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Saturday, February 20, 2016

ITR (TRIB) Volume 46 : Part 1 (Issue dated : 22-2-2016)

 

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

ONLINE EDITION

SUBJECT INDEX TO CASES REPORTED

Reassessment --Condition precedent--Formation of belief that income had escaped assessment--Reopening of assessment based on information from persons providing accommodation entries to assessee--Assessing Officer having no copies of statement or other details or document to form belief independently that income escaped assessment--Reopening of assessment without application of mind and examination of facts--Reopening of assessment invalid and bad in law--Income-tax Act, 1961, ss. 147, 148-- Unique Metal Industries v . ITO (Delhi) . . . 108

----Reopening of assessment based on information from persons providing accommodation entries to assessee--Failure to permit cross examination and furnish details to assessee--Assessee able to co-relate each transaction of purchase with sales--Restricting disallowance to 20 per cent. not sustainable--Income-tax Act, 1961-- Unique Metal Industries v . ITO (Delhi) . . . 108

Search and seizure --Assessment of third person--Notice under section 153C--Condition precedent--Satisfaction to be recorded by Assessing Officer of person in respect of whom search conducted--Cheque issued by assessee found on search not pertaining to any of years for which notice issued--Cheque "belongs to" person upon whom drawn and not to assessee who issued cheque--Condition for issue of notice under section 153C not satisfied--Income-tax Act, 1961, s. 153C-- Smt. Rekhaben Thakkar v . Asst. CIT (Ahd) . . . 97

 

PRINT EDITION

Volume 46 : Part 1 (Issue dated : 22-2-2016)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Amortisation of preliminary expenses --Expenses on initial public offer--Allowability of claim attaining finality in assessee's own case for same assessment year by Tribunal--Question not open to further adjudication--Assessment in pursuance of revision merely a ministerial task--Income-tax Act, 1961, ss. 35D, 263-- Yes Bank Ltd. v. Asst. CIT (Mumbai) . . . 88

Appeal to Commissioner (Appeals) --Additional evidence--Deduction of discount on issue of debentures on proportionate basis consequent to assessment order in case of subsidiary--Assessee prevented by reasonable cause from making claim before Assessing Officer during assessment proceedings--Additional ground admitted--Matter remanded--Income-tax Act, 1961, s. 246A-- Deputy CIT v. Rain Commodities Ltd.
(Hyd) . . . 1

Banks --Valuation of stock--Provision for revaluation of securities transferred from category "held to maturity" to "available for sale"--Deductible--Income-tax Act, 1961-- Yes Bank Ltd. v. Deputy CIT (Mumbai) . . . 121

Business expenditure --Capital or revenue expenditure--Amortisation of preliminary expenses--Initial public offer--Expenses not incurred prior to commencement of business--Not a case of setting up new business--Expansion only acquisition of existing undertaking--Expenses do not qualify for amortisation--Expenses not also allowable as revenue expenditure--Income-tax Act, 1961, ss. 35D, 37-- Deputy CIT v . Accel Frontline Ltd.(Chennai) . . . 138

----Commercial expediency--Nexus between expenditure and purpose of business--Business need not necessarily be business of assessee--No role of Revenue to decide how much is reasonable expenditure--Debt restructuring scheme pursuant to transfer of business from subsidiary to assessee--Transfer of liability also to be considered part of transaction of transfer of business to assessee--Amount paid to bank as one-time settlement on behalf of subsidiary--Business purpose of assessee--Revenue expenditure--Income-tax Act, 1961, s. 37-- Deputy CIT v. Rain Commodities Ltd.
(Hyd) . . . 1

----Deduction only on actual payment--Interest on sales tax deferment--Assessing Officer to verify difference in liability recorded in books of subsidiary and actual liability of sales tax--Matter remanded--Income-tax Act, 1961, s. 43B-- Deputy CIT v. Rain Commodities Ltd.(Hyd) . . . 1

Capital gains --Cost of improvement--Legal expenses to protect investments of assessee--Should be added to cost of shares as cost of improvement--Income-tax Act, 1961-- Vaipa Pharmaceuticals P. Ltd. v. Asst. CIT (Mumbai) . . . 109

----Long-term capital gains--Maximum marginal rate--Capital gains arising as a consequence of contravention of section 13(1)(c)--Taxable at maximum marginal rate--Income-tax Act, 1961, ss. 2(29C), 112, 164(2)-- Deputy DIT (Exemptions)-I v. India Cements Educational Society (Chennai) . . . 80

Capital or revenue expenditure --Tests--Expenditure on showroom maintenance and interior furnishing in leased premises--Nature of civil works not stated--Matter remanded--Income-tax Act, 1961-- K. R. Bakes P. Ltd. v. Asst. CIT
(Chennai) . . . 73

Capital or revenue loss --Banking company--Loss on revaluation of securities--Intention of assessee at time of purchase of securities that they were to be held "available for sale"--Investments to be treated as stock-in-trade--Loss arising on account of year end revaluation of securities to be allowed--Matter remanded for fresh consideration--Income-tax Act, 1961--Yes Bank Ltd. v. Deputy CIT (Mumbai) . . . 121

Charitable purpose --Exemption--Capital gains arising to trust on sale of land advanced to company--Money returned not invested within previous year--Trust not entitled to exemption--Income-tax Act, 1961, s. 11(1)(a)-- Deputy DIT (Exemptions)-I v. India Cements Educational Society (Chennai) . . . 80

----Exemption--Funds invested in limited company where trustee was managing director and his wife was a director--Trust not entitled to exemption--Income-tax Act, 1961, s. 11--Deputy DIT (Exemptions)-I v. India Cements Educational Society
(Chennai) . . . 80

Depreciation --Application software--Actual cost of assets acquired to be considered in terms of Explanation 3 to section 43(1)--Assessee not entitled to depreciation because already claimed by previous owner--Restricting depreciation at twenty-five per cent. on intellectual property rights and sixty per cent. on other software--Reasonable--Income-tax Act, 1961, s. 43(1)-- Deputy CIT v . Accel Frontline Ltd. (Chennai) . . . 138

----Leasehold premises--Temporary wooden structures--Assessing Officer to consider whether expenditure is revenue or capital in nature and decide afresh--Income-tax Act, 1961, s. 32(1)-- Deputy CIT v . Accel Frontline Ltd. (Chennai) . . . 138

Exemption --Export of computer software--Apportionment of expenses on basis of turnover of exempt unit and other unit--Fair--Income-tax Act, 1961-- Deputy CIT v . Accel Frontline Ltd. (Chennai) . . . 138

Housing project --Special deduction--Built-up area means inner measurement of residential unit at floor level including projections and balconies as increased by thickness of walls--Does not include common areas shared with other residential units--Open terrace not covered within meaning of built-up area--To be excluded from built-up area--Income-tax Act, 1961, s. 80-IB(10)-- Ashiana Amar Developers v. ITO
(Kolkata) . . . 17

----Special deduction--Project completed within allotted time and possession certificate produced--Completion certificate--Local authority instructing assessee to take completion certificate from registered architect for official purposes--Assessing Officer expecting assessee to produce completion certificate from local authority--Impossible of compliance--Income-tax Act, 1961, s. 80-IB(10)-- Ashiana Amar Developers v. ITO
(Kolkata) . . . 17

----Special deduction--Residential and commercial properties independent units and belonging to two independent entities--Deduction to be claimed unit-wise--Denial of deduction on ground commercial area in project more than three per cent.--Not justified--Income-tax Act, 1961, s. 80-IB(10)-- Ashiana Amar Developers v. ITO
(Kolkata) . . . 17

Income --Accrual of income--Method of accounting--Remuneration for services rendered by assessee in connection with project--Quantification of actual remuneration payable to assessee depending on completion of project--Amount received by assessee during year only advance--Assessee justified in adopting project completion method for accounting receipt--Amount not to be taxed in year in question--Income-tax Act, 1961-- ITO v. Trendsetter Construction P. Ltd. (Mumbai) . . . 132

----Computation--Disallowance of expenditure relating to exempt income--No borrowed funds utilised for earning exempt income--Dividend directly credited in bank account and no expenditure claimed--No disallowance--Disallowance in any case not to exceed exempt income--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Daga Global Chemicals P. Ltd. v. Asst. CIT (Mumbai) . . . 70

----Disallowance of expenditure in relation to exempt income--No interest expenditure incurred for earning tax-free dividend income--Disallowance not proper--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- Yes Bank Ltd. v. Deputy CIT
(Mumbai) . . . 121

----Computation--Disallowance of expenditure relating to exempt income--Provision prescribing disallowance inserted with effect from 24-3-2008 not retrospective--Cannot be applied for earlier assessment year--Assessing Officer directed to disallow 2 per cent. of exempted income for earlier year--Disallowance not to exceed exempt income for assessment years 2008-09 and 2009-10--Income-tax Act, 1961, s. 14A-- Deputy CIT v . Accel Frontline Ltd. (Chennai) . . . 138

Interest on borrowed capital --Interest-free advances to subsidiary--Capital financing not international transaction as law then in force--Nexus established by assessee--No interest burden on assessee by virtue of loan advanced to its subsidiary--No such interest could be attributed in hands of assessee--Income-tax Act, 1961-- Deputy CIT v. Rain Commodities Ltd. (Hyd) . . . 1

Penalty --Failure to deduct tax at source--Assessee, State Electricity Board, transmitting power through transmission network of Power Grid Corporation--Payment of wheeling and transmission charges to Corporation--Corporation paying tax--Assessee not in default--Reasonable cause for not deducting tax at source--Penalty cannot be levied--Income-tax Act, 1961, ss. 201, 271C-- Himachal Pradesh State Electricity Board v. Addl. CIT (TDS)(Chandigarh) . . . 113

Revision --Commissioner--Erroneous and prejudicial to Revenue--Assessing Officer failing to record in assessment order reasons for conclusion reached on issues arising for consideration--Revision directing fresh assessment proper--Income-tax Act, 1961, s. 263--Medall Health Care P. Ltd. v. Principal CIT (Chennai) . . . 36

----Commissioner--Powers--No power to decide issue adjudicated by appellate authorities--Search and seizure--Original seized document relating to agreement for purchase of land already considered by appellate authorities against Department--Copy of same document not admissible in evidence in subsequent revision proceedings--Income-tax Act, 1961, s. 263--R. P. Import and Export P. Ltd. v. Principal CIT
(Chandigarh) . . . 97

----Scope of proceedings--Failure by assessee to challenge addition in original assessment--Addition cannot be challenged in appeal against order passed pursuant to revision--Income-tax Act, 1961, ss. 143(3), 263-- Deputy CIT v. Accel Frontline Ltd.
(Chennai) . . . 138

Transfer pricing --International transaction--Arm's length price--Determination--Assessee falling within category of companies having turnover between Rs. 1 crore and Rs. 200 crores--Companies having turnover of more than Rs. 200 crores to be eliminated from list of comparables--Comparables having related party transactions of up to 15 per cent. of total revenues can be considered--Income-tax Act, 1961, s. 92CA-- Obopay Mobile Technology India P. Ltd. v. Deputy CIT (Bang) . . . 42

----International transaction--Arm's length price--Determination--Foreign exchange fluctuation gains--To be added to operating revenue--Income-tax Act, 1961, s. 92CA-- Obopay Mobile Technology India P. Ltd. v. Deputy CIT
(Bang) . . . 42

 

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961

S. 2(29C) --Capital gains--Long-term capital gains--Maximum marginal rate--Capital gains arising as a consequence of contravention of section 13(1)(c)--Taxable at maximum marginal rate-- Deputy DIT (Exemptions)-I v. India Cements Educational Society (Chennai) . . . 80

S. 11 --Charitable purpose--Exemption--Funds invested in limited company where trustee was managing director and his wife was a director--Trust not entitled to exemption-- Deputy DIT (Exemptions)-I v. India Cements Educational Society
(Chennai) . . . 80

S. 11(1)(a) --Charitable purpose--Exemption--Capital gains arising to trust on sale of land advanced to company--Money returned not invested within previous year--Trust not entitled to exemption-- Deputy DIT (Exemptions)-I v. India Cements Educational Society (Chennai) . . . 80

S. 14A --Income--Computation--Disallowance of expenditure relating to exempt income--No borrowed funds utilised for earning exempt income--Dividend directly credited in bank account and no expenditure claimed--No disallowance--Disallowance in any case not to exceed exempt income-- Daga Global Chemicals P. Ltd. v. Asst. CIT (Mumbai) . . . 70

----Income--Computation--Disallowance of expenditure relating to exempt income--Provision prescribing disallowance inserted with effect from 24-3-2008 not retrospective--Cannot be applied for earlier assessment year--Assessing Officer directed to disallow 2 per cent. of exempted income for earlier year--Disallowance not to exceed exempt income for assessment years 2008-09 and 2009-10-- Deputy CIT v . Accel Frontline Ltd. (Chennai) . . . 138

----Income--Disallowance of expenditure in relation to exempt income--No interest expenditure incurred for earning tax-free dividend income--Disallowance not proper-- Yes Bank Ltd. v. Deputy CIT (Mumbai) . . . 121

S. 32(1) --Depreciation--Leasehold premises--Temporary wooden structures--Assessing Officer to consider whether expenditure is revenue or capital in nature and decide afresh--Deputy CIT v . Accel Frontline Ltd. (Chennai) . . . 138

S. 35D --Amortisation of preliminary expenses--Expenses on initial public offer--Allowability of claim attaining finality in assessee's own case for same assessment year by Tribunal--Question not open to further adjudication--Assessment in pursuance of revision merely a ministerial task-- Yes Bank Ltd. v. Asst. CIT (Mumbai) . . . 88

----Business expenditure--Capital or revenue expenditure--Amortisation of preliminary expenses--Initial public offer--Expenses not incurred prior to commencement of business--Not a case of setting up new business--Expansion only acquisition of existing undertaking--Expenses do not qualify for amortisation--Expenses not also allowable as revenue expenditure-- Deputy CIT v . Accel Frontline Ltd. (Chennai) . . . 138

S. 37 --Business expenditure--Capital or revenue expenditure--Amortisation of preliminary expenses--Initial public offer--Expenses not incurred prior to commencement of business--Not a case of setting up new business--Expansion only acquisition of existing undertaking--Expenses do not qualify for amortisation--Expenses not also allowable as revenue expenditure-- Deputy CIT v . Accel Frontline Ltd.
(Chennai) . . . 138

----Business expenditure--Commercial expediency--Nexus between expenditure and purpose of business--Business need not necessarily be business of assessee--No role of Revenue to decide how much is reasonable expenditure--Debt restructuring scheme pursuant to transfer of business from subsidiary to assessee--Transfer of liability also to be considered part of transaction of transfer of business to assessee--Amount paid to bank as one-time settlement on behalf of subsidiary--Business purpose of assessee--Revenue expenditure-- Deputy CIT v. Rain Commodities Ltd.
(Hyd) . . . 1

S. 43B --Business expenditure--Deduction only on actual payment--Interest on sales tax deferment--Assessing Officer to verify difference in liability recorded in books of subsidiary and actual liability of sales tax--Matter remanded-- Deputy CIT v. Rain Commodities Ltd.(Hyd) . . . 1

S. 43(1) --Depreciation--Application software--Actual cost of assets acquired to be considered in terms of Explanation 3 to section 43(1)--Assessee not entitled to depreciation because already claimed by previous owner--Restricting depreciation at twenty-five per cent. on intellectual property rights and sixty per cent. on other software--Reasonable--Deputy CIT v . Accel Frontline Ltd. (Chennai) . . . 138

S. 80-IB(10) --Housing project--Special deduction--Built-up area means inner measurement of residential unit at floor level including projections and balconies as increased by thickness of walls--Does not include common areas shared with other residential units--Open terrace not covered within meaning of built-up area--To be excluded from built-up area-- Ashiana Amar Developers v. ITO
(Kolkata) . . . 17

----Housing project--Special deduction--Project completed within allotted time and possession certificate produced--Completion certificate--Local authority instructing assessee to take completion certificate from registered architect for official purposes--Assessing Officer expecting assessee to produce completion certificate from local authority--Impossible of compliance-- Ashiana Amar Developers v. ITO
(Kolkata) . . . 17

----Housing project--Special deduction--Residential and commercial properties independent units and belonging to two independent entities--Deduction to be claimed unit-wise--Denial of deduction on ground commercial area in project more than three per cent.--Not justified--Ashiana Amar Developers v. ITO (Kolkata) . . . 17

S. 92CA --Transfer pricing--International transaction--Arm's length price--Determination--Assessee falling within category of companies having turnover between Rs. 1 crore and Rs. 200 crores--Companies having turnover of more than Rs. 200 crores to be eliminated from list of comparables--Comparables having related party transactions of up to 15 per cent. of total revenues can be considered-- Obopay Mobile Technology India P. Ltd. v. Deputy CIT(Bang) . . . 42

----Transfer pricing--International transaction--Arm's length price--Determination--Foreign exchange fluctuation gains--To be added to operating revenue-- Obopay Mobile Technology India P. Ltd. v. Deputy CIT (Bang) . . . 42

S. 112 --Capital gains--Long-term capital gains--Maximum marginal rate--Capital gains arising as a consequence of contravention of section 13(1)(c)--Taxable at maximum marginal rate--Deputy DIT (Exemptions)-I v. India Cements Educational Society
(Chennai) . . . 80

S. 143(3) --Revision--Scope of proceedings--Failure by assessee to challenge addition in original assessment--Addition cannot be challenged in appeal against order passed pursuant to revision-- Deputy CIT v. Accel Frontline Ltd.
(Chennai) . . . 138

S. 164(2) --Capital gains--Long-term capital gains--Maximum marginal rate--Capital gains arising as a consequence of contravention of section 13(1)(c)--Taxable at maximum marginal rate-- Deputy DIT (Exemptions)-I v. India Cements Educational Society (Chennai) . . . 80

S. 201 --Penalty--Failure to deduct tax at source--Assessee, State Electricity Board, transmitting power through transmission network of Power Grid Corporation--Payment of wheeling and transmission charges to Corporation--Corporation paying tax--Assessee not in default--Reasonable cause for not deducting tax at source--Penalty cannot be levied--Himachal Pradesh State Electricity Board v. Addl. CIT (TDS)
(Chandigarh) . . . 113

S. 246A --Appeal to Commissioner (Appeals)--Additional evidence--Deduction of discount on issue of debentures on proportionate basis consequent to assessment order in case of subsidiary--Assessee prevented by reasonable cause from making claim before Assessing Officer during assessment proceedings--Additional ground admitted--Matter remanded--Deputy CIT v. Rain Commodities Ltd. (Hyd) . . . 1

S. 263 --Amortisation of preliminary expenses--Expenses on initial public offer--Allowability of claim attaining finality in assessee's own case for same assessment year by Tribunal--Question not open to further adjudication--Assessment in pursuance of revision merely a ministerial task-- Yes Bank Ltd. v. Asst. CIT (Mumbai) . . . 88

----Revision--Commissioner--Erroneous and prejudicial to Revenue--Assessing Officer failing to record in assessment order reasons for conclusion reached on issues arising for consideration--Revision directing fresh assessment proper-- Medall Health Care P. Ltd. v. Principal CIT (Chennai) . . . 36

----Revision--Commissioner--Powers--No power to decide issue adjudicated by appellate authorities--Search and seizure--Original seized document relating to agreement for purchase of land already considered by appellate authorities against Department--Copy of same document not admissible in evidence in subsequent revision proceedings-- R. P. Import and Export P. Ltd. v. Principal CIT
(Chandigarh) . . . 97

----Revision--Scope of proceedings--Failure by assessee to challenge addition in original assessment--Addition cannot be challenged in appeal against order passed pursuant to revision-- Deputy CIT v. Accel Frontline Ltd. (Chennai) . . . 138

S. 271C --Penalty--Failure to deduct tax at source--Assessee, State Electricity Board, transmitting power through transmission network of Power Grid Corporation--Payment of wheeling and transmission charges to Corporation--Corporation paying tax--Assessee not in default--Reasonable cause for not deducting tax at source--Penalty cannot be levied--Himachal Pradesh State Electricity Board v. Addl. CIT (TDS)
(Chandigarh) . . . 113

Income-tax Rules, 1962

R. 8D --Income--Computation--Disallowance of expenditure relating to exempt income--No borrowed funds utilised for earning exempt income--Dividend directly credited in bank account and no expenditure claimed--No disallowance--Disallowance in any case not to exceed exempt income-- Daga Global Chemicals P. Ltd. v. Asst. CIT (Mumbai) . . . 70

----Income--Disallowance of expenditure in relation to exempt income--No interest expenditure incurred for earning tax-free dividend income--Disallowance not proper-- Yes Bank Ltd. v. Deputy CIT (Mumbai) . . . 121

 

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