding outstanding amount in ledger account--Ledger account not additional evidence in case of assessee--No requirement of invoking provisions of rule 29--Income-tax Act, 1961--Income-tax (Appellate Tribunal) Rules, 1963, r. 29-- Vipin Malik v. Asst. CIT
(Delhi) . . . 589

Appeal to Commissioner (Appeals) --Powers of Commissioner (Appeals)--Power to enhance assessment and travel beyond subject matter of appeal--Income-tax Act, 1961, s. 251(2)-- Sundaram Medical Foundation v. Deputy DIT (Exemptions) I
(Chennai) . . . 500

Business expenditure --Employees' stock option plan--Discount--Excess of public issue price over price charged to employees would qualify as discount--Difference allowable as discount--Income-tax Act, 1961, s. 37-- HDFC Bank Ltd. v. Deputy CIT
(Mumbai) . . . 529

Cash credits --Share transactions--No direct or material evidence against assessee to hold share transactions not genuine--General statement of director of another company before investigation wing--Assessee not provided opportunity to confront director in relation to transactions related to assessee--Additions under section 68 not warranted--Income-tax Act, 1961, s. 68-- Yamuna Estate P. Ltd. v. ITO (Mumbai) . . . 517

Charitable purpose --Computation of income--Carry forward of excess application of funds to subsequent years--Not permissible--Loss on transfer of assets--Purchase cost of assets allowed as application of funds in year of purchase--Loss on sale thereof not to be treated as application of funds again--Sale proceeds income of assessee to be applied for objects of trust--Depreciation on assets full cost of which allowed as application of funds--Not allowable--Bad debts--Mercantile system of accounting--If receivables on which claim made earlier treated as income of trust to be allowed as application of funds when they become bad and are written off in books of account--Income-tax Act, 1961, s. 11-- Sundaram Medical Foundation v. Deputy DIT (Exemptions) I
(Chennai) . . . 500

----Exemption--Definition--Provision of medical relief--Is charitable activity--Generation of surplus does not disqualify assessee--Corpus donations not to be treated as income--Income-tax Act, 1961, ss. 2(15), 11-- Sundaram Medical Foundation v. Deputy DIT (Exemptions) I (Chennai) . . . 500

Income --Accrual--Assessee receiving professional advances from its clients to meet expenses for and on behalf of its clients--Assessee keeping advance receipts in separate ledger account in name of client where all expenses deposited from time to time including professional bills--Assessee transferring professional fees to profit and loss account and carry forward credit balance in advance account to next year as sundry creditors--Professional advance received not income in hands of assessee--Income-tax Act, 1961--Vipin Malik v. Asst. CIT (Delhi) . . . 589

----Disallowance of expenditure in relation to exempt income--Dividend--Assessee maintaining same books of account for every activity--Dividend earned incidental to normal business activities of assessee--Disallowance under section 14A should not exceed quantum of exempt income--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- K. Ratanchand and Co. v. ITO (Ahd) . . . 608

----Disallowance of expenditure relating to exempt income--General principles--That assessee utilised its own funds in making investments not relevant to whether assessee incurred expenditure in relation to earning exempt income--Investment in securities made out of common pool of funds--Tax-free investments acquired over the years in the course of its business--Failure by assessee to establish exact funding of tax-free investments with reference to accounts--No case on facts or finding that securities formed part of assessee's stock-in-trade--Disallowance proper--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- HDFC Bank Ltd. v. Deputy CIT
(Mumbai) . . . 529

----Expenditure in relation to income not includible in taxable income--Dividend--Assessee not making suo motu disallowance--To be presumed that assessee claiming no expenditure incurred by him in relation to income not forming part of total income-- Disallowance of dividend proper--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Vipin Malik v. Asst. CIT (Delhi) . . . 589

Income from house property --Annual letting value--Assessing Officer computing annual letting value based on notional rent on cost of properties--Failure by Department to consider additional evidence produced by assessee vitiating principles of natural justice--Assessing Officer to determine afresh income from house properties in accordance with provisions of sections 22 and 23 and to follow principles laid down by court--Matter remanded--Income-tax Act, 1961, ss. 22, 23-- Vishwanath Acharya v. Asst. CIT
(Mumbai) . . . 554

Penalty --Concealment of income or furnishing inaccurate particulars of income--Assessee computing taxable income on book profits and giving full and complete details of short-term loss accrued and dividend earned--Failure to give effect to section 94(7) has no bearing on payment of tax to be paid--No evasion of tax liability--Penalty under section 271(1)(c) not leviable since income assessed under section 115JB--Income-tax Act, 1961, ss. 94(7), 115JB, 271(1)(c)-- Compucom Software Ltd. v. Deputy CIT
(Jaipur) . . . 619

Precedent --Authority only for what it actually decides not what may remotely or even logically follow from it-- HDFC Bank Ltd. v. Deputy CIT (Mumbai) . . . 529

Reassessment --Income escaping assessment--Search operations in premises of third person--Documents found belonging to persons in respect of whom search conducted and not to assessee--Reopening on basis of loose papers containing name of assessee as person to whom accommodation entries provided--Condition precedent for issuance of notice under section 153C not satisfied--Reopening of assessment rightly done under section 147--Income-tax Act, 1961, ss. 147, 153C-- Yamuna Estate P. Ltd. v. ITO (Mumbai) . . . 517

Unexplained cash credit --Advance received against sale of accommodations in name of close family members of assessee--Accommodations stated to be acquired out of undisclosed income of assessee and brought to tax as undisclosed income in hands of assessee--Capital gains arising on sale of accommodations to be charged in hands of assessee--Assessing Officer to compute capital gains arising out of accommodations--Matter remanded--Income-tax Act, 1961, s. 68-- Vishwanath Acharya v. Asst. CIT
(Mumbai) . . . 554

----Cash deposits--Failure by assessee to substantiate deposits with evidence before Assessing Officer--Assessee not well versed with terms of accountancy, tax and other laws and regulations--Assessee's accountant leaving employment without handing over charge of books of account and assessee travelling while assessment proceedings going on--Sufficient cause shown for non-production of evidence--Assessing Officer to admit additional evidence and decide issue afresh on merits--Matter remanded--Income-tax Act, 1961, s. 68-- Vishwanath Acharya v. Asst. CIT (Mumbai) . . . 554

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961

S. 2(15) --Charitable purpose--Exemption--Definition--Provision of medical relief--Is charitable activity--Generation of surplus does not disqualify assessee--Corpus donations not to be treated as income-- Sundaram Medical Foundation v. Deputy DIT (Exemptions) I (Chennai) . . . 500

S. 11 --Charitable purpose--Computation of income--Carry forward of excess application of funds to subsequent years--Not permissible--Loss on transfer of assets--Purchase cost of assets allowed as application of funds in year of purchase--Loss on sale thereof not to be treated as application of funds again--Sale proceeds income of assessee to be applied for objects of trust--Depreciation on assets full cost of which allowed as application of funds--Not allowable--Bad debts--Mercantile system of accounting--If receivables on which claim made earlier treated as income of trust to be allowed as application of funds when they become bad and are written off in books of account-- Sundaram Medical Foundation v. Deputy DIT (Exemptions) I (Chennai) . . . 500

----Charitable purpose--Exemption--Definition--Provision of medical relief--Is charitable activity--Generation of surplus does not disqualify assessee--Corpus donations not to be treated as income-- Sundaram Medical Foundation v. Deputy DIT (Exemptions) I (Chennai) . . . 500

S. 14A --Income--Disallowance of expenditure in relation to exempt income--Dividend--Assessee maintaining same books of account for every activity--Dividend earned incidental to normal business activities of assessee--Disallowance under section 14A should not exceed quantum of exempt income-- K. Ratanchand and Co. v. ITO
(Ahd) . . . 608

----Income--Disallowance of expenditure relating to exempt income--General principles--That assessee utilised its own funds in making investments not relevant to whether assessee incurred expenditure in relation to earning exempt income--Investment in securities made out of common pool of funds--Tax-free investments acquired over the years in the course of its business--Failure by assessee to establish exact funding of tax-free investments with reference to accounts--No case on facts or finding that securities formed part of assessee's stock-in-trade--Disallowance proper-- HDFC Bank Ltd. v. Deputy CIT (Mumbai) . . . 529

----Income--Expenditure in relation to income not includible in taxable income--Dividend--Assessee not making suo motu disallowance--To be presumed that assessee claiming no expenditure incurred by him in relation to income not forming part of total income-- Disallowance of dividend proper-- Vipin Malik v. Asst. CIT
(Delhi) . . . 589

S. 22 --Income from house property--Annual letting value--Assessing Officer computing annual letting value based on notional rent on cost of properties--Failure by Department to consider additional evidence produced by assessee vitiating principles of natural justice--Assessing Officer to determine afresh income from house properties in accordance with provisions of sections 22 and 23 and to follow principles laid down by court--Matter remanded-- Vishwanath Acharya v. Asst. CIT (Mumbai) . . . 554

S. 23 --Income from house property--Annual letting value--Assessing Officer computing annual letting value based on notional rent on cost of properties--Failure by Department to consider additional evidence produced by assessee vitiating principles of natural justice--Assessing Officer to determine afresh income from house properties in accordance with provisions of sections 22 and 23 and to follow principles laid down by court--Matter remanded-- Vishwanath Acharya v. Asst. CIT (Mumbai) . . . 554

S. 37 --Business expenditure--Employees' stock option plan--Discount--Excess of public issue price over price charged to employees would qualify as discount--Difference allowable as discount-- HDFC Bank Ltd. v. Deputy CIT (Mumbai) . . . 529

S. 68 --Cash credits--Share transactions--No direct or material evidence against assessee to hold share transactions not genuine--General statement of director of another company before investigation wing--Assessee not provided opportunity to confront director in relation to transactions related to assessee--Additions under section 68 not warranted-- Yamuna Estate P. Ltd. v. ITO (Mumbai) . . . 517

----Unexplained cash credit--Advance received against sale of accommodations in name of close family members of assessee--Accommodations stated to be acquired out of undisclosed income of assessee and brought to tax as undisclosed income in hands of assessee--Capital gains arising on sale of accommodations to be charged in hands of assessee--Assessing Officer to compute capital gains arising out of accommodations--Matter remanded-- Vishwanath Acharya v. Asst. CIT (Mumbai) . . . 554

----Unexplained cash credit--Cash deposits--Failure by assessee to substantiate deposits with evidence before Assessing Officer--Assessee not well versed with terms of accountancy, tax and other laws and regulations--Assessee's accountant leaving employment without handing over charge of books of account and assessee travelling while assessment proceedings going on--Sufficient cause shown for non-production of evidence--Assessing Officer to admit additional evidence and decide issue afresh on merits--Matter remanded-- Vishwanath Acharya v. Asst. CIT (Mumbai) . . . 554

S. 94(7) --Penalty--Concealment of income or furnishing inaccurate particulars of income--Assessee computing taxable income on book profits and giving full and complete details of short-term loss accrued and dividend earned--Failure to give effect to section 94(7) has no bearing on payment of tax to be paid--No evasion of tax liability--Penalty under section 271(1)(c) not leviable since income assessed under section 115JB-- Compucom Software Ltd. v. Deputy CIT (Jaipur) . . . 619

S. 115JB --Penalty--Concealment of income or furnishing inaccurate particulars of income--Assessee computing taxable income on book profits and giving full and complete details of short-term loss accrued and dividend earned--Failure to give effect to section 94(7) has no bearing on payment of tax to be paid--No evasion of tax liability--Penalty under section 271(1)(c) not leviable since income assessed under section 115JB-- Compucom Software Ltd. v. Deputy CIT (Jaipur) . . . 619

S. 145 --Accounting--Method of accounting--Assessee following cash basis of accounting for income arising from profession and mercantile system of accounting for income arising from business consistently--Not hybrid method of accounting--Two method of accounting allowable for two sources of income-- Vishwanath Acharya v. Asst. CIT (Mumbai) . . . 554

S. 147 --Reassessment--Income escaping assessment--Search operations in premises of third person--Documents found belonging to persons in respect of whom search conducted and not to assessee--Reopening on basis of loose papers containing name of assessee as person to whom accommodation entries provided--Condition precedent for issuance of notice under section 153C not satisfied--Reopening of assessment rightly done under section 147-- Yamuna Estate P. Ltd. v. ITO (Mumbai) . . . 517

S. 153C --Reassessment--Income escaping assessment--Search operations in premises of third person--Documents found belonging to persons in respect of whom search conducted and not to assessee--Reopening on basis of loose papers containing name of assessee as person to whom accommodation entries provided--Condition precedent for issuance of notice under section 153C not satisfied--Reopening of assessment rightly done under section 147-- Yamuna Estate P. Ltd. v. ITO (Mumbai) . . . 517

S. 251(2) --Appeal to Commissioner (Appeals)--Powers of Commissioner (Appeals)--Power to enhance assessment and travel beyond subject matter of appeal-- Sundaram Medical Foundation v. Dy. DIT (Exemptions) I (Chennai) . . . 500

S. 271(1)(c) --Penalty--Concealment of income or furnishing inaccurate particulars of income--Assessee computing taxable income on book profits and giving full and complete details of short-term loss accrued and dividend earned--Failure to give effect to section 94(7) has no bearing on payment of tax to be paid--No evasion of tax liability--Penalty under section 271(1)(c) not leviable since income assessed under section 115JB-- Compucom Software Ltd. v. Deputy CIT (Jaipur) . . . 619

Income-tax (Appellate Tribunal) Rules, 1963

R. 29 --Appeal to Appellate Tribunal--Additional evidence--Admission and consideration of ledger account as additional evidence--Assessee placing copy of ledger account during first appellate proceedings and assessment proceedings--No dispute regarding outstanding amount in ledger account--Ledger account not additional evidence in case of assessee--No requirement of invoking provisions of rule 29-- Vipin Malik v. Asst. CIT (Delhi) . . . 589

Income-tax Rules, 1962

R. 8D --Income--Disallowance of expenditure in relation to exempt income--Dividend--Assessee maintaining same books of account for every activity--Dividend earned incidental to normal business activities of assessee--Disallowance under section 14A should not exceed quantum of exempt income-- K. Ratanchand and Co. v. ITO
(Ahd) . . . 608

----Income--Disallowance of expenditure relating to exempt income--General principles--That assessee utilised its own funds in making investments not relevant to whether assessee incurred expenditure in relation to earning exempt income--Investment in securities made out of common pool of funds--Tax-free investments acquired over the years in the course of its business--Failure by assessee to establish exact funding of tax-free investments with reference to accounts--No case on facts or finding that securities formed part of assessee's stock-in-trade--Disallowance proper-- HDFC Bank Ltd. v. Deputy CIT (Mumbai) . . . 529

----Income--Expenditure in relation to income not includible in taxable income--Dividend--Assessee not making suo motu disallowance--To be presumed that assessee claiming no expenditure incurred by him in relation to income not forming part of total income--Disallowance of dividend proper-- Vipin Malik v. Asst. CIT
(Delhi) . . . 589

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