ITR (TRIB) VOL 4 PART 6

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))

Volume 4 : Part 6 (Issue dated : 9-8-2010)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Accounting --Valuation of stock--Purchase of Government securities--Stock-in-trade--Valuation--Cost or market value whichever is lower followed by assessee--Profit on revaluation of securities--Not taxable--Excess of market price over cost price cannot be added to total income--Income-tax Act, 1961-- Deputy Director (International Taxation) v. Chohung Bank (Mumbai) . . . 627

Advance tax --Interest--Interest under section 234B--Is mandatory--Income-tax Act, 1961, s. 234B-- Aditya Birla Power Co. Ltd. v. ITO (Mumbai) . . . 658

Appeal to Appellate Tribunal --Competency of appeal--Monetary limit of tax effect as fixed by CBDT instruction from time to time--Limit as fixed by instruction prevailing at time of filing appeal to be considered--Income-tax Act, 1961-- ITO v. Sanatan Textrade Ltd. (Mumbai) . . . 593

Business expenditure --Bank--Purchase of securities--Interest for broken period--Deductible--Income-tax Act, 1961, s. 37-- Deputy Director (International Taxation) v. Chohung Bank (Mumbai) . . . 627

----Expenses on developing business of associate concerns disclosed as "advances recoverable"--Expenditure to be incurred till financial closure of business and recovery thereof contingent and uncertain--To be treated as work-in-progress--Income-tax Act, 1961-- Aditya Birla Power Co. Ltd. v. ITO (Mumbai) . . . 658

----Increase in salary and other expenses--No evidence to show genuineness of--Addition proper--Income-tax Act, 1961-- Aditya Birla Power Co. Ltd. v. ITO (Mumbai) . . . 658

----Interest on borrowed capital--Interest on unsecured loans granted to group companies, legal and professional fees related to project, consultancy fees for BPO project--Third party expenditure to be treated as work-in-progress--Income-tax Act, 1961, s. 36(1)(iii)-- Aditya Birla Power Co. Ltd. v. ITO (Mumbai) . . . 658

----Non-resident--Head office expenses--Salaries paid to expatriates--Expenditure incurred for branch office--Section 44C not applicable--Head office expenses allowable--Income-tax Act, 1961, ss. 37(1), 44C-- Deputy Director (International Taxation) v. Chohung Bank (Mumbai) . . . 627

----Revenue expenditure--Deferred revenue expenditure--Expenses on advertisement to create brand image--Partly debited in profit and loss account and balance deferred over a period of three years--Entry or absence of an entry does not determine allowability--Not a case that expenditure incurred not revenue in nature--To be allowed--Income-tax Act, 1961, s. 37-- Deputy CIT v. Godrej Tea Ltd. (Mumbai) . . . 649

Business loss --Bank--Loss incurred on sale of Government securities--Securities in nature of current investments--Loss arising from sale of stock-in-trade allowable as business loss--Income-tax Act, 1961, s. 28-- Deputy Director (International Taxation) v. Chohung Bank (Mumbai) . . . 627

Deduction --Expenses relating to non-taxable income--Assessee earning dividend from long-term investment--Disallowance under section 14A to be made in accordance with rule 8D--Income-tax Act, 1961, s. 14A--Income-tax Rules, 1962, r. 8D-- ITO v. Sanatan Textrade Ltd. (Mumbai) . . . 593

Income --Accounting--Accrual of income--Guarantee commission--No clause in agreement for refund of guarantee commission in case of revocation of guarantee--Entire guarantee commission accrues at time of executing guarantee--Liable to tax--Income-tax Act, 1961-- Deputy Director (International Taxation) v. Chohung Bank (Mumbai) . . . 627

Interest on borrowed capital --Borrowed funds transferred to BPO project--BPO project taken over by another company--Assessee receiving entire amount back from that company in following year without any profit--To be treated as work-in-progress and pro rata disallowances made during year to be made for following year--Income-tax Act, 1961, s. 36(1)(iii)-- Aditya Birla Power Co. Ltd. v. ITO (Mumbai) . . . 658

International transactions --Arm's length price--Transactional net margin method--Comparables--Enterprise treated as comparable on basis of evidence provided by assessee--Assessee not estopped from challenging inclusion of enterprise as comparable--Enterprise running at a loss, rendering different services from assessee and having a negative net worth--Not to be treated as comparable--Whether assessee to be given benefit of five per cent.--Matter remanded--Income-tax Act, 1961, s. 92C(2)--Income-tax Rules, 1962, r. 10B-- Deputy CIT v. Quark Systems Pvt. Ltd. [SB] (Chandigarh) . . . 606

Precedent --High Court--Contrary decisions by benches of equal strength--Later decision binding-- ITO v. Sanatan Textrade Ltd. (Mumbai) . . . 593

Reassessment --Capital gains--Provision permitting valuation for stamp duty purposes as value of property--Applicable only for purposes of capital gains--Not applicable for bringing to tax additional amounts in hands of purchaser of property--Income-tax Act, 1961, ss. 50C, 147-- ITO v. Venu Proteins Industries (Ahmedabad) . . . 602

Rectification of mistakes --Mistake apparent from record--Legal position at time of adjudication to be seen--Delayed payment of contribution of provident fund and employees State insurance--Deduction only on actual payment--Quantam of disallowance in original assessment enhanced by rectification--Prevailing legal position not in support of disallowance under section 43B--Payments cannot be disallowed by rectification--Income-tax Act, 1961, ss. 43B, 154-- Fouress Engineering (I) Ltd. v. ITO (Mumbai) . . . 643

Search and seizure --Block assessment--Undisclosed income--Amount not recorded in regular books of account--Addition justified--Income-tax Act, 1961, ss. 132, 158BC-- Deputy CIT v. Tulsibhai Mavjibhai Shankar (Ahmedabad) . . . 670

----Block assessment--Undisclosed income--Entries in seized documents considered for taxation in hands of company of which assessee partner--Deletion of sum in hands of assessee justified--Income-tax Act, 1961, ss. 132, 158BC-- Deputy CIT v. Tulsibhai Mavjibhai Shankar (Ahmedabad) . . . 670

----Block assessment--Undisclosed income--Seized documents decoded by interpreting and applying thousand to figures mentioned--Wrong interpretation of seized documents without any basis--Seized documents found in possession of assessee to be read as true--Income-tax Act, 1961, ss. 132, 132(4A), 158BC-- Deputy CIT v. Tulsibhai Mavjibhai Shankar (Ahmedabad) . . . 670

Unexplained money --Burden on Department to prove un-explained money belongs to assessee-- Asst. CIT v. Smt. Kusum Ramniklal Sanghani (Mumbai) . . . 582

----Deemed income--Search and seizure--Search at premises of assessee's son-in-law--Keys to locker belonging to assessee found and cash found in locker--Assessee explaining that cash represents donations received on behalf of trust and she has no source of income--Explanation and proof of details of donors to trust satisfactory--Addition to be deleted--Income-tax Act, 1961, ss. 69A, 132-- Asst. CIT v. Smt. Kusum Ramniklal Sanghani (Mumbai) . . . 582

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Income-tax Act, 1961 :

S. 14A --Deduction--Expenses relating to non-taxable income--Assessee earning dividend from long-term investment--Disallowance under section 14A to be made in accordance with rule 8D-- ITO v. Sanatan Textrade Ltd. (Mumbai) . . . 593

S. 28 --Business loss--Bank--Loss incurred on sale of Government securities--Securities in nature of current investments--Loss arising from sale of stock-in-trade allowable as business loss-- Deputy Director (International Taxation) v. Chohung Bank (Mumbai) . . . 627

S. 36(1)(iii) --Business expenditure--Interest on borrowed capital--Interest on unsecured loans granted to group companies, legal and professional fees related to project, consultancy fees for BPO project--Third party expenditure to be treated as work-in-progress-- Aditya Birla Power Co. Ltd. v. ITO (Mumbai) . . . 658

----Interest on borrowed capital--Borrowed funds transferred to BPO project --BPO project taken over by another company--Assessee receiving entire amount back from that company in following year without any profit--To be treated as work-in-progress and pro rata disallowances made during year to be made for following year-- Aditya Birla Power Co. Ltd. v. ITO (Mumbai) . . . 658

S. 37 --Business expenditure--Bank--Purchase of securities--Interest for broken period--Deductible-- Deputy Director (International Taxation) v. Chohung Bank (Mumbai) . . . 627

----Business expenditure--Revenue expenditure--Deferred revenue expenditure--Expenses on advertisement to create brand image--Partly debited in profit and loss account and balance deferred over a period of three years--Entry or absence of an entry does not determine allowability--Not a case that expenditure incurred not revenue in nature--To be allowed-- Deputy CIT v. Godrej Tea Ltd. (Mumbai) . . . 649

S. 37(1) --Business expenditure--Non-resident--Head office expenses--Salaries paid to expatriates--Expenditure incurred for branch office--Section 44C not applicable--Head office expenses allowable-- Deputy Director (International Taxation) v. Chohung Bank (Mumbai) . . . 627

S. 43B --Rectification of mistakes--Mistake apparent from record--Legal position at time of adjudication to be seen--Delayed payment of contribution of provident fund and employees State insurance--Deduction only on actual payment--Quantam of disallowance in original assessment enhanced by rectification--Prevailing legal position not in support of disallowance under section 43B--Payments cannot be disallowed by rectification-- Fouress Engineering (I) Ltd. v. ITO (Mumbai) . . . 643

S. 44C --Business expenditure--Non-resident--Head office expenses--Salaries paid to expatriates--Expenditure incurred for branch office--Section 44C not applicable--Head office expenses allowable-- Deputy Director (International Taxation) v. Chohung Bank (Mumbai) . . . 627

S. 50C --Reassessment--Capital gains--Provision permitting valuation for stamp duty purposes as value of property--Applicable only for purposes of capital gains--Not applicable for bringing to tax additional amounts in hands of purchaser of property-- ITO v. Venu Proteins Industries (Ahmedabad) . . . 602

S. 69A --Unexplained money--Deemed income--Search and seizure--Search at premises of assessee's son-in-law--Keys to locker belonging to assessee found and cash found in locker--Assessee explaining that cash represents donations received on behalf of trust and she has no source of income--Explanation and proof of details of donors to trust satisfactory--Addition to be deleted-- Asst. CIT v. Smt. Kusum Ramniklal Sanghani (Mumbai) . . . 582

S. 92C(2) --International transactions--Arm's length price--Transactional net margin method--Comparables--Enterprise treated as comparable on basis of evidence provided by assessee--Assessee not estopped from challenging inclusion of enterprise as comparable--Enterprise running at a loss, rendering different services from assessee and having a negative net worth--Not to be treated as comparable --Whether assessee to be given benefit of five per cent.--Matter remanded-- Deputy CIT v. Quark Systems Pvt. Ltd. [SB] (Chandigarh) . . . 606

S. 132 --Search and seizure--Block assessment--Undisclosed income--Amount not recorded in regular books of account--Addition justified-- Deputy CIT v. Tulsibhai Mavjibhai Shankar (Ahmedabad) . . . 670

----Search and seizure--Block assessment--Undisclosed income--Entries in seized documents considered for taxation in hands of company of which assessee partner--Deletion of sum in hands of assessee justified-- Deputy CIT v. Tulsibhai Mavjibhai Shankar (Ahmedabad) . . . 670

----Search and seizure--Block assessment--Undisclosed income--Seized documents decoded by interpreting and applying thousand to figures mentioned--Wrong interpretation of seized documents without any basis--Seized documents found in possession of assessee to be read as true-- Deputy CIT v. Tulsibhai Mavjibhai Shankar (Ahmedabad) . . . 670

----Unexplained money--Deemed income--Search and seizure--Search at premises of assessee's son-in-law--Keys to locker belonging to assessee found and cash found in locker--Assessee explaining that cash represents donations received on behalf of trust and she has no source of income--Explanation and proof of details of donors to trust satisfactory--Addition to be deleted-- Asst. CIT v. Smt. Kusum Ramniklal Sanghani (Mumbai) . . . 582

S. 132(4A) --Search and seizure--Block assessment--Undisclosed income--Seized documents decoded by interpreting and applying thousand to figures mentioned--Wrong interpretation of seized documents without any basis--Seized documents found in possession of assessee to be read as true-- Deputy CIT v. Tulsibhai Mavjibhai Shankar (Ahmedabad) . . . 670

S. 147 --Reassessment--Capital gains--Provision permitting valuation for stamp duty purposes as value of property--Applicable only for purposes of capital gains--Not applicable for bringing to tax additional amounts in hands of purchaser of property-- ITO v. Venu Proteins Industries (Ahmedabad) . . . 602

S. 154 --Rectification of mistakes--Mistake apparent from record--Legal position at time of adjudication to be seen--Delayed payment of contribution of provident fund and employees State insurance--Deduction only on actual payment--Quantam of disallowance in original assessment enhanced by rectification--Prevailing legal position not in support of disallowance under section 43B--Payments cannot be disallowed by rectification-- Fouress Engineering (I) Ltd. v. ITO (Mumbai) . . . 643

S. 158BC --Search and seizure--Block assessment--Undisclosed income--Amount not recorded in regular books of account--Addition justified-- Deputy CIT v. Tulsibhai Mavjibhai Shankar (Ahmedabad) . . . 670

----Search and seizure--Block assessment--Undisclosed income--Entries in seized documents considered for taxation in hands of company of which assessee partner--Deletion of sum in hands of assessee justified-- Deputy CIT v. Tulsibhai Mavjibhai Shankar (Ahmedabad) . . . 670

----Search and seizure--Block assessment--Undisclosed income--Seized documents decoded by interpreting and applying thousand to figures mentioned--Wrong interpretation of seized documents without any basis--Seized documents found in possession of assessee to be read as true-- Deputy CIT v. Tulsibhai Mavjibhai Shankar (Ahmedabad) . . . 670

S. 234B --Advance tax--Interest--Interest under section 234B--Is mandatory-- Aditya Birla Power Co. Ltd. v. ITO (Mumbai) . . . 658

Income-tax Rules, 1962 :

R. 8D --Deduction--Expenses relating to non-taxable income--Assessee earning dividend from long-term investment--Disallowance under section 14A to be made in accordance with rule 8D-- ITO v. Sanatan Textrade Ltd. (Mumbai) . . . 593

R. 10B --International transactions--Arm's length price--Transactional net margin method--Comparables--Enterprise treated as comparable on basis of evidence provided by assessee--Assessee not estopped from challenging inclusion of enterprise as comparable--Enterprise running at a loss, rendering different services from assessee and having a negative net worth--Not to be treated as comparable --Whether assessee to be given benefit of five per cent.--Matter remanded-- Deputy CIT v. Quark Systems Pvt. Ltd. [SB] (Chandigarh) . . . 606

 -CA.RAJU SHAH

Important Announcement relating to Students

Dear Sir/ Madam,

 

Pursuant to the decisions taken by the Council at its 297th meeting held in August, 2010, the following announcements have been hosted on the website of the ICAI:

 

1. Resolution of the Council;
2. Final Eligibility criteria of different streams; and
3. Exemption and relaxation to Intermediate/PE-II students from undergoing Orientation Programme and ITT

FOR DETAILS PLEASE VISIT www.icai.org

 

 

Regards,
-------
CA.C.V.PAWAR
Member of Western India Regional Council of
Institute of Chartered Accountants of India
The Chairman, Banking, Insurance and Pension Committee of WIRC of ICAI

0253-2319641. M-9423961209

Consolidation for Acceleration

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Dear Members,

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---------- Forwarded message ----------
From: Vijay Kapur, Director, Board of Studies, ICAI <vijaykapur@icai.org>
Date: Sat, Aug 7, 2010 at 1:00 PM
Subject: important announcement
To:

Dear Sir/ Madam,

 

Pursuant to the decisions taken by the Council at its 297th meeting held in August, 2010, the following announcements have been hosted on the website of the ICAI:

 

1. Resolution of the Council;
2. Final Eligibility criteria of different streams; and
3. Exemption and relaxation to Intermediate/PE-II students from undergoing Orientation Programme and ITT

You are requested to give vide publicity to this announcement and questions if any, will be forwarded so that necessary clarifications can be issued.

 

With kind regards,

--
Vijay Kapur
Director, Board of Studies
The Institute of Chartered Accountants of India
A-94/4, Sector-58
Noida 201 301
Phone: 91 120 3045901-02
Fax: 91 120 3045940
Email: vijaykapur@icai.org; vijaykapur@icai.in
Website: www.icai.org

ITR VOL 325 PART 4 / ITR (TRIB) VOL 4 PART 5

 

INCOME TAX REPORTS (ITR)

Volume 325 : Part 4 (Issue dated 2-8-2010)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

SUPREME COURT

Deduction of tax at source --Indian company engaged in sale and export of sea food--Entering into agreement with non-resident for chartering fishing vessels--Indian company bringing catch at high seas to Indian port where value of catch was assessed and local taxes paid--Indian company carrying fish to destination chosen by non-resident--Income of non-resident chargeable in India--Indian company liable to deduct tax at source--Income-tax Act, 1961, ss. 5(2), 195, 201(1)-- Kanchanganga Sea Foods Ltd. v. CIT . . . 540

HIGH COURTS

Advance tax --Interest payable by assessee on shortfall--Scope of section 234B--Interest can be levied for first time in reassessment proceedings--Loss shown and accepted in original return--Reassessment resulting in positive income--Interest not levied under section 234B(3)--Revision of reassessment--Interest could be levied on such revision--Income-tax Act, 1961, s. 234B(3)-- South Indian Bank Ltd. v. CIT (Ker) . . . 517

Appeal to Appellate Tribunal --Income or capital--Non-competing fees--Commissioner (Appeals) directing Assessing Officer to determine year of receipt and confirming assessment--Assessing Officer in meantime passing an order pursuant to direction of Commissioner (Appeals) assessing amount as capital gains--Commissioner (Appeals) deleting addition relying on order of Tribunal--Tribunal dismissing appeal from order of Commissioner (Appeals)--Chargeability of amount not properly analysed and considered--Matter remanded--Income-tax Act, 1961-- CIT v. United Breweries Ltd . (Karn) . . . 485

Assessment --Reference to Valuation Officer--Addition on basis of valuation by District Valuation Officer--Addition deleted on ground report not reliable--Finding of fact not challenged before Tribunal--No interference--Income-tax Act, 1961, s. 142A-- CIT v. N. S. Bakshi (P&H) . . . 607

----Trust--Trust deed providing for operation of trust till beneficiary attains 21 years--Beneficiary on attaining majority revoking trust and carrying on business as proprietor--No assessment on trust permissible thereafter--Department cannot insist trust will operate till beneficiary attains 21 years--Indian Trusts Act, 1882, s. 78(a)-- CIT v. Nelson Trust (Ker) . . . 456

Business expenditure --Deduction only on actual payment--Gratuity--Contribution to gratuity fund--Deductible if made before filing of return--Matter remanded--Income-tax Act, 1961, s. 43B(b)-- CIT v. Popular Vehicles and Services Ltd. (Ker) . . . 523

----Disallowance--Deduction of tax at source--Amount paid to non-resident without deducting tax at source--Demurrage paid by Indian company to foreign company--Section 172 not applicable--Demurrage paid without deducting tax at source--Disallowance under section 40(a)(i) justified--Income-tax Act, 1961, ss. 40(a)(i), 172-- CIT v. Orient (Goa) P. Ltd . (Bom) . . . 554

----Gratuity--Effect of section 40A(7)--Insurance against liability under Payment of Gratuity Act--Conditions laid down in section 40A(7)(a) not fulfilled--Amount not deductible--Income-tax Act, 1961, s. 40A(7)(a)-- CIT v. Pradeshiya Industrial and Investment Corpn. of U. P. Ltd. (All) . . . 583

Business income --Remission or cessation of trading liability--Credits outstanding for six years and acknowledged by creditors--No evidence of deduction in earlier years--Credits not assessable under section 41--Income-tax Act, 1961, s. 41(1)-- CIT v. Smt. Sita Devi Juneja (P&H) . . . 593

Capital gains --Capital asset--Definition--Agricultural land --Report of Tehsildar that land was beyond eight kilometres from municipal limit--Gains arising from transfer not assessable--Income-tax Act, 1961, ss. 45, 54B-- CIT v. Lal Singh (P&H) . . . 588

----Short-term capital loss--Renunciation of right to subscribe to rights shares--Renunciation in favour of general public--Transaction did not amount to transfer--Loss notional--Not deductible--Income-tax Act, 1961-- CIT v. United Breweries Ltd. (Karn) . . . 485

Capital loss --Dividends--Transactions in securities--Dividend stripping--Loss on sale of units set off against profits on sale of units--Sale beyond statutory period of three months--Section 94(7) not attracted--Income-tax Act, 1961, s. 94(7)-- CIT v. Shambhu Mercantile Ltd . (Delhi) . . . 535

----Sale of units--Sale taking place after expiry of three months from record date--Section 94(7) does not apply--Income-tax Act, 1961, s. 94(7)-- CIT v. Smt. Alka Bhosle (Bom) . . . 550

Company --Book profit--Computation--Depreciation not charged to profit and loss account but disclosed in note to accounts--Deductible--Income-tax Act, 1961, s. 115J--Companies Act, 1956, Sch. VI, Parts II, III-- CIT v. Sain Processing and Weaving Mills P. Ltd. (Delhi) . . . 565

Deduction of tax at source --Salary--Employees of Japanese company working for assessee--Assessee not liable to deduct tax at source on salary received by employees from their Japanese employer--Penalty cannot be levied on assessee for non-deduction of tax on such salary--Income-tax Act, 1961, ss. 192, 271(1)(c)-- CIT v. Indo Nissin Foods Ltd. (Karn) . . . 451

Doctrine of merger --Reassessment--Merger of original order in reassessment order only to extent of issues considered in original order--Income-tax Act, 1961, s. 147-- Ashoka Buildcon Ltd . v. Asst. CIT (Bom) . . . 574

Donation for charitable purposes --Special deduction--Assessee carrying on charitable works--Entitled to benefit under section 80G--Income-tax Act, 1961, s. 80G(5)(vi)-- CIT v. Sewa Bharti Haryana Pradesh (P&H) . . . 599

Gift-tax --Gift--Revocable gift not void for purposes of gift-tax--Bonus shares after revocation continue to be property of donee--Gift-tax Act, 1958, s. 6(2)-- CGT v. Sh. Om Parkash Munjal (P&H) . . . 605

Income --Business income--Bottle deposits received from customers--Finding that deposits not sale proceeds--Amount not assessable--Income-tax Act, 1961-- CIT v. United Breweries Ltd . (Karn) . . . 485

----Sale of beer--Bottle deposit shown as liability--Addition on ground that liability not proved--Addition justified--Income-tax Act, 1961-- CIT v. United Breweries Ltd . (Karn) . . . 485

Intercorporate dividends --Special deduction--Computation--Financial institution--Deduction allowable on gross amount of dividend without deducting proportionate deduction available under section 36(1)(viii)--Income-tax Act, 1961, ss. 36(1)(viii), 80M-- Deputy CIT v. G.I.I.C. Limited (Guj) . . . 597

Interest on borrowed capital --Expenditure in relation to income not forming part of total income--Funds diverted to sister concern of which assessee was a partner--Share income from firm not taxable--Interest not deductible--Income-tax Act, 1961 ss. 10(2A), 14A(1), 36(1)(iii)-- CIT v. Popular Vehicles and Services Ltd. (Ker) . . . 523

Precedent --Effect of decisions in Shree Sajjan Mills Ltd. v. CIT [1985] 156 ITR 585 (SC) and Kumson Motor Owners Union Ltd. v. CIT [1993] 201 ITR 601 (All)-- CIT v. Pradeshiya Industrial and Investment Corpn. of U. P. Ltd . (All) . . . 583

Reassessment --Condition precedent--Reason to believe that income had escaped assessment--Assessee carrying on life insurance business--Method of accounting accepted in original assessment--Subsequent reassessment proceedings on ground that method of accounting was incorrect--Not valid--Income-tax Act, 1961, ss. 147, 148-- ICICI Prudential Life Insurance Co. Ltd . v. Asst. CIT (Bom) . . . 471

----Condition precedent--Reason to believe that income has escaped assessment--Information available with Assessing Officer at time of original assessment--Cannot be a ground for reopening assessment--Audit objection--Not a "reason to believe income escaped assessment"--Income-tax Act, 1961, ss. 80-IB, 148-- Purity Techtextile Private Limited v. Asst. CIT (Bom) . . . 459

----Industrial undertaking--Special deduction--Eligibility--Assessee running unit on licence from purchaser of unit from MFSC--Unit not formed by splitting up or reconstruction of existing business--Deed of conveyance executed by MSFC only in respect of land and building--Plant and machinery installed by assessee not used in another business--That factory plan approved twelve years ago not material--Reassessment to withdraw deduction--Not permissible--Income-tax Act, 1961, ss. 80-IB, 148-- Purity Techtextile Private Limited v. Asst. CIT (Bom) . . . 459

----Notice--Notice in the name of dead person--Notice not served on legal representatives--Notice not valid--Income-tax Act, 1961, s. 148-- CIT v. Suresh Chandra Jaiswal (All) . . . 563

----Reassessment after four years--Industrial undertaking--Special deduction--That factory plan approved twelve years ago disclosed at time of assessment in audit report--No failure to disclose material facts--Reassessment after four years not permissible--Income-tax Act, 1961, ss. 80-IB, 148-- Purity Techtextile Private Limited v. Asst. CIT (Bom) . . . 459

----Reassessment beyond four years--Condition precedent--Failure to disclose material facts necessary for assessment--Assessee carrying on life insurance business--Accounts maintained in accordance with statutory provisions--Change in statutory provisions and consequent change in accounting method--Facts disclosed to Assessing Officer--Reassessment proceedings after four years on ground that accounting procedure was incorrect--Not valid--Income-tax Act, 1961, ss. 147, 148-- ICICI Prudential Life Insurance Co. Ltd . v. Asst. CIT (Bom) . . . 471

Reference --Question not raised earlier--Oral prayer for question--Question could not be referred--Gift-tax Act, 1958-- CGT v. Sh. Om Parkash Munjal (P&H) . . . 605

Refund --Self-assessment--Tax paid on self-assessment cannot be refunded--Voluntary returns and tax paid for assessment years 1979-80 to 1984-85--Reassessments annulled--Self-assessments not annulled--Assessee not entitled to any refund--Income-tax Act, 1961, s. 240, prov. (b)-- Varkey Jacob v. Deputy CIT (Asstt.) (Ker) . . . 507

Revision --Assessment order set aside by Commissioner--Tribunal setting aside order of Commissioner--No occasion for Assessing Officer to pass fresh assessment--Order setting aside order of Assessing Officer pursuant to revision--Justified--Income-tax Act, 1961, s. 263-- CIT v. Sir Shadi Lal Enterprises Ltd .(All) . . . 561

----Commissioner--Limitation--Assessment under section 143(3)--Reassessment--Notice issued on issues unrelated to grounds on which original assessment reopened and reassessed--Limitation starts from original assessment--Income-tax Act, 1961, s. 263-- Ashoka Buildcon Ltd . v. Asst. CIT (Bom) . . . 574

Search and seizure --Block assessment--Undisclosed income--Document seized considered in assessment of third person--Notice could not be issued on assessee under section 158BD--Income-tax Act, 1961, s. 158BD-- Superhouse Overseas Ltd. v. Deputy CIT (All) . . . 448

Wealth-tax --Asset--Definition--Law applicable--Effect of amendment w.e.f. 1-4-1995--Exclusion--Urban land on which commercial building constructed within two years of acquisition--Commencement of construction within two years and completion of construction subsequent to two years--Wealth-tax could not be charged on such land--Wealth-tax Act, 1957, s. 2(ea)(vi), Expln. 1(b)-- Apollo Tyres Ltd. v. Asst. CIT (Ker) . . . 528

----Net wealth--Asset--Urban land--Exclusion--Land on which construction not permitted--Not urban land--Value of land not includible in net wealth--Wealth-tax Act, 1957, s. 2(ea), Expln. 1(b)-- CWT v. Lt. Genl. (Retd.) R. K. Mehra (P&H) . . . 601

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Companies Act, 1956 :

Sch. VI, Parts II, III --Company--Book profit--Computation--Depreciation not charged to profit and loss account but disclosed in note to accounts--Deductible-- CIT v. Sain Processing and Weaving Mills P. Ltd.

(Delhi) . . . 565

Gift-tax Act, 1958 :

S. 6(2) --Gift-tax--Gift--Revocable gift not void for purposes of gift-tax--Bonus shares after revocation continue to be property of donee-- CGT v. Sh. Om Parkash Munjal (P&H) . . . 605

Income-tax Act, 1961 :

S. 5(2) --Deduction of tax at source--Indian company engaged in sale and export of sea food--Entering into agreement with non-resident for chartering fishing vessels--Indian company bringing catch at high seas to Indian port where value of catch was assessed and local taxes paid--Indian company carrying fish to destination chosen by non-resident--Income of non-resident chargeable in India--Indian company liable to deduct tax at source-- Kanchanganga Sea Foods Ltd. v. CIT (SC) . . . 540

S. 10(2A) --Interest on borrowed capital--Expenditure in relation to income not forming part of total income--Funds diverted to sister concern of which assessee was a partner--Share income from firm not taxable--Interest not deductible-- CIT v. Popular Vehicles and Services Ltd. (Ker) . . . 523

S. 14A(1) --Interest on borrowed capital--Expenditure in relation to income not forming part of total income--Funds diverted to sister concern of which assessee was a partner--Share income from firm not taxable--Interest not deductible-- CIT v. Popular Vehicles and Services Ltd. (Ker) . . . 523

S. 36(1)(iii) --Interest on borrowed capital--Expenditure in relation to income not forming part of total income--Funds diverted to sister concern of which assessee was a partner--Share income from firm not taxable--Interest not deductible-- CIT v. Popular Vehicles and Services Ltd. (Ker) . . . 523

S. 36(1)(viii) --Intercorporate dividends--Special deduction--Computation--Financial institution--Deduction allowable on gross amount of dividend without deducting proportionate deduction available under section 36(1)(viii)-- Deputy CIT v. G.I.I.C. Limited (Guj) . . . 597

S. 40(a)(i) --Business expenditure--Disallowance--Deduction of tax at source--Amount paid to non-resident without deducting tax at source--Demurrage paid by Indian company to foreign company--Section 172 not applicable--Demurrage paid without deducting tax at source--Disallowance under section 40(a)(i) justified-- CIT v. Orient (Goa) P. Ltd . (Bom) . . . 554

S. 40A(7)(a) --Business expenditure--Gratuity--Effect of section 40A(7)--Insurance against liability under Payment of Gratuity Act--Conditions laid down in section 40A(7)(a) not fulfilled--Amount not deductible-- CIT v. Pradeshiya Industrial and Investment Corpn. of U. P. Ltd. (All) . . . 583

S. 41(1) --Business income--Remission or cessation of trading liability--Credits outstanding for six years and acknowledged by creditors--No evidence of deduction in earlier years--Credits not assessable under section 41-- CIT v. Smt. Sita Devi Juneja (P&H) . . . 593

S. 43B(b) --Business expenditure--Deduction only on actual payment--Gratuity--Contribution to gratuity fund--Deductible if made before filing of return--Matter remanded-- CIT v. Popular Vehicles and Services Ltd. (Ker) . . . 523

S. 45 --Capital gains--Capital asset--Definition--Agricultural land--Report of Tehsildar that land was beyond eight kilometres from municipal limit--Gains arising from transfer not assessable-- CIT v. Lal Singh (P&H) . . . 588

S. 54B --Capital gains--Capital asset--Definition--Agricultural land --Report of Tehsildar that land was beyond eight kilometres from municipal limit--Gains arising from transfer not assessable-- CIT v. Lal Singh (P&H) . . . 588

S. 80G(5)(vi) --Donation for charitable purposes--Special deduction--Assessee carrying on charitable works--Entitled to benefit under section 80G-- CIT v. Sewa Bharti Haryana Pradesh (P&H) . . . 599

S. 80-IB --Reassessment--Condition precedent--Reason to believe that income has escaped assessment--Information available with Assessing Officer at time of original assessment--Cannot be a ground for reopening assessment--Audit objection--Not a "reason to believe income escaped assessment"-- Purity Techtextile Private Limited v. Asst. CIT (Bom) . . . 459

S. 80-IB --Reassessment--Industrial undertaking--Special deduction--Eligibility--Assessee running unit on licence from purchaser of unit from MFSC--Unit not formed by splitting up or reconstruction of existing business--Deed of conveyance executed by MSFC only in respect of land and building--Plant and machinery installed by assessee not used in another business--That factory plan approved twelve years ago not material--Reassessment to withdraw deduction--Not permissible-- Purity Techtextile Private Limited v. Asst. CIT (Bom) . . . 459

----Reassessment--Reassessment after four years--Industrial undertaking--Special deduction--That factory plan approved twelve years ago disclosed at time of assessment in audit report--No failure to disclose material facts--Reassessment after four years not permissible-- Purity Techtextile Private Limited v. Asst. CIT (Bom) . . . 459

S. 80M --Intercorporate dividends--Special deduction--Computation--Financial institution--Deduction allowable on gross amount of dividend without deducting proportionate deduction available under section 36(1)(viii)-- Deputy CIT v. G.I.I.C. Limited (Guj) . . . 597

S. 94(7) --Capital loss--Dividends--Transactions in securities--Dividend stripping--Loss on sale of units set off against profits on sale of units--Sale beyond statutory period of three months--Section 94(7) not attracted-- CIT v. Shambhu Mercantile Ltd . (Delhi) . . . 535

----Capital loss--Sale of units--Sale taking place after expiry of three months from record date--Section 94(7) does not apply-- CIT v. Smt. Alka Bhosle (Bom) . . . 550

S. 115J --Company--Book profit--Computation--Depreciation not charged to profit and loss account but disclosed in note to accounts--Deductible-- CIT v. Sain Processing and Weaving Mills P. Ltd. (Delhi) . . . 565

ITR'S TRIBUNAL TAX REPORTS (ITR (TRIB))

Volume 4 : Part 5 (Issue dated : 2-8-2010)

SUBJECT INDEX TO CASES REPORTED IN THIS PART

Appeal to Appellate Tribunal --Admission of additional grounds--Ground relating to validity of assessment order of non-existent company--Legal ground not requiring further investigation of facts--Considered--Confirmation of rectification order without providing opportunity of hearing to assessee--Violation of principles of natural justice--Matter remanded--Income-tax Act, 1961-- Asst. CIT v. Precot Meridian Ltd. (Chennai) . . . 495

Business expenditure --Disallowance--Conveyance expenses, telephone and postage expenses--Expenses recorded in books of account on day-to-day basis and assessee furnished complete details--Partial ad hoc disallowance not proper--Income-tax Act, 1961, s. 37-- Ayushakti Ayurved P. Ltd. v. Asst. CIT (Mumbai) . . . 537

----Disallowance--Foreign travel expenses incurred for business purposes--Not unreasonable--Brokerage expenses--Practice in business to pay 2 per cent. brokerage--No reasons specified for disallowance--Remuneration of director--Supported by resolution of board--Increase in turnover of company due to effort of director--Allowable--Income-tax Act, 1961, s. 37-- G. L. Gems Ltd. v. Asst. CIT (Jaipur) . . . 525

----Disallowance--Professional fees and contract payments--Deduction of tax at source made in last month of accounting year, paid before filing of return under section 139(1)--Not to be disallowed--Income-tax Act, 1961, s. 40(a)(ia)-- Ayushakti Ayurved P. Ltd. v. Asst. CIT (Mumbai) . . . 537

Business income --Engineering, procuring and commissioning contract between assessee and Dutch entity for development of wind farm and erection work to be done by joint venture--Project qualifying for grant of Dutch Government--Grant inalienable--Assessee surrendering rights under contract but continuing to be shown as owner of turbines--Disclosure of profit from surrender of rights--No cogent material to substantiate that assessee received extra consideration--No document on record indicating receipt of offset credits--Electricity charges paid for consumption of electricity for business purposes--Income-tax Act, 1961, s. 28(iv)-- Asst. CIT v. Tube Investments of India Ltd . (Chennai) . . . 477

----Sale of power to sister concern at concessional rate--Instant payment by sister concern without credit period--Sale at concessional rate not disputed and in business interest--Assessing Officer cannot adopt rate contrary to actual rate agreed between parties--Income-tax Act, 1961, s. 143(3)-- Asst. CIT v. Precot Meridian Ltd. (Chennai) . . . 495

Business Loss --Bad debts--Share broking business--Sums owed to assessee by clients on whose behalf transactions undertaken--Amount written off not shown as income in earlier year--Can be allowed as business loss--Income-tax Act, 1961, ss. 28, 36(1)(vii)-- Jalpradeep Securities Ltd . v. Deputy CIT (Delhi) . . . 491

Capital gains --Capital loss--Long-term capital loss--Loss on sale of shares of unlisted company--No primary evidence as regards genuineness of transaction, identity of purchasers, basis of valuation of shares and fixation of sale price--No capital loss--Income-tax Act, 1961-- Asst. CIT v. Precot Meridian Ltd. (Chennai) . . . 495

Charitable purposes --Registration of trust--Donation to charitable institution--Special deduction--No charitable activity carried out in first year of creation of trust--No doubt regarding charitable nature of trust--No opportunity granted to trust--Direction to grant registration and verify application for approval on fulfilment of conditions--Income-tax Act, 1961, ss. 12AA, 80G(5)(vi)-- Jasoda Devi Charitable Trust v. CIT (Jaipur) . . . 547

Co-operative society --Special deduction--Co-operative society providing credit facilities to members for housing projects--Interest on fixed deposits and savings accounts with commercial banks--Proximate connection between interest earned and business--Interest on funds attributable to business of society--Co-operative society entitled to deduction thereon--Income-tax Act, 1961, s. 80P(2)(a)(i)-- Punjab State Co-operative Federation of Housing Building Societies Ltd. v. Asst. CIT (Chandigarh) . . . 507

Depreciation --Intangible assets--Renewal of leave and licence agreement--Payment for continuous use of premises for official purposes--Is deposit for acquiring use of leasehold property--Payments not for acquiring intangible asset--Premises having no nexus with know-how, patents, copyrights, trade marks, etc.--Payments refundable on termination of leave and licence agreement--Assessee not entitled to depreciation--Income-tax Act, 1961, s. 32(1)(ii), Expln. 3-- Asst. CIT v. Malayala Manorama Co. Ltd. (Cochin) . . . 513

Interpretation of taxing statutes --Principle of ejusdem generis-- Asst. CIT v. Malayala Manorama Co. Ltd. (Cochin) . . . 513

Minimum alternate tax --Book profits--Computation--Exclusions--Only items enumerated in section--Long-term capital gains on sale of shares to hundred per cent. subsidiary--Included in computing profits presented before shareholders--To be included in computing book profits under section 115JB--Exemption under normal provisions not applicable--Income-tax Act, 1961, ss. 47(iv), 115JB--Companies Act, 1956, Sch. VI, Parts II, III-- Rain Commodities Ltd. v. Deputy CIT [SB] (Hyderabad) . . . 551

Penalty --Concealment of income--Assessee offering additional income during survey and in return--Penalty proceedings drop on ground co-operation extended by assessee--Co-operation extended by assessee apparent--Revision of order dropping penalty proceedings--Not justified--Income-tax Act, 1961, ss. 263, 271(1)(c)-- C. N. Narasimha Reddy v. CIT (Bangalore) . . . 530

----Concealment of income--Penalty where loss merely reduced--Treatment of business loss as speculative loss--Not concealment of income--Penalty cancelled--Income-tax Act, 1961, s. 271(1)(c), Expln. 4-- Asst. CIT v. Sudarshan Fiscal Services P. Ltd. (Mumbai) . . . 532

Scientific research expenditure --Expenditure related to research and development--To be allowed--Income-tax Act, 1961-- Ayushakti Ayurved P. Ltd. v. Asst. CIT (Mumbai) . . . 537

Words and phrases --"Attributable to"--"Derived from"-- Punjab State Co-operative Federation of Housing Building Societies Ltd. v. Asst. CIT (Chandigarh) . . . 507

----"Licences, business or commercial rights"-- Asst. CIT v. Malayala Manorama Co. Ltd. (Cochin) . . . 513

----"Subsidy"-- Asst. CIT v. Tube Investments of India Ltd. (Chennai) . . . 477

SECTIONWISE INDEX TO CASES REPORTED IN THIS PART

Companies Act, 1956 :

Sch. VI, Parts II, III --Minimum alternate tax--Book profits--Computation--Exclusions--Only items enumerated in section--Long-term capital gains on sale of shares to hundred per cent. subsidiary--Included in computing profits presented before shareholders--To be included in computing book profits under section 115JB--Exemption under normal provisions not applicable-- Rain Commodities Ltd. v. Deputy CIT [SB] (Hyderabad) . . . 551

Income-tax Act, 1961 :

S. 12AA --Charitable purposes--Registration of trust--Donation to charitable institution--Special deduction--No charitable activity carried out in first year of creation of trust--No doubt regarding charitable nature of trust--No opportunity granted to trust--Direction to grant registration and verify application for approval on fulfilment of conditions-- Jasoda Devi Charitable Trust v. CIT (Jaipur) . . . 547

S. 28 --Business Loss--Bad debts--Share broking business--Sums owed to assessee by clients on whose behalf transactions undertaken--Amount written off not shown as income in earlier year--Can be allowed as business loss-- Jalpradeep Securities Ltd . v. Deputy CIT (Delhi) . . . 491

S. 28(iv) --Business income--Engineering, procuring and commissioning contract between assessee and Dutch entity for development of wind farm and erection work to be done by joint venture--Project qualifying for grant of Dutch Government--Grant inalienable--Assessee surrendering rights under contract but continuing to be shown as owner of turbines--Disclosure of profit from surrender of rights--No cogent material to substantiate that assessee received extra consideration--No document on record indicating receipt of offset credits--Electricity charges paid for consumption of electricity for business purposes-- Asst. CIT v. Tube Investments of India Ltd . (Chennai) . . . 477

S. 32(1)(ii), Expln. 3 --Depreciation--Intangible assets--Renewal of leave and licence agreement--Payment for continuous use of premises for official purposes--Is deposit for acquiring use of leasehold property--Payments not for acquiring intangible asset--Premises having no nexus with know-how, patents, copyrights, trade marks, etc.--Payments refundable on termination of leave and licence agreement--Assessee not entitled to depreciation-- Asst. CIT v. Malayala Manorama Co. Ltd. (Cochin) . . . 513

S. 36(1)(vii) --Business Loss--Bad debts--Share broking business--Sums owed to assessee by clients on whose behalf transactions undertaken--Amount written off not shown as income in earlier year--Can be allowed as business loss-- Jalpradeep Securities Ltd . v. Deputy CIT (Delhi) . . . 491

S. 37 --Business expenditure--Disallowance--Conveyance expenses, telephone and postage expenses--Expenses recorded in books of account on day-to-day basis and assessee furnished complete details--Partial ad hoc disallowance not proper-- Ayushakti Ayurved P. Ltd. v. Asst. CIT (Mumbai) . . . 537

----Business expenditure--Disallowance--Foreign travel expenses incurred for business purposes--Not unreasonable--Brokerage expenses--Practice in business to pay 2 per cent. brokerage--No reasons specified for disallowance--Remuneration of director--Supported by resolution of board--Increase in turnover of company due to effort of director--Allowable-- G. L. Gems Ltd. v. Asst. CIT (Jaipur) . . . 525

S. 40(a)(ia) --Business expenditure--Disallowance--Professional fees and contract payments--Deduction of tax at source made in last month of accounting year, paid before filing of return under section 139(1)--Not to be disallowed-- Ayushakti Ayurved P. Ltd. v. Asst. CIT (Mumbai) . . . 537

S. 47(iv) --Minimum alternate tax--Book profits--Computation--Exclusions--Only items enumerated in section--Long-term capital gains on sale of shares to hundred per cent. subsidiary--Included in computing profits presented before shareholders--To be included in computing book profits under section 115JB--Exemption under normal provisions not applicable-- Rain Commodities Ltd. v. Deputy CIT [SB] (Hyderabad) . . . 551

S. 80G(5)(vi) --Charitable purposes--Registration of trust--Donation to charitable institution--Special deduction--No charitable activity carried out in first year of creation of trust--No doubt regarding charitable nature of trust--No opportunity granted to trust--Direction to grant registration and verify application for approval on fulfilment of conditions-- Jasoda Devi Charitable Trust v. CIT (Jaipur) . . . 547

S. 80P(2)(a)(i) --Co-operative society--Special deduction--Co-operative society providing credit facilities to members for housing projects--Interest on fixed deposits and savings accounts with commercial banks--Proximate connection between interest earned and business--Interest on funds attributable to business of society--Co-operative society entitled to deduction thereon-- Punjab State Co-operative Federation of Housing Building Societies Ltd. v. Asst. CIT (Chandigarh) . . . 507

S. 115JB --Minimum alternate tax--Book profits--Computation--Exclusions--Only items enumerated in section--Long-term capital gains on sale of shares to hundred per cent. subsidiary--Included in computing profits presented before shareholders--To be included in computing book profits under section 115JB--Exemption under normal provisions not applicable-- Rain Commodities Ltd. v. Deputy CIT [SB] (Hyderabad) . . . 551

S. 143(3) --Business income--Sale of power to sister concern at concessional rate--Instant payment by sister concern without credit period--Sale at concessional rate not disputed and in business interest--Assessing Officer cannot adopt rate contrary to actual rate agreed between parties-- Asst. CIT v. Precot Meridian Ltd. (Chennai) . . . 495

S. 263 --Penalty--Concealment of income--Assessee offering additional income during survey and in return--Penalty proceedings drop on ground co-operation extended by assessee--Co-operation extended by assessee apparent--Revision of order dropping penalty proceedings--Not justified-- C. N. Narasimha Reddy v. CIT (Bangalore) . . . 530

S. 271(1)(c) --Penalty--Concealment of income--Assessee offering additional income during survey and in return--Penalty proceedings drop on ground co-operation extended by assessee--Co-operation extended by assessee apparent--Revision of order dropping penalty proceedings--Not justified-- C. N. Narasimha Reddy v. CIT (Bangalore) . . . 530

S. 271(1)(c), Expln. 4 --Penalty--Concealment of income--Penalty where loss merely reduced--Treatment of business loss as speculative loss--Not concealment of income--Penalty cancelled-- Asst. CIT v. Sudarshan Fiscal Services P. Ltd. (Mumbai) . . . 532

 -CA.RAJU SHAH

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