ITR Volume 382 : Part 1 (Issue dated : 21-3-2016)

INCOME TAX REPORTS (ITR)--PRINT AND ONLINE EDITION
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> ONLINE EDITION
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> SUBJECT INDEX TO CASES REPORTED
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> HIGH COURTS
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> Appeal to High Court --Jurisdiction--Territorial jurisdiction of High Court--Discretion of High Court--Order passed by Assessing Officer of Delhi--Punjab and Haryana High Court had no jurisdiction to hear appeal from order--Income-tax Act, 1961, s. 260A-- Asian Consolidated Industries Ltd. v. Asst. CIT (P&H) . . . 324
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> Assessment --Return--Assessing Officer accepting second revised return--Commissioner (Appeals) enhancing assessment and bringing first revised income to tax--Finding of Tribunal that acceptance of second revised return in order--No application of mind--Tribunal to examine matter afresh--Matter remanded--Income-tax Act, 1961-- CIT v. DD Industries Ltd.(Delhi) . . . 294
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> Business expenditure --Increase of interest free security deposit for lease--Assessee needing premises consistent and long standing arrangement with sister concern--Security deposit not increased for long time--No other material to establish dubiousness in transaction--Expenditure allowable as commercially expedient--Income-tax Act, 1961-- CIT v. DD Industries Ltd. (Delhi) . . . 294
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> ----Interest on borrowed capital--Material to show that amounts not advanced in year in question--Assessee possessing mixed funds which included its own funds in sufficient quantity--Presumption that its own funds utilised for advances--Memorandum of understanding with sister concern not rejected by Assessing Officer or Commissioner (Appeals)--Balance-sheet of sister concern disclosing inventories in form of land--Advances cannot be linked with borrowed capital--Deduction of interest allowable--Income-tax Act, 1961, s. 36(1)(iii)-- CIT v. DD Industries Ltd. (Delhi) . . . 294
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> Export --Special deduction--Computation of special deduction under section 80HHC--Effect of clause (baa) of Explanation to section 80HHC--Income from services and repairs of vessels--Finding that activities had nexus to exports--Clause (baa) of Explanation to section 80HHC not applicable--Income from hiring barges--Extraction charges of iron ore, income from sales of pig iron, vessels, engineering products, materials and coke breeze--Clause (baa) ofExplanation to section 80HHC applicable--Income-tax Act, 1961, s. 80HHC-- Sesa Goa Ltd. v.CIT (Bom) . . . 306
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> Precedent --Effect of decision of Supreme Court in K. Ravindranathan Nair's case [2007] 295 ITR 228 (SC), Bombay High Court in Pfizer Ltd.'s case [2011] 330 ITR 62 (Bom) andDresser Rand India (P.) Ltd.'s case [2010] 323 ITR 429 (Bom)-- Sesa Goa Ltd. v. CIT (Bom) . . . 306
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> Revision --Powers of Commissioner--Failure by Assessing Officer to ascertain facts as directed by Tribunal--Commissioner has power to set aside order--Income-tax Act, 1961, s. 263-- U. P. Forest Corporation v. CIT (All) . . . 330
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> PRINT EDITION
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> ITR Volume 382 : Part 1 (Issue dated : 21-3-2016)
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> SUBJECT INDEX TO CASES REPORTED IN THIS PART
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> SUPREME COURT
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> Charitable purpose --Registration of trusts--Application for registration--Decision of High Court that if application not responded to within six months assessee to be deemed registered--Supreme Court--Registration to take effect six months after date of application--Income-tax Act, 1961, s. 12AA-- CIT v. Society for the Promotion of Education . . . 6
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> Deduction of tax at source --Interest for delayed payment of compensation for acquisition of land--Whether subject to deduction of tax at source--Failure by High Court to give reasons--Supreme Court--Matter remanded--Income-tax Act, 1961, s. 194A-- Commissioner, Belgaum Urban Development Authority v. CIT . . . 8
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> Supreme Court --Petition for special leave to appeal--Income--Assessability--Sums collected towards apprehended sales tax liability--Finding that sums refundable and since refunded and not taxable--Business expenditure--Enhanced rent paid under agreement after machinery revamped--Finding that agreement not sham and enhanced rent deductible--Factual determination by High Court--Supreme Court will not entertain special leave petitions--Income-tax Act, 1961-- CIT v. Khoday Breweries Ltd. . . . 1
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> HIGH COURTS
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> Appeal to Appellate Tribunal --Power to rectify mistakes--Assessee treating interest as business income--Assessing Officer and appellate authorities treating it as income from other sources--Tribunal can examine whether order sought to be rectified has apparent error of law not limited to mistakes of fact apparent on face of record--Tribunal dismissing rectification application filed by assessee--Tribunal to examine issue in light of stand of Department in earlier and later assessment years--Rule of consistency to be followed--Matter remanded--Income-tax Act, 1961, s. 254(2)-- Promain Ltd. v. CIT (Delhi) . . . 25
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> ----Power to remand matter--When exercised--When materials available on record, Tribunal to arrive at own conclusion--High Court remanding matter to Tribunal to decide issue applying decision of Supreme Court--Tribunal remanding matter to Assessing Officer without proper reason for remand--Not proper--Tribunal to decide issue in light of judgment of Supreme Court-- Dell International Services India P. Ltd. v. Asst. CIT (Karn) . . . 37
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> Assessment --Assessment in case of search--Limitation--Assessment to be completed within sixty days from date on which special auditor's report due--Assessment order dated 27-4-2007 served on assessee on 30-4-2007--No proof to establish that order issued beyond control of authority within period of limitation being 29-4-2007--Assessment barred by limitation--Income-tax Act, 1961, ss. 142(2A), (2C), 153A-- CIT v. B J N Hotels Ltd. (Karn) . . . 110
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> ----Draft assessment order--Eligible assessee--Assessee not foreign company and Transfer Pricing Officer accepting return filed by assessee--Assessee for purposes of section 144C(15)(b) not "eligible assessee"--Assessing Officer cannot propose draft order of assessment to vary income or loss declared in return--Income-tax Act, 1961, s. 144C(1), (15)(b)-- Honda Cars India Ltd. v. Deputy CIT (Delhi) . . . 88
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> Business expenditure --Accrued or contingent liability--Provision for warranty claims--Deduction permissible if requirements fulfilled--Matter remanded--Income-tax Act, 1961, s. 37-- Dell International Services India P. Ltd. v. Asst. CIT (Karn) . . . 37
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> ----Disallowance--Payments subject to deduction of tax at source--Salaries and perquisites paid by head office outside India to employees deputed to Indian branches--Payments not brought into profit and loss account in respect of business in India--Tax deductible in respect of such payments paid in subsequent year pursuant to clarification by CBDT--Assessee entitled to deduction thereof--Condition to deposit tax deducted at source within time cannot be read into section 40(a)(iii)--Absence of entries in books of account not decisive of entitlement of assessee to claim deduction--Income-tax Act, 1961, s. 40(a)(iii)--CBDT Circular No. 685, dated 17/20-6-1994-- ANZ Grindlays Bank v. Deputy CIT (Delhi) . . . 156
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> ----Expenses incurred on conveyance and telephone charges of directors--Expenditure incurred in providing benefit free of charge under Companies Act cannot be disallowed--Expenses allowable--Income-tax Act, 1961, s. 37-- Principal CIT v. Rimjhim Ispat Ltd. (All) . . . 152
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> ----Manufacturing expenses--Failure by assessee to produce bills, vouchers and other supporting documents in relation to various expenses--No stock register maintained--Disallowance of 5 per cent. proper--Income-tax Act, 1961, s. 37-- Principal CIT v. Rimjhim Ispat Ltd. (All) . . . 152
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> Capital gains --Exemption--Investment of consideration in residential house--No provision requiring amount received on transfer of original capital asset must be used for meeting cost of new asset--Investment by assessee within stipulated time and in sum greater than capital gains earned by him--Assessee entitled to get benefit under section 54F--Income-tax Act, 1961, s. 54F-- CIT v. Kapil Kumar Agarwal (P&H) . . . 56
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> Depreciation --Condition precedent--Manufacture of thing--Meanings of "thing" and "manufacture"--Thing could be intangible--Definition of "manufacture" in section 2(29BA) retrospective--Manufacture would include combination of processes--Claim in respect of intangible asset can be made without claim in respect of tangible asset--Broadcasting amounts to manufacture of thing--Plant and machinery used in broadcasting entitled to additional depreciation--Income-tax Act, 1961, ss. 2(29BA), 32(1)(iia)-- CIT v. Radio Today Broadcasting Ltd. (Delhi) . . . 42
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> ----Condition precedent--Use of plant or machinery in relevant accounting year--Meaning of word "use"--Plant or machinery kept ready for use would amount to user for purposes of section 32--Income-tax Act, 1961, s. 32-- CIT v. Radio Today Broadcasting Ltd. (Delhi) . . . 42
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> ----User of asset in business of assessee--Sale and lease back--Finding that transaction genuine--Lessee not claiming any depreciation and assessee taking loan against security of leased assets--Assessee entitled to depreciation--CBDT Circular No. 2 of 2001, dated 9-2-2001--Income-tax Act, 1961-- CIT v. Apollo Finvest (I) Ltd. (Bom) . . . 33
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> Interpretation of taxing statute --Speech of Finance Minister while inserting provision can be referred to-- U. P. Transformers (India) P. Ltd. v. CIT (All) . . . 66
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> ----Strict interpretation-- ANZ Grindlays Bank v. Deputy CIT (Delhi) . . . 156
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> Non-resident --Income deemed to accrue or arise in India--Double Taxation Avoidance Agreements between India and Thailand and between India and Netherlands--General principles relating to international double taxation--Royalty--Royalty having same meaning under Income-tax Act and double taxation avoidance agreements--Subsequent amendment in Income-tax Act widening scope of "royalty"--Meaning under double taxation avoidance agreements cannot be altered--Double taxation avoidance agreement more beneficial than Income-tax Act--Double taxation avoidance agreement applicable--Income-tax Act, 1961, ss. 9, 90--Double Taxation Avoidance Agreements between India and Thailand and between India and Netherlands-- Director of Income-tax v. New Skies Satellite BV (Delhi) . . . 114
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> ----Taxability in India--Double taxation avoidance--Fees for technical services--Liaison office not involved in supervisory activities and not allowed to do trading, commercial or industrial activity--Not supervisory permanent establishment in India--Income not taxable as business income but as fees for technical services--Double Taxation Avoidance Agreement between India and Japan, arts. 7, 12(2), (5)-- CIT v. Sumitomo Corporation (Delhi) . . . 75
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> Reassessment --Notice--Validity--Notice issued after death of assessee returned unserved--Notice to be sent prior to limitation period if Department intends to proceed against legal heirs of deceased assessee--Notice sent to legal heir after limitation period--Not valid--Income-tax Act, 1961, ss. 147, 148, 159-- Vipin Walia v. ITO (Delhi) . . . 19
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> ----Notice after four years--Failure to disclose material facts necessary for assessment--Notice should give reasons--Reasons cannot be supplemented by affidavit or other materials--No allegation in notice regarding non-disclosure of material particulars--Facts showing particulars had been disclosed--Notice not valid--Income-tax Act, 1961, ss. 147, 148-- Nirmal Bang Securities Pvt. Ltd. v. Asst. CIT (Bom) . . . 93
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> Special deduction --New industrial undertaking--Special deduction under section 80-I--Condition precedent--Industrial undertaking should be set up after 1-4-1981--Income-tax Act, 1961, s. 80-I-- U. P. Transformers (India) P. Ltd. v. CIT (All) . . . 66
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> ----New industrial undertaking in backward area--Special deduction under section 80HH--Conditions precedent--Not necessary that setting up of industry and manufacturing activity should take place simultaneously--Undertaking set up in accounting year relevant to assessment year 1980-81--Manufacturing activity started in accounting year relevant to assessment year 1985-86--Assessee entitled to special deduction under section 80HH for assessment years 1985-86 and 1987-88--Income-tax Act, 1961, s. 80HH-- U. P. Transformers (India) P. Ltd. v. CIT (All) . . . 66
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> Words and phrases --"Thing" --"Manufacture"--"Use"--Meanings of-- CIT v. Radio Today Broadcasting Ltd. (Delhi) . . . 42
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> Writ --Appeal to Commissioner (Appeals)--Powers of Commissioner (Appeals)--Power of enhancement of assessment-- Commissioner (Appeals) calling upon assessee to show cause why amount should not be disallowed--Issue can be contested on merits in accordance with law before Commissioner (Appeals)--No merit in writ petition--Income-tax Act, 1961, s. 251(1)(a)-- Megatrends Inc. v. CIT (Mad) . . . 13
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> SECTIONWISE INDEX TO CASES REPORTED IN THIS PART
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> Double Taxation Avoidance Agreement between India and Japan :
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> Arts. 7, 12(2), (5) --Non-resident--Taxability in India--Double taxation avoidance--Fees for technical services--Liaison office not involved in supervisory activities and not allowed to do trading, commercial or industrial activity--Not supervisory permanent establishment in India--Income not taxable as business income but as fees for technical services-- CIT v. Sumitomo Corporation (Delhi) . . . 75
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> Income-tax Act, 1961 :
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> S. 2(29BA) --Depreciation--Condition precedent--Manufacture of thing--Meanings of "thing" and "manufacture"--Thing could be intangible--Definition of "manufacture" in section 2(29BA) retrospective--Manufacture would include combination of processes--Claim in respect of intangible asset can be made without claim in respect of tangible asset--Broadcasting amounts to manufacture of thing--Plant and machinery used in broadcasting entitled to additional depreciation-- CIT v. Radio Today Broadcasting Ltd. (Delhi) . . . 42
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> S. 9 --Non-resident--Income deemed to accrue or arise in India--Double Taxation Avoidance Agreements between India and Thailand and between India and Netherlands--General principles relating to international double taxation--Royalty--Royalty having same meaning under Income-tax Act and double taxation avoidance agreements--Subsequent amendment in Income-tax Act widening scope of "royalty"--Meaning under double taxation avoidance agreements cannot be altered--Double taxation avoidance agreement more beneficial than Income-tax Act--Double taxation avoidance agreement applicable-- Director of Income-tax v.New Skies Satellite BV (Delhi) . . . 114
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> S. 12AA --Charitable purpose--Registration of trusts--Application for registration--Decision of High Court that if application not responded to within six months assessee to be deemed registered--Supreme Court--Registration to take effect six months after date of application--CIT v. Society for the Promotion of Education (SC). . . 6
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> S. 32 --Depreciation--Condition precedent--Use of plant or machinery in relevant accounting year--Meaning of word "use"--Plant or machinery kept ready for use would amount to user for purposes of section 32-- CIT v. Radio Today Broadcasting Ltd. (Delhi) . . . 42
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> S. 32(1)(iia) --Depreciation--Condition precedent--Manufacture of thing--Meanings of "thing" and "manufacture"--Thing could be intangible--Definition of "manufacture" in section 2(29BA) retrospective--Manufacture would include combination of processes--Claim in respect of intangible asset can be made without claim in respect of tangible asset--Broadcasting amounts to manufacture of thing--Plant and machinery used in broadcasting entitled to additional depreciation-- CIT v. Radio Today Broadcasting Ltd. (Delhi) . . . 42
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> S. 37 --Business expenditure--Accrued or contingent liability--Provision for warranty claims--Deduction permissible if requirements fulfilled--Matter remanded-- Dell International Services India P. Ltd. v. Asst. CIT (Karn) . . . 37
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> ----Business expenditure--Expenses incurred on conveyance and telephone charges of directors--Expenditure incurred in providing benefit free of charge under Companies Act cannot be disallowed--Expenses allowable-- Principal CIT v. Rimjhim Ispat Ltd. (All) . . . 152
>
> ----Business expenditure--Manufacturing expenses--Failure by assessee to produce bills, vouchers and other supporting documents in relation to various expenses--No stock register maintained--Disallowance of 5 per cent. proper-- Principal CIT v. Rimjhim Ispat Ltd. (All) . . . 152
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> S. 40(a)(iii) --Business expenditure--Disallowance--Payments subject to deduction of tax at source--Salaries and perquisites paid by head office outside India to employees deputed to Indian branches--Payments not brought into profit and loss account in respect of business in India--Tax deductible in respect of such payments paid in subsequent year pursuant to clarification by CBDT--Assessee entitled to deduction thereof--Condition to deposit tax deducted at source within time cannot be read into section 40(a)(iii)--Absence of entries in books of account not decisive of entitlement of assessee to claim deduction-- ANZ Grindlays Bank v. Deputy CIT (Delhi) . . . 156
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> S. 54F --Capital gains--Exemption--Investment of consideration in residential house--No provision requiring amount received on transfer of original capital asset must be used for meeting cost of new asset--Investment by assessee within stipulated time and in sum greater than capital gains earned by him--Assessee entitled to get benefit under section 54F-- CIT v. Kapil Kumar Agarwal (P&H) . . . 56
>
> S. 80HH --Special deduction--New industrial undertaking in backward area--Special deduction under section 80HH--Conditions precedent--Not necessary that setting up of industry and manufacturing activity should take place simultaneously--Undertaking set up in accounting year relevant to assessment year 1980-81--Manufacturing activity started in accounting year relevant to assessment year 1985-86--Assessee entitled to special deduction under section 80HH for assessment years 1985-86 and 1987-88-- U. P. Transformers (India) P. Ltd. v. CIT (All) . . . 66
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> S. 80-I --Special deduction--New industrial undertaking--Special deduction under section 80-I--Condition precedent--Industrial undertaking should be set up after 1-4-1981-- U. P. Transformers (India) P. Ltd. v. CIT (All) . . . 66
>
> S. 90 --Non-resident--Income deemed to accrue or arise in India--Double Taxation Avoidance Agreements between India and Thailand and between India and Netherlands--General principles relating to international double taxation--Royalty--Royalty having same meaning under Income-tax Act and double taxation avoidance agreements--Subsequent amendment in Income-tax Act widening scope of "royalty"--Meaning under double taxation avoidance agreements cannot be altered--Double taxation avoidance agreement more beneficial than Income-tax Act--Double taxation avoidance agreement applicable-- Director of Income-tax v.New Skies Satellite BV (Delhi) . . . 114
>
> S. 142(2A) --Assessment--Assessment in case of search--Limitation--Assessment to be completed within sixty days from date on which special auditor's report due--Assessment order dated 27-4-2007 served on assessee on 30-4-2007--No proof to establish that order issued beyond control of authority within period of limitation being 29-4-2007--Assessment barred by limitation-- CIT v. B J N Hotels Ltd. (Karn) . . . 110
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> S. 142(2C) --Assessment--Assessment in case of search--Limitation--Assessment to be completed within sixty days from date on which special auditor's report due--Assessment order dated 27-4-2007 served on assessee on 30-4-2007--No proof to establish that order issued beyond control of authority within period of limitation being 29-4-2007--Assessment barred by limitation-- CIT v. B J N Hotels Ltd. (Karn) . . . 110
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> S. 144C(1) --Assessment--Draft assessment order--Eligible assessee--Assessee not foreign company and Transfer Pricing Officer accepting return filed by assessee--Assessee for purposes of section 144C(15)(b) not "eligible assessee"--Assessing Officer cannot propose draft order of assessment to vary income or loss declared in return-- Honda Cars India Ltd. v. Deputy CIT (Delhi) . . . 88
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> S. 144C(15)(b) --Assessment--Draft assessment order--Eligible assessee--Assessee not foreign company and Transfer Pricing Officer accepting return filed by assessee--Assessee for purposes of section 144C(15)(b) not "eligible assessee"--Assessing Officer cannot propose draft order of assessment to vary income or loss declared in return-- Honda Cars India Ltd. v. Deputy CIT (Delhi) . . . 88
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> S. 147 --Reassessment--Notice--Validity--Notice issued after death of assessee returned unserved--Notice to be sent prior to limitation period if Department intends to proceed against legal heirs of deceased assessee--Notice sent to legal heir after limitation period--Not valid--Vipin Walia v. ITO (Delhi) . . . 19
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> ----Reassessment--Notice after four years--Failure to disclose material facts necessary for assessment--Notice should give reasons--Reasons cannot be supplemented by affidavit or other materials--No allegation in notice regarding non-disclosure of material particulars--Facts showing particulars had been disclosed--Notice not valid-- Nirmal Bang Securities Pvt. Ltd.v. Asst. CIT (Bom) . . . 93
>
> S. 148 --Reassessment--Notice--Validity--Notice issued after death of assessee returned unserved--Notice to be sent prior to limitation period if Department intends to proceed against legal heirs of deceased assessee--Notice sent to legal heir after limitation period--Not valid--Vipin Walia v. ITO (Delhi) . . . 19
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> ----Reassessment--Notice after four years--Failure to disclose material facts necessary for assessment--Notice should give reasons--Reasons cannot be supplemented by affidavit or other materials--No allegation in notice regarding non-disclosure of material particulars--Facts showing particulars had been disclosed--Notice not valid-- Nirmal Bang Securities Pvt. Ltd.v. Asst. CIT (Bom) . . . 93
>
> S. 153A --Assessment--Assessment in case of search--Limitation--Assessment to be completed within sixty days from date on which special auditor's report due--Assessment order dated 27-4-2007 served on assessee on 30-4-2007--No proof to establish that order issued beyond control of authority within period of limitation being 29-4-2007--Assessment barred by limitation-- CIT v. B J N Hotels Ltd. (Karn) . . . 110
>
> S. 159 --Reassessment--Notice--Validity--Notice issued after death of assessee returned unserved--Notice to be sent prior to limitation period if Department intends to proceed against legal heirs of deceased assessee--Notice sent to legal heir after limitation period--Not valid--Vipin Walia v. ITO (Delhi) . . . 19
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> S. 194A --Deduction of tax at source--Interest for delayed payment of compensation for acquisition of land--Whether subject to deduction of tax at source--Failure by High Court to give reasons--Supreme Court--Matter remanded-- Commissioner, Belgaum Urban Development Authority v. CIT (SC) . . . 8
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> S. 251(1)(a) --Writ--Appeal to Commissioner (Appeals)--Powers of Commissioner (Appeals)--Power of enhancement of assessment-- Commissioner (Appeals) calling upon assessee to show cause why amount should not be disallowed--Issue can be contested on merits in accordance with law before Commissioner (Appeals)--No merit in writ petition-- Megatrends Inc. v. CIT (Mad) . . . 13
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> S. 254(2) --Appeal to Appellate Tribunal--Power to rectify mistakes--Assessee treating interest as business income--Assessing Officer and appellate authorities treating it as income from other sources--Tribunal can examine whether order sought to be rectified has apparent error of law not limited to mistakes of fact apparent on face of record--Tribunal dismissing rectification application filed by assessee--Tribunal to examine issue in light of stand of Department in earlier and later assessment years--Rule of consistency to be followed--Matter remanded-- Promain Ltd. v. CIT (Delhi) . . . 25
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